BIR Form 2551Q (C.R.E.A.T.E. Law)

RA 11534, or the Corporate Recovery and Tax Incentives for Enterprises Act, better known as the C.R.E.A.T.E. Law, was signed on March 26, 2021.

Issued primarily to help ease the burden on corporate taxpayers during the current pandemic, C.R.E.A.T.E. affects how tax calculations are to be carried out going forward—including the calculation of percentage tax.

Note that provisions of RA 11534 relative to percentage tax are “temporary,” and they are only effective from July 1, 2020, through June 30, 2023.

In this post, we’ll focus on how RA 11534 affects the calculation of percentage taxes, particularly for individuals and non-individuals. We’ll also highlight the changes we’ve made to the form you’ll be using when entering transactions into our transactions module to help guide you along the way.

Under the temporary rate adjustment, where the percentage tax was formerly 3%, the tax rate is now at 1%. This change takes effect retroactively from July 1, 2020, and is good for three years.

Should you choose to use the temporary rate adjustment under the C.R.E.A.T.E. law, those rates will now be used as you populate the 2551Q form.

How Overpayments Will Be Treated as a Result of the Retroactive Effect of the Temporary Tax Rate Adjustment

Released on April 8, 2021, RR 4-2021 explains that taxpayers should calculate their overpayment from the previous quarters (Quarter 3 and 4 of 2020) and carry over the excess payment when filing their Q1 2021 tax return. Overpayment should be inserted into line number 17 of the Percentage Tax Form 2551Q.

Assuming that the taxpayer did NOT entirely consume the excess payment, the taxpayer can continuously carry over the excess payment until there is no more remaining balance.

If you need extra help in calculating percentage taxes using the new temporary rates under C.R.E.A.T.E., you can reach out to our support team any time by clicking the chat icon in the lowermost right corner of your screen. You can also schedule a call with any of our Partner Firms for personalized advice today.

Are you planning to file your BIR Form 2551Q soon?

Make tax compliance easier with Juan Accounting Software!

Juan integrates accounting, payments, financial reporting, and tax compliance with JuanTax into one complete solution, perfect for PH businesses. Experience all-in-Juan accounting and tax at https://www.juan.ac/.

‍