REPUBLIC Act 11976, also known as the Ease of Paying Taxes (EoPT) Act, provides relief to cash flow issues that may arise from output value-added tax (VAT) on uncollected receivables. Revenue Regulation (RR) 3-2024, issued by the Bureau of Internal Revenue (BIR) on April 11, 2024 to implement the EoPT law, provides guidance on how sellers can claim output VAT credit on their uncollected receivables.
A seller who has passed on the VAT to the buyer has no problem collecting the corresponding VAT in cash sales, since it has already been collected in the agreed selling price. However, in credit sales, the seller pays the VAT upfront and may not be able to collect the receivables on time, or at all, while the buyer is free to deduct the related input VAT at the time of payment. Previously, the seller’s only recourse was to recognize the uncollected receivables, including VAT, as bad debts and claim it as a deduction under Section 34(E) of the Tax Code.
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