With the new mandate to classify taxpayers based on their annual gross sales, the Bureau of Internal Revenue (BIR) has added the “Taxpayer Classification Inquiry” function to its online registration portal to enable individuals and entities to find out if they are classified as micro, small, medium or large taxpayers.
Through Revenue Memorandum Circular (RMC) No. 62-2024 issued on May 16, 2024, the agency announced that the Taxpayer Classification Inquiry functionality is now available in the BIR Online Registration and Update System or ORUS.
ORUS is a web-based system designed to give taxpayers a convenient and alternative facility for end-to-end processing of their registration with the BIR.
The Taxpayer Classification Inquiry function is to comply with Republic Act No. 11976, or the Ease of Paying Taxes (EOPT) Act, and Revenue Regulations (RR) No. 8-2024, both of which provide that taxpayers shall be classified into micro, small, medium and large taxpayers based on the annual gross sales from their business.
Uder the EOPT Act and RR 8-2024, taxpayers shall be classified as follows:
- Micro taxpayer refers to a taxpayer whose gross sales for a taxable year is less than P3 million.
- Small taxpayer has gross sales for a taxable year of P3 million to less than P20 million.
- Medium taxpayer has gross sales for a taxable year of P20 million to less than P1 billion.
- Large taxpayer has gross sales for a taxable year of P1 billion and above.
To determine a taxpayer’s classification, RR 8-2024 defines gross sales as total sales revenue during the taxable year, net of value added tax (VAT) and without any other deductions. Gross sales only cover business income, or income earned by a taxpayer from the conduct of trade or business or the exercise of a profession. Not included in the gross sales are compensation income earned under employer-employee relationship; passive income under Sections 24, 25, 27 and 28; and income excluded under Section 32(B), all of the Tax Code.
Making online inquiry
Per RMC 62-2024, to view or inquire about a taxpayer’s classification, the applicant should access ORUS through https://orus.bir.gov.ph/home. Once on the ORUS homepage, her or she should select the “Verify TIN/Search BIR-Registered Business” from the displayed functionalities.
The taxpayer then selects “BIR Registered Business Search and Taxpayer Classification Inquiry” from the dropdown list and clicks the “Proceed” button.
The entity must input the registered name or trade name as shown on the Certificate of Registration-BIR Form No. 2303 as well as the TIN and branch code. Next, it should tick the box verifying it is not a robot, then click the “Search” button.
The taxpayer’s classification will be displayed and the taxpayer should note if he or she is classified as micro, small, medium or large.
The circular further states that anyone who disagrees with the initial taxpayer classification may send a letter to the Revenue District Office (RDO) where the taxpayer is registered, informing the RDO of the correct classification. The taxpayer should attach a proof of his or her claim for the correct classification, such as the Taxable Year (TY) 2022 Income Tax Return or TY 2022 Income Statement showing the gross sales.
On the RDO’s part, it will evaluate the documents submitted and correct the taxpayer classification if the taxpayer’s claim is valid, and inform the taxpayer of the result of the evaluation and action taken.
As a rule, any person or entity that wishes to engage in business or the exercise of profession is required to register for tax purposes. Those taxpayers who will register from April 27 onwards, or upon the effectivity of RR 8-2024, must indicate their initial classification in the registration form.
This means new taxpayers will have to assess their classification based on the expected or estimated gross sales of their new business. This initial classification applies from the start of their registration until the taxpayer is reclassified by the BIR based on the new gross sales thresholds.
RR 8-2024 also provides for transitory rules on the classification of taxpayers that registered prior to April 27.
Taxpayers registered in 2022 and prior years shall be classified based on their gross sales for the taxable year 2022. If no information on their 2022 gross sales was submitted, taxpayers registered in 2022 and prior years will be initially classified as micro taxpayers, except VAT-registered taxpayers, who shall be classified as small taxpayers.
Similarly, taxpayers registered in 2023 and in 2024 before the effectivity of RR 8-2024 shall initially be classified as micro taxpayers, except VAT-registered taxpayers, who shall be classified as small.
