Tax Notes: New versions of BIR Form 2305 and Update of Exemption of Employees (UEE) Data Entry and Batch File Validation Modules

IN line with Republic Act (RA) 10754, also known as “An Act Expanding the Benefits and Privileges of Persons with Disability (PWD),” and Revenue Regulations 5-2017, the Bureau of Internal Revenue (BIR) has updated the Certificate of update of exemption, and employer and employee’s information (BIR Form 2305) and the corresponding UEE data entry and batch file validation modules, to include persons with disability (PWD) as qualified additional dependents, through the issuance of Revenue Memorandum Circular 42-2017 and 43-2017.

PWDs being claimed as qualified dependents should be a: (1) Filipino citizen; (2) within the fourth civil degree of consanguinity or affinity to the benefactor; (3) not gainfully employed; and (4) chiefly dependent upon and living with the benefactor.

These documents are needed to support the benefactor’s claim of additional qualified dependent in the first year of claiming the exemption and three years thereafter or upon renewal of the PWD ID, whichever comes first:

1. Duly accomplished BIR Form 2305;

2. Photocopy of PWD identification card issued by the Persons with Disability Affairs Office (PDAO) or the City/ Municipal Social Welfare and Development Office (C/MSWDO) of the place where the person with disability resides or the National Council on Disability Affairs (NCDA);

3. Sworn declaration of qualified dependent PWD, support and relationship;

4. Birth certificate of PWD;

5. Medical certificate attesting to disability issued by in accordance with the Implementing Rules and Regulations of RA 10754; and,

6. Barangay certification attesting to the fact that the PWD is living with the benefactor.

Under the UEE data entry and validation module, the following procedures shall be followed in enrolling a qualified PWD dependent as an additional exemption:

1. In Part III - Additional Exemptions of BIR Form 2305, encode the name and birthdate of the qualified PWD dependent;

2. Tick the “Mark if PWD/ Mentally/ Physically Incapacitated” box;

3. Click the save button after encoding all the required information.

The UEE data entry module is used to input updates regarding exemptions of each of its employees in CSV file format, which the batch file validation module reviews and validates for correctness of format and completeness of data.

Claiming a qualified PWD dependent for additional exemption for purposes of computing the benefactor’s income tax is effective starting taxable year 2016. Nevertheless, the same rules apply as to the maximum number of qualified dependents; that is, the benefactor can claim a total of four qualified dependents, inclusive of any PWD dependent.

The rules mentioned above shall apply until the tax reform bill is passed into law. P&A Grant Thornton
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