BY ATTY. TONEE PALOMENO
WHEN YOU eat in a restaurant, buy your groceries or coffee, or gas up your vehicle, do you ask for receipts? Or another question is, do you keep your receipts? Many of us, just throw away or disregard the receipts issued by business establishments. Notably, we do this to tape receipts, which fade away over time. As individual consumers, we usually associate these receipts with a waste of paper and miss out on their importance.
However, on the other side of the spectrum, these documents are the lifeblood of business owners. We can say that they make or break a business. To note, our tax rules are strict as to the requirements for these documents to be valid support for business transactions.
One of the requirements under our Tax Code is that business taxpayers must issue sales invoices (SIs) for the sale of goods or properties and official receipts (ORs) for the sale of services or the lease of properties. They are the principal evidence of these sale transactions. They should not be mixed up, as they cover different types of transactions. Hence, every business establishment is required to post a Notice to Issue Receipt or Invoice (NIRI) in a conspicuous place.
Also, certain information is required to be stated in the SIs and ORs (may be collectively referred to as “principal receipts”). Section 237 of the Tax Code, as amended and implemented by several BIR issuances, specifically provides that principal receipts should show at the minimum the following:
- Taxpayer’s registered name;
- Taxpayer’s Business Name/Style, if any;
- A statement that the taxpayer is VAT or NON-VAT registered, followed by the Tax Identification Number (TIN) and 4-digit branch code;
- Date of transaction;
- Serial Number of the sales invoices or official receipts;
- Name, address, and TIN of the buyer;
- Description of the items/goods, or nature of service;
- Quantity;
- Unit cost;
- Total cost; and
- VAT amount, with a breakdown as to VATable sales, zero-rated sales, and VAT exempt sales for mixed transactions.
Likewise, one of the requirements for ORs and SIs to be valid is their registration with the Bureau of Internal Revenue (BIR). For manual ORs and/or SIs, an Authority to Print must be secured. For system-generated SIs and/or ORs, accreditation of the Cash Register Machine (CRM)/Point-of-Sale (POS) machine/other sales machine/receipting software or an Acknowledgement Certificate for a computerized accounting system must be secured.
As mentioned, all these rules on the proper type of document to be issued, mandatory information to be indicated and registration with BIR must strictly be followed. We may consider the impact of non-compliance on these requirements as a double-edged sword affecting both the seller and purchaser.
For the seller or the issuer of the official receipts or sales invoices, non-registration of these documents may lead to penalties, while incomplete VAT details on their face may lead to the reclassification of sales from zero-rated to VATable or from exempt to VATable during a BIR tax audit.
In the recent case of Dole Philippines, Inc. vs. Commissioner of Internal Revenue (CTA Case No. 10212, dated June 13, 2023), the CTA considered the three requirements mentioned above in ruling the partial denial of the claim for refund on input taxes attributable to zero-rated sales of the taxpayer. Only sales of goods or services supported by proper official receipts and sales invoices with the required information and registration were considered qualified for VAT zero-rating. Consequently, only input tax attributable to these sales was granted a refund.
As for the purchaser or the recipient of the official receipts or sales invoices, expenses unsupported by these documents will be disallowed due to non-substantiation. Part of the substantiation requirement under Section 34(A)(1)(b) of the Tax Code, as amended, is the registration of ORs or SIs with the BIR. Thus, expenses supported by expired or unregistered ORs or SIs will likewise be disallowed. Further, VAT refund claims may be denied due to non-compliance with the requirements mentioned above. Tax courts have been consistent in denying tax refund claims due to the interchanging use of sales invoices and official receipts and incomplete information provided on the face, and non-registration of the ORs or SIs.
The BIR, through its recent issuances, reminds the public of the mandate of business establishments to issue principal receipts, as it replaced the previously issued “Ask for Receipt Notice” (AFRN) by the new NIRI. Taxpayers with an issued AFRN were required to secure the new NIRI until September 30, 2023. Failure to do so will subject the taxpayer to a penalty of a fine of not more than P1,000.
Although we may disregard the rules on ORs and SIs as individual consumers, it is clear from the foregoing discussion that taxpayers must strictly comply with the above rules. Otherwise, it will lead to unavoidable tax consequences. Hence, receiving a valid invoice or receipt is a MUST.
Atty. Tonee Palomeno is a Tax Advisory Senior of the Tax Advisory and Compliance at P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 29 Partners and more than 1000 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH, like us on Facebook: P&A Grant Thornton, and email your comments to pagrantthornton@ph.gt.com. For more information, visit our website: www.grantthornton.com.ph.
