Philippines: An update to registration procedures and invoicing requirements

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With the enactment of Republic Act (RA) 11976 otherwise known as the Ease of Paying Taxes Act (EOPT Law), amendments to registration procedures and invoicing requirements are now being implemented - primarily mandating all service-oriented taxpayers, individuals and non-individuals alike, to convert their principal document from 'Official Receipt' (OR) to 'Invoice.'

Prior to the effectivity of the EOPT Law, service-oriented taxpayers were required to issue an OR to their buyer or purchaser as written evidence for the sale of services. Considering that the EOPT Law no longer requires the issuance of ORs, it establishes the 'Invoice' as the primary evidence for both sale of goods and services.

The Bureau of Internal Revenue through Revenue Regulations (RR) 7-2024 established the new invoicing requirements to implement the amendments introduced in the EOPT Law. It took effect on April 27, 2024 and from said date, taxpayers issuing manual or loose leaf ORs (not converted to 'Invoice') shall not be considered as evidence of the sale of goods or services and shall be tantamount to failure to issue or non-issuance of 'Invoice' required under Section 6(A) of RR 7-2024.

Further, Section 8 of RR 7-2024, as amended by RR 11-2024, provides two options for the taxpayer with the remaining unused or unissued ORs (or other equivalent documents, e.g., collection receipt, acknowledgement receipt): (1) continue using as supplementary document; or (2) convert to an Invoice (or any name describing the transaction). These options were reiterated in RR 11-2024 (dated and published last June 13 2024) which contain amendments to RR No. 7-2024.

Hence, for taxpayers issuing manual or loose leaf ORs, they may opt to continue using the existing unused ORs as supplementary documents (ineligible for input tax claims), provided that the face of the document is stamped with the phrase 'This document is not valid for claiming of input tax.'

Alternatively, taxpayers may convert and use the remaining ORs as invoices and this can be done by striking the words 'Official Receipt' (e.g., Official Receipt) on the face of the printed receipt and stamp the word/s 'Invoice,' 'Cash Invoice,' 'Charge Invoice,' 'Credit Invoice,' 'Billing Invoice,' 'Service Invoice,' or any name describing the transaction.

Converted documents shall be considered valid for claiming input tax by the buyer or purchaser and can serve as proof of both the sales transaction and payment at the same time until they are fully consumed, provided they contain all the required information mentioned under Section 6(B) of RR 7-2024.

The stamping of ORs as invoices does not require approval from the BIR but the service-oriented taxpayers must submit an inventory of unused ORs indicating the number of booklets and corresponding serial number on or before July 31, 2024.

For taxpayers using Cash Register Machine and Point-of-Sales Machines and E-receipting or Electronic Invoicing Software, changing the word 'Official Receipt' to 'Invoice' or any other name describing the transaction is likewise allowed without the need to inform the BIR. As this reconfiguration is considered a minor system enhancement, it does not require the reaccreditation of sales software nor re-issuance of the Permit to Use (PTU).

On the other hand, for taxpayers with duly registered Computerized Accounting System (CAS) or Computerized Books of Accounts (CBA) with Accounting Records (AR) that generate the ORs, the needed reconfiguration will be considered as a major system enhancement. Hence, they are required to update their system registration following the existing policies and procedures to obtain a new Acknowledgement Certificate or PTU on or before December 31, 2024. RR 11-2024 provides that the deadline can be extended, subject to the approval of the BIR, and provided that the extension is only up to June 30, 2025.

ORs issued by CRM or POS machines, E-receipting or E-invoicing software, CAS or CBA with AR shall be valid for purposes of claiming input tax on the part of the buyer or purchaser but only until December 31, 2024 (unless extension, as discussed earlier, is secured) or until the completion of system enhancement, whichever comes first. Similar to manual or loose leaf ORs, there is a need to strike through the word 'Official Receipt' and stamp the word 'Invoice' (or any name describing the transaction) and indicate all the information contained under Section 6(B) of RR 7-2024.

With the changes brought about by the EOPT Law, it is the responsibility of taxpayers to be compliant and stay updated with the current and upcoming changes in our tax laws and regulations. This is to avoid any unwanted penalties such as: (1) the issuance of ORs after December 31, 2024 or completion of machine or system reconfiguration, whichever comes first (for taxpayers using CRM, POS, E-receipting or E-invoicing, CAS or CBA with AR); and (2) the issuance of ORs without converting them to Invoice starting April 27, 2024 (for all other taxpayers) may be subjected to penalties ranging from P1,000 to P50,000 and imprisonment of two to four years.

Janna Lyka Lamsen is an Associate from the Tax Group of KPMG in the Philippines (R.G. Manabat and Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Janna Lyka T. Lamsen or Mary Karen E. Quizon-Sakkam through ph-kpmgmla@kpmg.com, social media or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.