In line with the changing ways that taxpayers deal with their businesses and with various government agencies, the Bureau of Internal Revenue (BIR) has enacted three revenue regulations that would address the shift from manual to digital.
Under current rules, the use of digitized documents in the Philippines seem to be uncustomary. For instance, during VAT refunds, taxpayers continue to submit hard copies of invoices and receipts, and the BIR continues to stamp these documents as evidence for Value-Added Tax (VAT) refund claims. In other cases, taxpayers’ records in bulk hard copies are still being required to be submitted during tax audits. Undeniably, these practices can be costly and consume energy and time, not just for the taxpayer but also for the assigned BIR officer.
Given the advantages of recent technology, all paths lead to digitalization. One of the recent solutions implemented by the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 is the streamlining of tax reporting and enhancing transparency of business transactions through the application of the electronic invoicing/receipting and electronic sales system.
Revenue Regulations (RR) No. 8-2022 – Use of Electronic Invoicing/Receipting System
The shift to mandatory e-invoicing can be traced back to Republic Act No. 10963 or the TRAIN Law which took effect on January 1, 2018. The law introduced the Electronic Invoicing System (EIS) requiring taxpayers engaged in electronic commerce, taxpayers engaged in exporting goods and services, and taxpayers under the Large Taxpayers Service to electronically issue their invoices or receipts, as well as transmit their sales data to the BIR using electronic point of sales system, within the next five years from the TRAIN Law’s effectivity or on or before January 1, 2023.
All covered taxpayers are required to develop a sales data transmission system based on standard application programming interface guidelines; enroll prior to actual transmission of sales data to the EIS for security purposes; secure a certification of the sales data transmission system from the BIR through the ElS; submit an application for the issuance of permit to transmit in order to allow the transmission of sales data to the ElS; and transmit sales data in real time or near real time provided that it should be done within three (3) calendar days from the date of the transaction.
A corresponding penalty shall be imposed for delayed, late, or no transmission of sales data to the ElS. Invoicing requirements under the Tax Code, as amended, shall be satisfied relative to the issuance of electronic receipts or invoices.
July 2022 marks the pilot implementation of the new system with around 100 selected taxpayers. This transition to mandatory e-invoicing has been made possible by the BIR and the South Korean government. To date, they have successfully developed the EIS which includes the integrated tax database for all kinds of taxpayers’ transactions, including the e-invoicing and receipting system, BIR-hosted invoicing, e-sales reporting system, invoice data reception, and a VAT refund facility.
The EIS may be used by concerned taxpayers to issue electronic invoices, which include sales invoices, official receipts, debit, and credit notes, to their customers/clients. The BIR eyes to widen the reach of the EIS to cover at least 1 million businesses. By January 2023, the BIR is targeting the full implementation of the new system.
RR No. 9-2022 – Admissibility of Sales Documents in Electronic Format
The Philippine government has long recognized the need to improve the country’s existing policies on documenting business transactions. In fact, the Electronic Commerce Act of 2000, which acknowledges the authenticity and reliability of electronic documents as functional equivalents of paper documents, was passed into law. Consequently, the Rules on Electronic Evidence took effect in 2001, making emails, digital signatures, and other e-documents equivalent to an original document and admissible in the Court as legal evidence in civil actions and proceedings, as well as quasi-judicial and administrative cases, under the best evidence rule, provided that such reflects the data accurately.
With the use of these electronic documents, invoices/receipts in printed or hard copies will no longer be required. The sales and purchase data that will be generated and verified through the EIS will be admissible for tax audits or investigations, in lieu of hard copies, if these comply with the information requirements under Section 113 of the Tax Code. The requirement for prominently stamping the term “zero-rated sales” on the face of the receipt/invoice is no longer necessary, as a separate reporting in the EIS for each sales classification of VAT-able, zero-rated, and exempt sale is required.
On the other hand, for VAT refunds, printed invoices/receipts for purchases from suppliers using the web-based issuance in the EIS will no longer be required to be submitted. Only purchase data that are validated in the EIS shall be allowed for purposes of claiming input VAT under Section 110 of the Tax Code or for claiming deductible expenses for purposes of income tax under Section 34(A)(l)(b) of the Tax Code.
Nevertheless, it is important to note that the original form or digital copies, whichever is applicable, must be retained in order for the taxpayer to provide the same upon demand for verification and validation of the sales and purchase data generated through the EIS or submitted electronic forms of invoices or receipts.
RR No. 6-2022 – Removal of Five-Year Validity Period on Receipts/Invoices
The BIR has finally removed the five (5)-year validity period on all manual and system-generated receipts and invoices effective July 16, 2022. This means that all permits to use (PTU) cash register machines, point-of-sale (POS) machines, and other sales receipting system software shall remain valid, unless revoked by the BIR on meritorious grounds, such as but not limited to tampering of sales data or software features to avoid or alter the recording of sales transactions; performing major repair or modification of the software without prior approval by the BIR; and other violations of the current policies and procedures for manual and system-generated receipts and invoices.
The removal of the 5-year validity period pacifies the taxpayers’ long clamor on additional costs involved in printing new receipts and invoices every end of the 5-year validity and allows taxpayers to continuously use their existing manual receipts and invoices until fully exhausted.
As with any major changes, challenges may arise. It is prudent to keep an eye on further clarificatory issuances from the BIR in providing guidance in the proper implementation of these new rules and procedures. After all, it is every taxpayer’s hope that these adjustments in the invoicing system will strengthen digital transformation towards better and simpler tax administration and compliance.
As published in Mindanao Times, dated 27 July 2022