One of the amendments introduced in the Tax Reform for Acceleration and Inclusion (TRAIN) Law is related to the issuance of receipts or sales/commercial invoices under Section 237 of the National Internal Revenue Code (NIRC). Previously, all persons subject to an internal revenue tax shall issue duly registered receipts or invoices for each sale of merchandise or services amounting to at least P25.00. With the passage of the TRAIN Law, Congress increased the threshold for the issuance of receipts and invoices to P100.00.
However, the other invoicing rules remained basically the same, namely: (1) that the receipts and invoices must be prepared at least in duplicate, showing the date of transaction, quantity, unit cost, and description of merchandise or nature of service rendered; (2) that in case of a VAT-registered purchaser where the transaction covers rentals, commissions, compensation or fees, or where the sale is in the amount of P1,000 or more, the invoice or receipt must also show the name, business style (if any), and address, and Taxpayer Identification Number (TIN) of the purchaser, customer or client.
To clarify the meaning of Business Style, the BIR issued Revenue Memorandum Circular (RMC) 55-2019 on May 21.
Based on the RMC, the phrase Business Style refers to the business name registered with the concerned regulatory body used by the taxpayer other than its registered name or company name. The RMC cites the following examples:
1. A corporation registered under the corporate name XYZ Entertainment Corp. operates under the business name of Bozo the Clown, based on its Certificate of Registration issued by the Securities and Exchange Commission (SEC). Therefore, its business style is Bozo the Clown.
2. A single proprietor named Juanita M. Ricafrente registered the business name JMR Trading with the Department of Trade and Industry (DTI), as reflected in her DTI Certificate of Registration. Hence, the business style is JMR Trading.
Before RMC 55-2019, most taxpayers construed Business Style as referring to their line of business as indicated in the BIR Certificate of Registration (BIR Form 2303), such as water transport, textile manufacturing, private educational services, and others. Thus, when issuing or securing invoices or receipts, taxpayers only needed to refer to the BIR Form 2303 to get the required information.
With the issuance of RMC 55-2019, there is a concern about being penalized for non-compliance with formal requirements due to an erroneously indicated business style in the receipts and invoices. To properly comply, merchants may need to request copies of the SEC and DTI Certificates of Registration from their corporate and individual customers, respectively, to validate the business style to be reflected.
A more critical concern on the part of VAT-registered taxpayers is the impact of this new RMC in claiming input tax credits or refunds. Since one of the requirements to claim input VAT credits or refunds is substantiating the claim with compliant supporting documents, will the affected taxpayers now lose their right to claim a tax credit or refund if the Business Style field on the invoices/receipts supporting their previous purchasers is not properly filled up? Will the VAT refund claim for ongoing applications be denied if the indicated business style is not consistent with RMC 55-2019 or not written prominently in the receipts and invoices?
I believe that the impact of RMC 55-2019 should be applied prospectively without detriment to the taxpayer. Under Section 246 of the NIRC covering non-retroactivity of rulings, any revocation, modification, or reversal of any of the rules and regulations shall be not be given retroactive application if such will be prejudicial to the taxpayers. From my experience, the BIR had not previously questioned the practice of reflecting the line of business as the Business Style. It would not be fair to now clarify the matter and penalize taxpayers for past transactions which were based on a previously prevailing accepted practice. This is especially considering that information, such as the business style, has no impact on the recording of a company’s accounting transactions or on the determination of the amount of taxes to be paid.
It’s high time that the government revisit the required information to be indicated in the receipts and invoices. The omission of unnecessary information may help the government achieve its objectives of streamlining and simplifying the taxpayers’ compliance requirements. It will also lessen the tax authority’s administrative work as they will only need to validate lesser information. In fact, if we were to go to the extreme, one actually only needs the TIN to identify and validate an existing taxpayer since it is a unique number.
However, with the issuance of RMC 55-2019, taxpayers must ensure that they are compliant with the directives of the law. Not only is there is a risk of not being able to claim the proper deductions or credits, sadly, non-compliance with formal requirements, no matter how trivial it may seem, is considered a violation that is punishable with fines, or worse, by imprisonment under Section 264 of NIRC.
The views or opinions in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.
Maybellyn O. Pinpin-Malayao is a senior manager with the Client Accounting Services group of Isla Lipana & Co., the Philippine member firm of the PwC network.
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