Tax bureau sets penalties for VAT violations
November 24, 2011
Tax bureau sets penalties for VAT violations
PENALTIES for businesses that do not separately identify value-added tax (VAT) charges in their official receipts have been set by the Bureau of Internal Revenue (BIR).
Revenue Regulations 18-2011, dated Nov. 21, prescribes a fine of P1,000 to P50,000 and imprisonment of two to four years for violators.
“All VAT-registered taxpayers who are required ... to issue sales or commercial invoices or official receipts should separately bill the VAT corresponding thereto. The amount of the tax shall be shown as a separate item in the invoice or receipt,” the issuance read.
The tax bureau said it aimed to set the guidelines for the proper invoicing and receipting of the 12% VAT on the sale of goods and services.
“[The separate billing of VAT] is the requirement of the law. We are just making sure that people comply with it,” BIR Commissioner Kim S. Jacinto-Henares said in a text message.
The penalty system is expected to target smaller businesses, said Tammy H. Lipana, chairperson of the Philippine Chamber of Commerce and Industry tax committee.
Large firms with computerized systems already comply with the requirement to separate the billing of the sales tax in their receipts. However, taxpayers with smaller businesses tend to use manual processes and they may not be compliant, she explained.
Any entity with gross sales of more than P1.5 million a year is mandated to register as a VAT taxpayer.
“It is crucial for businesses to bill the VAT as a separate item to ensure transparency and correctness of the amount of VAT passed on to the customer,” Ms. Lipana said.
The indication of the exact amount of VAT is basically an admission of how much of the tax a seller is charging, reporting and paying to the BIR with regard to a transaction, said Lina P. Figueroa, a principal at Punongbayan & Araullo, in an e-mail to BusinessWorld.
The separate billing should also aid buyers, especially those who are qualified to collect credits on the VAT they pay on inputs, she added.
“If it is not done, the official receipt or invoice may not be considered valid and the buyer may be prohibited from claiming the input tax ... especially if audited by the BIR,” Ms. Figueroa said.
“Hence, the buyer becomes penalized and suffers the consequences of the noncompliant seller.”- Diane Claire J. Jiao, Business World