Compliance change on invoicing under EoPT
The heat of the dry season is still at its peak. At times like these, many travelers who enjoy the sun are basking in the various destinations and attractions of the archipelago. This reminds me of a family trip to an oceanarium on a sunny day. In the queue with hundreds of tourists to pay the entrance fee, I noticed that the crew was hindered by the task of preparing BIR-registered official receipt.
The use of pre-printed forms as official receipts is still widely practiced as this option is the easiest to obtain permits for. But with the passage of the Ease of Paying Taxes (EoPT) Act, the invoice has taken its place as the principal document to support the sale of both goods and services. Taxpayers, particularly those whose activities are service-oriented, would have to adapt to these changes and find the most effective way of invoicing customers.
In this regard, Revenue Regulations (RR) No. 7-2024 — the rules implementing the invoicing requirements of the EoPT Act which took effect on April 27, provide the following guidelines:
First, all taxpayers using manual official receipts (ORs) should start issuing valid invoices by July 1. This means that they must have authority to print or permit to use manual or loose leaf invoices by June 30. The existing ORs may be used as a supplementary receipt provided that ORs are stamped with the words “THIS DOCUMENT IS NOT VALID CLAIM OF INPUT TAX.”
Alternatively, taxpayers that have unused and unissued ORs may opt to convert these to invoices by striking out the word “Official Receipt” in the OR and stamping it with “Invoice”, “Cash Invoice”, “Charge Invoice” “Credit Invoice”, “Billing Invoice”, “Service Invoice” or any name describing the transaction. The converted ORs can be issued as a primary invoice until Dec. 31, and thereafter may be used only as supplementary receipts. This does not require prior approval from the BIR, but there is a need to report the inventory of the unused receipts to the BIR within 30 days of the effectivity of the regulations, or until May 26.
Second, taxpayers using BIR-registered Cash Register Machines (CRM), Point of Sale Machines (PoS), e-receipting or e-invoicing software are allowed to change the words “Official Receipt” to “Invoice” or any name describing the transaction without the need to notify the BIR. This change is considered a minor system enhancement; thus, it does not require the reaccreditation of sales software nor reissuance of the Permit to Use. However, a notice indicating the starting serial number of the converted invoice has to be submitted to the BIR office where the machines are registered.
As this change is expected to be minor, it can be implemented immediately. Documents issued by CRM, PoS and e-receipting or electronic invoicing software containing the word “Official Receipt” beginning April 27 are not considered valid.
Third, unlike the conversion of ORs to Invoices in the BIR-registered CRM, PoS and e-receipting or electronic invoicing software, which is a minor system enhancement, the changes to be introduced in the Computerized Accounting System (CAS) or Computerized Books of Account (CBA) require a major enhancement and update of registration following the existing policies and procedures of filing a new application.
In order to provide ample time in reconfiguring machines and systems, adjustments should be undertaken on or before June 30; any extension requires an approval not to exceed six months from the effectivity of the regulations, or until Oct. 27.
Do note that the issuance of an invoice is required upon collection of receivables arising from services on account that are rendered prior to the effectivity of the regulations. So, in addition to the billing documents issued before April 27, an Invoice must be issued upon receipt of payments from the said receivables.
To summarize the timelines:
1. Taxpayers using manual official receipts are required to use or issue invoices by July 1;
2. Taxpayers using CRM, PoS, e-receipting and e-invoicing software are required to issue an “Invoice” starting April 27 since the “Official Receipts” issued by these machines or softwares shall no longer be considered valid; and
3. Taxpayers using CAS or CBA have until June 30, which is extendible to Oct. 27, to reconfigure or adjust their systems to comply with the requirement.
RR 7-2024 appears to have shortened the period provided under the EoPT Act for taxpayers to comply with the changes introduced by the law. The transitory provisions of the EoPT Act provide taxpayers six months from the effectivity of the implementing rules or until Oct. 27 to comply with the amendments of the Tax Code, which covers the invoicing requirements.
Notably, RR 7-2024 states that the use of “Official Receipts” for the sale of goods or services after June 30 will not be considered evidence of sale of goods or services and equivalent to failure to issue an invoice. The regulations also declare that the ORs issued from CRM/POS beginning April 27 are not considered valid support for input tax claims by the purchaser. This is tantamount to penalizing the purchaser for the compliance faults of the seller.
While the EoPT Act penalizes the seller for failure to comply with invoicing requirements, it is lenient on buyers as to claiming input taxes in relation to some missing details in the invoices. It may be reasonable to adopt the same principle or leniency to the purchasers during the invoicing transition. After all, the buyers have no control over the compliance of the sellers.
I hope the BIR will revisit these points to align with the EoPT Act.
Clearly, businesses are currently experiencing the effect of compliance change brought about by the EoPT Act. As this is meant to provide ease or relief to taxpayers, one hopes that this would be easy and smooth and not as aggravating the effects of climate change.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Delila Dayag is an assistant manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network.