Compliance Requirements

7/31/2019 Compliance Requirements

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ComplianceRequirements


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1. Keeping of Books of Accounts

All corporations, companies, partnerships orpersons required by law to pay internal revenuetaxes are required to keep a journal and a ledger

or their equivalents.Language in which Books are to be kept The book

of accounts are required to be kept in Nativelanguage, English or Spanish.


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1. Keeping of Books of Accounts(Continuation)

Preservation of Books and Accounts and OtherAccounting Records:

All the book of accounts, including the subsidiary

books and other accounting records ofcorporations, partnerships, or persons, arerequired to be preserved by them for a periodbeginning from the last entry in each book until

the last day prescribed by the Tax Code withinwhich the Commissioner is authorized to make anassessment. The said books and records shall besubject to examination and inspection by internal

revenue officers.


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2. Registration Requirements

Annual Registration Fee:

An annual registration fee in the amount of P500for every separate or distinct establishment orplace of business, including facility types wheresales transactions occur, are required to be paidupon registration and every year thereafter on orbefore the last day of January: Cooperatives,individuals earning purely compensation income,whether locally or abroad, and overseas workersare not liable to the registration fee herein

imposed.


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Taxpayer Identification Number (TIN):

Any person required to make, render or file areturn, statement or other document shall besupplied with or assigned a TaxpayerIdentification Number (TIN) which he shallindicate in such return, statement or documentfiled with the Bureau of Internal Revenue for hisproper identification for tax purposes, and whichhe shall indicate in certain documents.


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Taxpayer Identification Number (TIN):(Continuation)

Only one Taxpayer Identification Number (TIN)

shall be assigned to a taxpayer. Any person whoshall secure more than one TaxpayerIdentification Number shall be criminally liableunder the provision of Section 275 on Violation

of Other Provisions of this Code or Regulations inGeneral.


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Issuance of Receipts or Sales or Commercial Invoices

All persons subject to an internal revenue tax arerequired, for each sale or transfer of merchandise or

for services rendered valued at P25.00 or more, to issueduly registered receipts or sales or commercialinc\voices, prepared at least in duplicate, showing thedate of transaction, quantity, unit cost and description

of merchandise or nature of service. Where the receiptis issued to cover payment made as rentals, commission,compensation or fees, receipts or invoices shall beissued which shall show the name, business style, if any,and address of the purchaser, customer or client.


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In the case of sales, receipts or transfers in the amount ofP100.00 or more, or regardless of the amount, where the

sale or transfer is made by a person liable to value-addedtax on another person also liable to value-added tax; orwhere the receipt is issued to cover payment made asrentals, commissions, compensations or fees, receipt or

invoices shall be issued which shall show the name, businessstyle, if any, address of the purchaser, customer or client.Where the purchaser is a VAT-registered person, inaddition to the information herein required, the invoice orreceipt shall further show the Taxpayer Identification

Number (TIN) of the purchaser.


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The original of each receipt or invoice shall be issued tothe purchaser, customer or client at the time the

transaction is effected, who, if engaged in business or inthe exercise of profession, shall keep and preserve thesame in his place of business for a period of 3 years fromthe close of the taxable year in which such invoice or

receipt was issued, while the duplicate shall be kept andpreserved by the issuer, also in his place of business, for alike period.


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3. Civil Penalties

In addition to the tax required to be paid, a penaltyequivalent to 25% of the amount due shall be imposed inthe following cases:

a) Failure to file any return and pay the tax due thereonas required under the Tax Code or rules and regulationson the date prescribed;

b) Unless otherwise authorized by the Commissioner, filing

a return with an internal revenue officer other thanthose with whom the return is required to be filled;

c) Failure to pay the deficiency tax within the timeprescribed for its payment in the notice of assessment;


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3. Civil Penalties

In addition to the tax required to be paid, a penaltyequivalent to 25% of the amount due shall be imposed inthe following cases:

d) Failure to pay the full or part of the amount of taxshown on any return required to be filed under the TaxCode or rules or regulations, or the full amount of taxdue for which no return is required to be filed, on or

before the date prescribed for its payment.


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3. Civil Penalties

Failure to file a return; Filing of false or fraudulentreturn

In case of willful neglect to file the return within the

period prescribed by the Tax Code or in case a false orfraudulent return is willfully made, the penalty to beimposed is 50% of the tax or of the deficiency tax, in case,any payment has been made on the basis of such return

before the discovery of the falsity or fraud.A substantial under declaration of taxable sales, receiptsor income, or a substantial overstatement of deductionsconstitutes prima facie evidence of a false or fraudulent

return.


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3. Civil Penalties

Failure to file a return; Filing of false or fraudulentreturn

Failure to report sales, receipts or income in an amount

exceeding 30% of that declared per return, and a claim ofdeductions in an amount exceeding 30% of actualdeductions renders the taxpayer liable for substantialunder declaration of sales, receipts or income or for

overstatement of deductions, as mentioned therein.


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4. Interest

An interest at the rate of 20% per annum, or suchhigher rate as may be prescribed by rules andregulations, shall be assessed and collected on anyunpaid amount of tax from the date prescribed for

payment until the amount is fully paid.

Deficiency Interest:

Any deficiency in the tax due is subject to the interest,

which shall be assessed and collected from the dateprescribed for its payment until the full paymentthereof.


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4. Interest

Delinquency Interest

Delinquency interest shall be assessed and collected incase of failure to pay:

a) The amount of tax due on any return to be filedb) The amount of the tax due for which no return isrequired

c) A deficiency tax, or any surcharge or interest thereon

on the due date appearing in the notice and demand ofthe Commissioner, there shall be assessed and collectedon the unpaid amount, an interest until the amount isfully paid, which interest shall form part of the tax.


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4. Interest

Interest on Extended Payment

If any person required to pay the tax is qualified andelects to pay the tax on installment but fails to pay the

tax or any installment, or any part of such amount orinstallment on or before the date prescribed for itspayment, or where the Commissioner has authorized anextension of time within which to pay a tax or a deficiencytax or any part thereof, there shall be assessed andcollected an interest on the tax or deficiency tax or anypart thereof unpaid from the date of notice and demanduntil it is paid.


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5. Other penalties

Failure to File Certain Information Returns

In case of each failure to file an information return,statement or list, or keep any record, or supply any

information required by the Tax Code there shall be paidby the person failing to file, keep or supply the same,P1,000 for each failure. The aggregate amount to beimposed for all such failures during a calendar year shallnot exceed P25,000.


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5. Other penalties

Failure of a withholding agent to collect and remit tax

Any person required to withhold account for, and remit anytax imposed by the Tax Code who willfully fails to withhold

such tax, or account for and remit such tax, or aids orabets in any manner to evade any such tax or the paymentthereof, shall, in addition to other penalties provided forunder this Chapter, be liable upon conviction to a penaltyequal to the total amount of the tax not withheld, or notaccounted for and remitted.


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5. Other penalties

Penal Liability of Corporations

Any corporation, association or general co-partnershipliable for any of the acts or omissions penalized under the

tax Code, in addition to the penalties imposed upon theresponsible corporate officers, partners, or employeesshall, upon conviction for each act or omission, be punishedby a fine of not less than P50,000 but not more thanP100,000.


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6. Prescription for Violations ofany Provision of this Code

All violations of any provision of the TaxCode shall prescribed after five (5) years.


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Illustration:

Income tax return for the calendar year 2009was due for filing on April 15, 2010 but thetaxpayer voluntarily filed his tax return,

without notice from the BIR, only on June 30,2010. The tax due per return amounts toP100,000.


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Illustration:

The taxpayers 2009 income tax return isrequired to be filed through the authorizedagent bank under the jurisdiction of RDO East

Makati. But, without prior authorization fromthe BIR, the taxpayer filed his return and paidthe tax through the authorized agent bankunder the jurisdiction of the RDO Davao City.

Tax due and paid per return is P100,000.


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Illustration:

The taxpayer did not file his income tax returnfor the calendar year 2008 which was due forfiling on April 15, 2009. he was notified by the

BIR of his failure to file the return, for whichreason, he filed his tax return and paid the tax,only after the said notice, on June 30, 2010.the tax due per return is P100,000.


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Illustration:

Taxpayer filed on time his income tax returnfor calendar year 2008 and paid P100,000 onApril 15, 2009. upon the pre-audit of his

return, it was disclosed that he erroneouslycomputed the tax due. The correct amount oftax due is P120,000. the taxpayer is assessedfor deficiency income tax in a letter of demand

and assessment notice issued on June 30, 2010.


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Illustration:

ABC Corporation filed its final adjustment income tax return forcalendar year 2008 and paid on time its income tax shown thereunder,amounting to P100,000. Said taxpayer was investigated. Uponverification of its accounting records, it was disclosed that itsdeduction, from gross income, of representation expenses in the

amount of P200,000 did not meet all the statutory requisites fordeductibility. The corporation was duly notified of the saiddiscrepancy through a Preliminary Assessment Notice. Based on theincome tax rate on corporations applicable in the year 2008, theincome tax due after investigation amounts to P170,000. after

deduction of income tax paid per return filed, the basic deficiencyincome tax amounts to P70,000, excluding penalties. Failing to proteston time against the preliminary assessment notice, a formal letter ofdemand assessment notice was issued on May 31, 2010, requiringpayment of the assessment not later than June 30, 2010.


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Illustration:

XYZ Corp. filed its final adjustment income tax return forcalendar year 2008 with a net taxable income of P500,000. atthe applicable income tax rate of 35% for the year 2008, itsincome tax amounted to P175,000. however, upon investigation,

it was disclosed that its income tax return was false orfraudulent because it did not report a taxable income amountingto another P500,000. on it net income of P1,000,000, perinvestigation, the income tax due is P350,000. deducting itspayment per return filed, the deficiency, excluding penalties,

amounted P175,000. It was duly informed of this findingthrough a Preliminary Assessment Notice. Failing to protest ontime against the preliminary assessment notice, a formal letterof demand and assessment notice was issued on May 31, 2010calling for payment of the deficiency income tax on or before

June 30, 2010.


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Additional Readings:

Gains and Losses from Sales or Exchange ofAssets

Income from Rents and Farming

Documents

Compliance Requirements