As a business owner in the Philippines, it’s essential to understand the tax compliance requirements for your business. One critical requirement is issuing official receipts (OR) to your customers. In this blog, we will discuss what is official receipt, differences between collection receipt vs official receipt, sales invoice vs official receipt philippines, official receipt sample philippines,collection receipt vs official receipt difference,acknowledgement receipt vs official receipt, requirements for bir receipt. Stay tuned!
What Is Official Receipt?
So, what exactly is an OR? An OR is a document that serves as proof of payment for goods or services received. It must be issued by the seller at the time of the transaction and include specific information such as the name and address of the seller, the date of sale, a description of the goods or services sold, and the amount paid.
Why are ORs significant? They’re essential because they serve as evidence of income for your business.
Allows you to track income and expenses for tax purposes:
Businesses in the Philippines must file an annual income tax return. To do this, you must record your annual income and expenses. ORs serve as proof of income, which you can use to calculate your taxes.
Enables you to claim input VAT:
Input VAT is the value-added tax charged on goods or services purchased by your business. If your business is registered for VAT, you can claim input VAT credits on your annual VAT return. This can result in a refund from the government if your inputs exceed your outputs. To claim input VAT credits, you must have proof of purchase in the form of an OR or sales invoice.
Proof Of Income For BIR Compliance:
As mentioned earlier, ORs serve as proof of income for your business. This is important for tax purposes, as discussed above. In addition, it’s also essential for compliance with the Bureau of Internal Revenue (BIR).
The BIR requires businesses to issue ORs to customers as proof of income. Companies that fail to do this may be penalized, including fines or imprisonment.
BIR Law On Official Receipts
The Official Receipt, also popularly known as the BIR Receipt, is a document issued by a taxpayer in exchange for payment received for goods or services.
The issuance of an Official Receipt is required under Section 237 of the National Internal Revenue Code of 1997. This section says that all people who have to pay taxes on income must issue receipts for each sale or transfer of something worth 25 pesos or more. The receipt must show the date, quantity, unit cost, and a description of what was sold or transferred. The receipt must also be made in duplicate.
Official Receipts must be issued to provide a record of the transaction and allow the taxpayer to claim deductions or input tax credits.
What is a BIR Form 2307? For those unfamiliar with the term, it is simply an official receipt that must be provided by a business to its supplier whenever withholding taxes are deducted from the payment. If, for example, 2% withholding tax is legally required to be deducted from an amount made to a supplier, the business must then file and remit that 2% withholding tax to the proper authorities. At the same time, the business must provide the supplier with a BIR Form 2307 as proof that the withholding tax has been applied. This form will then be used by the supplier when applying for a tax credit.
It will deduct the amount withheld from the supplier’s tax payable because she has effectively remitted the tax in advance through the service payment. Thus, businesses need to be aware of their obligations regarding withholding taxes and the requirements for issuing a BIR Form 2307. It would be best if you always kept official receipts on hand to avoid any penalties or fines.
Updates: The “Ease of Doing business and Efficient Government Service Delivery Act of 2018” removes the five (5)-year validity period on all manual and system-generated principal and supplementary invoices and receipts.
Requirements For BIR Receipt or Authority To Print (ATP)
The Bureau of Internal Revenue (BIR) requires all registered businesses to have an Authority To Print (ATP) their own receipts and invoices.
An ATP is simply a license or permit that allows a business to print its official receipts and invoices instead of having to purchase them from the BIR.
The process for applying for an ATP is relatively simple. Businesses will need to fill out and submit a BIR form 1906, along with the required documents. Once the application is approved, companies will be issued an ATP certificate, which they must display prominently on the business premises.
Here are requirements for BIR receipt:
- Final & clear sample of principal and supplementary receipts/invoices
- Photocopy of last issued ATP or Printer’s Certificate of Delivery (PCD) or any booklet from the previous issued ATP for subsequent application
Collection Receipt vs Official Receipt
A collection receipt is a document that serves as proof of payment but does not include all of the required information for an OR.
A collection receipt may be issued by businesses such as utility companies, schools, or hospitals. It should include the payee’s name and address, the payment date, and the amount paid.
If you’re issued a collection receipt, you should request an OR from the business. The business should then give you an OR with all of the required information.
Sales Invoice vs Official receipt
A sales invoice is a document that includes all of the required information for an OR, plus additional information such as the terms of sale, payment methods, and shipping details.
Businesses such as online retailers, manufacturers, or wholesalers may issue a sales invoice.
If you’re issued a sales invoice, you can use it as proof of payment. However, if you need an OR for tax purposes, you should request one from the business.
Acknowledgment Receipt vs Official Receipts
An acknowledgment receipt is a document that confirms you received the goods or services. However, it does not include all the required information for an invoice.
An acknowledgment receipt should include the name and address of the payee, the date of payment, a description of the goods or services received, and the signature of the person receiving the goods or services.
If you’re issued an acknowledgment receipt, you should request an OR from the business. The business should issue you an OR with all the required information.
Who needs to issue official receipts in the Philippines?
In the Philippines, businesses must issue ORs to customers for all transactions. This includes sales of goods and services, rentals, leases, and commissions.
The only exceptions are transactions exempt from VAT, such as exports and certain financial services.
How to Issue an Official Receipt in the Philippines
Official receipts can be issued manually or electronically.
If you’re issuing ORs manually, you should use pre-printed forms that include all the required information. You can purchase these forms from stationery stores or office supply stores.
If issuing ORs electronically, you can use accounting software such as QuickBooks or Xero. These software programs will generate ORs that include all of the required information.
Once you’ve generated the OR, you should print it out and issue it to the customer. The customer should then sign the OR to confirm receipt. Here is the official receipt sample from the Philippines.
Types Of the Information Included In An Official Receipt
The following information must be included on all ORs:
- Name, TIN (with a suffix of the word VAT), business style, if any, and address of the financial institution
- Date of transaction
- Name, TIN, business style, if any, and address of the VAT-registered client;
- Description of the nature of the transaction
- Invoice value or consideration, showing the VAT separately
- The total amount billed and received
- Space for date of transaction
- Space for customer name and address
- Serial Number of invoice or receipt
- ATP Number and series approved
- Printer information
Tips For Staying Compliant on Official Receipt With Philippine Tax Law
Here are some tips to help you stay compliant with Philippine tax law:
Keep track of all sales and purchases:
This includes cash transactions and transactions made using credit cards, checks, and bank transfers.
Issue an OR for every transaction, regardless of the amount:
It would be best if you issued an OR for every transaction, irrespective of the amount.
Make sure the ORs are easy to read and understand:
The OR should be straightforward to understand. It should include all of the required information and your business name and contact information.
Keep track of expired ORs:
ORs are valid for three years from the date of issuance. After that, they expire and can no longer be used for tax purposes.
Use accounting software to issue ORs electronically:
This will help you save time and ensure that all the required information is included in each OR.
Penalties and fines for non-compliance with tax laws in the Philippines
If you don’t comply with tax laws in the Philippines, you may be subject to penalties and fines.
The penalties for not issuing an OR can range from PHP 1,000 to PHP 30,000 for the first offense, while for the second offense, penalties can range from 2,500 to 50 000. See the table below.
Official receipts are an essential part of tax compliance in the Philippines. If you’re a business owner in the Philippines, it’s essential to understand what official receipts are and how to issue them properly. This blog post provided an overview of what is official receipt, differences between collection receipt vs official receipt, sales invoice vs official receipt philippines, official receipt sample philippines,collection receipt vs official receipt difference,acknowledgement receipt vs official receipt, requirements for bir receipt.
We’ll also offer some tips on staying compliant with Philippine tax law. Did you know that issuing proper official receipts is one of the key requirements for businesses in the Philippines? Make sure your business is up to date on all the latest tax compliance requirements by reading our latest blog post.