Compliance Requirements

1. Keeping of Books of Accounts

Language in which Books are to be kept The book of accounts are required to be kept in Native language, English or Spanish.

1. Keeping of Books of Accounts

Preservation of Books and Accounts and Other Accounting Records: All the book of accounts, including the subsidiary books and other accounting records of corporations, partnerships, or persons, are required to be preserved by them for a period beginning from the last entry in each book until the last day prescribed by the Tax Code within which the Commissioner is authorized to make an assessment. The said books and records shall be subject to examination and inspection by internal revenue officers.

2. Registration Requirements
Annual Registration Fee: An annual registration fee in the amount of P500 for every separate or distinct establishment or place of business, including facility types where sales transactions occur, are required to be paid upon registration and every year thereafter on or before the last day of January: Cooperatives, individuals earning purely compensation income, whether locally or abroad, and overseas workers are not liable to the registration fee herein imposed.

2. Registration Requirements
Taxpayer Identification Number (TIN): Any person required to make, render or file a return, statement or other document shall be supplied with or assigned a Taxpayer Identification Number (TIN) which he shall indicate in such return, statement or document filed with the Bureau of Internal Revenue for his proper identification for tax purposes, and which he shall indicate in certain documents.

2. Registration Requirements
Taxpayer
(Continuation)

Identification

Number

(TIN):

Only one Taxpayer Identification Number (TIN) shall be assigned to a taxpayer. Any person who shall secure more than one Taxpayer Identification Number shall be criminally liable under the provision of Section 275 on Violation of Other Provisions of this Code or Regulations in General.

2. Registration Requirements
Issuance of Receipts or Sales or Commercial Invoices All persons subject to an internal revenue tax are required, for each sale or transfer of merchandise or for services rendered valued at P25.00 or more, to issue duly registered receipts or sales or commercial inc\voices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service. Where the receipt is issued to cover payment made as rentals, commission, compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client.

2. Registration Requirements
Issuance of Receipts or Sales or Commercial Invoices In the case of sales, receipts or transfers in the amount of P100.00 or more, or regardless of the amount, where the sale or transfer is made by a person liable to value-added tax on another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipt or invoices shall be issued which shall show the name, business style, if any, address of the purchaser, customer or client. Where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.

2. Registration Requirements
Issuance of Receipts or Sales or Commercial Invoices The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of 3 years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.

3. Civil Penalties
In addition to the tax required to be paid, a penalty equivalent to 25% of the amount due shall be imposed in the following cases: a) Failure to file any return and pay the tax due thereon as required under the Tax Code or rules and regulations on the date prescribed; b) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filled; c) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment;

3. Civil Penalties
In addition to the tax required to be paid, a penalty equivalent to 25% of the amount due shall be imposed in the following cases: d) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the Tax Code or rules or regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.

3. Civil Penalties
Failure to file a return; Filing of false or fraudulent return In case of willful neglect to file the return within the period prescribed by the Tax Code or in case a false or fraudulent return is willfully made, the penalty to be imposed 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, receipts or income, or a substantial overstatement of deductions constitutes prima facie evidence of a false or fraudulent return.

3. Civil Penalties
Failure to file a return; Filing of false or fraudulent return Failure to report sales, receipts or income in an amount exceeding 30% of that declared per return, and a claim of deductions in an amount exceeding 30% of actual deductions renders the taxpayer liable for substantial under declaration of sales, receipts or income or for overstatement of deductions, as mentioned therein.

4. Interest
An interest at the rate of 20% per annum, or such higher rate as may be prescribed by rules and regulations, shall be assessed and collected on any unpaid 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 date prescribed for its payment until the full payment thereof.

4. Interest
Delinquency Interest Delinquency interest shall be assessed and collected in case of failure to pay: a) The amount of tax due on any return to be filed b) The amount of the tax due for which no return is required c) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, an interest until the amount is fully paid, which interest shall form part of the tax.

4. Interest
Interest on Extended Payment If any person required to pay the tax is qualified and elects to pay the tax on installment but fails to pay the tax or any installment, or any part of such amount or installment on or before the date prescribed for its payment, or where the Commissioner has authorized an extension of time within which to pay a tax or a deficiency tax or any part thereof, there shall be assessed and collected an interest on the tax or deficiency tax or any part thereof unpaid from the date of notice and demand until it is paid.

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 paid by the person failing to file, keep or supply the same, P1,000 for each failure. The aggregate amount to be imposed for all such failures during a calendar year shall not exceed P25,000.

5. Other penalties
Failure of a withholding agent to collect and remit tax Any person required to withhold account for, and remit any tax imposed by the Tax Code who willfully fails to withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this Chapter, be liable upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted.

5. Other penalties
Penal Liability of Corporations Any corporation, association or general co-partnership liable for any of the acts or omissions penalized under the tax Code, in addition to the penalties imposed upon the responsible corporate officers, partners, or employees shall, upon conviction for each act or omission, be punished by a fine of not less than P50,000 but not more than P100,000.

6. Prescription for Violations of any Provision of this Code All violations of any provision of the Tax Code shall prescribed after five (5) years.

Illustration:
Income tax return for the calendar year 2009 was due for filing on April 15, 2010 but the taxpayer voluntarily filed his tax return, without notice from the BIR, only on June 30, 2010. The tax due per return amounts to P100,000.

Illustration:
The taxpayers 2009 income tax return is required to be filed through the authorized agent bank under the jurisdiction of RDO East Makati. But, without prior authorization from the BIR, the taxpayer filed his return and paid the tax through the authorized agent bank under the jurisdiction of the RDO Davao City. Tax due and paid per return is P100,000.

Illustration:
The taxpayer did not file his income tax return for the calendar year 2008 which was due for filing on April 15, 2009. he was notified by the BIR of his failure to file the return, for which reason, 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.

Illustration:
Taxpayer filed on time his income tax return for calendar year 2008 and paid P100,000 on April 15, 2009. upon the pre-audit of his return, it was disclosed that he erroneously computed the tax due. The correct amount of tax due is P120,000. the taxpayer is assessed for deficiency income tax in a letter of demand and assessment notice issued on June 30, 2010.

Illustration:
ABC Corporation filed its final adjustment income tax return for calendar year 2008 and paid on time its income tax shown thereunder, amounting to P100,000. Said taxpayer was investigated. Upon verification of its accounting records, it was disclosed that its deduction, from gross income, of representation expenses in the amount of P200,000 did not meet all the statutory requisites for deductibility. The corporation was duly notified of the said discrepancy through a Preliminary Assessment Notice. Based on the income tax rate on corporations applicable in the year 2008, the income tax due after investigation amounts to P170,000. after deduction of income tax paid per return filed, the basic deficiency income tax amounts to P70,000, excluding penalties. Failing to protest on time against the preliminary assessment notice, a formal letter of demand assessment notice was issued on May 31, 2010, requiring payment of the assessment not later than June 30, 2010.

Illustration:
XYZ Corp. filed its final adjustment income tax return for calendar year 2008 with a net taxable income of P500,000. at the applicable income tax rate of 35% for the year 2008, its income tax amounted to P175,000. however, upon investigation, it was disclosed that its income tax return was false or fraudulent because it did not report a taxable income amounting to another P500,000. on it net income of P1,000,000, per investigation, the income tax due is P350,000. deducting its payment per return filed, the deficiency, excluding penalties, amounted P175,000. It was duly informed of this finding through a Preliminary Assessment Notice. Failing to protest on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 2010 calling for payment of the deficiency income tax on or before June 30, 2010.

Additional Readings:
Gains and Losses from Sales or Exchange of Assets Income from Rents and Farming