VAT Invoicing Requirements and Transitory Provisions Under the EOPT ACT

Last 12 April 2024, The Bureau of Internal Revenue (BIR) posted on its website, Revenue Regulations (RR) No. 7-2024, with effectivity on 27 April 2024. This RR aims to clarify the new rules of invoicing requirements brought about by the EOPT Act. However, as we are facing the transition with the new rules, confusion and panic arise among taxpayers. 

Naturally, taxpayers want to remain compliant with the new rules and don’t want to be penalized because of mere technicality when it comes to invoicing and documentation. Especially since the BIR is mostly driven by supporting documents which serve as evidence specifically when it comes to tax assessments and that claiming of input VAT relies heavily on valid supporting documents.

One of the key amendments brought about by the EOPT Act was the shift from a cash basis to an accrual basis for the sale of services. The EOPT Act mandates a single document for both sales of goods and services, that is, the invoice. Which means that the official receipt (OR) will no longer be the primary supporting document for the sales of services. This also means, of course, that the tax base shall no longer be gross receipts, but instead, the gross sales, even for sales of services.

Manual And Loose-Leaf Official Receipts

A common question encountered by taxpayers is what will now happen with their unused ORs, particularly for manual and loose-leaf ORs. Taxpayers have 2 options.

1. Taxpayers may still issue and continue to use their remaining ORs, but it will now only serve as a supplemental document for BIR purposes. The principal document shall be the invoice. All unused or unissued ORs may still be used as a supplementary document until fully consumed, provided that the phrase “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX.” is stamped on the face of the document. The OR, along with other equivalent documents such as the Collection Receipt, Acknowledgement Receipt and Payment Receipt are all the same, in which they serve as proof of payment that cash has been received or that payment has been collected/made.
    
2. Taxpayers are also allowed to convert and use the remaining ORs as invoices. For ease of doing business, taxpayers shall be allowed to strikethrough the word “Official Receipt” [e.g. Official Receipt] on the face of the manual and loose-leaf printed receipt and stamped “Invoice”, “Cash Invoice”, “Charge Invoice”, “Credit Invoice’, “Billing invoice”, “Service Invoice”, or any name describing the transaction, and to be issued as primary invoice to its buyer/purchaser until 31 December 2024. These documents shall be valid for claim of input tax by the buyer/purchaser for the period issued from January 22 to 31 December 2024, provided that the invoice to be issued bears the stamped “Invoice” and contains information required under Section 6(B) of RR No. 7-2024. The converted invoice can serve as proof of sales transaction and proof of payment at the same time. Any OR, whether stamped with “Invoice” or unstamped, issued after 31 December 2024, will be considered supplementary documents and ineligible for input tax claims. The stamping of ORs as invoices by taxpayers does not require approval from any Revenue District Offices (RDO) / LT Offices / LT Divisions. Taxpayers should obtain newly printed invoices with an Authority to Print (ATP) before fully using or consuming the converted ORs or before 31 December 2024, whichever comes first.

An important matter that must not be overlooked by taxpayers is the reportorial requirement of unused ORs to be converted as invoices. All unused manual and loose-leaf ORs to be converted as invoices shall be reported by submitting an inventory of unused ORs, indicating the number of booklets and corresponding serial numbers within 30 days upon effectivity of RR No. 7-2024, to the RDO / LT Office / LT Division where the Head Office or Branch Office is registered, in duplicate original copies.

Cash Register Machines (CRM), Point-of-Sale (POS) Machines E-Receipting or Electronic Invoicing Software, and Computerized Accounting Systems (CAS) OR Computerized Books of Accounts (CBA)

On another note, taxpayers using CRM / POS / E-Receipting / E-Invoicing Software may also change the word “Official Receipt” to “Invoice”, “Cash Invoice”, “Charge Invoice”, “Credit Invoice”, “Billing Invoice”, “Service Invoice”, or any name describing the transaction, without the need to notify the RDOs having jurisdiction over the place of business of such sales machines, since the reconfiguration shall be considered as minor system enhancement which shall not require the reaccreditation of sales software/system on the part of the software supplier nor the reissuance of the Permit to Use (PTU) on the part of the taxpayer-user. Provided, that the serial number of the renamed invoice shall start by continuing the last series of the previously approved OR and shall submit notice, indicating the starting serial number of the converted invoice to the RDO / LT Office / LT Division where the machines are registered, in duplicate original copies, almost similar to the process when converting manual or loose-leaf ORs to invoices.

Unlike with CRM / POS / E-Receipting / E-Invoicing Software, taxpayers using duly registered CAS or CBA need to revisit their system to comply with the provisions of the EOPT Act since the system reconfiguration will have a direct effect on the financial aspect, it shall be considered as a major enhancement which will require the taxpayer to update their system registration following the existing policies and procedures of filing a new application. The previously issued Acknowledgement Certificate (AC) or PTU shall be surrendered to the RDO where the concerned taxpayer is registered, and a new AC shall be issued to the Head Office / Branch. The required Annex of the AC shall include all the branches (if applicable) that are using the said system/software and the sets of series of accountable forms (invoice) to be used by each of the branches, if applicable. The BIR provided ample time in reconfiguring machines and systems. Adjustments must be undertaken on or before 30 June 2024. Any extension due to enhancements of the system shall seek approval from the concerned Regional Director or Assistant Commissioner of the Large Taxpayers Service which shall not be longer than 6 months from the effectivity of RR No. 7-2024.

Documents issued by CRM / POS, e-receipting or e-invoicing software containing the word “Official Receipt” beginning the effectivity of RR No. 7-2024 shall not be considered valid for claim of input tax by the buyer/purchaser. Issuance of “Official Receipt” for the sale of goods or services after 30 June 2024, will not be considered as evidence of sales of goods or services and shall be tantamount to failure to issue or non-issuance of invoice and is subject to a penalty of not less than PHP1,000 but not more than PHP50,000 and suffer imprisonment of not less than 2 years but not more than 4 years.

To summarize, RR No. 7-2024 have enlightened taxpayers regarding the invoicing requirements and the transitory requirements to remain compliant and avoid unnecessary penalties. For the taxpayers, these times are challenging and must adapt to the new rules swiftly considering the deadlines set by the BIR and the penalties involved.