The consequences of Tax Mapping violations
Forvis Mazars creates a short guide on the penalties for Tax Mapping Violations.
Awareness of the various duties and responsibilities beholden to business owners is key to successfully establishing a business in the Philippines. Keeping up with tax requirements is one of the most significant responsibilities tasked to a business owner.
One of the ways the Bureau of Internal Revenue (BIR) ensures compliance is through its Tax Mapping program or the Tax Compliance Verification Drive/Oplan Kandado.
The program operates by having the bureau send a BIR revenue staff to a business site to inspect a business and confirm if it follows the registration, bookkeeping, invoicing, and other rules required by the bureau.
Penalties for Tax Mapping violations
If an establishment is deemed non-compliant with specific requirements, a penalty will be issued by the investigating revenue officer. The severity of the fine will depend on the nature of the violation, with charges ranging from P1,000 to P50,000. But if the violations are too severe, business foreclosure or criminal charges might be given to the business owners.
BIR representatives arrive unannounced; however, establishments are given a 2-week notice to allow Companies to prepare and complete the necessary documents required for tax mapping.
Penalties for Tax Mapping violations are as follows:
Tax Mapping Requirements | Penalty amount to be paid | ||||||
1st Offence | 2nd Offence | ||||||
| A. Registration Requirements | |||||||
A1. Failure to Register | a. Cities | PHP 20,000 | |||||
| b. 1st Class Municipalities | PHP 10,000 | ||||||
| c. 2nd Class Municipalities | PHP 5,000 | ||||||
| d. 3rd Class Municipalities | PHP 2,000 | ||||||
A2. Failure to Renew Registration | PHP 1,000 | ||||||
A3. No Certificate of Registration displayed | PHP 1,000 | ||||||
A4. No “Notice to the Public” displayed | PHP 1,000 | ||||||
| B. Invoicing Requirements | |||||||
| B1. Failure to issue receipts/invoices | |||||||
| B2. Refusal to issue receipts/invoices. | |||||||
| B3. Duplicate Copy of the recipients/invoices is blank, but the accomplished original is detached. |
PHP 10,000 |
PHP 20,000 | |||||
| B4. Use of unregistered receipts/invoices | PHP 10,000 | PHP 20,000 | |||||
| B5. Incomplete information in the receipts/invoices | PHP 1,000 | PHP 2,000 | |||||
B6. Use of unregistered Cash Registered Machines (CRM) and/or components thereof without a permit
|
PHP 25,000 |
PHP 50,000 | |||||
| B7. Failure to register CRM as a cash depository only | PHP 25,000 | PHP 50,000 | |||||
| B8. Cash Depository CRM is used for issuing sales receipts/invoices | PHP 25,000 | PHP 50,000 | |||||
| B9. Failure to attach or paste the original sticker in the machine authorizing the use of the CRMS/POS or similar devices | PHP 1,000 |
| |||||
| B.10 Failure to attach or paste the original sticker in the machine authorizing the use of the CRM for cash depository only | PHP 1,000 |
| |||||
| B.11 Failure to display permit issued by the RDO (for CRM/POS or similar devices) | PHP 1,000 |
| |||||
| B.12 Failure to provide CRM with two (2) roller tapes | PHP 1,000 |
| |||||
| B.13 Failure to notify the Revenue District Officer before the transfer of CRM/POS or similar device to other devices to other business location | PHP 1,000 |
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| B.14 Use of CRM/POS or similar device in a place other than the specified permit | PHP 25,000 | PHP 50,000 | |||||
| C. Bookkeeping Requirements | If gross annual sales, earnings, or receipts | ||||||
C1. Failure to Register Books of Accounts | Exceeds | But does not Exceed | Compromise | ||||
PHP XXX | PHP 50,000 | PHP 1,000 | |||||
PHP 50,000 | PHP 100,000 | PHP 3,000 | |||||
C2. Failure to keep Books of Accounts at the place of business | PHP 100,000 | PHP 500,000 | PHP 5,000 | ||||
PHP 500,000 | PHP 5,000,000 | PHP 10,000 | |||||
PHP 5,000,000 | PHP 10,000,000 | PHP 15,000 | |||||
C3. Failure to make daily entries in the registered Books of Accounts | PHP 10,000,000 | PHP 20,000,000 | PHP 20,000 | ||||
PHP 20,000,000 | PHP 50,000,000 | PHP 30,000 | |||||
PHP 50,000,000 | PHP XXX | PHP 50,000 | |||||
| D. Others (refer to Section 275 National Internal Revenue Code [NIRC]) | |||||||
Tips for avoiding Tax Penalties
A business owner in the Philippines must register their business with the BIR; this is one of, if not the most, essential requirements for Philippine business owners. Without it, your business won’t be legally recognized by the Bureau and cannot operate.
Attempting to operate without being registered will lead to the following penalties:
- A fine of at least PHP 20,000
- Will receive a Pay Annual Registration Fee (BIR Form 0605) before January 31 of each year, which costs PHP 1,000 if not paid at the due date.
It is advisable to display the following documents on the business’ premises to avoid incurring any penalties:
- A BIR certificate of registration (BIR Form 2303)
- Annual Registration Fee for the Current Year (BIR Form 0605)
- Notice to the Public “ASK FOR RECEIPT” Signage
If these documents are not present at the business, a fine of at least PHP 1,000.00 will be administered.
Business owners must also issue receipts/invoices for the business’ sale of goods and services; the following offences will be issued if they can’t submit the following documents:
- 1st Offence: PHP 10,000 (Failure) PHP 25,000 (Refusal)
- 2nd Offence: PHP 20,000 (Failure) PHP 50,000 (Refusal)
It’s also mandated that companies register their manual receipts/invoices to the BIR, and if they don’t, a fine ranging from PHP 1,000.00 to PHP 50,000.00.
Businesses with Cash Registered Machines (CRM) and/or Point of Sales Machines (POS) or similar devices must be registered to the BIR. Uncompliant businesses incur the following penalties:
- 1st Offence: PHP 25,000/per unit
- 2nd Offence: PHP 50,000/per unit.
Using CRM/POS machines requires businesses to attach or paste an original sticker from the BIR that authorizes its use. If none are found in a machine, the company is fined PHP 1,000.00/per unit.
Businesses must also register their Books of Accounts to the BIR while maintaining it in the establishment’s location. If the book of accounts isn’t maintained or registered, the business will be issued a penalty fine ranging from PHP 200.00 to PHP 50,000.00, depending on its Gross Sales or receipts.
Another critical requirement mandated by the bureau is for businesses to withhold and remit the tax of the following to the BIR:
- Compensation for Employees (BIR Form 1601C)
- Payment subject to final and expanded withholding tax (BIR Form 1601E)
Businesses that can’t withhold and remit taxes to the bureau will incur at least a PHP 200.00 penalty depending on their Gross Sales/Receipts.
Lastly, businesses must pay and/or file business and income taxes monthly, quarterly, and annually. If this isn’t paid, a fine of at least PHP 2,000.00 is issued depending on the establishment’s Gross Sales or Receipts.