Legal basis and administrative authority
- The Commissioner of Internal Revenue is authorized to prescribe additional procedural or documentary requirements for tax administration and enforcement under Section 6(H) of the Tax Code of 1997, as amended.
- Section 1 ties the Circular to expanded accounting-information reporting to improve reliability and adequacy of data for better monitoring and analysis.
- Section 3 anchors penalties on the National Internal Revenue Code of 1997 (NIRC), as amended, specifically Sections 250 and 255.
Purpose and reporting objective
- The Circular applies reporting requirements consistently across sectors while considering industry-specific reporting volume under Section 1.
- The Circular requires taxpayers to submit schedules/lists in addition to the annual inventory list required under Section 13 of Revenue Regulations No. V-1 under Section 2.
- The schedules/lists must be reconciled with the amounts declared in the financial statements and annual income tax returns under Section 1.
- The Circular supports an expanded and improved landscape of accounting information reporting under Section 1.
Coverage: who must file
- The additional schedules/lists cover companies maintaining inventory of stock-in-trade, raw materials, goods in process, supplies and other goods under Section 1.
- Covered industries include the manufacturing, wholesaling, distributing, and retailing sectors under Section 1.
- Covered entities include real estate dealers/developers under Section 1.
- Covered service businesses include construction companies and building contractors under Section 1.
- Taxpayers with tangible asset-rich balance sheets—often with at least half of total assets in working capital assets such as accounts receivable and inventory—must submit the required schedules/lists under Section 2.
- Taxpayers not in the described industries must adopt the prescribed format applicable to their existing inventory under Section 2.
Required inventory and schedules format
- Taxpayers must submit schedules/lists in hard and soft copies in the formats under Section 2.
- Manufacturing/merchandising or retail companies must use Annex aAa under Section 2.
- Real estate companies must use Annexes aBa and aB-1a under Section 2.
- Construction industry taxpayers must use Annex aCa under Section 2.
- For taxpayers adopting formats based on existing inventory, the Circular requires use of the herein prescribed format applicable to their inventory under Section 2.
Deadline rules and submission mechanics
- For initial filing using the herein prescribed format, schedules and the inventory list must be submitted on or before September 30, 2015.
- Initial filing must cover ending inventory as of December 31, 2014 under Section 2.
- After initial filing, taxpayers must submit schedules and the inventory list every 30th day following the close of the taxable year, consistent with the taxpayer’s accounting period under Section 2.
- The Circular expressly uses Section 13 of Revenue Regulations No. V-1 to define the underlying rule of filing an annual inventory not later than thirty (30) days following the close of the taxable year under Section 2.
- The annual inventory rule requires persons required to pay internal revenue taxes on business to keep and record inventory detail (quantity, description, unit, and total cost) and to file inventories at specified times under Section 13 of Revenue Regulations No. V-1 as reproduced in Section 2.
- Inventories at the beginning must be made and submitted within ten days after securing the privilege tax receipts or starting business depending on the place of business, under Section 13 of Revenue Regulations No. V-1 as reproduced in Section 2.
- Subsequent inventories must be submitted not later than thirty days after the close of the calendar year or accounting period under Section 13 of Revenue Regulations No. V-1 as reproduced in Section 2.
- The Commissioner of Internal Revenue may extend the inventory submission period in meritorious cases under Section 13 of Revenue Regulations No. V-1 as reproduced in Section 2.
Offices of submission; DVD-R certification
- The inventory lists and other applicable schedules must be submitted to the concerned Revenue District Office (RDO) where non-large taxpayers are registered under Section 2.
- Large taxpayers classified as large must submit to the Large Taxpayers Assistance Division (LTAD), Excise Large Taxpayers Regulatory Division (ELTRD), Large Taxpayers Division (LTD) Makati, and Cebu under Section 2.
- Soft copies of the inventory list (including other applicable schedules) must be stored/saved in Digital Versatile Disk-Recordable (DVD-R) under Section 2.
- DVD-R media must be properly labeled under Section 2.
- DVD-R must be submitted together with a notarized certification under Section 2.
- The notarized certification must be in the form shown in Annex aDa and must be duly signed by the taxpayer’s authorized representative certifying the data are true and correct under Section 2.
Format noncompliance and deemed non-receipt
- Submission that does not conform to the prescribed format is deemed not received by the concerned office of the BIR under Section 2.
- Nonconforming submissions are grounds for the imposition of penalties under the NIRC of 1997, as amended under Section 2.
Penalties for violations
- Any violation of the Circular is subject to the corresponding penalties under Section 250 and Section 255 of the NIRC of 1997, as amended under Section 3.
- Section 250 penalties apply to failure to make, file, or submit required information returns, schedules, reports, sworn statements, certifications, and other documents, or failure to keep required records under Section 250, as reiterated in Section 3.
- The penalty amount under Section 250 is One Thousand Pesos (P1,000.00) for each information return, schedule, report, sworn statement, certification and other document not made, filed or submitted, or for each record not maintained, under Section 250, as reiterated in Section 3.
- Section 250 imposes an annual aggregate cap: the aggregate amount imposed for such failures during a calendar year shall not exceed Twenty Five Thousand Pesos (P25,000) under Section 250, as reiterated in Section 3.
- Section 255 penalties apply to failure to make/file/submit any return or supply correct information at the time or times required by law or regulation under Section 255, as reiterated in Section 3.
- The Section 255 fine is not less than PHP 10,000 and imprisonment of not less than one (1) year but not more than ten (10) years under Section 255, as reiterated in Section 3.
- Section 255 specifies that compromise amounts depend on whether gross sales/earnings/receipts or gross estate or gift exceeds thresholds, with the Circular reproducing the compromise table under Section 3.
Criminal liability and compromise table
- The Circular reiterates that Section 250 includes criminal liability and provides a compromise arrangement under Section 3.
- The Circular reiterates that Section 255 includes criminal liability and provides a compromise scheme tied to thresholds of gross sales, earnings, or receipts (or gross estate or gift) under Section 3.
- The compromise scheme in the reproduced table under Section 3 uses the format “P x x x” and provides compromise amounts corresponding to threshold ranges (including examples shown such as P50,000, P100,000, P3,000, P5,000, P10,000, P20,000, and P25,000).