Propriety of the COA Resident Auditor's Order Suspending Payments Made to Suppliers Who Failed to Issue BIR-Registered Sales

March 19, 1992 BIR RULING NO. 084-92 238-00 263-00 000-00 084-92 Philippine International Trading Corporation Philippine International Centre Tordesillas Street, Salcedo Village Makati, Metro Manila Attention: Mr . Jose Luis U . Yulo, Jr Executive Vice-President Gentlemen : This refers to your letter dated August 12, 1990 in relation to a letter of your Finance Manager dated August 15, 1990 requesting clarification on the propriety or legality of the Commission on Audit (COA) resident auditor's order suspending payments made to your suppliers who failed to issue BIR-registered sales/commercial invoices and/or official receipts and holding your personnel who signed disbursement vouchers personally liable for the amounts paid to said suppliers even though said personnel did not benefit from the transaction nor violated any BIR regulations regarding the registration of invoices and receipts. It is represented that you are a line corporate agency of the Department of Trade & Industry created under P.D. 1071 as amended, to primarily promote the export of Philippine Products in the World Market; that to carry out your mandate, you procure a wide range of Philippine products from small and medium-sized producers and manufacturers and promote/sell these products to foreign buyers; that upon delivery of the products to you, the suppliers issue sales/commercial invoice to you as basis for payment; that some of these invoices are not registered or stamped by the BIR; that in some cases, no official receipts are given to you; that notwithstanding the fact that the official receipts/commercial invoice issued to you are not registered, you paid the suppliers upon delivery of the goods; that you made these payments to enable the suppliers to continue their operation; that your COA resident auditor suspended in audit some payments intended for local suppliers who did not issue BIR-registered/stamped official receipts; and that the salary of some of your personnel whose names/signatures appear in the disbursement vouchers were suspended because they were made personally liable for the amounts paid to the local suppliers who failed to issue BIR-registered sales/commercial invoice and/or official receipts. In reply, please be informed that then Section 216 of the Tax Code as amended by P.D. No. 1457 (effective June 11, 1978), provides that "all persons subject to an internal revenue tax shall . . . issue duly registered receipts or sales or commercial invoices." The specific penalty for non-registration of receipts and invoices was also prescribed for the first time in the Tax Code (by amendment introduced by P.D. No. 1254 effective November 28, 1977) as Section 220-A thereof. However, the statutory requirement of registration and stamping of receipts and invoices before use was deleted/repealed by P.D. 2006 effective January 1, 1986, while the corresponding penalty for non-registration/stamping was deleted/repealed by P.D. 1994 which, likewise, took effect on January 1, 1986. Then Section 216 (now Section 238) of the Tax Code as amended by P.D. 2006 provides that "All person subject to an internal revenue tax shall . . . issue receipts or sales or commercial invoices". The phrase "duly registered" had been deleted thus doing away with the requirement under Revenue Regulations No. 2-78 dated February 20, 1978 that receipts/invoices shall be registered with and stamped by the corresponding Revenue District Office before the same may be used and issued to customers or clients. (RMC No. 46-86) Subsequently, Revenue Regulations No. 2-90 dated May 25, 1990 was issued restoring the requirement to register and stamp receipts and invoices prior to their use. Revenue Regulations No. 2-90 took effect sixty (60) days from the date of its publication in a newspaper of general circulation or on August 21, 1990 because the same was published in the Manila Bulletin, a newspaper of general circulation on June 22, 1990. In other words, from January 1, 1986 up to August 20, 1990, the registration of receipts and invoices was not required. Such being the case, since as represented the purchases of PITC in 1986 are covered by receipts/invoices issued by suppliers, no violation of internal revenue law, rules and regulations was committed within that period in issuing invoices/receipts which were not registered or stamped by the B.I.R. However, after August 21, 1990 the issuance of unregistered receipts/invoices constitutes violation of internal revenue rules and regulations; hence, the person issuing the same is subject to the penalty provided for in Section 274 of the Tax Code reading "Sec. 274. Violation of Other Provisions of this Code or Regulations in General . A person who violates any provision of this Code or any regulation of the Secretary of Finance promulgated thereunder, for which no specific penalty is provided by law shall, upon conviction for each act or omission, be fined in a sum of not more than One Thousand Pesos or imprisoned for a term of not more than six months, or both." These penalties, however, may only be imposed by the courts. For failure or refusal to issue receipts or sales or commercial invoices, however, the applicable penalties are those provided in Section 263(a) of the Tax Code which provides that upon conviction for each act or omission of any person who, being required under Section 238 of the Tax Code to issue receipts or invoices, fails or refuses to issue such receipts or invoices . . . shall be fined not less than One Thousand Pesos but not more than Fifty Thousand Pesos or imprisoned for a term of not less than six months and one day but not more than two years or both. Based on the foregoing presentation of facts, it is the opinion of this Office that the issuance of unregistered invoice and official receipts by suppliers to evidence payments by PITC in 1986 and prior to the effectivity of Revenue Regulations No. 2-90 on August 21, 1990, restoring the requirement of registration of receipts, sales and commercial invoices prior to their use, does not constitute a violation of the provisions of the Tax Code. It is, however, understood that such unstamped and unregistered invoice and official receipts issued by the Suppliers to PITC specifically during the period from January 1, 1986 up to August 20, 1990 must be duly authorized for printing as required under then Section 182 (now Section 239) of the Tax Code, as amended. In other words, the use even then of invoice/receipts bought from the counter will constitute violation of Section 239 of the Tax Code. Be that as it may, the PITC personnel in charge of the preparation of disbursement vouchers and payments to suppliers prior to August 21, 1990 but after January 1986 may not be penalized for violation of laws and regulations which this Bureau administer. aisadc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue