Guidelines on the Compliance with Certain Administrative Requirements of the Value-Added Tax System

December 7, 1987 REVENUE MEMORANDUM CIRCULAR NO. 51-87 SUBJECT : Guidelines on the Compliance with Certain Administrative Requirements of the Value-Added Tax System TO : All Revenue Regional Directors, Revenue District Officers and Others Concerned This Revenue Memorandum Circular is designed to provide information and guidelines on certain administrative requirements of the value-added tax (VAT) system. 1. Filing of inventory of unused invoices/receipts . In accordance with Section 26 of Revenue Regulations No. 5-87, unused invoices/receipts of VAT-registered persons as of December 31, 1987, may be allowed to be used or issued for VAT transactions beginning January 1, 1988, until exhausted. It is mandatory, however, that the taxpayer shall first a) file an inventory in triplicate of such unused invoices/receipts, which must show the VAT registration number of the taxpayer, number of booklets and corresponding serial numbers; and b) stamp on the original and duplicate of such unused invoices/receipts his VAT registration number. The inventory shall be filed with the revenue district office of the city or municipality where the principal place of business or branch is located. Pending submission of the final inventory of unused invoices, a tentative list of invoices to be used starting January 1, 1988 shall be filed not later than December 31, 1987. The final inventory shall be filed not later than January 31, 1988. For those who will become liable for the tax after January 1, 1988, the inventory shall be filed before the date they shall become liable for the VAT. 2. Registration of subsidiary sales and purchases journals . The subsidiary sales and purchases journals required to be kept and maintained by VAT-registered persons in addition to the regular books of accounts under Sec. 22 of RR 5-87 shall, before its use, be registered with the collection agent of the city or municipality where the principal place of business or head office of the VAT taxpayer is located. In the initial year of implementation, it shall be registered not later than January 1, 1988 (RR 6-87). The regulations do not prescribe a definite form or contents of the subsidiary books, which will depend on the particular need of the business of the taxpayers. However, the subsidiary sales journal (SSJ) shall at least contain separate columns for: sales-export; sales-zero-rated; sales-exempt; sales-taxable; deemed sales; and output tax. Similarly, the subsidiary purchase journal (SPJ) shall at least provide for purchases of goods for sale; purchases of supplies; purchases of raw materials; purchases of services; purchases of capital goods; purchases from non-VAT persons; input taxes; and input tax deemed paid. On the certificate of registration required to be stamped on the first page of the journal, the VAT registration number of the taxpayer, in addition to other items of information, shall be indicated by the registering officer. 3. Filing of information by construction and service contractors . In order that the tax on amounts due on contracts completed on or before December 31, 1987, payments of which are however, receivable on or after January 1, 1988, shall be considered as having accrued before the effectivity of the VAT and subject to the 4% percentage tax, Section 6(g) of RR 5-87 prescribes that - a) an information return showing the name(s) of the contractee(s) and the corresponding amount(s) of the contract price outstanding as of December 31, 1987, and containing a declaration of the obligation to pay the percentage tax due; cd b) the contractor billed the unpaid amount not later than December 31, 1987, a copy of which shall be attached to the information; c) the receivable amount has been duly recorded in the 1987 books of account of the contractor; and d) the contractor files the percentage tax return and pays the 4% contractor's tax due on payments received not later than the 20th day after the end of each quarter beginning with the last calendar quarter of 1987. This privilege is given only to a VAT-registered taxpayer. Consequently, his failure to comply with any of the above-stated conditions shall automatically make him liable to the 10% VAT. The information return (BIR Form No. ) shall be filed in triplicate not later than January 20, 1988. 4. Application for the imposition of the zero-rate Section 8(d) of RR 5-87, implementing Sections 100(2) and 102 of the Tax Code, prescribes prior application for, and approval of, the imposition of zero rate on certain transactions. The application shall be made in BIR Form No. ______, and filed with the Revenue District Officer of the city or municipality where the principal place of business or head office of the applicant is located in quadruplicate. The transactions for which application for zero-rate may be claimed are: (a) sales of goods to persons or entities whose exemption under special laws or international agreements effectively zero-rate such sales; and (b) services rendered to persons or entities whose exemption effectively zero-rates such supply of services. Once the application is approved for a certain transaction involving the same exempt persons or entities under the same law or international agreement, there is no need for renewal of the application for future transactions. 5. Transitional input tax credits . The presumptive input tax equivalent to 8% of the value of goods on hand as of December 31, 1987, which were either purchased as finished products for resale without processing or to be used as supplies in the course of business shall be allowed to a VAT-registered person who had filed the required inventory of such goods not later than January 31, 1988. The inventory must show the VAT registration number of the claimant, quantity, description and corresponding value per item of goods, and filed in triplicate with the Revenue District Officer of the city or municipality where the principal place of business of the claimant is located. This inventory requirement is distinct and separate from the inventory of goods for income tax purposes which is required to be submitted on or before January 30. All internal revenue officers and others concerned are enjoined to give this Revenue Memorandum Circular the widest publicity possible. (SGD.) BIENVENIDO A. TAN, JR. Commissioner