Administrative Requirements of the Value Added Tax System

December 7, 1987 REVENUE MEMORANDUM ORDER NO. 35-87 SUBJECT : Administrative Requirements of the Value Added Tax System TO : All Revenue Regional Directors, Revenue District Officers and Others Concerned In order to insure prompt service and enhance proper compliance with the administrative requirements of the value-added tax system, the following procedures are prescribed. 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. The copies shall be distributed as follows: acd Original RDO's copy. Duplicate VAT Division for transmittal to RDO of principal place of business. Triplicate taxpayer's copy. In this connection, spot checks shall be made to ascertain whether the VAT persons with unused invoices/receipts had complied with the filing of the required inventory, and having complied, stamped their registration numbers on the unused invoices/receipts. 2. Registration of subsidiary sales and purchase journals. - The subsidiary sales and purchase 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). In addition to the other items of information in the certificate of registration stamped on the first page of books of accounts, the registering officers should also indicate the VAT registration number of the taxpayer. 3. Filing of information return 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; 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. cd i The information return (BIR Form No. ____) shall be filed in triplicate not later than January 20, 1988, and the copies thereof shall be distributed as follows: Original to be transmitted to the VAT Division not later than January 20, 1988. Duplicate RDO's file. Triplicate Taxpayer's copy. The VAT Division shall process the return to develop information data on who of VAT-registered contractors had complied with the prescribed condition for cross checking purposes. 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 original, duplicate and triplicate copies shall be transmitted immediately to the Commissioner thru the VAT Division for action. The quadruplicate is given to the applicant. Action taken on the application shall be indicated on the original, duplicate and triplicate, and applicant given or sent the original for his information. The triplicate shall be sent to the Revenue District Officer concerned. 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. The Revenue District Officer shall distribute the copies as follows: Original to be transmitted to the VAT Division not later than ten days from last filing date. Duplicate RDO's file. Triplicate Taxpayer's copy. It is prescribed that the inventories shall be processed by the VAT Division to countercheck claims of credits arising from this presumptive input tax. 6. Continuing registration. - Even as the deadline for the first VAT registration had already elapsed, the effort to search and register potential VAT taxpayers should be given fresh impetus. Surveys made show that substantial number of registrable persons have failed to register for lack of information. Ways and means, therefore, to reach and inform taxpayers, such as thru seminars, media, door-to-door campaign, should be organized. In this connection, it is restated that registration is a continuing requirement. Those who become liable to the VAT are required to register within thirty days after the end of a 12-month period if their gross sales and/or receipts exceed P200,000 (Sec. 18, RR 5-87). This Order shall take effect immediately. cd (SGD.) BIENVENIDO A. TAN, JR. Commissioner