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BACKGROUND:

Pursuant to Section 6 (H) of the Tax Code of 1997, as amended, the Commissioner may prescribe additional procedural or documentary requirements for  tax  administration  and  enforcement.  This  Circular  is  therefore  issued  to provide  guidance  on  how  financial  accounting  information,  in  addition  to  the annual   inventory   list   required   to   be   filed   under   Section   13   of  Revenue Regulations No. V-1, should be reported to the Bureau. This is in line with the Bureau’s objective of implementing an expanded and improved landscape of accounting  information  reporting  that  seeks  to  provide  reliable  data  and  to maximize  the  quality  and  adequacy  of  such  data  for  better  monitoring  and analysis.

SECTION 1. SCOPE AND COVERAGE

This  Circular  aims  to  consistently   apply  the  data  requirements   across different sectors with the peculiarity of the industry where the taxpayers belong directing the volume of reporting. Hence, the additional reports or schedules  to be submitted and filed with the annual inventory list shall cover companies maintaining   /inventory   of   stock-in-trade,   raw   materials,   goods   in   process, supplies  and  other  goods  such  as  manufacturing,   wholesaling,   distributing/ retailing  sectors  including  real  estate  dealers/developers,   service  companies, e.g., construction companies, building contractors, etc. It bears stressing that the data/information  contained  in the said schedules/lists  should be reconciled  with the amount declared in the financial statements and annual income tax returns.

SECTION 2. PRESCRIBED FORMAT AND DEADLINE FOR SUBMISSION

All taxpayers with tangible asset-rich balance sheets, often with at least half of  their  total  assets  in  working  capital  assets,  e.g..  accounts  receivable  and inventory, shall submit, in addition to the annual inventory list, schedules/lists prescribed herein, in hard and soft copies, using the format as shown in Annex “A” (for manufacturing / merchandising or retail company); Annexes “B” and “B-1” (for real estate company)  and Annex “C” (for construction  industry).  Taxpayers not belonging to the above-described industries shall adopt the herein prescribed format that is applicable to their existing inventory.

The soft copies of the inventory list including other applicable schedules shall be stored/saved  in Digital  Versatile  Disk-Recordable  (DVD-R)  properly  labeled and  submitted,  together  with  a notarized  certification,  as shown  in Annex  “D” hereof,  duly signed  by the authorized  representative  of the taxpayer  certifying that the data/information contained in the DVD-R are true and correct.

For  initial  filing  using  the  herein  prescribed  format,  the  schedules  and inventory  list  shall  be  submitted  on  or  before  September  30,  2015  covering ending  inventory  as  of  December  31,  2014,  and  thereafter  every  30th   day following  the  close  of  the  taxable  year  (depending  on  the  accounting  period adopted   by   the   taxpayer)   as   enunciated   under   Section   13   of   Revenue Regulations  No. V-1, otherwise  known as the Bookkeeping  Regulations,  which

provides  for the filing of an annual  inventory  of stocks-in-trade,  raw materials, goods  in  process,  supplies  and  other  goods  not  later  than  thirty  (30)  days following the close of the taxable year, to wit:

“Sec. 13. Records of Inventories: - Persons required by law to pay internal revenue  taxes  on business  shall keep, in addition  to the other books  and records prescribed in these regulations, a book of inventories, in which they shall record  in detail  the quantity,  description,  unit and total cost of every item  in their  stocks-in-trade,  materials,  supplies  and  other  goods  found  in their premises, of their establishments as the time they start business and at the close of the calendar year or accounting period. The inventory at the beginning shall be made and submitted to the Commissioner of Internal Revenue, if the place of business is in Manila, or to the Deputy Provincial or City Treasurer, if in a municipality or city, within ten days after securing the privilege tax receipts or starting the business and the subsequent inventories not later than thirty days after the close of the calendar year or accounting period. This period may, in meritorious  cases, be extended by the Commissioner of Internal Revenue.”

The inventory lists as well as other applicable schedules are to be submitted with the concerned Revenue District Office (RDO) where the non-large taxpayers are registered and with the Large Taxpayers Assistance Division (LTAD), Excise Large Taxpayers Regulatory Division (ELTRD), Large Taxpayers Division (LTD) Makati and Cebu, for taxpayers classified as large under the Large Taxpayers Service.

The submission  of the schedules  and inventory  list that does not conform with the herein prescribed format shall be deemed not received by the concerned office  of  the  BIR  and  shall  be  considered  as  grounds  for  the  imposition  of penalties under the NIRC of 1997, as amended.

SECTION 3. PENALTIES

Any violation of the provisions of the Circular shall be subject to the corresponding  penalties  under  Section  250  and  255  of  the  National  Internal Revenue Code (N IRC) of 1997, as amended.

The same penalties were reiterated in Revenue Memorandum  Order (RMO) No. 7-2015,  with pertinent  excerpts  reproduced  hereunder  found on page 4 of Annex A, RMO No. 7-2015, to wit:

TAX CODE SEC	NATUR E OF V I OLATI ON	CR I MI NAL L I ABI LI TY	AMOUN T OF COMPROMI SE
250	Failure to make, file or submit information returns, schedules, reports, sworn statements, certifications and other documents (except quarterly SLS/P/I, and the Annual Alpha List of Payees and/or the Annual Alpha List of Employees subjected to withholding taxes), or keep any record required by the Tax Code, as amended, or other existing rules and regulations.		On e Thousand Pesos (P1, 000. 00 f or each i nf ormati on ret urn, schedul e, report, sworn st at ement s, certifi cati on and ot her document not made, fil ed or submitt ed, or f or each record not mai nt ai ned. Provi ded, however, t hat t he aggregate amount to be i mposed f or such f ail ur es duri ng a cal endar year shall not exceed Twenty Fi ve Thousand Pesos (P25, 000).
255	Failure to make/file/submit any return or supply correct information at the time or times required by law or regulation	Fine of not less than P10,000 and imprisonment of not less than one (1) year but not more than ten (10) years.	If gross sal es, earni ngs or recei pt s; or gross es t ate or gift (based on t he subj ect ret urns/i nf ormati on f or fili ng/ submi ssi on)
			Exceed s	Bu t does no t exceed	Compromise is
			P x x x	P50 , 000	P1 , 000
			50 , 000	100 , 000	3 , 000
			100 , 000	500 , 000	5 , 000
			500 , 000	5 , 000, 000	10 , 000
			5 , 000, 000	10 , 000, 000	15 , 000
			10 , 000, 000	25 , 000, 000	20 , 000
			25 , 000, 000	x x x	25 , 000

SECTION 4. EFFECTIVITY

This Circular shall take effect immediately.

All  internal  revenue  officials,  employees  and  other  concerned  are  hereby enjoined to give this Circular as wide a publicity as possible.

(SGD) KIM S. JACINTO-HENARES
Commissioner  of Internal Revenue