BIR prescribes additional reporting requirements

On Sept. 16, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 57-2015 prescribing the submission of inventory lists and additional reporting requirements for certain companies (mentioned below). 

Through the issuance of the said RMC, the BIR aims to provide guidance on how financial accounting information should be reported, in line with its objective to improve the reliability of accounting information data for better monitoring and analysis.

Under Section 1 of RMC No. 57-2015, additional reports and schedules must be submitted along with the annual inventory list by companies engaged in the business of manufacturing, wholesaling/retailing, including real estate dealers/developers and service companies that maintain inventories of stock-in-trade, raw materials, goods in process, supplies and other goods.

All taxpayers with tangible asset-rich balance sheets, often with at least half of their total assets in working capital shall submit, in addition to the annual inventory list, the schedules prescribed by the RMC in the following formats:

1. For manufacturing, merchandising or retail companies – inventory of merchandise/raw materials/goods in process/finished goods (Annex A)

2. For real estate companies – inventory of saleable units with corresponding cost per project (Annex B) and/or inventory of saleable units per project with the corresponding trade accounts receivable reconciliation (Annex B-1)

3. For construction industries – schedule of outstanding receivables (beginning and ending) and realized gross profit per project (Annex C)

Note the annexes are very industry specific, implying that only the abovementioned industries are covered by the requirement of additional submission. Note further that Section 2 of the subject RMC also states taxpayers not belonging to the aforementioned industries shall adopt from any of the above formats the most applicable to their existing inventory, without expressly stating the need to file the said schedules.

The RMC emphasized the information contained in the schedules should be reconciled with the amount declared in the financial statements and annual income tax returns.  

The inventory list, including other applicable schedules, must be submitted in hard and soft copies. The soft copies must be stored in a properly labeled DVD-R and submitted along with a notarized certification, duly signed by the authorized representative of the taxpayers certifying the data contained in the DVD-R are true and correct.

Initial filing of the additional reporting requirements was due on Sept. 30, covering companies with ending inventory as of Dec. 31, 2014. Thereafter, the report is due every 30th day following the close of the taxable year. The reports must be submitted to the revenue office having jurisdiction over the taxpayer. As stated in the said RMC, submission of schedules and inventory lists that do not conform to the prescribed format shall be deemed not received by the concerned BIR office and shall be considered as grounds for imposition of penalties as provided for under the National Internal Revenue Code of 1997, as amended.

On Sept. 24, the BIR Large Taxpayer Service (LTS) conducted a seminar on recent BIR issuances focusing on RMC No. 57-2015. Personnel from the Regular Large Taxpayers Audit Division (LTAD) III clarified that even if the amount of working capital assets do not meet the criteria as stated under Section 2 of the subject RMC (“at least one-half of the total assets in working capital assets”), as long as the taxpayer is included in the industries covered, it is still required to accomplish the prescribed schedules and comply with the said RMC.  Lately, the same personnel verbally clarified that if a taxpayer has previously submitted an inventory list, and even if the taxpayer does not belong to the enumerated industries (retailing, distributing, manufacturing, wholesaling, real estate companies, construction companies), the said taxpayer should refile its inventory list using the annexes as a guide to the format of the list to be filed. 

For example, with regard service companies, if the service company has an inventory that forms part of the direct cost in generating revenues, that is an indicator the service company should file an inventory list using the format required under RMC No. 57-2015 as a guide.

On the other hand, personnel from the office of the assistant commissioner of Internal Revenue, LTS also explained any requests for extension of the same shall be considered on a case to case basis and on meritorious grounds. The consideration of requests for extension to submit is based on Section 13 of Revenue Regulations No. V-1 (Bookkeeping Regulations).  It was further clarified that for covered companies with fiscal year ending after Dec. 31,  2014 until the first half of the year or June 30, the deadline for compliance is on Sept. 30,  while taxpayers which have fiscal year ending July 31, onwards are required to submit the additional reporting requirements within 30 days after the close of the taxable year. Based on the foregoing, it can be presumed taxpayers with fiscal year ending July 31 and Aug. 30, are required to submit their first RMC No. 57-2015- compliant inventory list on Sept. 30.  Note the requirement for submission by companies with fiscal years ending after Dec. 31, 2014, to specifically submit their inventory lists on or before Sept. 30, was not expressly stated in the RMC.

The BIR subsequently issued RMC No. 61-2015, which extended the deadline from Sept. 30, to on or before Oct. 31.  This is a welcome relief for taxpayers, since a cursory check of the sample lists attached to the RMC shows the addition of new information previously not required in the old inventory lists.  Further, the requirement of a notarized certification to accompany the list will definitely require additional effort on the part of the taxpayer.  Hopefully the BIR will hold additional seminars before the Oct. 31 deadline to clarify any other questions taxpayers may have regarding the wording of the RMC.  While we understand the need to enforce compliance with the requirements for financial accounting information, enforcement should be based on clear rules and guidelines, and should allow taxpayers ample time to comply with the same.

Marino P. Lizaso V is an associate from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email [email protected] or [email protected].

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