Rules on Receipts and Invoicing Requirements (Legal Article)
Disclaimer. This article is for general information only and is not legal advice. Philippine tax rules are implemented through the National Internal Revenue Code (NIRC), as amended, and detailed Bureau of Internal Revenue (BIR) issuances that may change or add requirements depending on taxpayer classification, industry, and the system used (manual, POS/CRM, or computerized).
1. The legal backbone: why “invoicing” is a tax compliance issue
In the Philippines, “invoicing” is not merely a commercial practice—it is a statutory obligation. The NIRC requires taxpayers engaged in business or practice of profession to issue duly registered invoices/receipts for sales of goods and services, and to keep books and records that match those documents. These documents serve multiple legal purposes:
- Evidence of sale and income (for the seller’s income tax and percentage tax/VAT).
- Support for deductibility (for the buyer’s expense claim).
- Audit trail (for BIR examinations, reconciliations, and third-party matching).
- Basis for penalties and even closure when not issued or improperly issued.
Noncompliance is not trivial: failure to issue compliant invoices, or issuing unregistered/incorrect ones, exposes the taxpayer to surcharges, compromise penalties, criminal liability, and potential business closure under the Tax Code’s enforcement provisions.
2. Who is a “Non-VAT taxpayer” and why it matters for invoicing
A. “Non-VAT” can mean different things
In practice, “Non-VAT” typically refers to a taxpayer not registered for VAT and therefore not charging output VAT and not claiming input VAT. This may include:
- Taxpayers below the VAT registration threshold (or those who did not opt to register for VAT), generally subject to percentage tax where applicable; and/or
- Taxpayers whose transactions are VAT-exempt by law (exemptions depend on the nature of the transaction); and/or
- Taxpayers under special regimes where VAT registration is not applicable or not chosen (subject to the specific law/rules).
B. The invoicing consequence of non-VAT status
A Non-VAT taxpayer must ensure its principal invoice:
- Does not show VAT as a separate component (no “12% VAT,” no “VATable Sales,” no “Output VAT”).
- Clearly indicates Non-VAT status (commonly “NON-VAT Registered”).
- Is duly registered with the BIR (printed with Authority to Print, or generated by a duly approved/registered system).
- Contains the mandatory information required for a valid invoice.
Misrepresenting VAT status (e.g., using VAT-registered invoice formats, issuing VAT invoices, or separately billing “VAT”) is a compliance risk and can trigger assessments and penalties.
3. Invoice vs. Official Receipt: the modern direction of the law
A. Traditional distinction (historical context)
Historically, Philippine practice distinguished between:
- Sales Invoice (commonly for sale of goods), and
- Official Receipt (OR) (commonly for sale of services and as proof of payment).
This distinction mattered greatly for VAT (especially input VAT substantiation), and many businesses and government offices became operationally dependent on ORs.
B. Current policy direction: “invoice” as the principal document
Reforms in tax administration have moved toward invoice-based documentation for both goods and services (with transition rules for legacy OR inventories). In general compliance terms today:
- The principal document expected to support a sale of goods or services is the invoice, and
- Legacy OR forms may be subject to conversion or replacement rules depending on the taxpayer’s situation and the latest implementing issuances.
Practical compliance point: even Non-VAT taxpayers should align to invoice-based documentation and ensure that whatever document is issued is the BIR-registered principal invoice recognized for tax purposes.
4. What a Non-VAT taxpayer must issue: the “principal invoice” requirement
A. The principal invoice
A principal invoice is the primary BIR-registered document issued to evidence a taxable transaction. For Non-VAT taxpayers, this is typically a:
- Sales Invoice (goods), and/or
- Service Invoice (services), depending on the business model and BIR registration.
B. Supplementary documents are not substitutes
Documents such as:
- delivery receipts, order slips, job orders, billing statements, acknowledgments, collection receipts, pro-forma invoices, or
- platform/app screenshots for online sales
are generally supplementary and do not replace the obligation to issue a BIR-registered principal invoice.
They can support internal controls, but the invoice is what anchors the transaction for tax.
5. “Duly registered” invoices: how Non-VAT taxpayers lawfully produce invoices
A Non-VAT taxpayer may issue invoices through one of three common setups, each requiring BIR registration/approval steps.
A. Manual or loose-leaf printed invoices (via Authority to Print)
Most small taxpayers use printed booklets or loose-leaf sets produced by a BIR-accredited printer. Core requirements include:
- Secure Authority to Print (ATP) (commonly via the BIR’s registration processes).
- Use a BIR-accredited printer.
- Ensure the invoice bears mandatory printing details (ATP information, printer info, serial ranges, etc.).
- Use invoices strictly within the registered serial number series and branch where applicable.
B. Cash Register Machine (CRM), POS, or similar sales machines
If issuing invoices via POS/CRM:
- The machine must be registered and permitted/acknowledged by the BIR under the applicable rules.
- The system-generated invoice must contain the required data fields and follow the registered format.
- Z-readings/X-readings and audit logs must be maintained.
C. Computerized Accounting System (CAS) / Computerized Invoicing
If invoices are generated by a computerized system:
- The system generally requires a BIR permit/acknowledgment under the rules for CAS/invoicing systems.
- Format, controls, audit trail, and print/electronic output must comply with BIR specifications.
Key point: “Duly registered” is not just about content; it is also about authority (ATP/permit/acknowledgment) and traceability (serial sequence and audit trail).
6. Mandatory contents of a Non-VAT invoice (what must appear on the face of the document)
While exact templates vary by industry and by BIR registration, a compliant Non-VAT invoice commonly needs the following categories of information.
A. Seller’s identifying information
- Registered name / trade name (as registered)
- Business address
- Taxpayer Identification Number (TIN), often with branch code if applicable
- Line of business / trade (commonly reflected in registration)
- Non-VAT status marking (e.g., “NON-VAT Registered”)
B. Invoice identity and control features
- Document type (Sales Invoice / Service Invoice)
- Serial number (pre-printed or system-generated, strictly sequential within the approved series)
- Date of transaction (and often time for POS receipts/invoices)
C. Buyer/customer information (especially for B2B)
For business buyers who need substantiation for deductions and withholding:
- Buyer’s registered name
- Buyer’s address
- Buyer’s TIN (commonly required for B2B, government, and where needed for withholding documentation)
For retail consumers, simplified buyer info may be acceptable depending on rules and thresholds, but the invoice must still be issued and must be completed when the buyer requests purchaser details.
D. Transaction details
- Description of goods/services
- Quantity and unit price (where applicable)
- Gross amount and total amount due
- Terms (cash/credit) when relevant
E. Tax statements appropriate to Non-VAT status
- No separate VAT line item.
- Statements commonly used for Non-VAT invoices include language indicating the document is not valid for input VAT claims (since Non-VAT sellers do not issue VAT invoices that create input VAT credits).
F. Printing/ATP details (for printed invoices)
Printed invoices typically include:
- ATP number and date
- Name/TIN/address of accredited printer
- Serial range and print details
7. Timing rules: when a Non-VAT invoice must be issued
The governing principle is that the invoice must be issued at the time the sale is made or the service is rendered, or consistent with the statutory/implementing rules on the timing of documentation and recognition.
In practice, common compliance approaches are:
A. Sale of goods
- Issue the invoice upon sale and generally before or upon delivery/release of goods.
- For deliveries, the invoice should accompany the goods or be provided to the customer within the required timeline under the taxpayer’s system and BIR rules.
B. Sale of services (including professional services)
- Issue the invoice upon billing and/or upon receipt of payment, depending on the applicable invoicing rules and the nature of the arrangement.
- For advance payments, issue the invoice consistent with the rule on documenting collections/earnings under the taxpayer’s system and registration.
C. Installments and progress billings
- Many businesses document progress billings and installment collections using invoices tied to contractual milestones.
- The key is consistency, traceability, and compliance with how the taxpayer is registered to issue principal invoices, including proper references to the underlying contract and prior billings.
Best compliance posture: issue an invoice for every transaction event that creates a taxable sale/collection under the taxpayer’s registered method, rather than relying on informal acknowledgments.
8. Non-VAT invoices and percentage tax (and other non-VAT tax consequences)
Non-VAT taxpayers are often subject to percentage tax (unless exempt or under a special rule). The invoice interacts with this in important ways:
- The invoice amount is part of the gross sales/receipts base used to compute percentage tax where applicable.
- The invoice should not mislead the customer into thinking VAT was charged.
- If a taxpayer incorrectly bills VAT or uses VAT invoice formats, the BIR may treat it as compliance evidence raising further issues (registration, improper tax billing, and potential deficiency assessments).
9. Withholding tax realities: what customers often require from Non-VAT suppliers
Non-VAT sellers providing services to business customers commonly encounter withholding tax. Practical implications:
- The seller issues a principal invoice stating the gross amount.
- The customer withholds (creditable or final) as required and issues a withholding tax certificate (e.g., creditable withholding documentation).
- The seller records gross income, not the net cash received, and treats the withholding as a tax credit (if creditable) subject to substantiation.
A frequent error is treating the invoice as a mere “collection document” and failing to align invoices, payments, and withholding certificates. This creates mismatches that can surface in audits.
10. Special situations that affect invoice content and handling
A. VAT-exempt transactions by a Non-VAT taxpayer
A taxpayer may be Non-VAT because its transactions are VAT-exempt by law. In such cases, the invoice is still required, but it should clearly indicate the VAT-exempt nature of the sale when relevant, including the basis or notation used in practice to support the exemption.
B. Senior Citizen and PWD discount transactions
Where statutory discounts apply, invoices should reflect:
- the gross selling price,
- the discount amount,
- the net amount payable,
- required purchaser identification details (as applicable), and
- other details required under discount rules and implementing issuances.
C. Sales returns, allowances, and corrections
Adjustments should not be handled by simply “rewriting” history. Standard compliant practice includes:
- Issuing a credit memo/debit memo (or other authorized adjustment document) referencing the original invoice number/date, and
- Maintaining a clear audit trail that ties the adjustment to returned goods, billing corrections, or approved discounts.
D. Cancelled or void invoices
A cancelled invoice should be:
- marked “CANCELLED/VOID,”
- retained with all copies (do not destroy),
- accounted for in the invoice sequence (gaps are red flags in audits).
E. Multiple branches and multiple invoice series
If the taxpayer has branches:
- each branch often uses a designated branch code and may have separate invoice series and registration, consistent with the taxpayer’s registration and BIR approvals.
F. Change of registration details (name, address, status)
When business information changes (e.g., trade name, address, VAT status, RDO transfer, branch additions), invoice stock and formats may require:
- registration updates, and often
- new printing/series or system updates
Continuing to use old invoice details after a material registration change can trigger compliance findings.
G. Loss, theft, or destruction of invoice booklets
Common compliance steps (depending on the case and local BIR practice) include:
- reporting to the BIR/RDO,
- executing an affidavit of loss,
- documenting remaining serial ranges, and
- aligning accounting records to prevent misuse of missing serial numbers.
11. Recordkeeping: storage, retention, and audit readiness
Invoices are not only issued—they must be kept.
A. Seller’s obligation
The seller must keep:
- duplicate copies (or electronic equivalents),
- summaries (POS readings, sales reports),
- and accounting entries that reconcile to issued invoices.
B. Practical retention horizon
Tax assessments generally operate on prescriptive periods, but enforcement and documentary requirements can extend the practical retention need—especially where fraud, non-filing, or special regimes are alleged. A conservative compliance posture is to retain invoices and supporting accounting records for a long enough period to cover audit risk and regulatory requirements applicable to the taxpayer’s classification and system.
12. Penalties and enforcement exposure for invoicing violations
Violations involving invoices and receipts can trigger overlapping consequences:
A. Failure to issue invoices / issuing noncompliant invoices
Potential consequences include:
- statutory fines and imprisonment for certain violations,
- compromise penalties,
- disallowance of deductions for customers (creating commercial disputes),
- and administrative enforcement.
B. Business closure powers
The Tax Code gives the BIR authority, in specified cases, to suspend or temporarily close a business for invoicing violations (e.g., failure to issue receipts/invoices, failure to register, and related major compliance failures).
C. Assessment risk: “unrecorded sales” and “no invoice, no sale record”
During audits, gaps in invoice sequences, unregistered documents, or inconsistent sales reports can lead to:
- estimated assessments,
- deficiency income tax/percentage tax,
- penalties and interest.
13. Practical compliance checklist for Non-VAT taxpayers issuing invoices
Confirm registration status: COR reflects Non-VAT status and the correct business line/branches.
Use only duly registered invoices: ATP-printed invoices or system-generated invoices from a registered/authorized setup.
Ensure invoice face content is complete:
- seller info (name, address, TIN/branch),
- “NON-VAT Registered” marking,
- serial number and date,
- buyer details (especially B2B),
- description and amount.
Maintain strict serial control: no skipped numbers without documented cancellation/voiding.
Do not bill VAT and do not use VAT-invoice language that implies VAT registration.
Handle adjustments properly: credit/debit memos (or authorized documents) with full references.
Reconcile regularly: invoices ↔ books ↔ POS readings ↔ returns (percentage tax/income tax) ↔ bank deposits.
Update invoices when registration details change (address, name, branch structure, tax type).
Retain records and backups in a BIR-audit-ready manner.
14. Common misconceptions (and the compliance-safe view)
- “I’m Non-VAT, so I don’t need invoices.” Incorrect. Non-VAT status affects the tax type, not the duty to document sales.
- “A billing statement or acknowledgment is enough.” Generally incorrect. Supplementary documents do not replace the principal invoice.
- “I can design my own invoice template and start using it.” Risky unless it is duly registered/authorized; invoices must meet BIR registration requirements.
- “If the customer doesn’t ask, I don’t need to issue.” The safe compliance approach is issuance as a standard practice; in many setups (POS/CRM), issuance is built into each transaction.
Conclusion
For Philippine Non-VAT taxpayers, issuing an invoice is not optional—it is a core legal compliance requirement rooted in the Tax Code’s documentation and recordkeeping framework. The practical rule is straightforward: issue a duly registered Non-VAT invoice for each sale of goods or services, ensure the invoice contains the required information and correct tax status disclosures, maintain serial integrity and proper adjustment documents, and keep records that reconcile to tax returns and books of accounts.