The digital revolution is here and is changing how we do business. Electronic invoicing has helped streamline business processes and increase tax compliance in several countries, including many in Southeast Asia.
While the Philipines are late to join the party, the country is desperate to digitize its economy in the coming years.
In 2019, the island nation took its first step toward a digital economy by rolling out the all-new Digital Transformation Strategy 2022. The policy was met with enthusiasm in the business world, with many businesses welcoming the much-awaited decision.
After much deliberation, the Bureau of Internal Revenue (BIR) finally released its e-invoicing portal for public use in July 2022. The EIS, short for e-invoicing system, is currently in a pilot phase with only 100 top taxpayers mandated to use it, and that too only for B2G invoices.
The government seemed excited about the success of the pilot phase of the EIS. One of the biggest indicators of a successful implementation was the filing of over 7.4 million e-invoices in the first few months.
It is not surprising that many small business owners are confused and worried about how these new e-invoicing regulations will affect them. The best place to prepare your business is to acquaint yourself with the system and learn how to adapt it to your needs, and that’s where we come in.
In this definitive guide to e-invoicing in the Philippines, we will discuss the system's current status and what businesses can do to comply with the changes.
What are the e-invoicing rules in the Philippines?
The Philippines has taken considerable strides in digitizing its economy with the Tax Reform for Acceleration and Inclusion (TRAIN) Act. Early in 2022, BIR announced plans to launch a new Electronic Invoicing/Receipting System for businesses to file e-invoices with. The System was rolled out in July last year, and businesses welcomed it with both hands.
The BIR is aiming to implement the e-invoicing system in a phased manner in accordance with the Philippine digital transformation strategy. The first phase of the web-based invoicing system began in July 2022, with the top 100 taxpayers shifting to the EIS to file all B2G invoices.
The system was so successful that starting September 2022, all B2B invoices were also shifted to the electronic invoicing platform.
Currently, the country uses a clearance approach to the e-invoicing system. Businesses can issue e-invoices to the recipient and then report the data to the tax authority within three working days.
The EIS supports sending several types of receipts and invoices, including:
- Official receipts
- Sales invoices
- Credit and debit notes
The EIS, in its current iteration, consists of the following three portals:
- The taxpayer portal
- The certification portal, and
- The portal for revenue officers
In real-time, the electronic invoicing reports are sent to the government’s central platform, the continuous transaction control or CTC reporting system.
Who needs to comply with the electronic invoicing regulations in the Philippines?
At the time of writing this article, there is no mandate for businesses other than the top 100 taxpayers in the country to issue electronic invoices through the EIS portal. The government has announced its plans to implement a pan-country e-invoicing system in the coming 4-5 years.
The e-invoicing mandates apply to the following taxpayers in the Philippines according to the BIR:
- Taxpayers engaged in the electronic commerce space
- Taxpayers engaged in the export of goods or services
- Taxpayers of a specific size as chosen by the BIR (called large taxpayers service or LTS)
All businesses and VAT payers exempt from the mandates can continue to file their invoices manually or digitize them through the EIS platform. No company in the country other than the top 100 taxpayers chosen by the BIR is mandated to issue electronic invoices or use the EIS.
How to send compliant e-invoices in the Philippines?
Sending compliant electronic invoices in the Philippines is essential to avoid issues with the tax authorities and the BIR. Failure to comply with the regulations can lead to businesses accruing heavy penalties and other regulatory restrictions.
Here is a step-by-step guide on sending electronic invoices and filing them with the tax authorities.
Step 1: Register your business with the BIR
To start issuing compliant e-invoices in the Philippines, a business must first register with the BIR. A company must register the following components of its electronic invoicing system with the bureau to obtain a BIR sticker upon completion of the inspection:
- The computerized accounting system you are using to generate e-receipts
- The cash register machines and other point-of-sales systems you are using
- The certified sales invoice data transmission system that you will use to upload the sales data to the EIS
Once the BIR inspects and approves these components, you can send e-receipts to the Philippines.
Step 2: Adhere to EIS guidelines
All taxpayers planning to choose the EIS must adhere to specific guidelines, for instance:
- Your sales data transmission system must be based on the BIR's API guidelines.
- You must register your e-invoicing or receipt software with the BIR before using it to generate invoices.
- You must transmit the electronic receipts data to the BIR within three business days of the transactions.
- All electronic invoices you issue must be digitally signed
- You must store all invoices for up to 10 years
Step 3: Set up your invoicing system properly with all details
Once you get the approval nod from the BUR regarding your e-invoicing software, you need to ensure that it is set up correctly so your invoices reflect the following data about your business:
- Business name and address
- Contact information
- Tax Identification Number (TIN)
Ensure your system can generate unique invoice numbers and provide secure and tamper-proof storage of your invoices.
Step 4: Sending the e-invoice to your customer
Once you have generated the e-invoice, the next step is to send it to the customer. If you are using an e-invoice system like many early adopter businesses in the Philippines, you can send the invoice directly to the customer through the program.
However, if you so choose, you can also download your electronic invoice and send it as an attachment to an e-mail.
Step 5: File your e-invoice report with the BIR using the sales data transmission system
You must file your electronic invoice with the BIR in the last and final step. You have a couple of options for getting this done- using the BIR's eSRS invoice reporting system or manually submitting the BIR form 2307 to your Revenue District Office (RDO).
If you use the EIS to file electronic invoices with the BIR, you can do it online within three days of issuing the invoice.
Characteristics of the electronic invoice in the Philippines
To facilitate tax compliance with the BIR regulations, all electronic invoices you issue in the Philippines must have the following features:
Accurate and complete information
It is incumbent on the sender of the invoice to ensure that all the sales data is accurate and complete. The information that a BIR-compliant e-invoice must include is as follows:
- The correct name, address, and contact information of the sender and recipient
- Date of issue
- Unique identification number/ invoice number
- Details of the goods sold or services rendered
- Amount of the sale
- Similar accounting documents issued
- VAT details, including the TIN
A valid digital signature
It is also essential to make sure that the sales data within the e-invoice is tamper-proof and signed with a digital signature. It provides the authenticity and integrity of your invoice.
Failure to digitally sign your invoice might lead to rejection by the EIS.
You can upload your e-invoice to the BIR using the Electronic Sales Reporting System (eSRS) portal. It is a web-based portal that allows businesses to transmit their e-invoice data to the BIR.
You must log into the eSRS portal with your TIN and upload the e-invoice in JSON format. The system will generate a confirmation receipt that serves as proof of submission.
Storage of the invoices
The BIR mandates that you store all your electronically filed invoices and other similar accounting documents in digital form for up to 10 years. You must produce a backup copy of any particular transaction when being audited.
What must businesses do to comply with e-invoice regulations in the Philippines?
Although the e-invoicing system in the Philippines is still in its infancy, given the push of the government and rapid electronic infrastructure development, it is bound to expand.
As a business operating in the Philippines, you must ensure that you have a compliant system before the mandates regarding e-invoicing in the Philippines are implemented.
Although businesses other than the 100 selected ones in the pilot project are not required to file electronic invoices, you can do it if you choose.
It is better to start implementing the system immediately instead of manual receipts so that you can perfect it by the time the mandates are rolled out shortly.
The present is the right time to look for a customized solution to generate compliant electronic invoices in the Philippines. At Storecove, we can help you understand the regulations and build a custom solution to make e-invoicing easy and efficient in the Philippines.
You can schedule an appointment with Dolf Kars, our e-invoicing expert, regarding your requirement.
Are you ready for e-invoicing in the Philippines?
There are several benefits of the e-invoicing system. It is no wonder then that several countries in the world are trying to implement it to improve transparency in their tax systems. The Philippines is one of Southeast Asia's latest entrants into the e-invoicing world.
Although the country is still ironing out the kinks in the EIS system and mandates only the top 100 taxpayers to file electronic invoices, the stage is set for broader implementation in a few years.
Your business must be prepared when the mandates come to ensure that your invoices comply with the BIR regulations. Early adopters will be more prepared when the paradigm shifts from paper-based to mainly an electronic system.
Storecove, with our vast experience providing custom e-invoicing solutions to over 50 countries, can help you develop one specifically for the Philippines. Please schedule a demo with one of our tax experts to learn more today!
More information about E-Invoicing Regulations in The Philippines?
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