Businesses in the Philippines that hold inventories for sale are required to submit an Inventory List to the BIR each year.
The Inventory List is a report that outlines the details of all inventories held by a company on the last date of its financial year. The BIR submission date each year depends on the financial year (i.e. calendar or fiscal) of the particular business.
Our explainer below outlines all you need to know about the submission of Inventory Lists to the BIR in the Philippines.
What is the Inventory List?
The Inventory List is a compliance requirement for businesses that hold inventory for sale in the Philippines. This list must be prepared and submitted by relevant companies to the BIR on an annual basis.
The Inventory List is not the only inventory-related document that has to be submitted at this time! The BIR requires other inventory-related documents, records and schedules to be submitted along with the Inventory List (see below).
If you aren’t sure if your company is required to submit an Inventory List, contact your accountant or bookkeeper in the Philippines without delay.
Why do companies have to submit an Inventory List?
Primarily and most importantly, it’s a mandatory compliance requirement here in the Philippines. That’s as good a reason as any!
Section 13 of Revenue Regulations No. V-1, also known as the Bookkeeping Regulations, provide that taxpayers in the Philippines are required to maintain a book of inventories (assuming they hold inventories). RR No. V-1 also requires that details relating to the inventories held at the end of each financial year must be prepared and submitted to the BIR.
If you don’t have robust inventory management processes in place, completing the Inventory List accurately can be difficult. So it might be helpful to check out our recent article where we identify a number of inventory management controls that can help your business!
What should be included in the Inventory List?
RR No. V-1 provides that the Inventory List should include details of the quantity, description, unit and total cost of every item of stocks-in-trade, materials, supplies and other goods found on the premises of a company’s establishment at the close of the financial year.
What should not be included in the Inventory List ?
Inventories that are not held for sale do not have to be included in the Inventory List.
Some examples of this might include spare parts, daily office supplies, IT equipment for internal use, manufacturing supplies, other equipment required for the internal operations of a company, etc.
Why is it important to know what to include in the Inventory List?
Submitting the Inventory List with accurate information is important. Why? Here are just a few reasons:
- Double reporting – Sometimes, two companies might include the same inventory in each of their Inventory Lists. For example, consigned goods might incorrectly appear in the inventory lists of both the consignor and the consignee. So it would make sense (if practical) for the consignor and consignee to communicate and settle any potential discrepancies that might arise within the Inventory Lists.
- Incorrect information in the Inventory List may result in inaccurate information being recorded in the accounting records/books, inaccurate budgets and forecasts as well as incomplete financial reports.
- The submission of incorrect information to the BIR can result in financial penalties.
- Inaccurate reporting of inventory can result in investigations or audits by the BIR.
If you are unsure about which categories or items of inventory to include in your Inventory List, speak with your accountant in the Philippines.
What if I have no actual inventory at the end of the financial year?
Doesn’t matter! If your company usually holds inventory, but, for some reason, it doesn’t have any inventories at the end of the relevant financial year, the company is still required to submit an Inventory List – it just won’t include any details!
When to submit the Inventory List?
Inventory Lists must be submitted annually, within 30 days of the end of the company’s financial year. So, the submission date for companies in the Philippines will depend on whether the company’s financial year follows the regular calendar year (i.e. 1 January – 31 December) or it’s own fiscal year.
In the example below, the financial year of ABC Company follows the calendar year, while XYZ Company and PPP Company follows their own fiscal years. As a result, the deadlines for the submission of annual Inventory Lists are different, as outlined below:
|Company Name||Financial Year||End of the Financial Year||Deadline for Submission of Annual Inventory List|
|ABC Company||Calendar Year||December 31, 2019||January 30, 2020|
|XYZ Company||Fiscal Year||June 30, 2020||July 30, 2020|
|PPP Company||Fiscal Year||September 30, 2020||October 30, 2020|
Additional reporting requirements
In 2015, the BIR issued Revenue Memorandum Circular No. 57-2015, which provided further guidelines on the submission of the Inventory List and additional information that must be submitted along with the Inventory List.
Certain companies are required to submit records, lists and schedules in addition to the Inventory List. This includes companies that maintain inventory of stock-in-trade, raw materials, goods in process, supplies and other goods, such as manufacturing, wholesaling, distributing/retailing sectors, real estate dealers/developers and service companies, e.g., construction companies, building contractors, etc.
Under RMC No. 57-2015, a business with tangible asset-rich balance sheets with at least half of its total assets in working capital assets (e.g. accounts receivable, inventory), must submit, in both hard and soft copy, additional schedules and lists in the prescribed format outlined in the Annexes to RMC No. 57-2015, as follows:
- For manufacturing, merchandising or retail companies – inventory of merchandise/raw materials/goods in process/finished goods (Annex A)
- 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)
- For construction industries – schedule of outstanding receivables (beginning and ending) and realized gross profit per project (Annex C)
What about the soft copies? The soft copies of the Inventory List and the additional schedules and reports must be submitted via an accurately labeled DVD-R, along with a Notarized Certification signed by the authorized representative of the taxpayer. This Certificate is to certify that the information contained on the DVD-R is true and accurate. A template format for this Certificate can be found at Annex D of RMC No. 57-2015.
Section 3 of RMC No. 57-2015 outlines the penalties for violations of the requirement to submit both the Inventory List and the additional reporting documents, records and schedules.
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Through our robust processes and controls, we ensure that our clients are not only aware of upcoming filing deadlines – but that they also have adequate time to start preparing.
Contact CloudCfo today and let’s discuss how we can support your accounting, filing and compliance requirements for the rest of 2020 and beyond!