How to Transition from BIR Official Receipts to Invoices

November 1, 2024

Seal of the Bureau of Internal Revenue (Philippines) over tax forms

In the Philippines, the Bureau of Internal Revenue (BIR) has mandated a significant shift in business documentation, requiring all taxpayers to transition from BIR Official Receipts (ORs) to Invoices for both goods and services transactions, as outlined in Revenue Regulations (RR) No. 7-2024 and subsequent amendments like RR No. 11-2024 and the Electronic Official Receipt and Invoicing Transformation (EoPT) Act. This change, effective mid-2024, aims to standardize and modernize tax compliance, aligning the country with global digital invoicing trends. For businesses, particularly small enterprises and freelancers, navigating this transition involves understanding new compliance requirements, updating systems, and meeting deadlines to avoid penalties. This guide, tailored for businesses in the Philippines, provides a comprehensive roadmap to ensure a smooth shift from BIR Official Receipts to Invoices, offering practical steps and insights to maintain compliance with BIR regulations.

Understanding the Shift from BIR Official Receipts to Invoices

The transition from BIR Official Receipts to Invoices marks a pivotal change in the Philippines’ tax documentation system, driven by the BIR’s push for uniformity and efficiency. Below are key points to grasp the scope of this shift:

Purpose of the Transition: The BIR introduced this change to streamline tax reporting by replacing ORs, previously used for service transactions, with Invoices as the universal document for all sales, including goods and services, under RR No. 7-2024.
Historical Context: ORs were traditionally issued for services, while Sales Invoices covered goods. The new rule eliminates this distinction, simplifying documentation for VAT and non-VAT taxpayers.
Legal Framework: The EoPT Act and RR No. 11-2024 reinforce the move toward digital invoicing, preparing businesses for the mandatory e-invoicing system by 2026.
Impact on Businesses: Companies must adapt their accounting practices, update software, and train staff to comply with the new Invoice requirements and ensure accurate tax reporting.
Benefits of Compliance: Adopting Invoices enhances transparency, reduces errors in tax filings, and aligns businesses with the BIR’s digital transformation goals.

This shift requires businesses to act promptly to align with BIR standards, as non-compliance can lead to significant penalties.

Key Compliance Requirements for Using Invoices

Businesses must adhere to specific BIR requirements to successfully transition from BIR Official Receipts to Invoices. Below are the essential compliance steps:

Invoice Format: Invoices must include mandatory details such as the taxpayer’s name, Taxpayer Identification Number (TIN), business address, Invoice number, date of issue, and a clear transaction description (goods or services).
Naming Flexibility: Businesses can use various invoice names, such as cash invoices, service invoices, or commercial invoices, provided the word “Invoice” is indicated, as per RR No. 7-2024.
VAT and Non-VAT Taxpayers: VAT-registered and non-VAT taxpayers must issue Invoices for all transactions, replacing ORs entirely, to ensure uniformity in tax documentation.
Stamping Supplementary Documents: If ORs are used as supplementary documents (e.g., for internal records), they must be stamped with “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” to prevent misuse in VAT claims.
Record-Keeping: Businesses must maintain Invoice records for at least three years, as required by the Tax Code, to facilitate BIR audits and ensure compliance.

Meeting these requirements ensures businesses remain compliant while avoiding errors that could trigger BIR scrutiny.

Converting Unused BIR Official Receipts to Invoices

Businesses with unused BIR Official Receipts can convert them into Invoices, but specific procedures must be followed. Here’s how to manage this process:

Conversion Process: Unused ORs can be converted by striking out “Official Receipt” and stamping or printing “Invoice” (or terms like Cash Invoice or Service Invoice) on each document, as allowed by RR No. 11-2024.
No Expiration Date: Unlike the initial December 31, 2024, deadline in RR No. 7-2024, RR No. 11-2024 permits businesses to use converted ORs as Invoices until fully consumed, offering flexibility for those with large OR stocks.
Inventory Submission: Businesses must submit an inventory of unused ORs to the BIR, detailing serial numbers and quantities, by July 31, 2024, via email or physical submission, as clarified in Revenue Memorandum Circular (RMC) No. 66-2024.
Supplementary Use: Converted ORs not used as Invoices can serve as supplementary documents but must be stamped with “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” to comply with BIR rules.
Documentation: Maintain records of converted ORs and their submission to the BIR to avoid penalties during audits.

Proper conversion and documentation are essential to ensure compliance and maximize the use of existing ORs.

Updating Systems for Invoice Compliance

Businesses using Computerized Accounting Systems (CAS), Customer Relationship Management (CRM), or Point-of-Sale (POS) systems must reconfigure their software to comply with BIR Invoice requirements. Key steps include:

System Reconfiguration: Update CAS, CRM, or POS systems to generate Invoices with BIR-mandated details, such as sequential numbering and taxpayer information, by December 31, 2024, as extended by RR No. 11-2024.
BIR Certification: Businesses using CAS or Computerized Books of Accounts (CBA) must obtain BIR certification for their updated systems, ensuring compliance with technical standards.
Notification Requirement: Submit a notice to the BIR within 30 days of system reconfiguration or by December 31, 2024, indicating the starting serial number of new Invoices generated by CRM or POS systems.
Testing and Training: Test updated systems to ensure accurate Invoice issuance and train staff on new processes to minimize errors during implementation.
Data Storage: Ensure systems can store Invoice data digitally for at least three years, aligning with BIR audit requirements and the upcoming e-invoicing mandate.

Timely system updates are vital to maintain operational efficiency and BIR compliance.

Penalties for Non-Compliance with Invoice Requirements

Failure to transition from BIR Official Receipts to Invoices can result in severe consequences under the Tax Code. Below are the potential penalties:

Fines: Non-issuance of Invoices after June 30, 2024, incurs fines ranging from PHP 1,000 to PHP 50,000 per violation, as stipulated in Section 264(a) of the Tax Code.
Imprisonment: Serious violations, such as willful non-compliance, may result in two to four years in prison for responsible officers or owners.
Operational Suspension: The BIR may suspend business operations until compliance is achieved, disrupting revenue and customer trust.
Reputational Damage: Non-compliance can harm a business’s reputation, signaling unreliability to clients and partners.
Audit Scrutiny: Incorrect or missing Invoices increase the risk of BIR audits, potentially leading to additional assessments and penalties.

Given the complexity of these requirements, it is highly recommended that businesses seek professional assistance from Triple i Consulting. Their expertise in navigating BIR regulations ensures businesses avoid penalties and achieve seamless compliance, simplifying the intricate process of transitioning to Invoices.

Preparing for the E-Invoicing Mandate

The transition from BIR Official Receipts to Invoices is a stepping stone to the BIR’s broader e-invoicing mandate under RR No. 11-2025, set to take effect in 2026. Key preparation steps include:

E-Invoicing Overview: By 2026, VAT-registered businesses must adopt fully digital Invoices transmitted in real time to the BIR, enhancing tax transparency and efficiency.
System Compatibility: Upgrade accounting and POS systems to support e-invoicing, ensuring compatibility with BIR’s Electronic Invoicing System (EIS) standards.
Data Security: Implement robust data storage and cybersecurity measures to protect digital Invoice records, as required for BIR audits.
Staff Training: Train employees on e-invoicing processes, including generating, transmitting, and storing digital Invoices, to ensure readiness by 2026.
Professional Support: Engage consultants like Triple i Consulting to assess system readiness and guide businesses through the e-invoicing transition, minimizing disruptions.

Proactive preparation for e-invoicing ensures businesses stay ahead of regulatory changes and maintain compliance with BIR standards.

Wrapping Up

The transition from BIR Official Receipts to Invoices, mandated by RR No. 7-2024 and RR No. 11-2024, represents a significant shift for businesses in the Philippines, aimed at standardizing tax documentation and paving the way for digital invoicing by 2026. Businesses can navigate this change by understanding compliance requirements, converting unused ORs, updating systems, and preparing for e-invoicing. However, the complexity of these processes, coupled with the risk of substantial penalties for non-compliance, underscores the need for careful planning and execution.

Is Assistance Available?

Yes, Triple i Consulting offers expert guidance to simplify this transition, ensuring businesses fully comply with BIR regulations. Contact us today to schedule an initial consultation with one of our experts: