NOTE: Amended in RR 7-2007
SUBJECT : Implementing the Provisions of Section 6(H) of the Tax Code of 1997, Authorizing the Commissioner of Internal Revenue to Prescribe Additional Procedural and/or Documentary Requirements in Connection with the Preparation and Submission of Financial Statements Accompanying the Tax Returns.
TO : All Internal Revenue Officers and Others Concerned.
Pursuant to Section 244 of the Tax Code of 1997, in relation to Section 6(H) of the Same Code, these Regulations are hereby promulgated to prescribe the manner of compliance with any documentary and/or procedural requirements in connection with the preparation and submission of financial statements accompanying the tax returns.
SECTION 1. CONTENTS AND FORMAT OF FINANCIAL STATEMENTS TO BE ATTACHED TO THE ANNUAL INCOME TAX RETURN OR INFORMATION RETURN. – The Financial Statements with accompanying Auditor’s Certificate attached to the Annual Income Tax Return, or Annual Information Return for the Tax exempt persons, as the case may be, to be filed with the Bureau of Internal Revenue, thru its collection agents including Accredited Agent Banks, shall present/state the accounts therein in a very descriptive fashion such that the nature of the specific transactions entered in the accounts are known to the reader.
The account titles to be used must be specific and not control accounts which must completely be enumerated in the financial statements and these accounts must conform to the rules and requirements of regulatory agencies that have supervision over them such as the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP), Insurance Commission (IC), etc.
The accounts prescribed in the reports required by the SEC, BSP, IC and other regulatory bodies shall likewise be the accounts to be used by individual taxpayers who are engaged in business or in the exercise of profession, except for accounts that are peculiar to corporations and other juridical persons.
The Profit and Loss Statement/Income Statement shall show separately by segment (there should be proper labeling), with breakdown of the specific accounts, the following:
1. Cost of Goods Sold (for seller of goods)/Cost of Services (for seller of services);
II. Selling and Administrative Expenses;
III. Financial Expenses, if any;
IV. Special Deductions (e.g., Net Operating Loss Carry-Over (NOLCO)), if any;
V. Deductions under Special Laws, if any.
(Note: Deductions III, IV and V should be fully explained in the Notes to the Financial Statements)
SEC. 2. COVERAGE. – The Financial Statements shall be composed of the following :
a) Balance Sheet;
b) Income Statement/Profit and Loss Statement;
c) Statement of Retained Earnings;
d) Statement of Changes in Financial Position; and
e) Schedules attached to the afore-cited statements.
The submission of the above statements is mandatory even if there is no income, retained earnings, etc.
All the financial statements filed with accompanying auditor’s certificate as cited above shall show the comparative figures of the current year and the previous year. Thus, Financial Statements with no required Auditors Certificate as enunciated in Sec. 232 of the Tax Code of 1997 need not be presented in comparative format.
SEC. 3. RESPONSIBILITY OF EXTERNAL AUDITORS. – Unless a longer period of retention is required under the Tax Code or other relevant laws (e.g. the Accountancy Law, etc.), the independent CPA who audited the records and certified the financial statements of the taxpayer, equally as the taxpayer, has the responsibility to maintain and preserve copies of the audited and certified financial statements for a period of three (3) years from the due date of filing the annual income tax return or the actual date of filing thereof, whichever comes later. This is in addition to all other responsibilities of the independent CPA under other pertinent provisions of the Tax Code and implementing regulations, including generally accepted auditing standards, and applicable jurisprudence.
SEC. 4. PENAL PROVISIONS – Any independent Certified Public Accountant who, in his capacity as external auditor, willfully falsifies any report or statement bearing on any examination or audit, or renders a report, including exhibits, statements, schedules or other forms of accountancy work which has not been verified by him personally or under his supervision or by a member of his firm or by a member of his staff in accordance with sound auditing practices, or, certifies financial statements of a business enterprise containing an essential misstatement of facts or omission in respect of the transactions, taxable income, deduction and/or exemption of his client, shall be dealt with in accordance with Section 257 of the Tax Code.
SEC. 5. APPLICABILITY OF THESE REGULATIONS.- These Regulations shall apply to all Income Tax and Information Returns to be filed hereafter.
SEC. 6. REPEALING CLAUSE. – All existing rules, regulations and other issuances or portions thereof inconsistent with the provisions of these Regulations are hereby modified, repealed or revoked accordingly.
SEC. 7. EFFECTIVITY CLAUSE. – These Regulations shall take effect after fifteen (15) days following complete publication in a newspaper of general circulation in the Philippines.
(Original Signed)
JOSE ISIDRO N. CAMACHO
Secretary of Finance
RECOMMENDING APPROVAL:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
REVENUE REGULATIONS NOS. 19-2002
SUBJECT: Amending Revenue Regulations No. 3-2002 and Further Amending Section 2.83 of Revenue Regulations No. 2-98 as Amended, Relative to Substituted Filing of Income Tax Return of Employees Receiving Purely Compensation Income from Only One Employer for One Taxable Year Whose Tax Due is Equal to Tax Withheld and Individual-Payees Whose Compensation Income is Subject to Final Withholding Tax.
TO: All Internal Revenue Officers, Employees and Others Concerned.
SECTION 1. Scope. - Pursuant to the provisions of Section 244 in relation to Section 51(A)(2)(b) of the National Internal Revenue Code of 1997, these Regulations are hereby promulgated to further amend pertinent provisions of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 3-2002.
SECTION 2. Amendment. - Section 2.83.1 of Revenue Regulations No. 2-98, as amended by Section 2 of Revenue Regulations No. 3-2002, is hereby further amended to read as follows:
“Section 2.83.1. Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316). In general, every employer or other person who is required to deduct and withhold the tax on compensation including fringe benefits given to rank and file employees, shall furnish every employee from whose compensation taxes have been withheld the Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316), on or before January 31 of the succeeding calendar year, or if the employment is terminated before the close of such calendar year, on the day on which the last payment of compensation is made. Failure to furnish the same shall be a ground for the mandatory audit of payor’s income tax liabilities (including withholding tax) upon verified complaint of the payee.
xxx xxx xxx
The Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316) shall contain a certification to the effect that the employer’s filing of BIR Form No. 1604-CF shall be considered as a substituted filing of the employee’s income tax return to the extent that the amount of compensation and tax withheld appearing in BIR Form No. 1604-CF as filed with BIR is consistent with the corresponding amounts indicated in BIR Form No. 2316. It shall be signed by both the employee and employer attesting to the fact that the information stated therein has been verified and is true and correct to the best of their knowledge. However, the withholding agents/employers are required to retain copies of the duly signed BIR Form No. 2316 for a period of three (3) years as required under the National Internal Revenue Code.
The employee who is qualified for substituted filing of income tax return under these regulations, shall no longer be required to file income tax return (BIR Form No. 1700) since BIR Form No. 1604-CF shall be considered a substituted return filed by the employer. BIR Form No. 2316, duly certified by both employee and employer, shall serve the same purpose as if a BIR Form No. 1700 had been filed, such as proof of financial capacity for purposes of loan, credit card, or other applications, or for the purpose of availing tax credit in the employee’s home country and for other purposes with various government agencies. This may also be used for purposes of securing travel tax exemption, when necessary.
However, information referring to the certification, appearing at the bottom of BIR Form No. 2316, shall not be signed by both the employer and the employee if the latter is not qualified for substituted filing. In which case, BIR Form No. 2316 furnished by the employer to the employee shall be attached to the employee’s Income Tax Return (BIR Form No. 1700) to be filed on or before April 15 of the following year.
For the implementation of these Regulations, BIR Form No. 2316 herein referred to shall be BIR Form No. 2316 version October 2002 or any later version. Thus, the old version cannot be used for this purpose although may be used for those taxpayers still required to file BIR Form No. 1700.”
Section 3. Repealing Clause. The provisions of existing regulations and issuances inconsistent with the provisions of these Regulations are hereby repealed, amended or modified accordingly.
Section 4. Effectivity Clause. These Regulations shall take effect fifteen (15) days after publication in any newspaper of general circulation in the Philippines.
(Original Signed)
JOSE ISIDRO N. CAMACHO
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
TO: All Internal Revenue Officers, Employees and Others Concerned.
SECTION 1. Scope. - Pursuant to the provisions of Section 244 in relation to Section 51(A)(2)(b) of the National Internal Revenue Code of 1997, these Regulations are hereby promulgated to further amend pertinent provisions of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 3-2002.
SECTION 2. Amendment. - Section 2.83.1 of Revenue Regulations No. 2-98, as amended by Section 2 of Revenue Regulations No. 3-2002, is hereby further amended to read as follows:
“Section 2.83.1. Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316). In general, every employer or other person who is required to deduct and withhold the tax on compensation including fringe benefits given to rank and file employees, shall furnish every employee from whose compensation taxes have been withheld the Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316), on or before January 31 of the succeeding calendar year, or if the employment is terminated before the close of such calendar year, on the day on which the last payment of compensation is made. Failure to furnish the same shall be a ground for the mandatory audit of payor’s income tax liabilities (including withholding tax) upon verified complaint of the payee.
xxx xxx xxx
The Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316) shall contain a certification to the effect that the employer’s filing of BIR Form No. 1604-CF shall be considered as a substituted filing of the employee’s income tax return to the extent that the amount of compensation and tax withheld appearing in BIR Form No. 1604-CF as filed with BIR is consistent with the corresponding amounts indicated in BIR Form No. 2316. It shall be signed by both the employee and employer attesting to the fact that the information stated therein has been verified and is true and correct to the best of their knowledge. However, the withholding agents/employers are required to retain copies of the duly signed BIR Form No. 2316 for a period of three (3) years as required under the National Internal Revenue Code.
The employee who is qualified for substituted filing of income tax return under these regulations, shall no longer be required to file income tax return (BIR Form No. 1700) since BIR Form No. 1604-CF shall be considered a substituted return filed by the employer. BIR Form No. 2316, duly certified by both employee and employer, shall serve the same purpose as if a BIR Form No. 1700 had been filed, such as proof of financial capacity for purposes of loan, credit card, or other applications, or for the purpose of availing tax credit in the employee’s home country and for other purposes with various government agencies. This may also be used for purposes of securing travel tax exemption, when necessary.
However, information referring to the certification, appearing at the bottom of BIR Form No. 2316, shall not be signed by both the employer and the employee if the latter is not qualified for substituted filing. In which case, BIR Form No. 2316 furnished by the employer to the employee shall be attached to the employee’s Income Tax Return (BIR Form No. 1700) to be filed on or before April 15 of the following year.
For the implementation of these Regulations, BIR Form No. 2316 herein referred to shall be BIR Form No. 2316 version October 2002 or any later version. Thus, the old version cannot be used for this purpose although may be used for those taxpayers still required to file BIR Form No. 1700.”
Section 3. Repealing Clause. The provisions of existing regulations and issuances inconsistent with the provisions of these Regulations are hereby repealed, amended or modified accordingly.
Section 4. Effectivity Clause. These Regulations shall take effect fifteen (15) days after publication in any newspaper of general circulation in the Philippines.
(Original Signed)
JOSE ISIDRO N. CAMACHO
Secretary of Finance
Recommending Approval:
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
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