REVENUE REGULATIONS NO. 4-00

July 18, 2000

REVENUE REGULATIONS NO. 4-00

SUBJECT         :           Prescribing the Posting of Notice for the Issuance of Sales/Commercial Invoice and/or Official Receipt by Persons Required by Law to Issue Sales/Commercial Invoices and/or Official Receipts and Providing the Penalties for Non-Compliance Thereof

TO                    :           All Internal Revenue Officers and Others Concerned

 

SECTION 1.      Scope. — Pursuant to the provisions of Section 244, in relation to Sections 237, 238, 264 and 275 of the Tax Code of 1997, these Regulations are hereby promulgated to prescribe the posting of a notice on the requirement for the issuance of sales/commercial invoice and/or official receipts by persons engaged in trade or business, including the exercise of profession, who are required by law or regulations to issue sales/commercial invoice and/or official receipts, define violations thereof and provide the penalties for non-compliance therewith.  

SECTION 2.      Policy. — These Regulations are intended to improve revenue collection through the enforcement of the legal provision on the issuance of sales/commercial invoice and/or official receipt by persons required by law or regulations to issue sales/commercial invoices and/or official receipts and to inculcate upon the minds of the taxpaying public that the issuance of sales invoice/official receipt is mandated by law such that every seller is obligated to issue sales/commercial invoice and/or official receipt on sales transactions with or without demand from the buyer of goods and services.

SECTION 3.      Exhibition of Notice at Place of Business. — Persons required to issue sales/commercial invoices and official receipts under existing rules shall cause to be posted in their places of business, including branches and mobile stores, in such area conspicuous to the public, a notice containing and showing in bold letters the following:

NOTICE TO THE PUBLIC:

THIS BUSINESS ESTABLISHMENT IS REQUIRED BY LAW TO ISSUE SALES/COMMERCIAL INVOICE/OFFICIAL RECEIPT. VIOLATION HEREOF IS PUNISHABLE BY FINE AND/OR IMPRISONMENT. PLEASE REPORT ANY VIOLATION TO THE BUREAU OF INTERNAL REVENUE.

(Issuance of sales/commercial invoice and/or official receipt is not required for every sale valued at P25 or below by a Non-VAT taxpayer)

Commissioner of Internal Revenue

At no time shall the above notice be detached, removed or covered from public view. For uniformity, the size specification of the notice shall be twelve (12) inches in width and eight (8) inches in length,

SECTION 4.      Violations and Penalties. — The following acts or omissions shall constitute violation of these Regulations:

a)         Failure and neglect to post the notice required herein; and/or   

b)         Deliberate removal of the notice.

Any person who commits any of the above acts or omissions shall, upon conviction, be punished by a fine of not more than One Thousand Pesos (P1,000) or suffer imprisonment of not more than six (6) months, or both, pursuant to the provisions of Section 275 of the National Internal Revenue Code (NIRC) of 1997.

SECTION 5.      General Provisions. — In case of corporations, partnerships or associations, the penalty shall be imposed on the president, partner, general manager, branch manager, officer-in-charge and/or employees responsible for the violation.

SECTION 6.      Repealing Clause. — All rules and regulations and other revenue issuances or parts thereof inconsistent with the provisions of these regulations are hereby amended accordingly.

SECTION 7.      Effectivity. — These Regulations shall take effect after fifteen (15) days from publication in any newspaper of general circulation.

(SGD.) JOSE T. PARDO

   Secretary of Finance

Recommending Approval:

(SGD.) DAKILA B. FONACIER

           Commissioner of Internal Revenue

REVENUE REGULATION NO. 3-80

April 14, 1980                                                                                        January 1, 1979

REVENUE REGULATION NO. 3-80

SUBJECT         :           Amending Revenue Regulations No. 1-80 which prescribe the rules requiring petroleum refining and marketing companies to change their method of inventory valuation.

TO                    :           All Internal Revenue Officers and Others Concerned

 

SECTION 1.      Scope. — These regulations, promulgated in accordance with Section 326 of the National Internal Revenue Code, implement the authority vested in the Commissioner of Internal Revenue by Section 36 of the same Code, as amended by Section 4 of Batas Pambansa Blg. 41, to require certain taxpayers to change or modify their inventory valuation method.

SECTION 2.      Requirement to Change Inventory Valuation Method from LIFO to Weighted Average Method. — Pursuant to the authority vested in the Commissioner of Internal Revenue by Section 36 of the National Internal Revenue Code, as amended by Batas Pambansa Blg. 41, all petroleum refining and marketing companies are hereby required to change their inventory valuation method from last-in, first-out (LIFO) to weighted average method on a per product basis. The change shall be effected by a gradual shift to the weighted average method of inventory valuation in two stages as prescribed in Section 3 and 4 of these regulations.  

SECTION 3.      Phase 1: Valuation of Inventories as of December 31, 1979. — The inventory of refined or blended petroleum products, crude and other base stocks, (hereinafter referred to as "petroleum products") as of December 31,1979 shall be valued under the LIFO unless it exceeds 75% of the inventory as of January 1, 1979, in which case the inventory as of December 31, 1979 shall consist of and be valued in accordance with the following:  

(a)        75% of the inventory on January 1, 1979 shall be valued under the LIFO method; and,

(b)        the excess over 75% of the inventory as of January 1, 1979 shall be valued under the weighted average method. For this purpose, the inventory on January 1, 1979 shall be deemed as the first product acquired, manufactured or produced in applying the weighted average method during 1979.  

SECTION 4.      Phase 2: Valuation of Inventory as of December 31, 1980. — The inventory of "petroleum products" as of December 31, 1980 shall be valued under the LIFO method unless it exceeds 50% of the inventory as of January 1, 1979, in which case the inventory as of December 31, 1980 shall consist of and be valued in accordance with the following:

(a)        50% of the inventory on January 1, 1979 shall be valued under the LIFO method; and

(b)        the excess over the 50% of the inventory as of January 1, 1979 shall be valued under the weighted average method. For this purpose, the inventory on January 1, 1980 shall be deemed as the first product acquired, manufactured or produced in applying the weighted average method during 1980.  

SECTION 5.      Valuation of inventories after January 1, 1981. — January 1, 1981, the inventory of "petroleum products" shall be valued fully under the weighted average method. For this purpose, the inventory on January 1, 1981 shall be deemed as the first product acquired, manufactured or produced in applying the weighted average method during 1981.

SECTION 6.      Adoption of Full Absorption Method. — In order to conform as clearly as may be possible to the best accounting practices and to clearly reflect income, taxpayers engaged in oil refining and marketing industries must adhere to the full absorption method of inventory costing. Under the full absorption method of inventory costing, production cost must be allocated to goods produced during the taxable year, whether sold during the taxable year or inventory at the close of taxable year. Thus, the taxpayer must include as part of the cost of inventory all direct production cost and to a certain extent, indirect production cost.

Direct production costs include those costs which are incident to and necessary for production or manufacturing operations or processes and are components of the cost of either direct materials or direct labor. Direct material costs include the cost of those materials which become an integral part of the specific product and those materials which are consumed in the ordinary course of manufacturing and can be identified or associated with particular units or groups of units of that product. Direct labor cost includes the cost of labor which can be identified or associated with particular units or groups of units of a specific product. The elements of the direct labor cost include such items as basic compensation, over-time pay, vacation and holiday pay, sick leave pay, shift differential, payroll taxes, etc.

In general, the inclusion or exclusion of elements of indirect production cost as part of the cost of inventory depends upon the treatment adopted by taxpayers which, in all cases, must be applied consistently with generally accepted accounting principles.

Indirect production cost includes all costs which are incident to and necessary for production or manufacturing operations or processes.

The elements of indirect production cost included in the inventoriable cost are general and administrative expenses incident to and necessary for the taxpayer's production or manufacturing operations or processes, indirect labor and production supervisory wages, indirect materials and supplies, utilities such as heat, power and light, repairs and expenses, maintenance expenses, etc.

To be excluded under indirect production cost are marketing expenses, advertising expenses, selling expenses, interest, research and experimental expenses, including product development expenses; general and administrative expenses incident to and necessary for the taxpayer's activities as a whole rather than to production or manufacturing operations or processes; and salaries paid to officers attributable to the performances of services which are incident to and necessary for the taxpayer's activities taken as a whole rather than to production or manufacturing operations or processes.

SECTION 7.      Requirements for the Use of Weighted Average Method. — The following requirements shall be complied with in adopting the weighted average:

(a)        The weighted average method shall be applicable to all inventory of "petroleum products".

(b)        The inventory shall be taken at cost, using the full absorption method, regardless of market value.

(c)        The method shall be used consistently from year to year, unless —

(i)         A change to a different method is approved by the Commissioner; or  

(ii)         A modification is required by the Commissioner.

SECTION 8.      Repealing Clause. — This amends Revenue Regulations No. 1-80.

SECTION 9.      Effectivity — These regulations shall apply to taxable year beginning January 1, 1979.

(SGD.) CESAR VIRATA

Minister of Finance

Recommending Approval:

(Sgd.) RUBEN B. ANCHETA

Acting Commissioner

REVENUE REGULATIONS NO. 01-80

January 16, 1980          

REVENUE REGULATIONS NO. 01-80

SUBJECT         :           Rules Requiring Petroleum Refining Companies to Change their Method of Inventory Valuation from LIFO to Moving Average Methods.

TO                    :           All Internal Revenue Officers and Others Concerned.

 

SECTION 1.      Scope. — These Regulations, promulgated in accordance with Section 326 of the National Internal Revenue Code, implement the authority vested in the Commissioner of Internal Revenue by Section 36 of the same Code, as amended by Section 4 of Batas Pambansa Blg. 41, to require certain taxpayers to change or modify their inventory valuation method.

SECTION 2.      Requirements to change inventory valuation method from LIFO to moving average method. — Pursuant to the authority vested in the Commissioner of Internal Revenue by Section 36 of the National Internal Revenue Code, as amended by Batas Pambansa Blg. 41, all petroleum refining companies are hereby required to change their inventory valuation method from last-in, first-out (LIFO) to moving average method on a per product basis. The change shall be effected by phasing out the LIFO method of inventory valuation in two stages as prescribed in Section 3 and 4 of these Regulations.

SECTION 3.      Phase 1: Valuation of inventories as of December 31, 1979. — The inventory of manufactured products and raw materials which shall form an integral part of the manufactured products as of December 31, 1979 shall be valued under the method heretofore used by the taxpayer, unless it exceeds 75% of the inventory as of January 1, 1979, in which case the inventory as of December 31, 1979 shall consist of and be valued in accordance with the following: 

(a)        75% of the inventory on January 1, 1979 shall be valued under the method heretofore used by the taxpayer; and,

(b)        the excess over 75% of the inventory as of January 1, 1979 shall be valued the moving average method.

SECTION 4.      Phase 2: Valuation of Inventory as of December 31, 1980. — The inventory of manufactured products and raw materials which shall form an integral part of the manufactured products as of December 31, 1980 shall be valued under the method theretofore used by the taxpayer, unless it exceeds 50% of the inventory as of January 1, 1979, in which case the inventory as of December 31, 1980 shall consist of and be valued in accordance with the following:

(a)        50% of the inventory of January 1, 1979 shall be valued under the method heretofore used by the taxpayer; and,

(b)        the excess over the 50% of the inventory of January 1, 1979 shall be valued under the moving average method.

SECTION 5.      Adoption of Full Absorption Method. — In order to conform as clearly as may be possible to the best accounting practices and to clearly reflect income, taxpayers engaged in the oil refining industries must adhere to the full absorption method of inventory costing. Under the full absorption method of inventory costing, production cost must be allocated to goods products during the taxable year, whether sold during the taxable year or in inventory at the close of taxable year. Thus, the taxpayer must include as part of inventoriable cost all direct production cost and to a certain extent, indirect production cost. 

Direct production costs are generally those costs which are incident to and necessary for production or manufacturing operations or processes and are components of the cost of either materials or direct labor or both. Direct materials cost includes the cost of those materials which become an integral part of the specific product and those materials which are consumed in the ordinary course of manufacturing and can be identified or associated with particular units or groups of units of that product. Direct labor cost includes the cost of labor which can be identified or associated with particular units or groups of units of a specific product. The elements of the direct labor cost includes such items as basic compensation, over-time pay, vacation and holiday pay, sick leave pay, shift differential, payroll taxes, etc.

In general, the inclusion or exclusion of elements of indirect product cost as part of inventoriable cost, depends upon the treatment adopted by taxpayers which, in all cases, must be applied consistently and not inconsistent with generally accepted accounting principles.

Indirect production cost includes all costs which are incident to and necessary for production or manufacturing operations or processes other than direct production cost.

The elements of indirect production cost included in the inventoriable cost are general and administrative expenses incident to and necessary for the taxpayer's production or manufacturing operations or processes, indirect labor and production supervisory wages, indirect materials and supplies, utilities such as heat, power and light, repairs and expenses, maintenance expenses, etc.

To be excluded under indirect production cost are marketing expenses, advertising expenses, selling expenses, interest, research and experimental expenses, including product development expenses; general and administrative expenses incident to and necessary for the taxpayer's activities as a whole rather than to production or manufacturing operations or processes; and, salaries paid to officers attributable to the performances of services which are incident to and necessary for the taxpayer's activities taken as a whole rather than to production or manufacturing operations or processes.

SECTION 6.      Valuation of Inventories after January 1, 1981. — After January 1, 1981, inventories shall be valued fully under the moving average method. For this purpose, the inventory on December 31, 1980 shall be deemed as the first product acquired, manufactured or produced in applying the moving method during 1981.

SECTION 7.      Requirements for the Use of Moving Average Method. — The following requirements shall be complied with in adopting the moving average method:

(a)        The moving average method shall be applicable to all types of inventory of manufactured products and raw materials which will form an integral part of the finished products. 

(b)        The inventory shall taken at cost, using the full absorption method, regardless of market value.

(c)        The method shall be used consistently from year to year, unless —

(i)         A change to a different method is a approved by the Commissioner; or

(ii)         A modification is required by the Commissioner.

SECTION 8.      Repealing Clause. — Any regulations, ruling or portions thereof which are inconsistent with the provisions of these Regulations are hereby revoked or amended accordingly.

SECTION 9.      Effectively. — These Regulations shall apply to taxable years beginning January 1, 1979.

ALFREDO PIO DE RODA, JR.

Acting Minister of Finance

Recommending Approval:

EFREN I. PLANA

Acting Commissioner