The consequences of Tax Mapping violations

Awareness of the various duties and responsibilities beholden to business owners is key to successfully establishing a business in the Philippines. Keeping up with tax requirements is one of the most significant responsibilities tasked to a business owner.

One of the ways the Bureau of Internal Revenue (BIR) ensures compliance is through its Tax Mapping program or the Tax Compliance Verification Drive/Oplan Kandado.
The program operates by having the bureau send a BIR revenue staff to a business site to inspect a business and confirm if it follows the registration, bookkeeping, invoicing, and other rules required by the bureau.

Penalties for Tax Mapping violations

If an establishment is deemed non-compliant with specific requirements, a penalty will be issued by the investigating revenue officer. The severity of the fine will depend on the nature of the violation, with charges ranging from P1,000 to P50,000. But if the violations are too severe, business foreclosure or criminal charges might be given to the business owners.

BIR representatives arrive unannounced; however, establishments are given a 2-week notice to allow Companies to prepare and complete the necessary documents required for tax mapping.

Penalties for Tax Mapping violations are as follows:

Tips for avoiding Tax Penalties 

A business owner in the Philippines must register their business with the BIR; this is one of, if not the most, essential requirements for Philippine business owners. Without it, your business won’t be legally recognized by the Bureau and cannot operate.

Attempting to operate without being registered will lead to the following penalties:

• A fine of at least PHP 20,000
• Will receive a Pay Annual Registration Fee (BIR Form 0605) before January 31 of each year, which costs PHP 1,000 if not paid at the due date.

It is advisable to display the following documents on the business’ premises to avoid incurring any penalties:

• A BIR certificate of registration (BIR Form 2303)
• Annual Registration Fee for the Current Year (BIR Form 0605)
• Notice to the Public “ASK FOR RECEIPT” Signage

If these documents are not present at the business, a fine of at least PHP 1,000.00 will be administered.

Business owners must also issue receipts/invoices for the business’ sale of goods and services; the following offences will be issued if they can’t submit the following documents:

• 1^st Offence: PHP 10,000 (Failure) PHP 25,000 (Refusal)
• 2^nd Offence: PHP 20,000 (Failure) PHP 50,000 (Refusal)

It’s also mandated that companies register their manual receipts/invoices to the BIR, and if they don’t, a fine ranging from PHP 1,000.00 to PHP 50,000.00.

Businesses with Cash Registered Machines (CRM) and/or Point of Sales Machines (POS) or similar devices must be registered to the BIR. Uncompliant businesses incur the following penalties:

• 1^st Offence: PHP 25,000/per unit
• 2^nd Offence: PHP 50,000/per unit.

Using CRM/POS machines requires businesses to attach or paste an original sticker from the BIR that authorizes its use. If none are found in a machine, the company is fined PHP 1,000.00/per unit.

Businesses must also register their Books of Accounts to the BIR while maintaining it in the establishment’s location. If the book of accounts isn’t maintained or registered, the business will be issued a penalty fine ranging from PHP 200.00 to PHP 50,000.00, depending on its Gross Sales or receipts.

Another critical requirement mandated by the bureau is for businesses to withhold and remit the tax of the following to the BIR:

• Compensation for Employees (BIR Form 1601C)
• Payment subject to final and expanded withholding tax (BIR Form 1601E)

Businesses that can’t withhold and remit taxes to the bureau will incur at least a PHP 200.00 penalty depending on their Gross Sales/Receipts.

Lastly, businesses must pay and/or file business and income taxes monthly, quarterly, and annually. If this isn’t paid, a fine of at least PHP 2,000.00 is issued depending on the establishment’s Gross Sales or Receipts.