In the Philippines, all companies that hold inventory for sale must present a complete Inventory List to the Bureau of Internal Revenue (BIR) annually. This list presents the details of all the inventories that any business still holds at the end of the calendar or fiscal financial year.
Whether you are new in the field of business or have been around for a while and in need of a refresher, here is everything that you need to know about the BIR Inventory List. Compliance is required to avoid stiff penalties. Let’s get started below.
1. What is the Inventory List?
In simple terms, the Inventory List is a complete outline of a company’s inventory at the end of a financial year. It must be submitted within 30 days of the end of the company’s financial year. If you are wondering when your due date is, that all depends on whether your organization’s financial year follows the regular calendar year of January 1 to December 31 or you have your own fiscal year.
Noteworthy, this compliance requirement must be prepared and submitted on time. Apart from the list, you have to submit other inventory-related documents, schedules, and records. If you are unsure about what to do, speak to an accounting professional so you can submit without delays.
2. Who must submit this list and what must be included?
Notably, most companies involved in the sale of both raw materials and final goods must provide this list to the BIR. These companies include merchandising, manufacturing, retail, wholesale, real estate, and construction businesses. The accounting of each resource held in inventory is vital to the accounting and taxation processes as each item holds monetary value, which will be used in computations.
This list should contain the details of quantity, description, unit cost, and total cost of each item of raw materials, supplies, other goods, and stocks-in-trade. Notably, if you have no more inventory at the end of the year, you are still required to submit a list, as long as you held inventory at some point.
3. What items are exempted from being reported on this list?
Goods that are exempt from being listed are spare parts, IT equipment, manufacturing supplies, daily office supplies, and other equipment required for a company’s internal operations. Do note that most service businesses need not submit this list. The submission of this list for service-based companies will depend on the nature of the business.
4. Why must companies submit this list?
For one, this list is a mandatory requirement imposed on all businesses that do hold inventory. Bookkeeping regulations in the Philippines postulate that all taxpayers must maintain a book of inventories along with the details of each item held under this book. Remember, incorrect reporting can subject you to a tax investigation and audit by the BIR.
5. Why is it important for business owners to know what must be included in this list?
Seeing that this is a document that is required by an official Philippine government office, producing a proper and meticulous Inventory List is vital as it prevents discrepancies in financial reporting which may result in incomplete financial reports, erroneous reports, and poor business forecasts. It is important to note that Financial Statements are official records that will be referenced by the BIR. Having errors in your inventory account could gravely affect your financial documents and may cause you to incur penalties and be subject to audit and investigation.
6. Are there other requirements?
Yes. Some businesses may be required to submit additional documents like records, lists, and schedules. Check this BIR Revenue Memorandum Circular No. 57-2015 to see further guidelines on the Inventory List, along with additional information which you may be required to submit.
The Final Word
As with all other government processes and requirements, the Inventory List is a mandatory document that must be taken seriously in order to avoid penalties. It is important to note that penalties will not only affect your standing with the BIR and other government offices, but they will also reflect on your company values.
If in any case, you need more information on the matter of Inventory List and the memorandums that require such, as well as other policies related to this matter, it is advised that you seek help from a certified public accountant. Our firm provides accurate accounting and bookkeeping services. We can help you prep the list and audit your records to ensure you will submit the right information to the BIR. Call us for a free 30-minute consultation so we can provide your company with proper guidance.
