The importance of asking for an official receipts on every purchases or payments made is not a common knowledge to individuals or business owners. This is why the BIR have created different ways to remind customers to do so such as requiring business establishments to display the ASK FOR RECEIPT signage, Premyo sa Resibo raffle promos and more.
Furthermore, it has issued Revenue Memorandum Circular No 16-2013, stating that for expenses to be claimed as deduction to income tax, it should be substantiated by Official Receipts/Invoices issued by third-party establishments.
Some Benefits of always Having an Official Receipt of Your Purchases
1. Completeness of Records
One of the basic benefits of asking official receipt is completeness of accounting records to support existence of recorded transactions. Without an official receipt, your accounting records is incomplete which can be risky in the long run.
2. Claim as Deduction or Refund
If you ask for an official receipt on your purchases or payments, you can validly claim it as expense and use it as deduction to sales. If in case you are VAT registered and your input tax (vat on expenses) exceeds output tax (Vat on sales), you may claim for refund on the excess or difference.
3. Decreases Tax Payments
Another importance of asking for an official receipt is that it can be used to legally minimize or decrease tax payables. Since the official receipt can be use as expenses which is deducted to sales, it will in effect minimize your company’s tax payments due to lower net income.
4. Minimizes Audit
In my experience as Accountant and Auditor, one of the major reason for audit is lack of documents, such as Official receipts, to support the existence of the transaction. Asking for official receipts and properly filing it will minimize the risk involving audit.
5. Hard Evidence
Last but I think the most important benefit of asking for an official receipt is having a hard evidence to support the existence of the transaction recorded. This is very important in the long run of the business especially during BIR or Government audit.
Thank you for this.
My friend wants to be a reseller of goods but although the supplier can provide an invoice, and perhaps a receipt, I am not sure the invoices or receipts are BIR registered. Will this affect the ability to deduct the purchase price to calculate net sales for income tax purposes?
I purchase my drinking water under credit; a duplicate copy of the delivery receipt is issued for each transaction. I settle my account at the end of each calendar month for which I am given an official receipt. Not until last month. Instead of issuing an OR, they issued me another delivery receipt — this time, the original. When I called their office, I was told that they no longer issue official receipts. Instead, they can just give me a sales invoice. Is this practice acceptable?