Ensuring that you have the correct information of your Suppliers (Philippines setting)

"Tax is the lifeblood of the government", this is what we always hear from the different sects of our society. And it simply implies that it is very important because without it, our government can't fully implement all of its projects,government offices cannot function well and our country can't support its people. So with this, as citizens (person and juridical persons) of this country,we are bound to follow every rule that our governing bodies implement.

But why am I talking about Tax,when all I want to share to you is about the importance of having correct information of your Suppliers?

To give you a clearer picture,let's try to discuss things in a step by step manner:

Objective
To gather accurate data of the Supplier and have it maintained in the Supplier Data System correctly.

Scope
1.Securing BIR Form 2303 from the supplier.

2.Creation or Recording of Supplier's Master Data.

Roles and Responsibilities

1. Supplier- responsible in providing necessary documents as basis for the Customer to maintain its record.

2.Purchasing Department (Customer) – responsible in receiving documents and records from the Supplier.

3.Master Data Department/Bookkeeper-maintains information in the system or record data gathered in it Accounting Record.

Definition of Terms

Tax - a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions. (source: https://www.google.com.ph/)

Juridical Person-Entity (such as a firm) other than a natural person (human being) created by law and recognized as a legal entity having distinct identity, legal personality, and duties and rights. (source: https://www.google.com.ph/)

Supplier - a person or organization that provides something needed such as a product or service. (source:https://www.google.com.ph/)

BIR Form 2303- it is the Certificate of Registration issued by BIR to any business entities who operates in the Philippines and is registered with the BIR.

Sales Invoice-an accountable form issued by the Supplier to its Customers upon delivery of its purchased goods.

Official Receipt-an accountable form issued by the Supplier to its Customers upon payment of its incurred services.

Guidelines

In case of first time transaction with the Supplier, the Customer should secure copy of Supplier's BIR Form 2303 (photocopy only). This is the very basis of the customer to ensure that he/she has the correct information for the following:

a. Busines Registered Name
b. Trade Name
c. Tax Identification Number (TIN)
d. Registered Address
f. Tax Type (either: VAT Registered or Percentage Tax Registered)
g. Business Activities

In case that the data about "Tax Type" of the Supplier can't be found on its BIR Form 2303,the Customer may secure a Photocopy of its Official Receipt or Sales Invoice.

In here, you may check the upper portion of the Accountable Form beside its TIN , you can find V (VAT) or NV (VAT).

Customer shall also confirm with the Supplier on what accountable will they issue upon delivery of goods or service in order to determine the right Withholding Tax Rate to be used.

In conclusion, it is very important that the Customers can have accurate information of the Suppliers in order to obtain the following:

a. Accurate Master Data for internal recording .
b. Accurate Information to be used for any government reportorial requirements.
c. Matching principle, wherein any record of the Supplier for its Sales, should matched with the purchases of the Customer.
d. Avoid any possible penalty (interest & surcharge) in case of error in reporting to tax implementing body of our government.
e. Ensure that expenses incurred are valid in claiming as deductible expense for Income Tax computation purposes.

Above information were mainly based on my experience and any suggestion to improve this post is highly recommended.

But if you find it helpful, I am pleased to help you my friend.In case of any further clarification, please feel free to comment below and I will try to answer it the best way I can.

Thank you very much for your time.