The Bureau of Internal Revenue (BIR) has exempted small-scale farmers from issuing receipts and invoices to make it easier for them to do business.
Revenue Regulations (RR) No. 12-2023 implements Section 237 of the National Internal Revenue Code of 1997, as amended, on the issuance of receipts or sales or commercial invoices by agricultural producers.
Under RR 12-2023, the BIR, for ease of doing business, “exempts agricultural producers from the issuance of principal and supplementary receipts or invoices on their sale of agricultural food products.”
This is provided that the gross sales/receipts for the year shall not exceed P1 million. Provided further that agricultural producers shall record each sale transaction in a simplified sales book containing the following information:
• Date of transaction
• Description of goods sold or services rendered
• Registered name, registered address, and taxpayer identification number of the purchaser
• Amount of sales
• Amount of tax withheld, if any
• Net amount received
A simple logbook or notebook can be used as a simplified sales book, the regulation says. All simplified sales books shall be kept and preserved for 10 years.
RR 12-2023 defines agricultural producers as individuals who are suppliers/producers/sellers, contract growers, and millers of agricultural food products whose annual gross sales/receipts, for tax purposes, do not exceed P1 million.
Agricultural products are products in their original state which are generally used in food for human consumption. They include farm produce, livestock, poultry, marine products, ordinary salt, and agricultural inputs such as fertilizers, seeds and seedlings, and feeds.
These agricultural products “shall still be covered by these revenue regulations even if they have undergone simple processes of preparation or preservation for market, such as freezing, drying, salting, broiling, roasting, smoking, or stripping,” RR 12-2023 further says.
If the annual gross sales/receipts exceed P1 million at any time during the taxable year, the agricultural producer is required to issue official receipts/sales invoices for every subsequent transaction valued at P100 or more.
The regulation also states that the agricultural producer will still be exempt from the issuance of receipt or invoice even if he or she derives income from the sale of goods or services other than agricultural food products.
“Provided that the annual aggregate gross sales/receipts shall not exceed P1 million. Provided further, the primary activity of the agricultural producer shall be the sale of agricultural food products and that the amount of sales from other goods or services shall not exceed 30% of the aggregate sales receipts of the agricultural producer for a given taxable year,” the RR says.
At the same time, agricultural producers are required to register once with the BIR, and their simplified sales book must also be registered.
Agricultural producers should also file quarterly and annual income tax return and pay income tax due, if any. Any taxes withheld by the buyer or purchaser can be used as tax credit by the agricultural producer.
On the part of buyers or purchasers engaged in trade or business, income payments they made to agricultural producers not exceeding the cumulative amount of P300,000 within the same taxable year shall be exempt from withholding tax. As such, they are required to issue BIR Form No. 2304 to agricultural producers per purchase transaction.
Income payments they made to agricultural producers which exceed the cumulative amount of P300,000 will be subject to withholding tax of 1%.This requires the buyer to issue BIR Form No. 2307 to agricultural producers.
Finally, the buyer or purchaser shall file quarterly remittance return of creditable income taxes withheld (BIR Form No. 1601-EQ) together with the quarterly alphabetical list of payees, whether actually subjected to or exempted from withholding tax.
RR 12-2023, issued on October 2, will take effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation.