Stay BIR-Compliant: Bookkeeping for Foreign Businesses in the Philippines

Setting up a business in the Philippines is often viewed as a desirable option among foreign entrepreneurs – from SMEs to big companies alike, they see the country as a potential business hub, or extension of their main entities. When a business is established, having a finance team is inevitable, especially when complying with governmental requirements. One backbone of the financial aspect is bookkeeping, — wherein maintaining a journal, ledger, and other books of accounts is essential.

In this blog, we will discover how foreign businesses in the Philippines or entities can comply with the Bureau of Internal Revenue’s (BIR) requirements through bookkeeping, its functions, and why it matters, with the agenda to avoid incurring violations and penalties.

Bookkeeping in the Philippines: Implementing Regulations

Some think bookkeeping is a simple task when it’s not. Here are some of the laws created on why bookkeeping in the Philippines matters and needs to be prioritized to be compliant with the rules and regulations set forth by the government:

1. National Internal Revenue Code (NIRC)

Under Section 334 of the NIRC (originally from Commonwealth Act No 466), it mandates that a journal and ledger or any equivalent shall be maintained for corporations, companies, partnerships, or persons by a bookkeeper or manager to enable to production accurate determination of the amount of taxes due.

2. Bookkeeping Regulations

Also known as Revenue Regulations No. V-1, as amended (RR No. V-1), it defines “books of accounts” to include journal, ledger, and subsidiary ledgers. Within seven (7) days, it requires posting to the ledger, using a bound form, with strict double-entry accounting.

3. TRAIN Law

Under Section 232 of Republic Act No. 10963, also known as the TRAIN Law, it mandates taxpayers to keep efficient and adequate bookkeeping records that are BIR-authorized.

4. Revenue Circulars

The BIR’s Revenue Memorandum Circulars 29-2019 (BIR RMC 29-2019) and 3-2023 (BIR RMC 2023) authorize online registration through the Online Registration and Update System (ORUS) and QR code stamping for books.

To summarize, these laws provide who should maintain books, what must be kept, how it should be formatted, when and where it is registered, and how formats may evolve.

Books for Bookkeeping: What Each Book Is For

There are several books that companies need to keep. Each has its own functions, and here are the descriptions of each:

1. General Ledger – Combines transactions from the journals by account, showing balances, and helps in the preparation of financial statements
2. Journal – Used to record transactions chronologically, which includes listing debits and credits, descriptions, dates, reference numbers, and amounts, among others. This is the initial record before posting it to the ledger.
3. Cash Receipts Journal – Here is where all inflows of cash, such as sales receipts, receivable collections, or loan proceeds, are detailed in each entry, with indicated date, amount, OR/invoice number, payor, to name a few.
4. Cash Disbursements Journal – Showcases all cash outflows, which are payments made for salaries, purchases, and any other expenses, with relevant dates, references, and payees.

Who Must Keep the Books?

According to Bookkeeping Regulations, the following shall maintain certified bookkeeping in the Philippines if:

• If the business’ quarterly sales exceed P5,000, they must use full journal and ledger systems
• If the sales do not exceed P5,000, they may opt for simplified bookkeeping with pre-approved formats, or can still choose to do full books
• If the quarterly gross sales exceed P25,000, an annual audit by a Certified Public Accountant (CPA) is required
• All corporations, partnerships, enterprises (such as PEZA), or individuals who pay internal revenue taxes (including non-resident foreign entities) are subject to similar rules

Foreign Owners Need to Know: Core Books Required

The BIR requires the following basic books to be complied with if you have a business established in the Philippines. Here are the essential books your business needs to keep:

Book	Purpose	Required For
General Journal	Chronological and complete record of all business transactions	All taxpayers
General Ledger	Posting per category by account; also, a basis for financial statements	All taxpayers
Cash Receipts Journal	Records all cash inflows	Recommended, but only required if using subsidiary ledgers
Cash Disbursements Journal	Useful to track all cash outflows	Recommended, but only required if using subsidiary ledgers
Subsidiary Sales and Purchases Journals	Details of credit sales and purchases	Required for VAT-registered entities

Furthermore, the following needs to be observed:

• Usage of double-entry bookkeeping (for debits = credits);
• Journal entries shall include the date, accounts, narration, debit, and credit amounts;
• Posting to the ledger shall be done within seven (7) days of each journal entry; and
• For simplified taxpayers (which gross quarterly sales ≤ ₱5,000), a simplified format can be used, though usage of standard books is still accepted.

**In cases of replacement of lost books due to force majeure (unforeseeable circumstances), secure BIR certification of loss and have the new books restamped. Notify RDO at least within 15 days and ensure restoration of backup files.

BIR Book Registration

As mentioned during the first part, registration of the books with the BIR is a must for them to be authorized for use. Apart from obtaining a Certificate of Registration (COR), here are the following options and requirements you can comply with:

• Online ORUS – Submit the Form 1905/1900 via ORUS, or obtain the QR code for books or a Permit to Use.
• Manual Filing (RDO) – in your respective Revenue District Office (RDO), submit the printed books (manual or bound loose-leaf) or a sample of electronic printout (computerized) and secure a physical stamp
• Submission Requirements –
  • For new applicants:
    • Form 1901 – For Self-Employed (Single Proprietor/Professional), Mixed Income Individuals, Non-Resident Alien Engaged in Trade/Business, Estate and Trust
    • Form 1903 – For Corporations, Partnerships (Taxable/Non-Taxable), Including GAIs, LGUs, Cooperatives, and Associations
  • For update/correction/cancellation:
    • Form 1905

Submission requirements include sample prints, license/certification for software, annexes, among others, as required.

Even though foreign businesses in the Philippines do not face different bookkeeping rules as compared to the local businesses, foreign branches may have additional tax filing requirements, which may also be referenced by the books they should keep, such as branch profit remittance tax when sending profits abroad.

Books of Accounts Format

Under the regulations of BIR RMC 29-2019 and RR No. V-1, the BIR authorizes the following formats:

• Manual (Bound) – Traditional Ledgers, stamped or QR-coded;
• Loose-Leaf (Bound) – computer-printed pages post-data entry, and it requires the BIR’s Permit to Use; and
• Computerized – digital accounting software, which also requires BIR’s Permit to Use and electronic file submission.

**Note that the deadline per BIR RMC 3-2023 is also provided. For Manual, it must be registered before first use. For Loose-Leaf, within 15 days after the fiscal year-end, and for Computerized, within 30 days after the fiscal year-end.

Non-Compliance Penalties

In cases of non-compliance, the law sets forth the following penalties for the offenses imposed:

• Failure to maintain books or falsification of entries – A fine of P50,000 – P200,000 and imprisonment of around 2-6 years;
• Late submission or unstamped additional volumes – Same as penalty for failure to maintain books
• Use of computerized books without the BIR Authority to Use – P10,000 for the first offense; P25,000 for each subsequent offense, with potential suspension of the used accounting software; and
• Failure to present books during audit – 1% of gross sales or receipts, with a minimum of P10,000.

Best Practices for Bookkeeping Compliance

To ensure compliance, here are the following tips you can follow to ensure that everything is in order, especially when tax or audit season comes:

1. Register your business and acquire a COR.
2. Make sure that you also register the required books via ORUS or on your respective RDO branch.
3. Choose the right book format.
4. Record every transaction: journals, ledger posting, and other compiled subsidiary journals
5. Ensure you have maintained backup (i.e., electronic files or printed copies)
6. Retain books for at least five (5) years from the last entry, as required via Ease of Paying Taxes (EoPT) Law.
7. Prepare for audit season (BIR may assess the accounts within three (3) years [7 years if fraud is suspected]).
8. Engage with professional help when needed to avoid penalties while streamlining compliance.

Why Bookkeeping in the Philippines Matters?

Having solid bookkeeping is not just another legal obligation – it is a foundation of responsible financial governance. For foreign businesses operating in the Philippines, ensuring adherence to the BIR’s standards in terms of journals, ledgers, and books of accounts maintains the integrity of tax reporting, reduces the risk of penalties, promotes audit readiness, and fosters long-term financial transparency.

From registration and maintaining relevant books through choosing the appropriate formats, recording every transaction with utmost precision, issuing invoices or receipts to customers, and seeking professional help, it is necessary and relevant for foreign businesses in the Philippines that confidently fulfill Philippine tax obligations while focusing on business growth.

Books Out of Order? Our Bookkeepers Can Do It Further!

When we say further, we can go the extra mile. We cannot only arrange and ease the backlog of your books for you, but we can also guide you through the right bookkeeping so you can always stay compliant. With Manila Bookkeepers, our team of experts can handle your books, so you can always be BIR-ready, anytime.

Whether you’re still planning to launch your operations in the Metro, or have an existing business in Metro Manila as a foreign business owner, contact [email protected] today so we can start taking care of your books.