The Bureau of Internal Revenue (BIR) in the Philippines has introduced Revenue Memorandum Circular RMC No. 65-2024. This new circular aims to help businesses by providing guidelines on how to handle Output VAT Credit on Uncollected Receivables. Let’s go over the details and see how it can benefit your business.
What is Output VAT Credit on Uncollected Receivables?
When businesses sell goods or services, they often have to pay Value Added Tax (VAT) on these transactions. However, sometimes customers don’t pay their bills on time, leaving businesses with uncollected receivables. RMC No. 65-2024 allows businesses to claim a credit for the VAT they paid on these uncollected receivables.
Key Points of RMC No. 65-2024
1. Claiming the VAT Credit
If a customer hasn’t paid their bill after the agreed period, businesses can deduct the VAT they paid on that transaction from their output VAT in the next quarter. This helps businesses manage their cash flow better.
2. Conditions for Claiming
To claim this credit, the business must have fully paid the VAT on the transaction. The VAT on the uncollected receivables should not have been claimed as a deduction under Section 34 (E) of the Tax Code.
3. What Happens When Receivables are Collected?
If the business eventually collects the receivables, they must add the output VAT back to their VAT payable for that period. This ensures that the VAT system remains fair and balanced.
4. Documentation Requirements
Businesses must stamp the invoice of the uncollected receivable with “Claimed Output VAT Credit” and provide a copy to the customer. This step is crucial for transparency and compliance.
Why is This Important for Businesses?
RMC No. 65-2024 is designed to ease the financial burden on businesses, especially those that deal with credit sales. By allowing businesses to claim a VAT credit on uncollected receivables, the BIR is helping improve cash flow and reduce the impact of bad debts. Revenue Memorandum Circular No. 65-2024 is a positive development for businesses in the Philippines. It provides a clear process for claiming VAT credits on uncollected receivables, helping businesses manage their finances more effectively. For more detailed information, you can refer to the full text of RMC No. 65-2024 on the BIR’s official website.
With Account It Right, these new guidelines won’t be an issue. We specialize in handling small to medium enterprises and freelance accounts, making sure that you stay informed and your business compliant with the documentation requirements so you can take full advantage of this new provision. Request for a quote to know how we can help you thrive.