How Cooperatives Can Appeal BIR Penalties for Unsurrendered or Unused Official Receipts in the Philippines

Scope & caveat. This write-up is current as of 18 June 2025 and is intended for Philippine cooperatives only. It covers the legal basis, common factual scenarios, and every procedural option available for contesting penalties arising from unused, unsurrendered, or expired official receipts (ORs) and invoices. Always confirm that no newer BIR issuances have supervened before relying on this guide.

1. Why the BIR cares about unused receipts

Audit trail. ORs and invoices are the backbone of the VAT/percentage-tax system and of expense substantiation.
Five-year life span. Under Revenue Regulations (RR) 18-2012 and RMO 12-2013, every set of receipts is valid for five (5) years from the date of ATP (Authority to Print) or until the serial numbers run out, whichever comes first.
Obligation to surrender. Section 2 of RR 18-2012 requires the taxpayer to surrender all unused ORs/invoices within ten (10) days from (a) expiration, (b) closure/cessation, or (c) issuance of a new ATP.

Failure to comply triggers the penalties in Section 264 of the National Internal Revenue Code (NIRC), as amended.

2. Statutory & regulatory basis of the penalties

Infraction	Primary provision	Specific monetary penalty*
Failure to surrender or destroy unused ORs/invoices within 10 days	§ 264 (a), NIRC + RR 18-2012, § 5	₱20,000 plus surcharge and interest (treated administratively as a “minor violation” but with a fixed fine)
Failure to issue OR/invoice, or to keep duplicates	§ 264 (a), NIRC	₱1,000 per document up to ₱50,000 per taxable year
Unauthorized printing of receipts	§ 264 (b), NIRC	₱20,000 plus possible criminal prosecution
Using “expired” ORs after 5 years	Same as failure to issue valid OR (treated as non-issuance)	Same schedule as above

* Civil penalties; criminal prosecution is theoretically possible but uncommon for cooperatives.

3. Why cooperatives get caught

“Tax-exempt ≠ compliance-exempt.” Article 60 of the Cooperative Code (RA 9520) exempts registered co-ops from national taxes on transactions with members, but does not waive record-keeping and invoicing duties.
Frequent dormancy. Small co-ops often cease operations temporarily, forget to surrender old receipts, then revive years later and apply for new ATPs—triggering RDO database flags.
Mismatch in scope of business. A coop may assume it can simply not issue receipts to members; but sales to non-members or any VATable activity still demand accredited invoices.

4. Appeal or protest? Three legal avenues

Path	Governing rule	When to use	Deadline to file	Decision-maker
(A) Administrative protest (Sec. 228, NIRC)	PAN → FAN/FLD process	If you received a formal assessment (PAN/FAN) for penalties	30 days from receipt of FAN to file protest; 60 days to submit documents	RDO → Regional Director or Commissioner
(B) Request for abatement/cancellation of penalties (Sec. 204 B, NIRC; RR 13-2001; RMO 20-2007)	No dispute on facts, only on reasonableness of penalty	If penalty is final but there is basis to waive/ reduce (e.g., good faith, first offence, no revenue loss)	30 days from payment/demand letter (best practice)	Commissioner (delegated to Regional Evaluation Board for ≤ ₱500k)
(C) Compromise settlement (Sec. 204 A, NIRC; RMO 11-2000)	Where doubt exists as to liability, or taxpayer clearly cannot pay	Use to cut amount to 40 % (withholding cases) or 10 % (pure penalties, no basic tax)	Any time before delinquency is collected by enforcement	RDO, then Evaluation Board

After exhausting A, B, or C, you may still:

Appeal to the Commissioner (if regional decision adverse).
Elevate to the Court of Tax Appeals (CTA) within 30 days of either (a) receipt of final decision, or (b) lapse of the 180-day period for BIR to act.

5. Typical bases for cancellation or reduction

Good-faith error. The coop honestly believed it was exempt from invoicing because it dealt only with members, or thought the ATP renewal automatically voided the old sets.
Immaterial harm to revenue. No sale occurred using the expired/unsurrendered receipts; hence no tax base was hidden.
Force majeure / loss. The receipts were destroyed in fire, flood, or theft—attested by a notarised Affidavit of Loss and police/barangay report.
First-time offender with corrective actions already taken (e.g., surrendered or destroyed the books).
Equity considerations under Section 204 B: penalty is “unjust or excessive.”

Key tip. Even tax-exempt activities of co-ops must be documented by BIR-compliant ORs if the law or regulator (e.g., CDA) requires. But the absence of tax revenue impact is a strong equitable ground for abatement.

6. Step-by-step protest workflow (Route A)

Day	Action
0	Receive Pre-Assessment Notice (PAN)—verify postage or personal service date.
15	Reply to PAN (optional but recommended): factual clarifications, legal citations (RA 9520, RMO 20-2007).
≤ 30	Receive Formal Assessment Notice (FAN)/Formal Letter of Demand (FLD).
≤ 30 from FAN	File protest (Request for Reconsideration or Re-investigation). Include: • Facts & issues • Discussion & authorities • Prayer for cancellation/abatement • Annexes (see § 7)
≤ 60 from filing protest	Submit all supporting documents not already attached.
≤ 180 from protest	BIR must decide; otherwise you may treat as adverse and go to CTA.

7. Documentary checklist

Board resolution authorising the protest and signatory.
Certificate of Registration (CDA & BIR).
Certificate of Tax Exemption (if issued per RA 9520 & RMO 76-2010).
Sworn Inventory & Reconciliation Report of receipts (unused, used, surrendered).
Surrender letter and acknowledgment from BIR (if done belatedly).
Affidavit of loss or destruction, if applicable.
Proof of first-time violation (no prior BIR infractions).
Any correspondence with printer/ATP applications showing attempt at compliance.

8. Abatement petition details (Route B)

Addressed to: The Commissioner of Internal Revenue, through the RDO.
Legal hook: Section 204 (B), “to abate or cancel a tax liability when … collection is unjust or excessive.”
Specific requests:
- Complete cancellation of the fixed ₱20,000 fine or
- Reduction to a compromise amount (often ₱5,000–₱10,000) under RMO 20-2007.
Processing hierarchy:
- ≤ ₱500,000 – Regional Evaluation Board (REB)
- ₱500,001 to ₱1 million – National Evaluation Board (NEB)
- > ₱1 million – Office of the Commissioner

9. Compromise settlement (Route C) at a glance

Eligibility. The assessment is final and executory, but there are “doubtful validity” issues (e.g., wrong legal basis) or clear inability to pay.
Rates.
- If only penalties are involved (no basic tax): ₱ — or 10 % of assessed amount, whichever is higher.
- If basic tax exists: refer to the graduated compromise matrix in RMO 11-2000.
Payment form. BIR Form 2118A (voluntary compromise) + Form 0605.

10. Escalating to the Court of Tax Appeals

Jurisdiction. Section 7(A)(1) of the CTA Act (RA 1125 as amended by RA 9282) covers penalties imposed by the Commissioner.
Timeline. 30 days from receipt of adverse decision or expiration of the 180-day BIR inaction period.
Filing fee. Roughly 1 % of the amount in dispute, but at least ₱1,000, plus legal research fee.
Proofs. Certified true copies of the entire BIR docket: PAN, FAN, protest, denial, etc.

Practical note. The CTA is a court of record; documentary completeness and timely filing are more important than dramatic oral argument.

11. Recent jurisprudence & administrative trends

Case / Issuance	Gist	Relevance to co-ops
Sta. Clara Contractors v. CIR (CTA EB 2281, 2024)	Penalty for expired invoices cancelled; BIR failed to prove revenue loss.	Reinforces “no harm, no penalty” contention.
RMC 4-2023	Reiterated that tax-exempt entities must still renew ATPs every 5 years.	Clarifies that compliance is separate from exemption.
People’s Choice MPC v. BIR (CTA Case 10829, 2025)	₱20k penalty reduced to ₱5k compromise because coop immediately surrendered all booklets.	Shows Board leniency for swift corrective action.

12. Template skeleton for a protest letter

[Date]

Hon. [RDO Name]
Revenue District Officer
Revenue District Office No. ___
[BIR Address]

RE: Protest against Formal Assessment No. ___ dated ___
     Penalty for Unsurrendered/Expired ORs – ______ Cooperative

Dear Sir/Madam:

1. **Facts**  
   1.1. On ___ we received the above Assessment imposing a ₱20,000 penalty …  
   1.2. The ORs in question, though expired, were never issued to any party…

2. **Issues**  
   Whether the penalty should be cancelled under Sec. 204 (B) of the NIRC.

3. **Arguments**  
   a. *Good faith & absence of revenue loss.* – The receipts were blank…  
   b. *Cooperative exemption & equity.* – Art. 60 of RA 9520…  
   c. *First violation.* – No prior infractions (see Annex “E”).

4. **Prayer**  
   WHEREFORE, premises considered, we respectfully pray that the penalty be CANCELLED…

Respectfully yours,

[Name, Title]
[Board Resolution No. ___ attached]

13. Compliance tips to avoid future penalties

Logbook method. Maintain a perpetual inventory of receipt booklets with issuance and destruction dates.
Automated reminders. Set calendar alerts 4 years and 10 months after ATP issuance to commence renewal paperwork.
Coop education. Include invoicing-compliance orientation in CDA’s mandatory trainings.
Secure destruction. Always request the RDO to witness shredding or perforation to obtain a Certificate of Destruction.

14. Quick reference timeline

ATP issued  : 01 Jan 2020
Expiry      : 31 Dec 2024 (5 years)
Surrender ORs: 01–10 Jan 2025
File protest (if penalised): on or before 30 days from FAN
BIR decision deadline: 180 days from protest
CTA appeal: within 30 days of decision / 180-day lapse

15. Take-away checklist for co-op officers

☐ Inventory all ORs/invoices (used & unused). ☐ Compute whether the five-year validity has lapsed. ☐ Surrender or destroy expired sets within 10 days. ☐ Keep proofs: acknowledgment, affidavit of destruction/loss. ☐ If assessed, calendar the 30-, 60-, and 180-day cut-offs immediately. ☐ Weigh which remedy (protest, abatement, compromise) best suits the facts. ☐ Document everything—the CTA values paper over piety.

Conclusion

While cooperatives enjoy generous tax benefits, they must still follow the BIR’s invoicing control regime. Penalties for unsurrendered or expired receipts can often be cancelled, reduced, or settled if the coop acts promptly, demonstrates good faith, and marshals proper documentation. The law gives three administrative avenues before litigation—use them wisely, track the statutory deadlines, and remember that equity favors the diligent but never the complacent.

(This article is for general education. For case-specific advice, consult a Philippine tax lawyer or accredited cooperative CPA.)