BIR INVENTORY LIST (ANNEX “A”) SUBMISSION WHEN THERE IS NO INVENTORY A Comprehensive Philippine Legal Guide (2025 Update)
1. Executive Snapshot
Since 2015, the Bureau of Internal Revenue (BIR) has required taxpayers that keep stocks of goods, materials or supplies to file an electronic Detailed Inventory List using the prescribed Annex “A” template. Questions inevitably arise when, on the last day of the taxable year, there is literally nothing left on hand—for example, a trading company that sold its entire line, or a pure-service entity that never held merchandise at all. This guide distills every rule, clarification, and practical lesson on how to handle an “inventory-nil” situation—avoiding penalties while keeping compliance friction-free.
2. Legal & Regulatory Bedrock
| Instrument | Key Points |
|---|---|
| §§ 232, 235 & 247, NIRC (Tax Code) | Allow the Commissioner to prescribe additional accounting reports and penalize non-submission. |
| Revenue Regulations No. 5-2015 (“RR 5-2015”) | First formally required the Inventory List in soft copy. Provides template Annexes (A to D) keyed to business type. |
| Revenue Memorandum Circular No. 57-2015 | Q&A; clarified coverage, medium, deadlines. Explained that “NIL” inventory generally means no Annex is due, but voluntary NIL filing is allowed. |
| RMC 64-2015 & 28-2016 | Further FAQs: definition of “inventory,” method of valuation, and treatment of consigned goods. |
| RMC 126-2020 (and succeeding eSubmission advisories) | Updated accepted media: USB/flash drive, email or eAFS uploads; replaced DVD-R. |
| Penalties: § 250 & § 275, NIRC; RMO 19-2007 schedule | ₱1 000 per unfiled list (max ₱25 000 per year) plus 25 % surcharge & interest; possible criminal prosecution for willful failure. |
3. Who Usually Files Annex “A”
| Category | Obligation |
|---|---|
| Manufacturers & Processors | Raw Materials, Work-in-Process, Finished Goods (3 tabs). |
| Wholesalers/Retailers | Merchandise on hand. |
| Real-estate developers | Annex “B” instead. |
| Construction contractors | Annex “C”. |
| Pure service entities (e.g., law, IT, consultancy) | Not ordinarily required. |
Thresholds. RR 5-2015 removed the former ₱10 million cost-of-inventory cut-off—all entities holding inventory must file, regardless of size.
4. Regular Deadlines & Filing Mechanics
| Filing trigger | Due date |
|---|---|
| Calendar-year taxpayers | 30 days after 31 Dec (i.e., 30 Jan of the following year). |
| Fiscal-year taxpayers | 30 days after the close of the fiscal year. |
Medium. Current practice (per RMC 126-2020) allows:
- Upload as .xlsx in the eAFS portal under category “Inventory List”.
- Or submit USB/flash drive plus notarized transmittal letter to the RDO.
Keep the final Excel file, PDF transmittal, and acknowledgment for 10 years (Sec. 203 & RMC 29-2019 retention rules).
5. What Goes in Annex “A” (When There Is Inventory)
Minimal columns:
Item Code • Complete Description • Unit of Measure • Qty Beg • Qty In • Qty Out • Qty End • Unit Cost • Total Cost.
RR 5-2015 also permits adding serial numbers, batch/lot, expiration, or BIN for customs-bonded goods.
6. When the Ending Balance Is Zero
No Legal Obligation to File Annex “A”. – RR 5-2015 and RMC 57-2015 jointly state that the Inventory List is required only if inventory exists at year-end. – Failure to file when nil does not constitute “failure to file a return” because the triggering event (stocks on hand) is absent.
Practical Work-arounds Adopted by Taxpayers. a. NIL Annex Upload. Submit the Excel template with the header sheet completed and a single line that reads “NO INVENTORY ON HAND AS OF [date]”. b. Letter of No Inventory. A notarized letter to the RDO formally stating that the entity had zero ending units and commits to file once inventory is replenished. Many examiners appreciate the documentation. c. Silence (Do Nothing). Strictly permissible, but may draw a notice of discrepancy if the RDO’s system automatically tracks habitual filers. If you adopt this stance, retain sufficient accounting schedules proving the zero balance.
Which Option Is Safer? – For small or new service entities, inaction is usually fine. – For trading/manufacturing taxpayers that historically filed Annex “A”, best practice is Option (a) or (b) for audit-trail continuity.
7. Typical Scenarios & Recommended Responses
| Scenario | Recommended Action | Rationale |
|---|---|---|
| Service start-up that never held goods | No filing; keep books showing no stock purchases or COS entries. | BIR expects inventory only from merchandising/manufacturing. |
| Trader sold out all units on 31 Dec 2024 | Upload NIL Annex “A” (template with zero line). | Auditor can trace sales ledger ↔ zero ending inventory. |
| Manufacturer with negative WIP due to system error | File Annex “A” with zero, accompany with reconciling note; correct books. | Negative stocks imply mis-postings; disclosure forestalls penalty. |
| Company changed method to “just-in-time” so always zero at year-end | Keep board resolution on change in production/logistics; file NIL Annex with note on JIT policy. | Confirms that zero is intentional, not omission. |
8. Consequences of Getting It Wrong
| Misstep | Exposure |
|---|---|
| Failing to file even though stocks exist | ₱1 000 per list (per year) + 25 % surcharge & interest; possible disallowance of cost of sales during audit. |
| Submitting after deadline | Same penalties, but BIR may accept late filing with compromise. |
| Over- or understated inventory | Can trigger VAT & income-tax deficiency (affects COS and VAT base). |
| Habitual nil-filing yet audit uncovers hidden stocks | “Substantial under-declaration” (30 % rule) leading to fraud penalties and criminal case. |
9. Audit-Ready Documentation Checklist
- Trial balance & detailed ledger proving zero balances on inventory accounts.
- Physical count sheets (if conducted) showing nil results.
- Sales cut-off test schedules proving that all items sold were duly invoiced.
- Supplier statements showing no deliveries near year-end that remained unrecorded.
- Board or management memo (if adopting JIT or changing business model).
10. Interaction With Other BIR Filings
| Report | Impact of Zero Inventory |
|---|---|
| Quarterly VAT Schedule of Sales & Purchases (SLSP) | Purchases column should likewise reflect nil purchases of goods if truly inventory-free. |
| Books of Accounts | General Ledger inventory control account must close to zero; subsidiary ledgers dormant. |
| Annual ITR & Audited FS | Note disclosure: “The company maintains no inventories as of [date].” |
| CAS / Loose-Leaf Permit | If using a perpetual system, bookstore module may show zero ending quantity; retain screenshots. |
11. Recent Developments & Digitalization Notes (2021-2025)
- eAFS Single-Portal Upload. Inventory List now falls under eAFS “Other Required Attachments”; no need for separate DVD-R.
- Online Sworn Statements. During pandemic years, BIR accepted e-notarized transmittals.
- Integration With e-INVOICE System. Large Taxpayer pilot entities using electronic invoices auto-generate stock movement data; BIR is drafting rules to replace Annex “A” with API feeds.
- Prospective repeal for micro-enterprises. A DOF working draft (June 2025) proposes waiving Annex “A” for businesses with gross sales ≤ ₱3 million, aligning with the 8 % income tax regime.
12. Frequently Asked Questions (FAQ)
| Q | A |
|---|---|
| Must a newly incorporated consultancy file a “NIL” Annex “A”? | No. A letter of no inventory is optional but prudent for first-time registrants. |
| We use the periodic method; do we report purchases instead of qty-in? | The Annex demands ending quantity & cost, regardless of accounting method. If zero, indicate zero; disclosure of method is optional. |
| Our stock value is below ₱100 000—are we exempt? | No monetary threshold exists under RR 5-2015; presence, not value, triggers filing. |
| What if we file a NIL Annex but later discover ₱50 000 of slow-moving items? | Amend Annex “A” immediately; late-filing penalties apply but are lighter than misrepresentation penalties. |
| Can we just roll forward last year’s NIL report? | Yes, provided the cover page reflects the current year; BIR systems treat the header metadata (TIN, year-end) as the unique identifier. |
13. Best-Practice Roadmap for a Zero-Inventory Year-End
- Close books early—ensure inventory accounts hit zero before 31 Dec/FYE.
- Run a spot physical count even if you expect none; document the “zero-count”.
- Generate NIL Annex “A” (or letter) and upload alongside your eAFS package.
- Archive trail—keep the NIL file, transmittal, BIR email acknowledgment, and the count certification together.
- Monitor replenishment—the moment inventory re-appears during the next year, revert to regular Annex filing.
14. Conclusion
In Philippine tax administration, compliance optics matter as much as black-letter law. While the regulations excuse taxpayers from submitting Annex “A” when no goods exist, proactively documenting a NIL position shields you from later disputes, especially during VAT and income-tax audits where inventory reconciliation is a staple test. The rule of thumb is simple: if there is something to count, file the list; if there is nothing, prove it and say so clearly. Doing less courts penalty; doing more costs little and buys peace of mind.
Prepared 3 July 2025 by a Philippine tax counsel. This article is for general information only and is not a substitute for formal legal advice or a written ruling from the BIR.