In the Philippines, the issuance of sales invoices and official receipts is not merely a matter of good bookkeeping—it is a mandatory legal requirement under the National Internal Revenue Code (NIRC), as amended by the TRAIN Law and, more recently, the Ease of Paying Taxes (EOPT) Act.

For businesses, failure to comply with invoicing requirements can lead to severe financial penalties, suspension of operations, or even criminal prosecution. Below is a comprehensive guide on the penalties and regulations surrounding sales invoices in the Philippine context.

1. The Legal Mandate: Section 237 of the Tax Code

Under Philippine law, all persons subject to an internal revenue tax are required to issue a duly registered Sales Invoice for each sale and transfer of merchandise or for services rendered.

Important Update (EOPT Act): Previously, there was a distinction between "Sales Invoices" (for goods) and "Official Receipts" (for services). Under the Ease of Paying Taxes Act (RR No. 7-2024), the "Sales Invoice" is now the primary document for both goods and services to simplify tax administration and VAT claims.

2. Common Violations and Graduated Penalties

The Bureau of Internal Revenue (BIR) imposes penalties based on the frequency and nature of the violation. These are generally categorized under Revenue Memorandum Order (RMO) No. 7-2015.

A. Failure to Issue Invoices or Receipts

If a business is caught not issuing an invoice for a transaction:

1st Offense: ₱10,000 fine
2nd Offense: ₱20,000 fine
Subsequent Offenses: May lead to criminal prosecution and higher fines.

B. Possession or Use of Unregistered Invoices

Using "fake" receipts or invoices that are not registered with the BIR (i.e., no Authority to Print or ATP) is a serious violation.

Penalty: ₱20,000 to ₱50,000 and imprisonment of not less than 2 years but not more than 4 years.

C. Failure to Register Invoices/Receipts

Penalty: ₱1,000 per unregistered book/document, but not to exceed ₱25,000 per year.

D. Printing of Invoices without BIR Authority

Printers who produce invoices without a valid Authority to Print (ATP) face:

Penalty: ₱20,000 to ₱50,000 and imprisonment.

3. "Oplan Kandado" and Business Closure

The BIR has the power to temporarily suspend or close a business under the Oplan Kandado program. Grounds for closure include:

Failure to issue receipts or invoices.
Failure to file a VAT return.
Understatement of taxable sales or receipts by 30% or more of the correct amount.

A business closed under this program can only reopen once the violations are rectified and the assessed penalties are paid.

4. Impact on VAT Compliance and Deductibility

Beyond direct fines, improper invoicing creates a "domino effect" on your tax liability:

For the Seller: Failure to issue a proper invoice does not exempt you from the tax. The BIR can estimate your sales and assess deficiency taxes plus 25% to 50% surcharges and 12% annual interest.
For the Buyer: If you purchase from a supplier who issues an improper or "fake" invoice, you cannot claim Input VAT or deduct the purchase as a business expense. This effectively increases your tax burden because the BIR will disallow the deduction during an audit.

5. Essential Requirements for a Valid Invoice

To avoid "Improper Issuance" penalties, a Sales Invoice must contain:

Registered Name and Address of the seller.
Taxpayer Identification Number (TIN) of the seller.
Date of the transaction.
Description of Goods/Services, quantity, and unit cost.
Total Amount: Must show a breakdown of the VAT-exempt, VAT-zero rated, and VAT-taxable sales.
Buyer Information: For transactions involving ₱1,000 or more (or for VAT-registered buyers claiming input tax), the buyer’s Name, Address, and TIN must be indicated.

6. Criminal Liability

Under Section 264 of the NIRC, any person who willfully fails to issue receipts or invoices, or uses multiple sets of invoices, shall, upon conviction, be punished by a fine of not less than ₱1,000 but not more than ₱50,000 and suffer imprisonment of not less than 2 years but not more than 4 years.

Conclusion

In the Philippines, an invoice is more than just a piece of paper; it is a critical instrument of tax enforcement. Modernizing your accounting systems to comply with the EOPT Act and ensuring every sale is documented with a BIR-compliant invoice is the only way to safeguard your business from the heavy hand of tax litigation and "Oplan Kandado."

Would you like me to draft a checklist of the specific information that must appear on your new Sales Invoices under the Ease of Paying Taxes Act?