Financial Crime World

Compliance Reporting Requirements in the Philippines: A Guide for Businesses

The Philippine government has established a comprehensive tax system that requires businesses to maintain accurate records of their financial transactions and submit regular reports to relevant government agencies. This guide provides an overview of compliance reporting requirements for businesses in the Philippines.

Compliance Requirements

  • All persons, natural or juridical, subject to internal revenue taxes must maintain accurate and complete records of their business dealings.
  • Companies with gross annual earnings exceeding PHP3 million (approximately USD53,790) are required to have their accounts audited by an independent certified public accountant (CPA).
  • Those with annual sales below this threshold can file their tax returns with unaudited financial statements.

Additional Reporting Requirements

Several government regulatory bodies have the authority to establish additional reporting requirements. These entities include:

  • Securities and Exchange Commission (SEC)
  • Insurance Commission (IC)
  • Bangko Sentral ng Pilipinas (BSP)
  • Professional Regulation Commission (PRC)
  • Professional Regulatory Board of Accountancy (PRBOA)

Regulated businesses, such as public utilities, insurance companies, and banks or corporations, are required to submit their audited financial statements to their relevant government regulatory agency and the SEC.

Auditor Appointments

  • All companies must submit their financial statements accompanied by an auditor’s report issued by an independent CPA.
  • The auditor is appointed by the board of directors and must be rotated every five years.
  • The BSP requires external auditors engaged by banks to change every five years, and the IC requires insurance companies to do the same.

Fiscal Periods

The Philippines uses a self-assessment tax system, with accounting periods consisting of 12 months, typically ending on December 31. Tax returns must be filed within 15 days of the fourth month following the closure of the taxable year. Companies can change their accounting period with prior approval from the Bureau of Internal Revenue (BIR).

Accounting Standards

The Philippine Financial Reporting Standards (PFRS) are the most authoritative accounting standards in the country, applicable to all entities with public accountability.

Annual Reports

  • All companies, regardless of size, are required to prepare their documents in Tagalog, Spanish, and English.
  • Companies must maintain accurate and complete records of their financial transactions and submit regular reports to relevant government agencies.
  • Accounting records must be kept in Philippine Pesos or a “functional currency” used in operations if approved by the SEC and BIR.

Penalties for Non-Compliance

  • Companies that fail to timely file any return are subject to a 25 percent surcharge on the amount of tax due, plus a 12 percent interest per annum.
  • Those who willfully neglect to file their returns or purposefully submit fraudulent returns are liable to a 50 percent surcharge on the basic tax due.

For more information and guidance on compliance reporting requirements in the Philippines, please contact us at [insert contact information].