Monday, September 12, 2011

Change in Accounting Period under RR No. 3-11

Revenue Regulations No. 3-2011 dated March 7, 2011 - "Regulations Providing for Policies, Guidelines and Procedures on the Application for Change in Accounting Period under Section 46 of the National Internal Revenue Code (NIRC) of 1997, as amended"

Under Section 46 of the Tax Code, as amended, it provides and hereunder quoted:

SEC. 46. Change of Accounting Period. If a taxpayer, other than an individual, changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commissioner, be computed on the basis of such new accounting period, subject to the provisions of Section 47.

Implementing the above provision, requirements of RR No. 3-11 may be summarized as follows:

a. While a choice of accounting period is a management discretion, change thereof must be approved by the Commissioner of Internal Revenue through the Revenue District Office of registration;
b. The reason for change must be duly stated in the application;
c. Submission of the final adjustment return; and,
d. Duly approved amended By-laws for corporate taxpayers with the new accounting period.

Accordingly, hereunder are the documentary requirements for the application to be filed at anytime not less than sixty (60) days prior to the beginning of the proposed new accounting period:
  1. Letter request addressed to the Revenue District Officer of registration indicating the (a) original accounting period and the new accounting period to be adopted, and (b) the reason for desiring to change the accounting period;
  2. Duly filled-up BIR Form No. 1905;
  3. Certified True Copy of the Amended By-laws with the new accounting period duly approved by the Securities and Exchange Commission (SEC);
  4. Sworn certification of "non-forum shopping" stating that the request has not been filed or previously acted upon by the BIR National Office, signed by the taxpayer or authorized representative; and,
  5. Sword undertaking by a responsible officer of the taxpayer to file a separate final or adjustment return for the period between the close of the original accounting period and the date designated as the close of the new accounting period on or before the 15th day of the fourth month following the end of the period covered by the final/adjustment return.
Under Section 6 of RR 3-11, the Certification approving the adoption of a new accounting period must be released within thirty (30) working days from the date of receipt of the complete documentary requirements.

Procedure wise, the first thing to do is to secure SEC amendment of By-laws, then, file the application with the BIR.

Resources:

Revenue Regulations No. 3-2011
BIR Form No. 1905


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