Count It Right: Your Quick Guide to BIR's Annual Inventory List Requirements

Tags: Annual Inventory List BIR, BIR inventory requirements, Inventory List format, Revenue Regulations, sample inventory list format, BIR compliance

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Keeping a detailed and accurate inventory list is not just good business practice—it’s a legal obligation under Philippine tax law. The Annual Inventory List (AIL) is one of the crucial compliance documents that the Bureau of Internal Revenue (BIR) requires from businesses engaged in the sale of goods. This blog will walk you through what the AIL is, how to create it, what issuances govern it, and provide a sample format for easy compliance. 

What is the Annual Inventory List?

The Annual Inventory List is a detailed record submitted to the BIR by businesses holding inventory at the end of each taxable year. This list serves as a declaration of the quantity and value of goods a business has on hand as of December 31, which is essential for determining the Cost of Goods Sold (COGS) and overall tax obligations.

Who is Required to Submit the Annual Inventory List?

According to Revenue Regulations (RR) No. V-1, as amended, and more specifically Revenue Memorandum Circular (RMC) No. 57-2015, businesses that are required to maintain books of accounts and are engaged in manufacturing, trading, merchandising, or importation must submit the AIL annually.

The regulation applies to:

• Manufacturers
• Wholesalers and retailers
• Importers
• Businesses with inventory subject to the perpetual or periodic inventory system

What Should Be Included in the Inventory List?

The BIR requires the following classifications in the AIL:

1. Raw Materials Inventory – for manufacturers
2. Work-in-Process Inventory – for manufacturers
3. Finished Goods Inventory – for manufacturers
4. Merchandise Inventory – for traders and retailers

Each classification should be separately listed and should include:

• Description of the inventory item
• Quantity per item
• Unit of measure
• Unit cost
• Total cost

This information should be based on your accounting records and must be consistent with the inventory reflected in your books of accounts and financial statements.

Deadline for Submission

The AIL must be submitted on or before January 30 of the following year (e.g., for the calendar year 2024, the AIL must be submitted on or before January 30, 2025).

This is in accordance with RR No. 5-2014 and clarified by RMC No. 57-2015.

Where and How to File the AIL?

The AIL may be submitted:

• Manually – at the Revenue District Office (RDO) where the taxpayer is registered
• Electronically – via email using the official email address of the concerned RDO

The AIL should be submitted in Excel or CSV format, accompanied by a transmittal letter signed by the taxpayer or an authorized representative.

Important BIR Issuances Related to AIL

1. Revenue Regulations No. V-1 (Bookkeeping Regulations) – General bookkeeping rules including inventory documentation
2. Revenue Memorandum Circular No. 57-2015 – Guidelines for the submission of the annual inventory list
3. Revenue Regulations No. 5-2014 – Updated filing deadlines and electronic submission requirements
4. Revenue Memorandum Circular No. 3-2006 – Rules on inventory systems, classification, and documentation

Guidelines in Creating the Inventory List

When preparing your AIL, follow these practical guidelines:

• Ensure inventory entries reconcile with your general ledger and financial statements
• Use consistent unit measurements (e.g., liters, kilograms, pieces)
• Avoid rounding errors—item values must reflect actual costs
• Separate inventory lists per category (raw materials, WIP, finished goods, merchandise)
• Tag inventories clearly as either perpetual or periodic system
• Refrain from including obsolete or unusable stocks

Sample Format: Annual Inventory List

Below is a sample table based on BIR's recommended layout:

[Annex A – Sample Inventory List Format]

Item Description	Category	Unit of Measure	Quantity	Unit Cost (Php)	Total Cost (Php)
Steel Sheets	Raw Materials	kg	2,000	75.00	150,000.00
Welded Assemblies	Work-in-process	unit	100	500.00	50,000.00
Engine Blocks	Finished Goods	unit	60	2,000.00	120,000.00
Spare Parts Kit	Merchandise	set	500	150.00	75,000.00

Note: You may adjust categories according to your industry.

Include a header on each page with:

• Taxpayer’s Name
• TIN
• Registered Address
• Inventory System Used
• Reporting Period (e.g., As of December 31, 2024)

Penalties for Non-Compliance

Failure to file the AIL on time or submission of inaccurate reports may result in the following:

• Compromise penalty ranging from PHP 1,000 to PHP 25,000
• Audit Findings that may disallow costs related to unreported inventory
• Classification as a non-compliant taxpayer, affecting tax clearance or refund claims

Pro Tips for Taxpayers

1. Automate Inventory Tracking – Use inventory software that can generate reports in the required format.
2. Update Regularly – Don’t wait until year-end; update inventory records monthly or quarterly.
3. Perform Inventory Counts – Conduct physical counts annually to reconcile with book records.
4. Consult Your CPA – Work with your accountant to ensure accuracy and consistency with your tax filings.

Final Thoughts

The Annual Inventory List is more than just a document—it's a key piece of the puzzle in the BIR’s compliance monitoring. With the right preparation, proper understanding of the regulations, and careful reporting, you can meet the BIR's requirements confidently and avoid costly penalties.

Stay compliant, stay informed, and remember: a properly counted inventory is a step closer to peace of mind in every audit season.