Many farmers are confused about their tax requirements. Do they need to issue official receipts? Do they still have to pay taxes? The Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 12-2023 to make things clearer for agricultural producers.
In this guide, we’ll explain who is covered, what the benefits are, and what farmers still need to do to stay compliant.
Who is Covered?
The rule applies to farmers and agricultural producers who sell agricultural food products.
If your gross sales for the year do not exceed ₱1,000,000, you are covered by this exemption.
What is the Benefit?
If you qualify, you do not need to issue BIR-printed receipts or invoices.
Instead, you only need to maintain a Simplified Sales Book.
This makes compliance:
- Cheaper
- Easier
- Less paperwork
What is a Simplified Sales Book?
This can be a simple notebook or logbook, but it must be registered with the BIR.
Each sale must be recorded with the following details:
- Date of sale
- Item sold
- Buyer’s name, address, and TIN (if business)
- Amount of sale
- Withholding tax, if any
- Net amount received
How Long Should You Keep It?
The Simplified Sales Book must be kept for 10 years:
- First 5 years – keep a hard copy
- Next 5 years – you may keep an electronic copy
When Do You Need Official Receipts?
If your sales go over ₱1,000,000 during the year, you are required to start issuing BIR-printed receipts or invoices for every sale worth ₱100 or more.
What is the Buyer’s Obligation?
If your buyer is a business, they will issue a certificate instead of you issuing a receipt:
- Form 2304 – if exempt from withholding tax
- Form 2307 – if subject to 1% withholding tax
These certificates act as your receipts and can be used for your tax purposes.
Withholding Rules
- Purchases up to ₱300,000 per year → Exempt, buyer issues Form 2304
- Purchases above ₱300,000 per year → 1% withholding tax, buyer issues Form 2307
Tax Filing for Farmers
Even if exempt from receipts, farmers must still file their:
- Quarterly Income Tax Return
- Annual Income Tax Return
The Form 2307 issued by buyers can be used as a tax credit to reduce income tax due.
How to Qualify for Exemption
To make sure you qualify, you must:
- Be registered with the BIR and have a TIN
- Sell agricultural food in its original state (example: rice, vegetables, fruits, fish)
- Keep total sales at ₱1,000,000 or less for receipt exemption
- Keep total sales at ₱3,000,000 or less for VAT exemption
- Limit non-agricultural sales to 30% or less of total sales
Sources
- BIR Revenue Regulations No. 12-2023
- National Internal Revenue Code, Section 237 and Section 109
- Revenue Memorandum Circular Nos. 29-2019 and 3-2023
Final Takeaway
For small farmers, RR 12-2023 is good news. It removes the need for costly receipts and makes compliance simpler. But remember: exemption from receipts is not exemption from income tax. Farmers must still register with the BIR, keep a logbook, and file tax returns.
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