Compliance First – BIR Rules for Petty Cash and Small Transactions
Compliance First – BIR Rules for Petty Cash and Small Transactions
Did you know the Bureau of Internal Revenue (BIR) scrutinizes petty cash just as much as large corporate spending? Whether it’s a ₱100 receipt or a ₱5,000 meal reimbursement, the rules are the same.
Here’s what every business should know about BIR compliance when handling petty cash.
- Petty Cash Is Not Exempt
Just because it’s a small amount doesn’t mean it’s exempt from:
- OR (Official Receipt) requirements
- VAT input recognition
- Accounting documentation
If audited, BIR expects complete documentation even for low-value expenses.
- Acceptable Supporting Documents
Every petty cash transaction should have:
- Original official receipts
- Petty cash voucher (PCV)
- Expense report with purpose
- Approval from an authorized signatory
Scanned copies should be stored in your ERP system or secure archive.
- VAT Input on Small Transactions
You are entitled to input VAT claims, as long as:
- There is an official VAT-registered OR
- The supplier has a valid TIN
- The transaction is recorded within the period
Dynamics 365 helps by:
- Automating VAT breakdowns
- Posting input VAT properly
- Flagging non-VAT or invalid receipts
- Monthly & Annual Reporting
Petty cash expenses should reflect in:
- Your books of accounts
- VAT relief reports
- Form 2307 (for purchases subject to withholding tax)
If you’re skipping petty cash in reports, you could be underreporting input VAT or violating bookkeeping rules.
✅ Final Thoughts
Petty cash may be low value, but for BIR, it’s a matter of principle. Consistency in recording, reporting, and validating small transactions is essential to keeping your compliance intact.
Stay tuned for our final blog in this series: How to Replenish Petty Cash Accurately and Avoid Audit Flags.