Year-ender tax compliance checklist

By Tristan Lopez

As the calendar year closes on 31 December 2025, it is critical for businesses to review and comply with applicable tax, corporate and local regulatory obligations so that mandated requirements are met in full before the fiscal year closes. The following, in a nutshell, presents compliance reminders and action items for the 2025 tax and regulatory season.

Payroll taxes and withholding

Employers should re-assess all forms of compensation given to employees (salary, allowances, bonuses, fringe benefits, other noncash benefits) and determine the correct classification under withholding tax on compensation, fringe-benefit tax or tax-exempt/nontaxable compensation.

Consequently, it should complete the annualization process before filing the December 2025 monthly withholding tax return to correctly determine any remaining withholding tax or refund to employees, eliminating or at least minimizing any potential penalty from erroneous withholding.

Once the annualization of employee compensation are completed, the employer must file the BIR Form 1604-C, which includes the Alphalist of Employees and should be filed not later than Jan. 31, 2026 and BIR Form 2316, which is the certificate of income tax withheld that should be issued and distributed to each employee on or before Jan. 31, 2026.

Prior to distribution, the employer should be reminded that both the employer representative and respective employee sign each certificate. In addition, for employees who qualified for substituted filing, their BIR Form 2316 should be submitted with the BIR on or before Feb. 28, 2026.

Taxpayers who are required to withhold taxes on their expenses that are subject to either final or creditable withholding tax must file the BIR Form 1604-F (annual final withholding), with the alphalist of payees, on or before Jan. 31, 2026, and the BIR Form 1604-E, with the alphalist of payees, on or before March 1, 2026, respectively.

For newly registered businesses, manual books of accounts must be submitted for registration before the due date of either the first quarterly income tax return or the annual income tax return, whichever is earlier.

Once the pages of an existing manual book are nearly used up, taxpayers must register a new set with the BIR. Those who are using loose-leaf books and computerized books of accounts must register these within 15 days and 30 days, respectively, after the close of each taxable year, unless the BIR grants an extension upon timely request.

Aside from keeping books properly registered and ensuring timely filing of tax returns, the end of the year is the opportune time to check and reconcile any inconsistencies among accounting records, tax returns, and figures reported in the annual alphalist of employees or payees; the summary alphalist of withholding taxes; the summary of sales, purchases, and importations; and the inventory list. This allows taxpayers to make necessary adjustments and corrections to the books or amend tax returns before the statutory audit is finalized.

Taxpayers should also confirm that all supporting documents meet the legal requirements, secure the required BIR Form 2307 from customers for claiming credits, and ensure that all expenses qualify as deduction for income tax purposes.

Additional compliance obligations

Taxpayers that maintain inventory or whose balance sheets reflect substantial tangible assets — generally those with at least 50 percent of total assets consisting of working capital assets such as accounts receivable and inventory — must file an inventory list with the BIR. The submission must be in DVD-R format, properly labelled, and accompanied by a notarized certification executed by an authorized company representative. The Inventory List must be filed within 30 days after the close of the taxable year.

All business establishments are required to renew their business permits with the corresponding LGU on an annual basis and to pay the applicable local business tax. Renewal, including payment of assessed fees and taxes, must be completed not later than Jan. 20 of each year in the jurisdiction where the business is registered and operates.

Under Revenue Memorandum Circular 12-2024, taxpayers opting to use foreign exchange rates other than those published by the Bankers Association of the Philippines must file a notarized sworn statement with the BIR. This sworn statement, due at least 30 days prior to the beginning of the taxable year, must identify the source of the forex rates utilized and include an express acknowledgment granting the BIR access to the day-to-day forex rates applied for purposes of any audit.

As a final note: By undertaking year-end compliance with deliberate planning, proper documentation, and a proactive approach, businesses can eliminate or at least reduce the risk of errors, mitigate potential penalties, and facilitate a smooth and efficient tax-filing process.

Tristan Lopez is a director with the tax and legal practice of Deloitte Philippines, a member firm of the Deloitte network.