↓Skip to main content

RMC No. 98-2026: What Happens If You Don't Issue a Compliant Electronic Invoice

·9 mins
Guides eFPS BIR Compliance Tax Updates

RMC No. 98-2026 does not write a new e-invoicing-specific penalty into the books — a covered taxpayer who misses the December 31, 2026 deadline or issues a defective electronic invoice falls back into Section 264(a) of the Tax Code’s existing ₱1,000-to-₱50,000 fine range, with imprisonment of two to four years on conviction. Less discussed is the other side of that same defect: whether the buyer who received that invoice keeps the input tax credit at all, which under current BIR invoicing rules turns on exactly which piece of information is missing, not on the fact that something is missing.

Get Your Withholding and VAT Filings Ready Before December — FREE →

What RMC No. 98-2026 requires, in brief #

RMC No. 98-2026, issued by the BIR on September 22, 2026, sets the operating policies for electronic invoicing under Section 237 of the Tax Code and names small, medium, and large e-commerce/internet-transaction sellers, Large Taxpayers Service filers, EOPT large taxpayers, and CAS users as covered by a December 31, 2026 deadline. For the full coverage rules and what technically counts as a compliant electronic invoice, see RMC No. 98-2026: Which Businesses Must Switch to Electronic Invoices, and What Actually Counts as One; for what a covered taxpayer must do when its e-invoicing system itself goes down, see RMC No. 98-2026: E-Invoicing System Downtime and How to Correct an Electronic Invoice. This post covers neither — it covers what happens when a covered taxpayer simply doesn’t comply, or issues an invoice that falls short.

The seller’s exposure: Section 264(a), not a new fine #

Neither RMC No. 98-2026 nor the regulations it implements — RR No. 8-2022 and RR No. 11-2025, as amended by RR No. 26-2025 — publish a standalone e-invoicing penalty schedule; a covered seller that keeps issuing a non-compliant document past its deadline is assessed under the Tax Code’s existing invoicing-violation provision. Section 264(a) of the National Internal Revenue Code, as amended:

“Any person who, being required under Section 237 to issue receipts or sales or commercial invoices, fails or refuses to issue such receipts or invoices, issues receipts or invoices that do not truly reflect and/or contain all the information required to be shown therein or uses multiple or double receipts or invoices shall, upon conviction for each act or omission, be fined not less than One thousand pesos but not more than Fifty thousand pesos and suffer imprisonment of not less than two years but not more than four years.” — Section 264(a), National Internal Revenue Code, as amended

That “issues receipts or invoices that do not truly reflect and/or contain all the information required” clause is the one that matters here: an electronic invoice generated under a non-accredited system, or one missing required content, is exactly the kind of invoice this clause reaches — not only a total failure to issue anything at all. In day-to-day enforcement, a first- or second-time finding of this kind caught during an ordinary tax mapping visit is typically settled the same day through a smaller administrative compromise penalty rather than criminal referral; the full mechanics of that compromise track, the RMO No. 7-2015 schedule, and the 50% discount RR No. 6-2024 gives micro and small taxpayers are covered in Penalty for Not Issuing a BIR Official Receipt or Invoice: Section 264 and the EOPT Act and RR No. 6-2024: The 50% Reduced BIR Compromise Penalty for Micro and Small Taxpayers. For the broader exposure once electronic sales-data transmission under Section 237-A also applies — including the daily Section 264-A penalty and surcharge/interest on any resulting deficiency — see BIR E-Invoicing EIS Penalties: What Happens If You Miss the December 31, 2026 Deadline.

The overlooked side: what a defective invoice does to the buyer #

A seller’s non-compliant electronic invoice isn’t only the seller’s problem — the buyer holding that invoice needs it to support an input tax claim, and whether that claim survives depends on exactly what’s missing, not on the fact that the document falls short of RMC No. 98-2026’s technical standard. Section 237 of the Tax Code is the same provision both RMC No. 98-2026’s electronic invoice and the EOPT Act’s paper “Invoice” trace back to, and RR No. 7-2024’s invoicing-content rules under that section set out which missing items are fatal to an input tax claim and which are not. Reporting on RR No. 7-2024’s Section 3(D)(3) converges on the same five critical items:

  • Amount of sales
  • VAT amount (shown as a separate line item)
  • The seller’s registered name and Taxpayer Identification Number (TIN)
  • Description of the goods or nature of the services
  • Date of the transaction

If an invoice is missing one of these five, input tax is disallowed on that document. If it’s missing something else instead — a branch code, a buyer’s business address, a minor formatting detail — secondary summaries of the regulation indicate the buyer generally keeps the input tax credit, since the missing item isn’t one the rule treats as critical. That distinction matters directly for a buyer receiving invoices from a supplier still transitioning onto a compliant e-invoicing system: not every rough edge in a newly electronic invoice costs the buyer their credit, but a handful of specific fields absolutely do.

Business closure: Oplan Kandado sits behind repeated violations #

A single defective invoice is a Section 264(a) exposure for the seller; a pattern of them — especially alongside underdeclared sales — is what actually risks a suspension or closure order under the BIR’s Oplan Kandado program. Oplan Kandado operates under NIRC Section 115’s authority to suspend business operations for VAT-related violations, including failure to issue receipts or invoices. Because electronic invoicing gives the BIR a structured, extractable feed of transaction data once a seller is actually compliant, a seller that keeps issuing paper or PDF workarounds past its RMC No. 98-2026 deadline is also easier to flag on a tax mapping visit than one buried in paper records — the visibility cuts against a taxpayer still running the old process. For the mechanics of a tax mapping visit and how a closure order actually gets triggered, see BIR Tax Mapping and Oplan Kandado: What to Expect During a Compliance Visit.

A worked example: two invoices, two different outcomes #

Manalo Hardware Supply, Inc. is a fictional medium-size CAS-using wholesaler in the December 31, 2026 e-invoicing cohort, still finishing its system rollout when two separate buyers each receive an electronic invoice with a missing field in January 2027.

InvoiceWhat’s missingInput tax outcome for the buyer
Invoice A, ₱280,000 saleThe VAT amount is not shown as a separate line item (bundled into a single total instead)Disallowed — VAT amount is one of the five critical fields under RR No. 7-2024’s Section 3(D)(3) framework
Invoice B, ₱150,000 saleThe buyer’s complete business address is missing, though the seller’s registered name, TIN, VAT amount, description, and date are all presentGenerally allowed — the missing item isn’t among the critical fields

For Manalo Hardware itself, both invoices are evidence the company’s electronic invoicing rollout isn’t yet capturing required data correctly — a pattern a BIR tax mapping visit could treat as a Section 264(a) finding regardless of which specific buyer was affected. For the buyers, the practical lesson is narrower: Invoice A’s buyer should request a corrected invoice before claiming ₱33,600 in input VAT (12% of ₱280,000) on that transaction, while Invoice B’s buyer has a workable document despite the gap.

What covered sellers and their buyers should do now #

  1. Sellers: confirm your e-invoicing system actually populates all five critical fields correctly before your December 31, 2026 go-live — not just that it produces something that looks like an invoice. A test transmission that surfaces a missing VAT-amount line now is far cheaper than a tax mapping finding in January.
  2. Sellers: keep ordinary VAT, withholding, and alphalist filings current in parallel with the e-invoicing project; a rollout delay is not grounds to also fall behind elsewhere. BIR Online Tools can help keep certificate and alphalist workflows moving while an e-invoicing system transition is still in progress.
  3. Buyers: spot-check incoming electronic invoices for the five critical fields before relying on them for input tax, especially from suppliers you know are still transitioning onto a new system.
  4. Both: document the transition in writing — vendor correspondence, test-transmission logs, internal memos — so a short compliance gap reads as a documented good-faith effort to an examiner, not an unexplained lapse.

Summary #

RMC No. 98-2026 leans on Section 264(a) of the Tax Code, not a bespoke fine, when a covered seller misses the December 31, 2026 deadline or issues a defective electronic invoice — a ₱1,000 to ₱50,000 fine and two to four years’ imprisonment on conviction, usually settled through a smaller compromise penalty in practice, with repeated violations risking Oplan Kandado closure exposure under Section 115. The side of this that’s easy to miss is the buyer’s: an incomplete electronic invoice only costs the buyer its input tax credit if the missing field is one of five specific items — amount of sales, VAT amount, registered name and TIN, description of goods or services, or the transaction date — not for any gap at all. For the underlying coverage rules and what counts as a valid electronic invoice, see RMC No. 98-2026: Which Businesses Must Switch to Electronic Invoices; for the downtime and correction procedure, see RMC No. 98-2026: E-Invoicing System Downtime and How to Correct an Electronic Invoice.

Sources #

Primary source

  • National Internal Revenue Code, Section 264(a), as amended (fine and imprisonment range for failure to issue, refusal to issue, or issuing an invoice lacking required information)

Secondary sources