Procedures for Tax Audit for Insurance Companies

May 12, 1986 REVENUE AUDIT MEMORANDUM ORDER NO. 2-86 SUBJECT : Procedures for Tax Audit for Insurance Companies TO : All Internal Revenue Officers and Others Concerned 1. BACKGROUND 1.1 Section 130 of Revenue Regulations No. 2, otherwise known as the Income Tax Regulations, provides: " Copy of report to Insurance Commissioner to be furnished the Commissioner of Internal Revenue . To facilitate the auditing of income tax returns, insurance companies shall submit to the Commissioner of Internal Revenue together with returns of income, wherever possible a copy of their annual report to the Insurance Commissioner." casia 1.2 Violation of any revenue regulation is punishable under Section 309 of the National Internal Revenue Code, as amended by P.D. 1994 (Sec. 337, old NIRC), as follows: " Violation of other provisions of this Code or regulations in general . A person who violates any provision of this Code or any regulation of the Ministry of Finance promulgated thereunder, for which no specific penalty is provided by law shall, upon conviction for each act or omission, be fined in a sum of not more than one thousand pesos or imprisoned for a term of not more than six months, or both." aisa dc 1.3 It has been observed that income tax returns filed by insurance companies do not bear official copy of the said "OIC Report". Neither is a copy of this report filed with the BIR, granting that the same could not be possibly filed with the BIR on time and simultaneously with the company's income tax return. It has also been observed that very often, only a partial copy and mere "xerox copy" thereof are submitted with Examiner's audit reports, rather than a complete and official copy of the OIC report from which may be obtained information leading to full appraisal of the company's tax liabilities. 2. AUDIT PROCEDURES 2.1 All insurance companies shall be required to comply with the said requirements of Section 130, Revenue Regulations No. 2 and any violation thereof shall be penalized, pursuant to the provisions of Section 309 of the Tax Code. 2.2 No audit report of investigation submitted by an Examiner shall be passed in audit unless the official copy of an insurance company's "OIC Report" is submitted and forms part of the docket. Mere xerox copy thereof shall not be permissible. Neither shall submission of partial copy of the OIC report be acceptable in audit. cd 2.3 No examiner's tax audit report shall be passed in audit unless the following internal revenue taxes for the taxable year are reconciled with the insurance company's "OIC Report" covering the same taxable year: (a) Premium tax; and (b) Documentary stamp tax. 3. EFFECTIVITY This Revenue Audit Memorandum Order takes effect immediately. Strict enforcement of this Order is enjoined. acd (SGD.) BIENVENIDO A. TAN, JR. Commissioner