Revenue Audit Memorandum Order No. 2-93

September 30, 1993 REVENUE AUDIT MEMORANDUM ORDER NO. 2-93 I. SCOPE: This order prescribes the guidelines for the processing and issuance of tax credit certificates (TCC) on value-added tax (VAT) credit claims of zero-rated taxpayers . cd i II. ADMINISTRATIVE POLICIES: 1. That this RAMO shall exclusively be applicable to VAT claims for TCC of direct exporters on their purchases of goods and services filed at the One-Stop-Shop (Center-DOF). Claims for VAT refund shall be filed and processed at the BIR National Office under RAMO No. 1-91. 2. That claims processed under this RAMO shall not require a Letter of Authority (LA) from the Commissioner of Internal Revenue (CIR). However, claimants/taxpayers can still be subjected to the regular audit of its other business tax liabilities (non-VAT transactions) by the Revenue District Offices or any audit office authorized by the CIR. 3. That any outstanding delinquent account shall first be settled by the claimant before the TCC shall be issued either by agreeing to the issuance of a separate TCC that may be used only to pay the said account or by paying in cash. Under the former, the fact that it shall be used only for the payment of the delinquent account shall be indicated on the face of the TCC. Another TCC shall be issued for the excess of the approved claim over the delinquent account. Where the delinquent account has been protested, the claim for TCC may be given due course provided that the protest has been filed in accordance with Revenue Regulations No. 12-85. Such fact shall be certified by the Chief, Accounts Receivable/Billing Division not later than 5 days from date of referral. 4. That any findings on deficiency internal revenue taxes shall be referred to the concerned audit office. 5. That the TCC may be used by the grantee in payment of its direct internal revenue tax liabilities as provided in Revenue Memorandum Order No. 20-91 dated June 10, 1991 . cdt 6. That the filing and processing of VAT credit application shall be on a quarterly basis and the 60- working day period for processing of claims shall start on the day of submission of the last documents specified in the checklist of requirements (Annex A). III. AUDIT PROCEDURES: A. Checklisting: Upon receipt of the claim, an evaluator shall have a maximum of 5 working days to ascertain the completeness of the application and to ensure that the claim is filed within the prescribed period. The day of filing shall be the reckoning date for the purpose of stopping the prescription of the right to the tax credit. If the supporting documents are incomplete and/or not in order ( e.g. , invoices not arranged in accordance with schedules submitted), the claimant will be advised to fully comply with the requirements: B. Pre-Audit Steps: 1. Review and familiarize with: a) the business organization of the taxpayer, and whether it has business establishments other than its main or head office; b) the economic activity and the applicable provisions of the laws and regulations governing such activity; c) the accounting methods and policies, and degree of internal control; and d) report of the audit of value-added tax credit/claim liabilities of the taxpayer for the immediately preceding period in order that were reported. 2. Determine if the claim was filed within two (2) years (Sec. 106, NIRC) (a) in the case of export sales, within 2 years from the date of exportation; (b) in the case of importation or local purchase of capital goods, within 2 years after the expiration of 2 succeeding quarters following the quarter in which the importation or local purchase was made; however, in the case of a VAT registered person who is just commencing business, the application must be within two years after the lapse of 180 days from the date of Registration or actual start of business operations, whichever comes later; (c) in the case of other zero-rated transactions, within 2 years after the close of the quarter when the transaction was made. C. Audit of Sales and Output Tax: 1. Determination of gross taxable sale of goods and services a) Review and reconcile the amount of each category of sales per VAT return with the recorded amount of sales in the general ledger and subsidiary sales journal prescribed under RR 5-87. In case of VAT refund/tax credit, reconcile sales with the reported zero-rated sales per application under BIR Form 2552. Any discrepancy should be properly accounted for and evaluated for possible value-added tax (output tax) deficiency. Ascertain that: a.1 Only those transactions which are specifically exempted under Section 103 of NIRC are treated as exempt sales. a.2 "Deemed" sales of goods are recorded as taxable transactions (Sec. 100(b), NIRC and Sec. 4, RR 5-87 a.2.1 Transfer, use, or consumption not in the course of business of goods originally intended for sale or for use in the course of business. Transfer of goods not in the course of business can take place when the VAT-registered person withdraws goods from his business for personal use; a.2.2 Distribution or transfer to shareholders or investors as share in the profits of the business; a.2.3 Transfer to creditors in payment of debt or obligation; a.2.4 Consigned goods not actually sold after 60 days from date of consignment are considered deemed sold. Consigned goods returned by the consignee within the 60-day period are considered not deemed sold; and a.2.5 Retirement from or cessation of business or death of an individual with respect to inventories of all goods on hand, whether capital goods, stock-in-trade, supplies or materials as of date of such retirement or cessation, whether or not the business is continued by the new owner or successor, estate or heir. The following circumstances shall, among others, give rise to transactions "deemed sale": 1. change of ownership of business in the case of a single proprietorship; 2. dissolution of a partnership and creation of a new partnership which takes over the business; and 3. death of an individual who is a VAT-registered person, even if the estate or heirs of the decedent shall continue to operate the business. a.3 Sales declared as zero-rated actually emanate from export sales, foreign currency denominated sales, and other transactions that may qualify as zero-rated sales (Sec. 100 (a) (1) and (2); Sec. 102 (a) (1), (2) and (3), NIRC and Sec. 8, RR 5-87). a.3.1 For direct export sales, examine sales agreement with foreign buyers as to the nature of products to be exported, pricing and other terms and conditions. Review export documents such as commercial invoices/receipts, bills of lading or airway bills, export declarations/permits, packing lists, etc., and ascertain that the proceeds of the sale had been actually inwardly remitted. This will require a liquidation statement from the Central Bank (CB) or any of its accredited agent banks certifying as to the amount of the export proceeds or consideration, the date of inward remittance, conversion rate and the total peso value thereof (RMO 23-88). Prepare and submit Schedule I with the following information: aisa dc SCHEDULE I (1) (2) (3) (4) (5) Date of Sales Name of AWB/ Shipment Export Invoice No Consignee BL No. Date (6) (7) Amount of Sales in Amount of Foreign Foreign Currency Per Currency Remitted Invoice (8) (9) Conversion Rate Amount Remitted in Pesos (10) (11) Date of Remittance Accredited Bank (12) (13) Bank Credit Memo No. Sales per Books (14) (15) Discrepancy Between Discrepancy Between 6 & 7 9 & 13 a.3.2 For foreign currency denominated sales, review the transactions and ascertain the following: i The buyers are Filipinos residing abroad, returning overseas workers or other non-residents; ii The objects of sale are goods for household or personal use assembled or manufactured in the Philippines and delivered to residents of the Philippines; iii The goods are paid for in convertible foreign currency inwardly remitted through the banking system. This requirement may be evidenced by a statement from the Central Bank or its accredited bank; and iv The sales do not exceed an aggregate value of US $1,000 or its equivalent per transaction. a.3.3 For zero-rated sale of services, verify contract agreement to ascertain the person for whom the services were rendered, amount of consideration, description of the services, and documents evidencing actual payments. Determine if proceeds of sale in foreign currency (Paragraphs 1 and 2 of Section 102, NIRC) had been inwardly remitted in accordance with CB rules and regulations. Prepare and submit Schedule II with the following information: SCHEDULE II (1) (2) Name of Contractee Contract Price (3) (4) Amt. Billed in Amt. Received in Foreign Currency Foreign Currency (5) (6) Official Receipt No. Date of Receipt (7) (8) Conversion Rate Amount Received in Pesos (9) (10) (11) Name of Bank Bank Cr. Memo No. Discrepancy Between 3 & 4 a.3.4 In case of constructive inward remittance, the claimant shall also submit the following: 1. Central Bank approval of offsetting arrangement. 2. Certification from the Central Bank on the amount constructively remitted under the off-setting arrangement. Should the amount of inward remittance be less than the total zero-rated sales, the input tax pertaining to the discrepancy shall be removed from the allowable input tax using the following formula: Unremitted Export Proceeds Allowable Input x Input Tax = Tax allocable to Total Zero-Rated Sales unremitted export sales a.3.5 For effectively zero-rated transactions, secure copy of the approved application for zero- rating. Take note of the effectivity and revocation date of the zero-rated transaction. Transactions effected before the effectivity date as indicated in the approved application are subject to VAT (RR 2-88). b) Analyze all accounts affecting total sales, particularly cash account, accounts and/or notes receivable, collections from receivables, sales discounts, and sales returns, bad debts written off, etc. In the case of sale of service, include in the analysis other accounts such as advances, retention receivables, mobilization fees, etc. b.1 Apply the following pro-forma computation to arrive at the total sale of goods. Cash sales xxx Add: Sales on account: Collections on accounts receivable xx Collection on notes receivable (if it pertains to sale of goods) xx Sales discounts granted xx Sales returns and allowances from sales on account xx Bad debts written off xx Accounts receivable, ending xx Notes receivable, ending xx Total receivables during the period xx Less: Accounts receivable, beginning xx Notes receivable, beginning xx xx xxx Total sales during the period xxx ==== b.2 Account for the quantity of goods actually sold, in appropriate cases, as a tool to further audit Finished goods, beginning xxx Add: Production or purchases xxx Total available for sale xxx Less: Samples or destroyed or lost items xxx Number of units sold during the period xxx Multiply by average selling price per unit xxx Total sales per audit xxx === b.3 Determine the taxable sale by applying the following computation: Total sales during the period (from c.1) xxx Add: Deemed sale per audit (from b.2) xx Total sales per audit xxx Less: Zero-rated sales (from b.3) xx Exempt sales (from b.1) xx xx Gross taxable sales xxx Less: Sales returns and allowances xx Taxable sales xxx ==== b.4 Apply the following pro-forma computation to arrive at the gross receipts during the period: Income or billings during the period xx Add: Beginning balances of: Accounts receivable xx Retention receivable xx Ending balances of: Deposits/Advances xx Mobilization Fee xx xx Total xx ==== Less: Ending balances of: Accounts receivable xx Retention receivable xx Beginning balances of: Deposits/Advances xx Mobilization Fee xx xx Collection during the period xx Add: Gross receipts from deemed sales xx ____ Total receipts during the period xx Less: Gross receipts from exempt service xx Gross receipts from zero-rate service xx xx Taxable gross receipts xx ==== b.5 In applying the foregoing computations, except c.2, all the accounts should be net of VAT. 2. Audit checks to detect irregularities in invoicing and accounting for sales transactions. a) Ensure that the sales invoices issued for sales transactions are all accounted for. Account for any break in the sequence of serial numbers of sales invoices and official receipts issued, and invoices assigned to branches. In case of cancelled sales invoice, the original copy should be on file. For those using loose-leaf invoices, require presentation of authority to use the same. b) Check if the amounts indicated in the sales invoices were properly recorded in the books of accounts. cd c) Determination of compliance with invoicing requirements and procedures. c.1 Ascertain that invoices bear all necessary information including the VAT/Taxpayer's Identification Number (Secs. 108(a) and 238, NIRC). c.2 For the verification of the VAT liabilities for the first quarter/semester of 1988, secure inventory list of unused sales invoices as of December 31, 1987 as prescribed under RMC 51-87 and verify authority to print subsequent receipts/invoices. Ensure that the sales invoices issued for sales transactions are all accounted for. c.3 Check authority to use cash register machines and verify whether each and every cash register machine in use is duly authorized. c.4 Be alert on the use of double or multiple set of invoices bearing identical serial numbers. c.5 Verify if the transactions covered by "Statement of Account," "Delivery Receipt," "Debit Notes," and other similar documents are properly recorded as sales. The mere issuance of these documents without the corresponding sales invoice is a violation of the bookkeeping regulations and an indication of unrecorded sales except in the case of bona fide consignment sales. When confronted with a delivery receipt, ascertain whether it covers a consummated sale or consignment sale. Consignment sale shall be considered as taxable sale after sixty (60) days following the date of consignment (Sec. 4(D), RR 5-87). c.6 If the taxpayer is engaged in both taxable and exempt transactions, ascertain that only VAT invoices are issued for VAT taxable transactions and separate invoices are issued for exempt transactions (Sec. 21, RR 5-87). Exempt transactions for which VAT invoices are issued shall be considered subject to VAT. c.7 In the case of zero-rated transactions to BOI-export-oriented enterprises or other entities whose purchases are effectively zero-rated or exempted under special laws or international agreement, check if the words "ZERO-RATED" or "EXEMPT" had been prominently stamped or printed on the face of the sales invoice (Sec. 2(a)(3), RR 2-88). If not, the transactions should be considered taxable. d) Ascertainment of the correctness of output tax computation by taking the following steps: d.1 Verify whether other charges such as excise taxes, packaging, insurance, freight and delivery expenses, etc., are treated as part of the gross taxable sales. d.2 Check the output tax by multiplying the total amount (inclusive of the amount intended by the seller to cover the tax or the tax billed erroneously) by 1/11 or such other factor applicable to persons partially exempt under special laws to determine the correct output tax (Sec. 6(a) and (b), RR 5-87). d.3 Determine if the taxpayer enjoys full or partial exemption from payment of the value-added tax pursuant to special laws, and verify the extent of exemption and compliance with the condition of such exemptions. Compute the amount of output tax by applying the corresponding factor applicable to the level of exemption: Percent of Exemption Factor 0% 1/11 10% 1/12.11 20% 1/13.5 50% 1/21 75% 1/41 d.4 Account for deductions from sales such as sales returns, allowances and discounts. Sales returns and allowances may be deducted from the gross taxable sale if they have been previously recorded and are properly supported by credit memos. Discounts, on the other hand, can only be taken into account if indicated on the face of the invoice at the time of sale. (Sec. 100 (d) (3), NIRC). e) In the case of gross taxable sales of services (GTSS), advance payment or downpayment or deposits, as well as the cost of materials supplied with the services shall form part of the GTSS. If it is claimed that the material component of the contract price is for the account of the customer of contractee, verify the terms of the contract to ascertain who actually made the purchase and in whose name the transaction was invoiced. f) Identify instances of gross selling prices of goods and services being unreasonably lower than the actual market price, and make the necessary adjustments (Sec. 6(a), RR 5-87). g) For VAT taxpayer claiming the privilege of paying the 4% contractor's tax after December 31, 1987, verify his compliance with the following conditions: g.1 Filing of information return showing the contractor's name, the outstanding contract price as of December 31, 1987, and a declaration to pay the contractor's tax due; g.2 Copy of the contractor's billing issued prior to January 1, 1988 must be attached to the information return; g.3 Ascertain the recording of the outstanding contract price receivable (on contracts completed and billed as of December 31, 1987) on the taxpayer's books of accounts; and g.4 Filing of the contractor's tax return on or before January 20, 1988 or the 20th day of the month following the end of each calendar quarter. Non-compliance with any of the above conditions subjects the amount received to 10% VAT (Sec. 6(g), RR 5-87). h) Be resourceful in discovering underdeclaration of sales. Abnormal levels of inventories, sales, purchases, accounts receivables, including manipulation of interbranch transactions, among others, etc., may suggest instances of underdeclaration. Cross-check transactions reflected in the books of accounts against the records of selected customers and suppliers. D. Audit of Purchases and Input Tax 1. Reconcile the amount of each category of purchases per VAT return with the amount of purchases per subsidiary purchase journal (Sec. 22(b), RR 5-87). Check if all the information required are maintained in the purchase journal. 2. Review the composition of the purchase accounts in the journals and ledgers and ascertain that: 2.1 Purchases from non-VAT and/or exempt persons do not result in any input tax credit; 2.2 Effectively zero-rated purchases do not result in any input tax credit; 2.3 Purchases from VAT persons, which are personal in nature, shall not give rise to input tax credit; and 2.4 Deemed-paid input tax credits (for purchases from BOI-registered pioneer enterprises) have been determined correctly in accordance with Sec. 13(4), RR 5-87. 3. Scrutinize the entries appearing in the subsidiary purchase journal and compare with information shown on the purchase invoice. 4. Determine substantiation of claims for input tax credits: 4.1 For domestic purchases of goods (including capital goods) and services in the course of business, these must be supported by VAT invoices or receipts showing the information required in Sec. 108 (a), 238 and 239 of the NIRC. A cash register machine tape, although it indicates the VAT registration/taxpayer identification number of the seller, does not constitute valid proof of input tax credit (Sec. 15(a), RR 5-87). The same condition will apply for delivery receipts or statements of accounts issued by the seller. aisa dc 4.2 Credit for input tax on importations shall be supported by official receipts issued by the Bureau of Customs, import entry declarations or equivalent documents showing actual payment of VAT on imported goods (Sec. 15(b), RR 5-87). Therefore, withdrawals of raw materials or other goods from customs bonded warehouses without the payment of VAT are not entitled to input tax credits. 4.3 VAT invoices issued for exempt and zero-rated transactions will not generate input tax credits to the purchaser. 5. Determine correctness of claims for input tax credits through the following procedures: 5.1 Check the correctness of input tax credits by multiplying the total invoice amount by the applicable factor (Sec. 13, RR 5-87). 5.2 If the taxpayer enjoys exemptions on its sales of goods or services under special laws, he is only entitled to input tax credits equivalent to his level of taxability. For example: X, a BOI-registered pioneer enterprise, enjoys a 10% tax exemption for the taxable year under investigation. During the same year, his sales amounted to P1,000,000 and the input tax on his purchases amounted to P50,000. The creditable input tax shall be computed as follows: Input tax: Input tax x Level of = Unallowable claimed exemption input tax Input Tax Unallowable = Creditable claimed input tax input tax Thus: Input tax P50,000.00 Less: Unallowable Input Tax based on level of exemption (P50,000 x 10%) 5,000.00 Creditable input tax P45,000.00 ========= 5.3 Check the authenticity of substantial claims of input tax credits by confirming purchase transactions through, but not limited to: a. access to supplier's records; b. comparing purchases of other taxpayers belonging to the same industry; and c. cross-checking the amount of purchases with the amount reflected in the Summary List of Purchases as prescribed under RR 6-89. 6. Make sure that the input tax credit available is correspondingly reduced by the full amount applied for refund/TCC filed with the BIR, BOI, Bureau of Customs and other government agencies, whether granted or not, in the quarter when the application was filed . cd 7. Allocate the input tax creditable as follows: If a VAT-registered person is also engaged in exempt activities, the input taxes paid for purchase of goods (including capital goods) and services which cannot be attributed to either operation shall be allocated between the VAT taxable operation and the non-VAT operation using the computation prescribed in Sec. 12 of RR 5-87. The amount allocated to the exempt transaction should reduce the input tax credit balance. For instance: Sales: From VAT operation P300,000 From non-VAT or exempt activity 200,000 Input tax 6,000 Input tax attributable to VAT taxable operation Sales on VAT Taxable Operations Total Input Tax X Input = Attributable to Tax Vat operation Total Sales (VAT Taxable + non - VAT or exempt activity) P300,000 x P6,000 = P3,600 ======= 500,000 Thus: Input Tax P6,000 Less: Allowable input tax credit P3,600 Unallowable input tax credit attributable to exempt activity P2,400 8. Reconcile the amounts of input tax claimed in the VAT return for the portion carried over from previous quarters and the balance carried to succeeding quarters with the amounts recorded in the books of accounts. 9. Exclude the following in computing the refundable/creditable input taxes: a. Transitory input tax; b. Deemed-paid input tax; and c. Deferred input tax on ending inventory as introduced under Step 2, Sec. 3 of RR 9-89. 10. Secure certification of amount on input taxes deferred under RR 9-89 from the head of the investigating unit which handled the processing of the immediately preceding and succeeding claims to determine the correct amount of input taxes to be added to the current claim. E. Reporting Requirements: The Evaluation/Audit Report is contained in a prescribed form (Annex B) which must be fully accomplished and accompanied by the following: 1. Authority to Issue VAT Credit Form (Annex C) 2. Letter to Bureau of Customs authorizing the said office to issue the corresponding tax credit certificate on the input taxes arising from importation (Annex D), in proper cases 3. Checklist of Audit Procedure Undertaken in the Audit of VAT Credit (Annex E) 4. Delinquency Verification Form duly certified by the Chief, Accounts Receivable/Billing Division 5. BIR Form No. 2552. Application for VAT credit 6. Photocopies of BIR Form no. 2550-VAT Returns 7. Audit Working Papers 7.1 Sales and Output Tax 7.2 Forex Receipts 7.3 Purchase and Input taxes, including disallowances 7.4 Analysis of relevant accounts such as cash, receivables, payables, purchases, input tax, etc. 8. Agreement Form, in proper cases 9. Other documents required from the claimant enumerated in the checklist of requirements (Annex A) F. Cancellation of Original Purchase documents: Upon the final approval of the claim, but before the preparation of the tax credit certificate or disbursement voucher for refunds, the sources of allowed or disallowed input tax credits such as the original purchase invoices and official receipts shall be cancelled with the words "cancelled" stamped on the invoice or official receipt. The cancellation shall also be initialed by the cancelling officer. casia Strict compliance herewith is enjoined. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue ANNEX A VALUE-ADDED TAX DIVISION VAT REFUND AND TAX CREDIT SECTION Room 214, BIR, NOB, Diliman, Q. C. Tel. No. 97-76-76 loc. 317, 571, 575 CHECKLIST OF REQUIREMENTS IN FILING VAT CREDIT/REFUND CLAIMS I. GENERAL REQUIREMENTS _____1. 3 Copies of application for VAT Credit/Refund (Form 2552). _____2. Photocopy of approved Application for Zero-Rate (for effectively zero-rated sales). _____ 3. For local purchases: In lieu of the second copy required to be attached to the VAT return under RR 6-89, photo copies of VAT purchases invoices for purchase of goods and official receipts (supported by statement of account or bill invoice) for purchase of services with the corresponding summary of purchase of goods and services and input tax claimed. The invoices must be arranged according to the summary list. The summary list should contain the details specified below. (Prepare separate list and documents for input tax not within the period but not previously claimed.) Total Name of VAT Invoice Date of OR Date Input Invoice Supplier Number Number Invoice No. of OR Amount Tax Amount Importations: A) Photocopies of invoices, import declaration, import entry document, official receipt or confirmation receipts evidencing payment of VAT (segregate payments made by cash or tax credit). B) Summary of importations made during the period with the following details: Date of AWB/ Date of Total Date of OR Inv. Supplier Item BL No. Arrival Value Payment No. VAT _____ 4. VAT returns(s) filed for the quarter showing that the tax credited on purchases of zero-rated sales were not applied against output tax for a certain quarter(s) and VAT return for the succeeding quarter. _____ 5. Certificate of taxpayer showing the amount of zero-rated, taxable and exempt sales, where applicable. _____ 6. Where the applicant's zero-rated transactions are regulated by certain government agencies, a statement therefrom showing the amount and description of sale of goods and services, name of persons or entities (except in case of exports) to whom the goods or services were sold and date of transaction. _____ 7. Authority to maintain Special Dollar Account. B. Other Documents (if applicable): A. Articles of incorporation - for first time filers. B. Sales contract/agreement. C. Beginning and ending inventory of raw materials, work-in process, finished goods, supplies and materials. D. BOI registration E. VAT Registration for those claiming refund/TCC for the first time. F. Certification from BOI, BOC, EPZA that subject taxpayer has not filed similar claims for the period. G. If 100% exporter, sworn statement that ending inventory as of the close of the period being claimed has been used directly or indirectly in the products subsequently exported as supported by export documents. (RR 9-89). H. For indirect exporters - documents of liquidation evidencing the actual utilization of the raw materials in the manufacture of goods at least 70% of which have been actually exported. (RR 2-88) I. Audited financial statements, if applicable. J. In case of constructive inward remittance: 1) Central bank approval of offsetting arrangement. 2) Schedule of monthly offsetting of receivables and payables in accordance with Central Bank rules and regulations. 3) Certification from CB on the amount constructively remitted under the off-setting arrangement. K. CB clearance on non-violation of any CB rule or regulation. II. SPECIFIC REQUIREMENTS 1. For Export sales (Semi-conductor companies, garments, food, etc.) _____ a) Summary of export sales stating the date of exportation, sales invoice number, name of buyer, airway bill/bill of lading number, lading date, amount of sales in foreign currency, peso value of sales, date of remittance, bank credit memo number and amount remitted in pesos. _____ b) Photo copies of export documents: 1. Invoices/receipts evidencing sale of goods, as well as the name of the person to whom the goods were delivered with respect to foreign currency denominated sales. 2. Export declaration/permit. _____ c) Bank credit memoranda and certificate from the Central Bank or any accredited agent bank showing that the proceeds of the sale in acceptable foreign currency had been inwardly remitted and accounted for in accordance with applicable banking regulations. The statement should also show the amount in foreign currency of the export proceeds or consideration, date of export proceeds or consideration, date of export, date of inward remittance, conversion rate into Philippine currency and the total peso value thereof. 2. For zero-rated Sale of Service (contractors, mining, etc.) _____ a) Authenticated copy of the contract showing the person for whom the services were rendered, amount of consideration, description of the services and documents evidencing actual payments. _____ b) Photo copies of official receipts and billings together with a summary of the date of billing, name of principal, official receipt number, date of receipt, amount in foreign currency and the corresponding peso value thereof, date of remittance, name of bank, bank credit memo number and amount remitted in pesos. _____ c) Bank credit memoranda and certificate from the Central Bank with information similar to 1-0 (export sales). _____ d) Reconciliation of billings against inward remittances. Additional Requirements for Manning services: _____ 2A. Monthly Central Bank report on income of agency received. _____ 2B. Breakdown of gross foreign receipts specifying the nature of foreign currency received (e.g. Commission, allotment, manning fee, agency fee, advances, etc.) showing the total foreign currency value with its peso equivalent, bank credit memo number, name of bank and date of remittance. 3. Effectively zero-rated sale of goods (mining, etc.)/ services (contractors, etc.) _____ a. Summary of Sales invoices/receipts showing the name of the person entity to whom the sale of goods or services were delivered, date of delivery, amount of consideration and description of goods or services delivered. (RR 6-89 and RMC 2-90). _____ b) Reconciliation of billings against payment. _____ c) Evidence of actual receipt of goods of services. 3. Effectively zero-rated sale of goods (mining, etc.)/ services (contractors, etc.) _____ 2A. Monthly Central Bank report on income of agency received. _____ 2B. Breakdown of gross foreign receipts specifying the nature of foreign currency received (e.g. Commission, allotment, manning fee, agency fee, advances, etc.) showing the total foreign currency value with its peso equivalent, bank credit memo number, name of bank and date of remittance. 3. Effectively zero-rated sale of goods (mining, etc.)/ services (contractors, etc.) _____ a. Summary of Sales invoices/receipts showing the name of the person entity to whom the sale of goods or services were delivered, date of delivery, amount of consideration and description of goods or services delivered. (RR 6-89 and RMC 2-90). _____ b) Reconciliation of billings against payment. _____ c) Evidence of actual receipt of goods of services. Additional Requirements for mining companies: _____ 1. Reconciliation of billings against actual collection. _____ 2. Operating agreement with owner of mining claim(s), if applicable. 4. Purchase of Capital Goods. _____ a) Original copies of invoices/receipts showing the date of purchase, purchase price, amount of value-added tax paid and description of the capital equipment locally purchased. _____ b) On imported capital equipment: 1. Photo copy of import entry document and confirmation receipt of payment issued by the Bureau of Customs for value-added tax paid. ANNEX B Kawanihan ng Rentas Internas VAT CREDIT CLAIM EVALUATION REPORT VAT Registered Name : ___________________________ TIN: ______________ Address : ___________________________ ___________________________ Amount of Claim : __________ Claim no. ________ Date Received : ______________ Period Covered : __________________________ Date Reported : ______________ ----------------------------------------------------------------------------------------------------------- 1 GENERAL PROFILE: 1.1 Type of Organization ____ Single Proprietorship ____ Partnership ____ Corporation ____ Others (specify) 1.2 Business Activity(ies) ____ Exporter of Goods ____ Importing ____ Manufacturing ____ Local Trading ____ Exporter of Service Principal product sold : ___________________ Type of service(s) : ___________________ Zero-rated activities under special laws (specify) : ____________________ VAT-exempt activities (specify) : ____________________ 1.3 Registration under Special Laws (BOI, EPZA, etc.) ____ Yes ____ No If yes, specify ________________________________________ 2 CONTROL CONSCIOUSNESS: 2.1 Books Maintained ____ General Journal ____ Sales Journal ____ General Ledger ____ Purchases Journal ____ Cash Receipts Book ____ VAT Subsidiary Sales Journal ____ Cash Disbursements Book ____ VAT Subsidiary Purchases Journal Others (specify): ____________________________ 2.2 Methods of Recording ____ Manual ____ Computerized 2.3 Manner of Invoicing/Issuance of Receipts ____ Manual ____ Mixed ____ Computerized ____ Others (specify) 2.4 BIR Permits for ____ Printer's authority to print invoices/receipts ____ Cash register machines, and for how many?" ____ ____ Loose-leaf invoices/receipts 2.5 Serial numbers of sales invoices/official receipts used during the period of claim: from ____________ to ____________ spoiled/cancelled numbers ________________ 3 EXTERNAL INFLUENCE: 3.1 Maintenance of Branches ____ Yes ____ How many? ____ No 3.2 Existence of Affiliated/Associated Companies (use additional sheet(s), if necessary) ________________________________________________________ ________________________________________________________ ________________________________________________________ 4 VERIFICATION MADE FROM OTHER GOVERNMENT OFFICES: 4.1 Non-availment of similar tax credits for the same period Bureau of Customs Board of Investments Yes ____ ____ No ____ ____ 4.2 Any carded account outstanding with the Accounts Receivable/ Billing Division, BIR National Office ____ Yes ____ No If yes, state the details ____________________________________________________ ____________________________________________________ ____________________________________________________ ____________________________________________________ 5 FINANCIAL/OPERATIONS STATISTICS: 5.1 Financial condition as of the end of the period of claim: As of ________________ Total Assets P________________ Total Liabilities ________________ Owner's Equity ________________ 5.2 Results of Operation covering the period of claim Zero-rated sales P________________ Taxable sales ________________ Exempt sales ________________ Transactions deemed sale ________________ Total Forex Receipts: Foreign Currency ________________ Philippine Peso ________________ Net profit (loss) ________________ 6 OTHER REMARKS/COMMENTS (use additional sheet/s if necessary) 7 COMPUTATION OF VAT CREDIT DOMESTIC PURCHASES IMPORTATIONS TOTAL Amount of Claim P P P Add: Output taxes applied ___________ ______________ __________ Total input taxes claimed Less: Disallowed input taxes ___________ ______________ __________ Allowable input taxes P P P Add (Deduct): Deferred input tax on immediate preceding period's ending inventory (for mixed transactions under RR 9-89) Deferred input on current period's ending inventory (this claim) ( ) ( ) ( ) Output taxes and penalties assessed ( ) ( ) ( ) Deferred input tax allocable to unremitted export proceeds ( ) ( ) ( ) Input tax allocable to exempt sales ( ) ( ) ( ) Input tax similarly claimed from BOI, BOC, EPZA ( ) ( ) ( ) Unprotested delinquent account ( ) ( ) ( ) Others (specify): ____________________ ____________________ ____________________ ____________________ AMOUNT CREDITABLE P__________ P__________ P__________ AMOUNT CREDITABLE P__________ P__________ P__________ IS THE TAXPAYER AGREEABLE TO THE FINDINGS? __________ Yes __________ No 8. RECOMMENDATION: ___________________________ Revenue Officer(s)/Evaluator(s) _______________________ _____________________ Supervisor/Section Chief Division Chief ______________________ ______________________ Assistant Commissioner Deputy Commissioner _________________________ Commissioner of Internal Revenue ANNEX C REPUBLIKA NG PILIPINAS KAGAWARAN NG PANANALAPI KAWANIHAN NG RENTAS INTERNAS VALUE ADDED TAX DIVISION Quezon City AUTHORITY TO ISSUE VAT CREDIT/REFUND ____________________ Date ____________________________ VAT Registered Name VAT Registration ____________________________ Address Date : __________________ Period Covered: ________________ RDO : __________________ Nature of Claim: [ ] Refund [ ] TCC TIN : __________________ Amount in figures Amount in words BIR __________________ ________________________________ BOC __________________ _________________________________ Total __________________ _________________________________ LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue ANNEX D REPUBLIKA NG PILIPINAS KAGAWARAN NG PANANALAPI KAWANIHAN NG RENTAS INTERNAS ____________,19__ THE HONORABLE COMMISSIONER Bureau of Customs Manila S i r : Please be informed that the claim of (name of taxpayer/claimant) for value-added tax credit on its importations for the period ______________ to _____________ in the amount of P ____________ has been approved by this office. Pursuant to the agreement executed by and between the Bureau of Internal Revenue and Bureau of Customs dated April 8, 1988, authority is hereby granted to your office for the issuance of tax credit certificate for value-added tax payments covered by the attached schedule, subject to verification by that Bureau to the actual receipts of payments by the government, in compliance with the requirement of the Commission on Audit and in which your office is more in a position to make. Enclosed herewith, please find the photocopies of the following documents: 1. Authority to issue VAT Credit 2. VAT Credit Claim Evaluation Report 3. Import Documents (folders) Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue ANNEX E CHECKLIST OF AUDIT PROCEDURES UNDERTAKEN IN THE AUDIT OF CLAIMS FOR VAT CREDIT (Prescribed Under RAMO No. ) Name of Taxpayer: ____________________________ TIN: ________________ Business Name of Style: _________________________ Claim No: ____________ Address: Amount of Claim ______________ Head Office: ___________________________ Period of Claim _______________ to ___________________ Plant Factory/Branch: ________________________________________________ AUDIT OF SALES AND OUTPUT TAX DONE NOT DONE REMARKS 1.1 Reconciliation of sales per books versus VAT return/s (Form #2552) _____ ________ ________ 1.2 Review of the composition of sales accounts _____ ________ ________ 1.3 Analysis of all accounts affecting total sales - _____ ________ ________ 1.3.1 Prepared reconstruction of sales using accounts receivable _____ ________ ________ 1.3.2 Prepared reconstruction of sales using the inventory method _____ ________ ________ 1.3.3 Prepared reconstruction of gross taxable receipts using accounts/billings receivable _____ ________ ________ 1.4 Scrutiny and comparison of information in the sales invoices and subsidiary sales journal _____ ________ ________ 1.5 Determination of compliance with invoicing requirements _____ ________ ________ 1.6 Determination of inward remittance of export sales proceeds including zero-rated sales such international agreement _____ ________ ________ 1.7 Determination of the taxable sales (including deemed sale transactions) _____ ________ ________ 1.8 Conduct of third-party verification of recorded transactions _____ ________ ________ 2.1 Reconciliation of purchases per books versus VAT return/s _____ ________ ________ 2.2 Review of the composition of purchase accounts _____ ________ ________ 2.3 Scrutiny and comparison of information in the suppliers invoices/receipts and subsidiary purchase journals _____ ________ ________ 2.4 Determination of propriety of claims for input tax credits _____ ________ ________ 2.5 Determination of correct purchases and corresponding input taxes _____ ________ ________ 2.6 Determination of the correct input tax credits carried over from previous quarters _____ ________ ________ 2.7 Determination of compliance with the conditions prescribed in the transitory provisions of the VAT law _____ ________ ________ 2.8 Conduct of third-party verification of recorded transactions _____ ________ ________ I/We hereby certify to the correctness of the foregoing information. ______________________________________ ______________________________________ ______________________________________ REVENUE OFFICER(S) EVALUATOR Attested by: __________________________________ SUPERVISOR/SECTION CHIEF __________________________________ DIVISION CHIEF