Amendments to Revenue Memorandum Order (RMO) 19-2012 Dated July 31, 2012 — Value Added Tax Audit Program of the Large Taxpayers Service (LTS)

July 21, 2015 REVENUE MEMORANDUM ORDER NO. 016-15 SUBJECT : Amendments to Revenue Memorandum Order (RMO) 19-2012 Dated July 31, 2012 Value Added Tax Audit Program of the Large Taxpayers Service (LTS) TO : All Officers and Employees of the Large Taxpayers Service and Others Concerned I. Objectives This Revenue Memorandum Order is issued to amend certain provisions of Revenue Memorandum Order No. 19-2012 dated July 31, 2012 for purposes of: 1. Setting higher caseload threshold for Revenue Officers under the LTS VAT Audit Group; and 2. Prescribing measures to ensure timely conclusion of VAT audit cases and to clearly define the scope of audit to be conducted in the Large Taxpayers Service vis--vis the cases assigned to the VAT Audit Group. II. Amending Provisions The provisions prescribed under the Coverage and Audit Policies and Procedures of RMO 19-2012, shall be amended to read as follows: "II. COVERAGE A.1. . . . xxx xxx xxx 1.9. Taxpayers whose VAT compliance is below the available established industry benchmarks (Selection Code: BIB) 1.10. Taxpayers with discrepancy in sales/revenues reported per e-Sales Report/Summary List of Sales (SLS) versus VAT Returns (Selection Code: DES); and aCIHcD 1.11. Taxpayers whose excess input tax carried forward in the VAT return of the succeeding quarter (line 20) is different from the input tax reflected in the VAT return of the previous quarter (line 23-A and 29) (Selection Code: EIT) A.2. . . . 2. AUDIT POLICIES AND PROCEDURES xxx xxx xxx 2.4. . . . To facilitate the reporting of VAT audit cases, the RO assigned to audit the case shall observe the following: 2.4.1 Revenue Officers are directed to perform only the audit procedures under Revenue Audit Memorandum Order (RAMO) No. 1-99 applicable to the risks identified for case selection and as a result of pre-audit analysis. 2.4.2 To provide an audit trail for the scope of the audit and to ensure that the audit activity planned and the books and records to be examined, will address the identified risks, an audit plan (Annex "A") must be completed by the Revenue Officers (for each allocated case) following their pre-audit analysis and agreed with their supervisor. If further risk areas are identified during the audit, this plan should be adjusted accordingly. 2.4.3 Only documentary requirements prescribed under RMO No. 53-98 that are applicable and relevant to the audit case shall be attached to the docket. However, the RO is not precluded from applying the full provisions of the aforementioned revenue issuances depending on the risks/areas of assessment found (OM No. 13-06-001)" cHaCAS xxx xxx xxx 2.9. The initial workload of each RO under this program shall be thirty (30) cases. In no case shall the number of cases handled by an RO exceed thirty (30) cases, subject to replenishment every after submission of the report of investigation/closure of each case. xxx xxx xxx However, excess in the allowable limit of thirty (30) cases as a result of returned case/s shall not be considered as a violation of this Order. xxx xxx xxx" III. Repealing Clause All other issuances inconsistent herewith are hereby modified or repealed accordingly. IV. Effectivity This Order takes effect immediately. (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX A General VAT Audit Plan Taxpayer : __________________________________________ Address : __________________________________________ TIN : __________________________________________ VAT Period(s) : _______________________ Reason(s) for selection : __________________________________________ All applicable codes : __________________________________________ Additional risks identified from stage 1.1 below: _____________________________ _____________________________________________________________________ _____________________________________________________________________ Records and books required to address identified risks: ________________________ _____________________________________________________________________ _____________________________________________________________________ Letter of Authority No. : _____________________________ Revenue Officer(s) : _____________________________ : _____________________________ Group Supervisor : _____________________________ Estimated Time Frame : _______________ Actual Time Spent: __________ Audit Plan submitted by : ______________________ Date: ______________ Audit Plan approved by : ______________________ Date: ______________ Audit Work Proposed Date I. Preparation/Planning 1. Pre-audit analysis to include: a. Review of VAT returns, SLS, SLP and other attachments of the return as appropriate; b. Determination of accounts/issues from previous audit reports working papers/dockets; c. Determination of risk areas and issues particular to the industry. ____________________ 2. Identification and prioritization of high risks to be addressed and checks/tests to be applied ____________________ 3. Preparation of Letter of Authority ____________________ 4. Preparation of Checklist of Requirements ____________________ 5. Preparation of questions for preliminary taxpayer interview ____________________ II. Audit Proper 1. Service of Letter of Authority and Checklist of Requirements. ____________________ 2. Preliminary discussion, interview with taxpayer or authorized representative and ocular inspection of business premises. ____________________ 3. Gathering and evaluation of documents per checklist of requirement. ____________________ 4. Retrieval of certification/required documents from offices within and outside the Bureau, including third party data. ____________________ 5. Conduct of field audit/examination of books of accounts and financial statements relevant to the risks identified. ____________________ 6. Determination of issues/findings and computation of tax deficiencies. ____________________ 7. Determination of evidence to support valid findings. ____________________ III. Reporting 1. Discussion with supervisor/VAT Audit Head with exceptions/findings noted. ____________________ 2. Initial presentation to the taxpayer of exception/findings. ____________________ 3. Evaluation of taxpayer's explanation and other documents presented by the taxpayer. ____________________ 4. Discussion of the result with Group Supervisor and VAT Audit Head. ____________________ 5. Re-computation of tax deficiency, if applicable ____________________ 6. Final conference with taxpayer. ____________________ 7. Preparation and submission of final report, including preparation of Payment Form, Preliminary Assessment Notice (PAN)/Final Assessment Notice (FAN), whichever is applicable. ____________________ IV. Adjustments Made Details ______________________________________________________________ Reasons for changes/additions ___________________________________________ Prepared by: ______________________ ________________ Date Noted by: ______________________ _______________ Date Note: Should there be addition and deviation from the audit plan, the Revenue Officer should discuss with his supervisor and prepare the revised audit plan as required in the prevailing situation.