Prescribing Guidelines and Procedures in Handling Letter Notices Generated Thru Tax Reconciliation System (TRS) and Reconciliation of Listing for Enforcement System (RELIEF)/Third Party Matching-Bureau of Customs (TPM-BOC) Data Program in the Year 2007 for Audit and Enforcement

April 23, 2009 REVENUE MEMORANDUM ORDER NO. 017-09 SUBJECT : Prescribing Guidelines and Procedures in Handling Letter Notices Generated Thru Tax Reconciliation System (TRS) and Reconciliation of Listing for Enforcement System (RELIEF)/Third Party Matching-Bureau of Customs (TPM-BOC) Data Program in the Year 2007 for Audit and Enforcement TO : All Internal Revenue Officers and Others Concerned I. OBJECTIVE This Order is issued to harmonize procedures and minimize processing time in handling Letter Notices (LNs) for taxable year 2007 generated thru the Tax Reconciliation System (TRS), Reconciliation of Listing for Enforcement System (RELIEF)-Summary List of Sales and Purchases (SLSP) and Third Party Matching-Bureau of Customs (TPM-BOC) Data Program to enhance and maximize revenue collections. TCAHES II. COVERAGE This Order shall cover the income and value added tax liabilities of individual and corporate taxpayers who were issued LNs based on the TRS and Consolidated RELIEF-SLSP and TPM-BOC Data Programs covering taxable years 2007. III. POLICIES 1. As provided for under existing Revenue Memorandum Orders (RMO) on TRS ( i.e. , RMO No. 28-2007, as amended by RMO No. 4-2008); RELIEF/SLSP System ( i.e. , RMO No. 30-2003, as amended by RMO Nos. 42-2003, 24-2004, 32-2005, 21-2006, 32-2007 and 36-2008) and TPM-BOC Data Program ( i.e. , RMO No. 34-2004, as amended by RMO Nos. 46-2004, 32-2005, 21-2006, 32-2007 and 36-2008), taxpayers with discrepancy on their income, sales and/or purchases (domestic or imported) shall be notified of such findings through the issuance of an LN (Annex "A" for TRS-LN and Annex "A-1" for RELIEF-LN). 2. LNs covering taxable year 2007 shall be deployed based on the parameters set by (a) Withholding Tax Division (WTD) for TRS-LN together with the Details of Withholding Agents/Payors and Payees/Income Recipient Report (DWAPR); and (b) Audit Information, Tax Exemptions and Incentives Division (AITEID) for RELIEF-LN together with the Details of Taxpayer's Customers/Suppliers (DTCS) and/or Details of Importations with Return Information Matching (DIRIM), via the Information Delivery Portal (IDP), as the case may be, and shall be approved by the Commissioner of Internal Revenue (CIR), through the Deputy Commissioner-Operations Group (DCIR-OG). 3. TRS-LNs covering taxable year 2007 shall be consolidated with RELIEF-LNs and shall be handled by the same investigating office (RO who shall handle TRS-LN shall be the same RO to handle RELIEF-LN) wherein the report of investigation/verification shall be forwarded to the Office of the Deputy Commissioner-Operations Group (ODCIR-OG) for proper disposition. 4. The CIR shall create an LN Task Force (LNTF) in the National Office (N.O) to handle LNs for taxable year 2007 to be composed of Revenue Officers-Assessment (ROs-A) in the Revenue District Offices (RDOs) who will be assigned in a concurrent capacity to be covered by a Revenue Special Order (RSO). The LN Task Force-N.O shall be supervised by the ODCIR-OG. Consolidated LNs covering taxable year 2007 shall be deployed to the LN Task Force. For LNs under Large Taxpayers, the LN shall be deployed to the respective investigating offices [ e.g. , Large Taxpayers Audit and Investigation Division (LTAID) I, LTAID-II and Large Taxpayers District Offices (LTDO)] under the Large Taxpayers Service. 5. If there is an on-going audit/investigation pursuant to an LA for taxable year 2007 in accordance with the applicable audit program ( i.e. , RMO Nos. 20-2008 and 21-2008 for taxable year 2007, etc.) issued prior to LN deployment, the LNs (TRS and/or RELIEF) shall be consolidated if there is a written request for consolidation of the same, subject to approval by DCIR-OG. The TPI reflected in the said LNs shall be properly utilized and the extent of its utilization shall be included in the report of investigation by the concerned RO. The ODCIR-OG in such cases may review the utilization of the third party information (TPI) which resulted to the discrepancy/ies reflected in the LNs. THEDcS 6. The audit report on collections/assessments based on the discrepancies reflected in the LN (TRS and/or RELIEF) together with the docket of the case shall be forwarded to AITEID after review by the Assessment Division/Large Taxpayers Service/DCIR-OG/CIR, as the case may be. 7. In the event the case with LA is already terminated before LN/s is/are issued, the Assessment Division (AD)/Reviewing Office-Large Taxpayer Service (RO-LTS) is required to ascertain whether the discrepancies reflected in the LNs were considered in the report of investigation. If not, the Assessment Division/Reviewing Office-LTS shall forward the LA docket together with the LN/s to ODCIR-OG thru the Office of the Regional Director (ORD) for non-large taxpayers; to CIR thru ACIR-LTS for large taxpayers for appropriate action. If the discrepancy was considered, the same shall be forwarded to the ORD/ACIR-LTS and recommend for the cancellation of the said LN/s to the ODCIR-OG/ACIR-LTS together with LA docket. ODCIR-OG/ACIR-LTS shall refer the same to AITEID for validation and/or cancellation. In all cases, the concerned investigating office shall forward the LN with LA tax dockets of audit (which contain LN discrepancy findings) together with BIR Form 0500 Series to the AD/Reviewing Office-LTS (RO-LTS) within ten (10) days after payment of deficiency tax(es) for approval thereof. The AD/RO_LTS shall conduct review and evaluation of dockets on action taken on the LNs with LA as to extent of LN discrepancy utilization/payment and forward the same thru ORD to the ODICR-OG/ACIR-LTS, as the case may be, Attention: AITEID for appropriate action. 8. The investigating offices shall prepare A Follow-up Letter (Annex "B") and serve the same to the taxpayer for which no response was received after fifteen (15) days from receipt of the LN. In the event a taxpayer who has been issued an LN refutes the discrepancy, he shall be given an opportunity to reconcile his records with those of the BIR within fifteen (15) days from receipt of the LN, to submit documentary proofs in support of his arguments. DSEaHT If after fifteen (15) days from receipt of Follow-up Letter, no response was received from the taxpayer, or he fails to submit the required documents after filing his protest within the fifteen (15)-day period after receipt of the LN, the investigating office shall endorse the docket and recommend to ORD (in case of RDOs); to ACIR-LTS (in case of LTAID-I, LTAID-II or LTDO); or to ODCIR-OG (in case of LN Task Force) or to the Office of the Commissioner of Internal Revenue (OCIR) in the absence of the former, the issuance of an issue-based LA to cover specifically "Income and Value Added Taxes Due to Discrepancy/ies Reflected in the LN". A Notice for Informal Conference together with the LA shall be served to the taxpayer. If taxpayer fails to settle his income and value added tax liabilities resulting from LN discrepancy/ies within fifteen (15) days from receipt of Notice for Informal Conference and LA, the investigating office shall endorse the docket to concerned ORD/ACIR-LTS/ODCIR-OG/OCIR for the issuance of the Preliminary Assessment Notice (PAN)/Final Assessment Notice (FAN) in accordance with the provisions of Revenue Regulations (RR) No. 12-99. 9. LNs which remain unserved due to failure to locate the taxpayers after exhausting all means ( e.g. , MERALCO, telephone directories, barangay certificates, etc.) shall be served by the assigned RO to the Barangay Captain or his authorized representative where the taxpayer is located. In case the Barangay Captain or his authorized representative shall refuse to receive the LN, the LN shall be sent thru registered mail with return receipt to the sender, and the assigned RO shall prepare a report on constructive receipt. If after fifteen (15) days from constructive receipt of the LN, no response was received from the taxpayer, the LN docket shall be endorsed by the RDO/Chief, LTAID-I, LTAID-II, LTDO/Head, LN Task Force to ORD/ACIR-LTS/ODCIR-OG/OCIR for issuance of an issue-based LA to cover specifically "Income and Value Added Taxes Due to Discrepancy/ies Reflected in the LN". A Notice for Informal Conference together with the LA shall be constructively served to the taxpayer. If taxpayer fails to settle his income and value added tax liabilities resulting from LN discrepancy/ies within fifteen (15) days from constructive receipt of Notice for Informal Conference and LA, the investigating office shall endorse the docket to ORD/ACIR-LTS/ODCIR-OG/OCIR for the issuance of the Preliminary Assessment Notice (PAN)/Final Assessment Notice (FAN) in accordance with the provisions of RR No. 12-99 and the same shall likewise be endorsed to ORD (in case of RDOs); to ACIR-LTS (in case of LTAID-I, LTAID-II or LTDO); or to ODCIR-OG (in case of LN Task Force) Attention: AITEID for inclusion in the suspense file. SCcHIE 10. For taxpayer issued with an LN who transferred to another investigating office, the RDO/LTAID-I,/LTAID-II/LTDO/LN Task Force shall forward the LN together with the DWAPR/TCS/DIRIM and documentary proofs, and shall forward the same to ODCIR-OG Attention: AITEID for validation/cancellation. AITEID shall refer the same to Systems Operations Division (SOD) for regeneration. 11. The deficiency income, value added and percentage taxes shall be computed using the formulas prescribed in the Computation Sheets hereto attached. (All appropriate Annexes under "C") 12. In case discrepancy is due to the fault of the taxpayer submitting incorrect Summary List of Purchases (SLP) in the case of purchases, the said discrepancy shall be disallowed as purchases and the corresponding input tax shall not be allowed to the purchaser. In the case of incorrect information on Summary List of Sales (SLS), the seller shall be penalized for failure to provide the correct information. 13. In case taxpayer files a protest against PAN/FAN and requests for reinvestigation/reconsideration, the ORD/ACIR-LTS/ODCIR-OG/CIR shall evaluate the protest in accordance with the provisions of RR No. 12-99. a. If the protest is valid, refer the case to the concerned investigating office for appropriate action on the request for reinvestigation. a.1 The RDO/LTAID-I/LTAID-II/LTDO/LN Task Force shall act on the protest based on pertinent revenue issuances. a.2 The RDO/Chief-LTAID-I/LTAID-II/LTDO/LNTF Head shall conduct review and evaluation of dockets on actions taken on the LNs as to the extent of LN discrepancy utilization/payment. DHIaTS a.3 After review of the Revenue District Officer/Chief, LTAID-I/LTAID-II/LTDO/Head, LN Task Force, the docket shall be forwarded not later than ten (10) days after payment or action taken on the protest to ORD/ACIR-LTS/ODCIR-OG/CIR for approval thereof. b. If the protest, however, is not valid, taxpayer shall be informed in writing by the concerned investigating office that his request for investigation has been denied and the case shall be referred to the appropriate BIR office to effect collection of the deficiency tax(es). 14. Taxpayer shall be entitled to the abatement of interests and penalties provided he pays the deficiency tax(es) within thirty (30) days from receipt of the LN covering taxable year 2007 only. Any payment of tax liabilities beyond the 30-day period shall be assessed the corresponding interests and penalties. 15. An "Agreement Form" shall be executed by the taxpayer or his duly authorized representative indicating therein the amounts and dates when the deficiency tax(es) shall be paid. 16. Installment payment shall be allowed in cases where the tax liabilities exceeds five hundred thousand pesos (P500,000.00). In this case, a written request for installment payment of the basic tax due plus increments using the Application for Installment Payment (Annex "D") has to be accomplished. The interest corresponding to the basic tax due per installment shall be computed up to the date of payment as shown in the application. Aforesaid request may be granted by the Head, LN Task Force/ACIR-LTS in accordance with the following: a. If the amount payable exceeds five hundred thousand pesos (P500,000.00) but not more than three million pesos (P3.0M), payment may be done in two (2) equal monthly installments; or b. If the amount payable exceeds three million pesos (P3.0M), payment may be done in three (3) equal monthly installments. Any request for deviation from the above-prescribed payment scheme but in no case exceeds six (6) monthly installments shall be subject to the recommendation of the Head, LN Task Force/ACIR-LTS and approval of higher authorities as follows: a. Over P500,000.00 ODCIR-OG up to P10.0M (for non-large taxpayers)/CIR (for large taxpayers) b. Over P10.0M CIR In case of default of any installment payment, the remaining balance shall become due and demandable immediately without prior notice to taxpayer. All applications shall be signed by the Recommending Officer and/or Head, LN Task Force/ACIR-LTS, as the case may be. The LN Task Force/LTS shall keep track of payments of taxpayers with requests for installment payments and indicate the same in the appropriate columns provided in the Monthly Collection and Status Report on Letter Notices for TY _____ (Annex "E") for submission to ODCIR-OG/ACIR-LTS, Attention: AITEID within ten (10) days following the close of each month. 17. The settlement and payment of the deficiency tax(es) under an LN or issue based LA by a taxpayer shall not preclude the Bureau from issuing an LA/TVN covering the comprehensive audit/investigation of his tax liabilities, if warranted. However, any payment of deficiency tax(es) shall be credited against any assessment that may be made by the investigating office pursuant to an LA/TVN provided the discrepancies disclosed by said audit/investigation are of the same nature as the discrepancies reflected in the LN. 18. In all cases, the investigating office shall forward the LN dockets (which contain LN discrepancy findings) to the ACIR-LTS/ODCIR-OG/CIR within ten (10) days after payment of the deficiency tax(es) for approval thereof. The ACIR-LTS/ODCIR-OG shall conduct review and evaluation of dockets on actions taken on the LNs as to the extent of LN discrepancy utilization/payment. DACcIH 19. Revenue Memorandum Circular No. 40-2003 provides that LNs issued to taxpayers can be considered notice of audit/investigation insofar as the amendment of any return covering the period referred to in the LN. Accordingly, a taxpayer is disqualified from amending his return covering the period referred to in the LN upon issuance of the same. Furthermore, CTA Case No. 7093 dated February 22, 2006 states that "LNs issued against a taxpayer in connection with the information of underdeclaration of sales and purchases gathered through Third Party Information Program may be considered as a "notice of audit or investigation " in the absence of evident error or clear abuse of discretion." 20. The guidelines and procedures in handling LNs as set forth under RMO on TRS ( i.e. , RMO No. 28-2007, as amended by RMO No. 4-2008); RMO on "RELIEF"/SLSP System (RMO No. 30-2003, as amended by RMO Nos. 42-2003, 24-2004, 32-2005 and 21-2006) and RMO on TPM-BOC Data Program ( i.e. , RMO No. 34-2004, as amended by RMO Nos. 46-2004, 32-2005, 21-2006, 32-2007 and 36-2008), shall continue to remain in force for LNs issued for TY 2006 and prior years. 21. All activities/accomplishments of the LN Task Force/investigating offices relative to this Order shall be monitored online thru the IDP by the ODCIR-OG/ACIR-LTS/ORD through AITEID under the e-Correspondence Monitoring System (eCMS)/Letter Notice Monitoring System (LNMS) based on access rights and privileges granted to those offices. IV. GUIDELINES AND PROCEDURES A. Systems Operations Division (SOD/Information System Developments Service (ISDS) 1. Activate the processes needed for Consolidated LN (TRS/RELIEF/BOC) generation covering calendar 2007 based on the discrepancy threshold set by the WTD/AITEID as approved by the CIR. 2. Inform, in writing or via e-mail, the AITEID on the generation, via the IDP, of the new batch of consolidated (TRS/SLSP/BOC) LN packages consisting of the following: a. List of taxpayers issued LNs sorted by Revenue Region (RR)/RDO/or Investigating Offices under Large Taxpayers Service (LTS); b. System-generated LNs; c. DWAPR; d. DTCS; e. DIRIM. 3. Provide system access rights and privileges to AITEID for TRS-LN information. 4. After the new Consolidated LN packages are validated by AITEID, inform, in writing or via e-mail, Head, LN Task Force, Assistant Commissioner-Large Taxpayer Service (ACIR-LTS) and the concerned Regional Director (RD) on the deployment via the IDP of the new batch of Consolidated LN packages. HTAIcD 5. Publish the new Consolidated LN packages to the LN Task Force/LTS/RD for taxable year 2007 channel in the IDP or print the new Consolidated LN packages if investigating offices channel in the IDP is not available and forward the same to AITIED for deployment to investigating offices. 6. Receive from AITEID the List of Approved LNs for cancellation/closure by ODCIR-OG/OACIR-LTS/ORD and reflect the same to the LNMS. 7. Regenerate Consolidated LNs together with the DWAPR/DTCS/DIRIM of taxpayers who transferred registration. B. Audit Information Tax Exemption and Incentives Division (AITEID) 1. Spell out the parameters for the issuance and deployment of 2007 LNs based on the policy direction of top management for approval of the CIR. 2. Set the threshold on LN discrepancies before the activation of the processes needed for generation. 3. Acknowledge, in writing or via e-mail, receipt from the SOD of information on the generation via the IDP of the new batch of LN packages. 4. Validate the new consolidated LN packages before deployment of the same via the IDP. 5. Direct the concerned investigating offices to download and print the new LN packages for service of the LNs, together with the DTCS/DIRIM/DWAPR to the concerned taxpayers. SDIACc If the IDP is not available, receive the new LN packages from SOD and effect deployment to the concerned investigating offices. 6. Receive from the concerned Reviewing Office thru DCIR-OG/ACIR-LTS/ORD the following LNs with LA tax dockets for validation: a. For cancellation of LNs, if the discrepancy was considered in the audit case of taxpayers with issued LNs; b. For closure of LNs on paid LAs, if the discrepancy was considered in the audit case of taxpayers with issued LNs; and HDTISa c. LNs with Integrated Tax System (ITS) error (due to erroneous encoding, timing difference, etc.) 7. Receive from the investigating office thru ODCIR-OG/ACIR-LTS/ORD the LN case recommended for cancellation/closure to LNMS for evaluation and validation, and forward the same to ODCIR-OG/OCIR for approval thereof. Forward to SOD/ISDS the above mentioned LNs (Item No. 6 and 7) for online updates on the status of all LNs via the IDP to LNMS after the evaluation and approval of the ODCIR-OG/OCIR. 8. Receive from concerned investigating offices copies of Annex "E". 9. Monitor compliance by the concerned investigating offices, in providing online real-time updates on LN status and collections relative to LNs downloaded by the said offices. 9. n Perform overall monitoring, via the IDP, of LNs issued based on real-time online updates provided by the LN Task Force/Investigation Office and other concerned offices granted access rights and privileges. 10. Provide top management with consolidated reports on LN status and collections as may be required. C. Withholding Tax Division 1. Spell out the parameters for the issuance and deployment of 2007 LNs based on the policy direction of top management for approval of the CIR. 2. Set the threshold on LN discrepancies before the activation of the processes needed for generation. 3. Forward LN information for validation to AITEID. D. Investigating Offices (LN Task Force/LTAID I & II/LTDO/RDO) 1. Acknowledge, in writing or via e-mail, receipt of directive from the ODCIR-OG/ACIR-LTS/RD for downloading and printing of the new Consolidated LN packages from the IDP. If investigating office channel in the IDP is not available, receive from AITEID print of the new Consolidated LN (TRS/RELIEF/BOC) packages for deployment. 2. Download from the IDP the new consolidated LN packages consisting of the following: a. List of taxpayers issued LNs sorted by RR/RDO; b. System-generated LNs; c. DWAPR; d. DTCS; and e. DIRIM. 3. Print the contents of the consolidated LN packages within three (3) days from downloading of the same. If the IDP channel is not available, receive from AITEID print of the new Consolidated LN packages for deployment. 4. The investigating office shall assign the consolidated LNs to the ROs for appropriate action, e.g. , review, evaluate and validate the discrepancies, and serve them personally to the concerned taxpayers or though registered mail with Registered Return Card, together with the DWAPR/DTCS/DIRIM. HICEca 5. Maintain a separate record of all consolidated LNs assigned to ROs for accountability. Said record shall contain the following information: a. LN Number (system-assigned control number); b. Name of Taxpayer issued LN; c. TIN of taxpayer; d. Period Covered; e. Name of RO assigned to handle the LN; f. Date of Assignment; g. Remarks. 6. Refer to AITEID the LNs with ITS error and transferred (with ITS updates and print out on REG on ITS) taxpayers for review, validation and regeneration. CaTcSA 7. Forward to AITEID the LNs recommended for cancellation/closure to LNMS for review and evaluation. 8. For LN which remain unserved due to failure to locate the taxpayers after exhausting all means ( e.g. , MERALCO, telephone directories, barangay certification, etc.) shall be served by the assigned RO to the Barangay Captain or his authorized representative where the taxpayer is located. In case the Barangay Captain or his authorized representative shall refuse to receive the consolidated LN, the consolidated LN shall be sent thru registered mail with return receipt to the sender, and the assigned RO shall prepare a report on constructive receipt for issuance of an issue-based LA to cover specifically "Income and Value Added Taxes Due to Discrepancy/ies Reflected in the LN". 9. Issue a Follow-up Letter (Annex "B") if the taxpayer fails to respond within fifteen (15) days from receipt of LN. 10. Act on all protests by the taxpayers within the fifteen (15)-day period after receipt of the LN. THCASc 11 . If after fifteen (15) days from receipt of Follow-up Letter, no response was received from the taxpayer or he fails to submit the required documents after filing his protest within the fifteen (15)-day period after receipt of the LN, prepare issue-based LA to cover specifically "Income and Value Added Taxes Due to Discrepancy Reflected in the LN" for signature of OACIR-LTS/ORD/DCIR-OG/CIR. Cause the service of Notice for Informal Conference together with approved LA to the taxpayer. If taxpayer fails to settle his income and value added tax liabilities resulting from consolidated LN discrepancy within fifteen (15) days from receipt of Notice for Informal Conference /LA, endorse the docket to ORD/ACIR-LTS/DCIR-OG/CIR for issuance of PAN or FAN, as the case may be, in accordance with RR No. 12-99. 12. If the taxpayer interposes no objection to the discrepancies in the consolidated LN and agrees to pay the required taxes within thirty (30) days from date of receipt thereof, collect the basic income and value added taxes without interest and penalties using the formulas prescribed in Annexes "C", "C-1", "C-2", "C-3" or "C-4" (Computation Sheets), as the case may be. Require him to execute an "Agreement Form". If payment will go beyond the 30-day period, collect the total amount due with the corresponding interests and penalties. The payment shall be made using BIR Form No. 0611-A. 13. Receive from taxpayer who refutes the accuracy of the figures in the consolidated LN (due to erroneous encoding or due to timing differences) documentary proofs, reconciliation schedules, etc. in support of his arguments within the thirty (30)-day period from receipt of the LN. Evaluate, review and compute the deficiency income and value added taxes based on the corrected/adjusted taxable base plus increments. If there are no documentary proofs or there was incomplete documentary requirements submitted by the taxpayer within the prescribed period in support of his protest, follow the procedures under Number 12 of this Item. 14. Receive from taxpayer Application for Installment Payment (Annex "D"). Evaluate, review and approve the same if it is in accordance with the conditions under Item III (16) hereof. However, if there is a deviation from the payment scheme under the same paragraph, prepare recommendation for approval/disapproval of the same by the ODCIR-OG/OCIR, if the amount payable is over five hundred thousand pesos (P500,000.00) up to ten million pesos (P10.0M), or by the CIR if the amount payable is over ten million pesos (P10.0M). The payment shall be made using BIR Form No. 0611-A. SCETHa 15. Receive dockets from the RD/ACIR-LTS/ODCIR-OG/OCIR to act on protest by taxpayers requesting reinvestigation relative to the LN cases already issued PAN or FAN, as the case may be. 16. Forward to the RD/ACIR-LTS/ODCIR-OG/CIR tax dockets within ten (10) days after payment of the deficiency tax(es) for approval thereof. 17. Prepare and submit Monthly Collection and Status Report on Letter Notices for TRS/RELIEF/BOC TY ______ (Annex "E") to ORD/OACIR-LTS/ODCIR-OG, Attention: AITEID, as the case may be within ten (10) days following the close of each month. 18. Monitor and keep track of payments of taxpayers with approved requests for installment payments. In case of default by taxpayer of any installment payment, collect the balance immediately plus the corresponding interests and penalties without prior notice to taxpayer. 19. Follow, wherever applicable, the procedures prescribed under RMO Nos. 30-2003, 42-2003, 24-2004 and 34-2004, as amended by RMO Nos. 46-2004, 32-2005, 21-2006, 28-2007, 32-2007 and 36-2008 insofar as the verification of the actions on LN discrepancy are concerned. 20. Provide real-time online updates on the status of all consolidated LNs via the IDP based on access rights and privileges granted to the concerned investigating office. 21. Monitor and evaluate the performance of ROs relative to the LNs assigned to them based on set key performance indicator. D. n Office of the Regional Director 1. Receive from the concerned RDO thru AD the consolidated LN dockets with reports on recommendations of applications on requests for installment payments and approve/disapprove the same if amount payable is less than five hundred thousand pesos (P500,000), or in accordance with the conditions under Item III (16) hereof. TIaCAc 2. Approve and sign PAN/FAN forwarded by investigating offices thru AD in accordance with the provisions of RR No. 12-99. 3. Receive from AD tax dockets for final review, evaluation and approval thereof. 4. Approve and sign recommended LN with LA tax dockets (photocopy of the entire docket) for cancellation/closure with ITS error by the RDO thru AD and forward the same to ODCIR-OG, Attention: AITEID for appropriate action. 5. Receive from the concerned RDO the Monthly Collection and Status Report on Letter Notices for TY ______ (Annex "E") within ten (10) days following the close of each month. 6. Monitor compliance by the concerned offices in providing online real time updates on consolidated LN status. E. Large Taxpayers Service 1. Receive from the concerned investigating office thru RO-LTS the consolidated LN dockets with reports on recommendations of applications on requests for installment payments and approve/disapprove the same if amount payable is less than five hundred thousand pesos (P500,000), or in accordance with the conditions under Item III (16) hereof. 2. Approve and sign PAN/FAN forwarded by investigating offices thru RO-LTS in accordance with the provisions of RR No. 12-99. 3. Receive from RO-LTS tax dockets for final review, evaluation, recommendation and approval thereof. ASEIDH 4. Approve and sign recommended LN with LA tax dockets (photo copy of the entire docket) for cancellation/closure/with ITS error by the investigating office thru RO-LTS and forward the same to ODCIR-OG, Attention WTD/AITEID for appropriate action. 5. Receive from the concerned investigating offices the Monthly Collection and Status Report on Letter Notices for TY _____ (Annex "E") within ten (10) days following the close of each month. 6. Monitor compliance by the concerned offices in providing online real-time updates on consolidated LN status. F. Office of the Deputy Commissioner Operations Group 1. Receive and evaluate the report of investigation/verification on 2007 consolidated LN discrepancy/ies, and review as the case may be the utilization of the third party information (TPI) which resulted to the discrepancy/ies reflected in the LNs deployed to offices other than LN Task Force. 2. Supervise the LN Task Force who shall handle the consolidated LNs for the taxable year 2007 in the National Office (N.O). 3. Require investigating office to submit report on collections/assessments based on the discrepancies reflected in the LN (TRS and/or RELIEF/BOC). 4. Receive from investigating offices the consolidated LN dockets with reports on recommendations of applications on request for installment payment/s and approve/disapprove the same. 5. Approve and sign LA to cover specifically Income and Value Added Taxes Due to Discrepancy Reflected in the consolidated LN as recommended by the LN Task Force. HESIcT 6. Approve and sign PAN/FAN forwarded by the LN Task force in accordance with the provision of RR No. 12-99. 7. Monitor compliance by the concerned offices in providing online real-time updates on consolidated LN status. F. n Assessment Division/Reviewing Office-LTS (Reviewing Offices) 1. Receive from investigation offices the dockets containing the consolidated LN with DWAPR/DTCS/DIRIM and follow the prescribed procedures in the review of dockets; and 2. Ascertain whether the consolidated LN discrepancy/ies was/were considered in the report of investigation. If the discrepancy/ies was/were considered forward the consolidated LN thru ORD to the ODCIR-OG/OCIR for final review as the case may be. If the discrepancy was not considered, transmit the docket to the concerned investigating office for appropriate action. V. REPEALING CLAUSE All other issuances and/or portions thereof inconsistent herewith are hereby repealed, modified or amended accordingly. VI. EFFECTIVITY This Order shall take effect immediately. (SGD.) SIXTO S. ESQUIVIAS IV Commissioner of Internal Revenue ANNEX A Quezon City RELIEF/BOC LN No. ________ TIN ______________________ Date ______________________ ______________________ ______________________ ______________________ Sir/Madam : A computerized matching conducted by the Bureau on information/data provided by third party sources against your declarations per VAT returns disclosed the following discrepancy(ies) for the calendar year ended __________. A. SALES Per Summary List of Purchases submitted by your customers Sales per Tax Returns filed Under-declaration on Sales Percentage (%) of Discrepancy B. LOCAL PURCHASES Per Summary List of Sales submitted by your suppliers Domestic Purchases per Tax Returns filed Under-declaration of Local Purchases Percentage (%) of Discrepancy C. IMPORTATIONS VAT Amount per BOC Data Input Tax on Importations per VAT Returns filed Discrepancy Under-declaration of Imported Purchases (Discrepancy divided by 12%) Percentage (%) of Discrepancy In line with the Bureau's policy of affording taxpayers the opportunity to reconcile the above discrepancy(ies), you are hereby invited to this Bureau _________________ (address of LN Task Force) on _________________ (should not be more than fifteen (15) days from receipt of the LN) from 8:00 a.m. to 12:00 noon, to present any documentary evidence in connection therewith. cDHAES Should you agree with the findings of discrepancy(ies) stated above, you are hereby directed to pay the resulting deficiency tax(es) using BIR Form No. 0611-A. The computation of the deficiency tax shall be based on the formula prescribed in BIR Form ____________ (Computation Sheet) . However, if you opt to settle and pay your tax liabilities within thirty (30) days from receipt hereof, you shall be entitled to the abatement of the corresponding interest and penalties. Settlement and payment of your tax liability beyond the said period shall be considered as a waiver of such entitlement. Any payment of deficiency tax(es) under this LN shall be credited against any assessment that may be made by the appropriate BIR Office pursuant to a Letter of Authority/Tax Verification Notice provided the discrepancies disclosed by said audit are of the same nature as the above discrepancy. If, however, you have already paid the taxes due pursuant to a Letter of Authority/Tax Verification Notice before the receipt of this letter, submit proof of such payment to the undersigned, Attention: ________________ (Head of LN Task Force), at the soonest time possible. Furthermore, upon payment of the taxes resulting from the aforesaid under-declaration(s)/discrepancy(ies), submit a photocopy of the validated BIR Form No. 0611-A to the same office. Should you fail to make a correct disclosure of sales/purchases and pay the corresponding taxes due thereon within the deadline set above, we will be constrained to fully enforce the provisions of the Tax Code which, among others, provides that under-declaration of sales, receipts and income is a ground for administrative, civil and/or criminal action. Furthermore, Sec. 115 of the Tax Code empowers the Commissioner or his authorized representative to suspend business operations and temporarily close the business establishment of any VAT-registered taxpayer found understating its sales or receipts by thirty (30%) or more of its corrected taxable sales/receipts for the taxable period. You may call the SIR Hotlines at ___________________ (telephone number of the LN Task Force) for further information. We trust that this matter will merit your preferential attention. Very truly yours, SIXTO S. ESQUIVIAS IV Commissioner of Internal Revenue Received by: ______________________ Signature over Printed Name Date: ______________________ Refer to: Revenue Officer ________________ LN Task Force ANNEX A-1 Quezon City LN TRS No. _________ TIN: ________________ Date: _______________ ______________________ ______________________ ______________________ Sir/Madam : A computerized matching conducted by the Bureau on information/data provided by Withholding Agents/Payors and Payees/Income Recipients against your declarations per INCOME/VAT/Percentage/Withholding Tax returns disclosed the following discrepancy/ies for the calendar/fiscal year ended ___________. cIHSTC AGENT-TAXPAYER RECONCILIATION A. Gross Sales/Income Payment per Alphalists of payors to one & the same payee P__________ VAT PERCENTAGE TAX INCOME TAX B. Gross sales/Income/receipts _____ _________________ ___________ per payee's returns filed C. Discrepancy on gross sales/ revenues/receipts (A-B) P_____ P________________ P__________ D. Percentage (%) of discrepancy on sales/revenues/receipts (C/A) _____ _________________ ___________ E. Tax withheld per alphalists of all payors _____ _________________ ___________ F. Tax withheld claimed per returns filed by the payee _____ _________________ ___________ G. Discrepancy on Taxes Withheld claimed by payee (F-E.) _____ _________________ ___________ In line with the Bureau's policy of affording taxpayer the opportunity to reconcile the above discrepancy(ies), you are hereby invited to this Bureau ______________________ (Address of LN Task Force) on _________________ (should not be more than fifteen day (15) from receipt of the LN) from 8:00 a.m. to 12:00 noon, to present any documentary evidence in connection therewith. Should you agree with the findings of discrepancy(ies) stated above, you are hereby directed to pay the resulting deficiency tax(es) using BIR Form 0611-A. The computation of the deficiency tax shall be based on the formula prescribed in BIR Form _______________ (Computation sheet) . However, if you opt to settle and pay your tax liabilities within thirty (30) days from receipt hereof, you shall be entitled to the abatement of the corresponding interest and penalties. Settlement and payment of your tax liability beyond the said period shall be considered as a waiver of such entitlement. Any payment of deficiency tax(es) under this LN shall be credited against any assessment that may be made by the appropriate BIR Office pursuant to a notice of investigation provided the discrepancies disclosed by said audit are of the same nature as the above discrepancy. HTCIcE If, however, you have already paid the taxes due before the receipt of this letter, submit proof of such payment to the undersigned, Attention: _______________ (Head, LN Task Force) , at the soonest time possible. Furthermore, upon payment of the taxes resulting from the aforesaid under-declarations)/discrepancy(ies), submit a photocopy of the Validated BIR Form 0611-A to the same office. Should you fail to make a correct disclosure of sales/revenues/receipts/purchases/expenses and pay the corresponding taxes due thereon within the deadline set above, we will be constrained to fully enforce the provisions of the Tax Code which, among others, provide that under-declaration of sales, receipts and income, as well as violations on withholding tax rules and regulations, are grounds for administrative, civil and/or criminal action. Furthermore, Sec. 115 of the Tax Code empowers the Commissioner or his authorized representative to suspend business operations and temporarily close the business of any VAT-registered taxpayer found understating its sales/income or receipts by thirty (30%) or more of its corrected taxable sales/income or receipts for the taxable period. You may call the BIR Hotlines at ___________________ (telephone number of the LN Task Force) for further information. We trust that this matter will merit your preferential attention. Very truly yours, SIXTO S. ESQUIVIAS IV Commissioner of Internal Revenue Received by: ______________________ Signature over Printed Name Date: ______________________ Refer to: Revenue Officer: ________________ LN Task Force ANNEX B FOLLOW-UP LETTER Date: _______________ _____________________ _____________________ _____________________ TIN: ________________ Dear Sir/Madam, Subject : Letter Notice RELIEF/BOC No. ____________ &/or Letter Notice TRS No. ____________ We refer to the above Letter Notice/s informing you of the discrepancy resulting from the Reconciliation of Listing for Enforcement (RELIEF) and Third Party Matching-Bureau of Customs (TPM-BOC) Data Program and/or Tax Reconciliation System (TRS) as declared in your tax returns filed for CY 2007. cEHITA To date, you have not taken any positive action to refute the validity of our findings and/or present any documentary evidence to reconcile the variances so indicated therein. We made it clear to you that your failure to respond within fifteen (15) days from receipt thereof will consider you in default and, as a matter of course, the Bureau shall conduct an appropriate review of the case and cause the issuance of Notice for Informal Conference/Letter of Authority, Preliminary Assessment Notice (PAN) or Final Assessment Notice (FAN), as the case may be. Please consider this letter as reminder and final notice to you that there has been a previous finding upon which we will base our forthcoming review/assessment. Henceforth, any further inaction on your part is deemed as an admission to the validity and accuracy of the discrepancy indicated in the subject LN/s. You are hereby accorded the last chance to settle at the soonest time possible the basic taxes (VAT and Income Tax) without the corresponding interests and penalties accruing on the aforementioned LN on the condition that the herein payment, using BIR Form 0611A, shall be paid within thirty (30) days from receipt of subject LN/s. The same shall be considered an advance deficiency tax payment and therefore without prejudice to any additional assessment that might be made by the appropriate BIR Office on subsequent issuance of a notice of investigation, in case said investigation are of the same nature as the discrepancies reflected in the LN/s. If, however, payment has been made before the receipt of this letter, please submit proof of such payment to the undersigned, together with the computation on how the amount paid was arrived at. Your prompt action is hereby enjoined. Very truly yours, ________________________ Head, LN Task Force Received by: _______________________________________ Signature of Taxpayer/Authorized Representative/ Tax Agent over Printed Name _______________________________________ Title/Position of Signatory _______________________________________ Contact # _______________________________________ Date Received ANNEX C COMPUTATION SHEET ANNEX C-1 COMPUTATION SHEET ANNEX C-2 COMPUTATION SHEET ANNEX C-3 COMPUTATION SHEET ANNEX C-4 COMPUTATION SHEET ANNEX D Republika ng Pilipinas Kagawaran ng Pananalapi Kawanihan ng Rentas Internas APPLICATION FOR INSTALLMENT PAYMENT Date _________________ The Honorable Commissioner Bureau of Internal Revenue Quezon City Sir/Madam: I/We acknowledge receipt of your LN-RELIEF/BOC No. _________ dated _____________ and/or LN-TRS No. _________ dated ______________ informing me/us of the discrepancy in our sales/purchases (local and/or imported) for the TY _____, amounting to the following: a. Sales ________________ b. Local Purchases ________________ c. Importation Purchases ________________ d. Others ________________ Total ________________ As a result of the above discrepancy, our computed tax liabilities are as follows: VAT Income Tax Basic P_____________ P_____________ Surcharge _____________ _____________ Interest _____________ _____________ Compromise _____________ _____________ Total P_____________ P_____________ I/We hereby request for installment payment of the aforesaid tax liabilities under the following schedule: Installment Amount Due Date 1st Installment P_____________ _____________ 2nd Installment _____________ _____________ 3rd Installment _____________ _____________ 4th Installment _____________ _____________ 5th Installment _____________ _____________ 6th Installment _____________ _____________ Total P_____________ _____________ I/We are made to understand that failure to pay any installment on or before the date fixed for its payment, the remaining balance shall become due and demandable immediately. __________________________ ___________________ ____________________ SIGNATURE OVER PRINTED Title/Position TIN of Taxpayer/ NAME OF TP/TP Signatory Authorized Representative/ AUTHORIZED Tax Agent REPRESENTATIVE/ TAX AGENT Contact No/s. _________ Email Address: ________ To be filled-up by BIR Received by: _________________ Date Received: _________________ Evaluated by: _________________ Receiving Office: _________________ [ ] within two (2) - three (3) months [ ] more than three (3) months Recommending Approval: Recommending Approval: ________________________ ______________________________ LN Task Force Member Head, LN Task Force/ACIR-LTS Approved/Disapproved: [ ] Approved for _________ installments [ ] Disapproved: Reason for Disapproval ___________ ______________________________ ______________________________ Head, LN Task Force/ DCIR-Operations Group/ ACIR-LTS COMMISSIONER Date: ____________________ Date: ____________________ Note: To be approved by: 1) DCIR-OG if amount payable is over P500,000 up to P10.0M; or 2) CIR if amount payable is over P10.0 M. ANNEX E Monthly Status Report on Consolidated SLSP/BOC and/or TRS Letter Notices 2007 n Note from the Publisher: Copied verbatim from the official copy. Duplication of Item No. 9. n Note from the Publisher: Copied verbatim from the official copy. Duplication of letter D. n Note from the Publisher: Duplication of letter F.