Prescribing the Audit/Investigation of Individual and Non-Individual Taxpayers by the Regional Assessment Divisions

July 6, 2018 REVENUE MEMORANDUM ORDER NO. 032-18 SUBJECT : Prescribing the Audit/Investigation of Individual and Non-Individual Taxpayers by the Regional Assessment Divisions TO : All Regional Directors, Revenue District Officers, Chiefs of the Assessment Divisions of Regional Offices, Other Revenue Officers and Others Concerned I. OBJECTIVE This Order is issued to improve the voluntary compliance of individual and non-individual taxpayers belonging to the small category and to generate additional revenues from these taxpayers through an audit to be conducted by Revenue Officers (ROs) of the Office Audit Section (OAS) of the Assessment Divisions in the Regional Offices. II. COVERAGE Electronic Letters of Authority (eLAs) shall be issued to cover the audit/investigation of taxpayers for tax returns for taxable year 2017 under the jurisdiction of the Regional Office with gross sales/receipts as follows: Revenue Region Nos. Gross Sales/Receipts 5, 6, 7 and 8 P10,000,000.00 Million Pesos and below 1, 4, 9A, 9B, 11, 12, 13, 16 and 19 P5,000,000.00 Million Pesos and below 2, 3, 10, 14, 15, 17 and 18 P2,000,000.00 Million Pesos and below One (1) eLA shall be issued for each taxable year to include all internal revenue tax liabilities of the taxpayer, except when a specific tax type had been previously examined ( e.g. , audit of VAT under the VAT Audit Program and claim for issuance of VAT refund/Tax Credit Certificate). Under such instance, the phrase "All internal revenue tax liabilities, except VAT" shall be indicated in the eLA. Exclusion: Claims for issuance of tax refund/Tax Credit Certificate (TCC) of taxpayers III. AUDIT POLICIES AND GUIDELINES 1. The audit of cases issued under this Order shall be conducted without field investigation by ROs (Assessment) of the OAS in the Assessment Division of the Regional Offices. 2. The Chief, Assessment Division shall retrieve copies of manually filed and electronically submitted tax returns through eFPS or eBIR Forms for taxable year 2017 from the Document Processing Division and Revenue Data Center, respectively. From the said tax returns, the Chief, Assessment Division shall select tax returns for office audit subject to the prescribed thresholds in Item No. II hereof. 3. The Electronic Letter of Authority Monitoring System (eLAMS) shall be used in the request, approval and issuance of eLAs, as well as in reporting the accomplishments on eLAs issued. However, to ensure the close monitoring of accomplishments of cases under this Order, the Chief, Assessment Division shall also submit the reports prescribed under Item IV. 4. The workload of each RO shall not exceed fifteen (15) cases at any one time, subject to replenishment after the submission of the report of investigation/closure of each case. 5. The report of investigation shall be submitted to the Review and Evaluation Section in the Assessment Division within ninety days (90) days from the issuance of the eLA. 6. The eLA, together with the Notice for the Presentation/Submission of Documents/Records with checklist of requirements may be delivered personally to the taxpayer by a BIR employee duly authorized for the purpose, who may be the RO assigned to the case or another employee with a written authorization, or delivered through a courier company. The concerned taxpayer shall be given ten (10) days from receipt of the Notice to present/submit the required documents and records. In case the taxpayer does not comply with the Notice, a reminder letter shall be sent immediately after the lapse of the 10-day period. In case the requested documents/records are not presented/submitted within five (5) days from receipt of the reminder letter, a memorandum report shall be prepared recommending the issuance of Subpoena Duces Tecum (SDT). No further extension for the presentation/submission of documents and records shall be allowed. 7. In case the eLA/Notice/reminder letter is sent through a courier company, the envelope containing the notice must be properly addressed with the following statement printed/stamped on it: Return to Sender: [ ] Moved Out [ ] Forwarding Address: [ ] Unknown _____________________ [ ] Refused to accept _____________________ [ ] No One to Receive [ ] Others: ______________ [ ] Insufficient Address _____________________ If undelivered within ten (10) days, please return to ( indicate specific BIR office and address ). 8. All existing policies and procedures as regards the issuance of assessment notices shall be strictly observed. IV. REPORTING REQUIREMENTS The Chief, Assessment Division shall submit to the Assistant Commissioner Assessment Service the following reports not later than the 10th day of each month: Name of Report Annex 1. eLAs Issued for the Office Audit/Investigation of Taxpayers A 2. Accomplishments on the Office Audit/Investigation of Taxpayers B 3. Report on eLAs Issued that were Cancelled Prior to the Service of eLA/Transferred to Other Office/Cannot Be Located Taxpayers C 4. Office Audit eLAs Referred to the Legal Division D 5. Report on Final/Executory Collectible and Protested/Disputed Assessments Issued to Taxpayers Posted in Form 40 E V. REPEALING CLAUSE All other issuances inconsistent herewith are hereby modified or repealed accordingly. VI. EFFECTIVITY This Order shall take effect immediately upon approval. (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue ANNEX A Revenue Region No. _____, _________________ Electronic Letters of Authority Issued for the Office Audit/Investigation of Taxpayers For the Month of ________________ A. Original eLA Issued RDO No. * eLA Serial No. (SN) LOA No. Date Issued Name of Taxpayer TIN PSIC/PSOC Taxable Period Gross Sales/ Receipts Name of Revenue Office (RO)/ Group Supervisor (GS) Assigned RO GS * RDO having jurisdiction over the taxpayer. B. Replacement eLAs due to reassignment of cases to another RO (pursuant to Operations Memorandum No. 2018-04-03) Previous eLA Issued New eLA Issued Name of Taxpayer TIN Reason for Reassignment* eLA SN Date Issued Name of RO Name of GS eLA SN Date Issued Name of RO Name of GS * e.g. , Transfer to another office/RDO, retirement or resignation of the original RO handling the case. I attest to the accuracy of the information contained herein. ______________________________ Chief, Assessment Division (Signature Over Printed Name) Note: In case there is no issuance of eLA for the month, the Chief, Assessment Division will still submit the above report with the notation, "No eLA issued for the Month." ANNEX B Revenue Region No. _____, _________________ Accomplishments on the Office Audit/Investigation of Taxpayers For the Month of ________________ A. Cases Collected eLA Name of Taxpayer TIN Year/ Period Covered Date of Payment per Bank Validation Deficiency Collections Name of RO Assigned Remarks SN Date Issued Tax Type Basic Tax Interest Penalties Total FAN No. /FDDA Date Issued Total Amount (Basic + Interest + Penalties) P_______ P_______ P_______ P_________ Note: All collections for the month, whether prior to or after issuance of assessment notice shall be reported. However, in case the collection was made after the issuance of the Final Assessment Notice/Formal Letter of Demand/Final Decision on Disputed Assessment (within the 30-day period from receipt of the FAN/FLD/FDDA) please indicate the assessment notice no. and date of issue under the "Remarks" column for proper recording of accomplishment. B. Final Assessment Notices Issued eLA Name of Taxpayer TIN Year/Period Covered Final Assessment Notice Issued Name of RO Assigned SN Date Issued FAN No. Date Issued Amount of Deficiency Assessment Basic Tax Interest Penalties Total P________ P________ P________ P________ C. Final Decision on Disputed Assessments Issued eLA Name of Taxpayer TIN Year/Period Covered FDDA Issued Name of RO Assigned SN Date Issued Date Issued Amount of Deficiency Assessment Basic Tax Interest Penalties Total P_______ P_______ P_______ P_______ D. Cases with No Discrepancy eLA Name of Taxpayer TIN Year/Period Covered Date of Approval of Report of Investigation Name of RO Assigned SN Date Issued I attest to the accuracy of the information contained herein. Submitted by: ________________________________ Chief, Assessment Division (Signature Over Printed Name) ANNEX C Revenue Region No. _____, _________________ Report on eLAs Issued that were Cancelled Prior to the Service of eLA/Transferred to Other Office/ Cannot Be Located Taxpayers For the Month of _________________ eLA Name of Taxpayer TIN Year/Period Covered Name of RO Assigned Remarks* Date* SN Date Issued Status Reason I attest to the accuracy of the information contained herein. Submitted by: ________________________________ Chief, Assessment Division (Signature Over Printed Name) * Please indicate the following under the "Remarks" column. Status Particulars "Date" column Cancelled e.g. , incorrect eLA details, change in period covered, etc. Date of cancellation Transferred e.g. , taxpayer enlisted as large taxpayer by LTS, transferred to RDO No. _________ Date of transmittal/indorsement CBL Reported to AITEID Date of reporting Others Please specify ANNEX D Revenue Region No. _____, _________________ Office Audit eLAs Referred to the Legal Division For the Month of ________________ eLA Name of Taxpayer TIN Year/Period Covered Name of RO Assigned Reason for Referral to Legal Division * Date Transmitted to Legal Division SN Date Issued I attest to the accuracy of the information contained herein. Submitted by: ________________________________ Chief, Assessment Division (Signature Over Printed Name) * Please indicate the appropriate "Code" corresponding to the reason for the referral to the Legal Division: Code Reason SDT - for issuance of Subpoena Duces Tecum LEGO - for issuance of a legal opinion CRIM - for filing of a criminal action For other reasons, please specify ANNEX E Report on Final/Executory Collectible and Protested/Disputed Assessments Issued to Taxpayers Posted in Form 40 For the Month of _______________ A. Final and Executory Collectible Assessments eLA Name of Taxpayer TIN Year/Period Covered FAN No. Date Issued Amount Assessed Date Transmitted to Collection Division SN Date Issued Basic Tax Interest Penalties Total P________ P________ P________ P________ B. Protested/Disputed Assessments eLA Name of Taxpayer TIN Year/Period Covered FAN No. Date Issued Amount Assessed Remarks (Indicate the new eLA SN, date of Issue and name of new RO in case of reassignment to another RO) SN Date Issued Basic Tax Interest Penalties Total P_______ P_______ P_______ P_______ I attest to the accuracy of the information contained herein. Submitted by: ________________________________ Chief, Assessment Division (Signature Over Printed Name)