Procedure in the Handling and Processing of foreign Income Tax Returns

September 2, 1971 REVENUE MEMORANDUM ORDER NO. 16-71 SUBJECT : Procedure in the Handling and Processing of foreign Income Tax Returns The following rules are hereby promulgated in order to consolidate and simplify the handling and processing of income tax returns bearing foreign addresses where the income declared is from sources within and/or without the Philippines, as well as those bearing local addresses but with income from sources without the Philippines all of which shall hereinafter be referred to as "foreign returns". 1. All foreign returns (original and duplicate) and tax payments thereon, if any, shall be forwarded immediately to the International Tax Affairs Staff (hereinafter referred to as ITAS). 2. All copies of foreign returns and other documents received by ITAS should bear the stamp of, and date of receipt in said office. 3. Returns showing an amount due but without remittance should be annotated "No payment" on the space provided for payment data on both the original and duplicate copies. They should be set aside and matched with remittance coming in without returns. 4. All foreign returns with remittances in checks or in cash in whatever currency shall be recorded by ITAS as and when received. If payment is in foreign currency check, an acknowledgment notice shall be issued by ITAS to the taxpayer, advising among other things, that the official receipt will follow, as soon as the check is cleared. 5. All remittances in foreign currency shall first be cleared and converted to Philippine currency by ITAS. Thereafter, an "Authority to Issue Tax Payment Acceptance Order" shall be prepared in triplicate. The original and duplicate copies (in lieu of the foreign returns) together with the remittance shall be transmitted to the designated Collection Agent in the National Office while the triplicate copy shall be attached to the return. The same procedure shall be followed on lump sum remittances received from Philippine Missions of the Department of Foreign Affairs in accordance with Revenue Memorandum Circular No. 3-71 dated January 25, 1971 except that the said authority shall be made in favor of the corresponding Philippine Missions abroad. 6. The Collection Agent shall issue to ITAS the corresponding Tax Payment Acceptance Order in accordance with existing procedures. 7. ITAS shall immediately make the necessary remittance to the Authorized bank who shall issue the corresponding official receipt. ITAS shall clearly indicate on the appropriate space in both copies of the corresponding foreign return the official receipt number, amount and date of payment. In The case of official receipts issued in favor of the Philippines Missions abroad, only the number and date shall be annotated on the returns covered. Immediately thereafter, the official receipt shall be transmitted to the tax-payer concerned or the Philippine Mission in case of the latter. 8. The returns shall be sorted and classified in accordance with the following classification codes: Classification Classification code (1) Individuals a. Taxable without tax credit 1 b. Exempt 2 c. Refundable (whether taxable or exempt) 3 d. Taxable with tax credit 7 (2) Corporations a. Taxable 4 b. Exempt 5 (3) Partnerships 6 9. After the returns are sorted and classified the same shall be bundled in batches of 100 and numbered consecutively. The assessment numbers to be assigned shall always start from 00001 for every classification in a taxable year, prefixed with the code "FR" (to denote foreign return) as well as the classification code, and suffixed with the last 2 digits of the taxable year for which the return was filed. Thus, the first 1971 exempt individual foreign tax return to be numbered shall be assigned assessment no. "FR 2 00001 71". This signifies as follows: FR foreign return 2 exempt individual income tax return 00001 main serial number of return 71 taxable year 1971 10. After May 31, all foreign returns remaining unpaid shall be assessed. A letter of demand for the delinquent amount as well as the corresponding penalties shall be prepared in triplicate. The original shall be mailed to the taxpayer, the duplicate and triplicate attached to the original and duplicate copies of the return respectively. 11. All copies of refundable income tax returns (arising from excess withholding tax on wages) shall, after numbering, be immediately forwarded to the Withholding Tax Division. After the refunds shall have been processed, the latter should forward all original copies of the returns to ITAS for custody and safekeeping. The duplicate copies, however, shall be referred for office or field audit under existing procedures, except that, those bearing foreign addresses shall be coursed to ITAS for referral to Revenue Attaches. 12. The duplicate copies of all returns (other than No. 11 hereof) shall be detached from the original copies. Each batch of original returns shall be covered by a block control sheet prepared in quadruplicate. The original copy shall be for the Data Processing Center, the duplicate copy to be retained by ITAS, the triplicate copy for the Assessment Department and the quadruplicate copy to be retained in the batch. 13. The batches of original copies of the returns covered by block control sheets shall be forwarded to the Data Processing Center for processing, after which, the latter shall return the same to ITAS which shall be the custodian of all foreign returns. 14. The duplicate copies shall be transmitted to the respective Revenue Attaches, or to the Regional Offices thru the Assessment Branches, as the case may be, for appropriate office or field audit. Existing procedures shall be followed in the examination, approval, assessment and collection on cases bearing local addresses. On cases bearing foreign addresses, however, the reports of investigation immediately upon approval, shall be forwarded to ITAS, which shall undertake the assessment and collection of deficiency taxes shown thereon. All prior instructions, circulars or orders inconsistent with this revenue memorandum order are hereby revoked. This order takes effect immediately. MISAEL P. VERA Commissioner of Internal Revenue ANNEX A April 5, 1970 MEMORANDUM FOR: Mr. Leonardo Cabaero Chief, Collection Department I have gone over the attached papers on the matter of collection of taxes abroad and I have observed that the proposed Revenue Memorandum Order is in accordance with the provisions of Department Order No. 3-71 of the Department of Foreign Affairs dated 29 December 1970. The papers show that the money collected by Revenue Attaches is to be remitted by them to the Commissioner of Internal Revenue together with the usual remittance advice. In this manner, the Commissioner of Internal Revenue will act as trustee of the money received from Revenue Attaches as internal revenue collections unless sooner the money is remitted to the National Treasurer. The procedure thus created seems to be not in accordance with the present arrangement whereby internal revenue collections by our local Collection Agents are being remitted by them to the National Treasurer and the Commissioner of Internal Revenue is just furnished remittance advices. cd The provisions of Department Order No. 3-71 of the Department of Foreign Affairs seems to be not in accordance with the cited practice of Collection Agents regarding this remittances of internal revenue collections to the National Treasurer. I would suggest that in order to relieve the Commissioner of Internal Revenue from the responsibility of keeping internal revenue taxes in a trust capacity of the money remitted by Revenue Attaches we should also follow the practice or arrangements being made by our Collection Agents. We may prepare a recommendation to amend the Department Order of the Department of Foreign Affairs. In the meanwhile, and inasmuch as we are running out of time to have this collection of taxes abroad by Revenue Attaches to be effected as soon as possible, and considering further that these are the days when collection of income taxes is in full swing, I suggest that the proposed Revenue Memorandum Order takes its due course for signature of the Commissioner until the above mentioned Foreign Affairs Department Order is amended accordingly. LEOPOLDO J. GONZALES Executive Officer International Tax Affairs Staff ANNEX B March 9, 1971 MEMORANDUM FOR The Revenue Operations Head (Collection) This refers to the memorandum of the Commissioner of Internal Revenue, dated February 19, 1971, which you referred to me for: (1) to prepare materials for the new procedure of collecting taxes abroad, and (2) to arrange a conference with Officials of the International Tax Affairs Staff (ITAS). The materials needed for the implementation of the new order shall be as follows: 1. Tax Numeric Codes 2. National Internal Revenue Code, as amended 3. GAO Circular No. 110 4. Collection report forms, namely (a) For Revenue Attach: 1. BIR Form 12.31, Abstract of Collection 2. Gen. Form 14B, Remittance Advice 3. BIR Form 25.24, Official Receipt 4. Gen. Form 106, Official Cash Book (b) For Finance Officers: 1. FA Form No. 88, Abstract of Collection 2. FA Form No. 39, Official Receipt 3. Gen. Form 106, Official Cash Book 4. Gen. Form 14B, Remittance Advice In meeting with the Officials of ITAS, it is suggested that the following questions be taken up: 1. Who are the Finance Officers deputized to accept payment for tax abroad? What are their specific addresses? 2. Who are our Revenue Attaches? Where are they assigned now? 3. Are each of the Finance Officers deputized to collect taxes abroad already aware of their additional duties? How do we know that they are already functioning as deputies of the Commissioner of Internal Revenue? 4. How do we know that they are already provided with the Official Receipts, Tax Numeric Codes, National Internal Revenue Code, GAO Circular No. 110, and collection report forms? Who will handle their supply needs? 5. Is anyone already assigned by the Hone Office of Department of Foreign Affairs to receive and account the collections and reports for each Finance Officer? Who will maintain the subsidiary ledger for each Finance Officer, will it be the Department of Foreign Affairs, or the Bureau of Internal Revenue? Suppose out of 108 Finance Officers only 10 will be reporting their collections, who will go after those who did not report? 6. Will it be the Officials of ITAS handle the liaison work between the Department of Foreign Affairs and the BIR especially as pertains to the coordination of the activities of the Finance Officers and the BIR? 7. What unit in the BIR who will receive checks from abroad drawn to any Commercial Bank in Manila and issue receipt thereof? Will it be South Manila Collection Agent? I have arranged with Atty. Gonzales, Chief, International Tax Affairs Staff a meeting with you, Mr. Tiongco, Mr. Usigan, Mr. Resurrection, and Mr. Pamittan on Thursday morning, March 11, 1971, at 10:00 O'clock. THEMISTOCLES R. MONTALBAN Chief, Tax Accounts Division ANNEX C 19 February 1971 MEMORANDUM FOR: The Revenue Operations Head Collection Department Pursuant to Revenue Memorandum Circular No. 3-71, dated January 25, 1971 publishing Department Order No. 3-71 of the Department of Foreign Affairs dated 29 December 1970 on the subject of "Collection of Internal Revenue Taxes Abroad", you are hereby requested to take immediate steps towards the implementation thereof. For this purpose, coordination must be made with the Executive Officer of the International Tax Affairs Staff. Should you find any necessity to make amendments to suit present conditions and circumstances, make the corresponding recommendations for transmittal to the Department of Foreign Affairs. MISAEL P. VERA Commissioner of Internal Revenue 1st Indorsement March 23, 1971 Respectfully referred to the Revenue Operations Head, Collection Department, the within letter of Mr. Elias E. Vega, Revenue Attach at Washington, D.C., dated 1 March 1971 for appropriate action. LEOPOLDO J. GONZALES Executive Officer International Tax Affairs Staff