Procedure in the Handling and Processing of Foreign Income Tax Returns (Revision of Revenue Memorandum Order No. 16-71)

April 16, 1974 REVENUE MEMORANDUM ORDER NO. 19-74 SUBJECT : Procedure in the Handling and Processing of Foreign Income Tax Returns (Revision of Revenue Memorandum Order No. 16-71) TO : All Internal Revenue Officers and Others Concerned The following rules and procedures are hereby promulgated in order to consolidate and simplify the handling, processing and custody of foreign income tax returns. "Foreign returns" shall include all income tax returns described as follows: a. Those bearing foreign addresses, regardless of source of income. b. Those bearing local addresses but with income from sources outside the Philippines. I. Receiving A. All foreign returns (original and duplicate) and tax payments thereon, if any, should be forwarded immediately to the International Tax Affairs Staff (hereinafter referred to as ITAS). B. All copies of foreign returns and other documents received in ITAS should be stamped with the date of receipt in said office. C. Returns showing an amount due but without remittances 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 remittances coming in without returns. D. 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. E. All remittances in foreign currency shall first be cleared and converted to Philippine currency by ITAS in accordance with Revenue Memorandum Order No. 25-73. Thereafter, pursuant to the same order, the corresponding revenue official receipts on BIR Form 2524 shall be issued by the Collection Agent assigned in ITAS. 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 revenue official receipts shall be issued in favor of the corresponding Philippine Mission abroad. F. ITAS shall clearly indicate on the appropriate spaces 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 Philippine Missions abroad, only the number and date shall be annotated on the returns covered. Immediately thereafter, the official receipt shall be transmitted to the taxpayer concerned or the Philippine Mission in case of the latter. G. After May 31 of every year, 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. II. Numbering A. The returns shall be sorted and classified in accordance with the following classifications: Classification Classification Code 1. Individuals (filed on BIR Form 1701 or 1701A) a. Taxable without tax credit 1 b. Exempt 2 c. Refundable (whether taxable or exempt) 3 d. Taxable with tax credit 7 2. Individuals (filed on BIR Form 1701C) a. Taxable 1 b. Exempt 2 3. Corporations a. Taxable 4 b. Exempt 5 4. Partnerships B. 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) except for individual income tax returns filed on BIR Form 1701C which shall be prefixed with the code "FRC" (to denote foreign return of non-resident Filipinos filed on Form 1701C), as well as the classification code, and suffixed with the last two (2) digits of the taxable year covered by the return. Thus, the first 1973 exempt individual foreign tax return (filed on BIR Form 1701 or 1701A) numbered, bears assessment number "FR-2-00001-73." This signifies as follows: FR foreign return 2 exempt individual 00001 main serial number of return 73 year 1973, taxable year covered by return However, the first 1973 exempt individual foreign return (filed on BIR Form 1701C) shall be assigned assessment no. "FRC-2-00001-73". Other than the first prefix "FRC" (to signify individual foreign return filed on BIR Form 1701C), the succeeding numbers follow the same pattern as above. C. Delinquent returns, or returns filed and/or received and numbered late shall be assigned the next unassigned assessment numbers in the series for the same taxable year covered by the returns in the same manner described above. They should not be assigned numbers of subsequent years. To insure continuity and accuracy of numbers assigned, all record books of assessment numbers shall be kept and maintained by year and preserved for a period of at least ten (10) years from the date of original use. III. Processing A. All foreign returns shall be preaudited. Changes arising from errors and/or other defects apparent on the return shall be reflected in audit sheets prepared in triplicate to be distributed as follows: Original to taxpayer Duplicate attach to original of return Triplicate attach to duplicate of return B. Preaudited returns shall be sorted and classified in accordance with paragraph II A hereof. Each classification shall be bundled in batches of 100 (the last batch may be less than 100), and numbered consecutively, adhering strictly to the numbering procedure given in II B hereof. C. Each batch of returns shall be covered by a block control sheet prepared in quadruplicate distributed as follows: Original Data Processing Center or the particular office of destination Duplicate retained in ITAS Triplicate Assessment Department Quadruplicate retained in the batch D. All batches of duly block-controlled foreign returns (original and duplicate) covering 1972 and subsequent years , shall be immediately forwarded by ITAS to the Data Processing Center for data extraction and/or refund processing. E. Individual refundable returns (arising from excess withholding tax on wages) covering taxable years prior to 1972 shall be forwarded by ITAS to the Withholding Tax Division for withholding tax credit validation. Immediate appropriate action shall be taken by the latter, after which, the subject refundable returns shall be forwarded to the Data Processing Center for check-making or returned to ITAS as the cases warrant. cd F. After processing, regardless of the taxable year covered, the Data Processing Center shall promptly return all documents to ITAS, except refundable returns which should be forwarded to the Withholding Tax Division together with the warrants among other things, for further processing. The returns shall be transmitted to ITAS by the latter after they shall have served the purpose. ITAS shall be the custodian of all foreign returns. G. After the returns shall have been received back in ITAS, the duplicate copies shall be detached from the original copies. The latter shall be retained in the files while 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 examination, immediately after approval, shall be forwarded to ITAS, which shall undertake the assessment and collection of deficiency taxes reflected thereon. This Order revokes Revenue Memorandum Order No. 16-71 and all other prior instructions and circulars inconsistent herewith. This Order takes effect immediately. MISAEL P. VERA Commissioner of Internal Revenue