Authority to Audit Returns of Non-Resident Citizens and Aliens and to Issue Certificate of Clearance for Transfer Tax Purposes

November 11, 1981 REVENUE MEMORANDUM ORDER NO. 31-81 SUBJECT : Authority to Audit Returns of Non-Resident Citizens and Aliens and to Issue Certificate of Clearance for Transfer Tax Purposes TO : All Revenue Attaches/Representatives and Others Concerned In order to expedite action on internal revenue tax cases involving non-resident Filipino citizens and non-resident aliens, and to facilitate the issuance of certificate of clearance for purposes of estate and gift taxes of non-resident aliens, the following rules are hereby promulgated for the information and guidance of all concerned: 1. Income Tax 1/1 Jurisdiction of Revenue Attache/Representative 1/1.1 The Revenue Attache/Representative shall have the authority to receive income tax returns and accept tenders of payments of income tax by non-resident Filipino citizens. A non-resident citizen may, however, opt to send his income tax return and remit his income tax payment directly to the Commissioner of Internal Revenue (Attention: The Chief, International Operations Division, Manila, Philippines). acd 1/1.2 The authority to audit/re-audit income tax returns of non-resident citizens reporting foreign source compensation income only on BIR Form No. 1701-C is vested primarily upon the Revenue Attache/Representative unless the same are filed directly with the National Office, Quezon City. However, the original of the returns shall be forwarded to the International Operations Division for processing in accordance with existing revenue memorandum orders. 1/2 Performance Audit 1/2.1 The International Operations Division shall conduct selective audit of returns forwarded by the Revenue Attache/Representative to the said Division for the purpose of ascertaining compliance by the Revenue Attache/Representative with the procedural requirements prescribed for the determination of the correct income tax liability of non-resident citizens. 1/2.2 The Chief of the International Operations Division shall maintain a record of each Revenue Attache's/Representative's data of assessment and/or collection performance which will be the basis for evaluating his degree of compliance with existing rules, regulations, or orders prescribed for proper determination of income tax liabilities of non-resident citizens. Any Revenue Attache/representative who is found to have consistently failed to comply with the established procedural requirements for the determination of the correct income tax liability of non-resident citizens coming under his jurisdiction, as well as with other requirements, shall be recommended for appropriate disciplinary action, possible recall or transfer to another assignment. cd 2. Transfer Taxes 2/1.1 The Revenue Attache/Representative having jurisdiction over the place where the decedent/donor has his residence at the time of death donation shall receive and process the returns filed. 2/1.2 Where the estate/gift consists only of shares of stock of Philippine corporations and the transfer agent of the share of stocks is located abroad, the Revenue Attache/Representative is hereby authorized to receive and audit the transfer tax return and to accept tenders of payments of the corresponding transfer tax per such return or deficiency transfer tax determined upon audit thereof. Upon payment of the tax found to be due, or if the return is ascertained to be exempt from tax, the Revenue Attache/Representative shall issue the requisite Certificate of Clearance. However, if the shares of stock are transferable only in the Philippines, the Revenue Attache/Representative shall pre-audit the return filed only after which he shall transmit the entire docket of the case to the Commissioner of Internal Revenue (Attention: The Chief, International Operations Division) for further action. 2/1.3 If in addition to the shares of stock, the decedent left other properties situated in the Philippines, the Revenue Attache/Representative shall accept the return and collect the tax due thereon, after which he shall forward the entire docket to the Commissioner of Internal Revenue (Attention: The Chief, International Operations Division) for further action. 2/1.4 Guidelines and procedures for the implementation of the transfer tax law and regulations by the Revenue Attache/Representative under this Memorandum Order will be promulgated. 3. Report of Returns/Cases Audited 3.1 The Revenue Attache/Representative shall render monthly a summary report (Annex A) of audited income tax returns and transfer tax cases to the Chief, International Operations Division within ten (10) days after the end of each month. The report shall show the name and address of the taxpayer, the taxpayer account number, kind of tax, taxable year, gross compensation income, gross estate or gross gift, tax due per return, deficiency tax per audit, penalties imposed, the basis of the deficiency assessment, and whether or not the deficiency assessment was paid. cdt 4. Functional Supervision of Revenue Attaches/Representatives. 4.1 The International Operations Division shall have the functional supervision over the assessment collection functions and activities of all revenue attaches/representatives. The IOD shall evaluate the assessment and collection performance of the Revenue Attache/Representative for purposes of determining the performance ratings/efficiency by head of the Attache unit. For this purpose, the International Operations Division shall monitor all such relevant activities of the Revenue Attache/Representative and submit periodic Reports to the Commissioner of Internal Revenue. 5. Effectivity. This Revenue Memorandum Order shall take effect immediately. (SGD.) RUBEN B. ANCHETA Acting Commissioner