Coordinated Examination Program Procedures

October 18, 1983 REVENUE MEMORANDUM ORDER NO. 32-83 SUBJECT : Coordinated Examination Program Procedures TO : The Revenue Service Chief, Sector Operations Office All Regional Directors All Others Concerned 1. Joint and Concurrent Examination 1.1 The coordinated (joint and concurrent) examination program as prescribed in Revenue Memorandum Order No. 31-83 (Annex "A") shall be applied in the investigation of taxpayers beginning with the taxable year 1982. Under this program examiners from an investigating unit (e.g. audit division or revenue district office) having primary audit jurisdiction and revenue examiners from an audit Division having functional audit jurisdiction shall jointly and concurrently audit a taxpayer selected for investigation. 1.2 Taxpayers listed in Annex "B" of Revenue Memorandum Order No. 31-83 shall be under the primary audit jurisdiction of the respective Audit Divisions of the National Office (herein referred to as primary audit divisions). All other taxpayers not listed in the said Revenue Memorandum Order shall be under the primary audit jurisdiction of the Regional Offices. cd i 1.3 Unless otherwise prescribed in this and subsequent or separate Revenue Memorandum Order, the Investment Incentives Division (IID) and the international Operations Division (IOD) (herein referred to as functional audit divisions) shall exercise functional audit jurisdiction over all taxpayers which are under the primary audit jurisdiction of other investigating units and which shall be jointly and concurrently investigated in the following cases: 1.3/1 The IID shall have functional audit jurisdiction over taxpayers enjoying fiscal incentives under the Investment Incentives Policy Act of 1983 (Batas Pambansa Blg. 391) and other special laws. 1.3/2 The IOD shall have functional audit jurisdiction over taxpayers engaged in overseas contracting business, transnational enterprises, the tax liabilities of which involve problems of international allocation of income and deductions as specified or defined in this or subsequent revenue memorandum order(s) and transactions or issues involving implementation of tax treaties. 1.3/3 Examiners in the IID and IOD shall confine their audit activities to the accounts or items involving investment incentives and overseas construction contracts, internal allocation of income and deduction and other items as may be specified from time to time in a separate Revenue Memorandum Order. 1.4 An examiner in the other Audit Divisions may be assigned by the Revenue Service Chief, Sector Operations Office, to conduct functional audit jointly and concurrently with other examiners in a different Division or in any Revenue District Office for the purpose of gathering data to be used in a specialized study or project to be undertaken in formulating or amending existing revenue regulations, orders or circulars applicable exclusively to a particular line of industry. 2. Assignment of Examiners for Coordinated Examination 2.1 Investment Incentives Division The Chief, Investment Incentives Division, shall identify the taxpayers listed in Annex "A" of RMO No. 31-83 (or in subsequent amendments thereto) which are grantees of fiscal incentives under existing investment incentive laws and shall furnish each Chief of Division having primary audit jurisdiction with a list of such taxpayers. He shall also designate the revenue examiner who should be included in the letter of authority to be issued by the Chief of the Audit Division having primary audit jurisdiction. 2.2 International Operations Division The Chief, International Operations Division, (IOD), shall identify the taxpayers listed in Annex "A" of RMO No. 31-83 (or subsequent amendment thereto), the determination of the tax liabilities of which involves overseas construction contracts, international allocation of income and deductions as specified or defined in the attached "Guidelines for Functional Audit of Multinationals." He shall furnish the Chief of the Division having primary audit jurisdiction with a list of such taxpayers and designate the revenue examiners who should be included in the letter of authority to be issued by the Chief of the Audit Division having primary audit jurisdiction. 2.3 Functional Audit of Selected Cases not Listed in RMO No. 31-83 2.3/1 The Chief, IID, and the Chief, IOD, may also exercise functional audit jurisdiction over taxpayers not listed in RMO No. 31-83 (Annex "B") or subsequent amendments thereto and shall furnish the Revenue District Officers, thru their respective Regional Directors, with a list of such taxpayers, as well as the names of the revenue examiners who will jointly and concurrently conduct the audit with the examiners in the revenue district offices. 2.3/2 In cases where, due to lack of information it is not feasible to prepare a list of taxpayers subject to joint and concurrent audit, and therefore such list is not available at the time of issuance of letters of authority to investigate, it is the responsibility of the examiner who is assigned primary audit jurisdiction over the case to submit a referral to the appropriate division vested with functional audit jurisdiction if, during the course of the examination, the examiner finds that the taxpayer has international or other transactions which are prescribed for functional audit. The functional audit division will evaluate the referral and make his recommendation as to whether an examiner will participate. 2.3/3 If the functional audit division decides that an examiner should participate in the case, the original referral report will be assigned to an examiner. At that point he may decide to withdraw, leaving procedural instructions in writing for the referring examiner. If he decides to stay in the case, he may pursue the issue on his own or with the help of the referring examiner, or withdraw at any point in the examination when he feels his expertise is not required. When, however, he pursues an issue to its conclusion, his recommendation will be made to the referring examiner thru the latter's immediate Chief in the form of a written report. 3. Letters of Authority and Reporting Procedures 3.1 The Chief of the Division having primary audit jurisdiction (or the Revenue District Officer, as the case may be) shall not issue letters of authority to investigate a taxpayer which is subject to joint and concurrent audit unless (a) the participating examiner from the IID or IOD is investigation the authority to investigate or (b) unless the Chief of the IID or IOD has duly informed him that an examiner in the functional audit division will not participate in the investigation. 3.2 A report of investigation shall not be recommended for approval unless it constrains the recommendation and report of the Chief of the IID or IOD in cases where joint and concurrent examination was conducted and the same is taken into account in the determination of the deficiency tax liability of the taxpayer. 3.3 It shall be the duty and responsibility of the respective heads of the primary audit divisions/revenue district officers and the functional audit divisions to coordinate the joint and concurrent audit activities of their respective revenue examiners. 4. Effectivity This Revenue Memorandum Order shall take effect immediately. (SGD.) RUBEN B. ANCHETA Acting Commissioner