Investigation of Persons and Entities Remitting Foreign Exchange Abroad other than for the Payment of Imports as well as Recipients thereof

September 10, 1968 REVENUE MEMORANDUM ORDER NO. 43-68 SUBJECT : Investigation of Persons and Entities Remitting Foreign Exchange Abroad other than for the Payment of Imports as well as Recipients thereof TO : The Revenue Operations Heads (Special Operations and Assessment), Regional Directors and Others Concerned In accordance with the instructions received from his Excellency, the President of the Philippines, to investigate taxpayers, remitting foreign exchange abroad other than for the payment of imports, appropriate arrangements were made with the Central Bank of the Philippines to furnish this Office with a list of remittances abroad of foreign exchange in the amount of P5,000 or more. A study of the list received from the Central Bank of the Philippines shows the following possibilities as the nature of the remittances: cdta 1. For services rendered within the Philippines which is subject to withholding tax at source; 2. Payments of foreign loans which may include interest payments, with the latter being subject to withholding tax at source; 3. Remittances of taxpayers whose declared income or his networth will not justify said remittances; 4. Foreign investments of resident taxpayers which should be taken into account in determining networth of the taxpayers; 5. Repatriation of profits of resident foreign corporations or branches to the parent company in the case of subsidiaries or to the mother company in the case of branches which should be looked into to determine whether they have been reported for Philippines income tax purposes; 6. The repatriation of profits to non-resident stockholders as dividends which is subject to withholding tax at source; 7. Living expense of beneficiaries abroad which should be taken into account in the cash analysis of a taxpayer being investigated under the networth method of investigation; 8. Royalties and other forms of fixed and determinable items of income remitted by domestic corporations which is subject to withholding tax at source; 9. Remittances of passengers' fares by foreign shipping and airline companies; 10. Remittances which require further verification as to their nature and purpose; 11. Other remittances which are lumped in one group without identification of purpose and the names of the component remitters; 12. Remittance made by fictitious persons. In order to implement fully and properly the Presidential directive to investigate the persons and entities remitting foreign exchange abroad other than for the payment of imports, as well as the recipients thereof, the following procedures should be followed: cd 1. The list of foreign exchange remittances being received from the Central Bank should be forwarded to and kept in the Special Operations Department. Upon receipt of a list of remittances from the Central Bank, an individual card for each remitter of foreign exchange shall be set up. Aside from the name of the remitter, the card shall also contain the amounts of foreign exchange remitted, the dates of remittances and the recipients of the remittances abroad. Subsequent data received on foreign exchange remittances shall be entered on the same individual card of the remitter. 2. On a letter of authority to investigate a taxpayer originating from a Division under the Special Operations Department and the Assessment Department, after it is signed by the Commissioner of Internal Revenue and before the same is released by the Deputy Commissioner of Internal Revenue (Operations), a slip shall be attached thereto containing the pertinent data on all remittances of foreign exchange made by the taxpayer under investigation. 3. If the slip attached to the letter of authority shows that the taxpayer under investigation is a remitter of foreign exchange, the investigation of the taxpayer concerning the remittances of foreign exchange shall be conducted simultaneously with the investigation being done pursuant to the letter of authority. 4. On the foreign exchange remittances made by taxpayers falling within the jurisdiction of the regional offices, data on said remittances shall be forwarded to the regional office concerned which shall conduct the investigation simultaneously with the investigation of the taxpayer pursuant to a letter of authority. 5. The result of the investigation concerning the foreign exchange remittance shall be contained in the report of investigation to be submitted pursuant to the letter of authority. No such report of investigation shall be given due course or approved, if the report does not contain the result of the investigation on the remittance of the foreign exchange. 6. Department Heads and the Regional Directors concerned shall submit progress reports to the Commissioner of Internal Revenue Thru the Deputy Commissioner of Internal Revenue (Operations), once every two (2) weeks on the result of the investigation of foreign exchange remittances conducted by the fieldmen under them. This Revenue Memorandum Order takes effect immediately and supersedes all previous memorandum and orders inconsistent herewith. aisadc MISAEL P. VERA Commissioner of Internal Revenue