Amended Procedure in Processing Corporate Annual Income Tax Returns Involving Refunds/Credits of Excess Income Taxes Paid on Corporate Quarterly Declarations of Net Income

September 3, 1975 REVENUE MEMORANDUM ORDER NO. 53-75 SUBJECT : Amended Procedure in Processing Corporate Annual Income Tax Returns Involving Refunds/Credits of Excess Income Taxes Paid on Corporate Quarterly Declarations of Net Income TO : All Internal Revenue Officers and Others Concerned To achieve a more expeditious processing of claims for refunds of excess income taxes paid under corporate quarterly declarations of net income and to facilitate refund of such excess income tax payments pursuant to Section 6 of Revenue Regulations No. 12-72, the following procedures are hereby prescribed which shall become effective on corporate final and adjustment income tax returns. I. Receipt and transmittal of returns Corporate annual income tax returns showing refundable amounts arising from overpaid quarterly income taxes shall be filed with the Direct Tax Division if the corporation claiming the refund has its principal office or place of business in Greater Manila Area. Corporations located outside Greater Manila Area may file their refundable final/adjustment returns either with the Direct Tax Division or with the proper field revenue office. Those received in such field revenue offices should be segregated and transmitted immediately to the Assessment Branch of the Region which in turn will immediately forward the same to the Direct Tax Division. cdt A list of refundable corporate returns received in the Direct Tax Division shall be prepared by the said Division and, on the basis of such list, the Assessment Branch which processes and consolidates all corporate quarterly returns, will segregate all such quarterly returns for transmittal to the Direct Tax Division. The Direct Tax Division shall classify all the returns according to regions and/or industry by industry basis and prepare the same for pre-audit and evaluation of the claim for refund or credit by the Special Review Committee pursuant to Revenue Special Order No. 41-75, as amended. II. Pre-audit and evaluation All refundable corporate annual income tax returns shall be pre-audited and evaluated under the control and supervision of the Special Review Committee. Pre-audit shall consist mainly of checking the mathematical accuracy of the figures in the return. No disallowance of expenses or inclusion of additional income shall be made during pre-audit, unless the information shown on the return clearly renders any expense claimed unallowable or unless any taxable income declared in the return was not included in the computation of the tax due. Checking of the accuracy of the computation shall extend up to and including the refundable amount. The Pre-Audit Sheet for Corporate Annual Income Tax Returns showing Overpayment of Income taxes Paid, attached as Annex "A" shall be accomplished for every return regardless of whether or not any adjustment was made. However, a final audit sheet, attached as Annex "B" shall be accomplished for refundable corporate annual income tax return which pass the pre-audit standards set by the Special Review Committee. If, in the opinion of the Special Review Committee, it becomes necessary that some returns be subjected to field investigation before refund or credit is granted, the same may be referred for field audit upon recommendation of the Special Review Committee and approval of the Commissioner of Internal Revenue. III. Numbering After pre-audit and evaluation by the Special Review Committee, all refundable corporate income tax returns shall be transmitted to the Direct Tax Division for numbering in accordance with existing procedures. After numbering the original copies of the returns should be transmitted to the Data Processing Center for further processing. However, the amount appearing in the return as overpayment should not be captured or indicated in the listing to be prepared by the Data Processing Center. The duplicate copies of the return should be utilized as a basis for the preparation of the final audit sheet as per attached Annex "B", by the Special Review Committee. IV. Tax refund The refundable returns which passed the pre-audit standards or field audit, as the case may be, shall be transmitted to the Direct Tax Division, which Office shall prepare the "Authority for Tax Refund/Credit" attached as Annex "C" for the approval of the Commissioner of Internal Revenue. Upon approval, the "Authority for Tax Refund/Credit" attached as Annex "B" shall be forwarded to the Accounting Division for the preparation of the refund check. The Accounting Division shall be responsible for determining whether or not the amount found to be refundable was actually paid to the Bureau of Internal Revenue before actual refund is made. After preparation of the refund check, the Accounting Division shall immediately forward to the Special Review Committee the docket, together with the refund check for appropriate action. V. Tax Credit A. In general . Unless the corporate taxpayer specifically requests for a tax refund of the amount refundable as shown in the annual final or adjustment return, the claim shall be considered a request for tax credit. After ascertaining that the amount to be credited has actually been paid as represented by the taxpayer to the Bureau of Internal Revenue, the Special Review Committee shall prepare the tax credit memo (Annex "D") in accordance with the procedure prescribed below. B. The Tax Credit Memo Tax credit memos shall be prepared for the signature of the Commissioner of Internal Revenue pursuant to paragraph V of Revenue Memorandum Order No. 35-74, dated July 1, 1974. After approval by the Commissioner the docket of the case shall be forwarded to the Direct Tax Division. The Direct Tax Division shall number the said tax credit memo chronologically by prefixing it with the symbol D-1 and affixing to it the year when the memo is issued. Thus, if a claim for tax credit is approved by the Commissioner of Internal Revenue in 1976, the same shall be numbered chronologically, as follows: TAXPAYER'S RECORD NO. D-1-00001-76 The Direct Tax Division shall keep a TAX CREDIT MEMO REGISTER for this purpose. Said register shall contain the following information: 1. Name of Taxpayer 2. TAN Number 3. Address of Taxpayer 4. Taxpayer's Record No. 5. Amount of tax credit; and 6. Debits to such tax credit. C. Tax debit memos After the release of the tax credit memo to the taxpayer, the docket of the case shall be forwarded to the Tax Accounts Division for the setting up of the tax credit memo in their records. The Tax Accounts Division shall then follow all existing procedures in issuing the tax debit memos to be used against the approved tax credits. The Tax Accounts Division shall, before releasing any tax debit memo pursuant to this memorandum order, notify the Direct Tax Division of the issuance of such debit memo for the proper entry to be made in the TAX CREDIT MEMO REGISTER kept by the said Direct Tax Division. VI. Tax refund or credit notification Before the approval of a tax refund or credit is communicated to the taxpayer, verification should be made to ascertain whether the claimant taxpayer has outstanding internal revenue tax liabilities. If the taxpayer has outstanding internal revenue tax liabilities, he should be advised in the tax refund or tax credit notification that his tax refund or his tax credit will be set-off against such outstanding tax liabilities. In the event that no outstanding tax liabilities exist, the Direct Tax Division shall prepare tax refund or tax credit notification (Annex "E"), after preparation of the refund check by the Accounting Division or after the Tax Credit Memo is recorded in the Tax Credit Memo Register. The notification, together with the docket of the case, shall be forwarded to the Chairman, Special Review Committee, for appropriate action. A tax credit notification should be accompanied with the original of the tax credit memo which shall be delivered to the taxpayer. VII. Tax refund or credit for less than the amount appearing in the return In cases where the tax refund or credit is less than the amount claimed appearing in the return after evaluation of the Special Review Committee, only the adjusted amount shall be allowed as tax credit or refund and notification thereof shall be made in accordance with Section VI above. VIII. Deficiency assessment In cases where, after the evaluation by the Special Review Committee, no amount is found refundable or available as tax credit and instead deficiency tax results, the Special Review Committee shall forward the docket to the Direct Tax Division, together with its comment and recommendation for the issuance of the corresponding assessment notices, and notification thereof shall be made in accordance with Section VI above. IX. Disposition of record The Tax Accounts Division shall, in accordance with paragraph VI of Revenue Memorandum Order No. 35-74, segregates from the docket the following documents: 1. Original income tax return, together with all the attachments; and 2. The three (3) quarterly returns and their attachments. The above documents shall be forwarded to the Data Processing Center for computer processing. The rest of the papers and documents in the docket shall be kept by the Tax Accounts Division in their files until after the full amount of the tax credit memo shall have been applied to the taxpayer's tax liabilities. Thereafter, the docket shall be forwarded to the Records Division for proper disposition. X. Transmittal of returns to the Data Processing Center After the preparation of the "Tax Refund Notice" or the "Tax Credit Notification", the original copy of the income tax return with the attachments shall be forwarded to the Data Processing Center for computer processing. XI. Repealing Clause Any and all existing Revenue Memorandum Orders and Circulars relative to processing refundable corporate income tax returns inconsistent herewith are hereby deemed repealed. XII. Effectivity The provisions of this Memorandum Order are effective immediately. MISAEL P. VERA Commissioner of Internal Revenue TAN: 1601-593-5