Prescribing an Office Audit Program in the Assessment Division of Revenue Regional Offices

August 9, 1999 REVENUE MEMORANDUM ORDER NO. 71-99 SUBJECT : Prescribing an Office Audit Program in the Assessment Division of Revenue Regional Offices TO : All Regional Directors, RDC Heads, Assistant Regional Directors, Chiefs of the Assessment Division of Regional Offices, Revenue District Officers, Revenue Officers and Others Concerned I. OBJECTIVES This Order is issued: 1. To enhance voluntary compliance of taxpayers engaged in small-scale business and in the practice of profession; 2. To collect additional revenue from small cases not covered by the Annual Audit Program in Revenue District Offices (RDO); and 3. To ensure uniformity of action in the investigation and reporting of the above cases by providing the necessary office audit procedures and reporting requirements. II. COVERAGE 1. The Office Audit Program shall cover the audit of tax returns of individual and corporate taxpayers, estates and trusts within the Region covering taxable year 1998, in accordance with the following order of priority: 1.1 Taxpayers engaged in business or in the practice of profession who did not avail of the Economic Recovery Assistance Program (ERAP) under Revenue Regulations No. 2-99 and Revenue Memorandum Order No. 10-98 whose tax returns indicate low level of compliance, where the gross sales/income is P3,000,000 or less for Revenue Regions Nos. 5, 6, 7, & 8 (Valenzuela, Manila, Quezon City and Makati) except taxpayers in RDO Nos. 35-Romblon, 36-Puerto Princesa & 37-San Jose, Occidental Mindoro, and P1,000,000 and below for all other regions and the above-enumerated RDOs, as follows: 1.1.1 Break-even returns and returns showing net loss for at least two consecutive years (Selection Code: BEL). 1.1.2 Taxpayers whose tax due per return is less than 2% of the reported gross sales/income (Selection Code: LPR). 1.1.3 Taxpayers with substantial reduction in gross sales/receipts/tax payments and/or substantial increase in cost of sales and expenses as defined in Section II.B.5 of RMO 67-99 (Selection Code: SRS). 1.1.4 Taxpayers belonging to the industries categorized as "Other Priority" taxpayers as enumerated under Section II.B of RMO No. 67-99 within the set threshold (Selection Code: PTL). 1.2 Taxpayers who made partial availment of the ERAP to the extent of tax liability not covered by the availment, subject to the thresholds set in Section II.1.1.1 hereof (Selection Code: PRP). 1.3 Such other cases that may be identified by top management from time to time within the set thresholds (Selection Code: NOM). 1.4 Taxpayers selected for audit by the Chief, Assessment Division which do not fall within the above guidelines provided these cases are within the set thresholds and the Division can still effectively manage its overall workload inventory (Selection Code: CAD). 2. The following cases shall be excluded from the coverage of this Order: 2.1 Taxpayers selected for audit by the RDOs under the Annual Audit Program; 2.2 Taxpayers selected for audit/investigation by the Special Investigation Divisions of Regional Offices, the Tax Fraud Division and other audit divisions/teams in the National Office; 2.3 Taxpayers who were granted immunity from audit and investigation under the Economic Recovery Assistance Payment Program, including taxpayers who increased their tax payments for 1998 by 20% but did not file the prescribed Immunity Availment Form (BIR Form 2103); and 2.4 Top 500 Large Taxpayers being monitored by the Large Taxpayers Division in the National Office and other taxpayers/industries covered by the Audit Program of the Enforcement Service pursuant to RMO No. 64-99. III. AUDIT POLICIES AND GUIDELINES 1. Office Audit shall be conducted without field investigation and only by Revenue Officers (Assessment) of the Office Audit Section (OAS) in the Assessment Division of Regional Offices. However, the Regional Director may request the conduct of office audit in Revenue District Offices which are located very far from the Regional Office for the convenience of the taxpayers. The request shall be subject to approval of the Assistant Commissioner, Assessment Service. 2. All cases selected for office audit must be submitted in a list (Annex "A") by the Chief, Assessment Division to the Regional Director. The Regional Director shall see to it that only cases that match with the foregoing selection criteria are included in the list. The Regional Director shall recommend the list of selected taxpayers to the Assistant Commissioner, Assessment Service for approval. 3. All office audit cases shall be covered by Letters of Authority (LAs). The LA for office audit (Annex "B") shall be printed with "OA" before the LA number to distinguish it from the LA form for RDO Cases. This accountable form shall be requisitioned by the Regional Director from the Accountable Forms Division in the National Office. Accordingly, the issuance of correspondence letter or any other similar orders for the purpose of office audit examination shall be strictly prohibited. 4. One LA shall be issued for each taxable year under audit. Only LAs with attached official duplicate copies of tax returns shall be signed by the Regional Director. 5. The policy on the simultaneous investigation of all tax liabilities of the taxpayer for the same taxable year shall be followed. One LA shall be issued for each taxable year to include all internal revenue tax liabilities of the taxpayer. 6. The initial workload of each Revenue Officer shall not exceed thirty (30) cases. In no case shall the number of cases handled by each Revenue Officer exceed 30 at any one time during the year, subject to replenishment after the submission of the report of investigation/closure of each case. 7. The same taxpayer shall not be allowed to be audited for the immediately succeeding taxable year, unless there is a valid written justification for the conduct thereof and subject to prior approval by the Assistant Commissioner, Assessment Service. 8. The same Revenue Officer (RO)/Group Supervisor shall not be allowed to audit the same taxpayer for the succeeding audit period. prcd 9. In case the taxpayer fails to respond to the Office Audit LA or if the LA is "returned to sender" by the Post Office, the RO shall immediately prepare a written report thereon to the Chief, Assessment Division. The concerned Chief, Assessment Division shall forward the said report to the Special Investigation Division in the Regional Office for appropriate action. 10. In auditing the tax returns and records of the taxpayers, the Revenue Officer shall apply the audit procedures and techniques under RAMO No. 2-95, except the procedures applicable to a field investigation. The Revenue Officer shall also comply with the reporting requirements prescribed under RMO No. 53-98. The Chief, Office Audit Section and the Chief of the Assessment Division, in the exercise of their supervisory duties and functions, shall see to it that substantial compliance with existing rules and regulations are observed by all Revenue Officers to ensure quality audit of tax returns. All reports of investigation to be submitted for review and approval must satisfy all the requisites of a quality report to meet the approval of any reviewing office, whether internal or external, for purposes of regular review, performance audit or post-audit evaluation. 11. The Revenue Officer shall utilize data obtained from Third Party Information (TPI) sources or any record available in the Bureau that may provide valuable basis for the determination of the taxpayer's true tax liabilities prior to the finalization of the audit. 12. The report of investigation shall be submitted within sixty (60) days from the issuance of the LA. In case the report cannot be rendered within the prescribed period due to constraints attributable to the taxpayer, the Revenue Officer shall request for revalidation of the LA by preparing a progress report to be approved by the Chief, Assessment Division. In all cases, however, only one revalidation of LA shall be allowed. The Chief, Assessment Division shall transmit the docket to the Regional Director for revalidation of the LA. The previously issued LA shall be stamped "Revalidated on _____" and shall be signed by the Regional Director. 13. Reports of investigation on closed and terminated cases wherein the deficiency taxes per investigation were paid at the Assessment Division level shall be prepared and submitted to the Regional Director for final review and approval within ten (10) days from the date of taxpayers' payment of such deficiency tax assessment. Reports of investigation/verification on cases for assessment shall be submitted to the Regional Director at least six (6) months before the prescription date of the cases. LibLex 14. Revenue Officer's Audit Reports (BIR Forms 1717/0500) shall be prepared for all reports of investigation. The same shall be the basis of assessment notices/demand letters, Audit Sheets, Payment Form (BIR Form 0605)/Authority to Accept Payment (ATAP), and Termination Letters. 15. The Chief, Assessment Division shall sign the pre-assessment notices. However, prior to issuance of the pre-assessment notice, the report together with the docket shall be reviewed by the Review and Evaluation Section in the Assessment Division. 16. All reports of office audit investigation shall be subject to final review and approval by the Regional Director. 17. The preparation, approval and release of Assessment Notices and Demand Letters as well as the preparation of BIR Form 40.00 shall be in accordance with the provisions of RMO No. 37-94, as amended by RMO No. 36-99. 18. All protests on assessment shall be evaluated by the Assessment Division in accordance with the provisions of Revenue Regulations No. 12-85. IV. PROCEDURE A. Transmittal of Returns Responsible Office/Person Process RDOs/RDC 1. Process income tax returns in accordance with existing policies and procedures. 2. Prepare/generate a list (Annex "C") of current income tax returns processed to be distributed as follows: Original - Revenue Regional Director Duplicate - Assessment Division Triplicate - File copy For RDC-based processing of tax returns, however, the list shall be distributed in the following manner: Original - Revenue Regional Director Duplicate - Revenue District Officer Triplicate - Chief, Assessment Division Quadruplicate - File copy Processing of annual income tax returns shall be completed within sixty (60) days from the last day of filing the returns. Revenue District Officer 3. Transmit to the Assessment Division the duplicate copies of tax returns not selected for audit/verification under the existing Audit Program for RDOs not later than June 30 of each year. In case of returns with installment payments due on July 15, such returns shall be transmitted on or before July 31. For taxable year 1998, however, the duplicate copies of tax returns not selected for audit shall be transmitted to the Assessment Division not later than October 31, 1999. Chief, Assessment Division 4. Receive duplicate copies of 1998 income tax returns together with the list of current tax returns processed. B. Request for Audit of Tax Cases Responsible Office/Person Process Chief, Assessment Division 1. Select the returns for office audit in accordance with the order of priority under Section II of this Order. 2. Submit the list of selected returns (Annex "A") to the Regional Director to be distributed as follows: Original - Assessment Service Duplicate - Assessment Division (to be returned to the Regional Office after approval by the Assessment Service) Triplicate - File copy of Regional Director 3. File systematically the duplicate copies of tax returns not selected for office audit. Regional Director 4. Sign the list of selected returns. 5. Cancel the name(s) of taxpayer(s) not recommended for audit and initial the cancelled portions in the list, if any. 6. Submit the original and duplicate copies to the Assessment Service for approval. 7. Retain the triplicate copy of the list. 8. Transmit duplicate copy of the list approved by the Assessment Service to the Assessment Division. C. Issuance of Letters of Authority Responsible Office/Person Process Chief, Office Audit Section 1. Assign Office Audit cases and prepare Office Audit LAs based on the approved list. Attach duplicate copies of income tax returns to the LAs. Chief & Asst. Chief, Assessment 2. Initial LAs. Transmit LAs with Division attached income tax returns to the Regional Director for signature. Regional Director 3. Issue/sign LAs on approved office audit cases for distribution as follows: Original - Taxpayer Duplicate - To be attached to the docket Triplicate - Office file copy 4. Return to the Assessment Division the original and duplicate copies of approved LAs together with the income tax returns. 5. Record all pertinent information in the log book. Chief, Office Audit Section 6. Receive signed LAs and attached Assessment Division income tax returns. 7. Record all pertinent information reflected in the LA and tax returns in the LA Register. 8. Distribute the LAs with the income tax returns to concerned ROs. Chief, Assessment Division 9. Request in writing from the concerned RDO all the other needed tax returns (i.e., VAT/percentage/withholding tax returns, etc.) of taxpayers for office audit. Revenue District Office 10. Provide Assessment Division with the duplicate copies of required tax returns within three (3) days from receipt of request. Chief, Office Audit Section 11. Receive duplicate copies of other tax returns and record pertinent information in the LA Register. 12. Distribute other tax returns to the concerned ROs. D. Investigation Proper Responsible Office/Person Process Revenue Officer 1. Accomplish an office audit checklist of (Assessment)/OAS requirements (Annex "D") to be attached to the original LA. 2. Transmit the original copy of the LA together with the duly accomplished office audit checklist to the Administrative Division for mailing. Administrative Division 3. Mail original LA and checklist through registered mail with return card. 4. Provide Chief, OAS with copy of the Registry Receipt issued by the Post Office as proof of mailing. RO (Assessment), OAS 5. If the LA is "returned to sender" by the Post Office, prepare a written report thereon for submission to the Chief, Assessment Division. Chief, OAS 6. Prepare endorsement letter forwarding the case to the Special Investigation Division for appropriate action. Chief, Assessment Division 7. Sign endorsement letter addressed to the Chief, Special Investigation Division and forward the docket of the case to the said Office. RO (Assessment), OAS 8. Prepare second notice (Annex F) in duplicate in case the taxpayer fails to respond to the LA. Chief, Assessment Division 9. Sign second notice. RO (Assessment), OAS 10. Send original copy of second notice to the Administrative Division for mailing. Administrative Division 11. Mail second notice. RO (Assessment), OAS 12. Prepare third and final notice (Annex F) in duplicate if the taxpayer fails to respond to the second notice. Chief, Assessment Division 13. Sign final notice. RO (Assessment), OAS 14. Send original final notice to the Administrative Division for mailing. Administrative Division 15. Mail original final notice. Provide Chief, OAS with copies of Registry Receipts of second and final notices mailed. RO (Assessment), OAS 16. In case the taxpayer fails to comply with the final notice, forward the docket of the case to the Legal Division for the issuance of Subpoena Duces Tecum (SDT) and for appropriate legal action. Legal Division 17. Evaluate case and issue SDT in accordance with RAMO No. 3-82 and RMO No. 35-90. RO (Assessment), OAS 18. On taxpayers who have submitted the books of accounts and other accounting records/documents, conduct office audit. Follow the audit procedures and techniques under RAMO No. 2-95, except the procedures applicable to a field investigation. 19. Prepare Revenue Officer's Audit Reports (BIR Form 1717/0500 Series). 20. In case the audit results to a deficiency tax assessment and the taxpayer agrees to the amount of the deficiency tax, prepare and initial Audit Sheet (Annex G) in duplicate. Chief, OAS 21. Review and initial Audit Sheet. Asst. Chief, Assessment Division 22. Review and initial Audit Sheet Chief, Assessment Division 23. Review and sign Audit Sheet. The Audit Sheet shall not be signed unless the report of investigation is attached to the docket. Detach and file duplicate Audit Sheet. 24. Transmit the copies of signed Audit Sheet and the entire docket of the case to the Chief, Office Audit Section. Chief, OAS 25. Request taxpayer to accomplish and sign separate Payment Form (BIR Forms 0605) based on the approved Audit Sheet for presentation with the duly accredited agent bank (AAB) for distribution by the AAB as follows: Original - AAB Duplicate - to be attached to the docket Triplicate - Taxpayer's copy E. Review & Approval of Report Responsible Office/Person Process Review and Evaluation Section 1. Review dockets within 30 days from Asst. Chiefs Assessment Division receipt prior to the final approval by the Chief, Assessment Division Regional Director. RO (Assessment), Review & 2. In case the taxpayer does not agree Evaluation Section with the deficiency tax, prepare pre- assessment notice. Chief, Assessment Division 3. Review and sign pre-assessment notice. 4. Transmit the original copy of the pre- assessment notice to the Administrative Division for mailing. Administrative Division 5. Mail Preliminary Assessment Notice to taxpayer through registered mail with return card. Furnish Chief, OAS with copies of Registry Receipts as proof of mailing. RO (Assessment), OAS 6. If the pre-assessment notice is not protested within fifteen (15) days from receipt thereof, forward the docket to the Tax Billing Section for preparation of Final Assessment Notice (FAN). Tax Billing Section, 7. Prepare final assessment notice and Assessment Division demand letter for final approval and signature of the Regional Director. 8. Prepare termination letter(Annex "H") after approval of the report of investigation by the Regional Director. Assistant Regional Director 9. Review and initial report of investigation, including Final Assessment Notice, Demand Letter and Termination Letter. Regional Director 10. Approve/sign the Report of Investigation, Termination Letter or Final Assessment Notice. 11. Transmit the entire docket of the case to the Assessment Division. Chief, OAS 12. Update entries to the LA Register based on information reflected in the approved report of investigation. 13. Transmit original copy of Termination Letter or Final Assessment Notice to the Administrative Division for mailing. 14. Forward entire docket of closed and terminated cases to the Administrative Division for safekeeping. Administrative Division 15. Mail all FANs through registered mail with return card. Provide Chief, OAS with copies of Registry Receipts as proof of mailing. 16. Keep dockets of closed and terminated cases on file. F. Action on Protested Cases Responsible Office/Person Process RO, Review & Evaluation Section, 1. Evaluate the merits of the taxpayer's Assessment Division protest letter requesting for reinvestigation/reconsideration of the assessment and prepare recommendation in accordance with RR No. 12-85. Chief, Assessment Division 2. Approve/disapprove taxpayer's request for reinvestigation/reconsideration. 3. Refer to RO (Assessment), OAS the entire docket of protested cases with granted requests for reinvestigation/ reconsideration for appropriate action. RO (OAS) 4. Evaluate docket/documents under reinvestigation/reconsideration and prepare appropriate recommendation. 5. In case there will be a change in the assessment due to the reinvestigation/reconsideration, prepare revised BIR Forms 1717/0500 and attach to the docket. The approval of the amended reports of investigation shall involve the same processes as the original reports of investigation. G. Submission of Periodic Reports Responsible Office/Person Process RO, OAS 1. Prepare and submit an individual Monthly Inventory of Pending Office Audit Cases (Annex "I") and individual Monthly Report on Audit Cases Closed and Assessed (Annex "J") on or before the 5th day of the following month for submission to the Chief, OAS. Chief, OAS 2. Prepare the following monthly reports for signature of the Chief, Assessment Division/Regional Director on or before the 7th day of the month: a. Status of Office Audit LAs Issued and Acted Upon (Annex "K") b. Report on Cases Closed and Assessed (Annex "L") c. Inventory of Pending Cases (Annex M) d. Report on Closed Cases/Dockets (Annex "N") e. Report on Office Audit LAs Issued (Annex "O") 3. Affix initials and submit the reports to the Chief, Assessment Division thru the Assistant Division Chief, Assessment Division. Chief, Assessment Division 4. Affix initials on the monthly List of Office Audit LAs Issued and transmit to the Regional Director for signature. 5. Sign all other reports prepared by Chief, OAS. 6. Submit the prescribed reports to the Assessment Service, copy furnished the Regional Director not later than the 10th day of the following month. Regional Director 7. Sign the monthly Report on Office Audit LAs Issued and transmit the same to the Assessment Service on or before the 10th day of the month. 8. Prepare a monthly Summary Report of Office Audit Cases Closed, Assessed and Outstanding (Annex "P") and submit to the Assessment Service together with the Regional Accomplishment Report on Assessment Activities. V. DEVIATIONS FROM POLICIES Deviations from these policies may be allowed but only upon prior written authorization from the Assistant Commissioner, Assessment Service as recommended by the Regional Director. VI. REPORTING REQUIREMENTS The Chief, Assessment Division shall submit a Monthly Status of Office Audit Letters of Authority Issued and Acted Upon (Annex "K"), Monthly Report of Cases Closed and Assessed (Annex "L"), Monthly Inventory of Pending Cases (Annex "M"), and Monthly Report of Closed Cases/Dockets (BIR Form No. 0603-A) (Annex "N") to the Assessment Service, copy furnished the Regional Director not later than the 10 th day of the following month. The Regional Director shall submit to the Assessment Service a Monthly Report of all Office Audit LAs Issued (Annex "O") on or before the 10 th day of the following month. Likewise, he shall submit to the Assessment Service the Monthly Summary Report of all Office Audit Cases Closed, Assessed and Outstanding (Annex "P") which shall be included as part of the Regional Accomplishment Report on Assessment Activities (BIR Form 40.21) prescribed under RMO No. 67-99. VII. VIOLATIONS Any unauthorized deviation from the foregoing policies and procedures and/or violation of any provision of this Order will result in the imposition of disciplinary action to the concerned revenue officers and officials and such shall be referred to the Internal Affairs Service for appropriate investigation. In this regard, the Assistant Commissioner, Assessment Service thru the Deputy Commissioner for Operations may recommend to the Commissioner the relief, re-assignment or transfer of any revenue official violating any of the provisions and instructions prescribed in this Order. VIII. REPEALING CLAUSE All other issuances inconsistent herewith are hereby modified or repealed accordingly. LibLex IX. EFFECTIVITY This Order shall take effect immediately upon approval. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue ANNEX A LIST OF TAXPAYERS SELECTED FOR OFFICE AUDIT ANNEX B LETTER OF AUTHORITY ANNEX C LIST OF TAX RETURNS PROCESSED ANNEX D OFFICE AUDIT CHECKLIST OF REQUIREMENTS Name of Taxpayer: _________________________________________________ Address: _________________________________________________________ Taxable Year: ____________ OA-LA No.: ____________ Date: _____________ I. INCOME TAX __________ 1. Audited Financial Statements __________ 2. Account Information Forms __________ 3. Books of Accounts __________ 4. Sales Invoices __________ 5. Official Receipts __________ 6. Sales Contracts __________ 7. Partnership Agreement __________ 8. Others (Specify) __________________________________ __________________________________ __________________________________ II. WITHHOLDING TAXES __________ 1. Monthly/Quarterly/Annual Returns of Taxes Withheld __________ 2. Alphabetical List of Employees and Payees From Whom Taxes Were Withheld __________ 3. Schedule of income payments subject to withholding tax and corresponding tax remittances __________ 4. Others (Specify) __________________________________ __________________________________ __________________________________ III. VALUE-ADDED TAX __________ 1. Quarterly VAT Returns and Monthly VAT Declarations __________ 2. Schedule of Sales/Income subject to output tax __________ 3. Schedule of Purchases for which input tax was claimed and supporting documents __________ 4. Approved application for zero-rating __________ 5. Schedule of importation and supporting documents __________ 6. Others (Specify) __________________________________ __________________________________ __________________________________ IV. PERCENTAGE TAX __________ 1. Non-Vat Registration Certificate __________ 2. Quarterly Remittance Return of Percentage Tax __________ 3. Schedule of Sales/Income/Gross Receipts V. DOCUMENTARY STAMP TAX __________ 1. Official Receipts evidencing payment of documentary stamp tax __________ 2. Documentary stamp tax returns duly validated by the bank ANNEX E BUREAU OF INTERNAL REVENUE Revenue Region No. ____ ___________________________ Assessment Division Office Audit Section Date ______________ SECOND NOTICE ____________________ ____________________ ____________________ Sir/Madam: A letter was previously sent to you wherein we requested you to provide us with documents and records which are necessary for the correct determination of your tax liabilities for the year ________. As of this date, however, we have neither received any reply from you nor the required documents and records. In order to expedite the examination of your tax return(s), you are requested to furnish us the requested documents/records per attached Office Audit Checklist. We shall be glad to attend to you or your authorized representative between 8:30 a.m. to 4:30 p.m., Monday through Friday. Very truly yours, ________________________ Chief, Assessment Division In reply, refer to: Revenue Officer __________________/Group Supervisor _____________ Office Audit Section, Assessment Division Telephone No. _____________ Office Audit Letter of Authority (LA) No. ___________ Date of LA _________________ ANNEX F BUREAU OF INTERNAL REVENUE Revenue Region No. ____ ___________________________ Assessment Division Office Audit Section Date ______________ FINAL NOTICE ____________________ ____________________ ____________________ Sir/Madam: Office Audit Letter of Authority No. _________ together with the Office Audit Checklist of Requirements and a Second Notice dated ____________ and ____________, respectively, were sent to you in connection with the examination of your tax liabilities for the year ___________. As of this date, however, we have neither received any reply from you nor any of the documents specified in the said checklist. In order to expedite the examination of your tax return(s), you are requested to furnish us the requested documents per attached Office Audit Checklist not later than ________________. In case you fail to respond to this final notice, we shall be constrained to refer your case to our Legal Division for issuance of a Subpoena Duces Tecum and for appropriate legal action. Very truly yours, ________________________ Chief, Assessment Division In reply, refer to: Revenue Officer __________________/Group Supervisor _____________ Office Audit Section, Assessment Division Telephone No. _____________ ANNEX G REVENUE REGION NO. _____ _______________________________ Assessment Division Office Audit Section AUDIT SHEET ______________ Date Name of Taxpayer: ___________________________________________________ Taxable Year: _________________ Business/Profession: ______________________ Coverage: ____________________ LA No. __________ Date Issued ___________ A. INCOME TAX Net income per return P ______________ Add: Discrepancies/Disallowances _____________________ P _________ _____________________ _________ _____________________ _________ _____________________ _________ _____________________ _________ Total discrepancies/disallowances _________ Net income per audit P _________ Income tax due P _________ Less: Tax due per return P _________ Deficiency income tax P _________ Add: Surcharge P _________ Interest P _________ Compromise penalties P _________ Total increments _________ TOTAL DEFICIENCY INCOME TAX ASSESSMENTS P _________ B. VALUE-ADDED TAX (VAT) Gross sales/receipts per return(s) P _________ Add: Discrepancies in sales/receipts _____________________ P _________ _____________________ _________ _____________________ _________ _____________________ _________ _____________________ _________ Total discrepancies in sales/receipts _________ Total gross sales/receipts per audit P _________ Output tax per return P _________ Less: Out tax per return P _________ Balance of output tax due P _________ Add: Disallowances of input tax _____________________ P _________ _____________________ _________ _____________________ _________ _____________________ _________ _____________________ _________ Total input tax disallowances _________ Deficiency VAT P _________ Add: Surcharge P _________ Interest _________ Compromise Penalties _________ Total increments _________ TOTAL VAT ASSESSMENTS P _________ C. PERCENTAGE TAX Gross receipts per return(s) P _________ Add: Discrepancies in receipts _____________________ P _________ _____________________ _________ _____________________ _________ _____________________ _________ _____________________ _________ Total discrepancies _________ Gross receipts per audit _________ Percentage tax due _________ Less: Percentage tax per return(s) _________ Deficiency percentage tax _________ Add: Surcharge P _________ Interest _________ Compromise penalties _________ Total increments _________ TOTAL PERCENTAGE TAX ASSESSMENTS P _________ D. DOCUMENTARY STAMP TAX (DST) Documents/transactions subject to DST ______________________________ _________ ______________________________ _________ ______________________________ _________ ______________________________ _________ ______________________________ _________ Total DST due P _________ Less: DST payments _________ Deficiency DST _________ Add: Surcharge P _________ Interest _________ Compromise penalties _________ Total increments _________ TOTAL DEFICIENCY ASSESSMENTS P _________ E. WITHHOLDING TAX Payments/Transactions subject to Withholding Tax ________________________ P _________ ________________________ _________ ________________________ _________ ________________________ _________ ________________________ _________ Total Withholding Tax due P _________ Less: Withholding Tax remittances _________ Deficiency Withholding Tax _________ Add: Surcharge P _________ Interest _________ Compromise penalties _________ Total increments _________ TOTAL DEFICIENCY WITHHOLDING TAX ASSESSMENTS P _________ F. EXCISE TAX Removal of articles subject to excise tax _________ Applicable excise tax rate _________ Excise Tax due P _________ Less: Excise tax paid _________ Deficiency excise tax P _________ Add: Surcharge P _________ Interest _________ Compromise penalties _________ Total increments _________ _________ TOTAL DEFICIENCY EXCISE TAX ASSESSMENTS P _________ TOTAL DEFICIENCY TAX ASSESSMENTS P _________ Prepared by: ______________________ Revenue Officer Reviewed by: Approved: _______________________ _______________________ Chief, Office Audit Section Chief, Assessment Division REMINDER: The above-computed deficiency tax assessments(s) is (are) not yet final. The corresponding report of investigation covering this tax case is still subject to approval by higher authorities. ANNEX H Republic of the Philippines Department of Finance BUREAU OF INTERNAL REVENUE Revenue Region No. ____ ___________________________ TERMINATION LETTER _____________ ______________________ ______________________ ______________________ Dear Sir/Madam: In connection with the routine verification of your tax liabilities for the year _______, please be informed that the report of the investigation submitted by Revenue Officer _____________________ was approved. Our records show that you paid the following amounts as deficiency tax/es upon the conclusion of the audit of your returns: In view thereof, this case is now considered closed and filed for future reference. Very truly yours, ___________________ Regional Director ANNEX I MONTHLY INVENTORY OF PENDING OFFICE AUDIT CASES ANNEX J MONTHLY REPORT ON OFFICE AUDIT CASES CLOSED AND ASSESSED Assessment Division Revenue Region No. ___, _________ MONTHLY REPORT ON OFFICE AUDIT CASES CLOSED AND ASSESSED For the Month of ____________ Note: 1. In reporting the deficiency assessments/collections per kind of tax, deficiency tax on withholding tax shall follow the classification of the principal tax. For example, withholding tax on income payments shall be classified under income tax while withholding on VAT shall be reported under VAT. 2. In counting the number of cases per kind of tax, if the audit of a Letter of Authority resulted to deficiency assessments/collections for more than one type of tax, such shall be considered as separate cases except for withholding tax. For example, an audit which resulted to deficiency assessment on income tax and VAT shall be counted as one case for income tax and another case for VAT. For withholding tax, if the principal tax (income, VAT or Percentage) was already considered, the case for withholding tax will no longer be counted but the amount of deficiency withholding tax shall be included in the deficiency assessment/collection of the principal tax. For example, an audit of a return which resulted to deficiency assessments on income and withholding tax shall be reported as only one case for income tax. Submitted by: _______________________ __________________ Revenue Officer Employee's ID Number Signature Over Printed Name Attested by: ______________________ __________________ Chief, Office Audit Section Employee's ID Number Signature Over Printed Name ANNEX K MONTHLY STATUS OF OFFICE AUDIT LETTERS OF AUTHORITY ISSUED AND ACTED UPON ANNEX L MONTHLY REPORT ON OFFICE AUDIT CASES CLOSED AND ASSESSED ANNEX M MONTHLY INVENTORY OF PENDING OFFICE AUDIT CASES/DOCKETS ANNEX N-1 Instructions for BIR Form 0603-A 1. BIR Form 0603-A will be completed monthly by the Chief, Assessment Division in triplicate. The form is a region-wide summary of the cases/dockets closed by individual Revenue Officers. The original form will be forwarded to the Assistant Commissioner, Assessment Service, one copy will be sent to the Revenue Regional Office, and one copy will be retained by the Assessment Division. The form will be completed and forwarded to the National Office and Regional Office on the 10 th day of the month immediately following the reporting period. 2. BIR Form 0603-A is divided into two sections. income tax - individuals including withholding returns income tax - corporations and partnerships including withholding returns The sections on income tax returns also include withholding tax investigations. Each Letter of Authority issued is counted as one audit. Under the package audit concept, Letters of Authority are applicable to all types of tax. 3. Specific Instructions for BIR Form 0603-A Heading 1 Enter the revenue region office number and name and the month covered by the report. Column 1 Tax Year Information on reported cases (dockets) will be provided by tax year. Column 2 Total Reported Dockets Enter the total number of dockets/cases closed during the month including original and reinvestigation audits. For purposes of this report, a docket is considered closed when it is forwarded to management for review consisting of the Chief of the Office Audit Section, Assistant Chief, Assessment Division and the Chief, Assessment Division. The data in this column should match the total of the data in Column 4a and 4b of Inventory of Pending Cases (Annex M). Column 3 Breakdown of Closed Cases/Dockets This column breaks down the number or original office audit investigation closed cases/dockets based on the Office Audit Work Plan Selection Code. The Office Audit Work Plan Selection Codes are outlined below. Note: Not all selection codes are applicable to each section of the report. Enter the total cases/dockets closed based on the selection code in each of the applicable columns. Each closed case will be entered in only one column. Column 3a Enter the number of audits closed during the month for taxpayers selected in the district who filed break-even returns or with returns showing net loss for at least two consecutive years (BEL). Column 3b Enter the number of audits closed during the month for taxpayers selected in the district whose tax due per return is less than 2% of the reported gross sales/income (LPR). Column 3c Enter the number of audits closed during the month for taxpayers with substantial reduction in gross sales/receipts/tax payments and/or substantial increase in cost of sales and expenses (SRS). Column 3d Enter the number of audits closed during the month for taxpayers belonging to the industries categorized as "Other Priority" taxpayers (PTL). Column 3e Enter the number of audits closed during the month for taxpayers who made partial availment of the ERAP to the extent of the tax liability not covered by the availment (PRP). Column 3f Enter the number of audits closed during the month for taxpayers identified by top management (NOM). Column 3g Enter the number of audits closed during the month for taxpayers selected for audit by the Chief, Assessment Division which do not fall within the above guidelines provided these cases are within the set thresholds and the Division can still effectively manage its overall workload inventory (CAD). Column 4 Enter the number of reinvestigations/protested cases closed during the month (REV). Note: The sum of Column 3 and Column 4 should equal Column 2. Report Summary Line 1 Enter the total number of cases/dockets closed this month with Letters of Authority (Sum of Column 2, Sections A to B). Line 2 Enter the total number of closed cases/dockets year to date with Letters of Authority. Line 3 Enter the total number of cases selected for Office Audit as approved by the ACIR, Assessment Service. Any approved changes in the total number of cases must be properly accounted for and reflected in this line. This line must show the total number of cases to be audited by the Assessment Division under the Office Audit Program. Line 4 Enter the percentage of completion based on the total number of cases selected for Office Audit (Line 2 Line 3). 4. Approval of the Report The Chief, Assessment Division shall require the Chief, Office Audit Section to take responsibility in the preparation of BIR Form 0603-A and ensure its completeness and accuracy by comparing the data in Column 2 with the data in Column 4 of Inventory of Pending Cases (Annex M). The Assistant Chief, Assessment Division will review the accomplished form and initial the report prior to its approval by the Chief, Assessment Division. The Chief, Assessment Division will review, approve and sign BIR Form 0603-A certifying its correctness and indicating thereon the date of its approval. BIR Form 0603-A must be submitted to the Assistant Commissioner, Assessment Service and to the Regional Director on or before the 10 th day of the following month. ANNEX O MONTHLY LIST OF OFFICE AUDIT LETTERS OF AUTHORITY ISSUED ANNEX P MONTHLY SUMMARY REPORT ON OFFICE AUDIT CASES CLOSED, ASSESSED AND OUTSTANDING