RMO No. 11-2006: Prescribes the 2006 Audit Program for Revenue District Offices

Key points

1. Coverage. The program covers investigation of 2005 internal revenue tax returns and income tax returns of fiscal period taxpayers whose taxable year ended on June 30, 2006. Returns for 2004 and prior years may be audited only with prior approval of the Commissioner, except claims for tax credit/refund, estate tax returns and tax clearance requests due to retirement of business.
2. When LAs and ANs are issued. Letters of Authority and Audit Notices are issued only in listed cases. These include mandatory cases such as income tax or VAT refund and tax credit claims exceeding P100,000.00, estate tax returns, and tax clearance requests with gross assets of P10,000,000.00. They also include top priority taxpayers, other priority taxpayers above stated gross sales or income thresholds, and short or issue-oriented audits.
3. When TVNs are issued. Tax Verification Notices are issued only for listed cases. These include income tax and VAT refund or credit claims of P100,000.00 and below, excise tax refund claims regardless of amount, erroneous or double payment claims regardless of amount, and protested cases or cases for reinvestigation.
4. Approval and rotation. The Regional Director prepares, approves and signs all LAs and ANs unless the Commissioner directs otherwise. No LA or AN is issued outside the selection criteria without prior written approval of the Commissioner, and a taxpayer examined for the prior year is not investigated for the next period by the same RO or Group Supervisor, with stated exceptions.
5. Special Investigation Division referral. RDOs refer to the Special Investigation Division taxpayers with substantial reduction in gross sales, receipts or tax payments, or substantial increase in cost of sales and expenses. Also referred are taxpayers found understating sales or income by more than 30%, and consistent violators identified through the TCVD.
6. Case classes and report deadlines. Cases are classified Small, Medium, Large or Very Large by gross sales or receipts or gross assets. Reports of investigation are due within 120 days for Very Large, 90 for Large, 60 for Medium and 30 for Small/TVN cases, and 120 days from submission of complete documents for VAT refund or credit claims.

Who is affected

• Revenue District Offices
• Regional Directors
• Taxpayers selected for audit under the listed criteria

Deadlines and effectivity

• Covers 2005 returns and fiscal returns for the year ended June 30, 2006
• Report of investigation: 120 days Very Large, 90 Large, 60 Medium, 30 Small/TVN
• VAT refund/credit claims: 120 days from submission of complete documents