RMO No. 19-2010: Prescribes the policies and guidelines in the conduct of investigations relative to the Taxpayers’ Lifestyle Check System

Key points

1. Indirect methods of proof. Taxable income may be shown by direct evidence when available. Indirect methods may be used when, among other conditions, the taxpayer keeps no books and records or they are unavailable, inadequate, or withheld from authorized Revenue Officers. Books that match the returns do not bar indirect proof.
2. Basis for assessments. RAMO No. 1-2000 is followed, and the BIR relies on RMC No. 23-2000 for deficiency assessments based on the Best Evidence Obtainable. Section 6(c) of the NIRC lets the BIR prescribe the minimum taxable base.
3. Verifying assets and spending. The National Investigation Division verifies high value assets and conspicuous spending through records of government and private entities, such as the Land Transportation Office, Registries of Deeds and credit card companies. The ACIR, Enforcement Service sets up linkages with agencies and checks the Integrated Tax System for TIN, registered address and business, returns filed and taxes paid.
4. Properties of relatives. Properties registered under a child or other relative are considered the taxpayer’s when not proven to have been acquired through means under the New Civil Code with tax paid, and/or when the child or relative has no independent means sufficient for the acquisition.
5. Prima facie evidence and data warehouse. An increased networth or substantial assets and spending out of line with declared income, with no Income Tax Return filed for that period per the ITS, is prima facie evidence of fraud and/or substantial under-declaration. A Letter of Authority may then be issued. An Electronic Data Warehouse will store TLCS information, and Special Investigation Divisions of Regional Offices and other audit offices may implement the TLCS upon the Commissioner’s approval.

Who is affected

• Individual taxpayers under lifestyle check
• National Investigation Division
• Assistant Commissioner, Enforcement Service