RMO No. 19-2015: Prescribes the BIR Audit Program

Summary

RMO No. 19-2015 prescribes the BIR Audit Program, setting policies, guidelines and procedures for the audit and investigation of tax returns through electronic Letters of Authority (eLAs).

Key points

1. Coverage and selection. All taxpayers are possible audit candidates, and eLAs cover mandatory cases, priority taxpayers and industries, and other priority audits identified by the Regional Director or the ACIR-LTS. Regional tax cases under items II.2 to 3 of the Order consist of 60% TAMP and 40% non-TAMP taxpayers of the RDO. Only returns of taxpayers registered in the office’s jurisdiction that match the selection criteria may be selected, or administrative sanctions apply.
2. Unaudited taxpayers and repeat audits. RDOs, LTDs and LTADs prepare two lists of unaudited taxpayers: those in operation for more than three (3) years up to five (5) years, and those in operation for more than five (5) years. A taxpayer audited for the last two (2) years and selected again in the 3rd year needs a written explanation to the Commissioner, unless an under-declaration of sales or income or overstatement of expenses or deductions of at least 30% is established, which is prima facie evidence of fraud. Deficiency assessments on these cases carry a 50% surcharge.
3. Systems and assignments. The Electronic Letter of Authority Monitoring System (eLAMS) is used to request, approve and issue eLAs and update their status until the Case Management System of the enhanced eTIS is rolled out. Electronic Memoranda of Assignment issued through eLAMS cover reassignment for a departed Revenue Officer, returned cases, referral to another investigating office, and protested cases or cases for reinvestigation.
4. One eLA per period. As a general policy, all liabilities of the taxpayer are investigated simultaneously, with one eLA for each taxable year or period, except when a tax type was previously examined. Only Revenue Officers of the Assessment Group may conduct audits, except under the Run After Tax Evaders Program. The same Revenue Officer or Group Supervisor is not assigned to a taxpayer examined the prior year, except where there is only one Group Supervisor or at most four (4) Revenue Officers in the office.
5. Special cases. VAT refund or TCC claims get one eLA for each taxable period or quarter of claim. Retiring taxpayers get one eLA covering the immediately preceding year and the short period, with two separate reports, and those with gross sales or receipts of P1,000,000.00 and below or gross assets not exceeding P3,000,000.00 are no longer verified or investigated. Estate tax cases with other tax liabilities get two eLAs and three separate reports, and estate tax cases with no other liabilities get a Tax Verification Notice regardless of gross estate, per RMO No. 69-2010.
6. Late reports and sanctions. A late report of investigation does not nullify the eLA, which stays enforceable subject to the periods of limitation under Sections 203 and 222 of the Tax Code of 1997, as amended. The Revenue Officer files a monthly progress report on the delay and may face administrative sanctions. A random revalida of audit cases may be conducted by the Office of the Commissioner or an office it designates.

Who is affected

• Taxpayers selected for audit
• Revenue Officers
• RDOs, LTDs, LTADs and the ACIR-LTS

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.