RMO No. 20-2008: Prescribes the guidelines for the preliminary analysis and audit/verification of 2007 internal revenue tax returns and the corresponding tax payments for taxpayers under the Large Taxpayers Service and Revenue Regions/Revenue District Offices

Summary

RMO No. 20-2008 prescribes guidelines for the preliminary analysis and audit or verification of 2007 internal revenue tax returns and payments of taxpayers under the Large Taxpayers Service (LTS) and the Revenue Regions and RDOs.

Key points

1. Pre-audit and benchmarks. Heads of investigating offices pre-audit 2007 income and business tax returns of corporations and individuals in business or practice of profession. Taxpayers are classified by industry or profession, and returns of those whose tax compliance ratio is below the normal industry benchmark are selected for audit.
2. Compliance ratios. For income tax, the ratio is tax due per final income tax return over gross sales, revenues or receipts. For business tax, it is net VAT payable for the four quarters over gross taxable sales (BIR Form No. 2550Q), or percentage tax due for the year over the taxable base (BIR Form No. 2551M or 2551Q).
3. Pre-audit focus. Focus areas include computation of tax due and payment, MCIT application, validity of income tax holiday and other incentive claims, and limits on interest, contributions and representation expenses. They also cover creditable withholding tax claims, Tax Credit Certificates supported by an approved Tax Debit Memo, and carry-over and offsetting of excess credits and partial payments.
4. LAs and TVNs by gross sales. LAs are issued where gross sales exceed P 10,000,000.00 in Revenue Region Nos. 5, 6, 7 and 8, except RDO Nos. 35, 36 and 37, and exceed P 5,000,000.00 in all other regions. TVNs are issued at P 10,000,000.00 and below, or P 5,000,000.00 and below, for the same groups. Taxpayers under the LTS get LAs when below the benchmark.
5. Mandatory cases. RDOs also issue LAs or TVNs for claims for tax credit certificates and refunds, estate tax returns, taxpayers retiring from business, those undergoing mergers or other reorganizations, protested cases, and those who transferred their principal place of business in taxable year 2007.

Who is affected

• Taxpayers under the Large Taxpayers Service
• Taxpayers under Revenue Regions and RDOs
• Corporations and individuals engaged in business or practice of profession

Deadlines and effectivity

• Covers 2007 internal revenue tax returns and payments

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