RMO No. 42-2003: Prescribes additional guidelines on the assessment of national internal revenue taxes covered by Letter Notices issued under the RELIEF system

Summary

RMO No. 42-2003 prescribes additional guidelines on assessing national internal revenue taxes covered by a Letter Notice (LN) issued under the RELIEF System and other data matching processes.

Key points

1. No-contact-audit approach. The Bureau adopts this approach, which includes computerized matching of sales and purchases data in the Schedules of Sales and Domestic Purchases and the Schedule of Importation submitted by VAT taxpayers under the RELIEF System. It may also match data from other information or returns filed with the BIR.
2. Letter Notices and amended returns. Taxpayers with under-declared sales and over-claimed purchases are notified of discrepancies through LNs. An LN counts as notice of audit or investigation for amending a return, so a taxpayer served with an LN can no longer amend the return.
3. Generation and service. The BIR computer system generates LNs automatically with the Details of Taxpayer’s Customer/Supplier Records (DTCS). They go to the RDO, LTDO or LTAID for service on the taxpayers.
4. Effect of an LN. An LN does not prevent the Commissioner from issuing a Letter of Authority for a comprehensive audit. It does not waive the Commissioner’s right to look into the reasonableness of operating and administrative expenses. It serves as a discrepancy notice similar to a Notice for Informal Conference.
5. Response periods and indorsement. The taxpayer may reconcile the discrepancy. If there is no response within 15 days from receipt of the LN, a follow-up letter gives 10 days to respond. If there is still no response, the case is indorsed with least possible delay to the Assessment Division of the Region or the appropriate office, for a Preliminary Assessment Notice and Final Assessment Notice, as the case may be.

Who is affected

• VAT taxpayers filing under the RELIEF System
• Taxpayers with under-declared sales or over-claimed purchases

Deadlines and effectivity

• 15 days from receipt of the LN to respond
• 10 more days after the follow-up letter

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