RMO No. 46-2004: Provides additional supplement and guidelines in handling Letter Notices with discrepancies arising from Data Matching Process that remain unserved, have been served but are without response or are under protest by taxpayers

Summary

RMO No. 46-2004 supplements the guidelines for handling Letter Notices (LNs) with discrepancies from the Data Matching Process that remain unserved, are served without response, or are under taxpayer protest.

Key points

1. Nature of discrepancy. A discrepancy under the no-contact-audit approach is the result of computerized matching of third party data against filed return information. It is not the result of an audit or investigation.
2. No-response LNs. LNs with no response are no longer forwarded to the Special Concerns Group (for SLS/SLP LNs) or the Technical Working Group (for BOC LNs). If the discrepancy is less than 30%, the Revenue Officer endorses the case to the Regional Assessment Division, or the Large Taxpayers Service equivalent, for a Preliminary or Final Assessment Notice.
3. Discrepancy of 30% and above. For a discrepancy of 30% and above, the Revenue Officer institutes closure proceedings under Revenue Memorandum Order No. 31-2002.
4. Protests. The Revenue Officer evaluates the protest and requires the taxpayer to execute a Sworn Statement on the alleged inaccuracies or errors in the Third Party Information (TPI). The TPI provider, except BOC, also executes a Sworn Statement attesting to the data it provided.
5. Tax evasion. Based on the documents of both TPI providers and the taxpayer, the Regional Director or Head of the Large Taxpayers Service decides, in addition to criminal charges, the most appropriate enforcement action such as audit, investigation, surveillance or stock-taking.
6. Audit approach and period. An audit should, whenever possible, be issue-based, focusing on the TPI information and the taxpayer’s explanation. A comprehensive audit is undertaken only when an issue-based audit is not feasible. The Revenue Officer has a minimum of 30 days and a maximum of 60 days from the TPI source’s Sworn Statement to end the audit or investigation.

Who is affected

• Taxpayers with unserved, unanswered or protested Letter Notices
• Revenue Officers
• Regional Directors and the Head of the Large Taxpayers Service

Deadlines and effectivity

• Audit or investigation: minimum of 30 days and maximum of 60 days from submission of the TPI source’s Sworn Statement

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