By: Tax and Accounting Center Philippines
Under Revenue Memorandum Circular No. 6-2018 (RMC 6-2018) dated December 18, 2017, the Bureau of Internal Revenue (BIR) has published and disseminated its priority programs for calendar year 2018 identified and adopted during its 2018 Annual Planning Session held last December 8-9, 2018 taking into consideration the Tax Reform for Acceleration and Inclusion (TRAIN) Law under Republic Act No. 10963. This RMC will address three (3) principal objectives of the BIR as follows:
Attain Collection Targets
To attain the BIR’s collection target for calendar year 2018, it would initiate the following programs:
Improve Taxpayer Satisfaction
For improving the taxpayer satisfaction, the BIR would initiate the following programs:
Strengthen Good Governance
For the effective management and integrity of the tax personnel and collection, the BIR would initiate the following:
BIR offices are enjoined to align their activities and projects to the above programs, to ensure the achievement of the above principal objectives, and fulfillment of BIR’s mandate.
For more details on the 2018 BIR Priority Programs in the Philippines, please download the copy of RMC 6-2018.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org, or you may post a question at Tax and Accounting Center Forum and participate therein.
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By: Garry S. Pagaspas
Under Executive Order No. 782 series of 2009 (EO No. 782) entitled “Instituting Measures to Assist Workers Affected by Global Financial Crisis and Temporary Filling Up of Vacant Positions in the Government”, all departments and agencies of the government are authorized to set-aside 1.5% of their Maintenance and Other Operating Expenses (MOOE) for temporary hiring of qualified Department of Labor and Employment (DOLE) registered displaced workers and their dependents on a job order basis. As I browse the internet, tax compliance of job order basis personnel had been a common topic for discussion both by the personnel involved and the government agency employee in charge for withholding. Accordingly, this article is an attempt to reach them out and guide them on their tax compliance, though; this is neither equivalent to an expert opinion, nor, a formal ruling on the matter. The author strongly suggest that the job order personnel, agency employees and others concerned secure formal confirmation with the Bureau of Internal Revenue (BIR)
How are job order personnel classified, employee or contractor?
Under BIR Ruling No. 8-2010, it was ruled that the performance of services by job-order personnel, who, is a non-professional, hired pursuant to EO No. 782 is not under “employer-employee relationship in reference to DOLE-DBM Joint Circular No. 1-092 and CSC Memorandum Circular No. 38 series of 1993. Services of job-order personnel are construed as a sale of service under Section 108 of the 1997 Tax Code, as amended, imposing value added tax (VAT) on sale of services. Tax compliance of job order personnel would then follow this classification – construed as seller of service and not as employee.
Withholding tax on income payments of job order personnel Philippines?
Under Revenue Regulations No. 2-98, as amended, government agencies are required to withhold income taxes on income payments made to its local resident supplier of services as follows:
The above rates apply to job order personnel depending on their classification to non-professional or professional, and the level of current year gross income. To determine the level of income, Revenue Regulations 2-98, as amended, further requires filing an affidavit of declaration with the BIR to substantiate the application of the 10% or 15% on professional fees. The employer agency could do the same in behalf of the professional, if the service of the professional is exclusive to such government agency.
The government agency will remit to the BIR such amount withheld from the job order personnel within the time prescribed by the regulations for remittance (e.g. not later than the 10th day following the end of applicable month using BIR Form No. 1601E). Likewise, the government agency will issue the job order personnel a proof of withholding tax, BIR Form No. 2307 (Certificate of Withholding Taxes Withheld) with filled-out on the upper portion of the form. Issuance could be made on a quarterly basis, or on every check payment to the job order personnel.
Withholding of 3% percentage tax or 5% value added tax of job order personnel Philippines?
Being a seller of service to the government agency, a job order personnel is liable for business tax as follows:
For a government agency payor, it is required to withhold the business tax as follows:
Notably, the withholding of business tax is in addition to the withholding of income tax above for 2% or 10%/15%. As proof of withholding of business tax and remittance, the government agency will issue the job order employee BIR forms as follows:
Substituted filing is allowed for 3% withholding tax of OPT, while 5% seems to be the final VAT liability for job order employees.
Summary
In sum, the rules on how the government agency will withhold the corresponding withholding tax has been provided as could be shown above through a combination of existing rules. What seems to be lacking is the rules on how the job order personnel would do its tax compliance specially on the following aspects:
While there could be some rules that could be applicable to them from existing regulations, there seems to be no formal issuance specifically applicable to the job order personnel with respect to its tax compliance in the Philippines. The author hopes that the tax authority will soon issue some more guidelines and clarifications on the above for guidance and easy reference.
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for about ten (10) years now helping out taxpayers on tax compliance, tax savings, tax assessments, tax refunds, financial statements audit, and other related professional accounting services. He is presently a frequent speaker of Tax and Accounting Center, Inc. and you may send him mail at garry.pagaspas(@)taxacctgcenter.org.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.org, or you may post a question at Tax and Accounting Center Forum and participate therein.
The President of the Philippines issued Proclamation No. 831 dated July 17, 2014 declaring the regular holidays, special (non-working) days, and special holidays for calendar year 2015. Luckily, there are at least twelve (12) long weekends that each of us could maximize such as going for a land travel, tour overseas, make family vacations, and more. Below are the list of 2015 holidays in the Philippines:
2015 Regular Holidays Philippines
2015 Special Non-working Days Philippines
2015 Additional Special Non-working Days
Special Holiday (for all schools)
Additional National Holdiay
The above two (2) additional national holiday in the Philippines shall be declared based on a separate proclamation after the approximate dates of the Islamic holidays have been determined.
We commend the Office of the President for the early release of the 2015 list of Philippine holidays under Proclamation No. 831. At this early, business establishments, public offices, schools, and other private offices could plan ahead courses of action towards effective operations during those Philippine holidays under Proclamation No. 831.
For private and public employees, business owners, corporate officers, freelancers in the Philippines, and students of public and private schools, it is a good opportunity to plan a vacation in tourist destinations in the Philippines (e.g. Boracay Philippines, Palawan, Cebu, Bohol, Davao, Camiguin, Leyte-Samar, etc), or plan travels abroad. Please note that it is best to book a plane ticket long ahead of travel dates for cheaper airline tickets.
Featured SME – Pagaspas Mini Transport
Pagaspas Mini Transport offers Van Rentals to tourist destinations in Luzon and Visayas Philippines for at least six (6) persons at reasonable rates for your planned long week end getaways in any of the following long weekends in the Philippines:
For Laguna or Batangas, an overnight stay would be ideal leaving Manila early Saturday and going back Manila after lunch on Sunday.
They likewise offer tours to other land destinations within the Philippines, and car rental for varying needs. Contact them for details or visit and like its Facebook page.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at inf*@************er.org, or you may post a question at Tax and Accounting Center Forum and participate therein.
For corporations and companies in the Philippines, filing of the audited financial statements with the Securities and Exchange Commission (SEC) for calendar year ending December 31, 2013 is past approaching. As such, we would wish to share some matters related to the filing of the audited financial statements with the SEC for reference and guidance as follows:
When to file audited financial statements with SEC?
Under SEC Circular number 16 series of 2013 dated 13 September 2013, the SEC prescribed the 2014 filing of the 2013 audited financial statements. All corporations, including Philippines branch offices, representative offices, regional headquarters, and regional operating headquarters of foreign corporations that file their audited financial statements at the SEC Head office or at SEC Extension Offices in Davao, Cebu, Ilo-ilo and Baguio shall file their 2013 audited financial statements based on the last digit of its SEC registration number as follows:
Prior to April 14, 2014, all corporations may file their audited financial statements regardless of the last numerical digit of their SEC registration number of license number. Any filing of audited financial statements after April 14, 2014 but before the prescribed date based on SEC number ending shall not be accepted.
What are included in audited financial statement to be filed?
For filing with the Securities and Exchange Commission (SEC) of 2013 audited financial statements in the Philippines this 2014, the following shall be its components for stock corporation:
Before the SEC officer will receive the audited financial statement, it will check whether all of the above applicable components are present, otherwise, it may not accept the same. Likewise, corporations shall need one (1) original copy of the audited financial statements plus three (3) photocopies thereof.
Late filing or non-filing of audited financial statements
Late filing of audited financial statements shall be accepted starting May 19, 2014 and shall be subject to prescribed penalties which shall be computed from the date of the last day prescribed based on the SEC registration ending. It could be a waste on penalties for late filing of audited financial statements. We would suggest you plan your compliance as early as possible, coordinate with your independent certified public accountant in the Philippines for the timely and appropriate compliance.
Under Revenue Memorandum Order No. 20-2013 (RMO 20-2013) dated July 22, 2013 entitled “Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Rulings to Qualified Non-Stock, Non-profit Corporations and Associations under Section 30 of the National Internal Revenue Code of 1997, as amended”, non-stock, non-profit corporations are required to secure BIR Tax Exemption Ruling.
Hereunder are the general requirements for the application for BIR Tax Exemption Ruling:
Notably, the above list is not all inclusive and BIR may required additional documentary requirements for BIR Tax Exemption. For non-stock, non-profit schools and other educational institutions, the following are the additional documentary requirements:
While RMO 20-2013 is under litigation on questions of validity, non-stock, non-profit corporations and associations are encouraged to apply for BIR Tax Exemption ruling in order to continue enjoying their income tax exemptions. Preparing some of the above requirements are quite technical so we suggest that you secure the services of a knowledgeable professional to ensure that the requirements are prepared taking into account the technical requirements of the BIR and related rules.
Once again, the Bureau of Internal Revenue (BIR) has been under fire lately with the issuance of the Revenue Memorandum Order No. 20-2013 (RMO 20-2013) dated July 22, 2013 entitled “Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Rulings to Qualified Non-Stock, Non-profit Corporations and Associations under Section 30 of the National Internal Revenue Code of 1997, as amended”.
Let us try to discuss the features of this new Revenue Memorandum Order No. 20-2013 (RMO 20-2013) and see for ourselves the new rules for BIR tax exemption of non-stock, non-profit corporations in the Philippines.
Only qualified corporations or associations will be exempted
Under RMO 20-2013, only corporations or corporations that are duly qualified under Section 30 of the tax Code, as amended, shall be issued Tax Exemption Rulings. Corporations or associations which apply for tax exemption ruling under Section 30(E) of the Tax Code, as amended, must meet the following:
Non-stock and non-profit corporation or association claiming exemptions under Section 30 of the Tax Code, as amended, but is not qualified will be subjected to regular income taxes. This however, may not apply to corporations claiming tax exemptions under special laws or under other provisions of the Tax Code, as amended, other than Section 30 thereof.
Validity of Tax Exemption Ruling
Under RMO 20-2013, a Tax Exemption Ruling in the Philippines shall be valid for three (3) years from date specified in the Ruling, unless, sooner revoked or cancelled. It shall be deemed revoked if there are material changes in the character, purpose, or method of operation of the corporation or association which are inconsistent with the basis for its income tax exemption.
Tax Exemption Ruling could be renewed upon filing an Application for Tax Exemption / Revalidation under the same requirements and procedures provided under RMO 20-2013. Upon approval, the same shall be valid for another three (3) years, unless sooner revoked or cancelled.
Status of Tax Exemptions issued prior to June 30, 2012
Under RMO 20-2013, tax exemption rulings or certificates issued to corporations or associations listed under Section 30 of the Tax Code, as amended, shall be valid as follows:
For those who would fail to file an application for revalidation on December 31, 2013, RR 20-2013 implies that they have lost their income tax exemption.
Processing of Certificate of Tax Exemption
Applications for tax exemptions are required to be filed with the BIR Revenue District Office (RDO) of registration along with the required documentary requirements for securing BIR Tax Exemption of non-stock, non-profit corporations or associations in the Philippines. After pre-evaluation and findings of the RDO on the qualifications, the RDO shall prepare a recommendation stating the factual and legal bases, and endorse the same to the Office of the Regional Director.
Upon concurrence of the Regional Director, it will forward the docket to the Office of the Assistant Commissioner, Legal Service, Attention: Law Division who shall further review and evaluate the documents submitted. Upon finding in order, the Law Division shall prepare the Tax Exemption Ruling for approval and signature of the Commissioner of Internal Revenue or duly authorized representative.
At the pre-evaluation under RDO level, the applicant may file an appeal to the Regional Director within thirty (30) days from receipt of the RDO denial stating the factual and legal basis for denial.
Documentary requirements
RMO 20-2013 provides specific list of requirements for securing BIR Tax Exemption rulings and certificates. The various requirements are directed to further evaluate the qualifications of the applicant non-stock, non-profit corporation or association. It is not an all inclusive list and BIR may further require additional documentary requirements, if it deem necessary.
In sum, the BIR is now quite meticulous with the provision of BIR Tax Exemption in seeing to it that only those qualified under a particular provision of law could enjoy the benefits of income tax exemption. The mere fact that a corporation is registered as a non-stock and non-profit is not conclusive as to its income tax exemption as it has to duly establish the fact and the legal basis on its claim for exemption. Failure to do so would mean disqualification, and thus, being subject to income tax.
While RMO 20-2013 has a pending case now for the determination of its validity, we suggest that non-stock and non-profit still pursue with the application to avoid being subjected to tax on its non-profit operations.
Under the present rules applicable to registered and licensed certified public accountants in the Philippines, not all of them can just conduct an audit and sign in the audited financial statements. Before one could conduct an audit of the financial statements in the Philippines , the independent CPA must be qualified and must duly accredited.
Here are some of the registrations and/or accreditations a certified public accountant in the Philippines normally required prior to the conduct of an audit on the financial statements for filing with the Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and other government agencies:
1. Board of Accountancy (BOA) Accreditation of CPAs Philippines
Board of Accountancy (BOA) is the professional board of Certified Public Accountants in the Philippines under Professional Regulation Commission (PRC), a government agency administered to register and regulate professionals in the Philippines. BOA accreditation is required for all CPAs in the Philippines conducting audit and signing on audited financial statements. BOA accreditation could either be for sole practitioner CPA or for the professional auditing firm in the Philippines. Bookkeepers and tax preparers are not required BOA accreditation.
2. Bureau of Internal Revenue (BIR) Accreditation of CPAs Philippines
BIR accreditation as tax agent is applicable to those who sign on the audited financial statements for sole proprietorship, partnerships, corporations and associations. It also applies to tax practitioners who sign on tax returns and communications, and represent themselves in behalf of taxpayer-clients. Without BIR accreditation, the BIR could deny acceptance of tax returns and communications, and could not entertain non-BIR accredited agents of taxpayers. A taxpayer could be penalized if its audited financial statements are signed by a non-BIR accredited CPA auditor.
3. Securities and Exchange Commission (SEC) Accreditation of CPAs Philippines
A BOA-accredited and BIR-accredited could already sign on the audited financial statements. However, some SEC regulated entities are required to be audited and signed by an SEC-accredited independent certified public accountant in the Philippines. SEC-accreditation comes in groups depending on the entity – Group A, B, C, and D. If said entities are audited by an auditor not accredited by SEC, then, penalties are likewise imposed.
4. Bangko Sentral ng Pilipinas (BSP) Accreditation of CPAs Philippines
BSP Accreditation is applicable to entities regulated by BSP or Central Bank of the Philippines such as banks and non-bank financial intermediaries. This is in addition to the BOA, and BIR, or even on top of SEC accreditation in some instances.
5. Cooperative Development Authority (CDA) Accreditation of CPAs Philippines
CDA accreditation is on top of BOA and BIR and is required for cooperatives registered with the Cooperative Development Authority. To qualify for CDA accreditation, a CDA accredited seminar is required to be attended and Philippine Institute of Certified Public Accountant (PICPA) offers the same at least once a month.
6. Insurance Commission (IC) Accreditation of CPAs Philippines
IC accredited auditor is likewise on top of BOA and BIR accreditations. This is mostly applicable to entities and corporations registered and under supervision of the Insurance Commission such as insurance brokers, insurance adjusters, life insurance companies, non-life insurance insurance companies, and other insurance companies in the Philippines.
A Certified Public Accountant (CPA) conducting an audit on the financial statements of companies and business entities are required to be accredited by BOA and BIR, in the minimum, except sole proprietorship required to submit audited financial statements which only requires BIR-accredited CPA. Specific entities would require other accreditation based on the supervising and administering government agency over the business or industry. Failure to comply with such required accreditation is at risk for being imposed penalties. Signing CPA’s could be subject to administrative penalties while the business entity could be subject to monetary penalties. Extra care and caution should be exerted by business entities in choosing accredited certified public accountants in the Philippines who would conduct the financial statement audit and sign on the audited financial statements.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances.
By: Garry S. Pagaspas, CPA
Fore registration of a corporation in the Philippines, capitalization is regulated as to minimum amount and is affected by nature of operations, extent of foreign ownership, targeted export market, and other factors. On top of the minimum amount, corporation should be aware of the funding for the operational needs of the company in order to set the healthy level of capitalization that would support the pre-operational financial requirements.
At times, the minimum capitalization requirements of the Securities and Exchange Commission (SEC) may not be sufficient to cover operational financing requirements. Corporations then, ends up securing financing from the stockholders and related parties to meet the financing needs. Such amounts secured is sometimes recorded in the books of accounts as follows:
The choice of account titles in the Philippines for recording purposes may relate to the intention of the parties manifested by documentations –
Is it a temporary financing provision that is intended to the repaid sooner or later? or Is it something permanent that the parties would intend to use borrower corporation’s shares of stock as consideration?
Is it a temporary financing provision that is intended to the repaid sooner or later? or
Is it something permanent that the parties would intend to use borrower corporation’s shares of stock as consideration?
Documentation may depend on which way the parties are leading to and has to be properly executed. Under the tax rules, issues could arise on documentary stamp tax of P1.00 per P200 or fractional part thereof and/or interest income on the part of the lending party – stockholder, officer, or related party.
To clear-up the financial statements side on deposit for future stock subscription in the Philippines, the Securities and Exchange Commission (SEC) has initially issued Financial Reporting Bulletin No. 6 dated April 3, 2012 with revision dated January 24, 2013 (amended FRB No. 6-2012.) inter-relating PAS 32 on equity investment and the provisions of the Corporation Code of the Philippines on the power of the corporation to issue shares of stock to subscribers.
Requirements for Deposit for Future Subscription in Philippines
Under FRB No. 6-2012,as amended, the corporation should not consider a “deposit for future subscription” in the Philippines as an “equity instrument” unless all of the following elements are present:
A subscription agreement stating among other things that it is not contractually obliged to return the consideration received and that the corporation is obliged to deliver own shares of stock for fixed amount of cash or property. On personal note, a company shall not have deposit for future stock subscription on its audited financial statements in the Philippines if there is sufficient unissued capital stock and issuance of unissued shares would require SEC confirmation on the SRC exemption under SRC Rule No. 10. Likewise, with the increase of authorized capitalization filing requirement, corporations should consider booking “deposit for future stock subscription” in the Philippines as early as possible.
Disclosure Requirements on Deposit for Future Stock Subscription in Philippines
FRB No. 6-2012,as amended, further requires that in the financial statements for the reporting period, the corporation shall disclose the following minimum information:
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for about ten (10) years now helping out taxpayers on tax compliance, tax savings, tax assessments, tax refunds, financial statements audit, and other related professional accounting services. He is presently a frequent speaker of Tax and Accounting Center, Inc. and you may send him mail at garry.pagaspas(@)taxacctgcenter.ph.
Securities and Exchange Commission (SEC) in the Philippines issued Memorandum Circular No. 1-2013 (SEC MC 1-2013) dated January 7, 2013 entitled “Mandatory Incorporation of the Tax Identification Number (TIN) of Foreign Investors in All Forms, Papers and Documents Filed with the SEC”. This SEC MC. No. 1-2013 is intended to take effect immediately from its issuance last January 2013.
SEC MC 1-2013 in relation to BIR Revenue Regulations No. 7-2012
Said SEC MC. 1-2013 was issued in relation to Revenue Regulations No. 7-2012 (RR No. 7-2012) dated April 2, 2012 entitled “Amended Consolidated Revenue Regulations on Primary Registration, Updates and Cancellation” where Section 4(1)(V) provides as quoted below:
“Section 4(1)(v) – Non-resident Aliens not engaged in Trade or Business (NRANETB) or non-resident foreign corporation (NRFC) shall be issued TIN’s for purposes of withholding taxes on their income from sources within the Philippines. The withholding agent shall apply for the TIN in behalf of the NRAETB or NRFC prior to or at the time of the filing their monthly withholding tax return.”
In effect, the above provision of RR No. 7-2012 requires the withholding agent to secure tax identification number in the Philippines in behalf of non-resident payees prior to filing or at the time of filing withholding tax returns.
SEC MC 1-2013 in relation to Executive Order No. 98 series of 1998
Likewise, SEC MC 1-2013 was in issued in relation to Executive No. 98 series of 1998 requiring all persons (natural and juridical) dealing with government agencies and instrumentality to incorporate Tax Identification Numbers in all forms, permits, licenses, clearances, official papers and documents which they secure from these government agencies and instrumentalities.
What are the new SEC rules on TIN of foreigners?
Under SEC MC No. 1-2013, the following new guidelines are issued with respect to applications or documents filed by corporations or partnerships with respect to foreign investors:
1. TIN of foreign investors on SEC Incorporation documents
No application for incorporation of a corporation, or registration of a partnership shall be accepted unless the tax identification number in the Philippines or passport number of all its foreign investors are indicated in its registration documents such as on the following:
Simply stated, in application for SEC registration of new corporation or partnership, tax identification number is not mandatory because a passport number could serve the purpose.
2. TIN of foreign investors on application for SEC amendments
For applications for amendments, the same shall not be accepted unless the tax identification number of all foreign investors, natural or juridical, resident or non-resident, are indicated therein. Example of application for SEC amendments could be as follows:
Simply put, after SEC approval of the application for registration of corporations and partnership, they now have the opportunity to apply for tax identification number of its foreign investors so that they could comply the mandatory TIN indication on SEC application for amendments.
3. TIN of foreign investors on all other SEC filings
All documents to be filed with the SEC by corporations and partnerships after their incorporation shall not be accepted unless the tax identification number of all its foreign investors, natural or juridical, resident or non-resident, are indicated therein. Here are some other documents for filing with the SEC:
Notably, once those documents to be files with the SEC are not accepted resulting to late filing or non-filing, then, corresponding penalties will be imposed by SEC.
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for about ten (10) years now helping out taxpayers on tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He is presently a frequent speaker of Tax and Accounting Center, Inc. and you may send him mail at garry.pagaspas(@)taxacctgcenter.ph.
Under Revenue Memorandum Order No. 20-2012 (RMO 20-2012) the Bureau of Internal Revenue (BIR) has created a VAT Audit Program for 2012 VAT returns where they would concentrate in the examination of quarterly VAT returns starting 2012.
Seeing the potential revenue to be generated from the 2012 VAT audit program, Revenue Memorandum Order No. 27-2013 (RMO 27-2013) dated 26 September 2013 had been issued to take effect immediately with the following new rules:
Increase of VAT audit case to 30 cases
First paragraph of Item IV.A.9 of RMO 20-2012 has been amended as follows:
“The initial workload of each Revenue Officer (RO) under this program shall be thirty (30) cases. In no case shall the number of cases handled by an RO exceed thirty (30) cases, subject to replenishment every after submission of the report of investigation/closure of each case”
From the initial case load of twenty (20) cases under RMO No. 20-2013, RMO 27-2013 increased the VAT audit program to a maximum number of case load of thirty (30) for every BIR Revenue Officer. This would mean that the VAT audit team could examine more VAT taxpayers. On the downside, this could also mean that each BIR Revenue Officer has less time now handling each case because the officer has more case to handle and attend to now.
Audit plan with focus on risk areas
A new sentence has been added on Item IV.A.9 of RMO 20-2012 as follows:
“However, the Revenue Officers shall prepare an audit plan and state therein the risk areas which shall be the focus of the investigation”
The new rules require a more focused and determined assessment concentrating on the risk areas. Preparation of the audit plan would require a thorough understanding of the business peculiarities of the taxpayer. As such, taxpayers should be extra careful in dealing with the industry peculiarities and see to it that they comply with the necessary rules to avoid being hit hard by the VAT audit program.
eLA for all internal revenue taxes
Finally, RMO 27-2013 amended Item IV.A.11 of RMO 20-2012 adding the following paragraph:
“Thus, where there is already an eLA issued by the VAT Audit Team for any taxable quarter for 2012 and/or thereafter, and the taxpayer has been selected for regular audit of the Revenue District Office (RDO), the tax type to be requested for investigation by the Revenue District officer shall be:
All internal revenue taxes, except Value Added Tax (VAT)”
Simply put, examination of VAT pursuant to the VAT Audit Program under RMO 30-2012 as amended by RMO No. 27-2013 does not prevent the BIR for the tax examination of all other internal revenue taxes. In order to avoid being examined twice, the VAT shall be excluded from the coverage of the electronic Letter of Authority once an eLA for value added tax has already been issued.
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