A look at the BIR’s audit of ‘small’ taxpayers
ATTY. PEACHES ARANAS
Small taxpayers, beware; the Bureau of Internal Revenue (BIR) has you in its sights. The BIR has issued Revenue Memorandum Order (RMO) No. 32-2018, dated July 6, 2018, prescribing the audit/investigation of individual and non-individual taxpayers by the Assessment Divisions of the BIR Regional Offices.
But what exactly is a “small” taxpayer? Under RMO No. 32-2018, to be considered a “small” taxpayer would depend largely on a person’s gross sales/receipts, which amount varies depending on the particular BIR Revenue Region a taxpayer belongs to:
–For those belonging to Regions5, 6, 7 and 8 and with gross sales/receipts amounting to P10,000,000 and below;
–For those belonging to Regions 1, 4, 9A, 9B, 11, 12, 13,16 and 19 and with gross sales/receipts amounting to P5,000,000 and below; and
–For those belonging to Regions 2, 3, 10, 14, 15, 17 and 18 and with gross sales/receipts amounting to P2,000,000 and below.
With the identification of small taxpayers, the BIR shall issue electronic Letters of Authority (eLA) to cover the audit/investigation of taxpayers for tax returns for taxable year 2017, which shall include all internal revenue tax liabilities, except when a specific tax type has been previously examined. Note that a Letter of Authority is an official document that contains the mandate of a BIR revenue officer (ROs) to examine a taxpayer’s books of accounts and other accounting records for a particular taxable year.
The audit of cases issued under the RMO shall be conducted by the ROs of the Office Audit Section (OAS) of the Assessment Divisions in the Regional Offices, and shall be performed without the benefit of a “field audit”. Generally, a “field audit” will entail scheduled visits by ROs to a taxpayer’s business address, where the examination of the taxpayer’s books of accounts and other accounting records will be made. By dispensing with the field audit, the BIR will instead retrieve copies of manually filed and electronically submitted tax returns for taxable year 2017from the BIR Document Processing Division and BIR Revenue Data Center. From these tax returns, the BIR shall select the “small” taxpayers who fall under the prescribed thresholds as explained above.
The eLA, together with the “Notice for the Presentation/Submission of Documents/Records” (Notice) may be delivered personally to the taxpayer by:
–The RO assigned to the case.
–Any other BIR employee with a written authorization to deliver the eLA.
–A courier company.
The concerned taxpayer shall be given 10 days from receipt of the Notice to submit to the ROs the required documents and records. If the taxpayer does not comply with the Notice, a reminder letter shall be sent immediately after the lapse of the 10-day period. If the requested documents are not submitted within 5 days from receipt of the reminder letter, a memorandum report shall be prepared recommending the issuance of a Subpoena Duces Tecum (SDT). For this purpose, an SDT is a process directed to a taxpayer requiring him to bring before a competent authority the books, documents, and other records required under the Notice. Failure to abide by the SDT may result in the imposition of stiff penalties and/or possible imprisonment.
With the issuance of the RMO, the BIR hopes for an increase in the voluntary compliance with the timely payment of taxes, as well as to generate additional tax revenues from small taxpayers.
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