Articles Taxation

BIR Updates its Policies, Guidelines and Procedures for its Audit Program

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The Bureau of Internal Revenue (BIR), through Revenue Memorandum Order No. 6-2023 (Order) issued on February 9, 2023, prescribed the updated and consolidated policies, guidelines and procedures for the BIR Audit Program. The Order aims to improve the operational efficiency in audit programs following the automation of various manual procedures, especially the automated selection of taxpayers for issuance of electronic letter of authority (eLA). The Order also aims to enhance taxpayers’ voluntary compliance by encouraging the correct payment of internal revenue taxes through the exercise of the enforcement functions of the Bureau.

 

In general, all taxpayers are considered as possible candidates for audit. To cover such audit/investigation, eLAs or Tax Verification Notice (TVN), as applicable, shall be issued. The RMO specifies Mandatory Cases and Priority Audit Cases:

  1. Mandatory Cases are transactions to which an audit is required before the issuance of Tax Clearance, processing of claims for tax credit/refund and other cases as may identified by the CIR as priority target for audit/investigation. The RMO lists the specific cases which are subject to mandatory and whether the case is covered by eLAs or whether it is covered by TVNs.
  2. Priority Audit Cases, on the other hand, are following:
    1. Cases which have been electronically selected by the Internal Revenue Integrated System-Audit Module based on prescribed selection criteria pursuant to identified risks that need immediate action;
    2. Audit cases that shall be handled by the VAT Audit Section and Office Audit Section of the Assessment Divisions, and Large Taxpayers VAT Audit Unit under the Large Taxpayers Service (LTS);
    3. Cases manually selected by the concerned Regional Director/ACIR-LTS approved by the CIR.

 

The Order then details the Policies and Procedures on the following:

  1. Issuance of eLA/TVN;
  2. Assignment of Cases;
  3. Conduct of Audit and Submission of Reports of Investigation;
  4. Review of Audit Reports and Issuance of Termination Letter;
  5. Handling of Protests Against Tax Assessments;
  6. Monitoring of Cases;
  7. Issuance of Replacement eLA; and
  8. Administrative Sanctions are specified in the Order.

 

Read the full Memorandum Circular Order here.

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