Professional Documents
Culture Documents
1701 MAP
SAWT
1702 SLSPs
2550Q Alphalist of employees (Form 1604-
CF)
2551M
Annual Information Return of
2551Q Creditable Taxes withheld –
Expanded/Income Payments Exempt
etc from Withholding tax (Form 1604-E)
List of regular suppliers
Monthly/Quarterly withholding
returns
LN- Sources of discrepancies
1. Sales reported by seller vs purchases reported by
the buyer (VAT and income tax)
2. CWT remitted by buyer vs SWT claimed by
seller/supplier (WT)
3. Income reported vs. CWT or FT paid by payor
4. Importations recorded by BOC vs importations
reported in the SLSP (VAT and income tax)
LNs vs LAs
1. LN = LA (Informal conference stage)
LN prohibits the amendments of the return for the
period covered by the LN
No conversion to LA
2. Taxpayer can still be issued an LA? Consolidation?
For LN on WT, LN should be consolidated with the LA if
already issued (RMO 28-07)
For LN on TPM-BOC, LN to proceed separately from LA
(RMO 32-07)
Linkages with Government Data
1. LGU
2. BOC
3. BSP
4. IC
5. SEC
6. Other regulatory agencies
7. Exchange of information under tax treaties
Selection Criteria
Letters of Authority (Las)/Audit Notices (ANs)
shall be issued only in the following cases:
* Mandatory
Claims for income tax refund or issuance of tax credit
certificate exceeding One Hundred Thousand Pesos
(P100,000.00)
• Request for tax clearance of taxpayers due
to retirement/cessation of business with
gross assets exceeding Ten Million Pesos
(10,000,000.00)
• Request for tax clearance
merger/consolidation/spin-off and other
types of corporate reorganizations with
gross assets exceeding Ten Million Pesos
(P10,000,000.00)
• Taxpayers/direct exporters who filed claims
for VAT credit
2. Top Priority Taxpayers
• Taxpayers who are reporting/filing “No. Operations”
Annual Income Tax Returns
• Taxpayers with obvious basic tax deficiency
amounting to One Hundred Thousand Pesos
(P100,000.00) or more based on Third Party
Information
• Property buyers with no income tax returns (ITR)
filed or with ITP whose reported income does not
warrant acquisition of such property, where the
value of the property acquired is at least Five Million
Pesos (P5,000,000.00)
• Taxpayers with Letter Notices per
recommendation of authorized
revenue official
• Taxpayers whose tax compliance falls
below the established benchmarks
• Taxpayers who availed of Net Operating Loss Carry Over
(NOLCO)
• Taxpayers who filed break-even returns or returns
showing net loss for at least two (2) consecutive years
• Taxpayers whose tax due/VAT payable or VAT paid for
taxable year 2004 is less than that of the immediately
preceding year
• Taxpayers with increase in assets but with reported net
loss
• Taxpayers maintaining an ending inventory of 100% or
more of its gross sales during the taxable year
• Other cases with substantial tax potential subject to the
approval of the Commissioners
Taxpayers found understanding the
correct sales/income by more than 30%
as a result of authorized
surveillance/stocktaking
Requirement of Examiners in Tax Audit
• CPA Accreditation Certificate,
• Annual Registration Fee,
• Articles of Incorporation and By-Laws,
• Quarterly Income Tax Returns,
• Proof of Income Tax Credits Claimed (BIR Form
2307),
• Monthly, Quarterly and Annual Returns for
compensation, expanded and final withholding
taxes including alpha listing and proof of
payments,
• Monthly VAT declarations and Quarterly Vat
Returns,
• List of Beginning and ending Inventories duly
stamped “RECEIVED” by the BIR,
• Contracts of Lease and proof of payment of
documentary stamp tax,
• Detailed Scheduled of the following:
– Summary List of Local Purchases specifying the
following:
• Registered name of Supplier
• TIN
• Invoice Number
• Date of Invoice
• Official Receipt Number
• Date of Official Receipt
• Amount of Purchase
• Input Tax
• Total Invoice Price
• Summary List of Importation made during
the period with the following details (if
applicable)
– Date of Invoice
– Name of Supplier
– Items Imported
– AWB/BL number
– Date of Arrival
– Complete details of composition of landed
cost/cost per book entry
– VAT paid
– Date of Official Receipt
– Official Receipt Number
• Summary List of Sales with the following
information:
– Date of Sale
– Invoice Number
– Name of Customer
– Amount Sold
– Output Tax
• Schedule of Accounts Payable as of January
1, ____ and December 31,____,
• Detailed Schedule of Taxes of Licenses,
• Detailed Schedule of Depreciation
• Working paper of general ledger
accounts monthly balances/Monthly
Trial Balance,
• Authority to use computerized books
of accounts accounting system,
• The following records for
verification/examination:
– General Ledger
– Sales and Purchase Journals
– General Journals
– Cash Receipt Book
– Cash Disbursement Book
– Sales Invoices and Official Receipts
– Purchase Invoices and Official Receipts
– Check and Journal Vouchers
– Debit/Credit Memo Registers
Indirect Approach to Investigation
Reconstruction of income is generally employed
where the taxpayer keeps no record or
inadequate records.
Net Income
--------------- = Profit Margin
Net Sales
Sales
-----------------
Total Assets
= Total Assets Turnover
Inventory turnover=
Sales
Total Assets
or
Cost of Sales
Beg. Invty. + End Invty./2
B. Net Worth Method
Net worth method is most often used when one or more of
the following conditions prevail:
59
Expenditures Method of Proof
Formula (tax case)
Expenditures (Money Spent or Applied)
Less: Sources of Funds
Equals: Adjusted Gross Income
Less: Itemized or Standard Deduction
Personal Exemptions
Equals: Corrected Taxable Income
Less: Reported Taxable Income
Equals: Additional Taxable Income
60
Applications of Funds
•Increase in assets
- Cash on hand
- Bank accounts
- Inventory
- Accounts receivable
- Equipment
- Real estate
- Personal assets
•Decrease in liabilities
- Accounts payable
- Loan principal
•Personal living expenses
•Loss on sale of personal assets 61
Example of Source and Application
Expenditures
Increase in bank balance P 200,000
Personal living expenses 15,000,000
Sources of Funds
Gross Profit P10,000,000
Equals
Funds from illegal sources P 5,200,000
==========
62
Third Party Information (Access to
Records) Method
Third party contacts are a source of
information that should not be forgotten. The
Revenue Officer should determine when to
make third inquiries.
Lifestyle Check on Individual
Taxpayers
64
The BIR would use its authority to access
public documents and would work with
agencies like the Land Transportation
Office, the Bureau of Immigration, the
Maritime Industry Authority, the Civil
Aeronautics Board, the Land Registration
Authority and the Registries of Deeds.
65
Piercing the corporate veil
66
Audit Procedures on Withholding Taxes
IN GENERAL:
1. Proof that input tax was incurred in the course of
trade or business.
2. Supported by VAT invoice or receipt bearing VAT
number or seller.
3. Seller must be VAT registered.
4. Purchaser must also be VAT registered.
5. Invoice must be in the name of buyer.
6. Address of buyer is indicated.
7. Business style of buyer.
Substantiation Requirements on Input Tax
Formula:
76
REVENUE REGULATION
NO. 10-2010
Financial Institutions
Foreign Tax Authority
FAILURE TO SUBMIT REQUIRED
RETURNS, STATEMENTS, REPORTS
AND OTHER DOCUMENTS
PERIOD OF RESPONSE:
30 DAYS FROM RECEIPT OF DEMAND
30 days CTA
Final
Letter of
Assessment
Authority
(FAN)
15 days
Informal Preliminary
Conference Assessment
(PAN)
Protesting a Case
PROTESTING A CASE
1. PAN
2. FAN
3. PROTEST within 30 days – FAILURE: FAN IS FINAL AND
EXECUTORY
4. FDDA – Whether appealed or not
5. CTA appeal (division level) within 30 days – FAILURE TO
APPEAL FAN IS FINAL AND EXECUTORY
6. CTA decision – whether appealed or not
7. En Banc (appeal)
8. En Banc decision – whether appealed or not
9. Supreme Court (appeal)
10. Supreme Court (final decision)
Defenses on Assessments
1. Validity of the assessment
2. Prescription periods
3. Legal and factual basis
4. Validity of the regulations/rulings
5. Immunities under tax amnesty and other
programs
6. Procedural issues
REVENUE REGULATIONS
NO. 12-99
PROTEST:
SHALL CONTAIN
THE FACTS THE APPLICABEL LAW,
RULES AND REGULATIONS OR
JURISPRUDENCE ON WHICH THE
ASSESSMENT IS BASED.
EFFECT OF FAILURE TO APPEAL ON
TIME
ASSSESSMENT BECOMES
FINAL,
EXECUTORY, and
DEMANDABLE
DEFINITION AND NATURE OF SURCHARGE
DEFINITION OF DELINQUENCY