Compliance verification

Tax Compliance Requirements

1. 1.Registration

2. Issuance of receipts and invoices

3. Keeping of books of accounts

4. Withholding of taxes

5. Filing and payment of taxes

Tax Compliance Verification

 activity conducted by the BIR to verify the compliance of a certain entity or business
establishment

 Not a tax assessment or audit

 Covers all establishments doing business, whether single proprietorship, partnership or An

corporation

 Conducted by authorized Tax Mapping Team in a certain locality at a certain time

TAX COMPLIANCE VERIFICATION PROCEDURES

TAX MAPPING TEAM TAXPAYER COMPLIANCE

Prepare for the Tax Compliance Prepare for the Tax Compliance
Verification Verification

 Observe good grooming, Properly receive and host the Tax

courtesy Mapping Team

 Present official BIR Check the identification of the BIR

identification card to the officer
taxpayer
Listen to the explanation
 Explain that he/she has been
authorized to conduct the
Tax Compliance Verification

 Explain to the taxpayer the

objectives of the Tax
Compliance Verification as
clearly and concisely as
 possible

 Verify if the establishment Present the following: Business establishment must be

is registered or not registered.
 Certificate of Registration
 If registered, determine if (BIR Form 2303) Original copies of registration
there is a need for documents must be displayed
registration update, verify  Payment form for Annual
Registration (BIR Form
conspicuously in the business
if the registration fee is
0605) establishment.
paid

 If not registered, require  Receipts Issuance

the establishment and/or signage/poster
taxpayer to register within
24 hours

Observe and verify if the Present Receipts and Invoices or the

establishment maintains duly CRM/POS must be duly
 Authority to Print (ATP) Receipts
authorized Receipts or and Invoices (BIR Form 1921) registered
Sales/Commercial Invoices.
 Receipts or Sales/Commercial Receipts and invoices are
Invoices properly accomplished:

 complete information

 duplicate copy is readable

 no discrepancy in the
amounts

Receipts and invoices are

properly issued to customers

Verify if the use of CRM/POS is Present: The CRM/POS must be

duly authorized and determine
 Permit to Use CRM/POS  registered
if there are violations in their
usage  Cash Register  attached with sticker
Machines/Point-of-Sale authorizing its use
Machines
 used for issuing receipts and
Provide two (2) roller tapes invoices

 used in the place as

authorized

Verify if the establishment is Present The books of accounts must be:

maintaining duly authorized books
of accounts or Computerized Books of Accounts  registered
Accounting System (CAS) and
 kept in the place of
recorded transactions are updated Permit to Use CAS business

Computerized Accounting System  updated

If warranted, issue an
Apprehension Slip to the taxpayer
for offenses penalized relative to
unauthorized use and issuance of
receipt, sales and commercial
invoices and unauthorized use of
CRM/POS/CAS.

List down all violations in the Violations Try to explain, appeal and present
Checklist and accomplish Taxpayer proof of compliance.
Information Sheet in duplicate; one
copy of each to be given to the If taxpayer agrees with the findings,
taxpayer who shall be required to sign and receive
acknowledge receipt thereof and the
 Taxpayer Information Sheet
other copy to be attached to the List of
Taxpayers Visited/Apprehended under
 List of Violations Report
the Tax Mapping Operation to be
submitted to the RDO.  Apprehension Slip

Politely but firmly decline Do not bribe to avoid additional

taxpayer’s request not to report violation and penalties
incidence of non-compliance in
exchange for something

Commend the taxpayer and Thank the Tax Mapping Team

encourage him/her to continue for properly conducting the Tax
in faithfully complying with the Compliance Verification
tax compliance requirement

Post a sticker as proof that the

establishment has been tax mapped
with color coding scheme as follows:

1st Visit – Yellow

2nd Visit – Red

3rd Visit - Green

Before leaving the

establishment, thank the
taxpayer for his/her time
To be presented by the taxpayer during TCV:

1. Certificate of Registration (BIR Form 2303)

2. Annual Registration Payment Form (BIR Form 0605)

3. Issuance of Receipt Poster/Signage

4. Authority to Print Receipts and Invoices (BIR Form 1921)

5. Receipts and Invoices

6. Permit to Use CRM/POS/CAS

7. CRM/POS/CAS

8. Books of accounts

In the apprehension of sales or commercial invoices and/or receipts and books of accounts, the Tax
Mapping Team shall:

1. Inform the taxpayer of the violation committed and basis for apprehension

2. Issue an Apprehension Slip signed by the Revenue District Officer and noted by the Group
Supervisor

3. Take physical possession of unauthorized books of accounts, commercial invoices and/or

receipts, invoice or receipt with material discrepancies between original and duplicate copies, or
identical set of invoices or receipts even if duly registered

4. Issue BIR Printed Receipts (BPR) to taxpayers who were found to be using unregistered or
unauthorized invoices or receipts including those with unregistered or unauthorized CRM or
POS. The BPR shall be used for at least one month; Provided that in case the CRM/POS users,
where use of BPRs will result to slow down of their business operation, continued use of their
CRM/POS may be allowed as long as they adhere to the following:

o Agree to immediately pay the penalties

o Allow Revenue Officers to undertake surveillance on the use of the machine for 1 (one) month,
and

o Register the machine immediately

In the apprehension of CRM/POS, the Tax Mapping Team shall:

 1. Inform the taxpayer of the violation committed and basis for apprehension

2. Issue an Apprehension Slip signed by the Revenue District Officer and noted by the Group
Supervisor

3. Seal the CRM/POS with tape to be witnessed and signed by the taxpayer or taxpayer’s
representative, the Revenue Officer and the Group Supervisor or another Revenue Officer in the
absence of the Group Supervisor. All signatories must print their names below their respective
signatures. Photographs or video tape of this event shall be taken as evidence and for the
protection of the apprehending RO.

4. Bring the apprehended CRM/POS to the assigned vehicle for that purpose for delivery to
custodian in the Office of the Regional Director.

Action on TVCD Violations:

A. Pay the Penalty at the Revenue District Office (RDO) using BIR Form 0613

B. File a Protest

C. No Action:

1. Second Opportunity Notice (SON) - respond within five (5) days

2. Last Opportunity Notice (LON)/Final Opportunity Notice (FON)

3. Legal Division Procedures.

STAGES OF BIR TAX ASSESSMENT/AUDIT

1. Receipt of eLA

2. Fieldwork

3. Informal Conference

4. Preliminary Assessment

5. Final Assessment

6. Final Decision - BIR

 7. Final Decision - Court

8. Collection

9. Termination or Closure

1. Receipt of electronic Letter of Authority

 eLA – an official document authorizing a Revenue Officer to examine the taxpayer’s tax and
accounting records in order to determine the taxpayer’s correct internal revenue tax liabilities

 Persons authorized to issue:

 National Office: CIR

 Regional Offices: Regional Director

Cases need not be covered by an eLA

 Cases involving civil or criminal tax fraud

 Policy cases under special audit teams in the National Office

Effects of issuance

 Tax return amendment no longer allowed (similar with LN (BIR notice to taxpayers with
significant discrepancies between sales or purchases reported and those of the Third Party
Information Program)

2. Fieldwork

 Duration: 120 days from the receipt of the eLA

 Frequency: once a year, except when:

1. The CIR determined there was fraud, irregularities or mistakes by the taxpayer

2. The taxpayer requested for re-investigation or re-examination

3. There is a need to verify the taxpayer’s compliance with the tax requirements

4. The CIR exercises the power to obtain information relative to the examination of other
taxpayers
  Taxpayer:

 Submit documents, records and reports relevant to the tax assessment

AUDIT CHECKLIST OF REQUIREMENTS

1. Books of Accounts/Other Records

2. Receipts and Invoices

3. Monthly Z-Reading for each CRM/POS Machine

4. Purchase Invoices/Receipts and other proofs of purchases

5. Disbursement Voucher/supporting documents for all deductions and expenses claimed

6. Bank Reconciliation, Bank Statements, negotiated and cancelled checks

7. Certification from bank/financing institution as to interest expense claimed

8. Payroll Register

9. Inventory Lists

10. Articles of Incorporation and By-Laws

11. Latest General Information Sheet submitted to SEC

12. Proof of Tax Exemption, if any

13. Software License Agreement/Service Agreement/Contract of Lease/Sales Contract, if any

14. List of Assets (RMO No. 26-2010)

15. Board Resolution/Minutes of Meeting of the board on the Appropriation of Retained Earnings

16. The following tax returns including proofs of payment:

 Annual Registration fee payment for all branches (BIR Form 0605)

 Annual and Quarterly Income Tax Return including attachments

 Monthly and Quarterly Value Added Tax Return

 Quarterly Percentage Tax Return

 Withholding Tax Remittance Returns

 Annual Information Return of Income Taxes Withheld on Compensation

  Annual Information Return of Creditable Income Taxes Withheld – Expanded

 Excise Tax Returns

 Documentary Stamp Tax Return

17. Schedules

1. Abstract of General Ledger

2. Schedule of Importation

3. Schedule of Export Sales

4. Schedule of Sales in Foreign Currency

5. Schedule of Taxes and Licenses

6. Schedule of Depreciation

7. Detailed Statement of Cost of Sales/Services

8. Schedule of Loans/Notes Payable

9. Schedule of Other Expenses

10. Schedule of Miscellaneous/Other Income

11. Schedule of Advances from/to Stockholders

3. Informal Conference

 Notice of Informal Conference

 a written notice informing a taxpayer that the findings of the audit conducted on his
books of accounts and accounting records indicate that additional taxes or deficiency
assessments have to be paid

 in order to afford the taxpayer an opportunity to present the side of the case

 shall in no case extend beyond thirty (30) days from receipt of the Notice of Informal
Conference

4. Issuance of Preliminary Assessment Notice (PAN)

 PAN: Official (written) document Informing taxpayer of the audit findings

  Issued by the

 Commissioner

 Assistant Commissioner – Large Taxpayers Services

 Assistant Commissioner – Enforcement and Advocacy Services

 Regional Assessment Division

 Cases not required (FLD/FAN will be issued outright):

1. Tax deficiency is due to mathematical computation error

2. Discrepancy has been determined between taxes withheld and remitted

3. Claimed tax refund or tax credit was carried over and claimed against taxes

4. Excise taxes due has not been paid

5. Articles purchased by exempt persons has been sold or transferred to non-exempt persons

 Taxpayer has 15 days to reply if contesting the findings in the PAN

5. Issuance of Final Assessment Notice (FAN)

 FAN is issued when:

 Taxpayer reply to the PAN was found to be without merit

 Taxpayer failed to respond to the PAN

 Assessment Prescriptive periods:

 Filed returns: 3 years after the tax due date

 Non-filing: 10 years from the prescriptive

 Fraudulent returns: 10 years from the date of discovery

 Collection Prescriptive periods

 If assessed 5 years from assessment

 Not assessed 10 years

 Fraudulent returns 10 years

  Taxpayer has 30 days to reply if contesting the findings in the FAN

 Request for reconsideration

 Request for re-investigation (Submit all supporting documents within 60 days from filing of
protest)

6. Final Decision - BIR

 Decision within 180 days, extendible by another 30 days

 If unfavorable, either

 file a motion for reconsideration, or

 file an appeal to the BIR CTA Division

7. Final Decision - Court

 Court of Tax Appeals Division

 Court of Tax Appeals en banc

 Supreme Court

 ?

8. Collection

 Cash Payment

 Distraint

 Levy

 Compromise

9. Termination or Closure

TIME PERIODS

Assessment Prescription: 3 years from later Fieldwork: within 120 days

of actual or due date of filing

Frequency: once in a taxable

 year, with exceptions

Informal Conference within 30 days from receipt of

the notice

Preliminary Assessment Protest: within 15 days from

receipt of PAN

Final Assessment Issuance: Protest: within 30 days from

receipt of FAN
 15 days after the
issuance of PAN, or Re-investigation: submit
documents within 60 days from
 15 days after the receipt submission of protest
of taxpayer’s response

Final Decision No Issuance No decision after 180 days: wait

pa for 30 days

Issuance: within 180 days from No decision after another 30

the filing of protest days: (exclusive choice)

a) wait pa more, or

b) appeal to CTA Division

Administrative Appeal: within

30 days from receipt of FDDA

Judicial Appeal CTA Division CTA division Supreme Court ( Ipagkatiwala

na kay Atty.)
CTA en banc

Supreme court