BIR Tax audits, investigations and field operations have been suspended until after the Christmas and New Years holiday period!
Under a recent Revenue Memorandum Circular released in early December, the BIR has suspended investigative activities such as the issuing of tax audit letters or verifications of the books of accounts of businesses in the Philippines.
Below, we outline exactly what is and what is not covered under this new BIR Memorandum as well as what companies in the Philippines can expect (or not expect!) during the holiday period.
Check it out below!
Revenue Memorandum No.127-2020
Revenue Memorandum Circular No.127-2020, entitled “Suspension of All Audit and Other Field Operations of the Bureau of Internal Revenue” was recently issued by the Bureau of Inland Revenue, or the BIR, dated 2 December.
RMC No.127-2020 provides for the suspension of certain activities of BIR officials including examinations, audits, investigations and verifications of the accounts and books of companies in the Philippines.
What activities have been suspended?
Under RMC No.127-2020, all field operations of the BIR relative to examinations and verifications of taxpayers’ books of accounts, records and other transactions are have been suspended.
This means that the BIR should not be conducting field audits, field operations or any form of visitation to a PH business or the execution of e-letters of Authority (commencing a tax investigation), Audit Notices or Mission Orders.
Further, no written orders to perform an audit or investigate taxpayers on their tax obligations can be served during this suspension time, except however, in limited cases (see exempt activities below).
Remember – The BIR Audit or Letter of Authority is quite different to the statutory annual audit that many businesses in the Philippines are required to undertake each year. For more information on this statutory audit requirement, check out one of our previous articles – Audit Season in the Philippines.
Why have these BIR activities been suspended?
A Manila Bulletin article states that suspending investigations will give “taxpayers a worry-free and meaningful Christmas celebration.”
According to one Philstar Newspaper article, this is “typical practice during Christmas season by BIR to lessen opportunities for examiners to receive gifts from taxpayers they assess which in turn compromises their work”.
Finally, RMC No.127-2020 also provides that BIR examiners and investigators should make use of the time during which investigative activities have been suspended to perform office work on outstanding cases or to finalize reports on previously completed field work.
How long will the suspension last?
The suspension of these BIR activities will cover a period of three weeks, commencing on 15 December 2020 and lasting until 7 January 2021.
Certain activities are not, however, subject to the suspension period.
RMC No.127-2020 provides that no written orders to audit and/or investigate taxpayers’ internal revenue tax liabilities shall be served except in the following specified cases:
- Investigation of cases prescribing on or before April 15, 2021;
- Tax evasion cases;
- Processing and verification of estate tax returns, donor tax returns, CGT returns and withholding tax returns relating to the sale of real property or shares of stock together with any related documentary stamp tax returns;
- Examination and/or verification of tax liabilities of retiring taxpayers
- Audit of National Government Agencies, LGUs and Government; Owned and Controlled Corporations;
- Monitoring of tiangge (privilege store);
- Other ongoing matters for which the BIR has already imposed a deadline or order have already been issued by the BIR.
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