Changes to 2012 VAT Audit Program in Philippines

changes to 2012 VAT audit program PhilippinesBy: Tax and Accounting Center Philippines

Under Revenue Memorandum Order No. 20-2012 (RMO 20-2012) the Bureau of Internal Revenue (BIR) has created a VAT Audit Program for 2012 VAT returns where they would concentrate in the examination of quarterly VAT returns starting 2012.

Seeing the potential revenue to be generated from the 2012 VAT audit program, Revenue Memorandum Order No. 27-2013 (RMO 27-2013) dated 26 September 2013 had been issued to take effect immediately with the following new rules:

Increase of VAT audit case to 30 cases

First paragraph of Item IV.A.9 of RMO 20-2012 has been amended as follows:

“The initial workload of each Revenue Officer (RO) under this program shall be thirty (30) cases. In no case shall the number of cases handled by an RO exceed thirty (30) cases, subject to replenishment every after submission of the report of investigation/closure of each case”

From the initial case load of twenty (20) cases under RMO No. 20-2013, RMO 27-2013 increased the VAT audit program to a maximum number of case load of thirty (30) for every BIR Revenue Officer. This would mean that the VAT audit team could examine more VAT taxpayers. On the downside, this could also mean that each BIR Revenue Officer has less time now handling each case because the officer has more case to handle and attend to now.

Audit plan with focus on risk areas

A new sentence has been added on Item IV.A.9 of RMO 20-2012 as follows:

“However, the Revenue Officers shall prepare an audit plan and state therein the risk areas which shall be the focus of the investigation”

The new rules require a more focused and determined assessment concentrating on the risk areas. Preparation of the audit plan would require a thorough understanding of the business peculiarities of the taxpayer. As such, taxpayers should be extra careful in dealing with the industry peculiarities and see to it that they comply with the necessary rules to avoid being hit hard by the VAT audit program.

eLA for all internal revenue taxes

Finally, RMO 27-2013 amended Item IV.A.11 of RMO 20-2012 adding the following paragraph:

“Thus, where there is already an eLA issued by the VAT Audit Team for any taxable quarter for 2012 and/or thereafter, and the taxpayer has been selected for regular audit of the Revenue District Office (RDO), the tax type to be requested for investigation by the Revenue District officer shall be:

All internal revenue taxes, except Value Added Tax (VAT)”

Simply put, examination of VAT pursuant to the VAT Audit Program under RMO 30-2012 as amended by RMO No. 27-2013 does not prevent the BIR for the tax examination of all other internal revenue taxes. In order to avoid being examined twice, the VAT shall be excluded from the coverage of the electronic Letter of Authority once an eLA for value added tax has already been issued.

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