2009 and 2010 LN guidelines

The BIR has issued the following guidelines and procedures in handling Letter Notices (LN) generated through third-party information data matching with tax returns. These guidelines shall be used for resolving issues on 2009 and 2010 LNs issued prior to the effectivity of these guidelines.

Among the significant features of the guidelines are as follows:

1. LNs shall be handled by the investigating office (Revenue District Office or Audit Division under the Large Taxpayers Service) having jurisdiction over the taxpayer.  An LN issued to a taxpayer can be considered a notice of audit of investigation, which shall disqualify the taxpayer from amending the return covering the period referred to in the LN upon its issuance.

2. A taxpayer who refutes the accuracy of the figures in the LN (due to erroneous encoding or timing difference) is given 10 days from receipt of LN to submit documentary proofs and reconciliation schedules. If the taxpayer cannot submit documentary proofs or provides incomplete documentary requirements within the prescribed period in support of his/her/its protest, the Revenue Officer (RO) shall endorse the docket and recommend the issuance of Notice of Informal Conference, which shall be served to the taxpayer within 30 days from its issuance.

3. If the taxpayer fails to settle his/her/its liabilities within five days from receipt of the Notice of Informal Conference, the investigation office shall immediately endorse the docket to the appropriate BIR office for any or a combination of the following actions:

a. Issuance of Preliminary Assessment Notice (PAN)/Final Assessment Notice (FAN) in accordance with RR 12-99

b. Imposition of administrative sanction of suspension and temporary closure of business establishments (Oplan Kandado) if the underdeclaration of sales, receipts and income amounts to 30% or more

c. Issuance and enforcement of subpoena duces tecum (SDT) in strict compliance with procedures under Revenue Memorandum Order No. (RMO) 88-2010

4. If there is an ongoing audit/investigation pursuant to an electronic Letter of Authority (eLA) prior to the LN assignment, the RO handling the eLA shall also be assigned the LN. The LN shall not be considered closed but shall be consolidated with the eLA.

5. If an eLA is terminated before an LN is issued, the investigating office shall request the tax docket from the Assessment Division or Administrative Division, as the case may be, for non-large taxpayers and Records Division for large taxpayers and shall ascertain whether the discrepancies reflected in the LN are in the report of investigation. If the discrepancies are not included, the RO shall pursue action on the LN based on the prescribed procedures.

If the discrepancies are considered, the RO shall recommend cancellation of the LN and the tax docket shall contain the LN and other required documents

6. The surcharge, interest and compromise penalty assessed against the taxpayer may be abated by paying the basic deficiency tax(es) within 30 days from receipt of the LN using BIR Form 0611-A. If deficiency tax is paid beyond the 30-day period, the taxpayer shall be assessed with the corresponding surcharge (if applicable), interest and compromise penalty. In both cases, an “Agreement Form” shall be executed by the taxpayer or his/her/its duly authorized representative indicating therein the amount and date when the deficiency tax(es) shall be paid.

7. Installment payment shall be allowed as settlement of tax deficiencies arising from LN in case the total tax liabilities exceed P500,000 for non-large taxpayers or P10 million for large taxpayers. A written request for installment payment of basic tax due plus increments using the prescribed Application for Installment Payment must be accomplished. The corresponding interest on the basic tax due per installment shall be computed up tothe date of payment as shown in the application. The payment shall be made using Payment Form, i.e., BIR Form 0611-A. In case of default of any installment payment, the remaining balance of basic tax plus the increments shall become due

and demandable immediately without prior notice to the taxpayer.

Revenue Memorandum Order No. 13-2012, May 16, 2012
Tax Brief – June 2012

Punongbayan and Araullo

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