BIR sets stricter audit for VAT payments

MANILA, Philippines - The Bureau of Internal Revenue (BIR) is implementing a stricter audit program for value-added tax (VAT) payments made by large taxpayers starting this month.

The VAT Audit Program shall be implemented by an audit team, which will be composed of two team heads and five audit groups, according to a new revenue memorandum order (RMO) signed by BIR Commissioner Kim Henares in July and to be implemented this month.

Under Revenue Memorandum Order 19-2012, the VAT audit team shall investigate the VAT returns of taxpayers belonging to the Large Taxpayers Service (LTS).

They will then classify the large taxpayers into two groups: high-risk taxpayers and medium-risk taxpayers.

High-risk taxpayers show signs of under-reporting or non-payment of VAT collections.

Characteristics or risk factors of taxpayers in this group include significant increase in exempt or zero-rated sales and VAT returns that reflect substantial input taxes such as when the total input taxes claimed exceed 75 percent of total output tax.

Taxpayers with history of filing claim for refund and those with substantial sales but report net loss may also belong to this group.

On the other hand, taxpayers belonging to complex industries as well as taxpayers registering for changes in the tax status or business registration will fall under the medium risk VAT taxpayers.

Medium-risk taxpayers may include those with complex corporate structures, including mergers, consolidations spin-offs and other types of corporate reorganizations.

The taxpayers that will be subject to audit by the VAT audit team shall be determined from this list. The VAT audit team shall recommend the issuance of one Letter of Authority for each taxable quarter or semester.

The BIR has been trying to collect more from large taxpayers.

Based on Revenue Memorandum Circular 1-2012, the bulk or P674 billion of the BIR’s P1.066-trillion revenue goal this year would be collected by the LTS group.

The amount accounts for 63.22 percent of the full-year goal.

The LTS group would also be in charge of collecting the agency’s excise tax target of P71.083 billion.

Large taxpayers include corporations with an authorized capitalization of at least P300 million, multi-national enterprises with an authorized capitalization or assigned capital of at least P300 million, companies listed in the Philippine Stock Exchange as well as universal, commercial and foreign banks.