Tax audit prioritizes property, telco, gaming firms

MANILA, Philippines - Apart from the self-employed individuals and professionals, the Bureau of Internal Revenue has identified real estate firms, telcos, gaming companies, and BPO firms as priority industries for its tax audit program.

The BIR issued Revenue Memorandum Order No. 19-2015 which set the guidelines on which entities or individuals are being prioritized for audit.

Under the agency’s priority list are contractors of government agencies and local government units, hospitals, laboratories and other medical firms, advertising agencies, insurance companies, and restaurants and food establishments.

BIR commissioner Kim Henares said the memorandum order was issued “to enhance taxpayers’ voluntary compliance by encouraging the correct payment of internal revenue taxes through the exercise of the enforcement function of the bureau.”

She, however, pointed out all taxpayers in general are considered possible candidates for an audit.

Professionals such as lawyers, doctors, engineers, architects, accountants, actors, media personalities and  athletes with low income or business tax compliance have been tagged as a priority under the tax bureau’s audit program.

The list also includes those covered to file their returns using the online filing and payment system but failed to do so, and those maintaining an ending inventory of 100 percent or more of their gross sales.

Issue-oriented audits, taxpayers with compliance below benchmark rates, those who failed to submit information returns, and those enjoying tax exemptions and incentives also fall under this category.

The BIR order also puts taxpayers under surveillance and enforcement programs, those reporting no taxable income for two consecutive years, government agencies with dues to the tax bureau, and LGUs who failed to remit taxes under the priority taxpayers group.

Taxpayers who declared an income tax of less than two percent of gross sales, those with increase of assets of more than 50 percent from the previous year but with a reported net loss, and those with claims for losses due to natural calamities are also under the BIR’s priority audit list.

The same goes for taxpayers obtaining revenues exclusively from parent company or subsidiaries, those claiming write-off of input tax as allowable deductions, those with shared expenses attributed by a parent firm to its units, those with zero-rated sales, and those with intelligence information such as specific business knowledge as priority cases.

Meanwhile, taxpayers with claims for refund or credit of income tax, value-added tax, excise tax, and on erroneous payment of taxes fall under mandatory cases.

Those that request a tax clearance due to the retirement of business with gross sales exceeding P1 million or gross assets reaching more than P3 million are also included in this category.

The mandatory cases also cover requests for tax clearance from taxpayers undergoing merger, consolidation, and other reorganizations, and cases with unresolved letter notices.