RMO 37-94. Issuance of BIR Termination Letter

REVENUE MEMORANDUM ORDER NO. 37-94

Assistant Commissioners, Assessment Service, Collection Service, Intelligence and Investigation Service, Regional Directors and others concerned.

Revision to RMO’s 27-85 and 51-89 regarding procedures on the preparation, approval and release of assessment notices and demand letters and the preparation of BIR Form 40.00

1. OBJECTIVES:

1. a)  To revise the existing system of internal control in the preparation, approval and
   issuance of demand letters and assessment notices.
2. b)  To revise the existing procedures in the preparation of BIR Form 40.00.
3. c)  To prescribe procedures for the expeditious resolution of protests to assessments.

11. POLICIES:

1. All letters of demand and assessment notices shall now be prepared, approved and issued by the Assessment Divisions of the Revenue Regions for duly approved reports of investigation within the jurisdiction of their respective offices, and in the Intelligence and Investigation Service for reports of the Tax Fraud Division in the National Office.
2. Pre-Assessment notices, demand letters and assessment notices shall be based on the “Revenue Officers Audit Report (BIR Form 1717)” prepared by the investigating officer and reviewed by the duly designated reviewing offices (Assessment Divisions in the Revenue Regions for Regional Cases, and the Intelligence and Investigation Service for Tax Fraud Division cases).
3. All letters of protests, requests for reinvestigation and similar communications shall be filed with or referred to the Assessment Division of the Revenue Regions or to the Intelligence and Investigation Service, as the case may be, for proper recording and resolution of the protest.

4. The Assistant Division Chief/Division Chief of Assessment Divisions in the Regional Offices for regional cases or the Assistant Commissioner, Intelligence and Investigation Service for Tax Fraud Division cases shall decide whether or not the protest to an assessment notice in accordance with the provisions of Section 229 and its implementing regulations, should be given due course and whether the protest involves a question of fact or of law or both;
   1. If involving a question of fact, which fact is available from the docket, the reviewing office shall resolve the same, otherwise it shall be referred to the revenue officer who recommended the deficiency assessment:
   2. If involving a question of law, the same may be acted upon by the reviewing office, otherwise, it shall be referred to the Legal Division in the Regional Offices or to the Appellate Division/Legal Service in the National Office, as the case may be, for resolution of the legal issues.
   3. If the protest involves both a question of fact and of law, the question of fact shall first be resolved before the question of law applying the abovementioned (a and b) criteria.
5. Form 40.00 Monthly Summary of Taxes Assessed) and Form 1758 (Authority to Cancel Assessment) and reports on these two forms shall be accomplished by the Assessment Divisions in the revenue regions and the Intelligence and Investigation Service in the National Office.
6. BIR Form 40.00 shall be revised to reflect the disputed assessments separately from the final and executory collectible accounts.
7. The Assessment Division in the Revenue Regions and the Intelligence and Investigation Service in the National Office shall be responsible for monitoring the issuance of assessment notices and letters of demand on the cases acted upon by them.
8. The Administrative Division in the Revenue Regions and the Records Division in the National Office shall see to it that all closed cases are transmitted to their offices for file.

111. PROCEDURES

A. Reports of Investigation –

1. The present procedures on the processing of reports of investigation and the pre-audit of the tax returns and other activities which give rise to a deficiency assessment shall remain effective.

2. Dockets of reports of investigation where the deficiency taxes are paid immediately after investigation but prior to the final approval of the report in accordance with RMO 5-86, shall include a copy of the receipt of payment.
3. The report of investigation must include a duly accomplished “Revenue Officers’ Audit Report (BIR Form 1717)” which shall be the basis for the issuance of a pre- assessment notice, demand letter and assessment notice as the case maybe. The reviewing office shall also consolidate in the aforementioned form any findings/corrections made during the review under the “Per Review” column.

B. Approving Offices –

1. The Division Chiefs of the Assessment Divisions in the Revenue Regions shall approve the assessment notices and demand letters including the report of investigation, for cases falling within their respective jurisdictions. For Tax Fraud Division cases, the Assistant Commissioner of the Intelligence and Investigation Service shall be the approving officer.

C. Review of Reports of Investigation and Service of Pre-assessment Notices. –

1. All reports of investigation shall be reviewed by the Assessment Divisions in the Revenue Regions for regional cases falling within their respective jurisdiction, and by the Intelligence and Investigation Service for cases falling under the Tax Fraud Division.
2. The aforementioned reviewing offices, after having reviewed the report of investigation, shall send a pre-assessment notice to the taxpayer, indicating therein the basis of the assessment, and a definite time frame within which he may protest the same if he is not agreeable. If the taxpayer files his protest within the period prescribed in the aforesaid notice, the same reviewing offices shall likewise decide whether the protest conforms with existing requirements and whether or not to give due course to the protest. The reviewing office shall then inform the taxpayer in writing of the result of the resolution of his protest.
   If the pre-assessment notice is not protested within the prescribed period, the reviewing office shall then issue a letter of demand and assessment notice to the taxpayer.
3. The “Revenue Officers Audit Report (BIR Form 1717)” prepared by the investigating officer, as reviewed and corrected by the reviewing office, shall be the basis of the pre-assessment notice, the demand letter and assessment notice.

D. Preparation of Demand Letters and Assessment Notices –

1. The letters of demand and assessment notices shall be prepared, approved and issued by the reviewing office and shall be signed by the authorized approving officers mentioned in 11B of this memorandum order.
2. The date of issue and the due date for payment of the deficiency tax (30 days after date of issue) shall be determined giving allowance for the movement of the docket from the time the letter and notice are prepared, signed by authorized officials and mailed by the appropriate office. The date of issue should approximate the date of receipt of the letter and notice by the taxpayer.
3. After the assessment notice and letter of demand are approved by the approving officers mentioned in 11B of this memorandum order, the original copy of the assessment notice and letter of demand shall be detached from the docket and released to the Administrative Divisions in the Revenue Regions or to the Records Division in the National Office, as the case maybe, for mailing to the taxpayer. Otherwise, the same may be personally served on the taxpayer.
4. The duplicate copy which is attached to the docket shall be stamped with the actual date of mailing. It shall also be stamped with the words “Carded for posting in BIR Form 40.00”. Details of the deficiency tax assessment shall then be recorded in cards, showing the name, address and TIN of the taxpayer, taxable period covered by the assessment, kind of tax, amount of the basic tax, and penalties.

5. Letters of Protest –
   1. Letters of protest or request for reinvestigation or reconsideration received in any other office authorized to receive communications shall be referred to the reviewing offices (Assessment Divisions for regional cases within the jurisdiction of their respective offices or to the Intelligence and Investigation Service for Tax Fraud Division cases) for proper action.
   2. Upon receipt of the letter of protest or request for reinvestigation or reconsiderations, the reviewing office shall record such documents and attach the same to the corresponding docket. It shall also act on the protest following the guidelines prescribed in 11D of this memorandum order.
6. Preparation of BIR Form 40.00
   1. BIR Form 40.00 shall be revised to reflect the disputed assessment separately from the final and executory collectible accounts.

2. If the reviewing office does not receive a protest within 60 days from the date of mailing of the assessment notice and letter of demand, the assessment becomes final and executory. It shall then be posted in BIR Form 40.00 as a “collectible account”.
   At the same time, the duplicate copy of the assessment notice shall also be stamped with the words “Posted in BIR Form 40.00 as a collectible account”. This fact shall also be recorded in the aforementioned taxpayers’ carded tax account on file with the reviewing office.
3. If the assessment is protested by the taxpayer pursuant to Section 229 of the Tax Code as implemented by Revenue Regulations 12-85, the assessment shall be recorded in Form 40.00 as a “disputed assessment”. This fact shall be recorded on the duplicate copy of the assessment notice by stamping the words “Posted in BIR Form 40.00 as a disputed assessment”. It shall also be recorded in the aforementioned taxpayers’ carded tax accounts on file with the reviewing office.
4. A duly accomplished Form 40.00 shall furnished to the Information System Operating Service, Assessment Service, Collection Division, Regional Director and one copy to be retained by the reviewing office.

G. Preparation of Authority to Cancel Assessment –

1.

The Authority to Cancel Assessment (ATCA) shall be issued whenever an assessment is cancelled or when a previously assessed deficiency tax is reduced as a result of a reinvestigation or a reconsideration requested by the taxpayer. The ATCA shall be prepared only after the report of reinvestigation has been approved by the duly authorized approving officers or compromised by appropriate revenue officials. The ATCA shall be prepared at the same time that the amended notices are prepared and shall be approved by the Chief of the reviewing office.

H. Issuance of Termination Letters –

1.

The approving officer mentioned in 11B of this memorandum order shall issue a Termination Letter to the taxpayer in the following cases:

1. a)  Where the deficiency taxes is paid immediately after investigation and the review yields no discrepancy;
2. b)  Where the deficiency assessment is paid after issuance of the pre-assessment notice but before issuance of final assessment notice;
3. c)  Where the deficiency assessment is paid within 30 days from issuance of assessment notice and letter of demand.

Said Termination Letter shall be mailed to the taxpayer by the Administrative Division or the Records Division, as the case maybe. In all cases, the receipt of payment and a copy of the Termination Letter shall be attached to the docket.

I. Transmittal of dockets

1.

2.

Dockets with findings of “No Discrepancy”, or where the assessment is paid before issuance of Assessment Notices and Letter of Demand, or where the tax assessment is paid within 30 days from issuance of assessment notice and letter of demand –

a) These dockets shall be batched separately, each batch with a minimum of 10 dockets, and shall go directly to the Administrative Divisions of the Revenue Regions or to the Records Division in the National Office.

Dockets with deficiency assessments –

1. a)  Dockets of “collectible accounts “ shall be batched, each batch with a maximum of 10 dockets, and shall be transmitted by the reviewing office to the Administrative Divisions or to the Records Division for microfilming, if warranted, then to the Collection Division for collection enforcement.
2. b)  Fordisputedassessments,thedocketsmaybereferredtotheofficesmentionedin 11D of this memorandum order. The office to which it was assigned shall be indicated in Form 40.00 on “disputed assessment”.

The dockets in the batch shall be listed in the “Transmittal List of Tax Dockets” to be prepared in 5 copies. The original copy shall always remain with the batch until action on all dockets is completed. If any tax case is removed from the batch for further action, such action shall be indicated in the original and all other copies still with the batch.

IV REPEALING CLAUSE

All issuance or portions thereof which are inconsistent herewith are hereby repealed.

V. EFFECTIVITY

This Revenue Memorandum Order shall take effect immediately.

LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue 

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COURSE OUTLINE or CURRICULUM FOR TAXATION PROFESSIONAL:
1. electronic Letter of Authority
2. First Request for Presentation of Records
3. Second and Final Request for Presentation of Records
4. Subpoena Duces Tecum
5. Warrant of Garnishment
6. Warrant of Arrest
7. Warrant of Levy and Distraint
8. DOJ Subpoena for Failure to Obey Summons
9. BIR-Complaint Affidavit
10. BIR-Rejoinder Affidavit
11. Taxpayer-Counter Affidavit
12. Taxpayer-Reply Affidavit
13. Benchmarking Notice
14. Benchmarking-Reply and Protesting
15. Oplan Kandado- Mission Order, Overt Surveillance, Covert Surveillance, Surveillance Form & Request for System Access
16. Oplan Kandado-Apprehension Slip, Sworn Statement of Revenue Officers, Five (5)-Day VAT Compliance Notice & 48-Hour Notice
17. Oplan Kandado-Closure Order & Lifting of Closure Order
18. Oplan Kandado-Protest, Reliefs and Remedies
19. Inventory Taking-Mission Order, Inventory List & Inventory Taking
20. Inventory Taking-Third Party Information, Analysis on Tax Implications & Computation of Over/Understatement
21. Tax Mapping (TCVD)-Mission Order, Revenue Region Special Order & Reminder to All Business Establishment
22. Tax Mapping (TCVD)-Violation Checklist
23. Tax Mapping (TCVD)-Tax Mapping Stickers, Payment Form No. 0613, Second Opportunity Notice & Last Opportunity Notice.
24. Final Notice Before Suit
25. Letter Notice (LN)-Letter Notice
26. Letter Notice (LN)-Third Party InformationL TRS, BOC & RELIEF
27. Letter Notice (LN)-Follow Up Letter, Confirmation Request & Sworn Statement
28. Letter Notice (LN)-Computation Sheet & Agreement Form
29. Letter Notice (LN)-Application for Installment Payment & Payment Form No. 0611-A
30. Preliminary Assessment Notice
31. Formal Letter of Demand & Final Assessment Notices
32. Regional Final Decision on Disputed Assessment
33. National Final Decision on Disputed Assessment
34. 34 Types of Income Tax Deficiency Findings (34 sessions)

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