MANILA, Philippines - The Bureau of Internal Revenue (BIR) will look into the value-added tax payments of its large taxpayers, focusing on those firms that report a significant drop of VAT returns to the government.
The BIR said in its memorandum that it would classify its “large taxpayers” to “high risk” and “medium risk.”
The agency has created a VAT audit team, composed of two heads and five audit groups, which would scrutinize all the returns of the country’s large firms during the whole month of September.
“The VAT Audit Team shall be given the responsibility of investigating VAT returns of LTS [Large Taxpayers Service] taxpayers. They will prepare the list of taxpayers recommended for audit based on the selection criteria specified in this order and submit the same to the assistant commissioner, Large Taxpayers Service, for approval,” according to the BIR memorandum signed by Internal Revenue Commissioner Kim Henares.
High-risk classification refers to companies that were found underreporting their VAT liabilities. They may include those with drastic decreases in their reported VAT payments, those that claimed input tax that exceeded 75 percent of the total output tax, those that filed VAT-exempt tax returns due to the availment of tax incentives and those that have history of filing claims for refund or requests for issuance of tax-credit certificates.
Firms that are not following administrative requirements would also be on the high-risk classification. It includes those that acquired more than P1 million in capital assets but failed to amortize the input tax as required, those that are non-compliant with the electronic-sales reporting and even those transacting with government entities.
Medium-risk firms, meanwhile, are those companies that have complex corporate structures as a result of mergers and acquisitions, consolidation, spin-off, split-up, among other things. They also include firms that have multiple branches all over the country but reported low sales and those companies that have different lines of business with different bases of computation for their VAT liabilities.
The audit program, which will be implemented throughout the month, hopes to issue an electronic letter of authority (eLA) for those who have tax deficiency.
“If an eLA has already been issued under the VAT Audit Program and the taxpayer becomes a candidate for regular audit in the concerned division based on the selection criteria under the annual audit program, the request for eLA should not include the VAT liability of the taxpayer,” it said.
An LA gives the power to the BIR to look into the books of the companies for verification.
The LTS of the BIR collects the bulk of the revenues for the agency, which was given a target collection of P1.066 trillion for the year.
Collection target for the year of the LTS was placed at P674.81 billion, or 63 percent of the entire goal of the agency, while the rest will come from the BIR’s regional offices and other income.