REVENUE MEMORANDUM ORDER NO. 19–2015 issued on September 18, 2015 prescribes the policies, guidelines and procedures in the audit/investigation of tax returns. In general, all taxpayers are considered as possible candidates for audit. To cover the audit/investigation of taxpayers, electronic Letters of Authority (eLAs) shall be issued. The said audit/investigation shall include, but not be limited to the mandatory cases and priority taxpayers/industries specified in this Order including other priority audit that may be identified by the Regional Director (RD)/Assistant Commissioner, Large Taxpayers Service (ACIR-LTS). The tax returns to be selected for regional tax cases (for item numbers II.2 to 3 of this Order) shall consist of 60% Taxpayer Account Management Program (TAMP) and 40% nonTAMP taxpayers of the Revenue District Office (RDO). The RDO and RD/Large Taxpayers Division (LTD), Large Taxpayers Audit Division (LTAD) and ACIR-LTS are equally responsible in ensuring that only returns of taxpayers registered within their jurisdiction and those that match the selection criteria of this Order are selected for issuance of eLAs. Otherwise, they shall be subject to administrative sanctions. Any deviation, except those selected under II.3 of this Order, shall require a request with a written justification to be submitted by the RD to the Deputy Commissioner-Operations Group (DCIR-OG), for regional cases, and by the ACIR-LTS to the Commissioner, for large taxpayer (LT) cases. A copy of the request approved by the DCIR-OG shall be furnished to the ACIRAssessment Service (AS), for monitoring purposes. The RDO/LTD/LTAD shall prepare two (2) lists of taxpayers who have not been audited, to wit: a. Taxpayers who have been in operation for more than three (3) years up to five (5) years; and b. Taxpayers who have been in operation for more than five (5) years. At any given time, the head of RDO/LTD/LTAD shall make sure that each Revenue Officer (RO) should have a case load coming from either of the two (2) lists above, whether or not any of the selection criteria under item II.2 of this Order has been met. If the taxpayer has been audited for the last two (2) years and has been again selected for audit on the current or 3rd year, the RDO/LTD/LTAD shall submit a written explanation to the Commissioner, copy furnished the DCIR-OG, for regional cases, as to why such taxpayer shall be subjected to audit for three (3) succeeding years, unless the RDO/LTD/LTAD has established that such taxpayer has an under-declaration of sales/income or overstatement of expenses/deductions by at least 30% (prima facie evidence of fraud). The deficiency assessment on these cases should be imposed a 50% surcharge. Discrepancies or audit/review findings arising from taxpayers with filed claims for VAT refund/credit referred by the VAT Credit Audit Division (VCAD) or Tax Audit Review Division (TARD) should be evaluated by the RDO/LTD/LTAD to determine any tax implications. The RDO/LTD/LTAD may select the taxpayer-claimant for issuance of eLA, if necessary. However, if the taxpayer-claimant is already the subject of an existing eLA for the same taxable year covered by the claim, the audit/review findings should be consolidated with the existing eLA/case. A copy of the narrative memorandum report on these cases should be transmitted by the RDO to the ACIRAS, for regional cases, and by the LTD/LTAD to the ACIR-LTS, for LT cases, on or before the 10th day of the month following the submission of the report of investigation by the RO. The Electronic Letter of Authority Monitoring System (eLAMS) shall be used in the request, approval and issuance of eLAs, as well as in updating the status of the same, until the Case Management System (CMS) of the enhanced Tax Information System (eTIS) is rolled-out in the National, Regional and District Offices. Electronic Memorandum of Assignment (eMOA) thru eLAMS shall be issued for the following cases: a. Reassignment for the continuation of the audit/investigation of a case to another RO due to resignation/retirement/transfer of the original RO; b. Assignment to the original RO of returned cases by the reviewing office or reassignment to another RO of returned cases in case of resignation/retirement/transfer of the original RO; c. Reassignment to another RO due to referral of the case to another investigating office [e.g. cases referred to Regional Investigation Division, National Investigation Division]; and d. Protested cases/cases for reinvestigation. As a general policy, the simultaneous investigation of all liabilities of the taxpayer shall be followed. One (1) eLA shall be issued for each taxable year or period to include all internal revenue tax liabilities of the taxpayer, except when a specific tax type had been previously examined (e.g., audit of VAT under VAT Audit Program and VAT arising from claim of tax refund/credit). Except for eLAs issued under the Run After Tax Evaders Program of the National Office (NO) or Regional Office, only ROs-Assessment Group shall be authorized to conduct audit and investigation of tax cases, whether in a principal or assisting capacity. The same RO and/or Group Supervisor (GS) shall not be assigned in the current year with the same taxpayers who have been examined for the prior year, except when there is only one GS or at most four (4) ROs in one district/investigating office. Notwithstanding the foregoing policies, eLAs shall be issued for the following tax cases: a. Specific audit of claims for VAT refund or issuance of Tax Credit Certificate wherein one eLA shall be issued for each taxable period/quarter of claim. The same RO may be assigned for two (2) or more taxable quarters provided the quarters covered are for the same taxable year. b. In the issuance of eLA covering the audit of tax liabilities of taxpayers retiring from business, one (1) eLA shall be issued for the audit/investigation of the internal revenue tax liabilities covering the immediately preceding year and the short period return. However, the RO assigned to the case shall prepare two (2) separate reports – one for the immediately preceding year and another on the results of the audit/investigation for the short period return. Taxpayers who are retiring from business with gross sales/receipts amounting to P1,000,000.00 and below or gross assets not exceeding P3,000,000.00 shall no longer be verified/investigated. c. For Estate Tax cases with other tax liabilities, two (2) separate eLAs shall be issued to the same RO, one (1) for the Estate Tax liability and a separate eLA covering the audit of other tax liabilities for the year immediately preceding the death of the taxpayer and the short period within the year up to the death of the decedent. The RO shall prepare three (3) separate reports, namely: 1) for the Estate Tax liability; 2) for the other tax liabilities covering the immediately preceding year; and 3) for the short period return. For Estate Tax cases where the decedent has no other tax liabilities, a Tax Verification Notice (TVN) shall be issued irrespective of the amount of gross estate as prescribed in RMO No. 69-2010. Failure on the part of the RO to render a report of investigation/verification within the time frame prescribed in this Order shall not nullify the eLA. The eLA is enforceable even if it remains outstanding beyond the time frame for submission of report of investigation/verification by the RO assigned to the case, subject to the period of limitation under Sections 203 and 222 of the Tax Code of 1997, as amended. However, the RO who fails to submit the report investigation/verification shall be subject to any applicable administrative sanction. As stated in RMO No. 44-2010, it is reiterated that pending eLAs as of the effectivity of the said Order shall no longer be revalidated. In case the report of investigation cannot be rendered within the prescribed period, the concerned RO shall prepare a monthly progress report starting from the time such audit report should have been rendered stating therein the reason for the delay in the submission of the report of investigation duly noted by his GS and approved by the RDO/LTD/LTAD. The said progress report/s shall be attached to the docket of the case. The RDO/LTD/LTAD shall report to the ACIR, Internal Affairs Service, Attention: The Chief, Internal Investigation Division, any RO under his supervision with prescribed tax cases and long overdue cases that are still unsubmitted despite several call up letters/reminders issued by the RDO/LTD/LTAD. A statement of all the facts and other documents (e.g., memoranda issued to the concerned RO calling his attention regarding submission of required reports of investigation within the prescribed period) must be submitted, together with his report, copy furnished the RD and ACIR-AS, for revenue regions, and the ACIR-LTS, for LT. A random revalida of audit cases may be conducted by the Office of the Commissioner and/or the Office designated by the Commissioner. Any violation of the instructions in this Order by any RO or official shall be a ground for the imposition of appropriate administrative sanctions/penalties.