APRIL 15 marks the end of another taxable year for many companies. This is the time when annual income tax returns are filed to report the company’s performance during the year. For the tax authority, however, this marks the beginning of another audit quest.
A taxpayer will know if it is under audit when it receives an electronic letter of authority (eLA). This is a written notice that signals the start of the tax authority’s audit process. Attached to the eLA is a request for submission, within a specific time frame, of documents like books of accounts, tax returns, and alphalists.
Taxpayers should always keep in mind that immediate attention must be given to these requirements. Non-compliance with this simple request can lead to various undesirable consequences. Taxpayers may clamor that this “simple request” is not really simple as it involves collation of voluminous documents that is time consuming.
In case where the information or records requested are not provided within the prescribed period, the assigned tax examiner will cause the issuance of a subpoena duces tecum (SDT) directed to the taxpayer. SDT is the document that orders the taxpayer to appear before a court and produce the requested documents during the hearing or trial. Evidently, a request from tax authorities must be taken seriously and must be acted upon promptly.
SDTs are issued to the president, partner, general manager, branch manager, treasurer, registered officer-in-charge, employee/s or other persons responsible for the custody of the books of accounts and other accounting records that are required to be submitted. In determining to whom the SDT will be issued, the examiner checks the General Information Sheet (GIS) submitted to the Securities and Exchange Commission (SEC) on a yearly basis.
The SDT will also contain the specific time, date, and place wherein the requested documents should be submitted to the examiner at the BIR office. The time indicated is between 8 a.m. and 5 p.m., which is the regular business hours. The date of compliance is set on the 14th day from the date imprinted on the SDT.
The issuance date on the SDT may not always be the same as the date the taxpayer actually receives it as the examiner has three days from the date of signing to serve the SDT to the taxpayer. This shall be served by the examiner personally at the taxpayer’s registered or known address or wherever he may be found. However, there may be cases wherein personal delivery may not be practicable, then it can be served through substituted service or mail at his registered or known address.
Substituted service may be resorted to when the party is not present at the registered or known address. Substituted service means: a) the SDT will be left with his clerk or with a person having charge at the registered address; b) the SDT may be left with his clerk or with a person having charge at the known address (business activities of the party are conducted); c) the SDT may be left with a person of legal age residing therein; d) the SDT may also be served to a barangay official and two disinterested witnesses to the address to attest that no person has been found at the party’s registered or known address; e) the SDT may also be served to a barangay official and two disinterested witnesses to the registered or known address in the presence of the party to observe the party’s refusal to receive the SDT. The names, official position, and signatures of witnesses will be contained in the bottom portion of the SDT.
On the date reflected on the SDT, the required documents submitted to the concerned BIR examiner must be substantially complete. In case the taxpayer does not submit the documents or submitted incomplete documents, the action lawyer that has been assigned will call a conference on the fifth working day after that was set in the SDT. Within seven days after the conference, the action lawyer will prepare a letter-compl aint together with the complaint-affidavit, recommending the criminal prosecution of the individual taxpayer or the responsible officer of the corporation or partnership who disobeyed the SDT.
It is important to note that Revenue Memorandum Order 10-2013 has explicitly provided that once the complaint-affidavit against the taxpayer is filed, this cannot be withdrawn even if the taxpayer submits the documents after the date that was set in the SDT.
The withdrawal of the complaint was previously allowed upon compliance with the submission of documents and payment of the P10,000 administrative fee. However, the tax authorities are implementing stricter rules to enforce their authority. Compliance is a must. Let us always be reminded to heed the tax authority’s call.
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