By Eileen Mencias
The Bureau of Internal Revenue (BIR) has identified businesses that report large sales but continue to lose money, pay income tax equivalent to less than 2% of their revenue, or show unusual changes in their value-added tax (VAT) filings as priority cases under a revamped audit program.
Revenue Memorandum Order No. 22-2026 consolidates the BIR’s audit policies and procedures into a single framework and sets criteria for electronically selecting taxpayers for examination.
Other priority cases include taxpayers with sharp declines in reported sales or VAT payments, large increases in exempt or zero-rated sales, discrepancy notices and unusually high input VAT claims.
The BIR may also prioritize businesses operating for more than five years that have never been audited and companies whose assets increased by more than 50% from the previous year despite reporting a loss.
Companies deriving most of their revenue from parent companies, subsidiaries or affiliates may also be selected, as may conglomerates with shared expenses and intercompany charges.
The revised program follows the BIR’s suspension in November 2025 of field examinations and the issuance of Letters of Authority, Mission Orders and Tax Verification Notices while audit procedures and safeguards were reviewed.
Audits resumed earlier this year under revised procedures.
The order says no examination may proceed without a valid eLA, Tax Verification Notice or Mission Order. An audit conducted without the required authority is considered unauthorized.
As a general rule, a taxpayer may be covered by only one eLA for a taxable year covering all applicable internal revenue taxes.
Taxpayers will remain anonymous during the selection and assignment stages, with their identities disclosed only after cases have been assigned to revenue officers and group supervisors.
A revenue officer may generally handle no more than 30 priority cases at a time. An examiner with at least 30 pending priority cases or 10 mandatory cases may not be assigned another audit.
Regional audits generally must be completed within 180 days, while cases handled by the Large Taxpayer Service are given 240 days.
Failure to meet the deadlines does not automatically invalidate a tax assessment, but BIR personnel responsible may face administrative sanctions.—Bilyonaryo.com
