September 20, 1990

REVENUE MEMORANDUM ORDER NO. 43-90

Subject : Amendment of Revenue Memorandum Order No. 37-90 prescribing

revised policy guidelines for Examination of Returns and Issuance
of Letters of Authority to Audit.
To : All internal revenue officers and others concerned.
A. Purpose.
This Revenue Memorandum Order is hereby promulgated for the purpose of
prescribing revised policy guidelines for the audit/investigation and issuance of
letters of authority (L/A) to audit. This order supersedes Revenue Memorandum
Order No. 37-90. cdtai

B. Package Audit Policy.

1. As provided in RMO No. 10-89, tax audit shall be conducted simultaneously for
all internal revenue tax liabilities of a taxpayer with the exception under certain
conditions as presented below, of the value-added tax, withholding tax, capital
gains tax, estate tax and excise tax.

2. In issuing L/A, each type of internal revenue tax shall be speci cally stated in
the L/A. Subject to the limitations prescribed hereunder, any of the following
categories of internal revenue taxes shall be indicated in the L/A:
(a) Income tax (including withholding tax liability of the taxpayer as
withholding agent, unless covered by a separate L/A; except capital gains
tax on sales of real property and shares of stock imposed under Title II of the
Tax Code.
(b) Transfer taxes (estate and donor's tax) imposed under Title III of
the Tax Code.

(c) Value-added tax imposed under Title IV of the Tax Code.

(d) Other percentage taxes imposed under Title V of the Tax Code.

(e) Excise taxes imposed under Title VI of the Tax Code.

(f) Documentary stamp tax imposed under Title VII of the Tax Code.
3. As a general rule, separate L/As should be issued for VAT.

3.1 However, in the revenue regions, if the annual gross sales or

receipts declared in the income tax return do not exceed P10 million and the
revenue of cer (RO) to whom the income tax return is assigned for audit is
also quali ed to audit VAT liabilities, only one L/A shall be issued for all
internal revenue taxes to be speci cally indicated in the L/A. The
requirement that separate L/As should be issued for income tax and VAT
audit if the gross sales or receipts exceed P10 million pesos, shall be strictly
observed.
3.2 In the Special Operations Service (SOS), separate L/As should be
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 issued for VAT. The VAT liabilities for taxpayers listed under the jurisdiction
of the SOS shall be audited by the VAT Division or by a group of revenue
officers to be designated therefor by the Assistant Commissioner (SOS).

4. Examination of excise tax liability should be covered by a separate L/A.

5. Separate L/As should be issued for the audit of the estate tax and other
internal revenue tax liabilities of the decedent and the examination shall be
conducted in accordance with Revenue Memorandum Order No. 40-83.

6. Unless otherwise ordered by the Commissioner, the audit of withholding tax

liability is included in the audit of the income tax liability of the taxpayer. The
Commissioner may designate any of ce and/or group of ROs to conduct an audit
of the withholding tax liabilities of a taxpayer separately from its other internal
revenue tax liabilities.

C. Other policies for issuance of L/As.

1. All audits/investigations, whether eld audit or of ce audit, should be
conducted under a Letter of Authority.

2. The duplicate of each internal revenue tax which is speci cally indicated in the
L/A shall be attached thereto, unless a return is not required under the Tax Code
to be led therefor or when the taxpayer has not led a return or the Assessment
Branch has certi ed that no return is on le therein or the same cannot be
located.

3. A Letter of Authority should cover a taxable period not exceeding one taxable
year. The practice of issuing L/As covering audit of "unveri ed prior years" is
hereby prohibited. If the audit of a taxpayer shall include more than one taxable
period, the other periods or years shall be specifically indicated in the L/A. cdasia

4. The maximum workload for a revenue of cer shall, at any one time, not exceed
10 cases in the case of eld audit and 30 in the case of of ce audit. If his
pending cases are less than ten for eld audit cases or thirty for of ce audit
cases, whichever is applicable, (excluding reported cases which were returned to
him by audit reviewers for further compliance with certain requirements), he may
be assigned additional tax returns or cases to replenish those cases the audit of
which were terminated and report thereon submitted to the Revenue District
Of cer for eld cases and Chief, Assessment Branch for of ce audit cases. For
purposes of determining the workload of each RO, each L/A shall be counted as
one case. Thus, a L/A for income tax examination and a L/A for VAT which may
be assigned to a RO shall be counted as two (2) cases. The workload limitation
shall not apply to cases pending in the hands of a RO who was transferred to
another district and such cases are re-assigned to other ROs in the same district.
If, however, a return is assigned to more than one RO for purposes of team audit
under only one L/A, each RO who is a member of the team or group shall be
considered as having been assigned one case in determining the maximum
number of cases to be assigned to each RO.

5. Any re-assignment/transfer of cases to another RO(s), and revalidation of L/As

which have already expired, shall require the issuance of a new L/A, with the
corresponding notation thereto, including the previous L/A number and date of
issue of said L/As.

6. The audit of VAT returns by quali ed ROs must strictly comply with
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 examination policy prescribed in RMO No. 18-90 announcing the results of the
VAT Audit Proficiency Examination.

D. Preparation and issuance of L/As.

1. All L/As for cases selected and listed pursuant to RMO No. 36-90 to be audited
in the revenue regions shall be prepared and signed by the Regional Director (RD).

2. The Regional Director shall prepare and sign the L/As for returns recommended
by the RDO for assignment to the ROs, indicating therein the name and address of
the taxpayer, the name of the RO(s) to whom the L/A is assigned, the taxable
period and kind of tax; after which he shall forward the same to the RDO or Chief,
Assessment Branch, who in turn shall indicate the date of issue of the L/A prior to
its issuance.
3. The L/As for investigation of taxpayers by National Of ce audit of ces
(including the audit division in the Sector Operations Service and Excise Tax
Service) shall be prepared in accordance with the procedures in the preceding
paragraph, by their respective Assistant Commissioners and signed by the Deputy
Commissioner concerned or the Commissioner. The L/As for investigation of
taxpayer by the intelligence and Investigation Of ce and any other special audit
teams formed by the Commissioner shall be signed by the Commissioner of
Internal Revenue.

4. For the proper monitoring and coordination of the issuance of Letter of

Authority, the only BIR of cials authorized to issue and sign Letters of Authority
are the Regional Directors, the Deputy Commissioners and the Commissioner. For
the exigencies of the service, other of cials may be authorized to issue and sign
Letters of Authority but only upon prior authorization by the Commissioner
himself. casia

5. All issued L/As shall be monitored in accordance with RMO No. 4-89 and 12-89.

E. Effectivity.
This Order shall take effect immediately.

(Sgd.) JOSE U. ONG

Commissioner of Internal Revenue

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