A CPD-ACCREDITED WEBINAR

A DEEP DIVE ON THIRD-PARTY INFORMATION

(TPI) MATCHING & RECONCILIATION
ASSESSMENT OF THE BIR:
DO’s & DONT’s ON YEAR-END ACCRUALS & ADJUSTMENTS
JANUARY 15, 2022 [SATURDAY] 2-4 [PICPA SMMC]
WILLIE B. SANTIAGO, LAWYER & CERTIFIED PUBLIC ACCOUNTANT
MCLE LECTURER & CPALE REVIEWER
WHAT IS TPI & WHY IS IT IMPORTANT?

Third party info allows BIR to ascertain

correctness of any returns, or in making a
return when none has been made, or in
determining liability of any person for
any internal revenue tax, or in collecting
any such liability, or in evaluating tax
compliance
BIR FINDING ON TPI!
 3 PARTY INFO
RD

PROVIDED BY COA
PNP-INITIATED 3RD PARTY INFO ON
CIGARETTES PACKS WITHOUT DST
ANY TECHNICALITY
ISSUES?
BIR USING TAGGANT READER TO TEST
AUTHENTICITY OF EXCISE STAMPS
HOW SHOULD
TP RESPOND?
LTFRB & LTO-PROVIDED INFO
TPI MATCHING PROGRAMS

TRS-RELIEF

TRS-BOC

TRS-LN
TRS-RELIEF
 CENTRALIZED DATA WAREHOUSE TO DETECT
REVENUE LEAKS BY MATCHING DATA GATHERED
FROM 3RD PARTY SOURCES VS. DATA IN BIR ITS
2 MAJOR GROUPS OF RELIEF

PRE-
PROCESSED
PROCESSED
SOURCES OF DATA

SLP SLS

List of
importation
NAVIGATING SLP
POSSIBLE RECON ISSUES?
NAVIGATING SLS
END RESULT!
KNOW WHAT DOES THE
CODE MEAN!
FINDING WHAT
COULD BE!
TPI MATCHING PROGRAMS

TRS-RELIEF

TRS-BOC

TRS-LN
TRS-BOC
TPI MATCHING PROGRAMS

TRS-RELIEF

TRS-BOC

TRS-LN
TRS-LN
 What if 2307 is voluminous 100+?

TP still needs to submit all the certificates for further

verification, reconciliation & 3rd party matching
ND
 Particulars Amount
Taxable receipts per value-added tax return 2,561,320.51
Adjustments
Unaccounted purchases per third party information (1) 366,553,866.67
Undeclared income from unaccounted expenses (2) 286,281,241.92
Undeclared sales per trial balance (3) 21,851,295.34
Receipt outside activity not subjected to value added tax (4) 184,475,382.83
Total adjustments 859,161,786.76
Vatable sales per audit 861,723,107.27
Value-added tax rate 12%
Output tax due 103,406,772.87
Less allowable input tax
Input tax carried over from previous period 667,547.03
Input tax on current purchases 2,976,837.98
Total 3,644,385.01
Less adjustments
Disallowed input taxes per audit (5) 867,255.17
Unsupported input tax per audit (6) 741,102.29
Excess input tax carried over to succeeding quarter/s (7) 1,808,627.47
Total input tax adjustments 3,416,984.93
Total allowed input tax 227,400.08
Value-added tax payable 103,634,172.95
Less payments -
Basic deficiency value-added tax 103,634,172.95
Add 12% interest per annum [07.25.20 to 10.30.21] 15,741,037.12
Total proposed value-added tax assessment 119,375,210.07
NIC
PAN
FAN/FLD
FDDA
 DEFENSES & ARGUMENTS
 BEG TO DISAGREE OR PARTLY AGREE
 Issue: factual & legal in nature
 noted discrepancy as result of application
of 3RD PARTY MATCHING/CAATs should not
be automatically translated into findings
of undeclared revenue
 Timing Difference, recording of sales vs
recording of invoice of Supplier
 Reconciliation & 3rd party confirmation by
showing email or affidavit
COMPUTERIZED MATCHING CONDUCTED BY
THE BIR TO COME UP WITH A PARTIAL TALLY

Discrepancy arising from comparison of

purchases submitted by Company’s
customers as against sales declared in
their tax returns

UNDERSTATED SALES:
ASSESSED WITH VAT
 CITATIONS
• CTA En Banc 1801 & 1808
3rd party matching discrepancy
failure to lay down factual basis of
findings
failure of BIR to inform TP on
factual basis of items in assessment
will result in
nullification of assessment
 CIR VS. GREEN VALLEY MARKETING CORP,
CTA EB CASE NO. 1801 & 1808 [OCT 14, 2019]

ISSUE: 3RD party matching discrepancy as a result

of (AITEID-SLP) & discrepancy findings as a
result of comparison made between SLP & Monthly
Alphabetical List of Payees
RESULT: Disallowance of expense
RULING:
1. failure to lay down factual basis of findings & failure of CIR to
inform TP on factual basis of items in the assessment will result
to nullification of assessment
2. deduction is in the nature of tax exemption which should be
strictly construed against TP, thus, must be established w/
competent factual & documentary bases
• CTA En Banc Case No. 1961

BIR is required to verify amounts

it obtained from computerized/3rd party
matching
by securing confirmation or certification
from 3rd-party info source or from
externally-sourced data
Without accomplishing it, data gathered
are left unverified
resulting assessment is void for lack of
factual & legal basis
WHAT SHOULD
HAVE BEEN?
BIR LETTER OF VERIFICATION OF SALES/PURCHASES:
If hindi po namin sasagutin ang letter, ano po ang
pwedeng maging implications sa BIR/ may pwede
po ba gawin ang BIR sa amin?
Inside jurisdiction:
• 5 days no response – consider true
• TPI source disagree w/ discrepancy – must sign Sworn Statement
stating actual sales/purchases. RO shall suggest that an eLA be
issued & perjury case be filed against TPI source for making an
improper declaration
Outside jurisdiction:
• 10 days no response – proceed to next step
• TPI source disagree w/ discrepancy – RO shall recommend issuance
of an eLA & filing of perjury case against TPI source for declaring
overstated purchases/understated sales.
DOES IT MAKE SENSE
• CTA Case No. 8345
no evidence was submitted showing that
income resulted from the unaccounted
purchases/expenses & that income was
actually received
wanting in legal & factual basis

presumptive in nature
 mislaid notion that undeclared purchases
would be similar to hidden income
to be valid, there must be clear proof of
realized income & such was received by TP
 BIR is required to verify amounts it obtained from its
computerized/3rd party matching by securing
confirmation or certification from 3rd party info
source, or from externally-sourced data

Without accomplishing the foregoing, data

gathered from computerized/3rd party
matching are left unverified & resulting
assessment is void for lack of factual & legal
basis

CIR VS. MCC TRANSPORT SINGAPORE PTE. LTD.,

CTA EB CASE NO. 1961 [JUL 14, 2020]
 ELEMENTS FOR THE IMPOSITION OF
ELEMENTS OF
INCOME TAXINCOME
there must clear proof of gain or profit

received
such gain or profit was
by TP actually or
constructively
it is not exempted by law or treaty from
income tax
WHEN NO THIRD PARTY MATCHING
WAS DONE BY THE BIR
• CTA Case No. 8991, December 17, 2019
Info of BIR was unverified
BIR did not secure required certifications
or confirmation to support integrity of
amounts per RELIEF
TP is free to deduct from its gross
income lesser amount or not to
claim any deduction at all
What is prohibited by income tax law is to
claim deduction beyond amount
authorized
 SC CASE G.R. NO. L-46644
assessment should not be based on mere
presumptions no matter how reasonable
or logical said presumptions may be
assessment must be based on actual facts
presumption of correctness of
assessment being a mere
presumption cannot be made to
rest on another presumption
 CTA CASE NO. 7540
no taxable income results from undeclared
expenses because it rests on mere
presumption
even if alleged undeclared expenses were
to be considered as income, the same
would be offset by recording the
equivalent expenses
Hence, such alleged undeclared expenses
will not result in taxable income
no deficiency VAT assessment should
arise from under-declared purchases
BIR must prove that TP was or
ought to be paid in
consideration for sale
& not when said TP purchases or
disburses cash to purchase goods or
properties
 SHIFTING THE BURDEN!
Assessment must fail if TP is able to prove
that the sole basis of assessment is
an unverified &unauthenticated document
without any support of externally-sourced
data &
that discrepancy between amounts
appearing in tax returns was a
result only of erroneous posting committed
by withholding agent
 WHERE BIR ISSUES NAKED ASSESSMENT
DETERMINATION OF TAX DUE IS WITHOUT
RATIONAL BASIS
AYALA PROPERTY MANAGEMENT CORP VS. CIR, CTA CASE 9298 [JAN 21, 2019]

• alleged unaccounted income,

based on differences from
BIR’s matching of TP’s SLS &
3rd parties’ SLP, were not
actually verified by BIR with
each third party

RULING: examiners should • Assessment is INVALID for failure of

obtain required certification the BIR to verify, validate or confirm
from 3rd party sources to the TPI with externally-sourced data to
establish correctness of data check its correctness & for failure to
garnered indicate the factual & legal bases
 BIR TO FOLLOW THEIR OWN!
data gathered from 3rd party sources using
BIR's relief system
guidelines & policies set forth under RMO
42-2003 & 46-2004 must be met
BIR to secure sworn statements or
certifications from TPI sources
Without verification or certification, such
info cannot be considered valid TPI
G.R. 255382 ON ESSENCE OF
REGISTERED-RETURN CARD
 BEST-EVIDENCE RULE
MISCONCEPTION
unverified data gathered from
computerized matching as basis of "Best
Evidence Obtainable" rule application?

RMC 23-00 only applies if report

or records requested from TP are not
forthcoming (i.e., the records are lost),
refuses to submit & reports submitted are
false, incomplete, or erroneous
SUBSCRIBE TO OUR

E-MAIL ME AT
willie.santiago@dmdcpa.com.ph