Lex Fori Philippines

Law, lawyering and everything in between.

  • Pages

  • Subscribe

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 129 other followers

  • DISCLAIMER

    Any opinion, information or remark made on this site, including any response to queries or comments posted, should not be regarded as a complete and authoritative statement of the law. There is no warranty as to the completeness or accuracy of the information and the authors will not be liable for any loss or damage relating to the use or reliance thereon. A grain of salt is recommended. No recipient of any information or content from this site should act or refrain from acting on the basis of such information or content. Consult your favorite legal representative. Use of this website does not and will not create any legal relationship between the authors and the receiver/user/reader and any lawyer-client privilege will not apply.

BIR Lifesytle Check for Individuals

Posted by lexforiphilippines on August 13, 2010

Recently, the Bureau of Internal Revenue (BIR) has been in the news for filing a case against a prominent businessman for failing to file his correct income tax return. Said businessman supposedly filed a zero tax return for the year 2007 but was able to acquire a Lamborghini worth Php26Million in the same year. The deed of sale for the luxurious car was said to have been provided by the Land Transportation Office (LTO) to the Bureau of Internal Revenue.

In his first State of the Nation Address, the President mentioned that the BIR will be filing cases against suspected smugglers and tax evaders on a weekly basis.

With this mandate coming from the highest official of the land, we can expect the BIR to focus its collection efforts against suspected tax cheats and high-profile individual taxpayers suspected of evading taxes.

But how will the Bureau go about this directive?

BIR Lifestyle Check

On March 9, 2010, the Bureau of Internal Revenue issued Revenue Memorandum Order (RMO) No. 19-2010, known as the Taxpayer’s Lifestyle Check System, with the objective to exhaust all means and methodology of determining an individual’s income. Under the RMO, the National Investigation Division (NID) of the BIR shall verify the existence of a taxpayer’s high value assets and/or conspicuous spending by accessing the records of appropriate government and private entities, such as but not limited to the following: the LTO, Bureau of Immigration, airline and shipping companies, Maritime Industry Authority, Civil and Aeronautics Board, Manila Electric Company, Land Registration Authority, Register of Deeds, resorts, membership clubs, or similar establishments, homeowner associations, real estate development authorities, and credit card companies, and Statement of Assets and Liabilities and Networth and/or Amnesty Returns filed under Republic Act No. 9480.

The information gathered from the aforementioned entities shall then be evaluated vis-à-vis the data extracted from the BIR’s Integrated Tax System (ITS) on the concerned taxpayer’s registered business/es, returns filed and amount of taxes paid. The economic use/beneficial ownership of properties shall be considered in the evaluation process. All properties registered under the name of  the taxpayer’s child, whether emancipated or minor, or any relative shall be considered as those of the taxpayer when the property is not proven to have been acquired under any of the means enumerated in the New Civil Code of the Philippines and the tax thereon has been properly paid, and/or the child or relative has no independent means sufficient for the acquisition of the property.

After evaluation, if sufficient evidence so warrants, the investigator shall request a formal issuance of a Letter of Authority to conduct a formal investigation of the subject taxpayer.

What will constitute prima facie evidence of fraud or substantial under-declaration of taxes?

If the taxpayer’s net worth has increased in a given year or if he has acquired substantial assets or incurred substantial spending and it was verified from the ITS that he has not filed an income tax return for the period or the declared income therein is disproportionate to his spending then the BIR will take is as a prima facie evidence of substantial under declaration of taxes.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: