RMO No. 40-2022 — Prescribes the guidelines and procedures in the conduct of enforcement operations, forfeiture and prosecution of cases relative to the unlicensed/illicit/unauthorized production, importation, trade sale or possession of articles subject to Excise Tax including raw materials, packages, cigarette paper, tipping paper, cigarette filter tips, ingredients, machinery, equipment, appara

BUREAU OF INTERNAL REVENUE Repubilic of the Philippines Department of Finance National office Quezon City RECEIVED BUREAU OF INTERNALREVENUE RECORDS MGT. DIVISION SEP 29 2022 :25-A.M ADMIN-1

August 23, 2022

REVENUE MEMORANDUM ORDER NO.40 -2022

SUBJECT : Revenue Stamps, Labels or Tags Filter Tips, Ingredients. Machinery, Equipment, Apparatus, Mechanical Contrivances, and Removable Fixture of Any Sort Used for their Production and the Unlicensed/lllicit/Unauthorized Use or or Possession of Articles Subject to Excise Tax Including Raw Materials, Packages, Cigarette Paper, Tipping Paper, Cigarette Possession of False, Counterfeit, Restored or Altered BIR internal Guidelines and Procedures in the Conduct of Enforcement Unlicensed/licit/Unauthorized Production, Importation, Trade Sale Operations, Forfeiture and Prosecution of Cases Relative to the

TO 1 All Internal Revenue Officials & Employees and Others Concerned

1. OBJECTIVES

This Order is hereby issued to:

1. Prescribe guidelines and procedures to be observed in the conduct of paper, tipping paper, cigarette filter tips, ingredients, machinery, equipment, apparatus, mechanical contrivances, and removable fixture of any sort used for their production and the use or possession of false, counterfeit, restored or altered BIR internal revenue stamps, labels or tags. the unlicensed production, importation, trade, sale or possession of articles subject to excise tax including raw materials, packages, cigarette enforcement operations, forfeiture and prosecution of cases relative to

2. Provide for immediate imposition of penalties and sanctions for offenses committed in order to deter further commission thereof.

3. Maximize the degree of voluntary tax compliance, thereby increasing revenue collection.

JI. LEGAL BASIS

BUREAU OF INTERNAL REVENUE IntErNAL CoMMUNiCAtIONS DIVISION OY ections 6/ The conduct of said activity or operation shall be based on the provisions of 3 131, 163, 164, 171 and 172 of the National Internal Revenue

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265-A. 265-B, 268(B) and 279 of the same Code Code (NIRC) of 1997, as amended; and Sections 224, 225, 260, 262, 263, 263-A, 265

III. DEFINITION OF TERMS

and are hereby defined as follows: For purposes of this Order, the following types of surveillance shall be utitized

a. Covert Surveillance -- the discreet verification on the business his possession or control of articles subject to excise tax including raw ingredients, machinery, equipment, apparatus, mechanical contrivances, and removable fixture of any sort used for their unticensed production and the use or possession of false, counterfeit, restored or altered BIR internal operations of any person for a certain period to determine the existence and materials, packages, cigarette paper, tipping paper, cigarette filter tips,

of the NIRc of 1997, as amended, and its implementing rules and regulations. of the aforementioned articles subject of an offense or used or intended to be used as the means of committing an offense in violation of any provision revenue stamps, labels or tags before the conduct of apprehension/seizure

view gathering of information to determine the existence and his possession or control of articles subject to excise tax including raw materials, packages. cigarette paper, tipping paper, cigarette filter tips, ingredients, machinery b. Overt Surveillance -- the type of surveillance which involves an open- equipment, apparatus, mechanical contrivances, and removable fixture of any sort used for their unlicensed production and the use or possession of false, counterfeit, restored or altered BiR internal revenue stamps, Iabels or tags before the conduct of apprehension/seizure of the aforementioned

of committing an offense in in violation of any provision of the NIRC of 1997 as amended, and its implementing rules and regulations. articles subject of an offense or used or intended to be used as the means

IV. POLICIES

two (2) Teams and constituted by the following officers who shall be responsible in the conduct of the undertaking: A. For purposes of this Order, a BIR STRIKE GROUP shall be composed of

Over-all Head: Operations Group Deputy Commissioner of Internal Revenue (DCIR)

Team I: Large Taxpayers

Asst. Head: Members: Head: Co-Head: Co-Asst. Head: HREA, LTS-Excise ACIR, Large Taxpayers Service (LTS) ACIR, Enforcement & Advocacy Service (EAS) Chief, National Investigation Division (NID) and Hrea.eas. Representatives BUREAUOF INTERNAL REVENUE RECORDS MGT. DIVISION

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Excise LT Audit Division II Representatives [Optional] Excise Tax Areas (EXTA) Representatives [Optional] Chief, Excise LT Field Operations Division (ELTFOD) and Representatives

Team II: Non-Large Taxpayers

Asst. Head. Members: Head: Excise Tax Areas (EXTA) Representatives [Optional] Chief, Regional Investigation Division (RID) and Representatives from Revenue District Office (RDO) [Optional] Concerned Regional Director Concerned Assistant Regional Director Representatives Representatives from Legal Division

offices to provide assistance and relevant information relative to the enforcement operation. Further, the BiR Strike Group may request other revenue personnel from other

the concerned Regional Director. Orders (MOs). The MO shall be signed by the DCIR-Operations Group, ACIR, LTS or B. All surveillance and/or enforcement activities shall be covered by Mission

as follows: The MOs shall be issued in triplicate/quadrupiicate copies, and to be distributed

2nd Copy -- 3rd Copy - 4th Copy -- Originai -- Issuing Office's file copy Investigating Office's / Division file copy to be attached to the report on surveillance after termination of Revenue Officer/s (ROs) directed to conduct the surveillance, and Taxpayer's copy (in case of overt surveillance) the activity.

Police (PNP), National Tobacco Administration (NTA), Local Government Units ground to believe that there is a violation of the NIRC, as amended, or its implementing confidential information or denunciation complaint fited by informers, private individuals or entities, and also from a referral of other government agencies [i.e. {LGUs), etc.]. of this Order shall either be covert and/or overt surveillance. Covert surveillance shal be resorted to initially evaluate the factual circumstances to determine reasonable rules and regulations. The SUBJECT of the surveillance generally comes from a Bureau of Customs (BOC), National Bureau of investigation (NBI), Philippine National C. The surveillance and/or enforcement activities relative to the implementation

taxpayer) shall conduct the activity. LTS, the said activity shall be performed by Team I (ELTFOD, NID, Excise LT Audit Division II or EXTA). Likewise, if the identified owner/possessor of excisable articles or machinery. etc. falls under the iurisdiction of the Revenue Region (RR), Team Il (RID, EXTA and/or concerned Revenue District Office having jurisdiction over the said D. In case the subject taxpayer is a registered excise large taxpayer under the BUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION

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E. All legal issues shall be referred to the Law & Legislative Division under the Legal Service at the National Office or to the Legal Division of the concerned Revenue Region, whichever is applicable. The resolution of the legal issues shall be prepared and issued within ten (10) days from the date of receipt of such request.

F. The Head of the concerned BIR Strike Team shalf coordinate with other government agencies and/or private individuals/entities who will be giving information relative to the activities covered by this Order.

G. The team shall submit the results of the surveillance and/or enforcement activities, together with the complete set of supporting documents to the DCIR- Operations Group for evaluation and appropriate action.

As part of their regular function, the ROs of ELTFOD shall be conducting reguiar covert surveillance to uncover violations of the NIRC pertaining to excise tax.

V.GUIDELINES AND PROCEDURES

1. Introduction to Surveillance Activity

surveillance is necessary for an effective implementation thereof. Before the actual Acquiring preliminary information on the person/entity to be placed under

surveillance; the concerned BIR Strike Team must:

1.1 Acquaint himself with the business organization and economic activity of

the subject of surveillance (SUBJECT), the location of the stores, outlets, production plant/factory and warehouse/storage facility, and such other relevant information as may be available and / or necessary. This must be done with utmost secrecy to prevent leakage of information to the SUBJECT.

1.2 Prepare the necessary recommendation for the issuance of a MO for approval and signature of the DCIR, Operations Group, ACIR, LTS or

concerned Regional Director.

1.3 Brief the implementing officers on the acts to be performed in compliance

with the MOs. The briefing shall be done at least thirty (30) minutes before the actual surveillance. To preserve the confidentiality of the surveillance operation, the identity of the target SUBJECT should be revealed to the implementing officers only upon arrival at the site of operations.

1.4 Coordinate with other Government Agencies, such as but not limited to NBI.

BOC, PNP, and concerned Loca! Government Unit (LGU).

2. Conduct of Surveillance Activity 2.1 ROs Authorized to Conduct Surveillance Activities on Business Establishments for Possible Violations of Pertinent Excise Tax Provisions

of the NIRC of 1997, as amended. - The Revenue Officers from the concerned team of the BIR STRIKE Group shall be authorized to conduct surveillance activities on identified business BUREAU OF INTERNAL REVENUE RECORDS MGT DIVASION establishments for-possihle

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violations of the provision of the NIRC of 1997, as amended based on a validly issued MO signed by the concerned authorized revenue official, and shalt perform the following procedures:

a Observe the business operations of the SUBJECT. Develop leads

from other sources by obtaining information from neighboring business establishments, locating additional outlets, stores, production plant/factory, warehouses/storage, or branches of the SUBJECT. b. Know the suppliers and buyers, and volume of deliveries made to any by the SUBJECT. This should be done discreetly c. Determine any violation of internal revenue laws, rules and regulations committed by the SUBJECT. d. Submit a report within five (5) days after completion of the said activity.

3. Evaluation of Surveillance Results --

3.1. A Memorandum Report shall be prepared recommending the necessary

enforcement action if the result of surveillance activities warrants the same.

3.2 The enforcement actions may consist of any or ail of the following:

a. Inventory stock-taking (requires MO) Inventory taking of all articles subject to excise tax including raw materials, supplies, ingredients, machinery, equipment, apparatus, mechanical contrivances, and removable fixture of any sort used for their unlicensed production and false, counterfeit, restored or altered BIR

internal revenue stamps, labels or tags found inside the SUBJECT's

the provisions of the NIRC of 1997, as amended, and its implementing rules and regulations; branches and perform other acts necessary to ensure compliance with outiets, stores, production plant/factory, warehouses/storage, or

b. Apprehension/seizure of articles, machinery, apparatus, etc. (requires MO)

The concerned ROs are authorized to make apprehension/seizure of all

machinery, equipment, apparatus, mechanical contrivances, and articles,' subject to excise tax including raw materials, packages, cigarette paper, tipping paper, cigarette filter tips, ingredients. removable fixture of any sort used for their unlicensed/illicit/unauthorized production and false, counterfeit, restored or altered BiR internal revenue stamps, labeis or tags for violation of any provision of NIRC of 1997, as amended, and its implementing rules or regulations, and the issuance of Apprehension Stip in accordance with Section 172 of the NIRC of 1997, as amended;

c. Forfeiture and Destruction of seized articles, machinery, apparatus, etc in accordance with the provisions of Section 225 of the NIRC of 1997.

as amended: BUREAUOF INTERNAL REVENUE RECORDS MGT DIYSION

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d. Issuance and service of an Assessment to the SUBJECT (i.e. PAN or 228 of the NIRC of 1997, as amended, and Revenue Regulations (RR) FLD & FAN) in accordance with the provisions of Sections 203, 222, 223 No. 12-99, as amended by RR Nos. 18-13, 7-18 and 22-2020 pursuant

regulations; and to a validly issued Letter of Authority (LOA) as required under Section 13 of the NIRC of 1997, as amended, and its impiementing rules or

e. Filing of civil case and/or criminal case under the Run After Tax Evaders

(RATE) Program pursuant to Sections 254, 263 and 265 of the NIRC of 1997, as amended.

3.3. Following the conclusion of the formal surveillance, the concerned BIR Strike Team shall refer the results, together with the complete set of supporting documents, to the DCIR-Operations Group for evaluation and approval.

4. Conduct of Enforcement Action Based on Surveillance Results

4.1. Prepare the necessary MO;

4.2. Serve the MOs to Subject Taxpayer -- Directing concerned ROs to enter any house, building, or place where articles subject to excise tax are produced, or kept, or are believed by him upon reasonable grounds to be produced or kept, so far as may be necessary to examine, discover or seize the same; and.

counterfeit, restored or altered BIR internal revenue stamps, labels or tags, in to make seizure of any article wherein excise taxes has not been paid, including violation of the NIRC of 1997, as amended, and any of its implementing rule or removable fixture of any sort used for its unlicensed production and false, raw materials, packages, cigarette paper, tipping paper, cigarette filter tips, ingredients, machinery, equipment, apparatus, mechanical contrivances, and

regulation:

4.3. Conduct Inventory-Taking/Physical Count -- Inventory taking of all articies subject to excise tax, including raw materials, packages, cigarette paper, tipping paper, cigarette filter tips, ingredients, machinery, equipment, apparatus, mechanical contrivances, and removable fixture of any sort used for its unlicensed production and false, counterfeit, restored or altered BIR internal revenue stamps, labels or tags used for their unlicensed/illicit/unauthorized production, and perform other acts necessary to ensure compliance with the

regulations; provisions of the NIRC of 1997, as amended and its implementing rules and

4.4. Serve a letter notice to give subject taxpayer due process -- A letter will be

five (5) days from receipt of the letter: served directing the subject taxpayer to present the following documents within

a. Registration of BranchWarehouse/Storage Facility (Sec. 236 of NIRC of

1997, as amended);

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b. Permit to operate as manufacturer/importer/dealer or maintain a Warehouse, for excise tax purposes (Sec. 154 of NIRC of 1997, as

f. Inventory books per warehouse; and g. Other documents that may be determined necessary. e. BIR Forms such as Official Delivery Notice (GUIA) / Excise Taxpayer c. Authenticated copy of Lease of Contract/Agreement: d. Officiat Register Books (ORB) for each subject warehouse; Authority to Reiease Imported Goods (ATRIG) or other proof of source of goods/ inventory kept in subject warehouses); Documents (i.e. Bill of Lading, Packing List, Commercial Invoice, Import Removal Declaration (ETRD) / Withdrawal Certificate (WC), Importation Entry and Internal Revenue Deciaration (IEIRD), Proof of Payments) amended):

4.5. Apprehension/Seizure or Detention of Goods -The concerned ROs are

with the Property Division : Administrative Division / Forfeited Assets Management Unit (FAMU), whichever is applicable, for the proper storage and safekeeping of confiscated or seized articles. including raw materials, packages, cigarette paper, tipping paper, cigarette filter tips, ingredients, machinery, equipment. apparatus, mechanical contrivances by the BIR and the issuance of Apprehension Slip in accordance with Section 172 of the NIRC of 1997, as amended. The enforcement team shall coordinate and removable fixture of any sort used for their unlicensed/illicit/unauthorized production and false, counterfeit, restored or altered BiR internal revenue stamps, labels or tags for violation of any law, rule or regulation administered authorized ta make apprehension/seizure of all articles subject to excise tax.

that the same are carried out with due regard to the SUBJECT's legal rights. 4.6 The authorized ROs are not precluded from applying additional procedures that may be deemed necessary based on initial evaluation of the case provided

4.7 A Memorandum Report shall be prepared containing the following:

3. Documentary requirements; 4. Results of the inventory taking: implementing rules and regulations & computation of internal revenue tax liability on excise tax; and 1. Facts of the case; 2. Procedures undertaken; 5. Violations of the provisions of the NIRC of 1997, as amended, and its

6. Recommendation: a. Forfeiture and destruction of seized articles, machinery, apparatus, etc. b. Issuance of a Letter of Authority and the corresponding Assessment c. Filing of civil case and/or criminal case under the RATE Program pursuant to Sections 254, 263 and 265 of the NIRC of 1997, as (i.e.PAN or FLD& FAN)

amended. d. Closure of business -- if there is sufficient ground for closure of business as provided under NiRC of 1997, as amended, and its

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implementing rules and regulations and other existing laws, rules and regulations administered by the BiR.

VIREPORTORIAL REQUIREMENTS

Group. days after the close of each month, and shall submit same to the DCIR-Operations 1. The concerned BIR Strike Team shall prepare an Accomplishment/Status Report on the Surveillance and/or Enforcement Activity that was conducted within ten (10)

2. The DCIR-Operations Group shall then submit a consolidated Accomplishment Commissioner of Internal Revenue. /Status Report within:twenty (20) days from the close of each quarter. to the

VII REPEALING CLAUSE

accordingly. Aff revenue issuances inconsistent herewith are hereby repealed or modified

VIIEFFECTIVITY

This Order shalf take effect immiediately.

Commissioner of Internal Revenue LILIA CAtRIS GUILLERMO MeLa 00 1694

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BUREAU OF INTERNAL REVENUE

RECORDS MGT. DIVISION

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