RMO No. 18-2017 — Prescribes the policies, guidelines and procedures for tagging/classifying inactive business taxpayers Digest | Full Text | Annex A | Annex B | Annex C | Annex D | Annex E | Annex F

CK REPUBLIC OF THE PHILIPPINES BAU OP NTERNALEYENE RECORE Aus 1 H 207 2.33 NCT.N PM.

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE Quezon City RECEIVEO Uo

August 07, 2017

REVENUE MEMORANDUM ORDER NO._/8- 207

SUBJECT : Prescribing the. Policies. Guidelines and Procedures for

Tagging/Classifying Inactive Business Taxpayers

TO All Internal Revenue Officers and Other Concerned

OBJECTIVES:

This Order is issued to:

1. Define and set criteria in tagging/classifying taxpayers as "Inactive":

2 Provide policies, guidelines and procedures in handling inactive business

taxpayers:

3. Include Inactive" status in the Integrated Tax System (ITS) under the list of

values of taxpayer status;

4. Clean-up Taxpayer Registration Database to minimize the significant increase of stop filer cases and prevent additional creation of invalid stop filer cases.

H. DEFINITION OF TERMS:

1. Inactive Taxpayers shall have an "Inactive" status and shall be defined as:

1.1 A registered business taxpayers (individuals and non-individuals) who were identified to have failed to file all of the required internal revenue tax returns for all tax types that they are registered (i.e. Withholding Tax, VAT, Percentage. Income tax, Excise Tax, Registration Fee, and/or Documentary Stamp Tax. pursuant to Section 236(C) of the NIRC, as amended and Section 9 of Revenue Regulation No. 7-2012) and pay taxes due thereon for the last two (2) consecutive years from:

1.1.1 1.1.2 the date of the last returns filed: the date of registration to cover the following scenarios: a. with issued TIN and COR only:

b. with issued TIN via eREG without COR; c. with issued TIN without COR; d. with issued TIN thru SEC with PSIC "0000 -- Unclassified

1.2 A taxpayer that has notified the BIR district office of the temporary cessation of its business operations;

1.3 Cannot be Located (CBL) Taxpayers - are taxpayers which cannot be located or Verification Drive (TCVD), or taxpayers that cannot be served Letter Notices. Revenue Officers to locate the subject taxpayers after exhausting all possible contacted after the conduct of the ocular inspection/verification/ Tax Compliancel Letter of Authorities and Tax Verification Notices due to failure of the concerned means to do so

I. POLICIES AND GUIDELINES:

1. For purposes of tagging/classifying the status of taxpayer, the registration system shall provide the following list of values: (table)

Active Inactive ITS Registered (Inactive) Registered (Active ) ETIS

Transferred Cancelled Ceased/Dissolved Deregistered Deregistered

All registered taxpayers engaged in trade or business (individual or non-individual) who falls under the definition of Inactive Taxpayers under this Order shall be classified as Inactive Business Taxpayers.

3. Inactive self-employed individual who is also registered as an employee (Mixed- his business shall be deemed cancelled/invalidated upon end-dating of its registered Office for destruction. Receipts/Invoices for which a valid Authority to Print has been previously granted to business tax types and shall be duly surrendered to the concerned Revenue District Income Earner) shall not be tagged as "Inactive". However, any unused Official

4. The CRM/POS Permits issued, as well as any unused Official Receipts/Invoices for Taxpayers tagged as Inactive shall be deemed cancelled/invalidated as of date of which a valid Authority to Print has been previously granted to all Business tagging.

5.In the case of TIN issued to Estate of a Decedent under ONETT, upon full payment updated to "Active" status in order to facilitate the filing of the amended estate tax shall be tagged as "Inactive". However, in case of additional properties discovered after payment of the estate tax, the TIN previously issued for such Estate shall be Estate. In case the decedent's business is operated by heirs under the "Estate of taxpayer until closed/liquidated by the heirs, in accordance with existing rules and of the estate tax by the heirs, administrator or executor, the issued TIN for the Estate return and shall be tagged "Inactive" upon full settlement of the tax liabilities of the Decedent", the TIN shall not be cancelled. It shall be treated as a separate individual procedures.

6 The National Office Data Center (NODC)/Revenue Data Centers (RDCs) shall generate the following to be forwarded to concerned district offices:

6.1 Alphalist of Inactive Business Taxpayers (Individual and Non-Individual by the concerned Revenue District Office/Large Taxpayer Division: Business Taxpayers) on or before June 30 of the following year or as required

7.The concerned Revenue District Officers (RDOs)/Chief, Large Taxpayers Divisions encoded/un-uploaded tax returns, and that open cases do not pertain to suspended tax (LTDs) shall validate if the tagging as non-filer of tax returns is not due to un- returns.

. All concerned RDOs/Chief, LTDs shall perform and undertake the following necessary verification and validation strategies prior to finality of the list for tagging as inactive taxpayers as follows:

8.1 Verify/validate if the said tagging of the non-filer of tax returns is not due to un-encoded/un-uploaded tax returns, and that open cases do not pertain to suspended tax returns

8.2 Include in the TCVD operations to confirm its physical existence/non existence; and

8.3 Ensure that only qualified registered business taxpayers, who have undergone strict validation process prescribed in this Order shall be recommended for tagging as "Inactive" taxpayers.

9. Business taxpayers under the List of Inactive Taxpayers who were found existing and operational will be given a prescribed reminder letter requiring them to respond closure of business operation pursuant to Section 115 of the 1997 NIRC, as amended. within five (5) working days upon receipt of such letter. If no response is received from the taxpayer within the prescribed period, the RDOs/LTDs shall recommend and file appropriate criminal/civil charges based on existing rules and regulations.

10. Registered individual business taxpayer who has erroneous taxpayer type their respective RDOs. RDO thru CSS Chief shall conduct thorough validation/verification if taxpayers have not filed and paid any tax returns on the erroneous tax/form type. In cases where a return was filed and/or paid, open cases System as Single Proprietor/Professionals, but who is not really engaged in business thereto shall be considered valid and shall be subjected to corresponding penalties. Otherwise, all existing open cases shall be deemed invalid and be subjected for "datafix" by their respective RDCs. Further, RDO thru CSS Chief shall update the registration information and correct the taxpayer type classification. classification during registration (e.g. Taxpayer who registered thru eRegistration or practice of profession) must submit a duly notarized affidavit to that effect with

11. Permanent closure of business shall be effected only upon submission of the tax types and form types to prevent creation of invalid "stop-filer" cases and necessary documents prior to changing of the status from "Inactive" to "Ceased/Dissolved" and resolution/closure of valid "stop-filer" cases. However, upon filing of closure of business, the RDO thru CSS Chief must effect the end-dating of immediate commencement if necessary investigation.

12. Penalties shall be imposed on taxpayers who failed to file/pay tax returns up to the time of filing the application for closure of business. Taxpayer shall then be required to submit duly accomplished BIR Form 1905 and necessary requirements for the closure of the business registration.

13. Business taxpayers that would be tagged as "Inactive" but determined to have opened/registered/encoded. Once reverted to active status, taxpayers shall be required to apply for a new set of invoices/receipts, if applicable. business transactions in the future shall be reactivated to have their status reverted back to :Active" and applicable form types and tax types shall be re-

14. Concerned RDOs/Chief, LTDs shall maintain a List of Inactive and Reactivated Taxpayers.

V PROCEDURES:

A. Information Systems Development and Operations Service (ISDOS):

I. Create a script for the generation of the Alphalist of Inactive Business Taxpayers per RDO based on the classification and criteria set forth/identified in Section II of this Order.

2. Create a script for mass datafix for tagging of taxpayers as 'Inactive" be done thru datafix. (reusable script) or provide the necessary major enhancements on the ITS to facilitate tagging of taxpayer as "Inactive". Reversion to "Active" status shall M

B. National Office Data Center (NODC)/Revenue Data Centers (RDCs):

Generate the Alphalist of Inactive Business Taxpayers per RDO (Annex "A"), on or before June 30 of the following year or as required by RDO/LTD concerned office.

2 Forward the lists to the concerned RDOs thru e-mail or in Compact-Disk furnished the Office of the Regional Director (RD) and the Client Support (TSPMD) at tspmd_tas@bir.gov.ph. (CD) not later than every 15th day of August for their further validation, copy Service thru the Taxpayers Service Programs and Monitoring Division

3 Receive reports from the Non-Electronic Tax Information System (eTIS)

RDOs on the final list of taxpayers for tagging of "Inactive" taxpayers (Annex "B").

4.Receive reports from the RDOs/LTDs on the list of taxpayers for "datafix" of open "stop filer" cases (Annex "F") for resolution within one (1) week from receipt of such request.

5. Use reusable script for tagging of taxpayers as "Inactive" by logging the issues in BIR Service Desk System.

C. Revenue District Offices (RDOs)/Large Taxpayers Divisions (LTDs):

1. Receive the Alphalist of Inactive Business Taxpayers (Annex "A") from its respective RDCs.

2. Undertake all the necessary verification strategy such as but not limited to inclusion on the Lists of Inactive Business Taxpayers for TCVD, to confirm its physical existence.

3. Validate the Alphalist of Inactive Business Taxpayers from RDCs, if the reason for the non-filing of tax returns is not caused by the non-encoding of been filed with the concerned RDO/LTD must first be performed prior to the the tax returns and that open cases do not pertain to suspended tax returns. Proper validation, updating and resolution of any tax returns found to have issuance of a letter notice for the taxpayer.

4. All concerned RDOs/Chief, LTDs in coordination with the Information Order shall be recommended for tagging as "Inactive" taxpayers (Anaex taxpayers who have undergone the validation procedures prescribed in this Systems Group (ISG) through the National Office Data Center (NODC)/RDCs shall ensure that only qualified and listed inactive business (B). 5.The CSS Chief/Section Chief of the concerned RDOs/Chief, LTDs shall tag Tagging as "Inactive" (Annex "B") of the concerned RDOs/Chief, LTDs. implemented. For RDOs/LTDs using the eTIS, tagging shall be done using the identified taxpayers as inactive (I) based on Section III (2)(3) and (5) of this Order and shall close all the form types and tax types by end- Tagging for taxpayer status "I -- Inactive" shall strictly be complied and the Taxpayer Registration System (TRS) facility. Non-eTIS RDOs shall forward the List of Taxpayers for Tagging as "Inactive" to their respective dating/deregistering the same, upon approval of the List of Taxpayers for RDC

Programs & Monitoring Division (TSPMD) at tspmd_tas@bir.gov.phfor The CSS Chief/Section Chief of the concerned RDOs/Chief, LTDs shall prepare submit the monthly reports on the Alphalist of Inactive Business consolidation/validation and publication in the BIR website. Taxpayers (Annex "D") to the Client Support Service: thru Taxpayer Service Taxpayers (Annex "C") and the Alphalist of Reactivated "Inactive

7. Issue the prescribed reminder letter (Annex "E") to taxpayers in the validated List of Inactive Business Taxpayers who are found existing and operational; requiring them to respond within five (5) working days upon period, resort to any or all of the following measures that may deemed appropriate, such as: receipt of such letter. If no response was received within the prescribed

a. Issuance of Letter of Authority for the conduct of audit; b. Issuance of Mission Order for the conduct of surveillance and/or stocktaking/inventory taking:

d. Filing of appropriate criminal/civil charges before a court based on C. Closure of business if the operation of the taxpayer is subject to Value Added Tax (VAT); or existing rules and regulations.

8. Require submission of relevant documents (e.g., copies of tax returns filed. when taxpayer registered its business, etc.) in support of the taxpayer's RDO's/Chief, LTD's action will depend on the nature or ground for protest of the taxpayer. protest relative to unfiled/unpaid tax returns or unpaid Registration Fee. proof of RF payment, BIR Form 1905 for the update of registration, copy of the duly-accomplished BIR Form 1901 or 1903 received by the RDO/LTD

9 Require submission of a duly notarized Affidavit/or Certification from

from the Barangay and Business Permit Division/Section of the Local Government Unit (LGU) having jurisdiction over the place of business. taxpayers attesting non-operation and/or cessation of its business operation

As such, concerned RDO/Chief, LTD shall require taxpayer to file the tax returns for the period it was still operating with the corresponding penalties to be imposed per existing revenue issuances. In cases where taxpayer business is no longer in operation, concerned RDO/Chief, LTD shall require the BIR Form 1905 with the following attachments: taxpayer who were found no longer in operation to submit and accomplish

a. List of ending inventory of goods, supplies, including capital goods; b. Inventory of unused sales invoices/official receipts: c. Unused sales invoices/official receipts and all other unutilized witnessed by BIR personnel and officials. permits as well as COR shall be subject for destruction to be accounting forms (e.g., vouchers, debit/credit memos, delivery receipts, purchase orders, etc.) including business notices and

10. Effect permanent closure of business only upon submission of all the taxpayers for closure of open "stop-filer" cases (Annex "F") concerned RDO/Chief, LTD shall provide the concerned RDC, the list of necessary documents and closure of open "stop-filer" cases. For taxpayers whose "stop-filer" cases need to be closed/resolved through "datafix"

D. Regional Director/Assistant Commissioner, Large Taxpayers

1. Monitor submission by RDC to RDOs/concerned LTDs of the Alphalist of Inactive Business Taxpayers; and the submission of all necessary annexes as described in this Order.

2. Oversee the actions taken by the RDOs/concerned LTDs on the forwarded Alphalist of Inactive Business Taxpayers by RDCs.

E. Client Support Service thru Taxpayer Service Programs and Monitoring Division:

1. Consolidate all the reports submitted by RDOs/concerned LTDs and RDCs relative to this Order;

2. Prepare call-up memoranda to RDOs/concerned LTDs for non-compliance on reportorial requirements; and to the Regional Directors/ACIR-LT on issues/concerns relative to this Order;

3. Recommend/implement measures to the RDOs/concerned LTDs who failed to comply with the provisions of this RMO: 2nd Offense: Suspension of 30 days 1st Offense: Reprimand

4. Elevate issues for policy decision and directions concerning inactive Commissioner, Operations Group. taxpayers and recommend resolutions for such issues to the Deputy

V. TRANSITORY PROVISIONS:

form types/tax types of the identified inactive business taxpayers and tag as available for such purpose. date/de-register the form types/tax types and tagged the identified inactive taxpayers as "Inactive" using eTIS-TRS, while RDOs using ITS shall end-date the "Inactive" upon enhancement of the ITS or any future system that becomes readily RDOs/LTDs using Electronic Tax Information System (eTIS) shall end-

taxpayers as "Inactive", the ISDOS-SDD shall tag the identified taxpayers submitted by the RDOs/LTDs, pursuant to Section 11(2)(ii) RR No. 7-2012. However, pending the enhancement of ITS, for the purpose of tagging of said

VI. EFFECTIVITY:

This Order shall take effect immediately

1owon1wo

H2 Commissioner of Internal Revenue CAESAR R.DULAY 008782