December is most known for the Christmas season. But for many accounting and business offices, it is known as the closing-of-books season. It is a month of never-ending accounting and reconciliation work in order to bring in order in the company’s financial records, an assessment of healthy fiscal processes, and of reviewing records – especially tax records. Tax fiscal years usually end in December of each year.
As taxes are the lifeblood of the government, the Bureau of Internal Revenue (BIR) is also busy this time of the year to ensure the soundness of the financial situation of the country. Records are checked and assessments are issued.
Playing a huge part in the BIR’s evaluation, assessment, and collection function is the issuance of a subpoena duces tecum (SDT) in order to find out the correct tax liability of a taxpayer. The subpoena power of the BIR is largely based on its broad powers under Section 5 of the National Internal Revenue Code (NIRC), granting the Commissioner of the BIR the power to obtain information, to summon any person to appear before the BIR, and produce books, papers, records containing entries relating to the business of the person liable for tax.
The BIR has implemented this mandate through various issuances over the years, the most famous or infamous of which, depending on one’s perspective, is Revenue Memorandum Order (RMO) 10-2013 issued on 22 April 2013.
RMO 10-2013 prescribes the revised guidelines and procedures in the issuance and enforcement of SDT and the prosecution of cases for non-compliance. It reiterates and implements the power of the BIR under the NIRC to order any person liable for tax or required to file a return or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax.
The BIR can issue such SDT to any office or officer of the national and local governments, government agencies and instrumentalities, including the Bangko Sentral ng Pilipinas and Government-Owned or Controlled Corporations (GOCC). An SDT may be issued against taxpayers already found liable for tax. The BIR can also subpoena those whose tax liability is subject to audit or investigation, such as those covered by a Memorandum Order, Mission Order, Letter of Authority, Tax Verification Notice or Letter Notice.
The process starts with a written notice from the Head of the Revenue District Office/Large Taxpayers Audit Division/Large Taxpayers District Office/National Investigation Division/Special Investigation Division for the person concerned to submit the required records. Under Revenue Memorandum Order 23-2018, the concerned taxpayer has 10 days from the receipt of the notice is to present/ submit the required documents and records. A reminder letter is sent if the taxpayer fails to present the documents, thereafter within five days from receipt of the reminder letter, the revenue officer may already request the issuance of SDT.
In the case of corporations, partnerships, or associations, the SDT shall be issued to the partner, president, general manager, branch manager, treasurer, or other persons in charge.
However, not all merry-making is lost even when a person or company receives a subpoena from the taxman in aid of its investigation into tax matters. There are due process requirements to be observed by BIR and remedies available to the taxpayer.
Primordial is the validity of the service of the SDT upon the taxpayer. Under RMO 8-2014 which amended RMO 10-2013, personal service of the subpoena is required. This happens by delivering a copy to the taxpayer at his registered address before the same is served to the taxpayer’s known address, or simultaneously to the taxpayer’s registered address and known address, or wherever he may be found. A known address shall mean a place other than the registered address where business activities of the party are conducted or his place of residence. The server shall make a written report under oath before a Notary Public or any person authorized to administer oath swearing to the accomplishment of these requirements.
Substituted service can be resorted to when the party is not present at the registered or known address The SDT may be left at the party’s registered address. If it is a place of residence, with a person of legal age residing therein; or, if no one is around, to a barangay official and two disinterested witnesses to the address so that they may personally observe and attest to such absence. (To be continued)
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
