I. Objective

The Tax Code of 1997 empowers the Commissioner of Internal Revenue to suspend the business operations of a taxpayer on certain grounds, pertinent provisions of which provides:

"Sec. 115- Power of the Commissioner to Suspend the Business Operations of a Taxpayer - The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the busi ness establishment of any person for any of the following violations:

(a) In the case of a VAT-registered Person -

(1) Failure to issue receipts or invoices;

(2) Failure to file a value-added tax return as required under Section 114; or

(3) Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.

(b) Failure of any Person to register as required under Section 236.


The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order."

Thus, this Order is hereby promulgated to provide for the guidelines governing the enforcement of the administrative sanction of suspension and temporary closure of businesses relative to the following provisions of the Tax Code of 1997:

"Sec. 113 - Invoicing and Accounting Requirements for VAT Registered Persons. 

(A)     Invoicing Requirements - A VAT-registered person shall for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax

(B)     Accounting Requirements - Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded.  The subsidiary journals shall contain such information as maybe required by the Secretary of Finance.

"SEC. 114. Return and Payment of Value Added Tax -

"(A) In General. Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VA T-registered persons shall pay the value-added tax on a monthly basis.

"Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the tax due thereon within twenty-five (25), days from the date of cancellation of registration: Provided, That only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches.

"(B) Where to File the Return and Pay the Tax - Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer or duly authorized city or municipal Treasurer in the Philippines located within the revenue district where the taxpayer is registered or required to register.

"(C) Withholding of Creditable Value-added Tax - The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment For this purpose, the payor or person in control of the payment shall be considered as the withholding agent.

"The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made.

"SEC. 236. Registration Requirements - '

"(A) Requirements - Every person subject to any internal revenue tax shall register once with the appropriate Revenue District Officer:

"(1) Within ten (10) days from date of employment, or
"(2) On or before the commencement of business, or
"(3) Before payment of any tax due, or
"(4) Upon filing of a return, statement or declaration as required in this Code.

"The registration shall contain the taxpayer's name, style, place of residence, business, and such other information as may be required by the Commissioner in the form prescribed therefor.

"A person maintaining a head office, branch or facility shall register with the Revenue District Officer having jurisdiction over the head office, branch, or facility.  For purposes of this Section, the term "facility' may include but not be limited to sales outlets, places of production, warehouses or storage places.

"(B) Annual Registration Fee - An annual registration fee in the amount of Five hundred pesos (P500) for every separate or distinct establishment or place shall be paid upon registration and every year thereafter on or before the last day of January: Provided, however, That cooperatives, individuals earning purely compensation income, whether locally or abroad, and overseas workers are not liable to the registration fee herein imposed.

"The registration fee shall be paid to an authorized agent bank located within the revenue district, or to the Revenue Collection Officer, or duly authorized Treasurer of the city or municipality where each place of business or branch is registered.

"(C) Registration of Each Type of Internal Revenue Tax - Every person who is required to register with the Bureau of Internal Revenue under Subsection (A) hereof, shall register each type of internal revenue tax for which he is obligated, shall file a return and shall pay such taxes, and shall update such registration of any changes in accordance with Subsection (E) hereof.

"(D) Transfer of Registration - in case a registered person decides to transfer his place of business or his head office or branches, it shall be his duty to update his registration status by filing an application for registration information update in the form prescribed therefor.

"(E) Other Updates - Any person registered in accordance with this Section shall, whenever applicable, update his registration information with the Revenue District Office where he is registered, specifying therein any change in tax type and other taxpayer details.

"(F) Cancellation of Registration - The registration of any person who ceases to be liable to a tax type shall be cancelled upon filing with the Revenue District Office where he is registered an application for registration information update in a form prescribed therefor.

"(G) Persons Commencing Business - Any person, who expects to realize gross sales or receipts subject to value-added tax in excess of the amount prescribed under Section 109(z) of this Code for the next 12-month period from the commencement of the business, shall register with the Revenue District Office which has jurisdiction over the head office or branch and shall pay the annual registration fee prescribed in Subsection (B) hereof.

"(H) Persons Becoming Liable to the Value-added Tax - Any person, whose gross sales or receipts in any 12-month period exceeds the amount prescribed under Section 109(z) of this Code for exemption from the value-added tax shall register in accordance with Subsection (A) hereof, and shall pay the annual registration fee prescribed within ten (10) days after the end of the last month of that period, and shall be liable to the value-added tax commencing from the first day of the month following his registration.

"(I) Optional Registration of Exempt Person - Any person whose transactions are exempt from value-added tax under Section 109(z) of this Code; or any person whose transactions are exempt from the value-added tax under Section 109 (a), (b), (c), and (d) of this Code, who opts to register as a VAT taxpayer with respect to his export sales only, may update his registration information in accordance with Subsection (E) hereof, not later than ten (10) days before the beginning of the taxable quarter and shall pay the annual registration fee prescribed in Subsection (B) hereof.

"In any case, the Commissioner may, for administrative reasons, deny any application for registration including updates prescribed under Subsection (E) hereof.

"For purposes of Title IV of this Code, any person who has registered value-added tax as a tax type in accordance with the provisions of Subsection (C) hereof shall be referred to as VAT-registered person who shall be assigned only one Taxpayer Identification Number.

"(J) Supplying of Taxpayer Identification Number (TIN) - Any person required under the authority of this Code to make, render or file a return, statement or other document shall be supplied with or assigned a Taxpayer Identification Number (TIN) which he shall indicate in such return, statement or document filed with the Bureau of Internal Revenue for his proper identification for tax purposes, and which he shall indicate in certain documents, such as, but not limited to the following:

"(1) Sugar quedans, refined sugar release order or similar instruments;

"(2) Domestic bills of lading;

"(3) Documents to be registered with the Register of Deeds or Assessor's Office;

"(4) Registration certificate of transportation equipment by land, sea or air;

"(5) Documents to be registered with the Securities and Exchange Commission;

"(6) Building construction permits;

"(7) Application for loan with banks, financial institutions, or other financial intermediaries;

"(8) Application for mayor's permit;

"(9) Application for business license with the Department of Trade and Industry; and

"(10) Such other documents which may hereafter be required under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

"In cases where a registered taxpayer dies, the administrator or executor shall register the estate of the decedent in accordance with Subsection (A) hereof and a new Taxpayer Identification Number (TIN) shall be supplied in accordance with the provisions of this Section.

"In the case of a nonresident decedent, the executor or administrator of the estate shall register the estate with the Revenue District Office where he is registered: provided, however, That in case such executor or administrator is not registered, registration of the estate shall be made with and the Taxpayer Identification Number (TIN) supplied by the Revenue District Office having jurisdiction over his legal residence.

"Only one Taxpayer Identification Number (TIN) shall be assigned to a taxpayer. Any person who shall secure more than one Taxpayer Identification Number shall be criminally liable under the provisions of Section 2 75 on 'Violation of Other Provisions of this Code or Regulations in General.'

"Sec. 237. Issuance of Receipts or Sales or Commercial Invoices - All persons subject to an internal revenue tax shall for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals commissions, compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.

"The original of each receipt or invoice snail be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged, in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.

"The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section.

"Sec. 238. Printing of Receipts or Sales or Commercial invoices - All persons who are engaged in business shall secure from the Bureau of internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same.

"No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style. Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

"All persons who print receipts or sales or commercial invoices shall maintain a logbook/register of taxpayers who availed of their printing services. The logbook/register shall contain the following information:

"(1) Names, Taxpayer Identification Numbers of the persons or entities for whom the receipts or sales or commercial invoices were printed; and

"(2) Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet.

II.         Guidelines for Suspension or Temporary Closure of Business

(1) Grounds - The following shall be the only grounds for suspension or temporary closure of business:

(a) Failure to issue receipts or invoices by a VAT-registered or registrable taxpayer
(b) Failure to file a value added tax return
(c) Understatement of taxable sales or receipts by 30% or more of the correct amount thereof in the case of a VAT-registered or registrable taxpayer
(d) Failure to register

(2) Revenue Officers Authorized to Conduct Surveillance Activities on Business Establishments for Possible Violations of Sections 113, 114, 236, 237 and 238 of the Tax Code of 1997 - Pursuant to RMO 54-2000, at least two (2) implementing officers comprised of Rev enue Officers (ROs) (Assessment/Excise), Intelligence Officers (IOs) and Special Investigators (Sis) assigned in the following investigating offices/divisions shall be authorized to conduct surveillance activities on identified business establishment based on a validly issued mission order signed by the concerned authorized revenue official:

Investigating Office/Division		Authorized Revenue Official
(a) Revenue District Office		Regional Director
(b) Special Investigation Division		Regional Director
(c) Tax Fraud Division		ACIR, Enforcement Service
(d) LT Audit & Investigation Division II (Excise Taxpayer)		ACIR, Large Taxpayers Service
(e)'LT Audit & Investigation Division I (Regular LTs)		ACIR, Large Taxpayers Service
(f) LT Field Operations Division		ACIR, Large Taxpayers Service
(g) LT District Office		ACIR, Large Taxpayers Service

The conduct of surveillance and performance of surveillance activities shall conform strictly with the policies and procedures laid down by RMO 54-2000.

(3) Mandatory Requirement for the Conduct of Surveillance and Apprehension of Business Establishments for Non-Compliance with the Provisions of Sections 113, 114, 236, 237 and 238 of the Same Code - No surveillance activities shall be conducted nor apprehension effected unless the same has been authorized by a mission order issued in accordance with the provisions of RMO 54-2000.

(4) Procedures for Recommending the Suspension or Temporary Closure of Business -

(A) Documentary Requirements -

The recommendation of the concerned head of the investigating office/division to the Regional Director or ACIR, Enforcement Service or ACIR, Large Taxpayers Service, as the case may be, to suspend or temporarily close business shall invariably be accompanied by documentary proof in support of the particular violation, as follows:

1. Failure to issue Value-Added Tax invoice/receipts

1. A certification by the record custodian concerned to the effect that the Taxpayer Identification Number of the taxpayer has been verified as correct;
   
   
2. The Mission Order issued to the apprehending officer, if any;
   
   
3. Apprehension slip detailing the items seized;
   
   
4. The items seized such as the pad of invoices or delivery receipts used instead of sales invoices, or used invoices where duplicate and triplicates are left blank or not filled up;
   
   
5. Sworn statement under oath of the apprehending revenue officer stating the circumstances leading to the apprehension;
   
   
6. Other evidence, if available.

2. Failure to file Value-Added Tax Returns

1. A certification from the records custodian that the Taxpayer Identification Number of the taxpayer has been verified as correct;
   
   
2. A certification from the Revenue District Officer concerned and/or the accredited banks, collection agent or duly authorized Treasurer of the City or Municipality where the principal office of the offender is located that no return was filed;
   
   
3. The memorandum report of the Revenue Enforcement Officer narrating the fact of non-filing, the grounds relied upon for such a conclusion, with attachments, if any;
   
   
4. The memorandum report shall be supported by at least a preliminary finding as to the amount of sales and the tax evaded during the quarters under investigation, these to be reflected in the prescribed reportorial forms and working papers;

3. Understatement of taxable sales by 30% or more

1. The return filed;
   
   
2. The taxpayer's records or part thereof as will show or from which it can be shown by other competent evidence that an understatement of sales/receipts has been committed.  Invariably, the investigating enforcement officer should take custody over these records under proper receipt as evidence;
   
   
3. The documents or certified copies thereof obtained through access to records of third persons or entities as provided under Sec. 5 of the Tax Code of 1997, which tend to show the actual sales/receipts of the taxpayer;
   
   
4. The memorandum report of the investigating revenue enforcement officer;
   
   
5. The prescribed reportorial forms, including working papers reflecting the details of the investigator's finding of understatement.

4. Failure of a Value-Added Tax subject person to register

1. Any one or a combination of the documents which show the line of business of the taxpayer, such as Certificate of Registration with the DTI, SEC, Treasurer's Office of concerned LGU, BOI, BIR;
   
   
2. Any one or a combination of documents showing that the annual gross sales/receipts from Value-Added Tax covered transactions of the taxpayer during the previous year exceed P550,000 or have exceeded said amount during the current year, such as the financial statements, income and business tax returns, reports of investigation by revenue enforcement officers, and the taxpayer's own records.  In the case of an importer, the letters of credit opened, import documents, or certifications from the Bureau of Customs, among others;
   
   
3. Certification from the Revenue District Officer who has jurisdiction over the taxpayer to the effect that the latter did not register as a Value-Added Tax person.
   
   
4. Late registration of business who shall have registered shall carry a penalty of Five Thousand Pesos (P5.000.00).

(B) Confrontational Requirements

1. Consistent with the requirements of due process, the concerned Regional Director or the ACIR, Enforcement Service/Large Taxpayers Service, as the case may be, upon receipt of the report of the violation, shall require through the Chief, Legal Division or ACIR-Legal Service, the taxpayer to refute the apprehension and to explain under oath within forty eight hours (48 hours) why he should not be dealt with administratively, by suspension of business or temporary closure of his establishment, and/or criminally, for violation of pertinent provisions of the Tax Code;

2. Upon submission of the explanation or if none is submitted on or before the deadline, the Regional Director or the ACIR, Enforcement Service/Large Taxpayers Service, shall indorse the docket of the case to the ACIR, Legal Service, with his specific recommendation on whether to pursue administrative or criminal action against the taxpayer.

3. If the evidence so warrant, the ACIR, Legal Service shall prepare the corresponding 5-day VAT Compliance Notice for the signature of the Commissioner of Internal Revenue or his duly authorized representative.

(C) Execution and Enforcement

1.         Where a taxpayer refuses, neglects or fails to heed or comply with the terms of the 5-day VAT Compliance Notice, the ACIR-Legal Service shall prepare for the signature of the Commissioner of Internal Revenue or his duly authorized representative, the corresponding closure order which shall be transmitted to the concerned head of the investigating office/ division, copy furnished the Regional Director or to the ACIR-Enforcement Service/Large Taxpayers Service, for execution.

However, if in the meantime the taxpayer corrects the violation, the Regional Director or the ACIR, Enforcement Service/Large Taxpayers Service, shall communicate such information to the Commissioner of Internal Revenue or his duly authorized representative and desist from implementing the closure order.

2.         Should the Commissioner decide to impose the administrative sanction of closure by issuing the closure order, the execution thereof shall consist in the physical closing of the doors or other means of ingress unto the establishment and the sealing thereof with the Bureau of Internal Revenue (BIR) official seal.

3. Where deemed necessary, the execution of the closure order shall be carried with the assistance of elements of the Philippine National Police (PNP) or Barangay Officials in the locality in accordance with the Memorandum of Agreement between the Bureau of Internal Revenue and the PNP or concerned Barangay Officials.

III. Duration of Closure- The closure order shall not be less than five (5) days and shall continue until the violation is rectified and the Commissioner of Internal Revenue or his duly authorized representative issues a written order for the rescission or lifting thereof.

IV. Effect of Rescission/Lifting of Closure Order- The lifting or rescission of the closure order shall be done in cases when:

(1)   There has been a subsequent filing or amendment of returns with the payment of the tax inclusive of statutory penalties;

(2)   Subsequent registration with the payment of the corresponding compromise penalties.

(3)   Payment of deficiency taxes inclusive of penalties corresponding to the sales where no invoices/receipts have been issued; and

(4)   Payment of deficiency taxes inclusive of penalties corresponding to the understatement of taxable sales or receipts

Provided, However, that the lifting or rescission order shall not release the taxpayer from the compliance requirements and from the penalties prescribed by the Tax Code for the violation which shall be dealt with by criminal prosecution or by compromise settlement, at the discretion of the Commissioner of Internal Revenue or his duly authorized representative.

V. Reportohal Requirements - Regional Directors and the ACIRS of the Enforcement Service and the large Taxpayers Service shall, within ten (10) days of each succeeding month, submit to the Commissioner of Internal Revenue, or his duly authorized representative, a monthly status report of all suspension/closure orders issued and/or executed and the lifting of closure orders within their jurisdiction.

VI. Repealing Clause - All revenue issuances inconsistent herewith is hereby repealed or modified accordingly. Unless inconsistent with the policies and guidelines herein prescribed, all other rules and policies pertaining to the enforcement of the administrative sanction of suspension and temporary closure of business shall be strictly observed and followed.

VII. Effectivity - This Revenue Memorandum Order shall take effect immediately.

Adopted: 21 Dec. 2000

(SGD.) DAKILA B. FONACIER
Commissioner