Pursuant to Revenue Memorandum Order No. 59-2016 issued on September 19, 2016, BIR prescribed policies in the conduct of issue-based audit under the VAT audit program (VAP). It aimed to increase the audit coverage of VAT registered taxpayers, introduce issue-based audit as part of the VAP, and facilitate completion and reporting of cases under the VAP. This order covers the issue-based audit/investigation of VAT liabilities of VAT taxpayers for the taxable quarter(s) of 2015 and thereafter.

Taxpayers shall be selected based on the following criteria:

  • Filed VAT returns with erroneous input tax carry-over
  • VAT compliance is below the established industry benchmarks
  • Has zero-rated and/or exempt sales due to availment of tax incentives or exemptions
  • Engaged in business where 80%, more or less, of their transactions are on a cash basis and whose purchases of goods and services do not generate substantial amount of input tax, i.e. restaurants, remittance/payment centers, etc.
  • Has VATable transactions which are subjected to expanded withholding tax but with no VAT remittance
  • Failed to remit/declare VAT due from purchase of services from non-resident aliens
  • Failed to declare gross sales/receipts subjected to VAT withholding on purchases of goods/services with waiver of privilege to claim input tax credit
  • Gross sales/receipts per income tax returns are greater than gross sales/receipts declared per VAT returns
  • Filing percentage tax returns whose gross sales/receipts exceed the VAT threshold

However, the following VAT returns shall not be covered:

  • Claims for issuance of Tax Credit Certificates/refunds; and
  • VAT returns selected for audit by the National Investigation Division under the Enforcement and Advocacy Service and by the Regional Investigation Division of the Revenue Regional Offices



RMO NO. 59-2016 Prescription of Policies in the Conduct of Issue-Based Audit under the VAT Audit Program