Knock, knock, who’s there? BIR!

Q."I just received a letter from the district office of the Bureau of Internal Revenue informing me that, in a few days, their examiners will be visiting my business premises to check on my accounting books, my registration, the receipts and invoices I issue, etc. I am just a small businessman and yet the BIR is pounding me with so many letters, requirements, and what have you!

"To be honest, I feel sick every time I receive these alarming letters from them. How do I deal with this?"–Nervous in Navotas

A.I guess this is a fact of doing business that you have to face, no matter how disturbing it might be. The BIR knocking at your door is officially called the "Tax Compliance Verification Drive" or TCVD that is basically a campaign to check if you are in compliance with their business rules and regulations. Specifically, BIR personnel will be inspecting business establishments across the country to verify compliance by businesses with registration, invoicing, and bookkeeping requirements provided for under existing internal revenue laws, rules, and regulations.

But before you entertain BIR personnel knocking at your door, be sure that you had previously received a reminder letter from them informing you that they will be visiting your premises within a specified period. Yes, there are fake BIR examiners, too. When you are sure that the visit in on the up and up, have the following ready for them:

• BIR Certificate of Registration prominently displayed at the place of business;

• Registered invoices/receipts which have been registered and rubber-stamped by the BIR;

• Registration of cash register machines or point-of-sale machines, if any;

• Registered books of accounts, meaning to say, registered and rubber-stamped general journals and ledgers; and

• BIR authorization letter, in case you are using a computerized bookkeeping system.

The advance notice gives you time to comply with the registration and administrative requirements before the actual visit. Violation of these requirements would mean sanctions, including confiscation of unauthorized cash register and point-of-sale machines, unregistered invoices/receipts and related business tools as well as payment of possible deficiency taxes, including increments of 25%/50% surcharge, 20% interest and compromise penalty ranging from P1,000 to P50,000 (depending on the nature and frequency of the violation), and even imprisonment for offenses that are subject to criminal prosecution.

Let me also warn you that this program of the BIR, no matter how well-meaning, may not escape the eyes of the unscrupulous and enterprising vultures who will capitalize and use this to harass. To prevent being victimized by imposters, it is wise to make sure that the following control measures adopted by the BIR itself are strictly observed by whoever pays you a visit.

• Follow-through must only be undertaken on the dates scheduled or indicated in the reminder letter scheduled and signed by the regional director of the BIR.

• Participating BIR officials must always be in uniform (red shirt with collar marked "BIR Tax Mapper" in yellow.

• The operation is always undertaken by more than one BIR official.

• Rectification of violations discovered during the operation and all payments must be done at the headquarters of the host revenue district office.

• A pre-numbered sticker will be posted in a conspicuous place in the business premises as a control document that premises have been tax-mapped.

On the whole, the best way to avoid BIR phobia is to be tax compliant in your operations and, if possible, have yourself (either on your own initiative or through a tax counsel) regularly updated on recent compliance developments in the BIR. You could check with your external auditors. Believe me, the pace of BIR development these days is giving software improvements a run for its money.

(Raymund S. Gallardo is tax partner of Laya Mananghaya & Co./KPMG. Questions and comments are welcome. Messages to the author can be sent by e-mail at [email protected]).