347. Post-Entry Audit AGP 6.8.12
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Page 1 of 2 BDB Law’s “Tax Law for Business” appears in the opinion section of Business Mirror every Thursday. Post-entry audit A FEW years ago, the post-entry audit system was introduced in the Philippines with revenue collection as one of its objectives. Under this system, the Bureau of Customs (BOC) is authorized to conduct compliance audit on importers and other stakeholders relative to import, export and other trading activities. The Post Entry Audit Group (PEAG) of the BOC, which was created via Executive Order 160, is the group tasked to implement the PEA laws, rules and regulations. To implement the audit process, usually a group under PEAG called Trade Information and Risk Analysis [TIRAO] gathers information and relevant data to be used as a basis for the audit selection process. When an “auditee” is selected, the responsibility for conducting the audit proper rests with the Compliance Assessment Office (CAO). The audit, however, should be preceded by the issuance of an Audit Notification Letter (ANL) approved by the commissioner of Customs. This ANL specifies the period, scope, relevant dates of the audit proper and the audit team. Without this ANL, the conduct of the audit is unauthorized. The audit team has to ensure that the ANL is served and properly received by the “auditee.” Failure to do so may divest them of their authority to audit. On the part of the “auditee,” it is important that he verifies that all the necessary and relevant details are indicated in the ANL. If some information is missing, the same may be wanting in authority that may be used as a basis in invalidating the authority granted. During the audit, the “auditee” should ensure that the audit team is not inspecting documents beyond what is required of the audit. The “auditee” must familiarize himself of the documents and records needed and required to be kept and presented to the audit team. After the audit proper, the audit team shall set a schedule for the exit conference. The purpose of the exit conference is to discuss the issues and findings of the audit team with the “auditee.” At this stage of post entry audit, the “auditee” is given the opportunity to comment and challenge the conduct and result of the audit.
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Another good article from BDB Law, one of the best tax consultants in the country.
Transcript of 347. Post-Entry Audit AGP 6.8.12
Page 1 of 2
BDB Law’s “Tax Law for Business” appears in the opinion section of Business Mirror everyThursday.
Post-entry audit
A FEW years ago, the post-entry audit system was introduced in the Philippines withrevenue collection as one of its objectives. Under this system, the Bureau of Customs (BOC)is authorized to conduct compliance audit on importers and other stakeholders relative toimport, export and other trading activities. The Post Entry Audit Group (PEAG) of the BOC,which was created via Executive Order 160, is the group tasked to implement the PEA laws,rules and regulations.
To implement the audit process, usually a group under PEAG called Trade Information andRisk Analysis [TIRAO] gathers information and relevant data to be used as a basis for theaudit selection process. When an “auditee” is selected, the responsibility for conducting theaudit proper rests with the Compliance Assessment Office (CAO).
The audit, however, should be preceded by the issuance of an Audit Notification Letter(ANL) approved by the commissioner of Customs. This ANL specifies the period, scope,relevant dates of the audit proper and the audit team. Without this ANL, the conduct of theaudit is unauthorized. The audit team has to ensure that the ANL is served and properlyreceived by the “auditee.” Failure to do so may divest them of their authority to audit. On thepart of the “auditee,” it is important that he verifies that all the necessary and relevant detailsare indicated in the ANL. If some information is missing, the same may be wanting inauthority that may be used as a basis in invalidating the authority granted.
During the audit, the “auditee” should ensure that the audit team is not inspecting documentsbeyond what is required of the audit. The “auditee” must familiarize himself of the documentsand records needed and required to be kept and presented to the audit team.
After the audit proper, the audit team shall set a schedule for the exit conference. Thepurpose of the exit conference is to discuss the issues and findings of the audit team withthe “auditee.” At this stage of post entry audit, the “auditee” is given the opportunity tocomment and challenge the conduct and result of the audit.
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Whatever the result after the exit conference shall be summarized in a Final Audit Reportand Recommendations (FARR) and submitted to the commissioner of Customs for review. Ifapproved, a demand letter indicating the amount of tax deficiency and penalty shall beserved to the “auditee.” The “auditee” in turn may opt to pay the deficiency in duties andtaxes or if he is not satisfied with the same, he may appeal to the Office of theCommissioner. If he is dissatisfied with the decision of the commissioner of Customs, hemay appeal the same to the Court of Tax Appeals.
While the post-audit entry system had already been part of the official customs practices inthe country for years, it is still new to some especially those who have not yet beensubjected to post audit. And so compliance with the record keeping requirements has notalso been a priority. Unfortunately, one of the usual findings in a post audit is the lack ofproper documentation or record keeping. This may have negative consequences if thedeclarations made cannot be properly supported.
It is worth emphasizing that in relation to the recordkeeping, Section 3514 of Republic Act9135 mandates all importers as well as brokers to keep, at their principal place of businessfor a period of three years from the date of importation, all the records of their importationsand/or books of accounts, business and computer systems and all customs commercialdata. Aside from the criminal liabilities that may be imposed, assessments may also beissued for improperly or undocumented transactions.
As the post-entry audit intensifies, it is important for importers and brokers to be aware ofthese record-keeping responsibilities to avoid unnecessary audit findings resulting fromfailure to produce or supply information and documents. But they should also be aware thatthey have rights and remedies available upon audit and upon the issuance of assessments.
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The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), amember-firm of World Tax Services (WTS) Alliance. The article is for general informationonly and is not intended, nor should be construed as a substitute for tax, legal or financialadvice on any specific matter. Applicability of this article to any actual or particular tax orlegal issue should be supported, therefore, by a professional study or advice. If you haveany comments or questions concerning the article, you can e-mail the author [email protected] or call 403-2001 local 370.
