BIR Revenue Memorandum Order (RMO) No. 01-2026 introduces a reformed audit and assessment framework aimed at enhancing transparency, efficiency, and taxpayer protection in the conduct of tax audits by the Bureau of Internal Revenue (BIR). The Order took effect upon issuance in 27 January 2026.
Key Highlights
1. Adoption of the Single-Instance Audit Framework
As a general rule, a taxpayer shall be subject to only one audit per taxable year, covered by a single Electronic Letter of Authority (eLA). The eLA shall cover all applicable internal revenue taxes, including VAT. The issuance of multiple eLAs for the same taxable year is expressly prohibited to avoid overlapping or fragmented audits.
2. Limited Exceptions to the Single-Instance Audit Rule
Separate or additional verification authority may be issued only in specific circumstances, such as:
- Transaction-based or event-based audits;
- One-Time Transactions (ONETT);
- Applications for cancellation of business registration (subject to thresholds);
- Cases involving fraud or irregularities under existing rules.
Where findings of fraud are established or reasonably indicated, the case shall be referred to the appropriate investigating office.
3. Consolidation of Pending eLAs Beginning March 4, 2026
All pending eLAs involving the same taxpayer and taxable year shall be automatically consolidated into a single audit through the issuance of a Single Replacement eLA, unless the taxpayer files a written Request for Non-Consolidation within the period prescribed by the RMO. The replacement eLA becomes the sole and continuing authority for the audit.
4. System-Assisted and Risk-Based Audit Selection
Audit selection shall be conducted through a system-assisted, anonymized, and centrally approved process, using objective criteria approved by the BIR. Lists of taxpayers proposed for audit are generated through BIR systems and validated prior to issuance of an eLA to reduce discretion and promote fairness.
5. Centralized Issuance and Proper Encoding of eLAs
All eLAs shall be issued only after completion of the system-assisted selection process and shall be properly encoded in the BIR’s Integrated Revenue Systems. The eLA must clearly reflect the taxpayer’s name, TIN, taxable year, and taxes covered, and must comply with the Single-Instance Audit Framework.
6. Termination and Transfer of Audit Task Forces
Audit and assessment functions of task forces created for audit purposes, including the Revenue Audit Task Force (RAFT), VAT Audit Sections (VATAS), and Large Taxpayers VAT Audit Units (LTVAU), are terminated. All pending cases, records, and working papers are transferred to the appropriate regular audit offices for continuation under the Single-Instance Audit Framework.
7. Mandatory Use of Standardized Audit Checklists
All audits must use the standardized audit checklist prescribed under the RMO. No audit shall be considered procedurally complete unless the checklist is fully accomplished, reviewed, and approved. The checklist is intended to prevent repetitive or irrelevant document requests and to ensure clear communication with taxpayers.
8. Due Process and Proper Conduct of Audit Activities
The RMO reiterates strict compliance with due process requirements, including:
- Proper service of notices and communications;
- Clear definition of the audit scope;
- Issuance of a Notice of Discrepancy (NOD) and conduct of discussions with the taxpayer;
- Limitation of requests to documents relevant to the authorized scope of audit; and
- Prohibition against fishing expeditions.
9. Examination of Books and Records
Audit examinations shall generally be conducted at the BIR office. Where physical submission of records is impractical due to volume or business disruption, examination may be conducted at the taxpayer’s place of business, subject to coordination and appropriate safeguards.
10. Sanctions and Accountability
BIR officials and employees are reminded to strictly comply with the procedures and safeguards under the RMO. Violations may be reported and addressed under existing civil service, administrative, or criminal laws, without prejudice to other applicable remedies.
Overall Impact
RMO No. 01-2026 represents a significant shift in Philippine tax audit administration by promoting a more predictable, fair, and transparent audit process. It is designed to protect taxpayers from audit abuse while strengthening compliance and institutional accountability within the BIR.
This guide provides a general overview of the above case at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Ludanielle N. Legarde is a Partner, GVES Law