THE Bureau of Internal Revenue (BIR) said 14 risk indicators will trigger priority audits for selected taxpayers, including income tax payments below 2% of gross sales, substantial sales accompanied by net losses, and a sharp increase in assets despite reported losses.

Revenue Memorandum Order No. 22-2026 directs that priority cases be electronically selected using tax returns and other information available to the BIR. These cases will be covered by electronic Letters of Authority (eLAs).

The move is part of the agency’s broader effort to focus limited audit resources on cases that show measurable inconsistencies in filings, while also using system-based selection instead of manual screening. Other indicators include a sharp decline in reported sales or value-added tax payments, a significant increase in exempt or zero-rated sales, discrepancy notices, and input tax claims exceeding 75% of total output tax.

Taxpayers that have operated for more than five years without being audited, those claiming losses from natural calamities or inventory obsolescence, and those reporting income or shared expenses involving related companies may also be selected.

The order classifies audit cases as either mandatory or priority, depending on the nature and risk profile of the taxpayer.

Mandatory cases include taxpayers found to have underdeclared sales or income, or overstated expenses or deductions, by at least 30%.

Taxpayers flagged through third-party information or system-generated discrepancies, as well as those claiming tax refunds or credits, among others, are also covered.

The BIR said all taxpayers are deemed potential candidates for audit for the purpose of determining the correctness of their internal revenue tax liabilities.

It clarified, however, that “audits or verifications shall be conducted only upon the issuance of a valid eLA, Tax Verification Notice, or Mission Order, and any audit or verification undertaken without such authority shall be deemed unauthorized.”

“Audit cases shall, as far as practicable, be assigned through an anonymized process, whereby the identity of the taxpayer remains concealed during the selection and assignment stages until the audit case is finalized in the system,” it added.

The BIR set a 180-day period for the submission of investigation reports involving regional cases and 240 days for cases involving large taxpayers.

Separately, the BIR said it sealed or confiscated 297 betting machines, computerized betting units, servers and other devices during simultaneous enforcement operations at 11 cockpits on Aug. 8.

The operations, conducted with the National Bureau of Investigation, covered equipment without the required Permit to Use and devices that did not appear in BIR records.

“Betting transactions must be properly recorded, and the machines used for them must be properly registered with the BIR. We will continue checking cockpit operations nationwide and take appropriate action when we find violations,” Commissioner Charlito Martin R. Mendoza said.

“We are expanding these operations nationwide. I have directed all Revenue Regions and Revenue District Offices to identify and verify operational cockpit arenas in their areas,” he added. — Justine Irish D. Tabile