February is often associated with love and friendship, because it is during this month that people celebrate Valentine’s Day. However, to some who are in a dating relationship, it is now common to hear the term “ghosting”. In normal parlance, ghosting means the act of suddenly cutting off ties without explanation due to fear of confrontation. But for taxpayers, ghosting the BIR is a taxpayer’s regret, especially in tax audits.
The BIR is no stranger to being ghosted by taxpayers tagged as Cannot Be Located (CBL). Recently, the BIR has issued Revenue Memorandum Order (RMO) No. 004-2025, dated 14 January 2025, discussing the policies and guidelines in the reporting of Cannot Be Located (CBL) taxpayers and the procedures in handling the cases pertaining thereto.
Taxpayers may be considered CBL when they are not found at their registered address, their whereabouts could not be established, or their indicated address is non-existent. The RMO also provides that those taxpayers who have a virtual office (a shared office utilized by different taxpayers), but with no authorized representative available to receive any correspondence addressed to them, may likewise be considered a CBL.
In case there are irregularities in the registration process resulting in the taxpayer being tagged as CBL, the concerned Revenue Officers (ROs)/officials involved shall be subject to appropriate sanctions.
Equally important to note is that, before the concerned RO handling the case may tag such taxpayers as CBL, they are required to exhaust all possible means available to locate the taxpayer.
One of the ways ROs confirm whether a taxpayer is a CBL is by collaborating with the relevant government agencies, suppliers, and purchasers possibly connected with the taxpayer. ROs are allowed to send notices to the taxpayer’s e-mail address or to its authorized tax agent on record. In the case of corporate taxpayers, ROs may send notices to their accountable officers, or even to the Certified Public Accountant indicated in the taxpayer’s financial statements.
In case these efforts to locate the taxpayer did not lead to favorable results, the case officers may also resort to obtaining certifications from the other relevant government agencies to confirm the non-existence/non-compliance/inactive status of the taxpayer. A consolidated list of CBL taxpayers is uploaded to the BIR website. The BIR is required to issue an “Advisory” on the newly published lists of CBL together with the instructions on what the taxpayers should do if they see their names in the list.
Effects of being tagged as a CBL
Period of limitation is suspended
So, what happens when a taxpayer with a pending BIR audit/assessment is tagged as CBL? In general, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for its filing or from the day the return was filed, whichever is later. This prescriptive period affords taxpayers protection against lengthy and unreasonable investigation. However, RMO 004-2025 highlights that when a taxpayer is tagged as CBL, such a period of limitation shall be suspended and shall only resume upon the service of any previously unserved correspondence/notice.
Notwithstanding the suspension of the period of limitation for both assessment and collection, it is required that the Notice of Discrepancy/Discussion of Discrepancy (NOD/DOD) is issued to document the taxpayer’s deficiency in any internal revenue tax.
In cases where the notices requesting the presentation of accounting records and documents have not been served due to the taxpayer being classified as CBL, the NOD/DOD shall be prepared based on available documents. The issuance of a subpoena is not necessary to justify the assessment based on available documents. Further, the taxpayer’s right to a DOD as indicated in the NOD shall be forfeited, and the PAN shall be issued accordingly.
The number of days to process the application shall not apply
To those taxpayers who have pending applications (i.e., tax clearance, registration of books of accounts, etc.), the BIR office concerned is required to conduct a verification of whether the applicant is among those tagged as CBL. In this case, the number of days to process the said applications as mandated under existing revenue issuance in accordance with the Ease of Doing Business, shall not apply.
Purchases from CBL suppliers are invalid
ROs handling audit or refund cases must verify from the published list of CBL taxpayers if there are expenses/input taxes being claimed by the auditee-taxpayer arising from transactions with CBL taxpayers. Purchases made from a published CBL taxpayer shall not be allowed as deductions for Income Tax Purposes, and if the transaction is with VAT component, the same cannot be claimed as input tax, unless the buyer can prove the authenticity of purchases made, among others.
Clearly, proper communication is very important not only when it comes to romantic relationships, but also in dealing with BIR. It is the taxpayers’ responsibility to keep their records updated especially when there are changes in their registration, specifically regarding their r registered address and other relevant information. For corporate taxpayers who use a virtual office as their registered business address, they must ensure that there is an authorized representative available to receive correspondence from the BIR. Although the CBL tagging may not be forever, there are still repercussions that the taxpayer may feel regretful about, especially when faced with a BIR audit.
As published in BusinessWorld, dated 11 February 2025
