The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Order (RMO) No. 1-2026, with the goal to create a more transparent, fair, and predictable audit process by revising how audits are initiated, conducted, and concluded.
Salient features are as follows:
- One audit authority per taxable year
RMO No. 1-2026 establishes a SingleInstance Audit Framework, under which a taxpayer shall generally receive only one electronic letter of authority (eLA) for each taxable year, covering all applicable internal revenue taxes, including VAT.
Exceptions shall apply only in limited and clearly defined circumstances such as onetime transactions, tax clearance requests, business cessation, and fraud, where a separate authority may be issued. In no case shall these exceptions be used to circumvent the regular audit of books of accounts and other accounting records for recurring internal revenue taxes.
Where findings arising from mission orders or tax verification notices indicate the need for a more comprehensive examination of taxpayer’s liabilities, such examination shall be undertaken only upon the issuance of a separate eLA.‑time transactions, tax clearance requests, business cessation,
- Consolidation of pending eLAs
Beginning 04 March 2026, all pending eLAs involving the same taxpayer and the same taxable year shall be automatically consolidated into a single eLA to streamline the audit scope and overall process.
Notwithstanding this, taxpayers with multiple pending eLAs covering the same taxable year shall have the option to file a written request for nonconsolidation no later than 16 February 2026. Any request filed after this date shall not be acted upon. Revenue officers shall continue with their respective audits until 30 April 2026. Thereafter, beginning 04 May 2026, all pending eLAs, regardless of stage, shall be automatically consolidated and shall no longer be permitted to proceed separately.‑consolidation no later than 16 February 2026. Any request filed after this date shall not be acted upon. Revenue officers shall continue with their respective audits until 30 April 2026. Thereafter, beginning 4 May 2026, all pending eLAs, regardless of stage, shall be automatically consolidated and shall no longer be permitted to proceed separately.
Prior to the automatic consolidation on 4 May 2026, taxpayers shall not be precluded from voluntarily settling any tax deficiencies through the modes allowed under existing issuances.
- System-assisted and anonymised selection‑assisted
New eLAs shall be issued through a system-assisted taxpayer selection process based on defined risk parameters set out in Annex A of RMO No. 12026. For instance, for mandatory cases that shall be covered by an eLA, the following shall serve as the selection criteria:‑assisted taxpayer selection process based on defined risk parameters set out in Annex A of RMO No. 1‑2026.
- Taxpayers with underdeclaration of sales or income, or overstatement of expenses or deductions by at least 30%, constituting prima facie evidence of fraud, declaration of sales or income, or overstatement of expenses or deductions by at least 30%, constituting prima facie evidence of fraud.‑declaration of sales or income, or overstatement of expenses or deductions by at least 30%, constituting prima facie evidence of fraud.
- Taxpayers identified through intelligence information, including specific business knowledge, third-party data, and publicly available information, when compared with the revenue or tax declared in returns, party data, and publicly available information, when compared with the revenue or tax declared in returns.‑party data, and publicly available information, when compared with the revenue or tax declared in returns.
- Taxpayers covered by a mission order where preliminary findings indicate an understatement of sales of at least 30%.
- One-off transactions where review findings have resulted in deficiency tax, or real property transactions with findings reflected in the eCAR system off transactions where review findings have resulted in deficiency tax, or real property transactions with findings reflected in the eCAR system.‑off transactions where review findings have resulted in deficiency tax, or real property transactions with findings reflected in the eCAR system.
- Taxpayers enjoying tax exemptions or incentives.
- Occurrences of noncompliance with tax obligations detected through spontaneous exchange of information compliance with tax obligations detected through spontaneous exchange of information.‑compliance with tax obligations detected through spontaneous exchange of information.
- Taxpayers requesting tax clearance whose gross sales exceed P1 million or whose gross assets exceed P3 million, whether due to death of the taxpayer, retirement from business, or mergers, consolidations, and other forms of corporate reorganisation.
Under this system-assisted and anonymised process, the identities of taxpayers shall not be visible to revenue officers at the initial selection stage, which reduces discretion and external influence, as selection approval shall be centralised, assisted and anonymised process, the identities of taxpayers shall not be visible to revenue officers at the initial selection stage‑assisted and anonymised process, the identities of taxpayers shall not be visible to revenue officers at the initial selection stage
- Standardised tools and practical filing relief for voluminous records
The standardised audit checklist set out in Annex B of RMO No. 12026 shall be mandatory and shall serve as the uniform basis for requesting, receiving, and evaluating records for audits, verifications, and other authorised compliance activities.‑2026 shall be mandatory and shall serve as the uniform basis for requesting, receiving, and evaluating records for audits, verifications, and other authorised compliance activities.
Where records are voluminous, taxpayers shall be permitted to submit certified copies in lieu of originals, or shall be allowed to request an on-premise audit at their principal place of business. The BIR shall retain the authority to require the presentation of original documents when necessary; however, the default shall recognise the practical burden associated with reproducing extensive files premise audit at their principal place of business. The BIR shall retain the authority to require the presentation of original documents when necessary; however, the default shall recognise the practical burden associated with reproducing extensive files.‑premise audit at their principal place of business. The BIR shall retain the authority to require the presentation of original documents when necessary; however, the default shall recognise the practical burden associated with reproducing extensive files.
RMO No. 1-2026 overhauls how the BIR selects, issues, and conducts audit and is effective immediately.
Source:
P&A Grant Thornton
Certified Public Accountants
P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.
As published in SunStar Cebu, dated 10 February 2026