28/08/2026
BIR RMO No. 22-2026 — dated August 24, 2026
Key Highlights
The Order represents a significant change in how BIR audits are selected, authorized, assigned, conducted, and monitored. The central direction is toward a single-instance, technology-driven, risk-based and more controlled audit system...
1. One eLA per taxable year is the general rule
A taxpayer should generally be subject to only one electronic Letter of Authority (eLA) for a particular taxable year, covering all applicable internal revenue tax types.
This is the Single-Instance Audit Framework, intended to prevent multiple or fragmented audit authorities for the same taxpayer and year.
However, lawful continuation, reassignment, consolidation, or issuance of a subsequent authority may still occur under the exceptions provided by existing rules.
2. No valid authority, no valid audit
BIR audit or verification must be supported by an appropriate:
eLA — electronic Letter of Authority
TVN — Tax Verification Notice
MO — Mission Order
An audit or verification conducted without the appropriate authority is considered unauthorized.
This is particularly important for taxpayers because the Order expressly emphasizes due process and protection of taxpayer rights.
3. BIR is moving strongly toward risk-based, data-driven audits
Selection of taxpayers will increasingly rely on:
Filed tax returns;
Third-party information;
BIR data analytics;
System-generated discrepancies;
Risk indicators; and
Other verifiable information.
For Priority Cases, selection is generally system-assisted, rather than simply dependent on individual examiner discretion.
4. Taxpayer identity is anonymized during selection and assignment
One of the most significant internal-control reforms is the use of anonymized taxpayer selection and case assignment.
As far as practicable, the taxpayer's identity remains concealed during selection and assignment. Only after assignment is completed will the taxpayer's identity and the assigned Revenue Officer/Group Supervisor be revealed.
This is intended to improve impartiality and prevent undue influence.
5. Two principal categories of audit cases
The Order divides cases into:
Mandatory Cases — situations where audit or verification is required because of the nature of the transaction, a statutory or administrative requirement, or specified audit trigger.
Priority Cases — taxpayers selected principally through BIR's electronic risk-based system because certain indicators suggest that immediate audit attention may be warranted.
This distinction is very important because Priority Cases are generally system-selected based on risk criteria.
6. Important Mandatory Audit triggers
Among the more significant mandatory cases identified in the Order are:
Underdeclaration of sales/income or overstatement of expenses/deductions by at least 30% — treated as prima facie evidence of fraud;
Specific intelligence or third-party information;
Mission Order findings indicating understatement of sales by 30% or more;
Certain ONETT transactions resulting in deficiency tax;
Certain real-property transactions with eCAR findings;
Taxpayers enjoying tax exemptions/incentives, subject to risk-based evaluation;
Non-compliance identified through Spontaneous Exchange of Information;
Certain taxpayers requesting tax clearance;
Failure to respond to BIR confirmation of Third-Party Information;
Validated discrepancies or material inconsistencies identified through system analytics or pre-audit validation; and
Certain income-tax refund/tax-credit claims.
Importantly, taxpayers enjoying tax incentives are not automatically audited merely because they enjoy an incentive. The Order provides for risk-based evaluation and validation.
7. Priority Cases — the practical “red flags”
For businesses and accountants, this may be the most useful part of the Order. The BIR specifically identifies risk indicators that can lead to Priority Audit selection, including:
Drastic decrease in reported sales or VAT payments;
Significant increase in exempt or zero-rated sales/revenues;
Discrepancy Notices;
Inconsistent excess input VAT carried forward;
Input VAT exceeding 75% of output VAT;
Income tax due of less than 2% of gross sales/revenues;
Percentage-tax filers whose gross sales exceed the VAT threshold;
Substantial sales but reported net losses;
Businesses operating for more than five years without having been audited;
Increase in assets of more than 50% from the previous year while reporting a net loss;
Claims for losses/damages from calamities or inventory obsolescence;
Revenue derived substantially or exclusively from parent companies, subsidiaries or affiliates;
Write-off of input tax as a deduction; and
Shared expenses and intercompany charges among related companies.
