Law Summary
Coverage of Revenue Regulations No. 3-90
- Submission of Certificate of Taxpayer Compliance (CTC) is optional.
- Only taxpayers submitting CTCs may enjoy the privilege of last priority in audit and investigation.
- Privilege is limited to income tax (including withholding tax) and value-added tax (VAT).
- Other national internal revenue taxes remain subject to BIR audit despite CTC submission.
- Partial certification allowed; CTC can cover income tax and withholding tax separately but must be unqualified.
- The privilege requires filing an unqualified CTC or payment of deficiency tax at or before filing.
- If payment occurs after filing, another CTC reflecting payment must be filed.
- CTC covering only input tax under VAT does not qualify for the privilege; output tax must also be certified.
- Required primarily for taxpayers with annual gross sales/receipts exceeding PHP 100,000 but voluntary submission allows access to privileges.
- Errors discovered requiring deficiency tax payment impose regular surcharge and interest; no penalty waiver allowed.
- Regulation applies only to income reported on regular income tax returns, excluding special returns like capital gains.
- Last priority privilege activates only upon filing final tax return with unqualified CTC.
- Only Commissioner and Deputy Commissioners can authorize examination of taxpayers with unqualified CTCs.
- Withholding tax on income subject to final tax included in CTC; withholding tax on salaries and wages excluded.
- BIR may verify qualified CTCs with general statements.
- Privilege does not apply to claims for refunds, cases under Section 235 exceptions, or confidential information per Section 281 of the Tax Code.
- Does not apply to COA auditors auditing government corporations.
Responsibilities of Taxpayers and CPAs
- Taxpayers primarily responsible for filing CTC and accuracy of returns and financial statements.
- CPAs to conduct tax audits following Statement of Auditing Standards and Practices No. 11.
- Tax audit to consider internal controls, invoice amounts, taxpayer's industry, and variance ranges.
- CPAs must report audit results to the Commissioner.
- CPA must notify authorities in writing within 30 days if engagement is cancelled or withdrawn.
- CPA not required to disclose salary withholding tax findings but must report other withholding taxes.
Types of Certifications and Filing Dates
- Three return types: without certified financial statements, with certified statements, and with certified statements plus CTC.
- CTCs can be filed monthly (withholding tax), quarterly (VAT), yearly (income tax), whichever is convenient.
- Income tax and withholding tax CTCs due with annual return; VAT CTCs due quarterly.
- Taxpayers may file all CTCs within 60 days from income tax due date if notice of intention is filed.
Uniform Format for CTCs
- Recommended pro-forma annexes for CPAs to use:
- Unqualified CTC for Income, Withholding Tax, and VAT;
- Unqualified CTC for Income and Withholding Tax;
- Unqualified CTC for VAT and Inventory Valuation.
Submission of Engagement Letters by CPAs
- Submission of engagement letters (financial or tax audit) by independent CPAs is compulsory.
- Deadlines for financial audit engagement letters per RMC 99-90.
- Tax audit engagement letters must be submitted within 30 days after income tax return due date.
Working Papers Requirement
- CPAs may be required to present working papers as proof that audit was conducted.
- Examiners verify audit team composition, completeness of audit programs, and proper identification of taxpayer records.
Filing Engagement Letters Upon Business Transfer
- Engagement letters must be filed with the new revenue district or CIP Office depending on location.
Effectivity
- Circular took effect immediately from February 18, 1991.
This framework ensures uniformity, accountability, and transparency in taxpayer compliance certification, audit processes, and CPA responsibilities under the Philippine tax regulatory regime.