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Section 1 of Rule 21 of the Revised Rules of Civil Procedure defines subpoena as “a process directed to a person requiring him or her to attend and to testify at the hearing or the trial of an action, or at any investigation conducted by a competent authority, or for the taking of his or her deposition. When a subpoena demands that the person brings with him or her any books, documents, or other things under his or her control, this now becomes a subpoena duces tecum (“SDT”) or a subpoena for production of evidence.

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 33-2023 on 17 March 2023 to clarify the issuance and enforcement of SDTs, a court order requiring the production of documents or records in a legal proceeding.

The issuance of the RMC serves to promote transparency and fairness in the BIR’s investigation and audit process. This is achieved by providing clear guidelines on the issuance and enforcement of SDTs. Additionally, the Circular clarifies that these guidelines and procedures, as provided by Revenue Memorandum Order (RMO) No. 10-2013, shall also apply to assessments regarding tax compliance of taxpayers in general, not only to taxpayers under audit or investigation.

An SDT may have tax implications for a taxpayer, as it may require the production of documents or records that are relevant to the taxpayer's tax liability. For example, if the documents or records produced in response to the subpoena show that the taxpayer has underdeclared their income or overstated their deductions, the BIR may assess additional taxes, penalties, and interest based on the findings.

As also discussed in RMO No. 10-2013, non-compliance or failure to obey the SDT shall result in criminal prosecution for violation of Section 266 of the National Internal Revenue Code of 1997, as amended (Tax Code). This Section states that any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda or other papers, or to furnish information as required under the pertinent provisions of this Code, neglects to appear or to produce such books of accounts, records, memoranda or other papers, or to furnish such information, shall, upon conviction, be punished by a fine of not less than P5,000.00 but not more than P10,000.00 and suffer imprisonment of not less than one (1) year but not more than two (2) years. If the taxpayer is a corporation, an association, or a general co-partnership, there shall be imposed an additional penal liability of not less than P50,000.00, but not more than P100,000.00, pursuant to Section 256 of the Tax Code.

These recent clarifications made by the BIR through RMC No. 33-2023 serve as important reminders to all taxpayers that it is crucial to take note of these guidelines, especially on the applicability of the SDT in general tax compliance. By doing so, taxpayers can better prepare themselves for any possible instance of receiving an SDT from the BIR, even if it is not related to a tax audit. Ultimately, this will help promote greater tax compliance and transparency, as well as foster a healthier relationship between the government and the taxpayers it serves.

It is always good to remember that when it comes to taxes, an ounce of prevention is worth a pound of cure. As Benjamin Franklin once said, "In this world, nothing can be said to be certain, except death and taxes." But with a little preparation, you can at least make sure that the latter does not take you by surprise.

Calvin Lui M. Alingarog
Tax Analyst
KPMG in the Philippines

Calvin Lui M. Alingarog is a Tax Analyst from the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to tax analyst Calvin Lui M. Alingarog or partner Leandro Ben M. Robediso through ph-kpmgmla@kpmg.com, social media or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.