The Philippine Tax Whiz clarifies the BIR-Megaworld fiasco and reiterates the grounds for suspension and closure of businesses due to non-compliance with the tax code
What is the legal basis of the aborted closure order against Megaworld Corporation? What are the grounds for the Bureau of Internal Revenue (BIR) to suspend business operations and issue a closure order? How long would a temporary closure take effect?
The aborted closure order against Megaworld was due to failure to comply with tax verification on One-Time Transactions (ONETT) on the sale or transfer of properties in Taguig City, which is under the jurisdiction of Revenue Region No. 8B or South NCR. The closure has since been set aside after Megaworld agreed to comply with a BIR audit, the concerned regional office said.
Pursuant to Section 115 of the tax code, the internal revenue commissioner or his authorized representative is empowered to suspend business operations and temporarily close the business establishment of any person for any of the following violations:
- Failure to issue receipts or invoices
- Failure to file a value-added tax return
- Understatement of taxable sales by 30% or more
- Failure to register with the BIR

The temporary closure of a business shall be for a duration of not less than five days. It will be lifted only upon compliance of the taxpayer with whatever requirements prescribed by the commissioner in the closure order.
When can the BIR lift a closure order? In case of partial payment of the amount provided in the five-day VAT compliance notice (VCN), can the BIR lift a closure order?
The lifting of a closure order shall be done in the following instances:
- Subsequent filing or amendment of returns with the payment of the tax inclusive of statutory penalties
- Subsequent registration with the payment of the corresponding compromise penalties
- Payment of deficiency taxes inclusive of penalties corresponding to the sales where no invoices/receipts have been issued
- Payment of deficiency taxes inclusive of penalties corresponding to the understatement of taxable sales or receipts
If there is partial compliance with the tentative amounts provided in the five-day VCN, such compliance shall still be considered as basis for the recommendation of the lifting of a closure order. This is provided that the payment shall not be less than the following:
- Seller of services: 10% of undeclared gross receipts as found by the BIR or 110% of the adjusted basic tax due (after considering underdeclaration), whichever is higher
- Seller of goods: 5% of undeclared gross sales as found by the BIR or 110% of the adjusted basic tax due (after considering underdeclaration), whichever is higher
The taxpayer may still be subjected to audit of tax returns filed notwithstanding compliance with the five-day VCN and subsequent lifting of the closure order.

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Originally Published May 23, 2022