GAG-NOTCH PREFI

DOCUMENTARY
STAMPS TAX
Purpose:
The untaxed document will not
be recorded, nor will it or any
copy thereof or any record of
transfer of the same be
admitted or used in evidence in
court until the requisite stamp
or stamps have been affixed
thereto and cancelled.
No notary public, or other
officer authorized to administer
oaths will add his jurat or
acknowledgment to any subject
to DST unless the proper
documentary stamps are affixed
thereto and cancelled. (of
course theoretically, notaries
public are required to make
sure that there is compliance of
this)
DST we are talking about is not
just being collected exclusively
by the BIR, there are other
government agencies who
collect DST, called the LOOSE
DOCUMENTARY STAMPS TAX,
say for example the SEC
As a requisite if you fail to pay
your DST and settle your DST
liability, the government agency
will treat you like this: your
document will not be
considered a public document
duly recognized by the
appropriate government agency
and may not even be
presentable as evidence to the
court because its a requisite
If you dont pay and affix the
necessary it cannot be
considered a public record,
there can be no transfer of
ownership and it cannot be

presented in court as proper

evidence because it is required
that there should be proper
payment of the DST
As Ive mentioned, DST may
either come in the formal filing
of return or payment or it may
come in the form of LOOSE DST.

Nature:
In general, DST are levied on the
exercise by persons of certain
privileges conferred by law for the
creation, revision, or termination of
specific legal relationships
through the execution of specific
instruments. Examples of such
privileges, the exercise of which, as
effected through the issuance of
particular documents, are subject to
the payment of DST are leases of
lands, mortgages, pledges and trusts,
and conveyances of real property.
(Philippine Home Assurance
Corporation vs. CA)

Take note this involves legal

relationships between two
contracting parties and specific
instrument because these
instruments, documents or
papers are specifically
enumerated under the Tax
Code.
Is it a requirement na dapat
commercial business na nimo,
or in the ordinary course of
trade or business (leasing of
lands, mortgages, pledges,etc)?
No. it is not required that you
be engaged in this business to
be liable for DST.

Who are required to file DST

Declaration Return? (formal filing of
DST)
a.) In case of constructive affixture
of documentary stamps, by the
persons making, signing,

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issuing, accepting or
transferring documents,
instruments, loan agreements
and papers, acceptances,
assignments, sales and
conveyances of the obligation,
right or property incident
thereto wherever the document
is made, signed, issued,
accepted or transferred when
the obligation or right arises
from Philippine sources or the
property is situated in the
Philippines at the same time
such act is done or transaction
had;
Not necessary that the seller
would pay the DST; the
seller and the buyer may
agree. But if everything is
silent, it would have to be
paid by the seller. In reality
it is the buyer because it is
he who wants the title to be
transferred.
If one of the two parties is
exempted from DST, the one
not exempted would have
the burden of paying the
DST.
b.) By using the web-based
Electronic Documentary Stamp
Tax (eDST) System in the
payment/remittance of
its/his/her DST liabilities and the
affixture of the prescribed
documentary stamp on taxable
documents; and
c.) By Revenue Collection Agent,
for remittance of sold loose
documentary stamps
Philacor Credit Corporation vs. CIR
(G.R. No. 169899, February 6,
2013)
Under Sec. 173 of the NIRC, the
persons primarily liable for the
payment of DST are persons
(1)making; (2) signing; (3)

issuing; (4) accepting; or (5)

transferring the taxable
documents, instruments or
papers. Should these parties be
exempted from paying tax, the other
party who is not exempt would then
be liable. In this case, Petitioner
Philacor is engaged in the business of
retail financing. Through retail
financing, a prospective buyer of
home appliance may purchase an
appliance on instalment by executing
a unilateral promissory note in favor of
the appliance dealer, and the same
promissory note is assigned by the
appliance dealer to Philacor. Thus,
under this arrangement, Philacor did
not make, sign, issue, accept or
transfer the promissory notes. It is the
buyer of the appliances who made,
signed and issued the documents
subject to tax while it is the appliance
dealer who transferred these
documents to Philacor which likewise
indisputably received or accepted
them. Acceptance, however, is an
act that is not even applicable to
promissory notes, but only to bills
of exchange. Under the NIL, the act
of acceptance refers solely to bills of
exchange. In a ruling adopted by BIR
as early as 1995, acceptance has
been defined as having reference to
the incoming foreign bills of exchange
which are accepted in the Philippines
by the drawees thereof, and not as
referring to the common usage of the
word as in receiving. Thus, a party to a
taxable transaction who accepts any
documents or instruments in the plain
and ordinary meaning does not
become primarily liable for tax.

The SC explained that the word

accepting should not be
understood in its loose term.
Thus, for the party accepting
the document to be held liable
to pay the DST, that acceptance

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must be a requisite in order to

make the transaction valid.
This case involves execution of
promissory note. Acceptance of
the promissory note is not
required since it is only needed
in bills of exchange.
In short, acceptance of a
promissory is not an essential
requisite, then Philacor cannot
be held liable to pay for the
DST.

which has jurisdiction over the

residence or principal place of
business of the taxpayer or where the
property is located in case of sale of
real property or where the Collection
Agent is assigned.
In places where there is no AAB:
Revenue Collection Officer or
Duly authorized Treasurer of the
city or municipality in which the
taxpayer has his legal residence
or principal place of business

Where DST Return is filed?

Authorized Agent Bank (AAB) within
the territorial jurisdiction of the RDO

DST RATES
Tax Code
174

176

177

178

Document

Taxable Unit

Original Issue
of Shares of
Stock with par
value
(for example:
1m)
Original Issue
of Shares of
Stock without
par value

P200.00 or
fraction
thereof
(1m/200)

Stock
Dividend
Bonds,
Debentures,
Certificate of
Stock or
Indebtedness
issued in
foreign
Countries
Certificate of
Profits or
Interest in
Property or
Accumulation
Banks,

Tax Due Per

Unit
1.00

Taxable Base

1.00

Actual consideration
for the issuance of
shares of stocks

P200.00 or
fraction
thereof
1.00
P200.00 or
fraction
thereof
P200.oo or
fraction
thereof

Par value of shares

of stocks

Actual value
represented by
each share

.75

Par value of such

bonds, debentures,
Certificate of Stock
or Idebtedness

P200.00 or
fraction
thereof

.50

Face value of such

certificate/memoran
dum

On each

1.50

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179

Checks,
Drafts,
Certificate of
deposit not
bearing
interest and
other
instruments
(EXC.
Documents
issued by
BSP)
All Debt
Instruments*
(debentures,
certificate of
indebtedness,
duties, simple loan
agreements,
instruments and
securities issued by
govt, evidences of
deposits,
promissory notes
whether negotiable
or non-negotiable)

180
181

182

All Bills of
Exchange or
Drafts
Acceptance of
Bills of
Exchange or
order for the
payment of
money
purporting to
be drawn in a
foreign
country but
payable in the
Philippines
Foreign Bills of
Exchange and
Letters of
Credit
(presupposes
that these
would have to
be exercised
here in the
Philippines)

Document

P200.00 or
fraction
thereof

1.00

Issue price of any

such instruments

P200.00 or
fraction
thereof
P200.00 or
fraction
thereof

.30

Face value of any

such bill of
exchange or draft
Face value of such
bill of exchange or
order or the
Philippine
equivalent of such
value, it expressed
in foreign currency

P200.00 or
fraction
thereof

.30

.30

Face value of such

bill of exchange or
letter of credit or
the Philippine
equivalent of such
value, if expressed
in foreign currency

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183

Life Insurance
Policies
(presupposes
that the insurer
is not exempted
under the DST
law. Because
later on, you will
realize that when
the company is
exempted, you
will not pay the
DST. Example:
established as
cooperative.
Everything they
collect is for the
mutual benefit of
the members. An
example is
Sunlife.)

If the amount
of insurance
does not
exceed
P100,000

Exceed
P300,000 but
does not
exceed
P500,000

Exceeds
P750,000 but
does not
exceed
P1,000,000

Policies of
Insurance
upon Property

185

Fidelity Bonds
and other
insurance
Policies
Policies of
Annuities or
other
instruments
Pre-Need
Plans
(educational
plan)
Indemnity
Bonds

186

187

Amount of
Insurance

10.00
Exceeds
P100,000 but
does not
exceed
P300,000

Exceeds
P500,000 but
does not
exceed
P750,000

184

Exempt

Exceeds
P1,000,000
P4.00
premium or
fraction
thereof
P4.00
premium or
fraction
thereof
P200.00 or
fraction
thereof

Amount of
Insurance
25.00
Amount of
Insurance
50.00
Amount of
Insurance
75.00

100.00

Amount of
Insurance
.50

Premium charged

.50

Premium charged

.50
.20

Premium or
instalment payment
or contract price
collected
Premium or
contribution
collected

.30

Premium charged

P200.00 or
fraction
thereof
P4.00 or
fraction

Amount of
Insurance

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188

189

190

Certificates of
Damage or
otherwise and
Certificate
document
issued by any
customs
officers,
marine
surveyor,
notary public
and certificate
required by
law or by rules
and
regulations of
a public office
Warehouse
Receipts
(except if
value does
not exceed
P200.00)
Jai-alai, Horse
race tickets,
lotto or other
authorized
number
games (aside
from DST, these
are also subject
to OPT even if
they do not issue
tickets for
admission
purposes)

191

Bill of Lading
or Receipts
(except
charter Party)
(applies to
forwarding
companies)

thereof
Each
Certificate

15.00

Each Receipt

15.00

P1.00 cost of
ticket

.10

Additional
P.10 con
every P1.00
or fraction
thereof if cost
of ticket
exceeds
P1.00
If the value of
such goods
exceeds
P100.00 and
does not
exceed
P1,000.00
If the value
exceeds
P1,000.00
Freight tickets
covering

Cost of the ticket

Cost of the ticket

1.00

Value of such goods

10.00

Value of such goods

Exempt

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192

193

Proxies
(except
proxies issued
affecting the
affairs of
associations
or
corporations,
organized for
religious
charitable or
literary
purposes)
Powers of
Attorney
(except acts
connected
with the
collection of
claims due
from or
accruing to
the
Government
of the
Republic of
the
Philippines, or
the
government
of any
provinces, city
or
municipality)

goods,
merchandise
or effects
carried as
accompanied
baggage of
passengers
on land and
water carriers
primarily
engaged in
the
transportation
of passengers
Each proxy

Each
Document

15.00

5.00

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194

195

196

Lease and
other Hiring
agreements or
memorandum
or contract for
the use or
rent of any
land or
tenements or
portions
thereof

Mortgages
Pledges of
lands, estate,
or property
and Deeds of
Trust (the
provision
questioned by
M. Lhuiller in
a case
wherein it
questioned
the DST on
pawn tickets)
Deed of Sale,
Instrument or
writing and
conveyances
of real
property
(except
grants,
patents or
original
certificate of
the
government)

First 2,000 or
fractional part
thereof

3.00

For every P1,

000 or
fractional part
thereof in
excess of the
first P2,000
for each year
of the term of
the said
contract or
agreement
First 5,000

1.00

20.00

Amount Secured

On each
P5,000 or
fractional part
thereof in
excess of
5,000

10.00

Amount Secured

First 1,000

15.00

Consideration or
Fair Market Value,
whichever is higher
(if government is a
party, basis shall be
the consideration)

For each
additional
P1,000 or
fractional part
thereof in
excess of
P1,000

15.00

*Debt Instrument shall mean

instruments representing borrowing
and lending transaction including but
not limited to:
Debentures
Certificates of indebtedness,

Consideration or
FMV, whichever is
higher (if
government is a
party, basis shall be
the consideration.)

Due bills,
Bonds,
Loan agreements, including
those signed abroad wherein
the object of the contract is

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located or used in the

Philippines,
Instruments and securities
issued by the government or
any of its instrumentalities,
Deposit substitute debt
instruments,
Certificates or other evidences
of deposits that are drawing
instrument significantly higher
than the regular savings deposit
taking into consideration the
size of the deposit and the risks
involved,
Certificates or other evidences
of deposits that are drawing
interest and having a specific
maturity date.
Promissory notes, whether
negotiable or non-negotiable,
except bank notes issued for
circulation

M.J. Lhuillier Pawnshop vs. CIR

The onus of proving that
pawnshops are not subject to
DST is thus shifted to petitioner.
In establishing tax exemptions,
it should be borne in mind that
taxation is the rule, exemption
is the exception. Accordingly,
statues granting tax exemptions
must be construed in strictissimi
juris against the taxpayer and

liberally in favor of the taxing

authority. One who claims an
exemption from tax payments
rests the burden of justifying
the exemption by words too
plain to be mistaken and too
categorical to be
misinterpreted.
In the instant case, there is no
law specifically and
expressly exempting
pledges entered into by
pawnshops from the
payment of DST. Section 199
of the NIRC enumerated certain
documents which are not
subject to stamp tax; but a
pawnshop ticket is not one
of them. Hence, petitioners
nebulous claim that it is not
subject to DST is without merit.
It cannot be over emphasized
that tax exemption represents a
loss of revenue to the
government and must,
therefore, not rest on vague
inference. Exemption from
taxation is never presumed. For
tax exemption to be recognized,
the grant must be clear and
express; it cannot be made to
rest on doubtful implications.
Questioned the act of CIR of
subjecting to DST the pawn
tickets.

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197

Charter parties
and similar
instruments

1,000 tons and

below

1,001 to
10,000 tons

P1,000 for the

first 6 months
plus P100 each
month or
fraction
thereof in
excess of 6
months

Over 10,000
tons

198

P500.00 for
the first 6
months plus
P50 each
month or
fraction
thereof in
excess of 6
months

Registered
gross tonnage

Registered
gross tonnage

Registered
gross tonnage

P1,500 for the

first 6 months
plus P150 each
month or
fraction
thereof in
excess of 6
months
At the same
rate as that
imposed on
the original
instrument

Stamp tax on
Assignments
and Renewals
or Continuance
of certain
Instruments
(presupposes that
the renewal
involves an
amendment or
change in the
document)

Exempt papers/documents from DST:

Policies of insurance or
annuities made or granted by
a fraternal or beneficiary
society, order, association or
cooperative company, operated
on the lodge system or local
cooperation plan and organized
and conducted solely by the
members thereof for the

exclusive benefit of each

member and not for profit.

Certificates of oaths
administered by any
government official in his official
capacity or acknowledgment by
any government official in
performance of his official duty

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Written appearance in any

court by any government
official in his official capacity
Certificate of administration
of oaths to any person as to
the authenticity of any paper
required to be filed in court by
any person or party thereto,
whether the proceedings be
civil or criminal
Papers and documents filed
in court by or for the national,
provincial, city or municipal
governments
Affidavits of poor persons for
the purpose of proving poverty
Statements and other
compulsory information
required of persons or
corporations by the rules and
regulations of the national,
provincial, city or municipal
government exclusively for
statistical purposes and which
are wholly for the use of the
bureau or office in which they
are filed, and not at the
instance or for the use or
benefit of the person filing them
Certified copies and other
certificates placed upon
documents, instruments and
papers for the national,
provincial, city or municipal
governments made at the
instance and for the sole use of
some other branch of the
national, provincial, city or
municipal governments
Certificate of the assessed
value of lands, not exceeding
P200 in value assessed,
furnished by the provincial, city
or municipal treasurer to
applicant for registration of title
to land.
Borrowing and lending
securities executed under the
Securities Borrowing and

Lending Program of a registered

exchange, or in accordance with
regulations prescribed by the
appropriate regulatory authority
Loan agreements or
promissory notes, the
aggregate of which does not
exceed P250,000 or any such
amount as may be determined
by the Secretary of Finance,
executed by an individual for his
purchase on instalment for his
personal use or that of his
family and not for business or
resale, barter or hire of a house,
lot, motor vehicle, appliance or
furniture
Sale, barter or exchange of
shares of stock listed and
traded through the local stock
exchange (RA 9684)
Assignment or transfer of
any mortgages, lease or a
policy of insurance, or the
renewal or continuance of any
agreement, contract, charter, or
any evidence of obligation or
indebtedness, if there is no
change in the maturity date or
remaining period of coverage
from that of the original
instrument.
Fixed income and other
securities traded in the
secondary market or through an
exchange.
Derivatives. Provided, that for
purposes of this exemption,
repurchase agreements and
reverse repurchase agreements
shall be treated similarly as
derivatives.
Interbranch or
interdepartmental advances
within the same legal entity
(involving the very same
company or entity)
All forebearances arising from
sales or service contracts

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including credit card and

trade receivables. Provided,
that the exemption be limited to
those executed by the seller or
service provider itself.
Bank deposit accounts
without a fixed term or maturity
All contracts, deeds, documents
and transactions related to the
conduct of business of the BSP.
Transfer of property pursuant
to Sec. 40(C)(2) of the NIRC of
1997, as amended (has
something to do with merger or
consolidation, because if the
property is combined, it is
considered to be one
personality later on)
Interbank call loans with
maturity of not more than 7
days to cover deficiency in
reserves against deposit
liabilities, including those
between or among banks and
quasi-banks

What is the Electronic Documentary

Stamp Tax (eDST) System (sec. 5 (1),
RR No. 7-2009)
The eDST is a web-based
application created for
taxpayers and the BIR that is
capable of affixing a secured
documentary stamp on the
taxable documents as defined
under the appropriate
provisions under Title VII of the
NIRC of 1997, as amended, thru
the use of a computer unit, any
laser printer with at least 1200
dpi resolution, and Internet
Explorer 7.0. It is also capable
of providing a 3-layer
watermark on stamps for added
security.
Is DST Law applicable on Electronic
Documents (sec. 10, RR No. 13-2004)

Yes. The DST rates as imposed

under the Code, as amended by
RA 9243 shall be applicable on
all documents not otherwise
expressly exempted by the said
law, notwithstanding the fact
that they are in electronic form.
As provided for by RA 8792,
otherwise known as the
Electronic Commence Act,
electronic documents are the
functional equivalent of a
written document under
existing laws, and the issuance
thereof is therefore tantamount
to the issuance of a written
document, and therefore
subject to DST.

Is any document, transaction or

arrangement entered in to under
Financial Lease subject to
Documentary Stamp Tax? (RMC No.
46-2014)
Yes. Financial lease is akin to a
debt rather than lease. A nature
of an obligation than a lease of
personal property. The mere act
of extending credit is already
means of facilitating an
obligation or advancing in
behalf of the lessee certain
property in lieu of cash in
exchange for a definitive
amortization to be paid to the
lessor with profit margin
included. Section 179 of NIRC,
as amended, covers all debt
instruments. Therefore, being a
nature of an obligation, any
document, transaction or
arrangement entered into under
financial lease is subject to DST
under such Section of the NIR,
as amended.
Finance lease is more like of
payment through installment.
OTHER PERCENTAGE TAX (OPT)

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Percentage tax on Domestic

Carriers and Keepers of Garages
Percentage Tax on International
Carrier
Franchise Taxes
Tax on Overseas
Communication
Tax on Banks and Non-bank
Financial Intermediaries
Performing Quasi-bank
Functions
Ta on Life Insurance Premiums

Tax on Agents of Foreign

Insurance Companies
Amusement Taxes
Tax on Winnings
Tax on Sale, Barter or Exchange
of Shares of Stock Listed and
Traded Through the Local Stock
Exchange or Through Initial
Public Offering
Return and Payment of
Percentage Tax

Coverage
Persons exempt from VAT
under Sec. 116

Basis
Gross Sales or Receipts

Tax Rate
3%

Domestic carriers and

keepers of garages
International Carriers:
International air/shipping
carriers doing business in
the Philippines
Franchise Grantees:
Electric, gas and water
utilities
Radio and television
broadcasting companies
whose annual gross
receipts of the preceding
year do not exceed
P10,000,000 and did not
opt to register as VAT
taxpayer
Tax on overseas dispatch,
message or conversation
originating from the
Philippines (Section 120)
(by telephone, telegraph,
telewriter exchange,
wireless and other
communication services)

Gross Receipts

3%

Gross Receipts

3%

Gross Receipts

2%

Gross Receipts

3%

Amount paid for the

service (paid by the
person availing the
service to the person
rendering the service
within 20 days after the
end of the taxable
quarter)

10%

(we are not after profit. The

question here is was there a
consideration?)

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Exemptions from Section 120:
1.
2.
3.
4.

Government
Diplomatic Services
International Organizations
News Services

Has something to do with their official function

Banks and non-bank

financing intermediaries

Interest, commissions and

discounts from lending
activities as well as
income from finance lease
on the basis of remaining
maturities of instruments:

Other non-bank finance

intermediaries (Sec. 122)

Short term maturity (5

years or less)
Maturity period is more
than 5 years
On Dividends and
equity shares in net
income of subsidiaries
On royalties, rentals of
properties, real or
personal, profits from
exchange and all other
items treated as gross
income under Sec. 32
of the Code
On Net Trading Gains
within the taxable year
on foreign currency,
debt securities,
derivatives and other
similar financial
instruments
On interest, discounts and
other items of gross
income paid to finance
companies and other
financial intermediaries
not performing quasibanking functions
Interest, commissions and
discounts paid from their
loan transactions from
finance companies as well
as income from financial

5%
1%
0%

7%

7%

5%

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Life insurance Companies

(except purely cooperative
companies or
associations) (Sec. 123)
Agents of foreign
insurance companies (Sec.
124) (except reinsurance
premium)

leasing shall be taxed

based on the remaining
maturities of instruments:
Maturity period is 5
years or less
Maturity period is
more than 5 years
Total premiums collected

Total premiums collected

5%
1%
2%

Twice as the tax imposed

in Section 123 (aside from
purely cooperative, these
are also exempt from tax:
- premiums refunded within six (6)
months after payment on account
of rejection of risk or returned for
other reason to a person insured
shall not be included in the
taxable receipts;
- nor shall any tax be paid upon
reinsurance by a company that
has already paid the tax;
- nor upon doing business outside the
Philippines on account of any life
insurance of the insured who is a
nonresident, if any tax on such
premium is imposed by the
foreign country where the branch
is established
- nor upon premiums collected or
received on account of any
reinsurance , if the insured, in
case of personal insurance,
resides outside the Philippines, if
any tax on such premiums is
imposed by the foreign country
where the original insurance has
been issued or perfected;
- nor upon that portion of the
premiums collected or received
by the insurance companies on
variable contracts (as defined in
section 232(2) of Presidential
Decree No. 612), in excess of the
amounts necessary to insure the
lives of the variable contract
workers.)
- variable insurance part life

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insurance, part investment

In all cases here owners of

property obtain insurance
directly with foreign
companies (without use of
any agent)

Proprietors, lessee or
operator of the following:
(the one liable to remit)
Cockpits
Cabarets, Night or Day
Clubs
Boxing exhibitions
(Except: World or oriental
championship is at stake
AND one of the
contenders if Filipino
citizen promoted by the
Filipino citizen of
Philippine Corporation
60% Filipino, 40%
Foreigners)
Professional basketball
games (PBA, NBA)
Jai-alai and race track
(operators shall withheld
tax on winnings)
irrespective of whether or
not any amount is charged
for admission (even if
they dont collect tickets)
Every stock broker who
effected a sale, barter,
exchange or other
disposition of shares of
stock listed and traded
through the Local Stock
Exchange (LSE) other than
the sale by a dealer in
securities

AMUSEMENT TAXES
Gross receipts
Gross receipts
Gross receipts

18%
18%

Gross receipts

10%

Gross receipts

15%

Gross receipts

30%

Gross selling price or

gross value in money of
shares of stocks sold,
bartered, exchanged or
otherwise disposed

of 1%

GAG-NOTCH PREFI
A corporate issuer/stock
broker, whether domestic
or foreign, engaged in the
sale, barter, exchange or
other disposition through
initial public offering
(IPO)/secondary public
offering of shares of stock
in closely held
corporations

GSP of gross value of in

money of shares of stocks
sold, bartered, exchanged
or otherwise disposed in
accordance with the
proportion of stocks sold,
bartered or exchanged or
after listing in the stock
exchange
Up to 25%
Over 25% but not
over 33 1/3 %
Over 33 1/3%

4%
2%
1%

Closely Held Corporations (Section

127)
Any corporation at least 50% in
value of the outstanding capital
stock or at least 50% of the
total combined voting power of
all classes of stock entitled to
vote is owned directly or
indirectly by or not more than
twenty (20) individuals
When and where to file OPT return?
WHEN: within 25 days after the end of
each taxable quarter (except
cancellation of VAT registration-OP tax
accrues from the date of cancellation)
Persons retiring from business subject
to business tax must notify the
nearest RDO, file his return and pay
the tax within 20 days after closing
the business.
NOTE: Commissioner by a revenue
regulation may prescribe manner and
time of filing
WHERE: AABs, RDO (having
jurisdiction, over the residence or
place of business), or duly authorized
treasurer of the city or municipality

Tax enforcement and

Administration
Agencies involved in tax
administration

bureau of internal revenue (BIR)

bureau of customs (BOC)
Provincial, city and municipal
assessors and treasurers

Powers and Duties of the BIR (AGEE)

Assessment and collection of all

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national internal revenue taxes,

fees and charges
Give effect to and administer
the supervisory and police
power conferred to it by the
Tax code or other
laws
Enforcement of all forfeitures,
penalties and fines in
connection therewith
Execution of judgments in all
cases decided in its favor by the
Court of Tax Appeals
and the ordinary courts.

Officials of the BIR

Kim S. Jacinto-Henares Commissioner of Internal

Revenue
Lilia C. Guillermo- Deputy
Commissioner Information
Systerms Group
Estela V. Sales- Deputy
Commissioner Legal and
inspection Group
Nelson M. Aspe- Deputy
Commissioner Operations Group

4
5
6

General Powers of the CIR

1st Authority to interpret the tax
code and other tax laws
( exclusive and original
jurisdiction)

Officials of the BIR

1

Commissioner of Internal
Revenue
4 Deputy Commissioners
SEC. 3. Chief Officials of the
Bureau of Internal Revenue. The Bureau of Internal Revenue
shall have a chief to be known
as Commissioner of Internal
Revenue, hereinafter referred to
as the Commissioner and four
(4) assistant chiefs to be known
as Deputy Commissioners.
Assistant Commissioners
(different from deputy
commissioners)
-assigned to a specific division
of BIR

Head Revenue Executive

Assistants (HREA)
-head of a specific division in a
specific region
Ex. Large taxpayers division in
NCR
Regional Directors
-head of each BIR region
Revenue District Officers
-located in each of the Revenue
District Offices
Revenue Enforcement Officers
-frontliners and examiners (RDO
in Talisay, CTU, Mandaue,
Banilad)

Recommending power in the

passage of Revenue Regulations
Revenue regulation- general
interpretations of the tax laws
seeking to explain the
provisions of the law
Revenue Ruling/ Opinion-more
specific in nature, addressing
particular needs of a taxpayer
but is applicable only to the
requesting taxpayer. Subject to
review by the secretary of
finance

2nd Authority to decide disputed

assessments, refunds, penalties &
other matters under the NIRC or
other laws administered by the
BIR

Administrative actions by
taxpayers prior to the judicial
action (CTA)
There must be clear and
unequivocal indication wheneer
the CIRs action on an

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assessment questioned by the

taxpayer constitutes his final
decision/determination on the
dispute
3rd Authority to obtain information
and to summon examine and take
testimony of persons
Extent:
Canvass from time to time the
revenue region or district office
Obtain informationon a regular
basis- information sourced from
the taxpayer (self-assessment)
or 3rd party information
Take testimony of persons
(under oath) as may be relevant
or material to the inquiry
Examine any book, record, data,
which may be relevant to the
inquiry, subject to the period to
prescribe the keeping of books.
How many years?
To issue summons

Is the BSP exempt from internal

revenue?
No, only the DST exemption

I.

Examination of returns and

determination of tax due- based
on best evidence obtainable.

GR: Confidentiality of Tax

Returns
Exception: [ PA-EFEC]
Upon written order of the
President of the Philippines
In aid of legislation by the
Congressional Oversight
Committee
Material Evidence in criminal
case where the government is
interested in the result
Inspection is authorized under
of Finance Regulation 33
Request for exchange of
information by foreign tax
authority (RA No. 10021,
FATCA)
Upon consent/authority of
taxpayer
II.

Examination of Returns and

determination of tax due- based
on best evidence obtainable

May the CIR and/his subordinate issue

subpoena i.e. Subpoena duces tecum?
Yes pursuant to the CIRs power to
obtain information and to summon
under Section 5, NIRC. However, this is
Not a requisite before resorting to best
evidence obtainable.

Conduct of inventory-taking,
surveillance and to prescribe
presumptive gross sales and
receipts
Issue jeopardy assessments

Sources:
Government offices/agencies
Corporations/employers
Clients or patients
Tenants, lessees, vendees and
from all other sources

4th Authority to make assessments

Examination of returns and

determination of tax due- based
on best evidence obtainable
Asess the proper tax

May returns, statement or declaration

filed with the BIR be withdrawn?
As a rule, No.
Exception:
Done within 3 years from the

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filing of the returns

No notice of audit or
investigation of such return has
been served upon the tax payer
Assess the proper tax

Concept of Assessment
Assess means to impose a tax,
to charge with a tax, to declare
a tax to be payable, to
apportion a tax to be paid or
contributed, to fix a rate, to fix
or settle a sum to be paid by
way of tax, to set, fix or charge
a certain sum to each taxpayer,
to settle determine or fix the
amount of tax to be paid [84
C.J.S. 74-750]
An asessmentis the notice to
the effect that the amount
therein stated is due from a
taxpayer as tax with a demand
for payment of the same within
a stated period of time
[commissioner v. CTA, 27 SCRA
1159]

III.

Assess the proper tax

Requisites for a valid assessment:

The taxpayer shall be informed

in writing of the law and the
facts on which the assessment
is made [sec.228 NIRC]
An assessment contains not
only a computation of tax
liabilities, but also a demand for
payment within a prescribed
period [CIR v. Pascor]
An assessment must be served
on and recieved by the taxpayer
[CIR v pascor]
o
o

Best evidence obtainable

OR
Use of the new worth
method- an extension of

the basic accounting

formula: Asset (A)=
Liabilities (L) + Equity (E)
Conditions (use of the Net
worth method):

No books of accounts or books do

not reflect the correct income or
refuses to produce the books or
books were destroyed:
There is evidence of possible
source/s of income causing an
increase in net worth
There is fix and opening net worth
The method reflects taxpayers
income with accuracy and certainty
after various adjustments

Net Worth Method

Net worth- end of taxable year
Less: Net worth beg. Of the taxable
year
Increase in net worth
Add: non-deductible disbursements
Correct Net income
Less: exemptions
Taxable income
X income tax rate
Income tax on taxable income
Less: amount already paid on taxable
income
Deficiency income tax
Add: Surcharge and interest
Total: amount due

GR: BIR Assessment only upon full

audit

GAG-NOTCH PREFI
Exception: Jeopardy assessment
IV.

Jeopardy Assessment- a tax

assessment made by an
authorized Revenue Officer
without the benefit of a
complete or partial audit in light
of the revenue officers belief
that the assessment and
collection of the deficiency tax
will be jeopardized by delay to
taxpayers failure to:

Comply with audit and

investigation requirements to
present his books and/ pertinent
records or
Substantiate all or any of the
dedution, exemption or credit
claimed in his return

5th Authority to terminate taxable

period
GR: Prescriptive periods are prescribe
by the BIR
Assessment : 3 years from the
date of filing, either actual
filing date or last day of filing
Consequence: Failure to follow
prescriptive periods the effect
would be that BIR can no
longer issue deficiency
assessment against the
taxpayer
Exception: when prescriptive periods
is terminated
LR-RA (Lahi Ra!)
L = Intending to Leave the
philippines
R = Retiring from business
R = Remove/hide/conceal his
properties in the Philippines

A = Peforming an Act tending to

obstruct the proceedings for
collection of the tax for past or
current quarter or year or to
render the same ineffective
(totally or partially)
Sir: These acts make it impossible for
the BIR to timely assess and collect.
6th Prescribe real property values
Zonal Valuation
Fair Market Value by the assessor or
by the BIR
Purpose: For taxation purposes, in
which the property will be based at
whichever is higher, FMV by the
assessor or FMV by the BIR
7th Inquire into bank deposit
GR: Bank Secrecy Law
Exception:
1. To inquire into bank deposits of
a decedent for purpose of
determining his gross estate,
determining the correct estate
tax due to the government
2. In an application for
compromise of tax liability due
to the incapacity to pay tax
liability
3. Exchange of information by the
BIR on tax matters pursuant to
internationally-agreed standards
a. RA10021
b. FATCA
Ra10021
Conditions:
1. The identity of the person under
examination or investigation;
2. A statement of the information
being sought including its
nature and the form in which
the said foreign tax authority
prefers
to
receive
the
information
from
the
Commissioner;
3. The tax purpose for which the
information is being sought;

GAG-NOTCH PREFI
4. Grounds for believing that the
information requested is held in
the Philippines or is in the
possession or control of a
person within the jurisdiction of
the Philippines;
5. To the extent known, the name
and address if any person
believed to be in possession of
the requested information;
6. A statement that the request is
in conformity with the law and
administrative practices of the
said foreign tax authority, such
that
if
the
requested
information was within the
jurisdiction of the said foreign
tax authority then it would be
able to obtain the information
under its law or in the normal
course
of
administrative
practice
and
that
it
is
conformity with a convention or
international agreement; and
7. A statement that the requesting
foreign
tax
authority
has
exhausted all means available
in its own territory to obtain the
information, except those that
would
give
rise
to
disproportionate difficulties.
Sir: The most important condition is
the last one in relation to the
exhaustion of remedies. This law
amended sec 6 of the tax code.
Remember, the requesting party is the
FTA (foreign tax authority) and the
requested party is the PTA (Philippine
Tax Authority)
FATCA (Foreign account tax
compliance act)
In 2010, US law requiring financial
institution to provide information of
citizens who are hiding properties or
money outside the USA. Now,
Philippines is now covered because it
was ratified by secretary purisima last
July 2015

Philipines obligation is to give a report

on suspicious deposit of US any
citizen, the report should not be given
directly to the IRS (Internal Revenue
System) but first with the Philippines
government then go to US
government (IRS).
8th authority to accredit tax
agents
Sir: talking about tax agents we are
referring to, usually are the
bookkeepers or the accountants who
files the returns in behalf of the client.
The agents should be duly accredit by
the BIR, but insofar as a BAR passer
9th prescribe additional procedural
or documentary requirements
Does the CIR have the power to
prescribe penalties for violation of the
regulation?
No. it is the SOF who issues the
revenue regulations, ergo, it is the SOF
who may prescribe the penalties, the
CIR can at most RECOMMEND such
Sir: Cir should not expand the law by
prescribing penalties.
10th authority of the
Commissioner to delegate power
Exception: non-delegateble power
(RICA)
a. Power to Recommend the
promulgation of rules and
regulations by the Sec. of
Finance
b. Power to Issue rulings of first
impression or to reverse,
revoke, modify any existing
ruling
c. Power to Compromise or abate
any tax liability, except
assessments issued by the
regional offices involving basic
deficiency
d. Power to Assign or reassign
internal revenue officers to
establishments where articles

GAG-NOTCH PREFI
subject to excise tax are
produced or kept
Sir: what is the difference between
compromise and abate class, kung mo
ingon kag compromise it would
REDUCE the amount while abate kay
the BIR forgo the the collection from
the taxpayer.
Exception to the exception:
1. those involving basic deficiency
amounting to P500,000 or less
2. Minor criminal violations.
Sir: Regional Evaluation Board is the
one who can enter compromise in
relation to Minor criminal violations
11th authority to make arrests and
seizures
Responsible officers: CIR, Deputy
commissioners, Regional Directors,
RDO and other revenue officers
Reason of the arrest/seizures: violation
of penal laws and rules or regulations
administered by the BIR
Proceedings: Before a competent
court, to be dealt with according to
law
Sir: but keep in mind, usually
imprisonment not the main penalty in
tax laws but more on interests and
surcharges. Can a BIR officer arrest
you immediately? Yes in cases of
plain view doctrine. You committed
the crime in front of the officer.
12th Authority to assign internal
revenue officers
1. Those involved in excise tax
functions
a. Limitation up to two
years
2. Assignment to other special
duties
a. Limitation
i. Internal revenue
officers assigned to
perform
assessment or
collection functions
shall no remain in

the same
assignment for
more the 3 years
ii. Assignment to
special duties shall
not exceed one (1)
year
Sir: this is to avoid familiarization with
the functions and the office.
13th authority to impose duties on
certain officer
Unless there is a certification
authorizing registeration(CAR):
Register of deeds - no
registration of transfer in the
registry of property transferring
real rights or any chattel
mortgage
Atty. A: As a rule the register of deeds
is obliged not to register the transfer
unless there is a certificate authorizing
registration

Debts of the deceased shall not

pay to the administrator, heirs,
legatee, executor,
administrator, etc.
Atty.A: In estate taxation, If you are
the debtor you have the duty to make
sure there have been payment of the
estate tax
Bank shall not allow withdrawal
Atty.A: The bank has the duty not to
allow withdrawal unless there is proper
certification in relation to the bank
account of the decedent except up to
20k for administration purposes.

Lawyer, notary public, or any

govt. officer must furnish copies
with the BIR
Atty. A: They are obliged to furnish
copies to the BIR or the documents
being notarized but in practice notary
publics do not actually send reports to

GAG-NOTCH PREFI
the BIR but usually send reports to the
RTC.

been an amendment to the addition of

two positions.

14th Authority to suspend

business operation of the
taxpayer

Field Service--Regional offices(headed

by the regional director)

I.

RMO 3-2009 - Oplan Kandado.

The closure of the business shall
last for a period of no less than
5 days and shall be in force until
the violation is rectified.

Atty. A: Pertains to business tax.

Usually to Vat registered tax payers
that:
fail to issue official reciept or
invoices,
fail to file their vat returns even
not vat registered but already
mandated to register under vat,
gulty of understating their
taxable sales or reciepts by 30%
or more.
II.

RATE - Run Against Tax Evaders

Atty. A: The authority of the other BIR

officials emanates from the autority of
the CIR which are just delegated to
them. So if you question the authority
of these officers you try to question
also whether the CIR has authority to
perform that particular function
4 deputy Commissioners plus 2
1.operations group
2.legal and inspection group
3.resource management group
4.information systems group
PLUS 2 deputy for newly created
positions
5.tax reform administrative group
6.special concerns group
Att. A: The tax code mentions about 4
deputy commissioner but there has

Powers and duties of the regional

director(Sec.10,NIRC)
1.Implement
laws,policies,plans,programs,rules and
regulations of the department or
agencies in the regional area
2.administer and enforce internal
revenue laws, and rules and
regulations, including the assessment
and collection of all internal revenue
taxes, charges and fees
3.Issues letters of authority(LOA) for
the examination of taxpayers within
the region
Atty. A:
LOA may be issued by the CIR if the
examination is being undertaken by
the national office. If undertaken by
the regional district officers then LOA
is issued by the regional director.
4. Provides economical, efficient and
effective service to the people in the
area
5.Coordinates with the local
Governments in the area
6.Coordinates with other regional
offices or other departments, bureaus
and agencies in the area
7. Exercises control and supervision
over the officers and employees within
the region
8. performs such other functions as
may be provided under the law and as
may be delegated by the CIR
Atty. A:
Regional director is the supervisor of
the revenue district officers within the
region. The regional director may
decide on assessments.

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Revenue district officers - implement

programs, methods, and procedures
necessary for the efficient, effective
and economical assessment and
collection of internal revenue taxes in
the revenue district
Compositions of RDOs:
A. Field men and examiners
B. Collection agents and clerks
ATTy. A.: Assessment and collection is
stated repeatedly because it is the
main function of the BIR

NIRC REMEDIES
Assessment

What are the duties and functions of

revenue district officers and other
internal revenue officers?

Basic
Collection

Authority of revenue
officers(Assessors/examiners) to:
1.Examine taxpayers within the
jurisdiction of the district in order to
administrative
collect the correct amount of tax
2.Recommend the assessment of any
deficiency
tax.
Remedies
of the Government
(of assessing and collecting the tax)
pursuant to a LOA issued by the
Nature
Regional Director
Filing a civil case

Lien
Distraint
Levy
Forfeitures
Compromise
Abatement
Fines, penalties, etc.

judicial
Filing a criminal case

Assessment and collection

procedure

Collection only (provided under the law/ court

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ISSUANCE OF LOA
AUDIT/TAX INVESTIGATION
ASSESSMENT PROCESS
DEFICIENCY?

YES

NO.

END

Inform the taxpayer, issue written report

TAXPAYER DISPUTES?
YES

NO.

PAY TAX

UPON DISPUTE

REVIEW BY ASSESSMENT DIVISION OF Regional offi

Basis? (factual or legal)

NO

Dismiss

YES

PRELIMINARY ASSESSMENT N

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ISSUANCE OF PAN
No final demand yet;
States
the RECEIPT)
factual and legal
RESPONSE FROM TAXPAYER (15 DAYS
FROM
basis of deficiency
assessment
15 days from receipt of
PAN; Simple explanation
as toNO
the possible cause
YES
of the deficiency

NO

YES

DISMISS

Formal letter of demand and final assessment notice (FLD-FAN)

PROTEST MORE
FORMAL
2 NATURES:
1. REQ FOR RECON
(30
asking BIR Protest
to revisit
itsdays)
computation
2. REQ FOR
NO
YES
Reinvestigation
based
on new evidence; you
need to submit additional
Becomes final andSubmit
executory
supporting documents within 60 days from fil

You cannot
anymore question
this to CTA. So,
always remember
that you need to
file an admin
protest before you
can avail of the
judicial remedy.

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With or without submission of supporting documents

CIR decision within 180 days from date of submission of documents/filing of protest

Decision within 180 days

MERITORIOU
S?
NO

NO
YES

days after lapse of 180 days OR wait for BIR decision (Lascona Case)
FAVORABLE TO TAXPAYER?

YES

Not required at all times in

order
to protest OR
because
it
ENDWITHIN
FOR TAXPYER,
FILE MR (NOT
MANDATORY)
IMMEDIATELY
APPEAL TO CTA
30 DAYSSOF MAY REVIEW
can be done directly or
indirectly.
directly issuance of the
FLD-FAN
indirectly - CIR
immediately filed a civil
case against you or the CIR
NOTE:
FILING
OF
FILE
THE
MRMR
OF
DOES
CIRS NOT
DECISION
TOLL TO
THECIR
30 DAY PERIOD TO APPEAL, HENCE UPON D
would
immediately
levy
NO
YES
your property

reinvestigat
TO THE CTA WITHIN 30 DAYS FROM RECEIPT OF ADVERSE
DECISION
FAVORABLE
ion

NO

FAVORABLE?

YES
END FOR TAXPAYER. CIR MAY APPEAL

MR does not
- Lapse
mean denial; merely
gives you a chance
to file an appeal
NO
FAVORABLE?
- These two are
mutually exclusive
PETITION FOR REVIEW TO SC

YES

(BUT YOU MUST HAVE FILED FIRST AN MR)

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If the decision on
the protest is
rendered by a
subordinate
(regional
director), you file
an MR to the CIR,
you still have 30
days to appeal to
the CTA. Because in
this case CIR
only once.
Example on 30 day period is not tolled by filing an MR to the decided
CIR
Tolled
only
Unfavorable decision received on June 1, basically you can appeal this within 30 if MR is
filed do
to the
days to the CTA so you have until July 1 to go to the CTA. But, if you dont
this,CIR on
its
own
you file a MR on June 10, the resolution which is unfavorable came out on Junedecision.
20.
The period to appeal to the CTA would not be 30 days from June 20. The period to
appeal would be remaining period since you already used up the 10 days before
filing an MR, so that would be around July 10.
TAKE NOTE!
Questions on the propriety of your assessment, apply the above procedure.
Questions on the validity of revenue regulation subjecting condominium
corporation to taxes the proper action is not Rule 45 or Rule 65 because
these are premised on the fact that the decision is made by a quasi-judicial
agency. But when it comes to issuance of revenue regulations by the BIR, its
more of quasi-legislative. Your action should be petition for declaratory relief.
Concurrent jurisdiction with RTC, CTA and SC. But you start first with the RTC.

GAG-NOTCH PREFI

NIRC REMEDIES
-Remedies of the Govt.
Atty. A: Two remedies in the NIRC.
Remedies of the Govt. and Remedies
of the tax payer. insofar as the
remedies of the govt. is concerned,
the provisions exist to guide the govt.
on how to properly assess and collect
tax and to guide the tax payer on how
to question if there are arbritrary
actions of the govt.
Basic remedies
assessment
collection
Nature
administrative
judicial
administrative
lien
defray
levy
forfieture
compromise
abatement
fine
penalty
etc.
Judicial
filing a civil case

Filing a criminal case for tax

evasion

Base on procedure
Through assessment and
collection(usual)
collection only(unusual)
atty. A: BIR does not anymore assess it
because probably it is already
provided under the law.
Presrciptive period for
assessment(sec.203.NIRC)
A. if the taxpayer filed a return,
internal revenue taxes shall be
assessed within 3 years after
the last day presricbed by law
for the filing of return
Atty. A:ex.1 Income tax return deadline
is 15th day of fourth month(April 15),
you filed it Jan. 5, when will the 3 year
prescriptive period start to run? April
or Jan.?
ANS: April 15th because the law states
after the last day presrcibed by law
B. If a return is filed beyond the
period prescribed by law, the 3
year period shall be counted
from the day the return was
filed.

GAG-NOTCH PREFI
Atty. A: ex.2 Income tax return
deadline is 15th day of fourth
month(April 15), you filed it July 5,
when will the 3 year prescriptive
period start to run? April or July?
ANS: July
Exception(sec.203,NIRC):
false return
fraudulent return with intent to
evadw tax
failure to file a return
Atty. A:
Intentional = fraudulent return
Negligence = false return
ASSESSMENT
General rule: taxes are self-assessing
Exceptions:(when there is a need for
assessment)
tax period of a tax payer is
terminated(sec. 60)
deficency tax liability arising
from a tax audit by BIR(sec.56b)
tax lien(sec. 219)
Dissolving corporation(sec. 52c)

Principles Governing tax

assessments
Presumed in favor of tax
assessment
must be based on actual facts
not on presumptions
discretionary upon the
commissioner
Atty. A: the commissioner cannot be
compelled by mandamus to make an
assessment or audit against a person
because it is not a ministerial duty
rather it is discretionary upon the
commissioner.
However, you can question the
arbritrariness through filing a certiorari

grounded on grave abused of

discretion.

the authority to assess may be

delegated
Atty. A: Can be delegated to a position
not lower than a division chief

must be directed to the right

party
Atty. A: the assessment must be duly
served and recieved by the tax payer
Kinds of assessment
I.
By the tax payer
self assessment
II.

By the BIR, without authority

illegal and void assessment

Atty. A:
Without authority meaning the bir is
given the authority to subject you to a
particular tax, probably the customs is
the one that has authority, or you are
exempted from a particular tax but the
BIR has assessed tax against you, then
it is void
III.

By the BIR, with authority

defeciency assessment
Atty. A: tax computation by the BIR is
way higher than the tax declared and
paid by the taxpayer then the BIR will
issue a defeciency assessment
erroneous assessment
Atty. A: There is authority by the BIR
but the BIR official commits an error in
the computation in the amount
payable. you cannot file a case against
the BIR official who committed an
error because of the regularity of
duty(office) unless there is
arbritrariness

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jeopardy assessment
disputed assessment
atty. A: usually starts in a deficiency
assessment by the BIR but the
taxpayer questions the propriety of
the assessment so it becomes a
disputed assessment. The taxpayer
either request for reconsideration or
reinvestigation.
Assessment process
Atty. A: Assessment conducted by the
BIR usually starts with the issuance of
the letter of authority, may be issued
by the commissioner if the one who
conducts the audit or investigation is
the national office but if it will be
conducted by the revenue district
officer, then LOA is issued by the
regional director.
After the issuance of the LOA,
assessment will be conducted.
If the BIR discovers defeciency, the
BIR will inform the taxpayer through a
written report.
REMEDIES OF THE GOVERNMENT
FOR NON-PAYMENT OF TAXES
I.
ADMINISTRATIVE
REMEDIES
A. TAX LIEN
B. DISTRAINT (ACTUAL
AND CONSTRUCTIVE)
C. LEVY
D. SALE OF PROPERTY OF
A DELIQUENT
TAXPAYER)
E. FORFEITURE OF
PROPERTY
F. COMPROMISE AND
ABATEMENT
G. PENALTIES AND FINES
H. SUSPENSION OF
BUSINESS
OPERATIONS
II.
JUDICIAL REMEDIES
A. CIVIL ACTION
B. CRIMINAL ACTION

III.

ENFORCEMENT OF
ADMINISTRATIVE FINE

TAX LIEN
A legal claim or charge on
property of the taxpayer as
SECURITY for the payment of
some debt or obligation
Accrues when the taxpayer
neglects or refuses to pay his
tax liability after demand with
interests, penalties and costs
that may accrue in addition
thereto
The lien is not valid against any
mortgagee, purchaser, or
judgment creditor until notice of
such lien shall have been filed
in the register of deeds of the
province or city where the
property is located. But
effective against third persons
only when notice of such lien is
filed by the Commissioner in the
Register of Deeds in the
province/city where the
property is situated.
Annotation on the title of the
property or in the tax
declaration and usually the lien
would set in once the tax
liability of the tax payer
becomes due and demandable
but still theres no payment
made by the taxpayer
What properties may be
subjected to a lien? Anything
and everything may be
subjected to a lien. In laymans
term this is more like a simple
claim coming from the
Commissioner na kani na
property pwede ni niya i-

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appropriate later on for the

payment of taxes.
Usually this is done through
annotation, usually in the
certificate of title or in the tax
declaration in the assessors
office.
If this is present, was there any
payment of the tax already? No
payment yet for the tax liability
Is this superior to judgment on
the private property? A lien
arising from unclaimed tax.

DISTRAINT
The collection of taxes is
enforced on the goods, chattels
or effects and other personal
property including stocks and
other securities, debts, credits
and interest and rights to
personal property.

properties subject to distraint

are PERSONAL PROPERTIES
ONLY
a summary procedure

Who may effect distraint?

a. Commissioner or his duly
authorized representative if
the amount involved is more
than P1,000,000
b. Revenue District Officer if
the amount involved is
P1,000,000 or less
Requisites of distraint (D2-FN)
1. The taxpayer must be
delinquent (except in
constructive distraint) in the
payment of tax
2. There must be a subsequent
demand for its payment
(assessment)

Formal or final assessment

3. The taxpayer fails to pay the
tax at the time required; and
4. The period within which to
assess or collect the tax has
not yet prescribed
When we talk of prescription,
the government is only given 3
years from the date of filing
actual or last day of filing, to
make the assessment
What
1.

2.

are the 2 types of distraint?

ACTUAL DISTRAINT
Manner of collecting the tax
CONSTRUCTIVE DISTRAINT
More of preservation of the
property; to avoid disposition or
encumbering of the property

ACTUAL DISTRAINT
There is taking of possession of
the property from the taxpayer
by the government
Resorted to when at the time
required for payment, a person
fails to pay his delinquent tax
obligation
Effected by:
a. Leaving a list of the distrained
property, or
b. By service of a warrant of
distraint or garnishment
Warrant of distraint applies to
goods, chattels, shares of
stocks
Warrant of garnishment
applicable when what is being
distrained is
Needs actual assessment
Procedure (Section 208)
1. The officer serving the
warrant of distraint shall
make or cause to be made

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an account of the goods,
chattels, effects or other
personal property distrained,
a copy of which, signed by
himself, shall be left either
with the owner or person
from whose possession such
goods, chattels, or effects or
other personal property
were taken, or at the
dwelling or place of business
of such person and with
someone of suitable age and
discretion, to which list shall
be added a statement of the
sum demanded and note of
the time and place of sale.
2. Stocks and other securities
shall be distrained by
serving a copy of the
warrant of distraint upon the
taxpayer and upon the
president, manager,
treasurer or other
responsible officer of the
corporation, company or
association, which issued
the said stocks or securities.
3. Debts and credits shall be
distrained by leaving with
the person owing the debts
or having in his possession
or under his control such
credits, or with his agent, a
copy of the warrant of
distraint. The warrant of
distraint shall be sufficient
authority to the person
owning the debts or having
in his possession or under
his control any credits
belonging to the taxpayer to
pay to the Commissioner the

amount of such debts or

credits.

Bank
accounts
shall
be
garnished by serving a warrant
of
garnishment
upon
the
taxpayer
and
upon
the
president, manager, treasurer
or other responsible officer of
the bank. Upon receipt of the
warrant of garnishment, the
bank shall tun over to the
Commissioner so much of the
bank accounts as may be
sufficient to satisfy the claim of
the Government.
1.

CONSTRUCTIVE DISTRAINT
The owner is merely prohibited
from disposing of this property
Issued even when there is no
actual tax delinquency
o Availed of when taxpayer is:
1. Retiring from any business
subject to tax;
2. Intenting to
a. Leave the Philippines; or
b. Remove his property
therefrom; or
c. Hide or conceal his
property; or
3. Performs any act tending to
obstruct the proceedings for
collecting the tax due
The above requisites are
also the grounds also of
jeopardy assessment
Effected by leaving a list of
distrained properties to the
owner
The possession remains with
the owner of the property

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Notice is given to the owner,

prohibiting him from disposing,
encumbering or disposing the
property without the approval
of the Commissioner. This is
issued even when there is no
actual tax delinquency because
the nature of this is more of
preservation to prevent the
dissipation of the property
before a lien may be made by
the bureau.
Procedure (Section 206)
1. The constructive distraint of
personal property shall be
affected by requiring the
taxpayer or any person
having possession or control
of such property to sign a
receipt
covering
the
property
distrained
and
obligate himself to preserve
the
same
intact
and
unaltered and not to dispose
of the same ;in any manner
whatever,
without
the
express authority of the
Commissioner.
2. In case the taxpayer or the
person
having
the
possession and control of
the property sought to be
placed under constructive
distraint refuses or fails to
sign the receipt herein
referred to, the revenue
officer
effecting
the
constructive distraint shall
proceed to prepare a list of
such property and, in the
presence
of
two
(2)
witnesses, leave a copy
thereof in the premises
where
the
property
distrained is located, after
which the said property shall

be deemed to have been

placed under constructive
distraint.

ACTUAL DISTRAINT
Made only on the property of a
delinquent taxpayer (there has been
final demand to pay the tax)
There is taking of possession
Effected by leaving a list of distrained
property or by service of a warrant of
distraint or garnishment
An immediate step for collection of
taxes
LIEN VS. DISTRAINT
LIEN
Directed against the property subject to
the tax (covers both real and personal
properties)
Regardless of the owner of the property

Distrain and levy are not

available if the tax liability does
not exceed P100

LEVY
Refers to the act of seizure of
real property in order to enforce
the payment of taxes
The requisites for the exercise
of the remedy of levy is the
same as in the remedy of
distraint
When before, simultaneously or
after the distraint of personal
property belonging to the
taxpayer.
covers real property

CON
Made on th
whether de
to have full
The taxpay
disposing o
encumberin
Effected by
a receipt of
officer prep
property
Not necess

Need
property

Property

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requisites are similar with that

of distraint
must be effected within the
prescriptive period to assess
PWEDE BA MAGDUNGAN SI
LEVY UG SI DISTRAINT?
GENERAL RULE: YES.
BEFORE,
SIMULTANEOUSLY OR
AFTER THE DISTRAINT OF
PERSONAL PROPERTY
HOWEVER, PROCEDURE
WISE, IF YOU HAVE
ALREADY DISTRAINED
THE PROPERTY, YOU
WAIT FOR 30 DAYS
BEFORE YOU CAN LEVY

Effected by:
1. Writing upon an authentic
certificate showing (DNA)
Name of the taxpayer
Amounts of the tax and
penalty due
Description of the
property upon which levy
is made
2. Written notice of the levy shall
be mailed to or served upon
The Register of Deeds of
the province or city
where the property is
located, and
The delinquent taxpayer
If he is absent from the
Philippines, to his agent
or the manager of the
business in respect to
which the liability arose
If there be none, to the
occupant of the property
in question
Procedure:

1. Internal revenue office shall

prepare a duly authenticated
certificate showing the name of
taxpayer, amounts of tax and
penalty due, enforceable
throughout the Philippines
2. Officer shall write upon the
certificate a description of the
property upon which levy is
made
3. Written notice of levy shall be
mailed or served upon
The Register of Deeds
where the property is
located and
The taxpayer or
agent/manager of the
business in respect to the
tax liability or to the
occupant of the property
4. If personal property of taxpayer
is not sufficient to satisfy the
tax due, levy on real property
shall proceed within 30 days
after distraint
5. Report on levy
1. By levying officer
Submitted within 10
days from receipt of
warrant
Submitted to the
Commissioner or his
representatives
2. By the Revenue Regional
Director consolidated
report, as may be required
by the Commissioner
PURPOSE OF DISTRAINT OR
LEVY IS TO SATISFY THE TAX
LIABILITY
The BIR can levy or distrain
your properties again and again
if you have tax liability. If your
properties are actually
distrained or levied, there is still

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no payment of the tax because

there is still no inflow. So, the
government would sell your
properties.
If you dont want this to
happen, your remedy would be
to exercise your right of
preemption. This gives you
the right to pay all the basic tax
assessed including interest,
penalties and surcharges prior
to the fixed date of sale of your
property and if you are able to
settle everything prior to the
fixed date of sale, then no sale
of property will take place.

SALE OF PROPERTY
2 POSSIBLE CASES In case of distrained property:
A. Notification specifying the time
and place of sale and the
articles distrained shall be
exhibited:
In not less than 2 public
places (one place shall be
at the office of the Mayor)
In the municipality or city
where the distraint is
made
B. The time of sale shall not be
less than 20 days after notice to
the owner or possessor of the
property and the publication or
posting of such notice
C. Sale of the property at:
Public auction to the
highest bidder for cash or
The bidder who is
willing to pay the
basic tax assessed,
interest, cost of
sale and
surcharges

Through duly licensed

commodity or stock
exchanges with the
approval of the CIR
Applies when the
property is shares
of stocks
If the highest bid does not meet
the tax liability, the remedy of
the government is to ascertain
if the taxpayer has other
property, it can distrain or levy
them again until the tax liability
is satisfied
If theres no highest bidder, or
the highest bid is not enough
and there is no other property
available, the remedy of the
government is FORFEITURE
NAGKASINABOT TA?HEHE

In case of levied property:

A. Advertisement of the time and
place of sale of the taxpayers
property as may be necessary
to satisfy the claim within 20
days after the levy and it shall
cover a period of at least 30
days
Posting a notice at the
main entrance of the
municipal building or city
hall and in a public and
conspicuous place in the
barrio or district in which
the real estate lies and
By publication once a
week for 3 weeks in a
newspaper of general
circulation in the
municipality or city where
the property is located
B. Sale at public auction to the
highest bidder

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At the main entrance of
the municipal building or
city hall or
On the premises to be
sold, as the officer
conducting the
proceedings shall
determine and as the
notice shall specifiy
C. Disposition of proceeds of sale
NB: in case the proceeds of the
sale exceed the claim (taxes,
penalties and interest) and cost
of the sale, the excess shall be
turned over to the owner of the
property applies only in the
case of highest bidder because
this falls under seizure. In
forfeiture however, it is different
because there is no highest
bidder or the bid is lacking.
There would be transfer of
ownership from the title of the
taxpayer to the government. No
sale yet.
Right of preemption
- Right of the taxpayer to prevent
the sale of the property so long
as he is able to pay prior to the
sale
- Applies to both personal and
real properties because it stems
from actual distraint and levy

Redemption by the taxpayer

Within 1 year from the date of sale,
that is, from the date of the
registration of the deed of sale by the
taxpayer or anyone for him by paying
the full amount of:
Taxes

Penalties
Interests and
Costs of sale

Pending redemption of the

property sold, the owner shall:
Not be deprived of the
possession of the property
Be entitled to the rents and other
income thereof
During the 1 year period, the
property need not be within the
possession of the purchaser, he
has to ask for a writ of
possession, if within 1 year,
there is a bond required, if after
a year, there is no bond
required
Forfeiture
Happens only when there is no
longer any property to be
additionally distrained or levied
Effected when:
There is no bidder for the real
Right of1.redemption
property in the public sale or
2. If the amount of the highest bid
is insufficient to pay the taxes,
penalties and costs
The Register of Deeds concerned shall:
o Upon registration of the
declaration for forfeiture,
transfer the title of the property
to the government
o Without the necessity of an
order from a competent court
Is there a right of redemption
here? Yes. 1 year from the date
of the issuance of registration
of the declaration for forfeiture.
Enforced by:

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A. In case of personal property
o Seizure and
o Sale or destruction of the
property
If undesirable personal property
(liquors, etc), it would have to
be destroyed.
B. In case of real property
Judgment of
condemnation and
Sale in a legal action or
proceeding, civil or
criminal as the case may
require
Redemption by the taxpayer
o Same as that of redemption in
case of sale
o The 1 year period starts from
the date of registration of the
declaration of forfeiture
Compromise
o A contract whereby the parties
by reciprocal concessions, avoid
litigation or put an end to one
already commenced
Requisites:
1. The taxpayer must have a tax
liability
2. There must be acceptance (by
the Commissioner or taxpayer
as the case may be) of the offer
in the settlement of the original
claim
3. There must be an offer (by the
taxpayer of an amount to be
paid by him)
Naa gihapon macollect ang
government, but the amount is
lower than the basic tax liability
Kinsa ang muuna ug
compromise? The taxpayer.

Officers authorized to
compromise:
1. Commissioner or Internal
Revenue is the only official
vested with such power and
discretion;
2. Subordinate officials may
preliminarily enter into
compromise
If the compromise is entered
into by the subordinate official,
if the compromise is approved,
it is not deemed final because it
is automatically reviewable by
the Commissioner. If its a
rejection made by the
subordinate, it is already
deemed final.
Compromise in Civil Cases
o Grounds (Civil Cases)
1. When a reasonable doubt as
to the validity of the claim
against the taxpayer exists
2. When the financial position
of the taxpayer
demonstrates a clear
inability to pay the assessed
tax
o Limitation as to amount
1. In case of financial
incapacity: 10% of the basic
assessed tax
So if your basic tax assessed is
1M, the minimum amount that
you would have to pay is
100,000
2. Other cases: 40% of the
basic assessed tax
o The approval of the
Evaluation Board (composed
of the CIR and the Deputy
Commissioners) is required
when:

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1. The basic tax involved

exceeds P1,000,000 or
2. The settlement offered is
less than the MCR
Comes in very rare
circumstances

Compromise in Criminal Violations

All criminal actions (those as provided
or enumerated in the TAX CODE) may
be compromised except:
1. Those already filed in court
2. Those involving fraud (RPC)
Extent of discretion:
A. Before the complaint is filed
with the prosecutors office:
The commissioner has
full discretion to
compromise except
those involving fraud;
B. After the complaint is filed with
the prosecutors office but
before the information is filed
with the court
The commissioner can
still compromise provided
the prosecutor
consented;
C. After the information is filed
with the court:
The Commissioner is no
longer permitted to
compromise with or
without the consent of
the prosecutor
This is because the BIR is not
the prosecuting arm of the
government
Remedies when taxpayer refuses or
fails to abide by a tax compromise:
A. Enforce the compromise

Judicial compromise can

be enforced by mere
execution
Extrajudicial can only be
enforced by court action
B. Regard it as rescinded and insist
upon original demand (Art.
2041, NCC)
Everything goes back to status
quo, then he can avail of the
other remedies
Compromise Penalty
An amount which the taxpayer
pays to compromise a tax
violation to avoid criminal
litigation
Paid in lieu of criminal
prosecution
A taxpayer cannot be compelled
to pay a compromise penalty
If he does not want to pay, the
CIR must institute a criminal
action
COMPROMISE

C
Definition
An amount of money paid by the
An amou
taxpayer to settle his civil liability for tax comprom
assessed
committe
criminal p
Basis of amount pa
Basic tax assessed
Gross sal
the tax d
Minimum amount
The limitation depends on the legal
Depends
grounds used by the taxpayer
violation
generally
Abatement cancellation of tax
liability
Grounds
1. When the tax assessed or
any portion thereof appears

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to be unjustly or excessively
demanded, or
2. When the administration and
collection costs involved do
not justify the collection of
the amount due
GENERAL RULE: the power to
compromise and abate cannot
be delegated by the CIR
EXCEPT:
1. Assessments issued by
regional offices involving
basic taxes of P500,000 or
less, and
2. Minor criminal violations
More of a remedy on the part of
the taxpayer
Government collects NOTHING

PENALTIES AND
FINES
Refer to:

a. Surcharges
b. Deficiency Interest
c. Delinquency Interest
d. Compromise penalty
I.
Surcharges:
Not really a penalty as used in criminal
law but a civil administrative sanction
designed primarily to:
Protect the State revenue, and
Reimburse the government for
the expenses in investigating
and the loss resulting from the
taxpayers fraud
Atty. A: Surcharges are generally 25%
but if involves fraud it goes up to 50%
II.

Interest
Deficiency Interest
20% per annum from the date
prescribed for its payment until the full
payment thereof
Atty. A: This is an amount added if the
taxpayer failed to pay the correct
amount of tax that he should pay
Delinquency Interest
Interest of 20% or the Manila
Reference rate, whichever is higher,
required to pay in case of failure to
pay:
The amount of the tax due on
any return required to be filed
Amount of the tax due for which
return is required
The deficiency tax or any
surcharge or interest thereon,
on the date appearing in the
notice and demand of the CIR
Atty. A: Delinquency meaning it is paid
beyond the period prescribed by law. It
is possible that you can be liable for
surcharges, deficiency interest and
delinquency interest.
III.

Compromise Penalty

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Similarities of compromise and
compromise penalty:

They both imply mutual

agreement.
A compromise penalty cannot
be imposed in the absence of a
showing that the taxpayer
consented thereto.
The CIR has no power to impose
and collect the compromise
penalties in the absence of a
compromise agreement validly
entered into between the
taxpayer and the CIR.
Atty. A: The purpose of a compromise
penalty is to avoid possible criminal
litigation that may be undertaken by
the BIR against you, so you pay
instead the compromise penalty
IV.

SUSPENSION OF BUSINESS
OPERATIONS
Failed to register under the VAT
system(if you already
mandatorily required)
Failure to file VAT return
Failure to issue VAT receipts
Atty. A: As a rule the business
operation may be suspended in no
less than 5 days as the case may be
-If despite all the administrative
remedies the taxpayer cannot pay,
probably no more money or
properties, then the government will
avail of the judicial remedies.

Actions instituted by the government

to collect internal revenue taxes.
Includes filing by the government
within the probate court claims
against the deceased taxpayer.
Atty. A: It is not at all times that the
Govt. will start the civil action, it is
allowed that the taxpayer can first file
the civil action and the government
will file an answer.
Enforced by:
Filing a civil case for the
collection of sum of money with
the proper regular court (i.e.
MTC or RTC) or
Filing an answer to the petition
for review filed by the taxpayer
with the CTA.
Civil actions filed with ordinary
courts
Resorted to only when tax becomes:
Delinquent
Collectible
Atty. A: You can consider a taxpayer
delinquent if there is already a final
assessment on the amount of tax
payable but still the tax payer failed to
pay on time.
Collectability arises when:
Self-assessed tax shown in the
return was not paid within the
date prescribed by law.
Atty. A: GR is pay as you file, so if you
file but you do not pay then the tax
there is now collectible.

JUDICIAL REMEDIES
I.

CIVIL ACTIONS

Final assessment is not

protested administratively
within 30 days from date of
receipt.
Atty. A: If no protest it becomes final
and executory, no more question, you
cannot go anymore in the CTA. The tax
is now collectible.

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Non-compliance with the

condition laid in the approval of
protest.
Failure to file a timely appeal to
the CTA on the final decision of
the CIR or his authorized
representative on the disputed
assessment.
Atty. A: Appeal to the CTA must be
made within the period of 30 days
from the date of reciept of final
decision of the CIR.
Defenses precluded by final and
executory assessments:
Invalidity or illegality of the
assessment and
Prescription of the
governments right to assess.
Atty. A: These defenses are already
precluded if you fail to file a protest
within the prescribed period even if
your claim is valid.
Civil actions filed with the CTA
Atty. A: These are in the form of
answers or response by the BIR to the
petition for review filed by the
taxpayer to the CTA.
The fact that no civil action was filed
before the ordinary courts to collect
the tax liability is no ground for
claiming that the right to collect had
already prescribed.
The answer filed by the government in
the CTA is tantamount to the filing of a
civil action for collection in the regular
court and has the effect of tolling the
prescriptive period. (Hermanos, Inc. vs
CIR, 29 SCRA 552)
Atty. A. Counterclaims are included in
the Answer filed by the govt. in the
CTA.
II.

CRIMINAL ACTIONS

Common crimes punishable under the

Tax Code:
Attempt to evade or defeat a
tax
Failure to file return, supply
correct and accurate
information, pay tax, withhold
and remit tax and refund excess
taxes withheld on
compensation.
Any person required under the Tax
Code
To pay any tax
Make a return
Keep any record
Supply correct and accurate
information
Withhold or remit taxes withheld
Refund excess taxes withheld
on compensation
Who willfully violates these
duties at the time or times
required by law shall be
punished upon conviction in
addition to other penalties.
Atty. A: Material understatement
(income, etc.) or overstatement
(expenses, etc.) is considered a prima
facie evidence of your intent to evade
payment of tax. Considered material if
there is a discrepancy of 30% or more.
Is the approval of the CIR required in
filing criminal or civil cases?
YES. However, the approval of the
Commissioner required for the judicial
enforcement of tax liability is not
jurisdictional. Lack of such approval
merely affects the cause of action or
capacity to sue.
Atty. A: Lack of signature or approval
of the commissioner does not
necessarily mean that it may
automatically be dismissed by the
courts for that reason alone. Lack of

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approval may be cured by an

amendment.
Is assessment required before a
criminal action may be charged?
NO, provided there is a prima facie
showing of a willful attempt to avoid
taxes.
Atty. A: GR: there must be full
assessment before a taxpayer can be
held liable
Exception:
Jeopardy assessment and in Criminal
action provided there is a prima facie
showing of a willful attempt to avoid
taxes.
Assessment is only necessary in a civil
action for collection.
Atty. A (Naay nalimitan si sir ni balik
siya sa constructive distraint)
-in constructive distraint it is usually
effected by leaving a list of the
distraint properties duly signed or
received by the owner. If the owner
does not sign then it will be left there
in the presence of two witnesses. The
owner of the properties under
constructive distraint cannot dispose
or mortgage the properties without
the approval of the commissioner. If
the taxpayer still disposed the said
property he will be liable to pay of no
less than twice the value of the
property and or imprisonment.

REMEDIES OF TAXPAYER
ADMINISTRATIVE
a. Before Payment
i. (payment) with protest
ii. Entering into a compromise
b. After payment filing of a claim for
refund or tax credit within 2 years
from date of payment regardless of
supervening cause.
JUDICIAL
I.
Civil action

II.

Appeal to CTA within 30

days from receipt of
decision on the protest or
from the lapse of 180
days due to inaction of
the Commissioner;
Action to contest
forfeiture of chattel and
Action for damages

Criminal Action
Filing of criminal
complaint against erring
BIR official and employee
and
Injunction when the CTA
in its opinion, considers
that the collection by the
BIR may jeopardize
taxpayer.
Atty. A: GR: there can be no
injunction insofar as collection
of taxes are concerned
Exception: CTA an issue
injunction if in its opinion,
considers that the collection by
the BIR may jeopardize
taxpayer

Protest of Assessment
File a request for reinvestigation or
reconsideration within 30 days from
receipt of the assessment
I.
Request for reinvestigation
A plea for re-evaluation of an
assessment on the basis of newlydiscovered or additional evidence,
that a taxpayer intends to present in
the reinvestigation. It involves a
question of fact or law or both.
Atty. A: If no protest, the assessment
becomes final and executory. It is not
a mere response, you must include
factual and legal basis in your protest.
II.

Request for reconsideration

GAG-NOTCH PREFI
A plea for re-evaluation of the
assessment on the basis of existing
records without need of additional
evidence. Involves a question of fact
or law or both (RR No. 12-85)
Within 60 days from filing of protest,
all relevant supporting documents
should have been submitted,
otherwise, the assessment shall
become FINAL (cannot be appealed).
(Sec. 228, NIRC)
Atty. A: Counting of the 180 day period
for the CIR to make a decision will
depend on the nature of the protest. If
the protest is reinvestigation then the
180 day period will be counted on
from the date of submission of the
additional documents. If
reconsideration then from the 180 day
period will be counted from the date of
protest.
Appeal of Protest to the CTA (Sec.
228 NIRC)
Grounds:
If the protest is denied in
whole or in part or
Is not acted upon within
180 days from
submission of
documents/filing of
protest (reconsideration)
Appellate Court: Court of Tax Appeals
Period to appeal: Within 30 days from
receipt of the decision denying the
protest or
30 days from the lapse of the 180 day
period.
Effect of failure to appeal: the decision
shall be final, executor and
demandable.
Atty. A: If there is MR in the CIR, only
the remaining number of days
available for you to appeal in the CTA.

Taxpayers Suit
Requisites:
the tax money is being
extracted and spent in violation
of specific Constitutional
protections against abuses of
legislative power
that public money is being
deflected to any improper
purpose
That the petitioner seeks to
restrain the respondents from
wasting public funds through
enforcement of invalid or
unconstitutional law.
Atty. A: The money subject to
taxpayer's suit must be public funds. It
must not be from special contributions
or donations.
However, the Supreme Court has
discretion whether or not to entertain
a taxpayers suit and could brush
aside the lack of locus standi where
the issues are of transcendental
importance in keeping with the courts
duty to determine that public officers
have not abused the discretion given
to them.
TAX REFUND OR TAX CREDIT
Grounds
Tax is collected erroneously or
illegally
Penalty is collected without
authority
Sum collected is excessive
Requisites
Claim must be in writing
It must be filed with the
Commissioner within two years
(2) after the payment of the tax
or penalty; and

GAG-NOTCH PREFI

Show proof of payment

Starting date of counting the 2-year

period:
GENERAL RULE: from the date
of payment, regardless of any
supervening cause that may
arise after payment.
EXCEPTIONS:
Corporate Income tax
Where a corporation paid
quarterly income taxes in any of
the first 3 quarters during the
taxable year but incurs a net
loss during the taxable year, the
2-year period for the filing of
the claim for refund or credit
shall be counted from the date
of the filing of the annual
corporate ITR.
Income Tax paid in installments,
taxes are deemed paid, for
purposes of determining the
commencement of the 2-year
period for filing a written claim
for the refund or credit
therefrom on the date the last
installment was paid.
PRESCRIPTION
Atty. A: Prescriptive period for the
govt. to assess and collect tax.
Purpose:
Prescriptive periods are designed to
secure the taxpayers against
unreasonable investigation after the
lapse of the period prescribed. They
are also beneficial to the government
because tax officers will be obliged to
act promptly.
General Rules:
When the tax law itself is silent
on prescription, tax is
imprescriptible.

When no return is required, tax

is imprescriptible
Defense of prescription is
waivable and
Provisions on prescriptions,
being remedial in nature should
be liberally interpreted to carry
out its intent.
Atty. A: There has to be an
express agreement between the govt.
and the taxpayer to waive prescription
Prescriptive period for the
ASSESSMENT of taxes:
GENERAL RULE:
Three years after the date the
return is due or filed, whichever is
later.
EXCEPTIONS:
Failure to file a return: ten (10)
years from the date of the
discovery of the omission to file
the return.
False or fraudulent return with
intent to evade the tax: ten (10)
years from the date of the
discovery of the falsity or fraud
Agreement in writing to the
extension (not reduction) of the
period to assess between the
Commissioner and the taxpayer
before the expiration of the
three-year period.
Atty. A: The extension must be
done before the expiration of the 3
year period.
Waiver or renunciation of the
original three (3) year limitation,
signed by the taxpayer.
Atty. A: The waiver must be duly
signed by the CIR or his authorized
representative,
Indicate the date when it was
signed (the date indicates the
cutoff of the prescriptive

GAG-NOTCH PREFI
period), contain the signature of
the taxpayer and express
agreement that the taxpayer
renounces his right of
prescription.
Prescriptive period for the
COLLECTION of taxes:
NIRC does not provide for prescriptive
period.
2 views Three (3) years from
assessment or within period for
collection agreed upon in
writing before expiration of the
five-year period (CIR v. SCB, GR.
192173, July 29, 2015)
Ten (10) years without
assessment in case of false or
fraudulent return with intent to
evade or failure to file return.
Atty. A: prescriptive period to collect is
5 years under the old tax code but it
was deleted.
Grounds for suspension of the
running of prescriptive period for
assessment and collection:
When the Commissioner is
prohibited from making the
assessment or beginning the
distraint or levy or proceeding
in court, and for 60 days
thereafter
Atty. A: This usually happens if
there is an injunction against the
commissioner so it suspends the
running of the prescriptive period

When the taxpayer requests for

a reconsideration which is
granted by the Commissioner
Atty. A: take note that if the
taxpayer request for reconsideration

or reinvestigation it is not automatic

that the prescriptive period is
suspended, it is only suspended if the
reconsideration or reinvestigation has
been granted by the CIR

When the taxpayer cannot be

located in the address given by
him in the return, unless he
informs the Commissioner of
any change in his address
When the warrant of distraint or
levy is duly served, and no
property is located and
When the taxpayer is out of the
Philippines.

Amended return
Allowed when:
The amendment is made within
3 years from the date of filing
the original return and
No notice of audit or
investigation of such return has,
in the meantime, been actually
served upon the taxpayer.
Effect on prescription:
The prescriptive period starts to
run from the filing of the original
return, if the same is sufficiently
complete to enable the CIR to
intelligently determine the
proper amount of tax to be
assessed.
However, where the amended return is
substantially different from the
original, the right to assess is counted
from the filing of the amended return.
Atty. A: it is considered substantial if it
changes the tax liability of the
taxpayer

GAG-NOTCH PREFI
Prescriptive period for the filing of
CRIMINAL ACTION:
Five (5) years from the day of the
commission of the violation, and if not
known, from the discovery thereof and
the institution of judicial proceedings
for its investigation and punishment.
Atty. A: this refers to the criminal
violations expressly provided under
the tax code.
Grounds for interruption of the
period:
When proceedings are instituted
against the guilty persons. (It
begins to run again if the
proceedings are dismissed for
reasons not constituting
jeopardy)
Offender is absent from the
Philippines.

Retroactivity of BIR Rulings

General Rule: Prospective
Exceptions:
Where the taxpayer deliberately
misstates or omits material
facts from his return or any
document required of him by
the BIR.
Where the facts subsequently
gathered by the BIR are
materially different from the
facts on which the ruling is
based and
Where the taxpayer acted in
bad faith.