Professional Documents
Culture Documents
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Tax Rights and
Remedies
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By Victorino Mamalateo
Book Summary
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4-C AY 2009-2010
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TAX RIGHTS AND REMEDIES by Victorino C. Mamalateo
Book Summary
believe that such person is not declaring districts as may be from time to time be
his correct income, sales or receipts for required for administrative purposes.
tax purposes. The findings maybe used as
the basis for assessing the taxes for the 11. Power to accredit and register tax
other months or quarters of the same or agents or practitioners
different taxable years and such
assessment shall be deemed prima facie The Commissioner shall accredit and
correct. register tax agents and practitioners
based on their professional competence,
The power to prescribe presumptive gross integrity and moral fitness. These tax
sales and receipts is exercised by the agents and practitioners may be
Commissioner when it is found that a individuals and general professional
person has failed to issue receipts and partnerships and their representatives
invoices. who may perform the following; (a)
prepare and file tax returns, statements,
8. Power to terminate taxable period reports, protests, and other papers with
the BIR; and (b) appear before the BIR for
Instances when the Commissioner may taxpayers for valuable considerations.
terminate the taxable period of a
taxpayer:
appeal should be acted upon by the 11) Request for rulings on topics covered
Commissioner; by RMO 3-2001 of taxpayers falling
2) Verify complaints and certify within the jurisdiction of the regional
against forum shopping in civil actions office
for collection of tax filed by the 12) Tax-deferred exchanges of property for
National Office except when, in the shares under Section 40(c)(2) of the
opinion of the Deputy Commissioner, Tax Code
the complaint should be acted upon by 13) Transfer of property by a pre-need
the Commissioner; corporation to a trustee in accordance
3) Sign complaints for criminal action with SEC guidelines on the
filed by the National Office with the establishment of trusts by pre-need
Department of Justice or Prosecutor’s companies;
Ofice except when, in the opinion of 14) Tax consequence of exchanges of
the Deputy Commissioner, the properties in order to correct clear
complaint should be acted upon by the mistakes of fact relating to ownership
Commissioner. of subdivision lots;
15) Joint ventures for real estate
Note: For the list of requirements for development where no cas advance or
rulings delegated to the Asst Comm for other payments are made to any co-
Legal Sevice, please refer to the book of venturer;
Mamalateo, p. 59. 16) Exemption of taxability of gains from
sale or transfer of shares of stock in
Delegated Powers to Assistant domestic corporations by non-resident
Commissioner (Legal Service) foreign corporations
1) “VAT Exemption Certificate” for 17) Taxability or exemption of income of a
embassies issued on the basis of resident of a foreign country from
reciprocity as confirmed by the Office independent personal services by
of Protocol, Dept of Foreign Affairs; virtue of a tax treaty;
2) “Certificate of Tax Exemption” for 18) Embassy requests, either for itself or
Asian Development Bank and other on behalf of its employees, for tax
international organizations based on exemption;
an international agreement; 19) Tax exemption of income derived by
3) “Certificate of Residency” issued in foreign governments from their
accordance with the provisions of tax investments in the Phils.
treaties between the Philippines and 20) Tax exemption of interest and/or
other countries; and dividend income of such foreign
4) “Certificate of Registration” as government institutions as are
qualified donee-institution in specified in the tax treaties to which
accordance with the provision of the Philippines is a signatory or in
Revenue Regulations No. 13-98 dated exchanges of letter between the
Jan. 1,1999. government of the Phils and the
5) “Denial of Claim for Informer’s foreign government;
Reward” under Sec. 282 of Tax Code; 21) Par 3, Sec. 4, Art. XIV of the 1987
6) Issuance of “Disbursement Voucher” Constitution re non-stock, non-profit
for informer’s reward private educational institutions
7) Issuance of “Tax Credit Certificate” or 22) Section 26 (general professional
“Disbursement Voucher” for tax refund partnerships), Tax Code
8) Request for tax exemption of 23) Section 28 (b)(7)(B) (separation
“reasonable private benefit plan” benefits), Tax Code
9) Request for confirmation that the 24) RA 4917 (retirement plans)
“reasonable private benefit plan” is 25) Kalakalan 20
still tax-exempt despite amendments 26) Rural Banks Act
to its provisions; 27) Cooperative Code of the Phils
10) Request for renewal of confirmation of 28) Urban Development & Housing Act of
the tax-exempt status of a “reasonable 1992
private benefit plan;” and
with the AAB, RCO, DMT and property being transferred with
processed within the RDO where the jurisdiction of each RDO.
the transferor is registered.
XI. CARs shall be issued sequentially
6) For tax-exempt transfers
- - in case the property being XII. RDO shall prepare the required
transferred is real property, the CARs in 4 copies
corresponding tax return shall be
filed and processed within the RDO ONE-TIME TRANSACTIONS (ONETT)
having jurisdiction over the location On account of the semi-schedular tax
of the property, where the system adopted by Congress, there are
decedent was domiciled or numerous one-time transactions that are
registered at the time of death or subject to final withholding income taxes.
where the donor is a resident or Also, there are gratuitous transfers of
registered, whichever is applicable. property subject to transfer taxes that
- If property being transferred may be treated as one-time transactions.
involves shares of stock not traded As a way of improving services being
in the stock exchange, the provided to the taxpaying public, the
corresponding tax return shall be Commissioner issued an order:
filed within the RDO where the 1) To simplify documentary requirements
seller is registered, where the and procedures in the processing,
decedent was domiciled or verification or audit and review of tax
registered at the time of death or returns on ONETT;
where the donor is a resident or 2) Ensure timely issuance of CAR
registered, whichever is applicable. 3) Establish measures to monitor the
processing, review and evaluation of
ONETT cases
VII. To authorize the audit or 4) Provide sanctions to be imposed for
verification and processing of the non-compliance by revenue personnel
return, a Letter of Authority or Tax concerned.
Verification Notice shall be issued
by the authorized revenue official Transactions covered:
in accordance with existing rules 1) Transactions subject to final capital
and regulations. gains tax on sale of real properties
considered as capital assets, as well as
VIII. CARs shall be issued by RDO which 2) capital gains tax on the net capital
processed the return gain on sale, transfer or assignment of
stocks not traded in the stock
IX. No CAR shall be issued by the RDO exchange,
unless: 3) expanded withholding tax on sale of
1) OR evidencing payment real properties considered as ordinary
2) Audit/verification report assets,
3) Confirmation letter 4) donor’s tax,
5) estate tax and
X. Transfers arising from inheritance 6) other taxes related thereto, including
and/or donation involving documentary stamp tax.
properties in multiple locations
covered by different RDOs or An ONETT Team composed of Revenue
where the estate tax return was Officers and support staff shall be created
processed and verified by a in every Revenue District Office to serve
district office without jurisdiction as One-Stop-Shop for ONETT.
over the place where the
properties are located, the Certificate Authorizing Registration
Regional Director shall issue the Registry Book
same containing all details of Maintenance of CAR Registry Book shall be
the responsibility of the ONETT Teams,
POSTING REQUIREMENT
• Registration of a taxpayer or his
books and records means that the ff
have been issued: Certificate of
Registration, Official Receipt
evidencing payment of annual
registration fee, Notice to the Public
that it is registered with the BIR and
Permit to use cash register machine or
point-of-sale machine attached to the
machine and clearly seen by the
customers
• Exhibition of Notice at place of
business for persons required to issue
Books may be in bound or loose-leaf form transactions therein are kept and duly
– A sworn cert. attesting to the # of taken up in the books of accnts of the
invoices used during a given yr. is principal store; otherwise the branch
required only in the case of loose-leaf establishment should be provided with
invoices. No cert. required in case the TP separate books of accnts.
uses invoices in bound form. Said cert.
should be filed within 15 days after the Register book to be kept by professionals
end of the taxable yr. unless upon request – in addition to the books & other records
of the TP, the Commissioner extends said prescribed in Chapter II of the
period. Bookkeeping Regulations, shall keep &
maintain a Register Book in which shall be
Purpose in requiring books of accnts – in entered immediately upon acceptance of
order that all taxes due the government the client or patient, the ff. info: (1) name
may readily and accurately be ascertained & ad of client/patient; (2) date & time of
and determined anytime of the yr not only arrival; (3) the amount of professional fee
by the TP but also by the diff. tax or other consideration received therefore;
collection agencies of the gov’t. and (4) number & date of the receipt/s
issued covering said payment.
Journal, Ledgers & their equivalent
Professionals – means any person who has
Journal – may consist of only one book, the been duly licensed to practice his
gen. journal. The equivalents may consist profession by the PRC or one who has
of several books such as sales book, been admitted to the practice of law in the
purchase book, cash book & such other Phil., if such person receives professional
books as the TP may find convenient for fees for his services. The term also
his business. includes any person who is engaged in the
practice of a profession whether or not he
Ledger – may consist of one book, the is licensed, authorized or qualified therein
gen. ledger. The equivalents may consist if, as in the case of those duly licensed, he
of several ledgers such as customer’s also receives professional fees.
ledgers, creditor’s ledger, stock ledger,
and such other books as the TP may find Records to be kept by proprietors or
convenient for his business. No entry shall operators of rope factories, sugar central,
be made in the ledger or its equivalent, and dessicated coconut factories – aside
unless said entry originates from the from the books & records required in
journal or its equivalent. Chap. 11 of the regulation, shall keep true
& correct records of their purchases of raw
Subsidiary books of accnts – all corps., materials, the finished products & by
companies, partnerships or persons products. It shall state the date of receipt,
keeping the books of accnts mentioned quantity and price of raw materials, the
above may at their option keep subsidiary name, address or residence cert. of the
books as the need of their business may purchaser or to whom they were
require. They shall be subj. to the same purchased.
rules as are applicable to the journal &
ledger. Ex. The so-called “poison book,” Owners of rice & corn mills – they are no
“abortive book,” and “prescription book” longer subj. to the 2% miller’s tax hence,
of pharmacies are considered subsidiary they are now required to use the books
books. and records prescribed by the
bookkeeping regulations.
Books to be kept in branch establishments
– an owner of a store who maintains a Records of jobs received by contractors –
branch establishment need not keep 2 road, building, waterworks, and other
sets of books of accnts, if the branch store construction work contractors and other
merely buys goods or merchandise for the persons subj to tax under sec. 191 of the
principal store and no ale is effected in the tax code shall in addt’n to the books &
former, provided that memoranda of other records required under chap. II of
the regulation, keep a register book for job certificates, should keep & use a simplified
orders received in which they shall enter set of bookkeeping records. Lessors of
immediately upon making a contract the Riceland come within the phrase ‘persons
date, name & address of the customer, required by law to pay internal revenue
description of the articles to be taxes.” Accordingly, they are required to
constructed, the consideration therefore, keep a journal and a ledger, or their
etc. equivalents.
Guest register book of hotels & lodging Preservation of books of accnts and other
houses – may, in lieu of the records of jobs accounting records – all the books of
received, keep a guest register book in accnts, including the subsidiary books,
which shall be entered immediately upon and other accounting records of such
accepting a guest the date & time of his corporations, companies, partnerships, or
arrival, the name & address of the guest & persons shall be preserved by them for a
the number of the room to be occupied, & period of at least 3 yrs from the date of
upon checking out, the date & time of his the last entry in each book and shall be
departure, and the amount paid by him. subj to examination and inspection at any
The entries shall be numbered time by internal revenue officers:
consecutively for purposes of reference. provided, that all corporations, companies,
partnerships, or persons who retire from
Records to be kept by brokers – they shall business shall within 10 days from the
use serially numbered contract forms, date of such retirement or within such
which shall be issued in chronological time as may be allowed by the
order, for each agreement had with their Commissioner in special cases, submit
customers showing the date & other facts their books of accounts, including the
concerning the services rendered & the subsidiary books, and other accounting
signature of the parties thereto. records, to the Commissioner or any of his
deputies for examination, after which they
Stock & Transfer Book to be kept by the shall be returned.
corp. secretary – the cert. in a stock &
transfer book shall be issued in All books of accounts of corp., partnership
chronological order. Each cert of stock or persons shall be subj to examination &
shall contain the cert. no., date of issue, # inspection shall be made only once in a
of shares, par value per share, name & TIN taxable yr except in the ff. cases: (a)
of the SH. fraud, irregularity, or mistake as
determined by the Commissioner; (b) the
Records to be kept by owner or operator taxpayer requests reinvestigation; (c)
of mines or quarry – shall keep & maintain verification of compliance with withholding
an Official Register Book and such other tax laws and regulations; (d) verification of
forms or records that may be required by capital gains tax liabilities; and (e) in the
the Commissioner from time to time. exercise of the Commissioner’s power
Records to be kept by manufacturers/ under sec. 5(b) to obtain information from
assemblers, importers and dealers of other persons in which case, another or
automobiles – submission of sworn separate examination and inspection may
statement, issuance of Withdrawal be made.
Certificates, and the maintenance of
Official Register Books from the Last entry in books of accnt – refers to a
manufacturers or assemblers as well as particular business transaction or an item
importers of automobiles. A sworn thereof that is entered or posted last or
declaration shall be filed for each & every latest in the books of accnts when the
brand or model of automobile, as well as same was closed. For purposes of
for each & every variant of each brand. determining the period of at least 3 yrs
within which the books shall be kept, the
Books of accnts to be kept by landowners same shall be recorded from the date of
– owners of agricultural lands, being subj the last entry in said books.
to the income and community tax
business and at the close of the calendar determined & the reasons should be
yr. or accounting period. clearly stated in the report;
2. should include a statement of the
Record of inventories need not be privilege or fixed taxes paid by the TP;
notarized- it is enough that said records 3. shall be subj to the condition that
are signed by the owner or manager of the the TP, upon receipt of the permit,
business. should immediately register a bound
book;
Sari-sari store owners are required to 4. the examiner must determine
submit their inventory of their stock in whether the TP is delinquent in the
trade. However, pawnshop operators are payment of his tax liabilities;
not required to submit inventory of 5. the Special Investigation Division
jewelries pawned to them at the end of shall det. Whether the TP has
the taxable yr. derogatory info. regarding tax evasion,
if so, the TP should be informed that
Proprietors of hotel business may be his request cannot be given due
required or exempt from submitting course;
inventory – if engaged purely in hotel 6. TP should be required to bind the
business, they are not required to submit loose-leaf forms within 15 days after
yearly inventory list. However, if they also the end of his taxable yr;
maintain restaurants and bars, they are 7. The permit should be duly
required to keep books of inventories of numbered & a permit register should
raw materials and stocks used; hence be kept;
required to submit yearly inventory list. 8. All permits are to be considered on
a permanent basis unless otherwise
Inventory or stock-taking – for the purpose revoked;
of determining the TP’s correct internal 9. A sworn certificate certifying the
revenue tax liabilities, or it may place said number of pages used during a given
business under observation or period must be submitted to the BIR.
surveillance.
The authority granted to the main
Registration of books of accounts & other establishment to use loose-leaf ledgers
accounting records – should be registered does not include the branch
with the BIR appropriate revenue district establishment. The latter cannot use
office before they are used or issued. In loose-leaf ledgers without specific
the case of renewal, the applicant shall authority therefor.
present his duly-registered books of
accounts used during the immediately Language in which books are to be kept –
preceding taxable yr. as a condition in a native language, English or Spanish, if
precedent for registration. not they should be translated (1950 pa
yung circular kya Spanish, hindi nkalagay
Registered books may be used for more kung na amend na). Translation shall be
than one yr – books of accounts registered made in aneat & legible manner in ink or
in one yr. may be used again for the indelible pencil, either on the same page
succeeding yrs without need of further of the books, registers, or opposite or
registration, provided that the portion below such entry or on a separate page
pertaining to the particular year is opposite the page to be translated.
properly labeled or marked. However,
such practice is not advisable. Use of functional currency – functional
currency means the currency of the
Permits to use loose-leaf books of primary economic environment in which
accounts, records invoices & receipts – the entity operates. It is equivalent to the
should be conducted in accordance with measurement currency which is defined
the ff.: simply as the currency used by an entity
1. the necessity of the use of the for measuring items in its financial
loose-leaf forms requested should be statements.
The permit to use cash register Issuance of the Permit to Use Cash
machine and point-of-sale machine Register and POS machines – The
shall be issued only to proprietors, Revenue
owners or operators of any of the District Officer shall issue the applicant
following lines of business and other the corresponding permit to use cash
similar establishments: register and POS machines upon receipt of
1. Supermarkets a duly filed application and proper
2. Department Stores inspection and evaluation of the Revenue
3. Drugstores Officer assigned by the Revenue District
4. Bookstores Officer , provided, that it is satisfactorily
5. Groceries shown by the applicant that he is provided
6. Bakeries with a duly registered cash register sales
7. Restaurants, bars, beer book, appropriately identified as such to
8. Record bars and music stores each machine being applied for use.
9. Video Shops selling and leasing out
cinematographic films Permits for different lines of business
10. Garages and other parking spaces
A separate permit shall be issued by the j. Likewise, the proprietor who have
Regional Director of the Revenue District been issued a permit to use cash
Officer concerned for every application register machine or POS machine.
duly filed, inspected and evaluated. k. After repair, upgrade, change
modification, update or otherwise
Conditions for the Issuance of the and before re-use of the machine,
permit the proprietor and the person who
made the repair shall submit a
a. The machine shall be used sworn statement to the Revenue
exclusively in the operation of only District Officer.
one line of business covered by the l. Registered machines may be
permit. withdrawn from use, either by
b. The machine should be equipped retirement or sale, only upon prior
with two rollers or its equivalent, application with and approval by
one for the audit journal tape the Regional Director or Revenue
intended for audit and internal District Officer, as the case maybe.
revenue tax purposes and other for m. The original permit should be
the customers tape. securely attached to the back of
c. When the machine is punched for the machine to which it refers and
the purpose of recording a sale, the must be conspicuously visible.
amount of the sale should n. In cases where the applicant is
automatically be printed on the engaged in taxable and non-
customer’s receipt and the audit taxable business activities, a
journal tape or its equivalent. permit for a cash register or POS
d. It must be equipped with a reset machine of the type, which is
counter that advances by one capable of clearly indication
every time the total is reset to separately in words of sales of
zero. taxable and non-taxable items,
e. The imprint on the customers and may be issued.
audit journal tapes or its equivalent o. Data required to be reflected in the
should always be legible. register receipts. The cash register
f. Electronic cash register machines receipts must show among others,
with volatile memory shall at all the following:
times be connected to a power (1) Proprietor’s business name
source and shall not be used at (2) Municipal/city address, if
anytime as reserve units. the machine is used by a
g. Upon filling of the application, all branch, the receipt should
the proprietors and reset keys of identify the particular
machines with resettable branch
accumulating grand total shall be (3) Proprietor’s VAT or non-VAT
surrendered to the Revenue number
District Officer for safekeeping and (4) Amount of the transaction
control. (5) Date of the transaction
h. Registered machines with resetable
accumulating grand total shall not CONDITIONS FOR THE USE OF
be reset, except when expressly CRM/POS MACHINES
authorized by the Revenue District
Officer. For users of CRM
i. The Proprietor shall not change its
business name or the use of the a. A duly registered cash register
registered machine or transfer to sales book shall be maintained for
another business location branch machine used, showing then
or establishment or otherwise columns required.
without prior written notice to the b. No CRM be operated without the
proper office of the BIR having corresponding tapes installed on
jurisdiction over said machine. both roller or its equivalent.
(b) NOT REGISTERED with the BIR, presentation of their TIN and proof
(c) NOT PERMANENTLY fixed to the of ACTUAL withholding tax due on
ground, its income tax payment or the
(d) normally set up in places like ADVANCE PERCENTAGE tax due
shopping malls, hospitals, office (5) MONITOR compliance of the
buildings, hotels, villages or privilege store operators/ owners of
subdivisions, churches, parks, their responsibilities under the BIR
sidewalks, streets and other public regulations.
places,
(e) For the purpose of selling a variety PRIVILEGE STORE OPERATOR is the person
of goods and services for SHORT leasing from the lessor or the owner or
DURATIONS. subleasing from the exhibitor. Obligations
include:
Should the duration EXCEED SIX MONTHS (1) To DEDUCT and WITHHOLD the
in any taxable year, then it shall NOT be EXPANDED WITHHOLDING TAX at
considered a privilege store. the rate of FIVE PERCENT on
LEASE/ RENTAL payments made to
A TRADE FAIR or EXHIBIT, for the purpose the exhibitor/ organizer for sub-
of showcasing Philippine products, either leased property OR to the
for domestic and international domestic lessor/owner of leased property
market, where there is NO SALE of goods and REMIT the same, ON or
or services done BUT orders are taken BEFORE the 10th DAY of the
without the issuance of the corresponding FOLLOWING MONTH except for the
invoice or receipt, shall NOT be considered month of December which shall be
a privilege store. filed on or before the 15th of
January of the following year [using
EXHIBITOR or ORGANIZER refers to the the Monthly Remittance Return of
primary lessee of the entire space where Creditable Income Taxes Withheld]
operations of the privilege stores are held (2) To pay ADVANCE INCOME TAX and
by virtue of a lease contract between the ADVANCE VAT or PERCENTAGE TAX
owner of the leased property and the said to the AAB or RDO having
organizer or exhibitor. Obligations include: jurisdiction over the place of event
(1) Posting of Certificate of or activity ON or BEFORE the 1st
Registration; [must register with day of operation and the 1st day of
the BIR at least 15 days from the every month thereafter;
event or activity] (3) To register with the RDO where
(2) To DEDUCT and WITHHOLD the their principal place of business is
EXPANDED WITHHOLDING TAX at located as stated in the articles of
the rate of FIVE PERCENT on LEASE incorporation or where the books of
payments to the lessor of the account are kept.
property and REMIT the same, ON
or BEFORE the 10th DAY of the Unless the activity covers a lesser period,
FOLLOWING MONTH except for the the PERCENTAGE tax imposed and
month of December which shall be collected on a monthly basis from the
filed on or before the 15th of PRIVILEGE STORE OPERATORS are as
January of the following year [using follows:
the Monthly Remittance Return of (1) P 150/ day or P 4,500/ month – in
Creditable Income Taxes Withheld] air conditioned place in a City of 1st
(3) To SUBMIT to the respective RDO a Class Municipality;
LIST the names, addresses and (2) P 100/ day or P 3, 000/ month - in a
other pertinent information of the NON - air conditioned place in a
participating privilege store owners City of 1st Class Municipality;
or operators PRIOR to the said (3) P 75/ day or P 2,500/ month – in air
activity or event conditioned place in a Municipality
(4) To DEMAND from the participant other than 1st Class Municipality;
privilege store operators the
(4) P 150/ day or P 1, 500/ month - in a accounting period without the prior
NON - air conditioned place in a approval of the Commissioner.
Municipality other than 1st Class
Municipality. If the SUM of the Quarterly Tax Payments
Made during the said taxable year is NOT
Advance payments shall be credited equal to the total tax due on the entire
against the actual business tax and taxable income the corporation shall
income tax due. For VAT purposes, either:
advance VAT is likewise allowed as credit (1) PAY the balance of the tax still due;
against output tax for the month the (2) CARRY-OVER the excess credit; or
advance payment was made. (3) Be CREDITED or REFUBDED with
the excess amount paid
The BIR may deploy Revenue Officers to
the place of activity to monitor and ensure Once the OPTION to Carry-Over and apply
compliance with BIR regulations. the excess quarterly income tax against
the income tax due for the taxable years
When the tax due is in excess of P 2,000, has been made, such option shall be
the taxpayer may elect to pay in two considered IRREVOCABLE for that taxable
equal installments. The 1st installment to period and NO application for Cash Refund
be paid at the time he return is filed and or issuance of Tax Credit Certificate shall
the 2nd installment to be paid on or before be allowed.
15th of July following the close of the
calendar year. Subic Bay Distribution vs. Commissioner
(CTA Case [2004])
B. CORPORATIONS “... The amendment of the company’s
income tax return for the succeeding
Every corporation subject to tax, except taxable year in order to remove from that
foreign corporations not engage in trade year’s available tax credit, prior year’s
or business in the Philippines shall render, excess credits sought to be refunded
in duplicate, a true and accurate cannot be availed of... If the second
QUARTERLY Income Tax Return and a amendment were allowed, it would
FINAL or ADJUSTMENT Return. amount to the taxpayer being allowed to
change the option it had already
The return must be FILED by the exercised.”
PRESIDENT, VICE-PRESEIDENT or other
PRINCIPAL OFFICER and shall be SWORN Within THIRTY DAYS after the adoption by
by such officer and by the TREASURER or the corporation a resolution or plan for its
Assistant Treasurer. DISSOLUTION or for the LIQUIDATION of
the whole or part of its capital stock,
Quarterly summary declarations of income including a corporation notified of possible
and deductions are computed on a INVOLUNTARY DISSOLUTION, or for its
CUMULATIVE basis. REORGANIZATION, it shall render a correct
return, verified under oath, setting forth
The amount so computed shall be the terms of such resolution or plan. Such
DECREASED by the amount of tax corporation, prior to the issuance of
previously paid or assessed during the Certificate of Dissolution or
preceding quarters and shall be paid NOT Reorganization, shall secure a certificate
LESS THAN SIXTY DAYS from the close of of TAX CLEARANCE from the BIR and
each of the first three (3) quarters of the submit the same to the SEC.
taxable year, whether calendar or fiscal
year. RECEIVERS, TRUSTEES or ASSIGNEES of
the property or business of a corporation,
A corporation may employ either shall make returns of the net income on
CALENDAR or FISCAL year as basis for behalf of the latter. The tax due on income
filing of its annual ITR. However, the as returned by them shall be assessed and
corporation shall NOT CHANGE the collected in the same manner as if
assessed directly against the corporation therein is legally entitled to a tax credit,
whose property or business they have the money value of which may be used in
custody or control. payment of his internal revenue tax
liability OR maybe converted into a cash
The quarterly income tax declarations and refund.
final adjustment return shall be filed with
the AAB, RDO, Collection Agent or TCC may be applied against ANY internal
authorized Treasurer of the City or revenue taxes EXCEPT withholding taxes,
Municipality having jurisdiction over the for which the taxpayer is DIRECTLY liable,
location of the PRINCIPAL OFFICE of the provided the original copy of the TCC
corporation filing the return OR where its showing a creditable balance is
MAIN BOOKS OF ACCOUNTS and other surrendered to the appropriate revenue
data which the return is PREPARED and officer.
KEPT.
TAX CREDIT shall refer to the amount due
Quarterly ITR – filed within SIXTY days to a taxpayer resulting from overpayment
following the close of each of the first of tax liability or erroneous payment of tax
three (3) quarters of the taxable year. due, such as:
(1) Excess in quarterly income taxes
Final Adjustment Return – filed ON or paid reflected in the Final
BEFORE the 15th day of APRIL, OR on or Adjustment Return;
BEFORE the 15th day of the FOURTH (2) Over-withholding tax at source of
MONTH following the close of the fiscal income taxes to the extent of the
year. amount of overpayment;
(3) Input taxes on zero-rated and
The tax due shall PAID at the time the effectively zero-rated sales;
declaration or return is filed. (4) Unused input taxes resulting from
cessation or retirement of business
In case of TRAMP VESSELS and SHIPPING of a VAT-registered person
AGENTS, Bureau of Customs is authorized (5) Excise Taxes paid on products sold
to hold the vessel and prevent its to tax-exempt entities;
departure until proof of payment of tax is (6) Erroneously or illegally paid taxes
presented or a sufficient bond is filed to and/or penalties.
answer the tax due.
TAX DEBIT MEMO is acknowledgment from
In case of INSURANCE COMPANIES, the the BIR that the taxpayer has paid his
filing of returns, the payment of PREMIUM internal revenue tax liability using the
tax, DOCUMENTARY STAMP tax, VAT, and TCC. The amount shown therein shall be
income tax shall be serviced by bank charged against and deducted from the
nearest to the office of the Insurance credit balance of the aforesaid TCC.
Commissioner – the Land Bank Branch at However, it is not acceptable as payment
U.N. Avenue, Manila. in the following tax liabilities:
(1) Withholding tax, including fringe
Traditionally, taxes are paid through (a) benefit tax;
over-the-counter payments, (b) bank debit (2) Those arising from tax amnesty;
system, and (c) check payment system. (3) Payment of deposits on withdrawal
However, accommodation checks, second of excisable articles;
endorsed checks, stale checks, post dated (4) Those not administered/ collected
checks, unsigned checks, and checks with by the BIR;
alterations or erasure are NOT allowed. (5) Documentary Stamp tax
(6) Compromise penalty;
TAX CREDIT CERTIFICATE (7) Those fees, taxes and charges
A certification, duly issued to the taxpayer collected under special schemes of
named therein, by the Commissioner or the BIR;
his duly authorized representative,
acknowledging the grantee-taxpayer
Taxpayer holds the TCC in the concept of (6) Documentary Stamp Tax paid or
an OWNER and hence may TRANSFER or payable of at least P 1 Million/ year;
ASSIGN the same subject to the following
conditions: [B] As to financial condition and results of
(1) It is made with the APPROVAL of operation, taxpayers with:
the Commissioner or duly (1) Total annual Gross Sales or
authorized representative to verify Receipts of at least P 1 Billion;
validity of TCC; (2) Total Net Worth of at least P300
(2) It is transferred ONLY ONCE; Million at the end of the year;
(3) It is made STRICTLY in PAYMENT of
his DIRECT INTERNAL REVENUE C. GENERAL PROFESSIONAL
TAX LIABILITY; PARTNERSHIPS
(4) Transferred TCC CANNOT anymore
be converted to cash; Every general professional partnership
shall file, in duplicate, a return of its
TCC which shall remain UNUTILIZED after income, except income exempt setting
FIVE years from date of issue, UNLESS forth the items of GROSS INCOME,
revalidated, would be considered as DEDUCTIONS, and the NAMES, TIN,
INVALID and the unutilized amount shall ADDRESSES, and SHARES of EACH of the
REVERT to the general fund of the PARTNERS.
Government. The REVALIDATED TCC shall
be valid for another FIVE years from date Any declaration, return and other
of issue. statements required under the Tax Code,
shall, in lieu of an oath, contain a written
CONVERSION of TCC into a CASH REFUND statement that they are made UNDER the
may be allowed for the duration of validity penalties of PERJURY.
of the TCC. A REFUND CHECK or
TREASURY WARRANT which shall remain CAPITAL GAINS TAX
UNCASHED or UNCLAIMED within FIVE Corporation deriving capital gains from
years from date of issue, mailing or Sale of stock of domestic corporation NOT
delivery, whichever is later, shall be traded thru local stock exchange – within
forfeited in favor of the Government. THIRTY DAYS after each transaction AND a
Final Consolidated Return on or before 15th
ELECTRONIC FILING and PAYMENT DAY of the FOURTH MONTH following the
SYSTEM close of the taxable year.
A system developed by the BIR for
electronically filing returns and paying Sale or disposition of real property in the
taxes due thereon; an alternative mode of Philippines – within THIRTY DAYS following
filing returns and payment of taxes which each sale or disposition made by the
deviates from the manual process of SELLER to an AAB located within the RDO
paper-bound tax returns. having jurisdiction over the PLACE WHERE
THE PROPERTY BEING TRANSFERRED IS
LARGE TAXPAYERS are taxpayers who LOCATED.
satisfy any of the following criteria:
WITHHOLDING TAXES
[A] As to tax payment,
(1) VAT paid or payable of at least P Employer delinquency id more
100, 000 per quarter; reprehensible that other tax delinquency
(2) Excise Tax paid or payable of at because the employer deprives the
least P 1 Million/ year; government of funds to which he never
(3) Income Tax paid or payable of at had a right. He holds such fund IN TRUST
least P 1 Million/ year; for the government.
(4) Withholding Tax paid or payable of
at least P 1 Million/ year; If an employer or other payroll officer fails
(5) Percentage Tax paid or payable of to fulfil his obligation either to withhold
at least P 100, 000 per quarter; taxes or to report the payment of income,
that person may become liable for BOTH items of income payable to natural or
taxes that should been withheld and other juridical persons, residing in the
penalties. Philippines, by payor – corporation or
persons as provided by law, at the rate of
The fact that a FOREIGN Corporation does NOT LESS THAN ONE PERCENT BUT NOT
not engage business here and had no MORE THAN THIRTY PERCENT thereof,
office or agent is the very reason why its which shall be credited against the income
income is subject to withholding tax. tax liability of the taxpayer for the taxable
year.
The withholding agent is constituted as
agent of BOTH the government and the For both large and non-large taxpayers,
taxpayer. With respect to the collection the withholding tax return shall be filed
and/ or withholding the tax, he is the and payments should be made WITHIN
government’s agent. In regard to filing of TEN DAYS AFTER THE END OF EACH
the necessary income tax return and the MONTH, except for taxes withheld FOR
payment of the tax to the government, he THE MONTH of December which shall be
is the agent of the taxpayer. filed on or before JANUARY 15 of the
following year.
In any case where bonds, mortgages,
deeds of trust or other similar obligations Final Capital Gains Tax on the onerous
of domestic or resident foreign disposition of a Real Property classified as
corporations, the OBLIGOR shall deduct Capital Asset, which shall be taken and
and withhold a tax equal to THIRTY withheld by the BUYER and remitted
percent of the interest on other payments WITHIN THIRTY DAYS from date of
on the bonds, mortgages, deeds of trust or notarization of the transfer document.
other similar obligations, whether the
interest or other payments are payable In case of disposition of Real Property
annually or a shorter or longer periods, classified as Capital Asset in favor of the
whether the bonds, securities or Government, the tax imposed subject
obligations had been issued or marketed, either to the (1) graduated income tax
and interest or other payment thereon rates OR (2) to the final tax of six percent
paid, within or without the Philippines, if at the option of the taxpayer. Hence, if the
the interest or other payment is payable seller chooses the first option, the buyer
to a non-resident alien or citizen of the does NOT have to withhold the six percent
Philippines. BUT no Certificate Authorizing Registration
shall be issued for the transaction until the
Taxes deducted and withheld shall be filed presentation of ITR actually filed.
and paid where the withholding has his
LEGAL RESIDENCE or PRINCIPAL PLACE of With respect to taxpayers availing the
business. EFPS, deadline for filing withholding taxes
shall be FIVE days LATER that that
The return for final withholding tax shall prescribed.
be filed and the payment made within
TWENTY FIVE days from the close of each REQUIREMENTS OF DEDUCTIBILITY
calendar quarter, while the return for the Any income payment which is otherwise
creditable withholding taxes shall be filed deductible shall be allowed as deduction
and the payment made NOT LATER THAN from the payor’s gross income ONLY if it is
THE LAST DAY OF THE MONTH shown that the income tax required to be
FOLLOWING THE CLOSE OF THE QUARTER withheld has been PAID to the BIR.
during which the withholding was made.
A deduction will also be ALLOWED in cases
WITHHOLDING CREDITABLE TAX AT where NO withholding of tax was made
SOURCE BUT
The Secretary of Finance may, upon (a) Payee reported the income and
recommendation of the Commissioner, pays the tax due thereon and the
require the withholding of a tax on the withholding agent-taxpayer pays
2. Pre-audit activities
(a) Processing of tax returns
Chapter 10 (b) Preparation of Audit
Program
Tax Audit Programs i. Revenue District Office
Grace Sarah Tria ii. Large Taxpayers Service
iii. Enforcement Service
BIR puts more emphasis on tax iv. Office Audit Section,
consciousness and education than tax Assessment Division
enforcement.
3. Issuance of authority to examine
Commissioner has to examine or not books and records
to examine tax returns of taxpayers 4. Conduct of tax audits
5. Submission of written report of
• In ascertaining the correctness of any examination
return, or in making a return when 6. Review of report examination
none has been made, or in 7. Filing of protest and supplemental
determining the liability of any person, memorandum by taxpayer
or in collecting any such liability, or in 8. Issuance of revised assessment
evaluating tax compliance, the and/or denial of protest by the
Commissioner is authorized to Regional Director
examine any book, paper, record or 9. Administrative appeal to the
other data which may be relevant to Commissioner
such inquiry 10. Filing of appeal to the Court of Tax
• Impliedly, the Commissioner has also Appeals by the taxpayer
the power not to examine the returns
of taxpayers not selected for tax audit Filing of tax returns and payment of
taxes
The Commissioner may • The Philippines adopts the self-
(a) prepare and file a tax return in the assessment system: taxpayer
name of a taxpayer who did not file initially determines his own tax
such tax return as required by law liability, files his tax return, and pays
(b) examine the tax return, if any, the tax as shown in his tax return
books of accounts and accounting within the prescribed period at the
record of the taxpayer for: proper revenue office or authorized
a. ascertaining the correctness agent bank
of the tax return filed
b. determining tax liability of Pre-audit activities
the person
c. verifying taxpayer’s 1. Processing of tax returns
compliance with existing One important activity that the
laws Commissioner should do after
(c) decide to suspend the examination the filing and processing of tax
of all tax returns for a limited returns is that all tax returns
period or not to authorize the filed by taxpayers either
examination of certain tax returns directly with the BIR or its
authorized agents must be
Significance of Tax Audit accounted for by the persons
• acts as a strong deterrent against who received them and
lowering voluntary tax payments by transmitted and received by the
taxpayers in their tax returns proper revenue offices that are
responsible for their encoding,
ASSESSMENT PROCESS safekeeping and storage.
• The Large Taxpayers Service (LTS) • The Office Audit Program shall
collects about 60% of the total cover the audit of tax returns of
collection of the BIR. individual and corporate taxpayers,
estates and trusts within the
Types of Audit: Region covering taxable year.
1. Mandatory Audit
2. Short Audit – audit of cases focused
on certain issues that need
immediate resolution to provide
taxpayers certainty as to its tax
treatment
LETTERS OF AUTHORITY
In issuing the letters of authority, the Post-signing activities
following rules shall be observed: The date of issue of the letter of
1. Information about the BIR form authority must be typed or
Proper BIR form would depend stamped on its face and must be
on the office and type of tax served within 30 days from such
and transaction covered by the date of issue
examination Service of the letter of authority is
As a general rule, the form to done by acknowledging receipt of
use is the Letter of Authority the original copy of the letter of
however there are cases where authority
special forms are allowed to be Constructive service may also be
used resorted by leaving of the original
2. Information about the taxpayer copy of letter of authority with the
The correct information about taxpayer or his representative
the taxpayer’s registered name,
complete address, and TIN
45 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]
TAX RIGHTS AND REMEDIES by Victorino C. Mamalateo
Book Summary
telecommunications/telephone/te
legraph/radio firms per company;
Chapter 13 3. Bangko Sentral ng
Pilipinas: amount of interest
Third Party Information income and other income of
Paul Isaac Barrameda
banks and their balances per
company;
Introduction
4. All departments,
- To determine the correctness of
agencies and
books and records by the taxpayer
instrumentalities of the
under tax audit, BIR can compare the
Government including
declarations of the taxpayer under
GOCC’s: contracts entered into
audit with the information such
with private contractors;
taxpayer has with his suppliers and
customers, which may be obtained by 5. SEC: names and addresses
the Commissioner. of all active registered
- Under the program of the BIR, corporations and partnerships
information obtained from third party with their financial statement.
sources will be referred to the Revenue - LGUs, GOCCs and other
District Offices for audit, the results of Government agencies and
which will be monitored and analyzed instrumentalities shall, without
to determine whether a program of hesitation, immediately comply with a
non-government third party request from the BIR for information
information should be operated on a relevant to its mission of effectively
continuous basis. implementing the revenue laws.
- Each BIR Team organized for the
audit will be responsible for the Register of Deeds and Assessors
preparation of “ACCESS TO RECORDS”
letters, service of letters, conduct of Monthly schedules submitted by RD to the
interviews and securing of the BIR:
requested information. The team may
ask for the assistance of a computer In order to validate that no transfer of real
advisor from the Management property has escaped taxation, the LRA
Oversight Group. shall provide the BIR National Office (Asset
- In general, “Access to records” evaluation Division or its equivalent
letters shall specify: Office) with the following monthly
1. Name and address of schedules on or before the 15th day of the
purchaser/lessor/lessee, member following month:
of the club, etc. and the TIN; 1. Summary list of blank
2. Date of transaction; OCT/TCT/CCTs issued to all RDs, with
3. Total amount of the mention of the sequential serial
transaction or instalment number;
payments, membership fees, etc. 2. Summary schedules of all transfers
in the year of transaction. for a particular month of titled real
properties effected by each RD;
Executive Order No. 53 3. Summary schedule of transferred
untitled real properties which have
- The following agencies shall been entered in the Primary Book of
provide the following data to the BIR Entry and the Book of Registration, for
on a regular basis: transfers of real properties under Act
No. 3344.
1. DTI: Production and sales
manufacturing companies per
Documents to be submitted by RDO to
industry;
LRA and RD:
2. DOTC: (a) gross receipts of
land, sea and air transport firms
and company; and (b) revenue of
trade, business or
profession; and
g. In the case of casualty
loss, it has been
reported to the BIR
within forty-five days
from date of occurrence
of the loss.
5. Bad debts
a. there must be an existing
indebtedness due to the taxpayer,
which must be valid and legally
demandable;
b. the same must be connected with
the taxpayer’s trade, business or
practice of profession;
c. the same must not be sustained in
a transaction entered into between
related parties
d. the same must be actually
ascertained to be worthless and
uncollectible as well as actually
charged off the books of accounts
of the taxpayer as of the end of the
taxable year.
6. Depreciation
a. the allowance for depreciation
must be reasonable
b. it must be for property arising out
of its use in the trade or business,
or out of its not being used
temporarily during the year; and
c. it must be charged off during the
taxable year from the taxpayer’s
books of accounts
The one who should certify must not degree, either by consanguinity
be a relative of the borrower within or affinity, except when the
the fourth civil degree, either by lender who is a relative of the
consanguinity or affinity, except debtor in the degree mentioned
when the lender who is a relative of filed with the RDO having
the debtor in the degree mentioned jurisdiction over the borrower, a
filed with the RDO having jurisdiction copy of the promissory note or
over the borrower, a copy of the other evidence of the
promissory note or other evidence of indebtedness, with fifteen days
the indebtedness, with fifteen days from execution thereof.
from execution thereof.
c. Certified true copy of the latest
c. Proof of financial capacity of the audited balance sheet of the
creditor to lend the amount at creditor with the detailed
the time the loan was granted, schedule of its receivable
as well as its latest audited showing the unpaid balance of
balance sheet with a detailed the decedent-debtor. Moreover,
schedule of its receivable a certified true copy of the
showing the unpaid balance of updated latest subsidiary
the decedent-debtor. ledger or records of the debt of
d. A statement under oath the debtor-decedent should
executed by the administrator likewise be submitted.
or executor of the estate
reflecting the disposition of the 3. Where the
proceeds of the loan if the loan settlemen
was contracted within 3 years t is made
prior to the death of the through
decedent. the Court
in a
2. If the testate or
unpaid intestate
obligation proceedin
arose g,
from pertinent
purchase document
of goods s filed
or service: with the
Court
a. Pertinent documents evidencin
evidencing the purchase of g the
goods or services, as duly claims
acknowledged, executed and against
signed by decedent-debtor, and the
creditor, and statement of estate,
account given by the creditor and the
as duly received by the Court
decedent-debtor; Order
b. Duly notarized certification approving
from the creditor as to the the said
unpaid balance of the debt, claims, if
including interest as of the time already
of the death. issued, in
addition
• The one who should certify to the
must not be a relative of the document
borrower within the fourth civil s
mentione usly
d in the taxed.
preceding
paragraph III. Transf
s ers
for
4. Claims of the deceased public
against insolvent persons use.
where the value of the
decedent’s interest therein IV. The
is included in the value of Famil
the gross estate y
5. Unpaid mortgages, taxes Home
and casualty losses
• Conditions for the allowance of
a. Unpaid mortgages upon, or any family home as deductions
indebtedness in respect to, from the gross estate.
property where the value of the
decedent’s interest therein, a.
undiminished by such mortgage The family home must be the
or indebtedness, is included in actual residential home of the
the value of the gross estate. decedent and his family at the
b. Taxes which have accrued as of time of his death, as certified
the death of the decedent by the Barangay Captain of the
which were unpaid as of the locality where the family home
time of the death. is situated;
b.
• The total value of the family
This deduction will not include home must be included as part
income tax upon income of the gross estate of the
received after death, or decedent; and
property taxes not accrued c.
before his death, or the estate Allowable deductions must be
tax due from the transmission in an amount equivalent to the
of his estate. current fair market value of the
c. There shall also be deducted family home as declared or
losses incurred during the included in the gross estate, or
settlement of estate arising the extent of the decedent’s
from fires, storms, shipwreck, interest (whether conjugal or
or other casualties, or from community, or exclusive
robbery, theft or property), whichever is lower,
embezzlement, when such but not exceeding P1,000,000.
losses are not compensated for
by insurance or otherwise, and V. Stand
if at the time of the filing of the ard
return such losses have not Deduc
been claimed as deductions for tions
income tax purposes in an
income tax return and provided • A deduction in the amount of
that such losses were incurred P1,000,000 shall be allowed as
not later than the last day for an additional deduction without
the payment of the estate tax. need of substantiation.
Expen unity
ses prope
rty.
• All medical expenses incurred
(whether paid or unpaid) within • After deducting the allowable
1 year before the death of the deductions appertaining to the
decedent shall be allowed as a conjugal or community
deduction, provided that the properties included in the gross
same are duly substantiated estate, the share of the
with official receipts for services surviving spouse must be
rendered by the decedent’s removed to ensure that only
attending physicians, invoices, the decedent’s interest in the
statements of account duly estate is taxed.
certified by the hospital, and
such other documents in
support thereof and provided, DONOR’S TAX
further, that the total amount
thereof, whether paid or Rates of Donor’s Tax
unpaid, does not exceed
P500,000. If net gift is:
VIII. Net
share Tax payable by the donor if the
of the donee is a stranger.
surviv
ing • When the donee or beneficiary is a
spous stranger, the tax payable by the
e in donor shall be 30% of the net
the gifts. For purposes of the donor’s
conju tax, a “stranger” is a person who is
gal NOT a:
partn
ership a) Brother, sister (whether by
or whole or half blood), spouse,
comm
Cooperative companies or
associations
The following are the exceptions to the No contact audit – tax liability of the
said general rule because an assessment taxpayer is determined by comparing the
must be issued by the BIR in order to information reflected in the tax returns
establish the taxpayer’s liability: filed by the taxpayer with the other
documents or information obtained by the
1. Tax period of the taxpayer is BIR from third parties, and any variance
terminated between the two figures are assessed by
the BIR.
Grounds for termination:
a. When it shall come to the Deficiency means:
knowledge of the Commissioner a. The amount by which the tax
imposed by law as determined by
the Commissioner or his authorized formally organized and did not commence
representative exceeds the operations.
amount shown as tax by the
taxpayer upon his return; Assessment Process
b. If no amount is shown as tax by
the taxpayer upon his return, or if The role of the government in the
no return is made is made by the assessment process includes:
taxpayer, then the amount by
which tax determined by the I. Examination of books of
Commissioner or his authorized accounts and other accounting
representative exceeds the records of the taxpayer by
amount previously assessed or revenue officers to determine
collected with assessment. his correct tax liability
IV. Denial of Protest by the The assessment shall not become final
Commissioner or his authorized and executory merely because the
representative taxpayer chooses to wait for the decision
of the Commissioner on his protest.
The decision of the Commissioner shall:
1. State the facts, the applicable law, NOTE: Since the cases are on appeal to
rules and regulations, or the higher court, it might be risky for the
jurisprudence on which such taxpayer to rely on the ruling of the CTA,
decision is based, otherwise the particularly if the deficiency tax
decision shall be void; and assessment involves substantial amount
2. That the same is his final decision. or significant tax issues.
5. Anyone could bid except foreign market value of the articles for
nationals and those disqualified sale;
under the law;
6. Bidders shall post a bond in cash or The property purchased may be resold by
manager’s check in an amount the Commissioner or his deputy.
10% of the minimum bid price at
least 1 day before the scheduled Forfeiture of Property for Want of Bidder
public auction. In the instances mentioned above, the
7. The winning bidder shall pay the property shall be declared forfeited to the
full amount of his bid within 2 days Government in satisfaction of the claim in
after receipt of notice of award; question and within 2 days shall make a
8. All taxes and expenses relative to return of his proceedings and the
the sale shall be borne by the forfeiture shall b spread upon the records
winning bidder; of his office.
9. The winning bidder shall be
responsible for the ejectment of The Register of Deeds shall register the
squatters. property in the name of Government
10. Negotiated or private sale shall be without necessity of an order from a
resorted to as a consequence of competent court upon presentation of the
failed public bidding for 2 declaration of forfeiture.
consecutive times;
11. Negotiated sales shall be approved The owner of the property may redeem
by the Secretary of Finance; said property one year from registration
12. Public auction sale shall be by paying the taxes due, penalties, costs,
approved by the Commissioner or and expenses. If not redeemed, forfeiture
his authorized representative; becomes absolute.
13. The Government reserves the right
to reject or cancel any or all bids. The forfeitures does not operate as full
satisfaction of the government’s claim if
Right of Redemption the value of the property is less than the
The owner shall not be deprived of amount of the claim. There would only be
the possession of the property a discharghe pro tanto of the tax
during the period of redemption liabilities.
and shall be entitled to the rents
and other income thereof until the Compromise
expiration of the time allowed for
redemption. Compromise – contract whereby the
Period of redemption is one year to parties, by making reciprocal concessions,
be counted from the date of avoid litigation or put an end to one
registration of the certificate of already commenced.
sale, in accordance with the rule
that it is the act of registration that The Commissioner may compromise any
binds the land. national internal revenue tax, when:
1. There is reasonable doubt as to the
Purchase by government or validity of the claim against the
Forfeiture taxpayer;
2. The financial position of the
Purchase by government at sale upon taxpayer demonstrates a clear
distraint inability to pay the tax assessed.
1. When the amount for the bid
property under distraint is not Minimum Compromise Amounts:
equal to the amount of the tax; 1. Financial incapacity – 10% of the
2. When the amount for the bid is basic tax assessed;
very much less than the actual 2. Other cases – 40% of the basic tax
assessed
Differences:
Compromise Compromise
Penalty
Amount paid by the Amount of money
taxpayer to settle paid by a taxpayer
his civil liability for to compromise a
tax and penalties tax violation that he
assessed by the has committed
government. which may be the
subject of criminal
prosecution.
The basis of the The basis of the
amount paid is the amount paid is the
basic tax assessed. gross sales or
receipts.
In compromise, the The amount
law sets a limit to depends on the
the amount that nature of the tax
may be accepted by violation and the
the government, minimum amount is
depending on the generally not less
legal grounds used than P 1,000.
by the taxpayer.
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Interests u
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1. Deficiency interest – for purposes of (
income tax is the interest due on any s
amount of tax due or installment thereof u
which is not paid on or before the date c
prescribed for its payment computed at h
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u The surcharge and/or interest shall apply
la to all taxes, fees, and charges imposed
ti under the Code which shall be collected
o at the same time, in the same manner,
n and as part of the tax.
s
) In case the tax due from the taxpayer is
r paid on a partial or installment basis, the
e interest on the deficiency tax or on the
q delinquency tax liability shall be
u imposed from the due date of the tax
ir until full payment thereof. The interest
e shall be computed based on the
d diminishing balance of the tax inclusive
t of interests.
o
b Public policy demands that the date
e within which the correct taxes as well as
p the surcharges and interests in case of
ai delinquency, are payable, being
d specifically fixed by the law, should not
i be moved or changed or made subject
n to the discretion of the Commissioner.
c
a Neither should the accrual of interests
s be made dependent on the final
e outcome of an action contesting the
o correctness of the assessment of
f deficiency tax by the Commissioner.
f
ai • The justification for the imposition of
l interest charges is the right of the
u government to a just compensation
r for the delay in the payment of the
e tax and for the concomitant use by
t the taxpayer of the funds that
o rightfully should be in the
p government’s hands.
a
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Interest
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In
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d Each failure to –
w a. file an information
it return, statement, or list, or
h b. keep any record,
a or
r c. supply any
b information required by this Code or
it by the Commissioner on the date
r prescribed therefor –
a
ri unless such failure is due to reasonable
n cause and not to willful neglect shall be
e paid by the person failing to file, keep, or
s supply the same P1,000.00, provided hat
s the aggregate amount to be imposed for
. all such failures during a calendar year
shall not exceed P25, 000.00
Compromise Penalties
Crimes, Other Offenses, and
Compromise Penalty is a certain Forfeitures
amount of money which the taxpayer pays
to compromise a tax violation that may be A. General
the subject of criminal prosecution. provisions
2. An
accompanying state of mind
which is described as being
“evil,” “in bad faith, ”willful,”
“deliberate,” and not accidental;
and
3. A course of
action or failure of action which
is unlawful.
Subsidiary Penalty
If the person convicted for violation of any
of the provisions of the Code has no
property with which to meet the fine
imposed upon him by the court, or is
unable to pay such fine, he shall be
subject to a subsidiary personal liability at
the rate of one (1) day for each P8.50,
subject to the rules established in Article
39 of the Revised Penal Code.
Renders the assessment void; The notice that the amount therein stated
is due as a tax, with a demand for
It is only through a detailed appraisal payment within a stated period of time.
of its basis that a taxpayer may be
able to dispute the imposition or agree The official action of the administrative
with it. officer in determining the tax due from a
taxpayer.
There may not have been a specific The following are NOT considered
mention of the applicable Tax Code assessments:
provision, but an indication therein of 1. A letter containing a computation of
the kind of tax liability (e.g. capital supposed liabilities, giving the
gains tax) is substantial compliance taxpayer an opportunity to show the
with the requirement. incorrectness of the findings, or urging
the taxpayer to produce his books or
As long as the taxpayer is informed of records for verification, or to present
how the assessment was arrived at, his side.
Section 228 is not violated. 2. A letter-notice that did not provide,
even in a general way, reasons why
If petitioner had already been informed deficiency taxes were being collected
of the law and the facts during the 3. An affidavit by a revenue officer
preliminary stage, then it could not stating the tax liabilities of a taxpayer
insist that it was not informed. and attached to a criminal complaint
for tax evasion.
4. Preservation of books of accounts and 4. A pre-assessment notice signed by a
records; once a year examination revenue official.
5. A deficiency assessment outside the
See Section 235 NIRC scope of the letter of authority (a
nullity).
One way to prevent an exam is to avail
of tax amnesty, or “no audit program” The following may be considered
and other similar programs granting assessments:
the benefit of last priority in tax audit. 1. A letter from the Commissioner
demanding the amount of a rubber
5. Publication of administrative issuances check previously paid by a taxpayer, if
Tanada vs. Tuvera: Administrative it declares the tax to be payable and
rules and regulations must also be demands the settlement thereof.
published if their purpose is to enforce 2. A preliminary collection letter, if it was
or implement existing law pursuant to the initial notice received by the
a valid delegation. taxpayer regarding his internal
revenue tax liabilities,
Procedural Remedies • AND if it can be proven that
the taxpayer did not receive any
assessment notice,
Thus, an assessment signed by the Chief assessment, but also calling attention to
of the Income Tax Division or the RDO the facts or arguments disregarded in the
with delegated powers is a valid decision of the BIR, is a valid protest (not
assessment. considered pro forma).
But, in case of a void assessment (i.e. R.A. 9282: Construed as a denial of the
failure to state the law and the facts) the protest. Interpreted to mean that it is thus
CA has held that the CTA does not lose prudent for the taxpayer to file his appeal
jurisdiction. No rights will ripen in favour of with the CTA within 30 days from the
the government. lapse of the 180-day period.
The Commissioner has the power to make The validity of any revised assessment
subsequent assessments or modify or made nor the right to enforce it by court
revise the original assessment to collect proceedings is not affected – where no
additional sums return for the said tax had been filed.
• As long as the modification is done
within the prescriptive period for 3. Period to File Criminal Action
making assessment (and even while See Section 281 NIRC
the appeal of the original
assessment is pending before the Waiver of the defense of prescription
CTA. The said waiver is actually an agreement
between the taxpayer and the BIR that the
Basis: Section 6 (B) NIRC: best evidence period to issue an assessment and to
rule collect is extended to a certain date. The
written agreement is the so-called “Waiver
The period between the request for of the Statute of Limitations”.
reinvestigation or reconsideration
(approved by the BIR) and the revised If the waiver does not specify the kind and
assessment (pursuant to such approved amount of taxes covered – the waiver is
protest) must be subtracted from the total not valid. However, valid if at the time it
prescriptive period in Section 223 NIRC. was executed, the BIR had not yet come
When the assessment is reconsidered, it is up with preliminary findings (the kind and
the date the taxpayer is notified of the amount of tax due is still unascertainable).
reconsideration that tolls the 3 year period The waiver does not mean that the
of limitation. (Reason: An assessment that taxpayer relinquishes the right to invoke
is set aside or cancelled is no assessment the prescription unequivocally.
at all)
Prescription as a defense is waived if not
A revised assessment must be seasonably interposed (e.g. failure to
separately protested within the same 30 allege it in the Answer)
day period allowed under the law.
A taxpayer cannot question the validity of
Burden of Proof the waiver if he already paid some of the
a. to show submission of return (and deficiency taxes covered by the waiver.
consequently, the start of the period to
assess) A waiver signed by the Comptroller of the
• Falls on the taxpayer corporation is valid, even without a letter
b. that there was fraud, for the purpose of authority, as provided by RMO 20-90
of applying Section 222 (a) (any of the corp.’s responsible officials
may sign).
• Falls on the government, to be
established by clear and convincing
Prescription in relation to acts or
proof
delays of taxpayer
A taxpayer may be prevented from setting
2. Period to Collect
up the defense of prescription, even if he
See Section 222 (c)
has not previously waived it in writing,
Where a withholding agent fails to file a • When by his repeated requests or
withholding tax return positive acts, the government has
The proceeding in court for the collection been, for good reasons, persuaded
of such tax may be begun without to postpone collection (e.g. protest
assessment, within 10 years after the against the original assessment
discovery of the omission. resulted in several reinvestigations)
Revenue Officials authorized to sign The voluntary and unilateral act of the BIR
waivers in inviting the taxpayer to air its objections
Depending on the amount of tax sought to to the proposed assessment could not be
be collected (national office), or if the tax construed to suspend the period to assess
case is still pending investigation and the the tax.
period to assess is about to expire,
regardless of the amount (regional Section 223 (a): “When the Commissioner
offices); See RMO-200-90, page 798 is prohibited from making the assessment
Mamalateo or beginning distraint and levy or a
Form of the waiver proceeding in court and for 60 days
1. Duly notarized by a notary public thereafter;”
2. Indicating: Examples:
a. Definite expiration date 1. Pendency of the taxpayer’s appeal in
agreed upon to assess or collect the CTA and in the Supreme Court had
Failure of the parties to set or state the the effect of temporarily staying the
extended period of prescription in the hands of the Commissioner, who is
waiver invalidates the waiver. prevented from filing an ordinary
b. Date of acceptance by the action to collect the tax in regular
BIR courts.
Without the date, it cannot be 2. Failure by the taxpayer to give the BIR
determined whether the waiver was written notice of his change of address
actually accepted before the expiration of
the 3-year assessment period. A mere request for reinvestigation or
c. Fact of receipt by the reconsideration of an assessment does not
taxpayer of his copy of the have the effect of suspension. There must
accepted waiver (indicated in the be a written agreement for extension.
original) – to give notice of the • The rule is in accord with the general
acceptance of the BIR and the law on prescription requiring a
perfection of the agreement. written acknowledgement of the
d. A statement of the kind of debtor to renew the cause of action
tax and the amount of tax due or to interrupt the running of the
limitation period (Article 1155 NCC)
2. A return filed that is not for the 1. Simple statement in the letter that the
particular tax to be paid; a wrong returns were not fraudulent is not
return sufficient to overthrow the findings of
When there is no provision in the law the Commissioner;
requiring the filing of a return but such tax 2. Substantial underdeclaration of income
is such that its amount cannot be for six consecutive years
ascertained without pertinent data 3. Presence of fictitious expenses claimed
• The Commissioner may, by as deductions from gross income, with
appropriate regulations, require the no evidence presented to show that
filing of the necessary returns the return was no fraudulent.
for the taxable quarters of the succeeding 2. The claim was filed with the BIR within
taxable year. the prescriptive period.
Excess tax credits are applied on first-in, The two year period is counted from
first-out basis the date of payment of the tax or
penalty, regardless of any supervening
Remedy of tax credit is not an absolute cause that may arise after payment.
right. While a taxpayer is given the choice
whether to claim for refund or have its Exceptions:
excess taxes applied as tax credit for the a. Corporate Income taxes - counted
succeeding taxable year, such election is from the filing of the annual
not final. Prior verification and approval by corporate income tax return
the Commissioner is required. It does not b. Income tax paid in Instalments -
confer an absolute right on the taxpayer counted from the date when the
to avail of the tax credit scheme if it so last instalment was paid.
chooses. Neither does it impose a duty on
the part of the government to sit back and Moreover, even if the two-year period
allow an important facet of tax collection has already lapsed, the same is not
to be at the sole control and discretion of jurisdictional and may be suspended
the taxpayer. for reasons of equity and other special
considerations.
Legal basis for tax refund or credit
3. The taxpayer erroneously or illegally
I. Income paid the taxes to the government,
Tax which is evidenced by a tax return or
declaration and an official receipt or
Summary of conditions for claim for acknowledgement receipt issued
refund or tax credit of income tax:
1. The taxpayer filed a written claim for 4. A petition for review was filed by the
refund or tax credit with the BIR or taxpayer with the CTA within the
other proper government agency or prescriptive period (two years from the
unit, stating the legal and/or factual payment of the tax or penalty)
bases thereof.
Inaction of the Commissioner does
The filing of written claim with the not toll prescriptive period. The
BIR is Mandatory and is a Condition taxpayer must therefore file the court
Precedent. Non-compliance bars the action (with the CTA) without waiting
action (in the CTA) and subjects the for the action of the Commish on the
claim to dismissal. admin claim.
Letter tendering payment of tax is not In case the Commissioner rules of such
a claim. claim, it must be appealed to the CTA
Where the protested assessment by within 30 days, otherwise the same
BIR was paid by taxpayer to forestall becomes final and executory.
WDL, later need not file a separate
claim for refund or credit. 5. There is no deficiency tax assessment
against the taxpayer.
The claim for refund at the
administrative level and filing a claim II. Withhold
for tax credit at the judicial level ing Tax;
Requisite
The proper person to claim refund is s
the person on whom the tax is 1. the claim was filed within the two-year
imposed by the statute. prescriptive period
2. the fact of withholding is established for it to sell its raw materials to export-
by a copy of a statement duly issued oriented BOI-registered enterprises
by the payor (withholding agent) to the whose export sales exceed 70% of
payee total annual production
3. the income upon which the taxes were Sales to a PEZA-registered enterprise
withheld was included in the return of is subject to zero percent
the recipient.
IV. Documen
III. Value tary
Added Stamp
Tax Tax