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7/28/2019 Tax Rights and Remedies-2010
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TAX RIGHTS AND
REMEDIES
Atty. Vic C. Mamalateo
June 26, 2010
ASIAN INSTITUTE OF TAXATION
SCOPE OF PRESENTATION
Part I: Introduction
Part II: Assessment of deficiency taxes
Part III: Collection of deficiency taxes Part IV: Remedies of taxpayers
Part V: New administrative issuances on
tax audit
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INTRODUCTION TAXATION IS THE DESTRUCTIVE POWER WHICH INTERFERES
WITH THE PERSONAL AND PROPERTY RIGHTS OF THEPEOPLE AND TAKES FROM THEM A PORTION OF THEIRPROPERTY FOR THE SUPPORT OF THE GOVERNMENT.
Paseo Realty & Dev. Corp. vs. Court of Appeals
TAXATION SHOULD BE EXERCISED WITH CAUTION TOMINIMIZE THE INJURY TO THE PROPRIETARY RIGHTS OF ATAXPAYER. IT MUST BE EXERCISED FAIRLY, EQUALLY, ANDUNIFORMLY, LEST THE TAX COLLECTOR KILL THE HENTHAT LAYS THE GOLDEN EGGS. IN ORDER TO MAINTAINTHE GENERAL PUBLICS TRUST AND CONFIDENCE IN THE
GOVERNMENT, THIS POWER MUST BE USED JUSTLY ANDNOT TREACHEROUSLY.
Roxas y Cia vs. CTA, 23 SCRA 276
BIR ORGANIZATIONAL
STRUCTURE
NATIONAL OFFICE COMMISSIONER OF INTERNAL REVENUE
DEPUTY COMMISSIONERS
ASSISTANT COMMISSIONERS (LARGE TAXPAYERS
SERVICE, ENFORCEMENT SERVICE, LEGAL SERVICE,COLLECTION SERVICE)
DIVISION CHIEFS (LTAID I - VI, LTDO, NATIONALINVESTIGATION DIVISION)
REGIONAL OFFICES REGIONAL DIRECTORS
ASST. REGIONAL DIRECTORS
DIVISION CHIEFS (ASSESSMENT, COLLECTION, LEGAL)
REVENUE DISTRICT OFFICERS and SID
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DUTIES OF BIR
DUTIES OF BIR To assess and collect taxes
To enforce forfeitures, fines and penalties
To execute judgments in all cases decided in its favor by the taxcourt and ordinary courts
To administer supervisory and police powers conferred upon itby law
POWERS OF CIR To interpret tax laws and regulations
To decide disputed assessments and refunds/credits
To examine books and records of taxpayers and to assesscorrect taxes. When a report required by law is not forthcomingwithin the time fixed by law or rules, or there is reason to believethat such report is false, incomplete or erroneous, CIR shallassess proper tax based on best evidence obtainable
PART I: ASSESSMENT OF DEFICIENCY TAXES
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ASSESSMENT CYCLE
Filing of tax return
Tax audit by BIR
Informal Conference
Preliminary AssessmentNotice (PAN)
Reply to PAN
Final Assessment Notice(FAN)
Protest to FAN Supplemental Protest
Law prescribes due date
120 days + 120 days
15 days from receipt
3 years or 10 years
30 days from receipt
60 days from filing ofprotest
ASSESSMENT CYCLE
BIR ACTION Cancell assessment
Deny protest
Revise assessment
BIR INACTION Appeal to CTA
Appeal to CTA en banc
Appeal to Supreme Court
180 days from filing ofprotest, or supplementalprotest, if any
30 days from date ofreceipt of denial of protestor lapse of 180 days
15 days from date ofreceipt; additional 15days may be granted byCTA after payment ofdocket fee.
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DEADLINES FOR FILING OF TAX
RETURNS AND PAYMENT OF TAX INCOME TAX
Quarterly Return -- RCIT: 60 days after end of quarter
-- Self-employed: Apr 15 and 45 days after EOQ
Annual Return -- 15th day of fourth month of following year
Capital gains tax return -- 30 days from date of sale
WITHHOLDING TAX Creditable WT return -- 10 days after end of month, except for
Final WT return December, Jan 15 of following year
TRANSFER TAXES -- 6 months from date of death (estate tax)
-- 30 days from date of donation (donors tax) VAT
Monthly Declaration -- 20th day of following month
Quarterly Return -- 25th day following close of quarter
OTHER PERCENTAGE TAX Monthly return -- 20th day of following month
DST DST return -- 5th day of following month
KINDS OF TAXES
TAXES WHICH DO NOT REQUIREASSESSMENT TO ESTABLISH TAXLIABILITY
Self-assessing tax (Tupaz vs Ulep, 316 SCRA 118) Tax paid is lower than tax due per return filed
TAXES WHICH REQUIRE ASSESSMENT Deficiency tax liability
Tax period is terminated
Tax lien
Dissolving corporation (Sec. 52( c), NIRC)
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TAX AUDIT
AUDIT NOTICES Letter of Authority (LA)
Tax Verification Notice (TVN)
Letter Notice (LN)
CONTENTS OF LA Name, address and TIN of taxpayer
Name and designation of revenue officer(s) authorized toconduct tax audit
Scope of examination
Kinds of taxes Period
Approving official
Telephone number(s) of BIR office
AUDIT NOTICES
REQUIREMENTS OF LA AND AUDIT
ITR attached to LA
No erasures on LA
LA shall cover only one year; 2008 and unverifiedprior years is not allowed
Audit must be completed within 120 days, unless
revalidated for another 120 days
Only revenue officers named in LA are authorized to
look at books and records
Audit must be done in taxpayers place of business
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INFORMAL CONFERENCE
Revenue officers Will present in an informal manner their findings to the
taxpayer or his representative
Will verbally explain the source of information and thebases of their findings
May sign their findings
Taxpayer may Listen passively to the revenue officers
Explain his position or comment on the revenue
officers findings and submit documentary evidence Ask for another informal conference to give a more
detailed explanation to their findings
PAN
5-Day Letter Signed by the Revenue District Officer
Gives taxpayer the opportunity to explain in writing hisposition on the findings of revenue officers; otherwise,
findings will be considered as correct and report willbe forwarded to Chief, Assessment Division
15-Day Letter Signed by the Chief, Assessment Division or Regional
Director
Gives taxpayer the opportunity to explain in writing hisposition on the findings of revenue officers; otherwise,findings will be considered as correct and FAN will beissued
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REPLY TO PAN
WHEN TO FILE REPLY? Within 15 days from date of receipt of PAN Extension may be requested from BIR
CONTENT OF REPLY? Explanation to every item of income or deduction or other matter
questioned by revenue officer
Factual and/or legal bases, including applicable jurisprudence Prays for total or partial cancellation of PAN
QUESTION OF FACT OR LAW Question of fact: Truth or falsity?
Question of law: Law on certain set of facts?
DUE PROCESS OF LAW Issuance of FAN and Demand Letter is tantamount to denial of
Reply to PAN. Essential elements of due process are notice andopportunity to present ones side (Phil. Health Care Providers vs. CIR)
PRE-ASSESSMENT NOTICE
GENERAL RULE: PAN must be issued by BIR
EXCEPTIONS:
Deficiency tax is the result of mathematical error
Discrepancy is between amount withheld and amountof withholding tax remitted
Taxpayer who opted to claim refund/tax credit also
carried over and applied the same against tax of next
taxable quarter
Excise tax due has not been paid
Constructive importation (Sec. 228, NIRC)
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FINAL ASSESSMENT NOTICE
ESSENTIAL REQUIREMENTS FAN (BIR FORM 17.08) contains name, address, and TIN;
kind of tax; period covered; basic tax and penalties; date taxmust be paid
Must state facts, law, or jurisprudence; otherwise,assessment is void
Taxpayer was fairly informed since it was able to categoricallyexplain how assessment came about (Toledo Power Co. vs. CIR)
PAN has audit sheet but did not explain how assessment wasarrived. Demand letter did not contain the information on lawand facts (HPCO Agridev Corp vs. CIR)
Signed by Commissioner or his authorized representative
Issued within the prescriptive period under the law or theextended period agreed upon between the parties
Served by personal delivery or by registered mail
FINAL ASSESSMENT NOTICE
FORMS OF ASSESSMENT
1. Formal assessment notice (FAN)
2. Letter demanding payment of erroneously refunded amount(Guagua Electric Co v. CIR), or amount paid by bouncing check(Republic v. Limaco & de Guzman)
3. Follow-up or collection letter duly received by taxpayerwithin the prescriptive period (TAXPAYER DENIED RECEIPT OF ORIGINALDEMAND LETTER AND ASS. NOTICE) (Republic v. Nielson & Co)
CASES NOT CONSIDERED ASSESSMENT Letter from revenue officer granting opportunity to disprove findings
(SHOW-CAUSE LETTER) is NOT an assessment
Letter that did not provide reason why deficiency tax is beingcollected from taxpayer
Pre-assessment Notice
Affidavit in support of criminal complaint
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FINAL ASSESSMENT NOTICE
FAN AND DEMAND LETTER MUST GO TOGETHER
TAXPAYER OR HIS AUTHORIZED REPRESENTATIVE MUST RECEIVEASSESSMENT NOTICE
Actual receipt Constructive receipt
ADDRESS OF TAXPAYER
Change of address must be communicated in writing to BIR
Effect if no written notice is given to BIR?
DATE OF RECEIPT OF FAN
Stamp date on envelope and face of FAN and Demand Letter ASSESSMENT ISSUED WITHOUT VALID AUTHORITY IS A
NULLITY
FINAL ASSESSMENT NOTICE
WHEN ASSESSMENT MUST BE ISSUED? TAX RETURN FILED
Not false or fraudulent (3 years from date of filing of return) Each kind of tax has separate filing due date
False or fraudulent (10 years from date of discovery)
NO TAX RETURN FILED WHEN ASSESSMENT IS MADE OR DEEMED MADE?
ISSUE DATE
DATE OF SERVICE OR MAILING Mere notation of mailing cannot suffice
Presumption in the course of mail
DATE OF RECEIPT
IF ASSESSMENT DUE DATE FALLS ON SATURDAY,GOVERNMENT HAS NEXT BUSINESS DAY WITHIN WHICH TOASSESS (CIR v. Western Pacific Corp)
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PROTEST LETTER
PROTEST LETTER MUST BE FILED WITHIN 30 DAYS FROMDATE OF RECEIPT OF ASSESSMENT NATURE OF PROTEST
Request for reconsideration
Request for reinvestigation
DATE OF RECEIPT OF ASSESSMENT
CONTENTS OF PROTEST LETTER FINDINGS TO WHICH TAXPAYER AGREES
No action on protest until admitted tax is paid
FINDINGS TO WHICH TAXPAYER DOES NOT AGREE ANDSTATEMENT OF FACTS AND/OR LAW
WAIVER OF STATUTE OF LIMITATIONS
ABSENCE OF VALID AND TIMELY PROTEST MAKESASSESSMENT RECEIVED BY TAXPAYER AS FINAL ANDEXECUTORY Request for change of revenue officers
Change of venue for settlement of tax case
CIR v. Enron Subic Power Corp
FACTS
Enron is a domestic corporation registered with SBMA as freeportenterprise. It filed ITR for 1996 showing net loss of P7,684,948.
BIR, thru preliminary 5-day letter, informed Enron of deficiency
income tax assessment of P2,880,817. Enron disputed the proposed assessment in first protest letter.
May 26, 1999, Enron received FAN from CIR and it protested thesame on June 14, 1999.
Due to non-resolution of protest within 180-day period, Enron filedpetition for review in CTA. It argued the deficiency assessmentdisregarded Sec. 228 of Tax Code and Sec. 3.1.4 of RR 12-99, bynot providing the legal and factual bases of assessment. It alsoquestioned the substantive validity of the assessment.
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CIR v. Enron Subic Power Corp
Sept 12, 2001 - CTA granted Enrons petition and ordered thecancellation of assessment which is void.
Nov. 12, 2001 Motion for Reconsideration (MR) of CIR wasdenied.
CIR appealed to Court of Appeals (CA).
CA affirmed decision of CTA. It held audit working did notsubstantially comply with Sec. 228 and RR 12-99 because theyfailed to show the applicability of cited law to the facts of theassessment.
MR filed by CIR was deemed abandoned when he filed motion forextension to file a petition for review with SC.
ISSUE
Whether or not Enron was informed of legal and factual bases of thedeficiency tax assessment.
CIR v. Enron Subic Power Corp
SC RULING
Sec. 228 of the 1997 Tax Code provides that taxpayer shall beinformed in writing of the law and the facts on which the assessmentis made; otherwise, the assessment is void.
To implement such provisions, RR 12-99 provides that the letter ofdemand shall state the facts, the law, rules and regulations, orjurisprudence on which the assessment is based; otherwise, theformal letter of demand and assessment notice shall be void.
The use of the word shall in the above legal provisions indicatesthe mandatory nature of the requirements laid down therein.
In the issuance of FAN, the revenue officers did not provide Enronwith written bases of the law and facts on which assessment isbased. CIR did not bother to explain how it arrived at suchassessment. He failed to mention the specific provision of the TaxCode or rules and regulations not complied with by Enron.
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CIR v. Enron Subic Power Corp
BIR disallowed certain itemized deductions and considered somecost items as subject to 5% final tax on gross income earned,without indicating factual and legal bases. During the preliminarystage, BIR informed taxpayer thru preliminary 5-day letter andfurnished copy of audit working paper.
SC ruled above documents were not valid substitutes for mandatorynotice in writing of legal and factual bases of assessment. Thesesteps were mere perfunctory discharge of CIRs duties in correctlyassessing a taxpayer. The requirement for issuing a preliminary orfinal assessment, informing a taxpayer of the existence of deficiencytax assessment is markedly different from the requirement of whatsuch notice must contain. Just because CIR issued an advice,preliminary letter and final notice does not necessarily mean that
taxpayer was informed of the law and facts on which theassessment was made.
CIR v. Enron Subic Power Corp
Law requires that they be stated in the Demand Letter and FinalAssessment Notice. Otherwise, the express provisions of Art. 228of NIRC and RR 12-99 would be rendered nugatory. The allegedfactual bases in the advice, preliminary letter and audit workingpapers did not suffice.
Moreover, due to the absence of a fair opportunity to be informed oflegal and factual bases of assessment, the assessment is void. Oldlaw (1977 Tax Code) merely required taxpayer to be notified ofassessment. This was changed (by 1997 Tax Code) in 1998 andthe taxpayer must now be informed not only of the law but also ofthe facts on which the assessment is made. Such amendment is inkeeping with the constitutional principle that no person shall bedeprived of property without due process (CIR vs. Enron Subic PowerCorp, GR No. 166387, Jan. 19, 2009).
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CIR v. REYES
May 19, 1998 - the heirs of Tancinco received FAN and DL fordeficiency estate tax of P14.91 M, inclusive of penalties.
June 1, 1998 - protest was filed on ground that decedent had soldproperty in 1990.
CIR issued collection letter, followed by Final Notice Before Seizuredated Dec 4, 1998. WDL was served upon estate.
Heirs protested WDL and offered compromise by paying 50% ofbasic estate tax. CIR denied offer and demanded P18.03 M;otherwise, property would be sold.
April 11, 2000 - Reyes proposed to pay 100% of basic tax. As taxwas not paid on April 15, 2000, BIR notified Reyes on June 6, 2000that property would be sold at public auction in August, 2000.
June 13, 2000 - Reyes filed protest with BIR Appellate Div andoffered to pay estate tax without penalties. Without acting on protestand offer, CIR instructed CED to proceed with auction sale.
CIR v. REYES
Reyes filed petition for review with CTA and BIR filed Motion toDismiss on ground that CTA has no jurisdiction; assessment wasalready final and petition was filed out of time.
CTA denied motion.
In meantime, BIR issued RR 6-2000 and RMO 42-2000, offering
taxpayers with disputed assessments to compromise cases. Nov 25, 2000 - Reyes filed application for compromise and paidP1.06 M. While waiting for approval by BIR NEB, Reyes filed withCTA a motion to declare application as perfected compromise,which CTA denied since NEB approval is needed.
Reyes filed for judgment on the pleadings, which was granted. CTAdenied the petition.
Reyes filed appeal to CA, which granted petition, saying FAN andDL should have stated the facts and law on which assessment wasbased.
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CIR v. REYES
Since FAN and DL did not state facts and law, assessment was voidand proceedings emanating from them were also void, and anyorder emanating from them could never attain finality.
BIR appealed to SC, which ruled that Sec. 228 of Tax Code is clearand mandatory taxpayer shall be informed in writing of the law andfacts on which assessment is based; otherwise, it is void. Reyeswas only notified of the findings by the CIR, who merely relied onprovisions of former Sec. 229 prior to its amendment by RA 8424.
General rule is that laws apply prospectively. However, statutes thatare remedial, or that do not create new or take away vested rights,do not fall under the general rule. Since Sec. 228 of Tax Code, asamended by RA 8424, does not state that pending actions areexcepted from the operation of Sec. 228, or that applying it topending proceedings would impair vested rights, said law may beapplied retroactively (CIR vs. Reyes, and Reyes vs. CIR, GR Nos. 159694 and163581, Jan. 27, 2006)
CIR v. BPI
FACTUAL BACKGROUND: Oct 28, 1988 CIR assessed petitioner for def. percentage tax and
DST for 1986
Dec 10, 1988, BPI replied stating Your def assessments are noassessments at all As soon as this is explained and clarified in aproper letter of assessment, we shall inform you of the taxpayers
decision on whether to pay or protest the assessment. June 27, 1991, BPI received letter from BIR, stating .. Your letter failed
to qualify as a protest under RR 12-85 still we obliged to explain thebasis of the assessments.
July 6, 1991, BPI requested a reconsideration of assessments.
Dec 12, 1991, BIR denied protest, which was received on Jan 21, 1992.
Feb 18, 1992, BPI filed petition for review in CTA. Nov 16, 1995, CTA dismissed petition for lack of jurisdiction;
assessments had become final and unappealable.
May 27, 1996, CTA denied reconsideration.
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CIR v. BPI
On appeal, CA reversed CTAs decision. It ruled Oct 28, 1988 notices werenot valid assessments because they did not inform the taxpayer of the legaland factual bases therefor. It declared the proper assessments were thosein May 8, 1991 letter which provided the reasons for claimed deficiencies.CIR elevated case to SC.
CIR did not inform BPI in writing of the law and facts on which assessmentswere made. He merely notified BPI of his findings, consisting of thecomputation of the tax liabilities and a demand for payment within 30 daysfrom receipt. He relied on former Sec. 270, NIRC, prior to its amendment byRA 8424.
In CIR vs.Reyes, GR 159694, Jan 27, 2006, the only requirement was forthe CIR to notify or inform the taxpayer of his findings. Nothing in the oldlaw required a written statement to the taxpayer of the law and the facts.The Court cannot read into the law what obviously was not intended by
Congress. That would be judicial legislation. Jurisprudence simply required that assessments contain a computation of
tax liabilities, the amount to be paid plus a demand for payment within aprescribed period.
CIR v. BPI
The sentence the taxpayer shall be informed in writing of the lawand the facts on which the assessment is made; otherwise, theassessment shall be void. was not in old Sec. 270, but was onlyinserted in Sec. 228 in 1997 (R.A. 8424). The inserted sentencewas not an affirmation of what the law required; the amendment byRA 8424 was an innovation and could not be reasonably inferred
from the old law. The Oct 28, 1998 notices were valid assessments, which BPI should
have protested within 30 days from receipt. The Dec 10, 1988 replyit sent to BIR did not qualify as a protest, since the letter itself stated we shall inform you of the taxpayers decision on whether to payor protest the assessment.
BPIs failure to protest the assessment made it final and executory.The assessment is presumed to be correct (CIR vs BPI, GR 134062, Apr 17,2007).
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SUPPLEMENTAL PROTEST
Supplemental Protest
Filing of supplemental protest is directory
New or additional documentary evidence,
jurisprudence, and legal defenses
Analyses of items questioned by revenue
officers
Submitted within 60 days from date offiling of protest letter
No request for extension is necessary
START OF 180-DAY PERIOD
Since the petitioner did not submit anydocument in support of his protest withinsixty days from the filing of its protest, the
counting of the 180-day period was fromthe filing of the protest. Accordingly, whenrespondent failed to render his decisionwithin 180 days from the filing of hisprotest, petitioner has 30 days therefromto file an appeal to CTA (Oceanic Wireless Network vs. CIR, CTACase No. 6111, Nov. 3, 2004)
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ADMINISTRATIVE APPEAL
DECISION OF REGIONAL DIRECTOR IS NOTFINAL AND MAY BE APPEALED TO THECOMMISSIONER (Rev. Regs. No. 12-99)
PRIOR EXHAUSTION OF ADMINISTRATIVEREMEDIES GIVES ADMINISTRATIVE
AUTHORITIES THE OPPORTUNITY TODECIDE CONTROVERSIES WITHIN THEIRCOMPETENCE (Aguinaldo Industries Corp. v. CIR)
DENIAL OF PROTEST
FORM OF DENIAL OF PROTEST DIRECT DENIAL
Revenue Regulations No. 12-99
CIR v. Advertising Associates
CIR v. Union Shipping
INDIRECT DENIAL Final Notice Before Seizure (Isabela Cultural Corp vs CIR)
Warrant of Distraint and Levy
Filing of civil action by BIR
Referral to SOLGEN of case
Inaction of Commissioner
Lascona Land Co. vs. CIR (2000)
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INACTION IS DEEMED
DENIAL OF PROTEST If the Commissioner or his duly authorized representa-
tive fails to act on the taxpayers protest within onehundred eighty (180) days from date of submission bythe taxpayer of the required documents in support of hisprotest, the taxpayer may appeal to the Court of TaxAppeals within thirty (30) days from the lapse of the said180-day period; otherwise, the assessment shall becomefinal, executory and demandable (Sec. 228, NIRC).
The inaction of the Commissioner during the 180-day
period, where a definite period is required by law to bemade, shall be construed as a denial of the protest (R.A.9282, Apr 25, 2004).
INACTION IS DEEMED
DENIAL OF PROTEST
Since the petitioner did not submit any additionaldocument (in a supplemental protest) in supportof his protest within sixty (60) days from the filingof its protest, the counting of the 180-day periodwas from the filing of the (original) protest.
Accordingly, when respondent (CIR) failed torender his decision within 180 days from thefiling of the taxpayers protest, petitioner has 30days after the lapse of the 180-day period to filean appeal to CTA (Oceanic Wireless Network vs. CIR, CTA Case No. 6111, Nov. 3, 2004)
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INACTION IS DEEMED
DENIAL OF PROTEST After filing the protest against FAN, taxpayer
has two options: Wait for the final decision of the Commissioner on the
disputed assessment and file the appeal to the CTAwithin 30 days from date of receipt of the denial ofprotest; or
File appeal to the CTA within 30 days from lapse ofthe 180-day period (Lascona Land Corp vs. CIR)
Decision of the CTA on Lascona case was appealed byBIR to CA under RA 1125. Said CTA decision wasreversed by the Court of Appeals (CA). The CA rulingwas appealed to the Supreme Court, where it is stillpending.
PETITION FOR REVIEW
Petitioner maintains that its counsels neglect in not filingpetition for review within reglementary period (due toerror of counsels secretary) was excusable.
The 30-day period to appeal is jurisdictional and failureto comply would bar the appeal and deprive the CTA ofits jurisdiction. Such period is mandatory, and it isbeyond the power of the courts to extend the same (ChanKian vs CTA, 105 Phil 906 (1959).
The options granted to the taxpayer in case of inactionby the CIR is mutually exclusive and resort to one barsthe application of the other. Petition for review was filedout of time (more than 30 days after lapse of 180 days),and petitioner did not file MR or appeal; hence, disputedassessment became final and executory.
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PETITION FOR REVIEW
After availing of the first option (filing petition for
review with CTA), petitioner cannot successfully
resort to the second option (awaiting final
decision of CIR) on the pretext that there is yet
no final decision on the disputed assessment
because of CIRs inaction.
Assessments are presumed to be correct,
unless otherwise proven (RCBC vs CIR, GR No. 168498, Apr 24, 2007).
APPEALS
JUDICIAL APPEAL FINAL DECISION OF COMMISSIONER MAY BE
APPEALED TO COURT OF TAX APPEALS
Where a taxpayer filed a valid protest within
30 days from date of receipt of assessmentand on same day also filed with CTA apetition for review, there is yet no finaldecision of CIR on the protest that isappealable to CTA (Moog Controls Corp vs. CIR, CTA Case No.6700, Oct 18, 2004)
CTA DIVISION DECISION IS APPEALED TO CTA ENBANC (RA 9282)
COURT OF APPEALS EN BANCDECISION APPEALEDTO SUPREME COURT
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PRESCRIPTION PERIOD TO ASSESS DEFICIENCY TAX
RETURN WAS FILED
Not false or fraudulent 3 years from filing of return
False or fraudulent 10 years from date of discovery offalse or fraudulent return
NO RETURN WAS FILED
PERIOD TO COLLECT ASSESSED TAX 5 years from thedate of assessment
PERIOD TO FILE CRIMINAL ACTION Prescription shall beginto run from the day of the commission of the violation of the law,and if the same be not known at the time, from the discoverythereof and the institution of judicial proceedings for its
investigation and punishment.
PRESCRIPTION
TAXABLE YEAR
Normal year (365 days)
Leap year (366 days)
If there is a leap yearwithin the prescriptive period to assess (3years from filing of return), a year shall be deemed to have 365 days
only (NAMARCO v. Tecson, 29 SCRA 70). Thus, assessment issued on April
15 of the third year from filing of return (which is the 1,096th day)
shall be treated as invalid due to prescription.
EO 292 (Administrative Code of 1987), being the more recent law
than Civil Code, governs the computation of legal period. Accor-
dingly, a year shall be understood to be 12 calendar months; a
month of 30 days, unless it refers to a specific calendar month (CIR vs.
Primetown Property Group, GR No. 162155, Aug 22, 2007).
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PRESCRIPTION
Internal revenue taxes may be assessed or collectedafter the ordinary prescriptive period, if before its expira-tion, both the Commissioner and the taxpayer haveagreed in writing to its assessment and/or collection aftersaid period. The period so agreed upon may beextended by subsequent written agreement made beforethe expiration of the period previously agreed upon.
The running of the prescriptive periods for assessmentand collection of taxes is suspended when the taxpayer
requests for the reinvestigation which is granted by theCommissioner(Sec. 223, NIRC)
BPI v. CIR
FACTS
BPI, surviving bank after its merger with FEBTC, is a domestic corp.
Nov 26, 1986 - Revenue Service Chief issued PAN to BPI.
Nov 29, 1986 - BPI requested for details of amounts mentioned in
PAN. Apr 7, 1989 FAN issued for deficiency WTAS (swap transactions)
and DST for 1982 to 1986.
Apr 20, 1989 BPI filed protest and on May 8, 1989, filedsupplemental protest.
Mar 12, 1993 BPI requested for opportunity to submit additionaldocuments on swap transactions.
June 17, 1994 BPI submitted Swap Contracts with the BIR.
BPI executed several Waivers of Statute of Limitations, the last ofwhich was effective until Dec 31, 1994.
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BPI v. CIR
Aug 8, 2002 BIR withdrew deficiency WT assessment, butreiterated def. DST assessment and ordered BPI to pay within 30days from receipt. BPI received copy of decision on Jan 15, 2003.
Jan 24, 2003 - BPI filed petition for review with CTA.
Aug 31, 2004 CTA denied petition for review and ordered BPI topay deficiency DST.
Sept 21, 2004 MR filed which was denied for lack of merit inResolution dated Feb 14, 2005.
Mar 9, 2005 BPI filed with CTA en banc Motion for Extension ofTime to file petition for review.
Mar 28, 2005 Petition for review filed.
Aug 15, 2006 CTA ruled that BPI is liable for DST on its cabledinstructions to its foreign correspondent bank and that prescriptionhad not yet set in against the government.
BPI v. CIR
ISSUES Whether the collection of deficiency DST is barred by prescription
Whether BPI is liable for DST on its swap loan transactions
SC RULING
Supreme Court grants petition of BPI.
The CIR had 3 years from date of assessment (Apr 7, 1989) or untilApr 6, 1992 within which to collect the deficiency tax. However, itwas only on Aug 9, 2002 that CIR ordered BPI to pay.
Sec. 320 of the Tax Code suspends the running of the Statute ofLimitations when the taxpayer requests for a reinvestigation which isgranted by the Commissioner. In BPI v. CIR, GR No. 139736, Oct17, 2005, SC emphasized the rule that the CIR must first grant therequest for reinvestigation as a requirement for the suspension ofthe statute of limitations.
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BPI v. CIR
In Republic v. Gancayco, the Court stated thatthe act of requesting a reinvestigation alonedoes not suspend the period. The requestshould first be granted, in order to effectsuspension.
The burden of proof that the request forreinvestigation had been actually granted shallbe on the CIR. Such grant may be expressed inits communications with the taxpayer or implied
from the action of the CIR or his authorizedrepresentative in response to the request forreinvestigation.
BPI v. CIR
There is nothing in the records of the case whichindicates, expressly or impliedly, that CIR had grantedthe request for reinvestigation filed by BPI. It was onlythru the CIR, thru the OSG, argued for the first time that
he had granted the request for reinvestigation. The Court differentiated this case from Wyeth Suaco and
found the latter case inapplicable. In Wyeth, taxpayersent letters seeking reinvestigation or reconsideration ofassessment, as a result of which, BIR conducted reviewand reinvestigation of assessment. Finance managerknew of ongoing review and communicated its inability tosettle tax liability.
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BPI v. CIR
Neither did the Waiver of the Statute of
Limitations signed by BPI effective until Dec 31,
1994 suspend the prescriptive period. The CIR
himself contends that the Waiver is void as it
shows no date of acceptance in violation of
RMO 20-90.
Given the prescription of the governments
claim, the Court no longer deem it necessary topass upon the validity of the assessment.
PART II: COLLECTION OF DEFICIENCY TAXES
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COLLECTION PROCESS
ADMINISTRATIVE REMEDIES
WDL is summary in nature
WDL may be resorted to simultaneously
JUDICIAL REMEDIES
Civil action
Criminal action
ADMINISTRATIVE REMEDIES
TAX LIEN
COMPROMISE AND ABATEMENT
DISTRAINT AND/OR LEVY
FORFEITURE
SALE PENALTIES AND FINES
Surcharge, interest, and compromise penalty
TAX CLEARANCE No distribution of assets before payment of tax liabilities
Unpaid subscription receivable of stockholders
CLOSURE OF BUSINESS ESTABLISHMENT Operation Kandado
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TAX LIEN
Lien attaches from time of assessment (notonly from service of WDL) until paid
Lien on real property is not valid againstmortgagee, purchaser, or judgment creditoruntil it is filed with Register of Deeds (Sec. 219,NIRC)
Tax due on goods imported tax free is a lien
on goods, superior to all charges, regardlessof the possessor(Sec. 131(A), NIRC)
COMPROMISE
GROUNDS FOR COMPROMISE Reasonable doubt of assessment
40% of basic tax assessed
Financial position of taxpayer demonstrates clearinability to pay assessed tax
10% of basic tax assessed
Taxpayer waives in writing his bank secrecy privilegeunder RA 1405
ALL CRIMINAL VIOLATIONS MAY BE COMPRO-MISED, EXCEPT THOSE ALREADY FILED INCOURT OR INVOLVING FRAUD (Sec. 204(A), NIRC)
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COMPROMISE Fine was imposed on the original appraisement
of certain jewelry. It was questioned by taxpayerin CTA, but BOC won. Decision became final forfailure of taxpayer to appeal. BOC with approvalof DOF subsequently reappraised article andthen entered into compromise.
Power to compromise is not absolute. BOCCommissioner is not authorized to acceptanything less than what is adjudicated by the
court in favor of government in a decision thathas become final and executory (Rovero v. Amparo, 91 Phil228)
ABATEMENT
ABATEMENT MEANS ENTIRE TAX LIABILITYIS CANCELLED Tax is unjustly or excessively assessed
Administrative and collection costs do not justifycollection of the amount due
POWER TO COMPROMISE OR ABATE SHALLNOT BE DELEGATED BY CIR, EXCEPT: Regional assessments P500T or less
Minor criminal violations (Sec. 204(B)& Sec. 7, NIRC)
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DISTRAINT, LEVY OR
GARNISHMENT
DISTRAINT PERSONAL PROPERTY Actual distraint: Delinquency sets in
Constructive distraint Preventive remedy to forestall possible dissipation of
assets when delinquency takes place
Tax liability has preferential lien over constructivedistraint to answer for judgment lien in favor ofemployees of company for unpaid wages
LEVY REAL PROPERTY GARNISHMENT BANK DEPOSITS
DISTRAINT, LEVY OR
GARNISHMENT WDL must be effected within five years from date of
assessment (CIR v. Avelino)
WDL may be issued as a step preliminary to collectionby judicial action (Alhambra Cigar v. CIR).
It is not essential that the warrant be fully executed sothat it can suspend the running of the statute oflimitations on collection of tax. Distraint proceedings arevalidly begun by the issuance of the warrant and servicethereof to taxpayer(BPI vs. CIR, GR No. 139736, Oct 17, 2005).
WDL may be repeated until full amount due is collected(Sec. 217, NIRC)
Satisfaction of tax due means dischargepro tanto (Castrov. CIR)
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FORFEITURE No bidder in public auction sale or amount of
highest bid is insufficient to pay for taxes,penalties and costs (Sec. 215, NIRC)
Forfeiture becomes absolute after of one yearfrom date of forfeiture and no redemption ofproperty was made. NOTE: Under theGeneral Banking Act, redemption period of
foreclosed property by banks is 3 months. Discharge of tax liability ispro tanto
CLOSURE OF BUSINESS
VAT-REGISTERED TAXPAYER Failure to issue receipts or invoices
Failure to file VAT returns
Understatement of sales by 30% or more
NON-VAT PERSON Failure to register
TEMPORARY CLOSURE Not less than five (5) days
Lifted only upon compliance with requirements (Sec.115, NIRC)
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PENALTIES AND FINES COMPROMISE PENALTY
Amount which taxpayer pays to compromise taxviolation that may be the subject of criminalprosecution
Mutual agreement between the parties; it may not beimposed by BIR, if taxpayer does not agree thereto(CIR v. Firemans Fund Insurance Co.)
If taxpayer has expressed willingness to paycompromise penalty in an appeal to CTA, amount
may be collected as part of judgment (CIR v. Guerrero)
JUDICIAL REMEDIES
Judicial actions Civil action
Criminal action
Case to be filed in the name of the Govern-ment of the Philippines (Sec. 220, NIRC)
No civil or criminal action may be filed withoutthe approval of the Commissioner of InternalRevenue
Civil action is resorted to when tax liabilitybecomes collectible
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CIVIL ACTION
COLLECTIBILITY OF DELINQUENT TAX Final assessment is not protested within 30 days from date
of receipt (Marcos II v. CIR, 273 SCRA 47), or timely protested butBIR conditions for request for reinvestigation are not
complied with by taxpayer (Dayrit v. Cruz; Republic v. Ledesma)
Self-assessed tax shown in the return is not paid within the
date prescribed by law (e.g., 2nd installment)
Protest against assessment is denied by BIR (Basa v. Republic),
or 180-day period lapses and taxpayer failed to appeal toCTA within 30 days from date of receipt of denial of protest
or from lapse of 180-day period (Lascona Land Co. v. CIR)
CIVIL ACTION
WHO APPROVES?
CIR, Regional Director(Arches v. Bellosillo), or Chief, LegalDivision (Republic v. Hizon)
Solicitor General, or BIR special attorneys outside MetroManila, affirmed by SolGen (Republic v. Domecillo)
WHERE FILED? RTC (less than P1 M), or
CTA (P1 M or more)
HOW CIVIL ACTION BEGUN? File complaint with RTC(for amount less than P1 M); and
File Answer in CTA to taxpayers petition for review and prayfor payment of tax; hence, even if no RTC case was filed,
right to collect has not prescribed (Mambulao Lumber v. Republic)
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CRIMINAL ACTION
Sec. 220, 2005 NIRC: Form and Mode ofProceeding in Actions Arising under this Code Civil and criminal actions and proceedings instituted
in behalf of the Government under the authority of thisCode or other law enforced by the BIR shall bebrought in the name of the Government of thePhilippines and shall be conducted by legal officers ofthe BIR.
No civil or criminal action for the recovery of taxes or
the enforcement of any fine, penalty or forfeitureunder this Code shall be filed in court without theapproval of the Commissioner.
CRIMINAL ACTION
According to the OSG, [t]he primary responsibility to conduct civiland criminal actions lies with the legal officers of the BIR such that itis no longer necessary for BIR legal officers to be deputized by theOSG or the Secretary of Justice before they can commence anyaction under the 1997 Tax Code.
The institution or commencement before a proper court of civil andcriminal actions and proceedings arising under the Tax Reform Actwhich shall be conducted by legal officers of the BIR is not indispute. An appeal from such court, is not a matter of right. Section220 of the Tax Reform Act must not be understood as overturningthe long established procedure before this Court in requiring theSolicitor General to represent the interest of the Republic. ThisCourt continues to maintain that it is the Solicitor General who hasthe primary responsibility to appear for the government in appellateproceedings (Resolution in CIR vs. La Suerte Cigar & Cigarette Factory, G.R. No.144942, July 4, 2002).
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CRIMINAL ACTION
Sec. 7(b), RA 8292: Jurisdiction of CTA overCases involving Criminal Offenses Any provision of law or the Rules of Court to the
contrary notwithstanding, the criminal action and thecorresponding civil action for the recovery of civilliability for taxes and penalties shall at all times besimultaneously instituted with, and jointly determinedin the same proceeding by the CTA, the criminalaction being deemed to necessarily carry with it the
filing of the civil action, and no right to reserve thefiling of such civil action separately from the criminalaction will be recognized.
CRIMINAL ACTION
Sec. 205, 2005 NIRC: Remedies for the Collection ofDelinquent Taxes The judgment in the criminal case shall not only impose the
penalty but shall also order payment of the taxes subject of thecriminal case as finally decided by the Commissioner.
Sec. 253(a), 2005 NIRC: General Provisions Any person convicted of a crime penalized under this Code shall,
in addition to being liable for the payment of the tax, be subjectto the penalties imposed herein: Provided, That payment of thetax due after apprehension shall not constitute a valid defense inany prosecution for violation of any provision of this Code or inany action for the forfeiture of untaxed articles.
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CRIMINAL ACTION FILING OF CRIMINAL ACTION DURING PENDENCY OF
PROTEST
Assessment is not necessary to criminal prosecution for willfulattempt to evade tax.
Crime is complete when violator has knowingly and willfully filedfraudulent return with intent to evade tax
What is involved here is not collection of taxes where assessmentmay be reviewed by RTC, but criminal prosecution for violation ofTax Code
There is no precise computation and assessment of tax beforethere can be criminal prosecution
There can be no civil action to enforce collection beforeassessment procedures have been followed [Ungab v. Cusi (1980)]
CRIMINAL ACTION
CRIMINAL CHARGE WITHOUT ASSESS-MENT Assessment is not necessary before criminal
charge (for non-filing of return) is filed Criminal charge need only be proved byprima
facie showing of failure to file required return andsuch fact need not be proved by an assessment
Issuance of assessment is different from filing ofcomplaint for criminal prosecution [CIR v. Pascor Realty &Dev Corp (1999)]
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CRIMINAL ACTION For criminal prosecution to proceed before
assessment,prima facie showing of willful attempt to
evade tax must exist [CIR v. Fortune Tobacco (1997)]
Fortune Tobaccos situation is factually apart fromUngab
Registered whole price approved by BIR ispresumed the actual price
Not fraudulent, unless BIR has final determination
of what is the correct tax Preliminary investigation may be enjoined under
exceptional circumstances
PART III: REMEDIES OF TAXPAYERS
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REMEDIES OF TAXPAYERS ADMINISTRATIVE REMEDY
BEFORE PAYMENT OF TAX
PROTEST OF ASSESSMENT
AFTER PAYMENT OF TAX
TAX CREDIT, OR
REFUND
JUDICIAL REMEDY APPEAL TO COURT OF TAX APPEALS
TIPS IN HANDLING TAX AUDIT
BEFORE TAX AUDIT
File tax returns not later than the last day prescribed
by law for its filing at proper venue
Pay in full the tax shown in the return as the return isfiled
Reconcile figures per returns, financial statements,
attachments to returns, alpha lists, and inventory
File final audited financial statements and amend tax
returns, if necessary, before the service of audit
notice by the BIR and within 3 years from date of filing
of original returns
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TIPS IN HANDLING TAX AUDIT
DURING TAX AUDIT Assign a room where the revenue officers can do the audit of
books and accounting records
Designate particular persons who will talk to revenue officers oncertain matters and who will release books and documentsrelating to tax audit
Make sure that records about bank deposits are not given oraccessed by revenue officers; these are confidential recordsunder RA 1405
Only revenue officers whose names are stated in the audit noticeshould be allowed to examine the books and records of thetaxpayer
The scope of the tax audit is generally limited only to one year.Give books and records pertaining only to the period and kindsof taxes covered in the audit notice.
TIPS IN HANDLING TAX AUDIT
DURING TAX AUDIT The audit is expected to be completed within 120 days;
otherwise, the audit notice must be revalidated for another 120days.
For a second audit notice, usually made by the NID or SID and
served upon the same taxpayer already audited by the districtoffice or Large Taxpayers Service, try to limit the scope of thesecond tax audit to the areas covered by the confidentialinformation that became the basis for the issuance of the secondaudit notice approved by the Commissioner.
Get a copy of the agreement form and payment form (BIR Form0605) for the deficiency taxes paid from the tax office head thatconducted the audit. If possible, the Termination Letter signedby the Regional Director should be requested from the BIR.
Attend to written demands for the production of books andrecords by the revenue officers to avoid issuance ofsubpoena.
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TIPS IN HANDLING TAX AUDIT
FINAL ASSESSMENT NOTICE File a protest letter against the FAN in all cases, even if exactly
the same findings and computations as in the PAN are made byrevenue officers in the FAN.
Explain all the specific defenses (factual and legal) andarguments that you have against the deficiency assessments inthe protest.
Dont request for an extension to file the protest against the FAN.The law gives the taxpayer additional 60 days from the date offiling of protest within which to file the supplemental protest,where additional evidence and legal arguments may besubmitted in support of the protest.
If instead of a FAN, a collection letter was received from the BIR,the 30-day period to file the protest starts only from the date ofreceipt of the collection letter.
COMMON TAX ISSUES IN AUDIT
UNDECLARED OR UNDER-DECLARED INCOME Variance between gross sales or receipts per books and
revenue per income tax return
Adjustments to net income
Variance between income tax return and VAT returns Sales of goods or properties
Sales of services
Variance between audited financial statements and tax returns
Variance between SLS and SLP and tax returns and auditedfinancial statements
Variance between tax returns, audited financial statements andalpha list of compensation income
Formula to determine collection of receivables and amount ofsales
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COMMON TAX ISSUES IN AUDIT
UNEXPLAINED ASSETS, LIABILITIES, ORDISALLOWED EXPENSES Discrepancy between inventory per books, audited
financial statement and inventory filed with BIR
Unusual receipt or disbursement of funds
Interest imputed on loans of related parties oradvances of stockholders to the corporation orvice-versa
Tax arbitrage for banks and non-banks; limitation with
respect to deductible interest expense for the year NOLCO carried over succeeding years
Excessive contributions or contributions to non-qualified donees or beneficiaries
COMMON TAX ISSUES IN AUDIT
NO WITHHOLDING, OR UNDER- OR OVER-WITHHOLDING OF TAX Variance between withholding tax paid and deduction claimed in
tax return or figure in audited financial statements
Tax and expenses on transaction were assumed by the buyer in
the instrument of sale Accrual of expense was made during the year but expense was
paid in the succeeding year
Top 10,000 or 20,000 Corporations or Top 5,000 Individuals
Tax base of withholding tax income tax and withholding tax EWT base of security agencies vs. employment and janitorial
agencies
Failure of withholding agent to remit withheld tax to BIR
Proof of withholding tax (BIR Form 2307 and secondaryevidence)
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COMMON TAX ISSUES IN AUDIT
NON-BUSINESS-RELATED AND UNSUPPORTEDEXPENSES OR NON-PRESENTATION OFDOCUMENTS Personal trip or mixed personal and business trip with wife
and/or children
Representation expenses
Charitable contributions
Casualty losses (flood, storm, fire, etc)
Evidenced by closed and completed transaction
Insurance proceeds
Loss of inventory vs. loss of fixed assets used in business
Declaration of Loss filed within 45 days from date of loss
Allocation of rental and electricity expenses between relatedtaxpayers
COMMON TAX ISSUES IN AUDIT
ORDINARY EXPENSE OR CAPITAL
EXPENDITURE
Advertising expense
Major repairs Organization expenses
Expenses for listing of shares
Lawyers fees for the defense of title to property
Depreciation on appraisal value of property
Depreciation on improvements on real property
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COMMON TAX ISSUES IN AUDIT
OUT-OF-PERIOD TAX CREDITS ANDEXPENSES Accrual of expense in current year and payment in
succeeding year Productivity incentive paid in following year after the filing of
income tax return
Reporting of income in current year and claiming oftax credit in succeeding year
Claiming of tax credit without supporting BIR Form2307 (Certificate of Tax Withheld); use of secondaryevidence like Journal Voucher
Prior period expenses claimed in current year
COMMON TAX ISSUES IN AUDIT
ACCOUNTING METHODS Cash method
Accrual method All events test
Installment sale method
Percentage of completion method
Crop year method
Change of accounting method and period
Filing of short-period return
Open cases
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COMMON TAX ISSUES IN AUDIT
TAX BASE Sale of goods or properties (Gross Selling Price or Fair Market Value)
Sale of real property on installment
Sale of services (Gross Receipts)
Domestic common carrier by land vs. by air or water
International carrier by air or water
Shipping agent
Limousine services by a five-star hotel
Reimbursement expenses of brokers, forwarders, and professionals
DOCUMENTS TO PROVE INPUT TAX VAT sales invoice
VAT invoice for exempt transaction
VAT official receipt
Other documents (invoice, acknowledgment receipt, delivery receipt,etc.)
BIR Certificate of Registration
COMMON TAX ISSUES IN AUDIT
SALE OF GOODS OR SERVICES Sale of foods by restaurant
Sale of shares of stocks by dealer in securities
Sale of construction materials and labor by acontractor of house
Sale of books and school supplies
TAX APPLICABLE ON TRANSACTION VAT or other percentage tax or no business tax
Sales of medicines by hospital to in-patients and out-patients
Sales of vegetables by farmer, dealer or retailer
Thresholds for sale or lease of real property
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PRESCRIPTION
Sec. 203, 2005 NIRC: Period of Limitation uponAssessment and Collection Except as otherwise provided in Sec. 222, taxes shall be
assessed within three (3) years after the last day prescribed bylaw for the filing of the return.
No proceeding in court without assessment for the collection oftaxes shall be begun after the expiration of prescriptive period.
Sec. 222(a), 2005 NIRC: Exceptions as to Period ofLimitation of Assessment and Collection of Taxes In case of a false or fraudulent return with intent to evade tax or
of failure to file a return, the tax may be assessed, or aproceeding in court for the collection of such tax may be filedwithout assessment, at any time within ten (10) years after thediscovery of the falsity, fraud or omission.
PRESCRIPTION
Sec. 281, 2005 NIRC: Prescription for Violations of anyProvision of this Code All violations of any provision of this Code shall prescribe after
five (5) years.
Prescription shall begin to run from the day of the commission ofthe violation of the law, and if the same be not known at the time,from the discovery thereof and the institution of judicialproceedings for its investigation and punishment.
Prescription shall be interrupted when proceedings are institutedagainst the guilty persons and shall begin to run again if theproceedings are dismissed for reasons not constituting jeopardy.
The term of prescription shall not run when the offender isabsent from the Philippines.
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PRESCRIPTION
The 3-year period within which to assess any deficiencytax commences after the last day prescribed by law forthe filing of the income tax return.
For VAT, each taxable quarter shall have its ownprescriptive period. VAT return is filed quarterly and afinal return is not required at the end of the year.
In case of creditable withholding taxes, the 3-year periodshall be counted shall be counted from the last dayrequired by law for filing monthly remittance return.Each monthly return is already a complete return. The
annual information return submitted to BIR is just anannual report of income payments and taxes withheldand is not in the nature of a final adjustment return (HPCO
Agridev Corp. vs. CIR, CTA Case No. 6355, July 18, 2002)
EXTENSION OF STATUTE OF
LIMITATIONS Waiver must be in the form identified in RMO 20-90.
Expiry date of period agreed upon is indicated in the waiver.
Waiver form requires statement of the kind of tax and amount of taxdue; if not indicated in the waiver, there is no agreement.
Waiver is signed by taxpayer or his authorized representative. In
case of corporation, waiver is signed by any responsible official. CIR or his authorized representative shall sign waiver indicating that
BIR has accepted and agreed to the waiver.
Date of acceptance by BIR is indicated.
Date of execution and acceptance by BIR should be beforeexpiration of prescriptive period.
Waiver is executed in 3 copies; second copy is for taxpayer. Fact ofreceipt by the taxpayer should be indicated in the original copy (Pfizer,Inc. vs. CIR, CTA Case No. 6135, Apr. 21, 2003; FMF Dev. Corp. vs. CIR, CTA Case No. 6153,Mar. 20, 2003)
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EXTENSION OF STATUTE OF
LIMITATIONS Waiver must indicate definite expiration date
agreed upon by CIR and taxpayer
Waiver should state date of acceptance by BIR.Without the date, it cannot be determinedwhether waiver was accepted before expirationof 3-year period.
Taxpayer must be furnished copy of acceptedwaiver. Under RMO 20-90, second copy ofwaiver is for taxpayer. Fact of receipt bytaxpayer of his copy should be indicated in theoriginal copy (Phil. Journalists vs. CIR).
SUSPENSION OF STATUTE OF
LIMITATIONS RUNNING OF STATUTE OF LIMITATIONS ON
MAKING OF ASSESSMENT, AND BEGINNING OFDISTRAINT OR LEVY OR PROCEEDING IN COURTFOR COLLECTION IS SUSPENDED
During which CIR is prohibited from making assessment orbeginning distraint or levy or proceeding in court and for 60 daysthereafter
When taxpayer requests for reinvestigation which is granted byCIR
When taxpayer cannot be located in the address given by him inthe return filed, unless he informs CIR of change of address
When WDL is duly served upon taxpayer or his representativeand no property could be located; and
When taxpayer is out of the Philippines (Sec. 223, NIRC)
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SUBPOENA DUCES TECUM
Legal basis: Sec. 266, NIRC
RAMO 3-82 provides guidelines inissuance ofsubpoena duces tecum
Remedies to enforce compliance
Filing of criminal case for violation of Sec. 72(suit to recover tax based on false orfraudulent return) and Sec. 265 (offenses
relating to DST) Initiate proceedings for indirect contempt
under Rule 71 of the Revised Rules of Court
INQUIRY ON BANK DEPOSITS
GENERAL RULE:
CIR may not examine bank deposits of taxpayers nor
can he inquire into bank deposits (RA 1405)
EXCEPTIONS: To determine gross estate of a decedent
The application for compromise based on financial
incapacity of a taxpayer shall not be considered,
unless and until he waives in writing his privilege.
Such waiver constitutes the authority of CIR to inquire
into the bank deposits of the taxpayer.
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REFUND/TAX CREDIT
INCOME TAX
Taxpayer filed a written claim for refund or tax credit,
stating the factual and/or legal bases
Claim was filed with BIR within the prescriptive period
Taxpayer erroneously or illegally paid the tax to the
government, which is evidenced by a return filed and
official receipt issued
Petition for review was filed with the CTA within the
prescriptive period
There is no deficiency tax against the taxpayer
PART IV: NEW ADMINISTRATIVE ISSUANCES
ON TAX AUDITS
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ADMINISTRATIVE ISSUANCES
RMO 13-2009, April 28, 2009 To address the low compliance of taxpayers falling under the
small- and medium-business categories, the Office Audit Sectionof the Assessment Division has been empowered to conductaudit covering 2007 tax returns not selected for issuance of LAor TVN and TAMP, except those whose principal place ofbusiness is in island districts under the jurisdiction of theRegional Office.
Office audit shall be conducted without field investigation andonly within the premises of the Assessment Division.
They shall be covered by OA-LA, which will be mailed totaxpayers, to distinguish them from LA-RDO and shall cover allinternal revenue taxes for one year.
ADMINISTRATIVE ISSUANCES
RMO 2-2008, Jan. 8, 2008 Additional BIR officials are authorized to issue
subpoena duces tecum
In the national office: Aside from ACIR, Legal Service, the HREA of Legal Service
and LTS
Chief, LTAID or LTDO may be authorized in writing by theCIR
In the regional offices: Aside from the Regional Director or his Assistant RD, the
Chief, Legal Division or the RDO, as may be authorized bythe Regional Director thru a Regional Delegation Order.
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ADMINISTRATIVE ISSUANCES
RMC 23-2009, April 16, 2009
Pursuant to RAMO 3-82 and RMO 35-90, onlythe books, records and specific documentsnecessary for the inspection but not yetprovided by the taxpayer should bementioned in the memo of the revenue officerrecommending the issuance of SDT.
Documents submitted as partial compliance toearlier request should no longer be mentionedin the memo.
ADMINISTRATIVE ISSUANCES
RMO 12-2009, April 28, 2009 Every failure by a taxpayer who is required to submit the SLS
and/or SLP in the prescribed format for a particular period, or ataxpayer who submits erroneous, incomplete, falsifiedinformation in SLS and/or SLP, shall be considered as a groundfor the issuance ofsubpoena duces tecum by the BIR.
Upon submission of the SLS and/or SLP, the concerned shallalso be required to pay the compromise penalty in the amount ofP10,000 for each non-submission of the SLS and/or SLP.
If taxpayer continues to fail to submit SLS and/or SLP, non-submission shall be construed as failure to supply correct andaccurate information under Sec. 255 of the Tax Code.
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ADMINISTRATIVE ISSUANCES
RMO 23-2009, July 8, 2009
The NID shall have authority, subject to the approval
of the CIR, to conduct audit on inter-related
companies and conglomerates, including related
individual taxpayers from certain industries.
Various schemes shall be identified, such as the use
of tax-exempt entities or those with special tax
privileges, inter-related company loans and advances,
cost sharing and the supply of goods and services. Transfer pricing among related parties shall be
considered.
ADMINISTRATIVE ISSUANCES
RMO 24-2008, May 9, 2008 To qualify under the RATE Program, a case must
conform to the following conditions: Cases representing violations under any of Secs. 254, 255,
257 and 258 of the Tax Code, including one-timetransactions;
High-profile taxpayers or taxpayers well-known within thecommunity, industry or sector to which the taxpayer belongs;and
Estimated basic tax deficiency is at least P1 million per yearand tax type, but priority should be given to tax cases wherethe aggregate basic tax deficiencies for all tax types per yearis P50 million or more.