TAX REMEDIES UNDER THE NIRCAtty. Vic C. Mamalateo July 12-14, 2011 ATENEO LAW SCHOOL
INTRODUCTION Taxation is the destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government.
Paseo Realty & Dev. Corp. vs. Court of Appeals
Taxation should be exercised with caution to minimize the injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that lays the golden eggs. In order to maintain the general publics trust and confidence in the government, this power must be used justly and not treacherously. Roxas y Cia vs. CTA, 23 SCRA 276
BIR ORGANIZATIONAL STRUCTURE NATIONAL OFFICE (Sec. 3, NIRC) Commissioner of Internal Revenue Deputy Commissioners + National Evaluation Board Assistant Commissioners (Large Taxpayers Service Regular and Excise), Enforcement Service, Legal Service, Collection Service) Division Chiefs (LTRAD, LTETD, National Investigation Division, and Policy Cases Division)
REGIONAL OFFICES Regional Directors Assistant Regional Directors Division Chiefs (Assessment, Collection, and Legal) Revenue District Officers, LTDO, and Special Investigation Division
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 tax court and ordinary courts To administer supervisory and police powers conferred upon it by law (Sec 2, NIRC) BIR Commissioner and subordinate officials BOC Commissioner and subordinate officials with respect to taxes on imported goods (VAT and excise tax) Authorized agent banks (AAB) with contracts with BIR Taxpayers (as withholding agents) [Sec 12, NIRC]
BIR OFFICIALS AND COLLECTING AGENTS
DUTIES OF TAXPAYERS To get Taxpayer Identification Number (TIN) [Sec. 236(J), NIRC] To register as a taxpayer Income tax, Withholding agent, VAT or Non-VAT, etc. and to update BIR Certificate of Registration (Sec. 236(A), NIRC) To register books of accounts (whether computerized or manual) [Sec. 232, NIRC] and to keep books and records for 3 years from date of last entry (Sec. 235, NIRC) To secure Authority To Print (Sec. 238, NIRC) and to register and issue sales invoices (Sec. 237, NIRC), incl. delivery receipts, official receipts, incl. provisional receipts and acknowledgement receipts, and other accounting records (whether computerized or manual) To register cash register machines and POS machines To file tax returns and pay taxes within the dates prescribed by law; otherwise, penalties will be imposed To withhold and remit taxes required by law or regulations and to issue Certificates of Tax Withheld (BIR Form 2307) To submit reports and other information required by law or regulations (e.g., inventory, SLS and SLP, SAWT and MAP, alpha list of employees, audited financial statements, etc.)
POWERS OF CIR To interpret tax laws and regulations, subject to review by the Secretary of Finance (Sec. 4, NIRC) To decide disputed assessments and to refund or credit taxes erroneously or illegally paid, subject to appeal to CTA (Sec. 4, After the return has been filed, to examine books and records of taxpayers and to assess correct taxes. Failure to file return shall not prevent CIR from authorizing examination (Sec. 5A), NIRC)NIRC)
When a report required by law is not forthcoming within the time fixed by law or rules, or there is reason to believe that such report is false, incomplete or erroneous, CIR shall assess proper tax based on best evidence obtainable (Sec. 6(B), NIRC) In case a person fails to file required return or wilfully or otherwise files a fraudulent return, CIR shall Make or amend return from his own knowledge and from such information he can obtain, in the name of the taxpayer (Sec 6(B), NIRC)
POWERS OF CIR Any return or declaration filed in any BIR office shall not be withdrawn, but taxpayer may modify, change or amend the same within 3 years from date of filing, provided that no notice for audit of such return or declaration has been actually served upon the taxpayer in the meantime (Sec. 6A, NIRC) To terminate taxable period of taxpayer To make a canvass of taxpayers in the region or district To prescribe real property market values To accredit and register tax agents To inquire into bank deposit accounts of taxpayer, except to inquire into bank deposits of (a) a decedent to determine his gross estate; or (b) a person who filed application for compromise based on incapacity to pay (Sec 6F, NIRC)
Rev. Regs. No. 10-2010 Oct 6, 2010 R.A. 10021 Act to allow the exchange of information by BIR on tax matters Sec. 2. Any general or special law notwithstanding, and for the purpose of complying with the provisions on exchange of information contained in tax treaties, CIR is authorized to obtain any information, including but not limited to bank deposits and other related information held by financial institutions, as may be required to respond to a request by a treaty country. Sec. 3. Once information is gathered, BIR is likewise authorized to use, for tax assessment, verification, audit and enforcement purposes, such information from financial institutions. Sec. 4. Any such information shall not constitute an unlawful divulgence of information under the Tax Code, and CIR is designated as the competent authority.
Rev. Regs. No. 10-2010 Oct 6, 2010 Sec. 5. Income tax returns of specific taxpayers subject of a request for exchange of information by a foreign tax authority shall be open for inspection upon the order of the President of the Phil, under rules and regulations prescribed by the Secretary of Finance. Sec. 6. Any information received by foreign tax authority from BIR shall be treated as absolutely confidential in nature and shall be disclosed only to persons or authorities, including courts and administrative bodies, involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by such conventions or agreements. Sec. 10. A taxpayer shall be notified in writing by the CIR that a foreign tax authority is requesting for exchange for information held by financial institutions within 60 days from receipt of said request.
POWERS OF CIR CIR may, at any time during the year, order inventory-taking of goods of any taxpayer as a basis for determining his tax liabilities, or place the business operations of any person under observation or surveillance, if there is reason to believe that such person is not declaring his correct income, sales or receipts. The findings may be used as basis for assessing taxes for the other months or quarters or the same or different taxable years and such assessment shall be deemed prima facie correct. When it is found that a person has failed to issue receipts and invoices, or there is reason to believe that his books and records do not correctly reflect the declarations or returns made, CIR may prescribe minimum amount of gross receipts or sales, and such amount so prescribed shall be prima facie correct for purposes of determining the tax liabilities of such person (Sec 6C, NIRC)
POWERS OF CIR To obtain information from persons who are not subject to tax audits (Sec 5B, NIRC) To issue subpoena duces tecum or duces testificandum (Sec 5C&D, NIRC) To delegate powers vested upon him to his subordinate officials with a rank of Division Chief or higher, except the following powers: Power to recommend promulgation of rules and regulations by the Secretary of Finance Power to issue rulings of first impression or to reverse, revoke or modify any existing ruling Power to compromise or abate any tax liability, except regional assessments involving basic tax of P500,000 or less, and minor criminal violations Power to assign or reassign revenue officers to establishments where articles subject to excise tax are produced or kept (Sec 7, NIRC)
POWERS OF CIR Any revocation, modification or reversal of any of the rules and regulations or rulings or circulars promulgated by CIR shall not be given retroactive application, if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases: A. Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the BIR; or B. Where the facts subsequently gathered by BIR are materially different from the facts in which the ruling is based; or C. Where the taxpayer acted in bad faith (Sec. 246, NIRC)
PART II: ASSESSMENT OF DEFICIENCY TAXES
ASSESSMENT CYCLE Filing of tax return Tax audit by BIR Informal Conference Preliminary Assessment Notice (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 of protest
ASSESSMENT CYCLE BIR ACTION Cancell assessment Deny protest Revise assessment
Appeal to CTA Motion for Recon-CTA Appeal to CTA en banc Appeal to Supreme Court
180 days from filing of protest, or supplemental protest, if any 30 days from date of receipt of denial of protest or lapse of 180 days 15 days from date of receipt 15 days from date of receipt 15 days from date of receipt
FILING OF RETURN AND PAYMENT OF TAX Self-assessment of tax (taxpayer determines his tax liability) Pay-as-you-file system (pay tax upon filing of tax return) Where to file return and pay tax? Large Taxpayer (corporation): EFPS Non-large taxpayer: RDO where principal place of business of taxpayer is located Individual Self-employed: RDO where principal