Issues, Problems and Solutions in Tax Audit and Investigation(1-10-13).ppt

8/10/2019 Issues, Problems and Solutions in Tax Audit and Investigation(1-10-13).ppt

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Issues, Problems and Solutions in

Tax Audit and Investigation of BIR

Ruperto P. Somera, Ph.D., DBA, CPA

Tax Consultant, Professor/Lecturer

Former Director, Bureau of Internal RevenueFormer Member of the Board of Accountancy

Fellow in Tax Management


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STATUTORY BASIS OF ASSESSMENT:

INTERNAL REVENUE CODE

Sec. 6 (A) Aftera return has been filedas required under the provisions of thiscode, the commissioner or his dulyauthorized representative may authorize

the examination of any taxpayer and theassessment of the correct amount of taxxxx.


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ANY RETURN, STATEMENT OR

DECLARATION FILES IN ANY BIR OFFICE

AUTHORIZED TO RECEIVE THE SAME SHALLNOT BE WITHDRAWN: PROVIDED, THAT

WITHIN THREE (3) YEARS FROM THE DATE

OF SUCH FILING, THE SAME MAY BE

MODIFIED, CHANGED, OR AMENDED:PROVIDED, FURTHER, THAT NO NOTICE

FOR AUDIT OR INVESTIGATION OF SUCH

RETURNS, STATEMENT OR DECLARATIONHAS, IN THE MEANTIME, BEEN ACTUALLY

SERVED UPON THE TAXPAYER.


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Types of Audit and Assessments:

Audit and Investigation Third Party InfoMatching Post Audit Review

Audit of books of

accounts (with LA)

Audit based on face

of return (no LA andlimited to

mathematical

accuracy)

Table audit

Industry audit

Short period audit

No-contact audit-

surveillance

Normally covered

by LN

Tax reconciliation

systems Matching of

Summary Alpha list

of withholding taxes

/ alpha list of pages

Matching with govt.

infoBOC, LGU,

BSP, IC

Access to records

Sec. 5 of Tax Code

Assessment arising

from review

Post Review Audit

Assessment arising

from post review

audit


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Audit Notices to Examine Books and

Records Audit Jurisdiction

1. Large taxpayer servicetop 1,300 corporation

2. Enforcement service

a) National Investigation DivisionNIDb) Special Investigation Division

c) Revenue District Office (RDO)


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Under RMO 62-2010, the manual issuances of Lasfor all investigating offices under the RegionalOffices, the LTS, the Enforcement Service, and thevarious Task Forces and Special Teams authorized by

the CIR has been discontinued. This Order paved theway for the issuance of electronic Las (BIR Form No.1966) through the Letter of Authority MonitoringSystem (LAMS). In said RMO, the issuance of TVNs

has likewise been stopped, and instead, eLAs weresupposed to be issued for cases to be covered byTVNs

Electronic Letters of Authority (eLA)


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The Regional Director shall issue the

corresponding Letter of Authority if indications of

fraud have been established, and the same hasbeen confirmed by the Regional Tax Fraud

Committee (RTFC), composed of the following:


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One LA shall be issued for each taxable

year to include all internal revenue tax

liabilities of the taxpayer. However, forpurposes of verifying tax liabilities of a

decedent, one consolidated LA shall be

issued to cover the estate tax liabilityand the income tax liability for the

immediately preceding year up to the

time of the death of the taxpayer.


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LAs shall be issued only when theduplicate copy of the tax return of the

taxpayer for the taxable year covered bythe LA is attached thereto. Where thereturn of a taxpayer selected for auditcannot be located, the LA shall be issuedonly when there is a certification to thateffect by the Head-Revenue Date Centerfor taxpayers covered by ITS RDOsand

by the Assistant Commissioner,Information Systems Operations Servicefor taxpayers covered by non-ITS RDOs.


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The same Revenue Officer/Group

Supervisor shall not be allowed to audit

the same taxpayer for two consecutiveyears.

LAs shall be revalidated only the

Regional Directors when there is anattached progress report of the

investigating Revenue Officer(s) duly

noted by his Group Supervisor andapproved by the Revenue District

Officer/Chief, SID.


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PRIORITY TARGET IN

TAXPAYERS AUDIT

Top 100 taxpayers in the district in termsof gross sales/receipts where there is no

VAT or percentage tax payment for the

current year and the immediatelypreceding year.


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Those with substant ia l increase in

costs of sales and expenses willmean at least twenty percent (20%)

increase in claimed cost of sales and

expenses over and above the increase incosts and expenses in gross

sales/receipts.


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INDUSTRY BENCMARKING

Benchmarks will be determined on a per area(district/town/city), per industry and per tax type

basis.

Initially the top 200 taxpayers (based on gross

sales) will be audited


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REVENUE MEMORANDUM

NO. 3-2010

The following policies and guidelines shall be observed in theaudit of 2010 tax returns by the Revenue District Offices:

All taxpayers are considered as possible candidates for

audit.

Priority shall be given to the following taxpayers who

render professional services:

Lawyers;

Doctors; Engineers;

Accountants; and

Other Professionals


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Last Priority status for income tax audit shall be

accorded to those taxpayers with an effective income

tax rate of eighteen percent (18%) (Gross Income x18%).

Taxpayers with the following effective VAT rate are

also last in the priority for VAT audit:

3% or higher for sale of goods; and

6% for sale of service.

An exception to the Last Priority status shall be those

taxpayers where there are findings/suspicions of under-

declaration of sales/revenues


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REVENUE MEMORANDUMORDER NO. 22-2011

Amended Audit Criteria for TaxableYears 2009-2010


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To be entitled to the Last Priority for audit status

enunciated under RMO No. 4-2011, the following

conditions must concur:

a. Effective Income Tax Rate of 18%;

b. Increase in Income Tax payment by at least 20% fromthe immediately preceding year;

c. Full compliance with all the submission and

reportorial requirements (i.e. SLSP, Alphalist, etc.). To

constitute full compliance, all required fields of saidreports must be properly filled-up; and

d. No Letter Notice issued against the taxpayer.


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EXCLUDED FROM AUDIT ANDINVESTIGATION BY THE RDOS

Taxpayers under the jurisdiction of theLarge Taxpayers Division in the National

Office and other taxpayers/industries

covered by the Audit Program of theEnforcement Service


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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 to conduct tax audit

- Scope of examination

Kinds of taxesPeriod

- Approving official

- Telephone number(s) of BIR office


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REQUIREMENTS OF LA- ITR attached to LA

- No erasures on LA- LA shall cover only one year; 2008 and unverified

prior years is not allowed, except when signed by CIR

- Audit must be completed within 120 days, unless

revalidated for another 120 days

- Only revenue officers named in LA are authorized

to examine books and records

- Audit must be done in taxpayers place ofbusiness

- Submission of CD for computerized


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REVENUE MEMORANDUM

CIRCULAR NO. 62-2010Starting July 1, 2010, the manual issuance of Las

and TVNs shall be discontinued for all investigating

offices under the Regional Offices, the LargeTaxpayer Service (LTS), the Enforcement Service

(ES), and the various Task Forces and Special Teams

authorized by the Commissioner of InternalRevenue to conduct audit/investigation.


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TAX VERIFICATION NOTICES

TVNs shall be issued only for thefollowing non-audit cases in RevenueDistrict Officer with their correspondingcase codes:

Verification and processing of all capitalgains tax returns (TVN-C)

Verification and processing ofwithholding tax returns involving propertytransactions (TVN-W)


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Verification and processing of estate

and donors tax return, where the grossestate/gift is below the audit threshold

under the existing audit program (TVN-

E/TVN-D) Verification and processing of claims for

tax credit/refund, where the gross

sales/income and claims are below theaudit threshold under the existing audit

program (TVN-TCR).


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LETTER OF NOTICE

In the event of taxpayer who has been issued an

LN refutes the discrepancy, it shall be given an

opportunity to reconcile its records with those of

the BIR within ten (10) days from receipt of its LNand to submit documentary proofs in support of

its arguments.


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If after ten (10) days from receipt of Follow-up

Letter, no response was received from the taxpayer,

or it fails to submit the required documents afterfiling the protest within the five-day period after

receipt of the LN, the LNTF/concerned investigating

office shall endorse the docket and recommend to

the OCIR through the Overall Head, LNTF, the

issuance of an issue-based LA to cover specifically

Income Tax, VAT, Percentage Tax, and Withholding

Taxes Due to Discrepancy Reflected in the LN. ANotice for Informal Conference together with the LA

shall be served to the taxpayer.


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However, if the audit covered by the LA was

already completed and terminated by the

revenue officer assigned thereto andsubsequently, an LN is issued by the BIR, another

round of examination will be conducted pursuant

to the LN to determine the accuracy of the salesand/or purchases declared by the taxpayer in its

tax returns.


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Handling LNs

1. LN based on TRS (Tax Reconciliation

System)

2. LN based on Consolidated RELIEF-SLSP3. LN based on TPM-BOC Data Program

(Third Party Matching-Bureau of

Customs)


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LN- Sources of discrepancies

1. Sales reported by seller vs purchasesreported by the buyer (VAT and income tax)

2. CWT remitted by buyer vs SWT claimed by

seller/supplier (WT)3. Income reported vs. CWT or FT paid by payor

4. Importations recorded by BOC vs

importations reported in the SLSP (VAT andincome tax)


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LNs vs LAs

1. LN = LA (Informal conference stage)

LN prohibits the amendments of the return forthe period covered by the LN

No conversion to LA2. Taxpayer can still be issued an LA?

Consolidation?

For LN on WT, LN should be consolidated withthe LA if already issued (RMO 28-07)

For LN on TPM-BOC, LN to proceed separatelyfrom LA (RMO 32-07)


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LNs vs LAs

3. To protest an LN, taxpayer has to tryexplain both his declaration and that ofthe Third Party source of the

information Details of the reconciliation with third

party payor/payee source of discrepancy is

normally attached to LN


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POWER OF THE COMMISSIONER TO OBTAIN

INFORMATION, ETC.

In ascertaining the correctness of any return, inmaking a return where none been made, or in

determining the liability of any person for any

internal revenue tax, or in collecting any suchliability, or in evaluating tax compliance, the

Commissioner of Internal Revenue is authorized.

1. To examine any book, paper, record or otherdata which may be relevant or material to such

inquiry;


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2. To obtain on a regular basis from any person

other than the person whose internal revenue

tax liability is subject to audit or investigation,or from any office or officer of the national and

local governments, government agencies and

instrumentalities, including the Bangko Sentralng Pilipinas (BSP) and government-owned or

controlled corporations any information such

as, but not limited to, cost and volume of

production, receipts or sales and gross incomes

of taxpayers.

3 To summon the person liable for tax or required to file a


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3. To summon the person liable for tax or required to file a

return, or any officer or employee of such person, or any

person having possession, custody, or care of the books

of accounts and other accounting records containingentries relating to the business of the person liable of

tax, to appear before the Commissioner or his duly

authorized representative at a time and place specified

in the summons and to produce such books, papers,records, or other data, and to give testimony.

4. To take such testimony of the person concerned, under

oath.

5. To cause revenue officers and employees to make a

canvass from time to time of any revenue district or

region and inquire after.


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REVENUE REGULATION

NO. 10-2010

Exchange of Information Regulation


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Foreign Tax Authority May be Allowed to Examine

Income Tax Returns of Taxpayers in the Philippines.

Obligation to Maintain Confidentiality

Processing of Requests All requests for informationpursuant to an international convention or agreement

on tax matters shall be coursed through the

International Tax Affairs Division (ITAD) of the BIR.


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Access to Records

SEC. 5, NIRCSEC. 5. Power of the

Commissioner to Obtain Information and to

Summon, Examine and Take Testimony of

PersonsIn ascertaining the correctness of anyreturn or in making a return when none has

been made, or in determining the liability of any

person for any internal revenue tax or incollecting any such liability, or in evaluating tax

compliance the Commissioner is authorized


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Linkages with Government Data

LGU

BOC

BSP

IC

SEC

Other regulatory agencies Exchange of information under tax treaties


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FAILURE TO SUBMIT REQUIRED

RETURNS, STATEMENTS, REPORTS

AND OTHER DOCUMENTS

When a report required by law as a basis for the

assessment of any national internal revenue taxshall not be forthcoming within the time fixed by

laws or rules and regulations or when there is

reason to believe that any such report is false,

incomplete or erroneous, the Commissionershall assess the proper tax on the best

evidence obtainable.


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REVENUE MERANDUM ORDER

NO. 45-2010

Revised guidelines in the requests for the

production of the books of accounts and/or otherrecords and documents and in the issuance of

Subpoena Duces Tecum for failure of taxpayers to

comply with the requests.


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The following policies and guidelines :

1. If the taxpayer, upon receipt of the Letter of Authority

(LA) and checklist of presentation of the requirements

for the audit, or access to records request, the

Revenue Officer (RO) concerned shall send a First

Notice, signed by himself and/or his group supervisor,

to the taxpayer, after ten (10) calendar days from

receipt of the LA and checklist of requirements/ access

to records request, demanding, the taxpayer to furnish

to the RO the requirements previously requested.


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2. If the taxpayer ignores the First Notice and continues to

disregard the demand for the submission of the required

documents, a Second and Final Notice, signed by the Head

of Office concerned, shall be sent to the taxpayer after ten

(10) calendar days from receipt of the First Notice.

3. If, after the taxpayers receipt of the Second and Final

Notice, said taxpayer still refuses to comply with therequirements for the notice, the Head of Officer shall

request for the issuance of a subpoena duces tecum (SDT)

from the Legal Service (National Office), Legal Division

(Regional Office), after ten (10) calendar days from receipt

of the Second and Final Notice.

4 The Legal Service Legal Division or any other authorized


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4. The Legal Service, Legal Division or any other authorized

office shall act on the request from the issuance of SDT

within five (5) calendar days from receipt of such request.

5. The RO must serve immediately the SDT to the taxpayerand shall return a served copy of the SDT to the office

which issued the same within five (5) calendar days from

the issuance thereof.

6. If the taxpayer refuses to comply with the SDT, theconcerned BIR legal offices shall perform the following

courses of action:

a) File a criminal case against the taxpayer for violation of


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a) File a criminal case against the taxpayer for violation of

Section 5 in relation to Sections 14 and 266 of the National

Internal Revenue Code; and/or

b) Initiate a proceeding to cite the taxpayer for contempt,under Section 3(f), Rule 71 of the Revised Rules of Court.

7. If the taxpayer subsequently requests for the dismissal of

the cases filed in court and submits the requested

information, the concerned BIR office shall occur with suchrequest for dismissal upon the submission of the requested

document/s and the payment of penalty by the taxpayer of

ten thousand pesos (P10,000) for the delayed compliance

and violation of pertinent provisions of the revenueregulations.


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Processing of recommendation for issuance of

subpoena. The Prosecution Division or Legal

Division concerned shall evaluate therecommendation for issuance of subpoena

within two (2) working days from receipt and

may take the following alternative actions: (a)return the case to its origin for further

documentation or action; or (b) prepare the

corresponding subpoena in three copies for initial

and/or signature of the officials concerned.


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Service Ideally, the service of the subpoenashould be effected by the revenue officers

assigned to investigate the case. However, suchservice may be made by any internal revenueofficer authorized for the purpose.

How service may be effected.a. The subpoenashall be served handing the original copy thereofto the individual named therein in person or, if he

refuses to receive it, by tendering it to himwitnessed by another revenue officeraccompanying the server.


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Limitation on the best-evidence rule

The taxpayer did not adduce evidence to prove its correct tax

liability. However, it has been established that BIRs

assessment is which factual basis, such failure of the taxpayer

cannot serve as a basis for the Court to confirms its liability for

the amount assessed; otherwise , the Court would thereby becommitting a travesty.

Case was remanded to the CTA for BIR to present further

evidence BIR failed. CTA issued a denial in 2007

(Hantex Trading Co. Inc. v Commissioner of Internal Revenue,

CTA Case No. 5126, February 7, 2007; CIR v Hantex Trading Co.,

Inc. GR 136975, March 31, 2005)


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BIR or the Courts will not accept a

photocopy as evidence of a claim for

input VAT, expense paid or CWT, etc.


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Meaning of Best Evidence

Best evidence

The law allows the BIR access to allrelevant or material records and data

in the person of the taxpayer

Existing Revenue Procedures and


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st g e e ue ocedu es a d

Jurisprudence Governing Assessment

based on the Best Evidence ObtainableFailure to Submit Required Returns, Statements,

Reports and other Documentswhen a report

required by laws as a basis for the assessment of

any national internal revenue tax shall not beforthcoming within the time fixed by laws or

rules and regulations or when there is reason to

believe that any such report is false, incompleteor erroneous, the Commissioner shall assess the

proper tax on the best evidence obtainable.

I f il t fil i d


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In case a person fails to file a required or

other documents at the time prescribed by

laws, or willfully or otherwise files a falseor fraudulent return or other document,

the Commissioner shall make or amend

the return from his own knowledge andfrom such information as he can obtain

through testimony or otherwise, which

shall be prima facie correct and sufficientfor all legal purposes.

Assessment based on Estimate: 50% Rule, in


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Assessment based on Estimate: 50% Rule, in

the Absence of Receipts to Prove Actual

Amount of Expense Deduction

If there is showing that expenses have been

incurred but the exact amount thereof cannot

be ascertained due to absence of documentary

evidence, it is the duty of the BIR to make anestimate of deduction that may be allowable in

computing the taxpayers taxable income

bearing heavily against the taxpayer whoseinexactitude is of his own making. That

disallowance of 50% of the taxpayers claimed

deduction is valid.


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Based on photocopies of 77 Consumption Entries, an informer reportedthat importations of the company were understated in its accounting

BOC was unable to certify the validity of the photocopies because the

originals were either destroyed or lost. Certifications were only issued

based on BC records of importations up to about 60% of the amounts in

the Consumption Entries. The importations per photocopies of the Consumption Entries were

validated against the companys FS and ITR and BIR concluded that there

was undeclared importation on which basis assessments were issues for

deficiency income tax and VAT

Company refused to be further subjected to investigations because theyalready been audited for the subject periods.

A FaAN/demand letter was issued which the company appealed at the

CTA.

(Hantex Trading Co., v CIR, CTA Case No. 5126 February 7, 2007. CIR v Hantex

Trading Co., Inc., GR 136975, March 31, 2005)


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Assessment can be based on the best evidence obtainable iftaxpayer fails to submit the required returns, statement,

records and other documents (Section 6, NIRC)

Best evidence obtainable cannot include mere photocopies of

records or documents. These have no probative value as basisfor concluding under declaration of importations and

assessment of deficiency income or business tax against a

taxpayer.

Consumption Entries are prepared in several copies; duplicate copies

submitted to other offices should have been accessed.

(Hantex Trading Co., v CIR, CTA Case No. 5126 February 7, 2007.

CIR v Hantex Trading Co., Inc., GR 136975, March 31, 2005)


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AMENDMENT OF RETURN

Returns can be amended within three (3)

years from filing. Provided, that no noticefor Audit and examination has been

actually served to the taxpayer.


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FRAUDULENT RETURN

A substantial under declaration 30% of

taxable sales, receipts or income, or asubstantial overstatement 30% of

deductions shall constitute prima facie

evidence of a false or fraudulent return.

Revalidation of Letters Authority


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An LA which is over 120 days from the date of issue

loses its validity and must be revalidated. The ruleson revalidation of LA are:

1. Regional LAs shall be revalidated only by theRegional Directors when there is an attached

progress report of the investigating RevenueOfficer(s) duly noted by his Group Supervisor andapproved by the RDO/Chief, SID.

2. Revalidation of Letters of Authority shall belimited to only once in the regional offices andtwice in the National Office after issuance of theoriginal LA.

Revalidation of Letters Authority


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5 Th Di i i Chi f/RDO h ll b ibl


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5. The Division Chief/RDO shall be responsiblefor the monthly monitoring of Las issued toensure that reports are rendered within thereglementary 120-day period. The DivisionChief/RDO shall be jointly responsible withthe Revenue Officers for cases with Las

pending beyond the 120-day period.6. It shall be the duty of the Division Chief/RDO

to immediately to report the InspectionService any tax case for which no report ofinvestigation has been rendered 120 daysafter the issuance of an LA.

h l h d f


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Beginning June 1, 2010, the rule on the need for

revalidation of Las for failure of the revenue

officials to complete the audit within theprescribed period shall be withdrawn.

Accordingly, there is no need for revalidation of

the LA even if the prescribed audit period has

been exceeded. However, the failure of the RO

to complete the audit within the prescribed

period shall be subject to the applicable

administrative sanctions.

REMEDIES DURING AUDIT


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REMEDIES DURING AUDIT

Submit copy of returns, worksheets, and other reportorial

requirements to revenue officers with covering transmittalletter

Present only books, records, and other documents covered

by the period under audit

Bank deposits and related records are covered by RA 1405(Bank Secrecy Law), which cannot be examined by revenue

officers

Make analyses of accounts and comparison of figures

shown in ITR, VAT returns, audited FS, SLS and SLP, alphalist of compensation income and fringe benefits, inventory,

etc. Many findings of revenue officers relate to

discrepancies between or among above documents

NOTICE OF INFORMAL CONFERENCE


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NOTICE OF INFORMAL CONFERENCE

PURPOSE:

PRESENTATION of AUDIT FINDINGS

Give taxpayer the opportunity to present his side

PERIOD of RESPONSE:

15 DAYS FROM DATE OF RECEIPT OFNOTICE

EFFECT of FAILURE to RESPOND:

ENDORSEMENT to ASSESSMENT DIVISIONfor REVIEW and ISSUANCE of DEFICIENCYTAX ASSESSMENT

INFORMAL CONFERENCE


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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 the bases of their findings

-May or may not sign their findings


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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

-Request for breakdown of findings or sourceof the information from revenue officers as

well as the factual and/or legal bases

INFORMAL CONFERENCE


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INFORMAL CONFERENCEFINDINGS OF FACT

-Undeclared or under-declared income

-Deduction is unsupported or personal in

nature

-Deduction is for another year (before or

after) not for the current year audit

-Income payment is subject to withholdingtax that was not deducted and remitted to

BIR by payor of income


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-There is variance between gross sales per

ITC, VAT return, audited financial

statements, alpha list, summary list of sales,

etc.

-Claimed tax credits are not supported by taxcredit certificates attached to income tax

returns


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-Cost and expenses are not direct items;

hence, not part of Cost of Services for

MCIT

-Assessment has prescribed or is not valid

-Taxpayer has committed fraud in filing tax

return

-Nature of asset is ordinary or capital

INFORMAL CONFERENCE


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INFORMAL CONFERENCEQUESTIONS OF LAW

-Income is subject to or exempt from tax

-Income or expense is realized or unrealized

during the year

-Income payment is subject to or exempt

from expanded withholding tax

-Business expense is ordinary andnecessary of unreasonable in amount


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PRELIMINARY ASSESSMENT NOTICE


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PRELIMINARY ASSESSMENT NOTICE

PURPOSE:

PRESENTATION OF AUDIT PROPOSAL

Give Taxpayer the Opportunity to Present HisSide

CONTENTS:

COMPUTATION of PROPOSED DEFICIENCYTAX;

DETAILS OF FACTS & LAW, RULES andREGULATIONS, or JURISPRUDENCE ONWHICH THE ASSESSMENT IS BASED

PERIOD OF RESPONSE:


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PERIOD OF RESPONSE:

15 DAYS FROM DATE OF RECEIPT OF THEPRELIMINARY ASSESSMENT NOTICE

EFFECT OF FAILURE TO RESPOND:

ISSUANCE OF FORMAL LETTER OF DEMAND

REVENUE REGULATIONS NO 12-99


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REVENUE REGULATIONS NO. 12-99

PRELIMINARY ASSESSMENT NOTICE (PAN)

If after review and evaluation by the Assessment

Division or by the Commissioner or his duly

authorized representative, and it is determined

that there exists sufficient basis to assess the

taxpayer for any deficiency tax the Assessment

Division shall issue to the taxpayer, at least by

registered mail.


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If the taxpayer fails to respond within

fifteen (15) days from date of receipt of thePAN, he shall be considered in default, in

which case, a formal letter of demand and

assessment notice shall be caused to beissued by the said Office, calling for

payment of the taxpayers deficiency tax

liability, inclusive of the applicablepenalties.


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A Preliminary Assessment Notice (PAN)

for the proposed assessment, shall showin detail, the facts and the law, rules and

regulations, or jurisprudence on which the

proposed assessment is based.

REMEDIES RELATIVE TO PRELIMINARY


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ASSESSMENT NOTICE

-File written request for extension to file Reply to

PAN-Ask for source of information or breakdown ofcertain income and expenses relating to findings ofrevenue officers, so that appropriate thereto could

be submitted-Agree to file Waiver of the Statute of Limitationsfor six months (RMO 20-90)

-Request for consolidation of tax audits being donethru LA and LN

di d i i l bl


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Undisputed issue is not appealable

Issues not properly protested shall beconsidered undisputed issues and the

assessment hall become final, executory

and demandable

(Allied Banking Corporation v. The Commissioner of

Internal Revenue, CTA EB No. 157 Re: CTA Case No.6981, January 2, 2007)

Protest on the PAN cannot be


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appealed at the CTA

A Formal Letter of Demand (FLD) received in responseto a protest filed on the Preliminary Assessment Notice

(PAN) states as follows:

Your subject protest

It is requested that the above deficiency tax be paid

immediately upon receipt hereof, inclusive of penalties

incident to delinquency. This is our final decision basedon investigation. If you disagree, you may appeal this

final decision within 30 days from receipt hereof,

otherwise said deficiency assessment shall become

final, executory and demandable.



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appealed at the CTA

Taxpayer erroneously interpreted the wording of theFLD.

The FLD should be considered as the Fan, which

should be appealed administratively by filling arequest for reconsideration or reinvestigation within

30 days. Denial or inaction on said administrative

appeals is the one appealable to the CTA.

Period to protest expired because an appeal to CTA(wrong venue) instead of a protest to BIR

(Allied Banking Corporation v. The Commissioner of Internal Revenue, CTA EB

No. 157 Re: CTA Case No. 6981, January 2, 2007)

NO PRE-ASSESSMENT NOTICE IS REQUIRED


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1.mathematical error in computing tax liability per

return;2.discrepancy in tax withheld and amount

remitted;

3.carry-over and automatic application of excess

creditable withholding tax to estimated taxliabilities;

4.unpaid excise on exciseable articles;

5.transfer of an otherwise taxable article by anexempt person to a non-exempt person


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Absence of PAN does notinvalidate an assessment

Case: (Bank of Philippine

Islands v. CIR, CTA Case No.7397, April 09, 2008)

Court of Tax Appeals:


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Decision:

1. Although issuance of PAN is required, it is notindispensable. In fact, a taxpayer is notobligated to protest a PAN and failure onits/his part to protest a PAN does not result in

the finality of assessment. What the lawrequires is the issuance of FAN which is insubstantial compliance of what is mandatedunder Section 228 of the NIRC.

FORMAL LETTER OF DEMAND AND


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FORMAL LETTER OF DEMAND AND

ASSESSMENT NOTICE

PURPOSE:

TO FORMALLY CALL for the PAYMENT of the

DEFICIENCY TAX;

TO SET THE DATE for the IMPOSITION of the

25% SURCHARGE;

TO AFFORD THE TAXPAYER THE FINALOPPORTUNITY TO PROTEST

ADMINISTRATIVELY.


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ASSESSMENT OF INCOME TAX


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Assessment is the official action of an officer

authorized by law in ascertaining the amount of tax

due under the law from a taxpayer.

The action necessarily involves:

1. the computation of the sum due;

2. the giving of a notice to that effect to

the taxpayer; and

3. the making, simultaneously with or

sometime after the giving of notice, of

a demand upon him for the payment

of the tax or deficiency stated.


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EFFECT OF ASSESSMENTS


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EFFECT OF ASSESSMENTS

An assessment fixes and determines the tax

liability of a taxpayer. Once a tax is assessed, the

taxpayer will owe the government the amount

when the date fixed in the assessment notice for

payment arrives.


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FORMAL LETTER OF DEMAND


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FORMAL LETTER OF DEMAND

AND ASSESSMENT NOTICE

Shall be sent to the taxpayer only by

registered mail or by personal delivery. If

sent by personal delivery, the taxpayer orhis duly authorized representative shall

acknowledge receipt thereof in the

duplicate copy of the letter of demand.

Prescription Period


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Prescription Period

Date of mailing is considered the date of fillingof any petition or pleading.

A mailed letter is deemed received by the

addressee in the ordinary course of mail.However, a direct denial of the receipt thereof

by the addressee shifts the burden of prving

the same to the sender.(Asia International Auctioneers v. CIR, CTA EB 276, August 03,

2007)

Prescription Period


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Prescription Period

Failure to present registry return card. Evidencepresented:

Registry Receipt No. xx

Philpost Certification on the delivery and receipt by BIR

BIR Records Divisions Receipt of ImportantCommunications Delivered showing RN No. xx

Taxpayer failed to prove that the letter mailed (per

evidence provided) is the protest letter for the

subject assessment.

BIR was able to show inconsistencies in the

chronology of events.(Asia International Auctioneers v. CIR, CTA EB 276, August 03, 2007)


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Proof of receipt of FAN

If the taxpayer denies receipt of FAN, burden of

proving that FAN has been received is shifted to

BIR. Failure of the BIR to prove receipt ofassessment notice is fatal.


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Case:(Mallari vs. RP,CTA EB Criminal Case No.002,1-8-08)

Ruling: Where the assessment notice was released

and mailed by BIR to the taxpayer and the original wasnot returned to the BIR, the taxpayer is presumed to have

received it. But such presumption is disputable. When the

same is directly denied by taxpayer, the burden to prove

receipt is shifted to the BIR.The transmittal list presentedby BIR is self serving and did not sufficiently establish

receipt of FAN.


CONTENTS:


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COMPUTATION OF PROPOSED DEFICIENCYTAX;

DETAIL OF FACTS and the LAW, RULES andREGULATIONS, or JURISPRUDENCE onWHICH THE ASSESSMENT IS BASED.

PERIOD OF RESPONSE:30 DAYS FROM RECEIPT OF DEMAND

EFFECT OF FAILURE TO RESPOND:

ASSESSMENT BECOMES FINAL,EXECUTORY AND DEMANDABLE


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ASSESSMENT

The taxpayer shall be informed in writing

of the law and the facts on which the

assessment is made; otherwise, the

assessment is VOID.


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Assessment based on "tentativetax return

Case: (Magnetic ResonanceImaging Services v. CIR, CTA CaseNo. 6608, October 20, 2009)


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Ruling:

Assessment is valid even if it is based on the "tentativereturn". The BIR is not prohibited from looking into a

taxpayer's tentative tax return in ascertaining thecorrectness of its final return. Under Section 5 of theTax Code, the Commissioner of Internal Revenue orhis duly authorized representative is allowed toexamine any book, paper, record or other data whichmay be relevant or material in determining the correctliability of a taxpayer. The law states any returnwhich is indicative that it includes not only the finalreturn but also a tentative return.



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The Regional Director shall approve theassessment notices and demand letters

including the reports of investigation, for

cases falling within their respectivejurisdictions. Likewise, the Regional

Directors shall issue Termination Letters.


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Assessment flow

Filing of

Return

Informal

Conference

PreliminaryAssessment

(PAN)

FinalAssessment

(FAN)

Administrative

Protest

15 days

30 days CTA

30 days; 180 days

Letter of

Authority

Post-Audit Review Report


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Post-Audit Review Report

Assessmentis correct

Assessment

is correct TL not

yet issued

Issue

Assessment Notice

Reprimand

examiner

*TL= Termination Letter

SUMMARY OF ASSESSMENT


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CYCLEFiling of tax return Law prescribes due date

Tax audit by BIR 120 days + 120 days

Informal Conference

Preliminary Assessment

Notice (PAN)

Reply to PAN 15 days from receipt

Final Assessment Notice

(FAN) 3 years or 10 years

Protest to FAN 30 days from receipt

Supplemental Protest 60 days from filing ofprotest

SUMMARY OF ASSESSMENT CYCLE


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SUMMARY OF ASSESSMENT CYCLE

BIR ACTION-Cancel assessment

- Deny protest

- Revise assessment

BIR INACTION

Appeal to CTA

Appeal to CTA en banc

180 days from filing ofprotest, or supplementalprotest, if any

30 days from date of

receipt of denial ofprotest or lapse of 180days

15 days from date ofreceipt; additional 15

days may be granted byCTA after payment ofdocket fee.

Protesting a Case


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Protesting a CasePROTESTING A CASE

1. PAN

2. FAN

3. PROTEST within 30 daysFAILURE: FAN IS FINAL AND

EXECUTORY

4. FDDAWhether appealed or not

5. CTA appeal (division level) within 30 daysFAILURE TO

APPEAL FAN IS FINAL AND EXECUTORY

6. CTA decisionwhether appealed or not

7. En Banc (appeal)

8. En Banc decisionwhether appealed or not

9. Supreme Court (appeal)

10. Supreme Court (final decision)

Defenses on Assessments


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Defenses on Assessments

1. Validity of the assessment

2. Prescription periods

3. Legal and factual basis

4. Validity of the regulations/rulings

5. Immunities under tax amnesty and other

programs

6. Procedural issues


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Assessment is not required for tax evasion

cases

Sec. 269. Exceptions as to period of limitation ofassessment and collection of taxes.-(a) In the case of afalse or fraudulent return with intent to evade tax or of

failure to file a return, the tax may be assessed, or aproceeding in court after the collection of such tax maybe begun without assessment, at any time within tenyears after the discovery of the falsity, fraud or

omission


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REVENUE REGULATIONS

NO. 12-99

The taxpayer or his duly authorizedrepresentative may protest

administratively against the aforesaid

formal letter of demand and assessment

notice within thirty (30) days from date of

receipt thereof.

The taxpayer shall state the facts, the

li bl l l d l i


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applicable law, rules and regulations,

jurisprudence on which his protest is based,

otherwise, his protest shall be considered

vo id and w ithout fo rce and effect .

If the taxpayer fails to file a valid protestagainst the formal letter of demand and

assessment notice within thirty (30) days

from date of receipt thereof, theassessment shall become final, executory

and demandable.

The taxpayer may appeal to the Court of

Tax Appeals within thirty (30) days from


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Tax Appeals within thirty (30) days from

the lapse of the said 180-day period,

otherwise, the assessment shall become

final, executory and demandable.

If the protest is denied, in whole or in part,by the Commissioner, the taxpayer may

appeal to the Court of Tax Appeals within

thirty (30) days from date of receipt of the

said decision, otherwise, the assessment

shall become final, executory and

demandable.

OTHER ADMINISTRATIVE REMEDIES


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-Request for change of revenue officers

-Change of venue for settlement of taxassessment case

-Collection Division

-Legal Division

CONSEQUENCES OF ABSENCE OF

VALID AND TIMELY PROTEST

- Makes assessment final and executory

- Appeal to CTA is no longer available; CTAcannot acquire jurisdiction over the case

- Compromise of assessment is still possible


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DISPUTED ASSESSMENT

If the Commissioner of his duly authorized

representative fails to act in the taxpayers

protest within one hundred eighty (180) days

from date of submission, the taxpayer, of the

required documents in support of his protest.

The taxpayer may appeal to the Court of TaxAppeals within thirty (30) days from the


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Appeals within thirty (30) days from thelapse of the said 180-day period, otherwise,

the assessment shall become final,executory and demandable.

If the protest is denied, in whole or in part,by the Commissioner, the taxpayer mayappeal to the Court of Tax Appeals withinthirty (30) days from date of receipt of the

said decision, otherwise, the assessmentshall become final, executory anddemandable

DISPUTED ASSESSMENT


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DISPUTED ASSESSMENT

PROTEST:

SHALL CONTAINTHE FACTS THE APPLICABEL LAW,

RULES AND REGULATIONS OR

JURISPRUDENCE ON WHICH THEASSESSMENT IS BASED.


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EFFECT OF FAILURE TO APPEAL ON

TIME

ASSSESSMENT BECOMES

FINAL,

EXECUTORY, and

DEMANDABLE

DEFINITION AND NATURE OF SURCHARGE


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Surcharge is a civil penalty imposed by law as

addition to the main tax required to be paid.

It is not a criminal penalty but a civil administrativesanction

DEFINITION OF DELINQUENCY

Delinquency is the failure of the taxpayer to paythe tax due on the date fixed by law or indicated inthe assessment notice or letter of demand.


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60-day period for submission of

d


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documents

Non-submission of documents within 60 days does notrender the assessment final. Petitioner only lost is

chance of further contesting the assessment

Petitioner decides whether or not to submit

documents. Non-submission may mean that:

Petitioner finds no need to submit additional

documents; protest letter is sufficient; or

Petitioner failed to comply, thus it can no longer givejustification with regard to its objections as to the

correctness of the assessment.(CTA Case 6557 as quoted in Prulite UK v. CIR, CTA Case 6774, Sept. 11, 2007)

EFFECT OF DENIAL OF PROTEST:


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APPEAL THE DECISION OF THECOMMISSIONER WITHIN 30 DAYS TO THE

COURT OF TAX APPEALS.

EFFECT OF INACTION ON THE

PROTEST WITHIN 180 DAYS:

APPEAL THE DECISION OF DENIAL

DIRECTLY TO THE COURT OF TAX APPEALS


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C t f T A l


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2. The waivers in question were defective and did notvalidly extend the original 3-year prescriptive perioddue to following infirmities:

a) Lack of signature of CIR or the defectivemanner by which the other revenue official

has accepted and agreed to the waiver

b) Absence of dates of such acceptance

by the BIR; andc) Failure to show the taxpayer's receipt

of its copies of the subject waivers.


Requisites for a valid waiver under RMO 20-90

1 Th i t b i th f id tifi d h f Thi f


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1. The waiver must be in the form identified hereof. This form

may be reproduced by the Office concerned but there

should be no deviation from such form. The phrase "but notafter ______ 19 ___" should be filled up. This indicates the

expiry date of the period agreed upon to assess/collect the

tax after the regular three-year period of prescription. The

period agreed upon shall constitute the time within which toeffect the assessment/collection of the tax in addition to the

ordinary prescriptive period.

2. The waiver shall be signed by the taxpayer himself or his

duly authorized representative. In the case of a corporation,the waiver must be signed by any of its responsible

officials.

Soon after the waiver is signed by the taxpayer, the

Commissioner of Internal Revenue or the revenue official


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authorized by him, as hereinafter provided, shall sign the

waiver indicating that the Bureau has accepted and agreed

to the waiver. The date of such acceptance by the Bureaushould be indicated. Both the date of execution by the

taxpayer and date of acceptance by the Bureau should

be before the expiration of the period of prescription or

before the lapse of the period agreed upon in case asubsequent agreement is executed.

4. The waiver must be executed in three (3) copies, the

original copy to be attached to the docket of the case, the

second copy for the taxpayer and the third copy for the

Office accepting the waiver. The fact of receipt by the

taxpayer of his/her file copy shall be indicated in the original

copy.


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B. In the Regional Offices1.The Revenue District Officer with respect to tax cases still pending

investigation and the period to assess is about to prescribe regardless of amount.

2. The Regional Director, the Assistant Regional Director, the Chief,

Assessment Branch or the Chief, Legal Branch with respect to cases still pending

review and the period to assess/collect is about to prescribe, regardless of

amount. 3. The Regional Director, the Assistant Regional Director, the Chief,

Collection Branch or the Chief, Legal Branch with respect to cases still pending

collection and the period to assess/collect is about to prescribe regardless of

amount.

The prescriptive periods


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Prescriptive

Period

Start of running of period

1. Assessment of tax liability 3 years From filing of return in case of late

filing or as of last day of filing if filed

on or before the deadline

2. Request for reconsideration/protest of

assessment

30 days From receipt of assessment

3. Submission of documents supporting

protest

60 days From filing of protest

4. Appeal to the CTA 30 days From receipt of denial of request for

reconsideration or protest

5. Claim for refund with CIR 2 years From date of payment or from final

payment if paid in installment

6. Appeal to CTA on denial of claim for

refund with CIR

30 days;

w/n 2 yrs.

From receipt of denial

From date of payment of tax

7. Collection of tax 5 years From the date of assessment

Doctrine of Imprescriptibility


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p p y

The stature of limitation for assessment of tax ifa return is filed is within three (3) years from the

last day prescribed by law for the filing of the

last day prescribed by law for the filing of thereturn or if filed after the last day, with-in three

years from date of actual filing. If no return is

filed or the return filed is false or fraudulent, the

period to asses is within ten years from

discovery of the omission, fraud or falsity.

Doctrine of Imprescriptibility


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p p y

Any internal revenue tax which has beenassessed within the period of limitation as

prescribed in paragraph (a) of Sec. 222 may be

collected by distraint or levy or by a proceedingin court within five (5) years following the

assessment of the tax.


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CIVIL REMEDIES

REMEDIES AVAILABLE TO THE TAXPAYERUNDER THE TAX CODE IN CONNECTION


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UNDER THE TAX CODE IN CONNECTIONWITH THE COLLECTION OF TAXES

(1) Administrative Remedies

(a) Before Payment

1) filing a petition for reconsideration orreinvestigation

2) entering into compromise

(b) After payment

1) filing of claim for tax refund

2) filing of claim for tax credit

(2) Judicial Remedies

(a) Civil action


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(a) Civil action

1) appeal to the Court of Tax Appeals

2) action to contest forfeiture of chattel

3) action for damages

(b) Criminal action

1) filing of criminal complaint against erring

Bureau of Internal Revenue Officials and

employees.

Remedies available to the government


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1) Administrative

a) Distraint of personal property;

b) Levy of real property;

c) Enforcement of forfeiture of property;

d) Enforcement of tax lien;e) Entering into compromise of tax cases;

f) Requiring the filing of bonds;

g) Requiring proof of filing income tax returns;h) Giving of rewards to informers;

i) Imposition of surcharge and interest


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A collection notice cannot substitute aFAN; Procedural requirements for FANnecessary.

Case: (Golden Harvest Global Corporationv. VIR,CTA 7503, September 18,2009)


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The Final Notice before Seizure cannot be treatedass the assessment notice to inform petitioner ofthe factual and legal basis of its liabilities

NOTE: This position reverses their old position thatthe notice before seizure will be considered as theFAN for purposes of the 3-year prescriptive period.

GUIDELINES AS TO FINALITY OF ASSESSMENTS


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1. If the assessment is not contested by the

taxpayer with the Commissioner of InternalRevenue within thirty (30) days from receipt

thereof, the assessment becomes final,

executory and demandable upon the lapse ofthe 30-day period for appeal to the Court of

Tax Appeals.

2. The issuance of a warrant of distraint and levy

is proof of the finality of the assessment

because it amounts to an outright denial of

the taxpayersrequest for reconsideration.

3. If the Commissioner states in his last letter

that the same is his final decision, then such


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decision is the one which must be appealed

within the 30-day period to appeal it to theCourt of Tax Appeals.

4. The reply of the Commissioner of Internal

Revenue to a letter of the taxpayer, whichreply rejected the latters contention that the

assessment of his tax liabilities was barred by

prescription and required the taxpayer to paythe tax not later than or before a certain date

is in legal contemplation the ruling or decision

from which the taxpayer must appeal.

REMEDIES FOR THE COLLECTION OF

DELINQUENT TAXES


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DELINQUENT TAXES

A) The civil remedies

1) By distraint of good, chattels, or effects,

and other personal property of whatever

character, including stocks and othersecurities, debts, credits, bank accounts, and

interest in and rights to personal property,

2) By levy upon real property; andB) By criminal action

DEFINITION OF DISTRAINT


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Distraint (sometimes also called distress) is theseizure by the government of personal property,

tangible or intangible, to enforce the payment of

taxes to be followed, by its public sale of the

taxes are not voluntarily paid.

KINDS OF DISTRAINT


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Actual distraint here, there is a taking ofpossession of the personal property out of the

taxpayer into that of the government Physical

transfer of possession.

Construction distraint Here, the owner is

merely prohibited from disposing of his property.

Protest filed on a warrant of

Distraint is not valid


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Distraint is not valid

A warrant of Distraint and Levy cannot bethe subject of an appeal at the CTA

because it does not involve a disputed

assessment but a collection case.

(Central Metro Trade distributors, Inc., v. Commissioner

Guillermo Parayno, Jr., CTA EB Case No. 179, January

3, 2007)

DEFINITION OF LEVY (ON REAL PROPERTY)


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Levy, as a summary administration remedy,refers to the same act of seizure of real property

in order to enforce the payment of taxes.

HOW LEVY EFFECTED

The levy on real property is effected by serving

upon the taxpayer a written notice of levy in theform of a certificate containing:

1. A description of the property upon which levy

is made;

HOW LEVY EFFECTED


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The levy on real property is effected by servingupon the taxpayer a written notice of levy in the

form of a certificate containing:

1. a description of the property upon which levy

is made;

2. the name of the taxpayer; and

3. the amount of the tax and penalty due fromthem.


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149/184


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LEVY ON REAL PROPERTY


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Levy shall be affected by writing upon said

certificate a description of the property uponwhich levy is made. At the same time, written

notice of the levy shall be made to or served

upon the Register of Deeds of the province or

city where the property is located and upon

the delinquent taxpayer, or if he be absent

from the Philippines, to his agent or the

manager of the business in respect to whichthe liability arose, or if there be none to the

occupant of the property in question.


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GARNISHMENT


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Bankaccounts shall be garnished by serving a

warrant of garnishment upon the taxpayer and

upon the president, manager, treasurer or other

responsible officer of the bank. Upon receipt ofthe warrant of garnishment, the bank shall turn

over to the Commissioner so much of the bank

accounts as may be sufficient to satisfy the claim

of the Government.


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SUSPENSION OF RUNNING OF

STATUTE OF LIMITATIONS


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S U O O S

(COLLECTION)

1. There is a proceeding in court.

2. For sixty (60) days when the taxpayerrequest for a reinvestigation, which is

granted by the Commissioner.

3) When the taxpayer cannot be located

in the address given by him in the


156/184

g y

return filed upon which a tax is beingassessed or collected.

4) When the warrant of distraint or levy

is duly served upon the taxpayer.5) When the taxpayer is out of the

Philippines.

AUTHORITY OF THE COMMISSIONERTO COMPROMISE, ABATE AND


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REFUND OR CREDIT TAXES

The Commissioner may:

Compromise the payment of any internal

revenue tax, when;A reasonable doubt as to the validity of theclaim against the taxpayer or;

The financial position of the taxpayer

demonstrates a clear inability to pay theassessed tax.

MINIMUM COMPROMISE SETTLEMENT


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1) For cases of financial incapacity, aminimum compromise rate equivalentto ten percent (10%) of the basicassessed tax; and

2) For other cases, a minimumcompromise rate equivalent to forty

percent (40%) of the basic assessedtax.

3) Where the basic tax involved exceeds


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One Million Pesos (P1,000,000) or

where the settlement offered is lessthan the prescribed minimum rates, the

compromise shall be subject to the

approval of the Evaluation Board whichshall be composed of the

Commissioner and the four Deputy

Commissioner.

Compromise Settlement -

Coverage


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Coverage

1. Delinquent accounts;2. Cases under administrative protest (FAN) pending in

the Regional Offices, RDO, Legal Service, LTS,

Collection Service, Enforcement Service and other

offices in the National Office;

3. Civil tax cases being disputed before the courts;

4. Collection cases filed in courts;

5. Criminal violations, other than those already filed incourt or those involving criminal tax fraud.

Compromise Settlement


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DOUBTFUL VALIDITY There is reason to believe that the

assessment is lacking in legal and/or

factual basis

Minimum compromise rate40%


Doubtful validity


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y

1. Failure to file administrative protest for alleged failure toreceive AN

2. Jeopardy assessment

3. Arbitrary assessment

4. Failure to file a request for reinvestigation/ reconsiderationwithin 30 days from receipt of FAN

5. Failure to appeal to CTA, assessment failed to comply with

Sec. 228

6. Assessments based on Best Evidence Obtainable Rule7. Questionable validity of the Waiver

8. Issue has been decided by lower courts in favor of taxpayer

but still pending with SC


Financial incapacity


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p y

1. Capital deficit by at least 50%-40%2. Networth deficit (total liabilities exceed total assets)10%

3. Purely compensation income earner and no other leviable or

distrainable assets, other than his family home10%

4. Bankrupt/insolvent as declared by competenttribunal/authority20%

5. Dissolved corporation20%

6. Non-operating companies for a period of:

3 years or more10% Less than 3 years20%

*Taxpayer should execute a waiver of his privilege of the secrecy of bank

deposits


Exclusion


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1. Withholding tax cases, unless the applicant-taxpayer invokesprovisions of law that cast doubt on the taxpayers obligation

to withhold;

2. Criminal tax fraud cases confirmed CIR or his representative;

3. Criminal violations already filed in court;4. Delinquent accounts with duly approved schedule of

installment payments;

5. Cases where taxpayer agreed to pay reduced assessment

6. Cases which taxpayer agreed to pay reduced assessment forcompromise is doubtful validity of the assessment); and

7. Estate tax cases where compromise is requested on the

ground of financial incapacity of the taxpayer.


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TAX CREDIT OR REFUND OF TAXES


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No tax credit or refund of taxes orpenalties shall be allowed unless the

taxpayer files in writing with the

Commissioner a claim for credit or refundwithin two (2) years after the payment of

the tax or penalty.

The following guidelines are applicable on tax credit or

refund:


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1. The taxpayer files in writing with the Commissioner aclaim for credit or refund;

2. A return filed showing an overpayment shall be

considered as a written claim for credit or refund;

3. No tax refund be given resulting from availment of

incentives granted pursuant to special laws for which

no actual payment was made;

4. The claim must be filed within two (2) years after thepayment or the tax or penalty.


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170/184


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FORFEITURE OF CASH REFUND


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A Tax Credit Certificate issued in accordance

with the pertinent provisions of the Code, which

shall remain unutilized after five (5) years from

the date of issue shall, unless revalidated, be

considered invalid and shall not be allowed aspayment for internal revenue tax liabilities of the

taxpayer, and the amount covered by the

Certificate shall revert to the General Fraud.

POWER OF THE COMMISSIONER

TO MAKE ASSESSMENTS


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Examination of Returns and Determination of

Tax Due.

Authority To Conduct Inventory-Taking,

Surveillance and to Prescribe Presumptive

Gross Sales and Receipts.

Authority to Terminate Taxable Period.

Authority of the Commissioner to PrescribeReal Property Values.

Power of the Commissioner to

Suspend the Business Operations of a

T


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Taxpayer

The Commissioner or his authorized

representative is hereby empowered to

suspend the business operations and

temporarily close the establishment of

any person for any of the following

violations.


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The temporary closure of the


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The temporary closure of the

establishment shall be for the duration ofnot less than five (5) days and shall be

lifted only upon compliance with whatever

requirements prescribed by theCommissioner in the closure order.

All surveillance activities shall be covered by

Mission Orders (MOs). The MOs shall be printed

t bl f t b i iti d b th


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as accountable forms to be requisitioned by the

Revenue Officials authorized to sign said MOs.MOs issued should be chronologically recorded

in the Mission Order Register.

Original : Revenue Officer(s)

2ndCopy : Investigating Offices /

Divisions file copy

3rdCopy : Issuing Offices file copy

4thCopy : Taxpayers copy (in case of

overt surveillance)

Analysis of Surveillance Results

1. Extrapolate the data gathered from the surveillance by

using the following formulas:


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using the following formulas:

To get the Average Daily Sales:

Total Sales During Surveillance

Total No. of Days Under Surveillance =

Average Daily

Sales (ADS)

To get the Average Quarterly Sales:

ADS x 30 days x 3 months = Average Quarterly Sales (AQS)


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TAX AMNESTY

Case: (Philippine Banking Corporation v. CIR,GR 170574, January 30, 2009)


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As a qualified tax amnesty applicant which has

complied with the requirements of the taxamnesty program, shall thereafter be immune

from the payment of taxes and appurtenant

civil, criminal or administrative penalties arising

from the failure to pay internal revenue taxes fortaxable year 2005 and prior years.

Supreme Court:


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Tax amnesty qualification

The disqualification under the amnesty law

is exclusive. The BIR cannot expand it bymere regulation.

Disqualifications added under a BIR issuance

i dditi t th t id d i th l i t


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in addition to that provided in the law is not

valid (MBTC vs. CIR,CTA Case No. 269, 3-28-08 )

A tax amnesty is a general pardon and must be liberally

construed. A taxpayer who desires to avail of the

benefits of must only have to comply with the requisitesof the law: (1) payment of amnesty tax; (2) notice of

availment; (3) file SALN (4) file Tax amnesty return.

Compliance of these will qualify a taxpayer to the

benefits of amnesty.


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Thank You

and

M GOD Bl Y i