tax rights and remedies-2010

7/28/2019 Tax Rights and Remedies-2010

1/53

1

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


2/53

2

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


3/53

3

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


4/53

4

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.


5/53

5

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)


6/53

6

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


7/53

7

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


8/53

8

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)


9/53

9

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


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


10/53

10


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


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)


11/53

11

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.


12/53

12


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.


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.


13/53

13


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.


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).


14/53

14

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.


15/53

15

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.


16/53

16

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).


17/53

17

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)


18/53

18

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)


19/53

19

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)


20/53

20

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.


21/53

21

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


22/53

22

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).


23/53

23

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.


24/53

24

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.


25/53

25

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.


26/53

26

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


27/53

27

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


28/53

28

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)


29/53

29

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)


30/53

30

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)


31/53

31

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)


32/53

32

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


33/53

33

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)


34/53


35/53

35

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).


36/53

36

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.


37/53

37

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)]


38/53

38

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


39/53

39

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


40/53

40


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.


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.


41/53

41


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


42/53

42


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


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)


43/53

43


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


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


44/53

44


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


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


45/53

45


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


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


46/53

46

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.


47/53

47

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)


48/53

48

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)


49/53

49

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.


50/53

50

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


51/53

51

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.


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.


52/53

52


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.


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.


53/53


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.


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.