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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AUTHORIZED TO RECEIVE THE SAME SHALLNOT BE WITHDRAWN: PROVIDED, THAT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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Limitation on the best-evidence rule
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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Limitation on the best-evidence rule
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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Limitation on the best-evidence rule
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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Protest on the PAN cannot be
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.
Protest on the PAN cannot be
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Protest on the PAN cannot be
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.
Court of Tax Appeals:
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.
Court of Tax Appeals:
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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.
Court of Tax Appeals:
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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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
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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%
Compromise Settlement
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
Compromise Settlement
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
Compromise Settlement
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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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