TAX GUIDE ON PHILIPPINE TAXATION LAWS
THE CONSTITUTION OF THE PHILIPPINES (constitutional limitations) Observance of due process of law Observance of equal protection of the laws Prohibition against imprisonment for nonpayment of poll tax Prohibition against impairment of obligation of contracts Requirement of uniformity and equity in taxation Prohibition against taxation appropriation for religious purposes Prohibition against taxation of religious, charitable and educational entities(Religious and charitable institutions exempt from property taxes) Prohibition against taxation of non-stock , nonprofit educational institutions and proprietary educational institutions (exempt from property and income taxes as well as customs duties except income derived from business activity not related to its educational purpose) NATIONAL INTERNAL REVENUE CODE OF 1997 Organization and Function of the Bureau of Internal Revenue Income Tax Estate and Donor's Tax Value Added Tax Other Percentage Taxes Excise Taxes Documentary Stamp Tax Remedies Compliance Requirements Statutory Offenses and Penalties Allotment of Internal Revenue Oversight Committee Repealing Provisions Final Provisions Annexes TARIFF & CUSTOMS CODE ( Taxes on Importations) LOCAL GOVERNMENT TAXATION Local Government Taxation General Provisions Specific Provisions on the Taxing and Other Revenue-Raising Powers of Local Government Units Provinces Municipalities Cities Barangays Common Revenue Raising Powers Community Tax Collection of Taxes
1987 Constitution
available at the BIR library
Section 1, Article III, Bill of Rights Section 1, Article III, Bill of Rights Section 20, Article III, Bill of Rights Section 10, Article III, Bill of Rights Section 28, Article VI, Legislative Department Section 29, Article VI, Legislative Department Section 28, Article VI, Legislative Department
section 4, Article XVI, Education
Tax Code Title I, NIRC
Tax Code
Title II, NIRC Title III, NIRC Title IV, NIRC Title V, NIRC Title VI, NIRC Title VII, NIRC Title VIII, NIRC Title IX, NIRC Title X, NIRC Title XI, NIRC Title XII, NIRC Title XIII, NIRC Title XIV, NIRC
Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Tax Code Customs available at the Website BIR library DILG Website available at the BIR library
Book II, Title I Book II, Title I, Chapter I Book II, Title I, Chapter II
Book II, Title I, Chapter II, Art. 1 Book II, Title I, Chapter II, Art. 2 Book II, Title I, Chapter II, Art. 3 Book II, Title I, Chapter II, Art. 4 Book II, Title I, Chapter II, Art. 5 Book II, Title I, Chapter II, Art. 6 Book II, Title I, Chapter III
Civil Remedies for Collection of Revenues Miscellaneous Provisions Taxpayer's Remedies Real Property Taxation General Provisions Appraisal and Assessment of Real Property Assessment Appeals Imposition of Real Property Tax Special Levies on Real Property Collection of Real Property Tax Disposition of Proceeds Special Provisions Share of Local Government Units in the Proceeds of the National Taxes Allotment of Internal Revenue Share of Local Government Units in the National Wealth SPECIAL LAWS Omnibus Investment Code (Executive Order 226 as amended by RA 7888, 7918 and 8756) Philippine Economic Zone Authority (Republic Act 7916 as amended by RA 8748) Bases Conversion & Development Act (Republic Act 7227) Foreign Investment Act of 1991
Book II, Title I, Chapter IV Book II, Title I, Chapter V Book II, Title I, Chapter VI Book II, Title II Book II, Title II, Chapter I Book II, Title II, Chapter II Book II, Title II, Chapter III Book II, Title II, Chapter IV Book II, Title II, Chapter V Book II, Title II, Chapter VI Book II, Title II, Chapter VII Book II, Title II, Chapter VIII Book II, Title III Book II, Title III, Chapter I Book II, Title III, Chapter II
NEDA Website available at the BIR library
PEZA Website available at the BIR library BCDA Website available at the BIR library BOI Website
(Republic Act 7042 as amended by RA 8179) Foreign Bank Liberalization Act
available at the BIR library available at the BIR library
(Republic Act 7721) Build Operate Transfer Act
BOI Website
available at the BIR library
(Republic Act 6957 as amended by RA 7718) Retail Trade Liberalization Act of 2000
DTI Website
available at the BIR library
(Republic Act 8762) Export Development Act of 1994
DTI Website
available at the BIR library
(Republic Act 7844) Oil Industry Deregulation Act (Republic Act 8180 as amended by RA 8479) Zamboanga City Special Economic Zone Act (Republic Act 7903) Cagayan Special Economic Zone Act of 1995 (Republic Act 7922) Alien Social Integration Act (Republic Act 7919 as amended by RA 8247) Magna Carta for Small and Medium Enterprise
available at the BIR library PEZA Website available at the BIR library PEZA Website available at the BIR library available at the BIR library available at the
BIR library (Republic Act 6977 as amended by RA 8289) Special Purpose Vehicle Act
available at the BIR library
(Republic Act 9182) ADMINISTRATIVE MATERIALS Revenue Regulations 1960s-2002
BIR Website available at the BIR library available at the BIR library available at the BIR library available at the BIR library available at the BIR library available at the BIR library available at the BIR library
1998 1999 2000 2001 2002 2003 Revenue Memorandum Circulars 1960s-2002
BIR Website available at the BIR library available at the BIR library available at the BIR library available at the BIR library
2001 2002 2003 Revenue Memorandum Orders 1960s-2002
BIR Website available at the BIR library available at the BIR library available at the BIR library available at the BIR library available at the BIR library available at the BIR library
1998 1999 2000 2001 2002 Revenue Memorandum Ruling 2001
BIR Website available at the BIR library available at the BIR library
2002 ADMINISTRATIVE RULINGS/OPINIONS BIR Numbered Rulings 1960s-2002 1998 1999 2000
BIR Website available at the BIR library available at the BIR library available at the BIR library available at the BIR library
2001
available at the BIR library available at the BIR library available the Law Division available at the Regional Offices
VAT Rulings Delegated Authority Rulings Regional Rulings
CASE LAW Supreme Court Decisions
Supreme Court Website
Court of Tax Appeals Decisions Court of Appeals Decisions TREATIES Philippine Treaty Series
available at the BIR Library and ITAD available at the BIR Library and ITAD available at the BIR Library and ITAD available at the BIR Library and ITAD available at the BIR Library and ITAD available at the BIR Library and ITAD available at the BIR Library and ITAD available at the BIR Library and ITAD
Vienna Convention
UNESCO-Florence Agreement
RP-CARE Agreement
RP-UNICEF Agreement
RP-IBRD Agreement
RP-ILO Agreement
RP-FAO Agreement
PERIODICALS AND OTHER REFERENCES Philippine Revenue Journal (up to year 2000) BIR Tax Bulletin BIR Annual Report
BIR Website
Taxpayer's Rights and Obligations
BIR Website
Zonal Valuation
BIR Website
NTRC Tax Research Journal
Tax Remedies Notes in Tax Remedies February 24, 2009
available at the BIR Library available at the BIR Library available at the BIR Library available at the BIR Library available at the BIR Library and Zonal Valuation Division available at the BIR Library
PRE-ASSESSMENT NOTICE impt!!! A pre-assessment notice is served by the Government upon the taxpayer under any of the following circumstances: 1. if the taxpayer fails to file a return where return is required; 2. if he files a return but fails to pay the tax; 3. if he files a return and pays the tax, but payment is insufficient because certain deductions claimed are disallowed by the BIR.
After the taxpayer’s receipt of the pre-assessment notice, any of the following situations can take place: 1. taxpayer accepts liability and pays the tax as appearing on the pre-assessment notice; 2. taxpayer disagrees with the pre-assessment notice and responds by explaining that he is not liable; 3. taxpayer pays the tax and later on files a written claim for refun d; 4. taxpayers enters into a compromise agreement with the BIR; 5. taxpayer ignores the pre-assessment notice. The tax code states that the period to respond shall be prescribed by implementing rules and regulations. If the taxpayer fails to respond within such period (30 days), a final assessment shall issue. ORDINARY PERIOD FOR ASSESSMENT The right of the government to asses and later on to collect the tax is subject to prescription, upon th e lapse of which it can no longer exercise this right. Section 203, of the tax code provides th at internal revenue taxes shall be assessed within 3 years after the last day prescribed by law for the filing of the return. The same provision of law lays down the rules as to when the 3 year prescriptive period for assessment begins: 1. if the return is filed before the last day prescribed by law for the filing thereof, it shall be considered as filed on the last day; 2. if the return is filed on the last day prescribed by law, then it is considered as filed on such day; 3. if the return is filed beyond the period prescribed by law, the 3 year period shall be counted from the day the return is filed. So it is clear, that the reckoning point for the 3 year prescriptive period is flexible; if the return is filed on or before the deadline, the reckoning point is the deadline; if filed beyond the deadline, the reckoning point is the date the return is actually filed. The 3 year period for assessment begins to run from such a date. FINAL ASSESSMENT...IMPT! A final assessment issues: 1. if the taxpayer, having received a pre-assessment notice fails to respond within the period provided for by the rules and regulations; 2. under the 5 circumstances enumerated under section 228 of the tax code where pre-assessment notice is not necessary
Section 228. enumerates the exceptional circumstances where a pre-assessment notice is not necessary: IMPT!!! 1. when the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; 2. when a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or 3. when a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to h ave carried over and automatically applied the same amount claimed against the estimated tax liabilities for t he taxable quarter or quarters of the succeeding taxable year; 4. when the excise tax due on excisable articles has not been paid, or 5. when an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded, or transferred to non-exempt persons. Under the foregoing circumstances, the taxpayer s hall immediately receive a final assessment wit hout
the benefit of pre-assessment notice.
REMEDIES AVAILABLE TO THE GOVERNMENT IN THE COLLECTION OF THE INCOME TAX...VERY IMPT!!
1. ADMINISTRATIVE a. Distraint of personal property; b. Levy of personal property c. Enforcement of forfeiture of property d. Enforcement of tax lien e. Requiring the filing of bonds f. Requiring proof of filing income tax returns g. Deportation of aliens h. Inspection of books of accounts. 2. JUDICIAL a. ordinary civil action b. criminal action
DISTRAINT- seizure by the government of personal property, tangible or intangible, to enforce the payment of taxes to be followed by its public sale if the taxes are not voluntarily paid. Kinds of Distraint a. Actual- there is taking of possession of the personal property out of the taxpayer into that of the government; b. Constructive- the owner is merely prohibited from disposing of his property. LEVY- A summary administrative remedy, seizure of real property to enforce payment of taxes. A written notice of levy, containing a description of the property upon which levy is made, the name of the taxpayer and the amounts of the tax and penalty due from them is served upon the taxpayer.
FORFEITURE- a divestiture of property without compensation, in consequence of a default or offense. In case of chattels and removal of fixtures of any sort, forfeiture is enforced by seizure and sale or destruction of the specific forfeited property. The forfeiture of real property is enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may require. TAX LIEN- a legal claim or charge on property eit her real or personal established by law as a security in default of the payment of taxes. The tax, together with interest, penalties and cost that may accrue in addition thereto is a lien upon all property and rights to property belonging to the taxpayer. The lien however, shall not be valid against any mortgagee, purchaser or judgment creditor until legal notice of such liens should be filed by the Commissioner of internal revenue in the Office of the Register of Deeds of the province or city where the property of the taxpayer is located. The lien attaches when the taxpayer neglects or refuses to pay the tax after demand, but relates back from the time when assessment was made by the Commissioner. REQUIRING THE FILING OF BONDS - Filing of performance bond to secure the payment of taxes or compliance with certain provisions of tax laws and regulations. This may be required by the BIR for the issuance of a tax clearance. REQUIRING PROOF OF FILING INCOME TAX RETURNS. – Before a license to engage in trade or business or occupation or to practice a profession can be issued to a person, partnership, association or corporation, he must submit to the officer issuing such license or permit, proof that he has filed his income tax return during the preceding year and that income taxes due have been paid thereon. DEPORTATION OF ALIENS- any alien who 1. knowingly and fraudulently evades the payment of any internal revenue tax or 2. willfully refuses to pay such tax an d its accessory penalties after the decision on the tax liability rendered by the Commissioner of Internal Revenue, or the CTA or any competent judicial tribunal shall have become final and executor, is subject to deportation. The penalty of deportation is not a bar to any proceeding taken by the government to enforce collection of tax delinquency. INSPECTION OF BOOKS OF ACCOUNTS
JUDICIAL ACTION 1. Civil Action- After the assessment made by the Commissioner of Internal Revenue has become final and executory for failure of the taxpayer to dispute the same and appeal the disputed assessment to the Court of Tax Appeals, the government may institute civi l actions to collect internal revenue taxes in the Regional Trial Court and the Metropolitan Trial Court, City and municipal courts. 2. Criminal Action- maybe pursued by the authorities for the collection of d elinquent taxes. An assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion. The crime is complete when the violator has knowingly and willfully filed a fraudulent return or neglected to file a return with intent to evade the tax. If the taxpayer is acquitted, the government may still collect the tax i n a civil action, because the payment of a tax is an obligation imposed by statute and does not arise from a criminal act.
Prescriptive period for collection. Where an assessment was made, the period for collection by judicial action or by distraint or levy is within 3 years after the date of assessment. Where no assessment was made and a return was filed, and the same is not false or fraudulent, the period for collection by a proceeding in court is within 3 years after the return was due or filed whichever is later, except: Where a return required to be filed was not filed, or even if filed the same is false or fraudulent, and made with the intent to evade the tax, the period is ten years after discovery of the omission to file the return or from the discovery of the falsity or fraud. The other exception relative to the prescriptive periods for assessment are also applicable. Where the government makes another assessment on the basis of a reinvestigation requested by the taxpayer, or a revised assessment because of an amended return or as a result of a reinvestigation asked for by the taxpayer, the period is counted from the last assessment or the last revised assessment. Where the action is brought to enforce a compromise agreement into between the commissioner and the taxpayer, the prescriptive period is ten years from the time the cause of action accrues as fixed in the civil code. The running of the statute of limitation on the making of an assessment, the beginning of distraint or levy or any proceeding in court for collection is suspended: IMPT!!!!! 1. for the period during which the Commissioner of Internal Revenue is prohibited from making tax assessment or beginning the distraint or levy or any proceeding i n court and for sixty days thereafter; 2. when the taxpayer requests for a reinvestigation which is granted by the commissioner; 3. when the taxpayer cannot be located in the address given by him in the return fil ed upon which a tax is being assessed or collected, unless the taxpayer informs the Commissioner of any change in address; 4. when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or with a member of his household with sufficient discretion and no property could be located; and 5. When the taxpayer is out of the Philippines. Learn about tax rights and remedies
(The Philippine Star) | Updated April 17, 2016 - 12:00am MANILA, Philippines – How do you deal fairly and squarely with tax authorities when there are disputes in your tax assessments? What do you do when they knock on your door for a tax mapping, audit or when you are presented with a letter of authority to inspect your books? To address these issues and help individual and business taxpayers, the Center for Global Best Practices will conduct its yearly seminar
titled “Tax Rights and Remedies for SMEs and Large Taxpayers” on May 6, 2016 at the EDSA Shangri La Hotel, Mandaluyong City. In this seminar, know the taxpayer’s rights that matter, understand the BIR’s bases of assessment, how to craft a protest letter, what to do when the BIR padlocks your establishment according to Oplan Kandado, or when they enforce auction on your property for tax collection. The program will also extensively cover the topics on the remedial actions a taxpayer can take from an administrative, judicial, procedural, and substantive perspective. Case facts will be presented to get a full understanding of the latest Supreme Court and Court of Tax Appeal rulings on different tax issues. This seminar will feature tax expert practitioner Atty. Nicasio C. Cabaneiro, CPA. He is a sought-after lecturer tax consultant of many high net worth families and individuals and corporations to help them with their tax and other legal matters. He is an authority in the practice of taxation and commercial law. He finished his accounting degree (magna cum laude) and his law degree (cum laude) at the San Beda College of Law. Interested participants three or more are encouraged to avail of the group discounts. For details and a complete list of seminars including Taxation of Professionals and General Partnerships, Estate and Tax Planning, A Guide to Wills and Trusts, and more, log on to www.cgbp.org or ca
FACTS: Raytheon (original company) was a pioneer manufacturer of rectifier tubes which are used in radio receiving sets (using alternating current instead of batteries). The Radio Corporation of America developed a competitive tube, with the same effect as the Raytheon tube. RCA owned many patents covering radio circuits. Beginning 1927, RCA’s license agreements with radio set manufacturers included a clause which required the manufacturers to buy their tubes only from RCA. Soon, Raytheon’s sales
gradually declined. Raytheon (new company that bought original company) brought an action against RCA for violating antitrust laws, as well as for destruction of Raytheon’s profitable business and goodwill. Both parties finally
agreed on a $410,000 settlement of the anti-trust case, with RCA acquiring patent license rights and sublicensing rights. Raytheon counted the $60,000 from the amount as income from patent licenses, while the remaining $350,000 were counted as damages, and therefore not subject to income tax. The income from patents was determined from the cost of the development of such patents, and the fact that few of them were being used and none were earning royalties. Thus, the value of patents and the goodwill was backed by evidence during trial. ISSUE: Whether or not damages for loss of business good will are a nontaxable return of capital or income. HELD: No. They are not taxable in general. Damages for violation of the anti-trust acts are treated as ordinary income where they represent compensation for loss of profits. The test is not whether the action was one in tort or contract but rather the question to be asked is "In lieu of what were the damages awarded?" Where the suit is not to recover lost profits but is for recovery in injury to good will, the recovery represents a return of capital and, with certain limitations (necessity of proof/evidence), is not taxable. The suit by Raytheon was not one of recovering lost profits. From its allegations, Raytheon’s suit was for
the destruction of its goodwill. The presentation of evidence of profits was merely used to establish the value of good will and the business, since such value is derived by a capitalization of profits. Therefore, a recovery on goodwill and business represents return of capital. The fact that the case ended in settlement is of no moment. The determining factor is the NATURE of the basic claim from which the compromised amount was realized. However, compensation for the loss of goodwill in excess of its cost is gross income. The law does not exempt compensatory damages just because they are a return of capital. The tax exemption applies only to the portion that recovers the cost basis of that capital; any excess damages serve to realize prior appreciation, and should be taxed as income. In addition, evidence must be produced to establish the value of the goodwill and business. In this case, Raytheon was not able to establish the value of its goodwill and business. It did not produce enough evidence to such effect. The amount of nontaxable capital cannot be ascertained. Since Raytheon could not establish the cost basis of its good will, its basis
will be treated as zero. The Court concludes that the $350,000 of the $410,000 attributable to the suit is thus taxable income. ax Remedies: Remedies of the Government on 7:09 AM in Notes, Taxation 0 IMPORTANCE OF TAX REMEDIES o o
to enhance the government’s tax collection efforts to safeguard against arbitrary action NON-INJUNCTION OF TAX STATUTES
Sec. 218, NIRC: No court shall have the authority to grant injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. EXCEPTION: a decision of the CIR appealed to the CTA does not suspend payment, levy or distraint of taxpayer’s property; but if the CTA finds that collection may jeopardize the interest of the taxpayer or the
government, then CTA may suspend or restrain the collection of tax and require the taxpayer to either deposit the amount claimed or to file a surety bond for more than double the amount with the court Q: During pendency of the appeal in the CTA, the BIR files a civil action for collection of tax in the RTC, what is the remedy of the taxpayer? A: The taxpayer may file a motion to di smiss in the RTC on the ground that the collection of tax has no basis where the assessment thereof is still under dispute with CTA. REMEDIES OF THE GOVERNMENT
- these remedies may be pursued singly or simultaneously 1. Tax Lien
- from the moment the tax is due, not from the service of the warrant of distraint - not valid against a mortgage purchaser or judgment creditor until NOTICE has been filed by CIR with the RD of the province or city where property is located (the tax lien shall be annotated on the title) 2. Compromise
- allowed when: 1. 2.
a reasonable doubt as to validity of the claim against the taxpayer exists financial position of the taxpayer demonstrates a clear inability to pay the assessed tax (minimum compromise rate equivalent to 10% of the basic assessed tax and the taxpayer must waive in writing his privilege under the Banking Secrecy Law, such waiver constituting authority of the CIR to inquire into his bank deposits) Compromise v. ABATEMENT:
o o
As Effect – C: reduce tax liability; A: cancel the entire tax liability As to when proper – C: when there is reasonable doubt as to validity of tax assessment or the taxpayer is financially incapacitated to pay; A: when there is unjust assessment (excessive) or when administration and collection cost do not justify the amount of tax due
GR: compromise of criminal violations is allowed, EXCEPT: 1. 2.
those already filed in court those involving fraud
GR: power to compromise is a non-delegable power of CIR, EXCEPT that regional evaluation board may compromise: 1. basic taxes less than P500,000 2. minor criminal violations NOTA BENE: A compromise penalty is in l ieu of a criminal prosecution. If the taxpayer fails to abide by the compromise arrangement, the government has two options: 1. 2.
collect the compromised sum; or disregard the compromise and collect the original tax due. ADDENDUM: But if the taxpayer does not agree to the compromise, a collection action by the government for the compromise penalty does not lie. This is because, by its nature, a compromise is entered into by mutual agreement
between parties and the proposed compromise penalty is neither tax nor an administrative penalty for tax delinquency. Q: May a case still be compromised after final judgment? A: No, because by virtue of the final judgment, the government had already acquired a vested right. Q: Can withholding tax be compromised? A: No. Taxpayer constituted as withholding agent who deducted and withheld at source the tax on income payment made by him holds the taxes as trust funds for the government. He is obligated to remit them to the BIR. His subsequent inability to pay or remit the tax withheld is not a ground for compromise because the withholding tax is not a tax upon the withholding agent but is only a procedure for collection of tax. 3. Distraint and Levy
- summary, extra-judicial or administrative enforcement remedies DISTRAINT v. LEVY: distraint is to personal property while levy is to real property KINDS OF DISTRAINT:
1. 2.
Actual – when delinquency of the payment sets in; there is actual seizure and distraint Constructive – no actual delinquency ; the owner is prohibited from disposing of his property; preventive remedy to forestall a possible dissipation of the taxpayer’s assets when delinquency takes pl ace CONSTRUCTIVE DISTRAINT PROPER IF:
1. 2. 3. 4.
taxpayer is retiring from any business subject to tax he intends to leave the Philippines he removes his property therefrom he performs any act tending to obstruct the proceedings for collecting the tax due or which may be due from him PROCEDURE:
o
1. 2. 3. 4.
Actual Distraint Procedure commencement of distraint proceedings by CIR (P1M+) or RDO (P1M or less) service of warrant of distraint notice of sale of distrained property to the owner or possessor not less than 20 days from date of sale, and osting in not less than 2 public places in municipality or city where distraint is made sale of property distrained by public auction, highest bidder for cash, or with approval of CIR through duly licensed commodity or stock exchange
EQUITY OF REDEMPTION: payment of all proper charges any time prior to sale NOTA BENE: A person in possession or having control of property under actual distraint (or levy) may be penalized if upon demand he fails or refuses to surrender the goods, EXCEPT in case of judicial attachment or execution. o
1. 2. 3.
o
1. 2. 3.
4.
5. 6. 7. 8.
Constructive Distraint Procedure commencement of distraint proceedings service of warrant of constructive distraint taxpayer is required to sign a receipt covering the property distrained and obligate himself to preserve the same; if taxpayer refuses to sign the receipt, the revenue officer shall prepare a list of property distrained and in the presence of two witnesses leave a copy thereof in the premises Procedure on Levy of Real Property service of warrant of levy after the expiration of time required to pay the delinquent tax duly authenticated certificate showing the name of the taxpayer and the amounts of the tax and penalty due from him (operate with the force of a legal execution) written notice of levy to the Register of Deeds and the delinquent taxpayer, his agent or manager (if TP is absent), occupant of the property (if no agent/manager); in case government first effected distraint and it is not enough to cover the tax, then CIR shall, within 30d after execution of the distraint, proceed with levy advertisement of the sale within 20d after levy for a period of at least 30d at the main entrance of the municipal building and other public, conspicuous places and publication once a week for 3wks in a newspaper of general circulation public sale of the property under levy at main entrance of the municipal building or on the premises to be sold return of sale within 5d after sale issue certificate of sale; taxpayer is entitled to any residue in case of no bidder, the property shall be declared forfeited to the government
EQUITY OF REDEMPTION: any time prior to sale RIGHT OF REDEMPTION: within 1yr from date of sale or forfeiture
4. Civil Action
WHEN: 1.
when a tax is assessed and the assessment becomes final and unappealable (because TP failed to file administrative protest with BIR within 30d fr om receipt of assessment) 2. when an administrative protest is denied or is not acted upon within 180d from submission of documents and TP fails to appeal to the CTA
WHERE: regular courts, with approval of CIR except if express delegation to Regional Director; motion to dismiss the complaint should also be filed in the regular courts HOW: the complaint must be brought in the name of the Government and conducted by a legal officer of the BIR 5. Criminal Action
WHEN: before lapse of 5 years (prescription period) WHERE: DOJ HOW: complaint approved by CIR brought in the name of the Government and conducted by a legal officer of the BIR GROUND: prima facie showing of failure to file a required tax return or a willful attempt to evade taxes; no need for assessment 6. Other Remedies Available o o o
Forfeiture Suspension of Business Operations Enforcement of Administrative Sanctions
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Tax Remedies: Remedies of the Taxpayer
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REMEDIES OF THE TAXPAYER BEFORE PAYMENT
1. administrative protest 2. request for reconsideration 3. request for reinvestigation 4. judicial protest AFTER PAYMENT
1. 2.
claim for tax refund claim for tax credit 1. Administrative Protest (Protest against Assessment)
WHEN: within 30 days from receipt of final assessment notice (FAN) WHERE: BIR HOW: written protest, stating facts, applicable law, rules and regulations or jurisprudence o which his protest is based; if only portions of FAN are disputed, must pay the deficiency tax on undisputed portion PROCEDURE: 1. protest against pre-assessment notice (PAN) within 15 days from receipt 2. protest against FAN within 30 days from receipt 3. submit relevant documents within 60 days from filing of protest 4. CIR has 180 days to decide 5. in case of denial or lapse of 180-day period, taxpayer has 30 days to bring his protest to the CTA en division
WHEN PAN IS NOT REQUIRED: 1.
finding for any deficiency tax is the result of mathematical error in computation of tax as appearing on face of return
2. 3.
4. 5.
a discrepancy has been determined between the tax withheld and the amount actually remitted taxpayer who opted to claim a refund or credit of excess creditable withholding tax for at taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter/s for the succeeding taxable year/s excise tax due on excisable articles have not been paid article locally purchased or imported by an exempt person 2. Request for Reconsideration – a plea for re-evaluation of an assessment on the basis of EXISTING
RECORDS without need of additional evidence (question of law or fact or both) 3. Request for Reinvestigation – a plea for reinvestigation of an assessment on the basis of NEWLY-
DISCOVERED EVIDENCE that a taxpayer intends to present in the reinvestigation (question of law or fact or both) - in either case, the request must be accompanied by a WAIVER of the statute of limitations in favor of the government 4. Judicial Protest
PROCEDURE 1. 2. 3. 4.
within 30 days from denial of protest by CIR or from lapse of 180-day period, appeal to CTA division if CTA division denies, motion for reconsideration within 15 days from receipt within 15 days from denial of motion, appeal to CTA en banc appeal to SC within 15 days by petition for review (Rule 45) 5. Refund/Credit
- based on the legal principle of quasi-contract or solutio indebiti - in the nature of an exemption, which cannot be allowed unless granted in the most explicit and categorical language - strictly construed against the claimant (proof of claim must be established) - partial payment of a tax cannot be the basis for a tax refund - interest on taxes refunded may not be paid by the Government to the taxpayer, UNLESS: (a) the CIR acted with patent arbitrariness (inexcusable or obstinate disregard for legal provision); and (b) in the case of income taxes withheld on the wages of employees, which must be refunded within 3 mos from April 15 Tax Refund vs. Tax Credit o o
R: takes place when there is actually a reimbursement of the tax C: the Government issues a tax certificate or tax credit memo covering the amount determined to be reimbursable, which can be applied after proper verification against any sum that may be due and collectible from the taxpayer Requisites for Recovery
1. 2. 3.
there was an actual collection and receipt by the Government of the tax sought to be recovered (factual proof) legal basis for the granting of refund or credit, including verification of compliance with the statutory requirements relative to the filing of claims within the reglementary 2-yr period in case of corporations, must signify whether to avail of tax refund or tax credit in the corporate income tax return Q: Are income tax returns actionable documents which must be specifically denied by the Government, otherwise it would constitute an admission to the allegation that payment has in fact already been made and therefore the taxpayer no longer has to submit proof of claim of refund? A: Income tax returns are not actionable documents because the action is not based on the income tax returns but on the entitlement of the taxpayer to tax refund. Therefore, his claim for refund must be supported by proof.
NOTA BENE: If proof of claim for refund is established, the BIR should refund without any unreasonable delay Q: Is tax deficiency assessment a bar to tax refund or credit claim? A: Yes. The deficiency assessment creates a doubt as to the truth and accuracy of the return. Said return cannot therefore be the basis of refund or credit. Statutory Requirements for Refund/Credit Claims
1. written claim for refund or tax credit must be filed by the taxpayer with the CIR 2. the claim must be a categorical demand for reimbursement 3. both administrative and judicial claims for r efund/credit must be filed within 2 years from date o f payment regardless of any supervening cause (in case of corporations, the 2-year period is counted from the date final adjusted return was filed at end of taxable year)
Q: Suppose A filed his claim for tax refund with the BIR within the 2-yr reglementary period but it is only after two years have lapsed before BIR rendered a decision and it is one of denial. A now files an appeal of the BIR’s decision with the CTA within the 30-day period to appeal. Will A’s action prosper
A: No, A’s action will not prosper. Although A filed his claim for refund with the BIR within the 2-yr prescriptive period, he failed to file the same within the same period with the CTA. The rule is that t he taxpayer need wait for the action of CIR on his claim for refund before he can take his claim to the CTA. The 2-yr period must be complied with in both the BIR and CTA, regardless of any supervening cause.
WHEN 2-YR PRESCRIPTIVE PERIOD SUSPENDED 1. 2.
there is a pending litigation between the two parties the CIR in that litigated case agreed to abide by the decision of the SC
WHY WRITTEN CLAIM IS NECESSARY: 1. 2.
to afford CIR an opportunity to correct action of subordinates to notify Government that taxes sought to be refunded are under question and that, therefore, such notice should be borne in mind in estimating the revenue available for expenditure
GR: Government is not liable for interest on tax refund, UNLESS: o o
CIR acted with patent arbitrariness case of income taxes withheld on wages of employees, which must be refunded within 3 months from April 15 PRINCIPLE OF EQUITABLE RECOUPMENT – allows a taxpayer whose claim for a refund has been
barred due to prescription (lapse of more than 2yrs counted from date of payment) to recover said tax by setting off the prescribed refund against a tax that may be due and collectible from him; NOT ALLOWED in the Philippines because it puts a premium on the taxpayer’s neglect to enforce or assert his rights
under the law
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