The Philippines: Tax Assessment, Appeal and Dispute Resolution

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The Philippines:
Tax Assessment, Appeal and
Dispute Resolution
Presentation made for
The ASEAN Tax System Seminar
September 15 to 17, 2010
Bangkok, Thailand
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
The Philippine Tax Office: BIR
DEPARTMENT
OF FINANCE
Bureau of
Internal
Revenue
Bureau of
Customs
Bureau of
Treasury
Bureau of
Local
Government
Finance
2
Chiefs Officials of the BIR
Commissioner of
Internal Revenue
Deputy Commissioner
Operations Group
Deputy Commissioner Legal &
Inspection Group
Deputy Commissioner
Resource
Management Group
Deputy Commissioner
Information
Systems Group
3
Large Taxpayers Offices
LT Audit Offices
Group (Assistant
Commissioners
Regular & Excise)
CIR
1
2
8
4
Regional & District Offices
District
Offices
Regions
DCIR -
OG
1
19
119
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Powers & Duties of the BIR
! Assess and collect of all internal revenue
taxes, fees, and charges, and
! Enforce all forfeitures, penalties, and fines
connected with the assessment & collection
function
! Execute favorable judgments the Court of
Tax Appeals and the ordinary courts.
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Powers of the Commissioner of BIR
! Interpret:
" exclusive and original jurisdiction to interpret the
provisions tax laws (subject to review by the Secretary
of Finance)
! Decide:
" To decide on, (subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals)
" disputed assessments
" refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto,
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Power of Commissioner of the BIR
! Examination
" Notice of Audit, Letters of Authority, Tax Verification
Notice, Letter Notice
! Obtain information
" Request for Third Party Information, Data-Linkage
! Summon any person
" Subpoena Duces Tecum
! Take testimony
" Subpoena Ad Testificandum
! To order canvass [survey or surveillance]
" Mission Orders
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Audit Notice
! Issuance of Audit Notice
" Letter of Authority
" Letter Notice of Discrepancy
! Burden of proof is upon the taxpayer to show
clearly that the assessment is wrong and
without basis or is erroneous.
! Failure to do so on the part of the taxpayer
justify the judicial affirmation of the
assessment
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Audit and Investigation
! Audit and Investigation Proper
" Actual audit of taxpayers books of account
" Use of third party information to check on
accuracy of reporting
" Revenue Officers who audit the taxpayer shall
prepare a report of discrepancies noted with a
report of possible tax deficiency assessment
" Average: 120 days to conduct audit &
investigation
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Informal Conference
! Notice of Informal Conference
" A Notice of Informal Conference is an invitation by
the Revenue District Office (RDO) to a taxpayer
under audit to visit the tax office to hear all the
discrepancies noted by the Revenue Officer who
audited their books of accounts with a
computation of possible tax deficiency
assessment
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Informal Conference
! Notice of Informal Conference
" An Informal Conference affords the taxpayer with
an opportunity to present his side of the case
" After service of a Notice of Informal Conference,
taxpayer is given fifteen (15) days from date of
receipt to appear before the tax agency, otherwise
he shall be considered in default.
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Preliminary Assessment Notice (PAN)
! Preliminary Assessment Notice (PAN)
" After an Informal Conference, taxpayer is given
reasonable time to present documentary evidence
or explanation on the discrepancies noted and to
rebut the deficiency tax assessment against them
" If still there exist a sufficient basis to assess or
after the taxpayer has been declared in default in
an informal conference a PAN shall be issued
against a taxpayer
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Preliminary Assessment Notice (PAN)
! Preliminary Assessment Notice (PAN)
" A PAN is issued and served either personally or
by registered mail to the taxpayer
" It contains a explanation of the deficiency tax
assessment, showing in details the facts and the
laws and rules and regulations or jurisprudence on
which the proposed assessment is based
" Taxpayer is given fifteen (15) days to respond to
said PAN otherwise they are considered in default
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Final Assessment Notice (FAN) and
Formal Letter of Demand
! Final Assessment Notice (FAN) and Formal
Letter of Demand
" After giving opportunity to the taxpayer to rebut
the PAN and still there are basis to assess
deficiency taxes or there are still unexplained
issues or after they have been in default, a Final
Assessment Notice shall be issued against them
with a Formal Letter of Demand calling for the
payment of the computed deficiency tax
assessment
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Exceptions to Prior Notice of Assessment
! When the finding for any deficiency tax is the
result of mathematical error in the
computation of the tax appearing on the face
of the tax return by the taxpayer; or
! When a discrepancy has been determined
between the tax withheld and the amount
actually remitted by the withholding agent; or
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! When a taxpayer who opted to claim a refund
or tax credit of excess creditable withholding
tax for a 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 of the succeeding taxable year; or
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! When the excise tax due on excisable articles
has not been paid; or
! When an article locally purchased or
imported by an exempt person, such asm but
not limited to vehicles, capital equipment,
machineries, and spare parts, has been sold,
traded or transferred to non-exempt persons
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Final Assessment Notice (FAN) and
Formal Letter of Demand
! Final Assessment Notice (FAN) and Formal
Letter of Demand
" Issued by the Commissioner or his authorized
representative
" It must state the facts, the laws, rules and
regulations, or jurisprudence on which the
assessment is made, otherwise the letter of
demand and assessment notice shall be void
" Sent to taxpayer by mail or by personal service
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Disputed Tax Assessment
! A taxpayer may protest administratively within thirty
(30) days from receipt of the formal letter of demand
and assessment notice
! If there are several issues involved in the formal
letter of demand and assessment notice but the
taxpayer only disputes or protests validity of some
issues raised, the taxpayer shall be required to pay
the deficiency tax on undisputed tax assessments
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! Taxpayers failure to present facts, laws,
rules and jurisprudence to support his protest
on an issue will likewise make such issue
undisputed thus collectible
! A collection letter shall be issued to the
taxpayer calling for the payment of the said
deficiency tax, inclusive of the applicable
penalties on the undisputed assessment
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! Taxpayer who administratively protest an
assessment is required to submit required
documents within sixty (60) days from filing of
letter of protest, otherwise, the assessment
becomes final, executory and demandable
! Also, if the taxpayer fails to file a timely
protest, the assessment becomes final,
executory and demandable
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Final Decision on Disputed Assessment
(FDDA)
! Within 180 days, the protest may be denied
in whole or in part by the Commissioner of his
authorized representative through the
issuance of a Final Decision on Disputed
Assessment (FDDA), where taxpayer is given
thirty (30) days to administratively appeal or
judicially make an appeal
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Administrative Appeal
! Within thirty (30) days from receipt of FDDA
taxpayer may file an appeal before the
Commissioner on matters involving question
of law or before the assessing office on
matters involving question of facts, otherwise,
the assessment becames final, executory
and demandable
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Judicial Appeal
! In alternative, within thirty (30) days from
receipt of FDDA taxpayer may opt to file an
appeal before the Court of Tax Appeals
(CTA)
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Administrative Decision on Appeal
! The CIR is expected to render a decision
which shall state the facts, the applicable law,
rules and regulations or jurisprudence on
which the decision is made, otherwise such a
decision shall be considered void
! Likewise it should state that such is a final
decision
! Thereafter, taxpayer may make a judicial
appeal before the Court of Tax Appeals
(CTA)
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Judicial Decision on Appeal
! Decision rendered by the Court of Tax
Appeals (CTA) may be appealed before CTA
on motion for reconsideration, then it can still
be further appealed before the CTA En Banc,
then finally before Supreme Court
Court of Tax Appeals
! Composed of nine (9) justices
! Divided into three (3) branches
! Makes a decision either
" En Banc
" Branch (consisting of 3 justices each)
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Appellate Jurisdiction of CTA
! By law has exclusive appellate jurisdiction to
review by appeal
" Decision of the CIR
" Inaction of the CIR
" Decisions of lower court on local tax cases
" Decision of Commissioner of Customs
" Decisions of real property taxes
" Decisions of Finance on cases elevated to them
by automatic review
" Decisions of Department of Trade & Agriculture
involving dumping and countervailing duties
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