Tax Rights and Remedies

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Tax Rights and
Remedies
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By Victorino Mamalateo
Book Summary
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4-C AY 2009-2010
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TAX RIGHTS AND REMEDIES by Victorino C. Mamalateo
Book Summary
abandonment of procedures requiring

him personally to sign every letter or
Chapter 1 document.
BIR Organizational 4) Effective system of discipline and
personnel investigation. - As the
Structure taxes grow in complexity and as
Ralph Salvador discretion and judgment on the part of
the tax official play a greater role, the
Measures to improve personnel ability of a revenue official to affect
aspect of tax administration the result in a particular case without
[Stanley S. Surrey, Tax Administration in outward indicia of purchased
Underdeveloped Countries, University of favoritism is heightened. The most
Miami Law Review XII (Winter, 1958), 158- effective method of achieving honesty
188] is the severe punishment of dishonesty
1) Higher pay scales. - Attracts highly which must extend not only to the
qualified people to the revenue service government employee but to the
to improve the quality of services to taxpayer or his representative who is a
the taxpayers. Prevent dishonesty, party to the dishonesty.
bribery and corruption. 5) Statement of assets and liabilities.
2) Appropriate training procedures. - - As a supplement in individual
Tax work being technical and checking it is desirable to require each
specialized, the personnel should be employee to submit a net worth
given an understanding of the statement at the time of his
operation of the tax system as a employment and periodically
whole, of the relation of their specific thereafter. These statements may be
jobs to that system, and of the used as basis for an investigation
requirements of their jobs. Material when an employee's standard of living
should be suited to the personnel is beyond that which his salary and
under instruction, with appropriate previous wealth would indicate.
recognition of the differences in Generalized sources of income, such
training required for non-specialist as gambling should be scrutinized.
employees, supervisory personnel, 6) Alliance with professions
technical personnel needing interested in the tax field. -
knowledge of tax law and tax Lawyers, accountants, economists in
accounting, and so on. the academic profession who have
3) Delegation of authority. - This great interest in the tax system and its
personalization of the tax office in the administration should understand its
person of the director such as when he operations and be able to criticize
decides all the details of office intelligently its activities, and they
management adversely affects the should aid in interpreting that system
morale and initiative of the other to the public.
officials. It opens up avenues of abuse, 7) Attention to criticisms of
since often the director is either taxpayers. - Too often these
chosen from the social and economic objections are regarded as mere
level of the wealthier taxpayers or is resentment caused by the tax burden
desirous of attaining that level, so that itself. But quite infrequently, the
the concentration of authority makes criticisms are occasioned by the
for considerable pressure on the irritations created through inefficient
director as well as considerable operation of the tax system rather
opportunity for favoritism. There than its monetary impact. Usually,
should be a limitation on the authority persistent taxpayer complaints
of the director to inject himself into regarding “red tape” or inefficiency
substantive decisions in particular will be traceable to objectionable
cases, except under prescribed routines, though the complaints may
conditions. The advantages lie in be exaggerated.
freedom from routine, in the
2 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]
Book Summary
BIR Organizational Structure - specialize on tax fraud and policy

1 – Commissioner cases assigned by the Commissioner.
6 - Deputy Commissioners who lead the 3) Large Taxpayers Division or District
following groups: Office, Revenue District Offices, and
1) Operations other audit offices in the national and
2) Legal and Inspection regional offices - handle the rest of the
3) Resource-and Management audit cases
4) Information Systems Agents in the Collection of National
5) Prosecution Internal Revenue Taxes. -
6) Special Concerns Group 1) the Commissioner of Customs and
his subordinates - value added tax
13 - Assistant Commissioners for the
and excise tax on imported goods;
different services
19 - Regional Directors 2) the head of the appropriate
115 - Revenue District Officers government office and his
2 - Large Taxpayers Divisions subordinates - collection of energy
2 - Large Taxpayers District Offices, tax;
and 3000+ revenue officers who audit 3) the authorized agent banks -
of taxpayers' books of accounts and receipt of payments of internal
accounting records. revenue taxes authorized to be made
through banks.
 BIR is mainly organized along
functional lines – assessment,  Any bank officer or employee
collection, legal, and administrative involved in this task are subject to
and finance. sanctions and penalties under
Sections 269 (violations committed
 Some offices created and
by government enforcement
organized according to the kind of
officers) and 270 (unlawful
taxes they are responsible on.
divulgence of trade secrets) of the
Examples:
Tax Code.
1) Large Taxpayers Audit and
 Not all banks are authorized to
Investigation Division II - principally
receive tax payments. “Authorized
handles taxpayers subject to excise
agent banks” generally refers to
taxes
universal, commercial, and
2) Withholding Tax Division - does development banks that have been
withholding tax verifications specially authorized by the BIR,
3) VAT Review Committee - resolving or through the execution of a written
interpreting issues involving the value bilateral agreement to so receive
added tax tax payments from taxpayers and
4) International Tax Affairs Division - to remit the taxes collected within
resolving or interpreting issues a certain time.
involving and tax treaty provisions 4) withholding agents - required to
deduct and remit taxes within the
 Some Offices render specialized prescribed dates on payments of
services to particular group of compensation income, certain income
taxpayers or developing tax fraud payments, passive investment
or policy cases. incomes and capital gains subject to
final tax, and gross incomes paid to
Examples: non-resident foreign persons as well as
1) Large Taxpayers Service - in charge of payments by the government for
listed large taxpayers goods and services subject to value
added tax or other percentage tax.,
2) National Investigation Division
pursuant to the Tax Code and its IRRs.
(national office) and Special
 Collection of national internal
Investigation Division (regional offices)
revenue taxes is done principally

Book Summary
through private persons either

through the authorized agent
banks and withholding agents who
make certain payments of income
to taxable persons in or out of the
country
 Under existing agreements, the
authorized agent banks are
properly compensated for their
collection services through the use
or investment of taxes received by
them for a limited period called
“float period” (e.g., five days)
without paying interest thereon to
the government.
 Withholding agents (private or
government) are not so
compensated for their legal
obligations to deduct and remit the
taxes due. Failure to so withhold
and remit the correct taxes due on
time would subject them to
penalties.

Book Summary
directly related to the assessment and

collection functions of the BIR.
Chapter 2
1. Power to assess and collect the
Primary Powers of the amount of tax
Commissioner
Eraño Dumale Note 1: After the return is filed, the
Commissioner or his duly authorized
Introduction representative may authorize the
examination of any taxpayer and the
While the power of taxation is called the assessment of the correct amount of tax.
power to destroy, it should be exercised However, failure to file a return shall not
with caution to minimize the injury to the prevent the Commissioner from
proprietary rights of the taxpayer. It must authorizing the examination of any
be exercised fairly, equally, and uniformly, taxpayer.
lest the tax collector kill the ‘hen that lays
the golden eggs’. In order to maintain the Note 2: When a report required by law as
general public’s trust and confidence in basis for assessment shall not be
the government, this power must be justly forthcoming, or there is reason to believe
and not treacherously.1 that such report is false, incomplete or
erroneous, the Commissioner shall assess
Aspects of Taxation proper tax on the basis of best evidence
obtainable.
1. Levy
2. Assessment 2. Power to examine book of accounts
3. Collection and other accounting records and to
obtain information from third parties
Note: The power to levy taxes, which
involves tax policy, is essentially This power is full and plenary subject only
legislative in character, although the to certain exceptions mentioned in the
power maybe delegated to administrative Bank Secrecy Law and other general and
agencies with respect to administrative special laws granting confidentiality of
matters, provided that adequate transactions and may not thus be
guidelines and safeguards are followed in examined by regulatory authorities,
the administration of tax laws. including the BIR. The law further
authorizes the Commissioner and his
POWERS AND DUTIES OF THE BIR subordinate officials to issue subpoena
duces tecum to carry out this power.
1. To assess and collect national internal
revenue taxes, fees and charges; 3. Power to inquire into bank deposits of
2. To enforce all forfeitures, penalties and taxpayers
fines connected therewith;
3. To execute judgment in all cases The general rule is that the Commissioner
decided in its favor by the Court of Tax and his subordinates may not examine the
Appeals and the ordinary courts; and bank deposits of taxpayers pursuant to
4. To effect and administer the the express provision of the Bank Secrecy
supervisory and police powers Law. Exceptions; (a) the bank account of a
conferred upon it by the Tax Code or decedent to determine his gross estate;
other special laws. and (b) any taxpayer who has filed an
application for the compromise of his tax
PRIMARY POWERS OF THE liability under Section 204 (A) (2) of the
COMMISSIONER Tax Code by reason of financial incapacity
The term “primary powers” refers to the to pay his tax liability.
powers of the Commissioner which are
4. Power to interpret tax laws
1
Roxas vs. Court of Appeals, 23 SCRA 276
Book Summary
The power to interpret the provisions of precedents, laws, regulations,

the Tax Code and other tax laws shall be opinions and other orders and
under the exclusive and original directives issued by offices and
jurisdiction of the Commissioner, subject agencies other than the BIR, for
to review by the Secretary of Finance. information, guidance and
compliance of revenue personnels.
The interpretations of the provisions of the
Tax Code and other tax laws are made by e. Bank Bulletins – these
the Secretary of Finance or the are issued by the Commissioner for
Commissioner through the issuance of the the information and guidance of
following administrative issuances: bank personnel who have been
authorized under the law to receive
a. Revenue Regulations – payment of taxes made by
these are formal interpretations of taxpayers.
the Tax Code provisions by the
Secretary of Finance, upon the f. Revenue Audit
recommendation of the Memorandum Orders – guidelines
Commissioner. These are for revenue officers in conducting
numbered consecutively every their tax audits
calendar year.
g. Revenue Memorandum
b. BIR Rulings – there are Orders
several types of BIR Rulings, (1)
BIR Rulings; (2) Value Added Tax h. Revenue Administrative
Rulings; (3) International Tax Orders
Affairs Division Rulings; and (4)
Delegated Authorities or 5. Power to decide disputed assessments
Unnumbered Rulings.
The assessments issued by the Regional
Directors, Assistant Commissioners and
No Ruling Areas – in order to Deputy Commissioners may be appealed
reduce the number of rulings that administratively to the Commissioner.
have to be acted upon by the Legal
Services and Regional Directors on 6. Power not to allow withdrawal of any
matters that are already clear, return, statement or declarations
definite and covered by
precedents, the Commissioner Any return, statement or declaration filed
declared certain “no ruling areas” in any office authorized to receive the
whereby the taxpayer shall not same shall not be withdrawn. However,
secure and the revenue officers will the same may be modified, changed or
not require the presentation of amended within three (3) years from the
rulings. (Please see “no ruling date of such filing, provided that no notice
areas” in the book, too many to for audit or investigation of such return,
enumerate). statement or declaration has, in the
meantime, been actually served upon the
c. Revenue Memorandum taxpayer.
Rulings – special type of rulings on
certain significant tax matters 7. Power to conduct inventory-taking,
affecting group of taxpayers or surveillance, and to prescribe
industry. presumptive gross sales and receipts
d. Revenue Memorandum Inventory-taking of the goods of any

Circulars – these are issued to taxpayer and observation or surveillance
disseminate and embody pertinent of its business operation may be ordered
and applicable portions as well as by the Commissioner at any time during
amplifications of the rules, the taxable year if there is reason to

Book Summary
believe that such person is not declaring districts as may be from time to time be
his correct income, sales or receipts for required for administrative purposes.
tax purposes. The findings maybe used as
the basis for assessing the taxes for the 11. Power to accredit and register tax
other months or quarters of the same or agents or practitioners
different taxable years and such
assessment shall be deemed prima facie The Commissioner shall accredit and
correct. register tax agents and practitioners
based on their professional competence,
The power to prescribe presumptive gross integrity and moral fitness. These tax
sales and receipts is exercised by the agents and practitioners may be
Commissioner when it is found that a individuals and general professional
person has failed to issue receipts and partnerships and their representatives
invoices. who may perform the following; (a)
prepare and file tax returns, statements,
8. Power to terminate taxable period reports, protests, and other papers with
the BIR; and (b) appear before the BIR for
Instances when the Commissioner may taxpayers for valuable considerations.
terminate the taxable period of a
taxpayer:
a. the taxpayer is retiring from

business subject to tax;
b. the taxpayer is intending to leave
the Philippines or to remove his
property therefrom or to hide or
conceal his property;
9. the taxpayer is performing any act
tending to obstruct the proceedings for
the collection of the tax
Upon termination of the taxable year, the

Commissioner shall send notice of such
decision together with a request for
immediate payment of the tax for the
period so declared terminated and tax for
the preceding year or quarter, or such
portion thereof as maybe unpaid, and said
taxes shall be due and payable
immediately and shall be subject to all
penalties prescribed.
10. Power to prescribe real property values

and create revenue district offices
The Commissioner is authorized to divide

the Philippines into different zones or
areas and shall, upon consultation with
competent appraisers both from private
and public sectors, determine the fair
market value of real properties located in
the zones or areas.
With the approval of the Secretary of

Finance, the Commissioner shall divide the
Philippines into such numbers of revenue

Book Summary
Authority to assign internal revenue

officers
Chapter 3  Commissioner shall employ, assign or
Secondary Powers of the reassign internal revenue officers
Commissioner involved in excise tax functions, as
Charlie Ho often as exigencies of the revenue
service may require, to establishments
or places where articles subject to
Secondary Powers – refers to the
excise tax are produced or kept.
powers of the Commissioner that are
necessary, ancillary, or incident to the
Authority to delegate powers
exercise of his primary powers relative to
assessment and collection of taxes.  the Commissioner may delegate the
powers vested in him under pertinent
Secondary Powers of the provisions of this Code to any or such
Commissioner include: subordinate officials with the rank
1) Authority to administer oaths and take equivalent to a division chief or higher,
testimony subject to such limitations and
2) Authority to make arrests and seizures restrictions imposed under the rules
3) Authority to assign internal revenue and regulations promulgated by
officers Secretary of Finance.
4) Authority to delegate powers
5) Power to require permits before Powers of the Commissioner which
certain facilities or systems are used cannot be delegated p 55
by excise tax payers 1) To recommend the promulgation of
6) Power to impose duties on certain rules and regulations by the Secretary
officers of Finance.
2) To issue rulings of first impression or
Authority to administer oaths and to reverse, revoke or modify any
take testimony existing ruling of the Bureau;
3) To compromise or abate any tax
 The Commissioner, Deputy
liability. However, the following may
Commissioners, Service Chiefs,
be compromised by the regional
Assistant Service Chiefs, Revenue
evaluation board composed of regional
Regional Directors, Chiefs and
director, asst regional director, head of
Assistant Chiefs of Divisions, Revenue
legal, assessment and Collection
District Officers, special deputies of the
Divisions of the RDO having
Commissioner, internal revenue
jurisdiction over the taxpayer:
officers and any other employee of the
a. Deficiency taxes of P 500,000 or
BIR thereunto deputized by the
less, and
Commissioner shall have the power to
b. minor criminal violations
administer oaths and to take
4) To assign or reassign internal revenue
testimony in any official matter or
officers to establishments where
investigation conducted by them,
articles subject to excise tax are
regarding matters within the
produced or kept.
jurisdiction of the BIR.
Delegated powers to Deputy
Authority to make arrests and
Commissioner (Legal & Inspection
seizures
Group):
 Commissioner, Deputy Commissioners,
1) Verify petitions for review and
Revenue Regional Directors, Assistant
certify against forum shopping in cases
Revenue District Officers, other
of appeal from adverse court
internal revenue officers shall have the
decisions, except when, in the opinion
authority to make arrests and seizures
of the Deputy Commissioner, the
for the violation of any penal law, rule
or regulation administered by the BIR.
Book Summary
appeal should be acted upon by the 11) Request for rulings on topics covered
Commissioner; by RMO 3-2001 of taxpayers falling
2) Verify complaints and certify within the jurisdiction of the regional
against forum shopping in civil actions office
for collection of tax filed by the 12) Tax-deferred exchanges of property for
National Office except when, in the shares under Section 40(c)(2) of the
opinion of the Deputy Commissioner, Tax Code
the complaint should be acted upon by 13) Transfer of property by a pre-need
the Commissioner; corporation to a trustee in accordance
3) Sign complaints for criminal action with SEC guidelines on the
filed by the National Office with the establishment of trusts by pre-need
Department of Justice or Prosecutor’s companies;
Ofice except when, in the opinion of 14) Tax consequence of exchanges of
the Deputy Commissioner, the properties in order to correct clear
complaint should be acted upon by the mistakes of fact relating to ownership
Commissioner. of subdivision lots;
15) Joint ventures for real estate
Note: For the list of requirements for development where no cas advance or
rulings delegated to the Asst Comm for other payments are made to any co-
Legal Sevice, please refer to the book of venturer;
Mamalateo, p. 59. 16) Exemption of taxability of gains from
sale or transfer of shares of stock in
Delegated Powers to Assistant domestic corporations by non-resident
Commissioner (Legal Service) foreign corporations
1) “VAT Exemption Certificate” for 17) Taxability or exemption of income of a
embassies issued on the basis of resident of a foreign country from
reciprocity as confirmed by the Office independent personal services by
of Protocol, Dept of Foreign Affairs; virtue of a tax treaty;
2) “Certificate of Tax Exemption” for 18) Embassy requests, either for itself or
Asian Development Bank and other on behalf of its employees, for tax
international organizations based on exemption;
an international agreement; 19) Tax exemption of income derived by
3) “Certificate of Residency” issued in foreign governments from their
accordance with the provisions of tax investments in the Phils.
treaties between the Philippines and 20) Tax exemption of interest and/or
other countries; and dividend income of such foreign
4) “Certificate of Registration” as government institutions as are
qualified donee-institution in specified in the tax treaties to which
accordance with the provision of the Philippines is a signatory or in
Revenue Regulations No. 13-98 dated exchanges of letter between the
Jan. 1,1999. government of the Phils and the
5) “Denial of Claim for Informer’s foreign government;
Reward” under Sec. 282 of Tax Code; 21) Par 3, Sec. 4, Art. XIV of the 1987
6) Issuance of “Disbursement Voucher” Constitution re non-stock, non-profit
for informer’s reward private educational institutions
7) Issuance of “Tax Credit Certificate” or 22) Section 26 (general professional
“Disbursement Voucher” for tax refund partnerships), Tax Code
8) Request for tax exemption of 23) Section 28 (b)(7)(B) (separation
“reasonable private benefit plan” benefits), Tax Code
9) Request for confirmation that the 24) RA 4917 (retirement plans)
“reasonable private benefit plan” is 25) Kalakalan 20
still tax-exempt despite amendments 26) Rural Banks Act
to its provisions; 27) Cooperative Code of the Phils
10) Request for renewal of confirmation of 28) Urban Development & Housing Act of
the tax-exempt status of a “reasonable 1992
private benefit plan;” and

Book Summary
The Commissioner or the Deputy  Appeal from adverse action by the

Commissioner for legal and Inspection Regional Director may be taken to the
Group may motu propio reverse, modify or Commissioner.
alter any such ruling issued by Asst
Commissioners, Legal Service, at any time Power to require permits before
after its issuance… certain facilities or systems are used
by excise taxpayers.
Delegated Powers to Chief,  permits for excise tax purposes
International Tax Affairs Division  administrative in nature (self-
Requests for ruling on VAT exemptions of explanatory) p. 72
embassies and their personnel are filed
first with the Department of Foreign Power to impose duties on certain
Affairs (DFA) before the same is officers
transmitted to the BIR for processing and  Power extends to persons that have
issuance of certificates. certain powers or responsibilities
under the law.
Note: For the guidelines for issuance of Ex. Register of Deeds
tax-exemption certificate, please refer to
the book of Mamalateo, p. 62 I. Issuance of Certificate Authorizing
Registration (CAR) and Reporting
Delegated Powers to Assistant Real & Personal Property
Commissioner (Collection Service) Transactions
Signing of ITS-generated Assessment  prescribe a uniform CAR
Notices in pilot RDOs for Large Taxpayers to be issued by both
is delegated to the Asst Commissioner, Integrated Tax System
Collection Service. (ITS) and non-ITS RDOs
for transactions
Delegated Powers to Regional involving the transfer of
Directors real and personal
All regional directors given authority to properties
sign and issue actions on the following
 Prescribe consolidated
cases as may be requested by taxpayers
and updated guidelines
under their respective jurisdiction:
and procedures for
1) Tax exemption of cooperatives
audit/ verification and
2) Tax exemption of senior citizens
processing transactions
3) Tax exemption benefits under Section
involving sale, transfer,
32(b)(6)(b) of Tax Code
exchange or other
4) Requests to use pre-numbered loose
disposition of real and
leaf forms, receipts and invoices
personal properties
5) Requests of GOCCs as well as private
sector participating in Socialized  ensure proper reporting
Housing Program and Community and monitoring of
Mortgage Program for tax incentives transactions
under RA 7279
6) Request for exemption for withholding II. CARs shall be issued by ITS and
tax on wages for the monetized 10 day non-ITS Revenue District Offices.
vacation leave credits;
7) Request for change of accounting III. CARs shall be printed as
period under Section 43 of Tax Code accountable forms, serially
exchange change of accounting numbered, printed in four copies
method. each and bound in fifty sets per
pad.
 Filing of above delegated matters must
be accompanied by a certification on IV. The Accountable Forms Division in
non-forum shopping. the National Office shall be the
custodian of blank CARs and shall

Book Summary
be in charge of CAR issuance to Commissioner through RDO No. 39,

authorized revenue officials. Quezon City. The return shall be
likewise be processed by the said
V. Only the Regional Directors are RDO.
authorized to requisition CARs -
from the Accountable Forms 3) For transfer of real property
Division. The RDO shall in turn subject to capital gains tax
requisition the forms from the - for the sale and transfer of real
Regional Directors. property, the capital gains tax
return shall be filed by the seller or
transferor with the AAB, RCO, DMT
VI. For the purpose of determining and processed within the RDO
the jurisdiction of each RDO with having jurisdiction over the place
respect to the filing and where the property being
processing of tax returns involving transferred is located.
transfers of properties, the - In case of sale or transfer of shares
following guidelines shall be of stock and other personal
applied: properties, the return shall be filed
with the AAB, RCO, DMT and
1) For transfer of real property processed within the RDO where
subject to estate tax the seller or transferor is
- estate tax shall be filed by registered.
executor, administrator or heir of
the estate with the Accredited 4) For transfer of property subject to
Agent Bank, Revenue Collection creditable withholding tax
Officer or Deputized Municipal - in case of sale of real property and
Treasurer and processed with RDO notwithstanding the provision
where decedent wad domiciled or under Section 2.58(A)(1) of the RR
registered at the time of his death, 2-98, the creditable withholding tax
regardless of the location of his return shall be filed by the
properties. withholding agent-buyer with the
- If decedent is a non-resident citizen AAB, RCO, DMT and processed
and the estate tax return was filed within the RDO having jurisdiction
with the Phil embassy or Consulate over the place where the property
in the country where he was a being transferred in located.
resident at the time of his death, - For shares of stock and other
the return shall be processed by personal properties, the return
RDO No. 51, Pasay City. shall be filed with the AAB, RCO,
DMT and processed within the RDO
2) For transfer of property subject to where the seller or transferor is
donor’s tax registered.
- donor’s tax return shall be filed by
the donor with the AAB, RCO or 5) For transfer of real property
DMT and processed within the RDO subject to final tax
where the donor is a resident or is - in case of transfer of real property
registered. as property dividends to individual
- If donor is a non-resident and the stockholders, the final withholding
donor’s tax return is filed with the tax return shall be filed with the
Phil embassy or Consulate in the AAB, RCO, DMT and processed
country where he is a resident, the within the RDO having jurisdiction
return shall be processed by RDO over the place where the property
No. 51, Pasay City. is located.
- If donor is a non-resident and has - In case of transfer of shares of
no legal residence in the stock as property dividends to
Philippines, the donor’s tax return individual stockholders, the final
shall be filed with the Office of the withholding tax return shall be filed

Book Summary
with the AAB, RCO, DMT and property being transferred with
processed within the RDO where the jurisdiction of each RDO.
the transferor is registered.
XI. CARs shall be issued sequentially
6) For tax-exempt transfers
- - in case the property being XII. RDO shall prepare the required
transferred is real property, the CARs in 4 copies
corresponding tax return shall be
filed and processed within the RDO ONE-TIME TRANSACTIONS (ONETT)
having jurisdiction over the location On account of the semi-schedular tax
of the property, where the system adopted by Congress, there are
decedent was domiciled or numerous one-time transactions that are
registered at the time of death or subject to final withholding income taxes.
where the donor is a resident or Also, there are gratuitous transfers of
registered, whichever is applicable. property subject to transfer taxes that
- If property being transferred may be treated as one-time transactions.
involves shares of stock not traded As a way of improving services being
in the stock exchange, the provided to the taxpaying public, the
corresponding tax return shall be Commissioner issued an order:
filed within the RDO where the 1) To simplify documentary requirements
seller is registered, where the and procedures in the processing,
decedent was domiciled or verification or audit and review of tax
registered at the time of death or returns on ONETT;
where the donor is a resident or 2) Ensure timely issuance of CAR
registered, whichever is applicable. 3) Establish measures to monitor the
processing, review and evaluation of
ONETT cases
VII. To authorize the audit or 4) Provide sanctions to be imposed for
verification and processing of the non-compliance by revenue personnel
return, a Letter of Authority or Tax concerned.
Verification Notice shall be issued
by the authorized revenue official Transactions covered:
in accordance with existing rules 1) Transactions subject to final capital
and regulations. gains tax on sale of real properties
considered as capital assets, as well as
VIII. CARs shall be issued by RDO which 2) capital gains tax on the net capital
processed the return gain on sale, transfer or assignment of
stocks not traded in the stock
IX. No CAR shall be issued by the RDO exchange,
unless: 3) expanded withholding tax on sale of
1) OR evidencing payment real properties considered as ordinary
2) Audit/verification report assets,
3) Confirmation letter 4) donor’s tax,
5) estate tax and
X. Transfers arising from inheritance 6) other taxes related thereto, including
and/or donation involving documentary stamp tax.
properties in multiple locations
covered by different RDOs or An ONETT Team composed of Revenue
where the estate tax return was Officers and support staff shall be created
processed and verified by a in every Revenue District Office to serve
district office without jurisdiction as One-Stop-Shop for ONETT.
over the place where the
properties are located, the Certificate Authorizing Registration
Regional Director shall issue the Registry Book
same containing all details of Maintenance of CAR Registry Book shall be
the responsibility of the ONETT Teams,

Book Summary
wherein CARs issued for every completed

ONETT processed shall be recorded
following the sequential numbers of the
CARs. Only one CAR Regsitry Book shall be
maintained for ONETT and that all pages
of the same shall be fully utilized before a
new one is issued.
Power to Suspend Business

Operations of a Taxpayer:
The Commissioner or his authorized
representatives is hereby empowered to
suspend the business operations and
temporarily close the business
establishment of any person for any of the
following violations:
1) In case of a VAT-registered person:
a. Failure to issue receipts or invoices
b. Failure to file a value added tax
return as required under Section
114 of the Tax Code
c. Understatement of taxable sales or
receipts by 30% or more of his
correct taxable sales or receipts for
taxable quarter.
2) Failure of any person to register as
required under Section 236 of the Tax
Code
The temporary closure of the

establishment shall be for the duration of
not less than five (5) days and shall be
lifted only upon compliance with whatever
requirements prescribed by the
Commissioner in the closure order.

Book Summary
3. Registration of each type of

internal revenue tax for which every
person, required to register with the
BIR, is obligated, shall file a return ,
Chapter 4 and shall pay such taxes, and shall
Registration of Taxpayers update such registration of any
Mae Angelie Etang changes.
4. Any person commencing business
MODIFIED TAX COMPLIANCE subject to VAT
VERIFICATION DRIVE 5. Persons becoming liable to VAT
Guidelines and Procedure 6. Optional registration of VAT-
1. Reminder letter to business exempt persons w/ respect to export
establishments containing what needs sales only
to be done, requirements prior, during 7. Books of accounts (journal, ledger)
and after operation of a business, BIR and other accounting records (journal
forms, deadlines and payment of vouchers, delivery receipts, order
taxes, advance warning of visit on slips)
compliance 8. Sales invoices, receipts and
2. Visitation of the RDO permits
3. BIR requirements posted in
conspicuous places When to register?
4. Control measures: a) agents in • w/n 10 days from employment
uniform red shirt w/ collar marked BIR • on or before commencement of
tax mapper in yellow; b)at least 20 business
officers; c) rectifications of violations • before payment of any tax due
and payments in RDO HQ; d) no • upon filing of a return, statement
payment outside the RDO and to non- or declaration
collection personnel; e) list of officers, • update of registration information if
area covered, date or time of there is a change in tax type or
operation taxpayer details
• transfer of registration if transfers
Who are required to register?
place of business but secure tax
• Every person meaning individual, clearance from RDO first
trust, estate, corporation, partnership
• cancellation of registration if
except GPP, joint venture on
ceases to do business
construction, petroleum, coal,
geothermal and other energy
Where is the appropriate revenue
operations under a service contract w/
office?
the government
• if large taxpayer, with the Large
• Even the national and local
Taxpayer Assistance Division, Large
government, its agencies, bureaus,
Taxpayers Service, BIR National Office
instrumentalities and political
• if not, with the RDO
subdivisions which are subject to
withholding taxes must register • A RDO cannot refuse issuance of
VAT Certificate of Registration on the
• Administrator or executor must
ground of unpaid doc stamp tax
register the estate of the decedent
What are required to be registered?  Update of registration information

1. Business establishments which can should be made whenever
be the head office, branch or facility applicable, specifying the tax type
(sales outlets, places of production, and other taxpayer details
warehouses or storage places)  Transfer of registration requires
2. Business of exploring, developing, necessary tax clearance from the
exploiting and disposing minerals, RDO where he is originally
mineral products and quarry resources registered and only upon the
on mineral lands. cancellation of his previous

Book Summary
registration can he file his tax sales/commercial invoices and official

returns and pay his taxes with the receipts and at no time shall it be
new RDO where he transferred. detached, removed or covered from
 The registration of any person who public view.
ceases to do business or to be
liable to a tax type shall be
cancelled only after application for
registration information update is
done in the form prescribed.
TAXPAYER IDENTIFICATION NUMBER

• Only one TIN assigned to a
taxpayer, otherwise, criminally liable
under sec 275
• Exception: foreign currency deposit
unit of a local or foreign bank is
assigned a separate TIN
• Mandatory incorporation of TIN in
government forms, papers or
documents
• Express lane on persons presenting
TIN
• All taxpayers required to file a
return, statement or other document
w/ BIR shall apply for issuance of TIN
• Taxpayer who changed his name
must apply to cancel his old TIN and
secure a new one w/n 3 years from the
filing of his last return where he used
his old TIN
• TIN shall not be issued to minors
opening a bank account
ANNUAL REGISTRATION FEE

• P500 shall be charged for ever
separate and distinct establishment or
place of business shall be paid upon
registration and every year thereafter
on or before the last day of January
POSTING REQUIREMENT
• Registration of a taxpayer or his
books and records means that the ff
have been issued: Certificate of
Registration, Official Receipt
evidencing payment of annual
registration fee, Notice to the Public
that it is registered with the BIR and
Permit to use cash register machine or
point-of-sale machine attached to the
machine and clearly seen by the
customers
• Exhibition of Notice at place of
business for persons required to issue

Book Summary
Vendors in public markets – Filipinos

Chapter 5 selling meats, poultry, fish, fruits & other
food products in their original state in
Keeping of Books of public market places that are exempt from
Accounts VAT are not relieved from the duty to keep
Ma. Charizma Madriaga books of accounts, because they are subj.
to income tax.
Strict compliance with the bookkeeping
regulations is necessary in order to ensure Compensation income earners – an indiv.
that the correct revenues are timely and Who receives purely compensation income
completely reported and only deductions is not required to keep books of accnts.
authorized by law are properly claimed in
returns supported by accounting entries in
the books of accounts and by contracts, Books of Accounts
invoices and receipts.
- Shall include the journal and the
Taxpayers Required to Keep Books of ledger and their subsidiaries, or other
Accounts equivalents.
All corporations, companies, partnership Journal – is a book of original entry in

or persons required by law to pay internal which the happenings or transactions
revenue taxes shall keep a journal and a affecting the business of a taxpayer are
ledger or their equivalents. recorded consecutively day by day as they
occur.
The term “corporation” as used in this
section refers to corporations duly Ledger – is a book of final entry to which
registered as such under the corp. code are posted the classified accnts or items of
and it does not refer to corp. as defined in all transactions entered in the journal or
sec. 22(b) of the tax code. its equivalents.
- The reason for this opinion is that the
law lists companies & partnerships Simplified sets of bookkeeping records –
separately from corp. consists of the record of daily sales and
cash receipts, the record of daily
Companies are groups of people organized purchases, expenses and cash
to perform an activity, business or disbursements, record of net worth and
industrial enterprise. operations, which may be in combined
form or in separate booklets.
Partnerships are formed when 2 or more
persons contributed money, prop. or If the person’s gross quarterly sales,
services to a common fund for the earnings, receipts, or output:
purpose of dividing profits and losses. A. does not exceed 50K – he shall
keep and use simplified set of
Person means an individual, a trust, estate bookkeeping records duly
or corp. authorized by the Sec. of Finance
B. exceeds 50K – he shall keep & use
Foreign insurance co. – should maintain a journal & a ledger or their
books & records pursuant to the equivalents
bookkeeping regulations. That they are C. exceeds 150K – he shall have his
subject to the requirements of the books of accnt audited & examined
Insurance Commissioner does not affect yearly by independent CPA & his
their obli. income tax returns accompanied
with a duly accomplished Accnt.
Franchise grantee- required to keep books Info. Form
of accnt. & to issue registered invoices or
receipts

Book Summary
Books may be in bound or loose-leaf form transactions therein are kept and duly
– A sworn cert. attesting to the # of taken up in the books of accnts of the
invoices used during a given yr. is principal store; otherwise the branch
required only in the case of loose-leaf establishment should be provided with
invoices. No cert. required in case the TP separate books of accnts.
uses invoices in bound form. Said cert.
should be filed within 15 days after the Register book to be kept by professionals
end of the taxable yr. unless upon request – in addition to the books & other records
of the TP, the Commissioner extends said prescribed in Chapter II of the
period. Bookkeeping Regulations, shall keep &
maintain a Register Book in which shall be
Purpose in requiring books of accnts – in entered immediately upon acceptance of
order that all taxes due the government the client or patient, the ff. info: (1) name
may readily and accurately be ascertained & ad of client/patient; (2) date & time of
and determined anytime of the yr not only arrival; (3) the amount of professional fee
by the TP but also by the diff. tax or other consideration received therefore;
collection agencies of the gov’t. and (4) number & date of the receipt/s
issued covering said payment.
Journal, Ledgers & their equivalent
Professionals – means any person who has
Journal – may consist of only one book, the been duly licensed to practice his
gen. journal. The equivalents may consist profession by the PRC or one who has
of several books such as sales book, been admitted to the practice of law in the
purchase book, cash book & such other Phil., if such person receives professional
books as the TP may find convenient for fees for his services. The term also
his business. includes any person who is engaged in the
practice of a profession whether or not he
Ledger – may consist of one book, the is licensed, authorized or qualified therein
gen. ledger. The equivalents may consist if, as in the case of those duly licensed, he
of several ledgers such as customer’s also receives professional fees.
ledgers, creditor’s ledger, stock ledger,
and such other books as the TP may find Records to be kept by proprietors or
convenient for his business. No entry shall operators of rope factories, sugar central,
be made in the ledger or its equivalent, and dessicated coconut factories – aside
unless said entry originates from the from the books & records required in
journal or its equivalent. Chap. 11 of the regulation, shall keep true
& correct records of their purchases of raw
Subsidiary books of accnts – all corps., materials, the finished products & by
companies, partnerships or persons products. It shall state the date of receipt,
keeping the books of accnts mentioned quantity and price of raw materials, the
above may at their option keep subsidiary name, address or residence cert. of the
books as the need of their business may purchaser or to whom they were
require. They shall be subj. to the same purchased.
rules as are applicable to the journal &
ledger. Ex. The so-called “poison book,” Owners of rice & corn mills – they are no
“abortive book,” and “prescription book” longer subj. to the 2% miller’s tax hence,
of pharmacies are considered subsidiary they are now required to use the books
books. and records prescribed by the
bookkeeping regulations.
Books to be kept in branch establishments
– an owner of a store who maintains a Records of jobs received by contractors –
branch establishment need not keep 2 road, building, waterworks, and other
sets of books of accnts, if the branch store construction work contractors and other
merely buys goods or merchandise for the persons subj to tax under sec. 191 of the
principal store and no ale is effected in the tax code shall in addt’n to the books &
former, provided that memoranda of other records required under chap. II of

Book Summary
the regulation, keep a register book for job certificates, should keep & use a simplified
orders received in which they shall enter set of bookkeeping records. Lessors of
immediately upon making a contract the Riceland come within the phrase ‘persons
date, name & address of the customer, required by law to pay internal revenue
description of the articles to be taxes.” Accordingly, they are required to
constructed, the consideration therefore, keep a journal and a ledger, or their
etc. equivalents.
Guest register book of hotels & lodging Preservation of books of accnts and other
houses – may, in lieu of the records of jobs accounting records – all the books of
received, keep a guest register book in accnts, including the subsidiary books,
which shall be entered immediately upon and other accounting records of such
accepting a guest the date & time of his corporations, companies, partnerships, or
arrival, the name & address of the guest & persons shall be preserved by them for a
the number of the room to be occupied, & period of at least 3 yrs from the date of
upon checking out, the date & time of his the last entry in each book and shall be
departure, and the amount paid by him. subj to examination and inspection at any
The entries shall be numbered time by internal revenue officers:
consecutively for purposes of reference. provided, that all corporations, companies,
partnerships, or persons who retire from
Records to be kept by brokers – they shall business shall within 10 days from the
use serially numbered contract forms, date of such retirement or within such
which shall be issued in chronological time as may be allowed by the
order, for each agreement had with their Commissioner in special cases, submit
customers showing the date & other facts their books of accounts, including the
concerning the services rendered & the subsidiary books, and other accounting
signature of the parties thereto. records, to the Commissioner or any of his
deputies for examination, after which they
Stock & Transfer Book to be kept by the shall be returned.
corp. secretary – the cert. in a stock &
transfer book shall be issued in All books of accounts of corp., partnership
chronological order. Each cert of stock or persons shall be subj to examination &
shall contain the cert. no., date of issue, # inspection shall be made only once in a
of shares, par value per share, name & TIN taxable yr except in the ff. cases: (a)
of the SH. fraud, irregularity, or mistake as
determined by the Commissioner; (b) the
Records to be kept by owner or operator taxpayer requests reinvestigation; (c)
of mines or quarry – shall keep & maintain verification of compliance with withholding
an Official Register Book and such other tax laws and regulations; (d) verification of
forms or records that may be required by capital gains tax liabilities; and (e) in the
the Commissioner from time to time. exercise of the Commissioner’s power
Records to be kept by manufacturers/ under sec. 5(b) to obtain information from
assemblers, importers and dealers of other persons in which case, another or
automobiles – submission of sworn separate examination and inspection may
statement, issuance of Withdrawal be made.
Certificates, and the maintenance of
Official Register Books from the Last entry in books of accnt – refers to a
manufacturers or assemblers as well as particular business transaction or an item
importers of automobiles. A sworn thereof that is entered or posted last or
declaration shall be filed for each & every latest in the books of accnts when the
brand or model of automobile, as well as same was closed. For purposes of
for each & every variant of each brand. determining the period of at least 3 yrs
within which the books shall be kept, the
Books of accnts to be kept by landowners same shall be recorded from the date of
– owners of agricultural lands, being subj the last entry in said books.
to the income and community tax

Book Summary
Tax-exempt organizations and grantees of times in his place of business, is

incentives – shall be subj to examination mandatory and it strictly prohibits the
by the BIR for purposes of ascertaining bringing of books outside the TP’s bus.
compliance with the conditions under establishment. An independent CPA in
which they have been granted tax auditing the client’s books for purposes of
exemptions or tax incentives, and their statutory audit, may not bring them
tax liability, if any. outside the client’s office. No exemption
exists. This same rule applies to
Powers of BIR collection agents – a bookkeepers who record transactions of
collection agent can inquire or determine their client-TP.
whether or not the TP has paid the
corresponding annual registration fee. Submission and return of books and
However, he does not have the power to records – all TPs required to keep books of
seize or confiscate goods subj to specific accounts who retire from bus. shall within
tax even if the tax thereon has not been 10 days from such retirement, or within
paid. The collection agent has also the such period of time as may be allowed by
power to apprehend bus conductors for the Commissioner in special cases upon
not issuing tickets or receipts to application therefore in writing, submit
passengers, such act being a patent their books of accounts and other records
violation of internal revenue law. pertaining to their bus.
Collection agents may not inspect books
of accounts, they not being empowered to The books of accnts and other records
assess (but only to collect) internal shall not be returned until after the taxes,
revenue taxes. charges and penalties found to be due, if
any, shall have been paid, unless authority
Revenue office to conduct tax audit of to do so shall have been first secured from
books – where a corporation has its the Commissioner.
principal place of business in one district
office and manufacturing and warehousing Books may be searched and seized or
activities in other district offices, the required to be produced for inspection –
revenue officer in the district office where under a properly issued warrant, for the
the principal place of business is located purpose of preventing further frauds.
shall conduct the examination.
Loss or destruction of books of accounts
Venue where tax audit may be conducted and other accounting records – through
by revenue officers – either at the TP’s fire, flood, theft, or other means shall
place of business or outside thereof. officially be reported to the police or fire
dept. upon the happening thereof, and an
Books of accnts of TPs should not be affidavit regarding such loss or destruction
retained by internal revenue officers for shall be submitted to the RDO or LTAD, as
more than 60 days except (a) when the the case may be, within 45 days, together
books, records or papers constitute the with the cert true copy of the reported loss
evidence of this Office in an unsettled to the police or fire dept.
case; (b) in case such records and papers
pertain to a case pending in courts; (c) in Records of Inventories
all cases where fraud is evident and the
records and papers must accompany the Persons required by law to pay internal
fieldman’s report for evaluation purposes; revenue taxes on business shall keep in
and (d) in all cases where the records and addition to the other books and records, a
papers have been seized by virtue of a book of inventories, in which they shall
search warrant and the Court has not record in detail the quantity, description,
ordered their return to the TP. unit and total cost of every item of their
stock-in-trade, materials, supplies and
Venue where financial audit may be done other goods found in the premises, of their
by external auditors – all books of accnts establishments at the time they start
and other records of TP must be kept at all

Book Summary
business and at the close of the calendar determined & the reasons should be
yr. or accounting period. clearly stated in the report;
2. should include a statement of the
Record of inventories need not be privilege or fixed taxes paid by the TP;
notarized- it is enough that said records 3. shall be subj to the condition that
are signed by the owner or manager of the the TP, upon receipt of the permit,
business. should immediately register a bound
book;
Sari-sari store owners are required to 4. the examiner must determine
submit their inventory of their stock in whether the TP is delinquent in the
trade. However, pawnshop operators are payment of his tax liabilities;
not required to submit inventory of 5. the Special Investigation Division
jewelries pawned to them at the end of shall det. Whether the TP has
the taxable yr. derogatory info. regarding tax evasion,
if so, the TP should be informed that
Proprietors of hotel business may be his request cannot be given due
required or exempt from submitting course;
inventory – if engaged purely in hotel 6. TP should be required to bind the
business, they are not required to submit loose-leaf forms within 15 days after
yearly inventory list. However, if they also the end of his taxable yr;
maintain restaurants and bars, they are 7. The permit should be duly
required to keep books of inventories of numbered & a permit register should
raw materials and stocks used; hence be kept;
required to submit yearly inventory list. 8. All permits are to be considered on
a permanent basis unless otherwise
Inventory or stock-taking – for the purpose revoked;
of determining the TP’s correct internal 9. A sworn certificate certifying the
revenue tax liabilities, or it may place said number of pages used during a given
business under observation or period must be submitted to the BIR.
surveillance.
The authority granted to the main
Registration of books of accounts & other establishment to use loose-leaf ledgers
accounting records – should be registered does not include the branch
with the BIR appropriate revenue district establishment. The latter cannot use
office before they are used or issued. In loose-leaf ledgers without specific
the case of renewal, the applicant shall authority therefor.
present his duly-registered books of
accounts used during the immediately Language in which books are to be kept –
preceding taxable yr. as a condition in a native language, English or Spanish, if
precedent for registration. not they should be translated (1950 pa
yung circular kya Spanish, hindi nkalagay
Registered books may be used for more kung na amend na). Translation shall be
than one yr – books of accounts registered made in aneat & legible manner in ink or
in one yr. may be used again for the indelible pencil, either on the same page
succeeding yrs without need of further of the books, registers, or opposite or
registration, provided that the portion below such entry or on a separate page
pertaining to the particular year is opposite the page to be translated.
properly labeled or marked. However,
such practice is not advisable. Use of functional currency – functional
currency means the currency of the
Permits to use loose-leaf books of primary economic environment in which
accounts, records invoices & receipts – the entity operates. It is equivalent to the
should be conducted in accordance with measurement currency which is defined
the ff.: simply as the currency used by an entity
1. the necessity of the use of the for measuring items in its financial
loose-leaf forms requested should be statements.

Book Summary
Foreign currency means currency other

than the functional currency of the
qualified entity. The Phil. Peso will be
considered as a foreign currency if it is not
the functional currency of the qualified
entity.

Book Summary
Sales invoice –is an evidence of sale;

must be serially numbered to prevent
Chapter 6 duplication
Invoices and Receipts Delivery receipt -is an evidence of the
Ace Jello Concepcion delivery to and receipt by the purchaser of
the subject matter of the sale.
An Authority to Print (ATP) must first be
secured from the RDO before a business The delivery receipt must necessarily
establishment may be allowed to print and contain a list of the articles sold and
use invoices and receipts. delivered and the price thereof. Like
regular receipts and invoices, they are
All persons subject to an internal revenue part of the accounting record and must
tax shall, for each sale or transfer of likewise be registered with the RDO.
merchandise or for services rendered
valued at twenty-five pesos (P25.00) or Purchase order or invoice
more, issue duly registered receipts or In cases where no receipt or invoice was
sales or commercial invoices, prepared at issued by the vendor because he is
least in duplicate, showing the date of exempt from the requirement to issue the
transaction, quantity, unit cost and same, the purchaser, customer or client
description of merchandise or nature of may require said vendor or person
service. rendering service to sign a purchase or
expense voucher, indicating his name,
In case of sales, receipts or transfers in address and business style if any.
the amount of one hundred pesos
(P100.00) or more, or regardless of the Tickets used by a canteen in a
amount, where the sale or transfer is company compound
made by a person liable to value added The fact that in a canteen located in a
tax to another person also liable to VAT, or company compound tickets instead of
where the receipt is issued to cover cash are used as the medium of exchange
payment made as rentals, commissions, does not exempt the owner or operator
compensation or fees, receipts or invoices thereof from issuing invoice or receipts for
shall be issued which shall show the sale made by him.
name, business style, if any, and address
of the purchaser, customer or client. While the invoice or receipts are required
Where the purchaser is a VAT registered to be registered prior to their use, the
person, in addition to the information tickets need not be registered.
herein required, the invoice or receipt
shall further show the TIN of the Pawnshop tickets
purchaser. Pawnshop tickets constitute evidence of
the pledge hence need not be registered
• The original of each receipt or invoice with the BIR before they are used.
shall be issued to the purchaser or However, pawnshops must issue
client at the time the transaction is registered receipts for amounts received
effected who, if engaged in business or by them as interests and service fees.
in the exercise of profession, shall
keep and preserve the same in his Hotel receipts
place of business for a period of 3 A hotel receipt shall be issued to each
years from the close of the taxable individual guest lodging in a hotel,
year in which such invoice or receipt is notwithstanding the fact that charges
issued, while the duplicate shall be corresponding to a group or company of
kept and preserved by the issuer, also lodgers are shouldered by only one of
in his place of business, for a like them.
period.
Use of delivery receipts; order slips

Book Summary
• When consignment invoice is used to issue duly registered receipts or

in the delivery of goods, registration invoices
of the same with the proper b) Registered with the BIR but without
authorities is required before using receipts or invoices
the same. c) Possession of any of the following:
• Collector’s provisional receipts and (a) unregistered and/or fake
salesman’s provisional delivery receipts or invoices; (b) multiple or
receipts are part of the corporation’s double sets of receipts or invoices;
accounting system, accordingly they (c) unregistered cash register
must presented for approval and machines, POS or similar devices.
registration.
Vouchers for transaction
Form and manner of issuance of
invoices and receipts Persons paying internal revenue taxes
• Must be serially numbered and who are required to keep the books of
made at least in duplicate (there can accounts shall have a voucher entry in
be as many duplicates as necessary their books. The voucher may be an
but the duplicates shall bear the same invoice, receipt, check or other documents
serial number as the original) which shall show the details of each
• Bound in the form of books or pads transaction.
of 50 or 100 each
The record of petty sales or receipts may
• Shall show among others the name
be dispensed with if a cash register
and address and the business style if
machine with roll sheets is used to record
any of the person issuing the same
all petty transactions.
• Issued at the time the transaction
Debit and/or credit memos
is effected and the original must be
delivered to the buyer or customer
These are memoranda issued in numbered
form to clients or customers to indicate
BIR printed receipts (BPR)
that the latter’s account with the issuer or
seller has been increased or decreased
BIR printed receipts are used to allow
respectively, to the extent of the
establishments found during the Tax
particular amount described therein.
Compliance Verification Drive without duly
authorized receipts or invoices or cash
These memos have the same use as
register machine or similar devices to
receipts or invoices and are also required
operate provisionally using the BPR
to be registered with the BIR.
pending the issuance of the regular
authority to print receipts
Freight stub receipts and passage
tickets required of common carriers -
Coverage
printed in such form as the Public Service
Commission may prescribe from time to
All registered tax payers who are required
time.
by law to issue duly registered receipts
may opt to use the BPR provided these
Airway bills, passenger tickets, and
taxpayers have business transactions that
bills of lading - may not be used without
will require the use of not more than one
prior BIR approval
booklet of fifty pages in one taxable period
(of not less than 12 months)
Admission tickets and other records
to be issued or kept by persons
The use of the BPR is mandatory for
subject to amusement tax - before
taxpayers who were found during the
being used the tickets should be
TCVD to have committed for the first time
presented to the commissioner for
any of the following violation:
approval and registration, if the place of
a) Failure to register with the BIR
the business is located in Manila,
under sec 236 of the tax code but
has commence business and failure
Book Summary
otherwise to the revenue district officer in

the province.
The fact that tickets to a particular

amusement place shall be sold exclusively
to the members of an organization, club or
society, will not by itself exempt said
tickets from the registration requirements.

Book Summary
11. Gasoline Stations

12. Hotels, motels, lodging houses and
Chapter 7 the like
13. Token exchange stations
Cash Register Machines, 14. Recreational and amusement
Point-of-Sale Machines, centers, refreshment parlors and
other eating places
and Computerized
Accounting Systems Application
Oliver Misador
A manufacturer, dealer, vendor, or
Point-of-sale terminal or point-of-sale distributor must register – on behalf of the
(POS) machine – is a computerized buyer or user the Cash Register Machine
replacement for cash register machine, or POS machine to be sold or distributed,
inasmuch as the POS system has the not later than five days (5) from the date
capability ti record and track customer of the sale of the machine, and before it is
orders, process credit and debit cards, actually used by the buyer or user.
connect to other systems in the network,
and manage inventory. The registration may be done:
a. manually (with RDO/ LTAD I and II/
Cash Register Machine (CRM) – is a LTDO
machine that has a memory and can b. electronically through the BIR’s
record the sale or transfer of merchandise electronic mail or website
or invoices rendered, in lieu of a
registered sales invoice or official receipt. INFORMATIONS REQUIRED TO BE
DISCLOSED:
Pool of CRM/POS machines – refers to a. TIN of the buyer
CRM/POS machines reserved for use b. VAT or non-VAT number of the
during peak season by the taxpayer and taxpayer-buyer
which shall be registered under the Head c. Serial number, brand and model of
Office. the machine sold
d. Present reading and date of
• The BIR allows their use subject to reading
the condition that prior permit to
use them shall be secured from the Where to file the application: Revenue
appropriate revenue office.(Not District Officer within whose jurisdiction
every business establishment is the business establishment where the
permitted to use such machine) machine will be used.
The permit to use cash register Issuance of the Permit to Use Cash
machine and point-of-sale machine Register and POS machines – The
shall be issued only to proprietors, Revenue
owners or operators of any of the District Officer shall issue the applicant
following lines of business and other the corresponding permit to use cash
similar establishments: register and POS machines upon receipt of
1. Supermarkets a duly filed application and proper
2. Department Stores inspection and evaluation of the Revenue
3. Drugstores Officer assigned by the Revenue District
4. Bookstores Officer , provided, that it is satisfactorily
5. Groceries shown by the applicant that he is provided
6. Bakeries with a duly registered cash register sales
7. Restaurants, bars, beer book, appropriately identified as such to
8. Record bars and music stores each machine being applied for use.
9. Video Shops selling and leasing out
cinematographic films Permits for different lines of business
10. Garages and other parking spaces

Book Summary
A separate permit shall be issued by the j. Likewise, the proprietor who have
Regional Director of the Revenue District been issued a permit to use cash
Officer concerned for every application register machine or POS machine.
duly filed, inspected and evaluated. k. After repair, upgrade, change
modification, update or otherwise
Conditions for the Issuance of the and before re-use of the machine,
permit the proprietor and the person who
made the repair shall submit a
a. The machine shall be used sworn statement to the Revenue
exclusively in the operation of only District Officer.
one line of business covered by the l. Registered machines may be
permit. withdrawn from use, either by
b. The machine should be equipped retirement or sale, only upon prior
with two rollers or its equivalent, application with and approval by
one for the audit journal tape the Regional Director or Revenue
intended for audit and internal District Officer, as the case maybe.
revenue tax purposes and other for m. The original permit should be
the customers tape. securely attached to the back of
c. When the machine is punched for the machine to which it refers and
the purpose of recording a sale, the must be conspicuously visible.
amount of the sale should n. In cases where the applicant is
automatically be printed on the engaged in taxable and non-
customer’s receipt and the audit taxable business activities, a
journal tape or its equivalent. permit for a cash register or POS
d. It must be equipped with a reset machine of the type, which is
counter that advances by one capable of clearly indication
every time the total is reset to separately in words of sales of
zero. taxable and non-taxable items,
e. The imprint on the customers and may be issued.
audit journal tapes or its equivalent o. Data required to be reflected in the
should always be legible. register receipts. The cash register
f. Electronic cash register machines receipts must show among others,
with volatile memory shall at all the following:
times be connected to a power (1) Proprietor’s business name
source and shall not be used at (2) Municipal/city address, if
anytime as reserve units. the machine is used by a
g. Upon filling of the application, all branch, the receipt should
the proprietors and reset keys of identify the particular
machines with resettable branch
accumulating grand total shall be (3) Proprietor’s VAT or non-VAT
surrendered to the Revenue number
District Officer for safekeeping and (4) Amount of the transaction
control. (5) Date of the transaction
h. Registered machines with resetable
accumulating grand total shall not CONDITIONS FOR THE USE OF
be reset, except when expressly CRM/POS MACHINES
authorized by the Revenue District
Officer. For users of CRM
i. The Proprietor shall not change its
business name or the use of the a. A duly registered cash register
registered machine or transfer to sales book shall be maintained for
another business location branch machine used, showing then
or establishment or otherwise columns required.
without prior written notice to the b. No CRM be operated without the
proper office of the BIR having corresponding tapes installed on
jurisdiction over said machine. both roller or its equivalent.

Book Summary
c. The imprint on the customers and principal place of business of the

audit journal tapes, or their proprietor.
equivalent, should be legible at all f. Following the repair, upgrade,
times and preserved pursuant to change modification, update or
the provisions of Section 203 and otherwise and prior to the re-use of
222 of the Tax Code the concerned machine, the user
d. He subsidiary cash register sales and the person who made the
book shall be kept at all times at repair, update, change,
the place where the CRM is modification shall submit a joint
located, and shall be available at sworn statement attesting to such
any time for verification by duly development to the BIR
authorized internal revenue appropriate revenue office.
officers. g. Registered machines may be
withdrawn from use, either by
For users of POS machines retirement or sale, only upon prior
application of and approval by the
a. All users of POS machines must BIR appropriate revenue officer.
secure approval from the BIR, in h. In order to maintain the
writing, for the use of such consecutive sequence of the
machines, for the subsequent transaction numbers imprinted on
document range of serial numbers the customers receipts and the
to be used at least one month audit journal tapes, the receipt
before the previously authorized numbering mechanism or circuit of
document range numbers is a registered machine shall not be
consumed. disturbed or tampered with.
b. No POS Machine shall be operated
without the corresponding Receipt numbering
electronic journal. mechanism/circuit- In order to
maintain the consecutive sequence of
For users of both CRM and POS the numbers imprinted on the
machine customers receipts and the audit
journal tape, the receipt numbering
a. All numbers of reset must be duly circuit or mechanism of a registered
recorded and reported to the BIR machine shall not be disturbed or
as required tampered with
b. All machines shall not be switched Inspection/verification of
to “training mode” or to “no sale subsidiary cash register sales
transaction mode” book and cash register machines-
c. The concerned machine shall be the subsidiary cash register sales book
used exclusively in the operation of shall be kept at all times at the place
only one line of business covered where the machine is located and shall
by the permit to use. be available at any time for verification
d. The machine user shall not change by duly authorized internal revenue
his business name or the use of the officers.
registered machine or transfer to
another business location, branch
or establishment or otherwise. Cash registered machines for internal
e. A machine user who has been control- Any proprietor, owner or
issued a Permit to Use CRM or POS operator of a business establishment may
machine shall not have the use a cash register machine of any type
machined repaired, upgraded, for “internal control purposes”, provided
changed, modified, updated or that duly registered sales invoices or
otherwise removed from its receipts are issued for every sale.
specified location, without prior However such proprietor, owner or
written notice to the proper BIR operator shall first notify the proper
office having jurisdiction over the Revenue District Officer of his intention to

Book Summary
use the machine solely for “internal and other accounting

control” and shall secure a poster from records.
said office which shall be securely 3. Any application system
attached at the back of the machine which generates subsidiary
conspicuous to the public showing the ledger and is part of official
following: accounting documents such
as official receipts sales and
WARNING: THIS MACHINE IS cash invoices, cash
NOT AUTHORIZED TO ISSUE RECIEPT. vouchers, journal vouchers,
ASK FOR SALES INVOICE. REPORT billing statements, sales
ANY VIOLATION TO THE B.I.R. ticket, etc.
COMMISSIONER OF INTERNAL 4. Any application system
REVENUE. which generates reports
required by the BIR (e.g. a
Exemptions - Person authorized to use separate report for void and
cash register machines are hereby suspended transactions to
exempted from showing on the cash explain the deduction from
register receipt the name, business style sale, compilation of their
and address of the purchaser and integrated or consolidated
taxpayer identification number in case sales report produced every
where the purchaser is a VAT registered end of the day
person, regardless of the amount of sales. 5. Point of sale machine/cash
This, however, does not preclude the register Machine connected
purchaser from requiring a registered to a network or linked to
sales invoice or official receipt. CAS
Validity of prior permit- All taxpayers METHODS OF ACCOUNTING

previously granted permits to use cash
register and POS machines issued before All returns required to be filed
the effectivity of these regulations shall under the Tax code shall be prepared in
remain valid within (60) sixty days from conformity with the provisions of the Tax
the effectivity of these regulations and are Code and the rules and regulations issued
mandatorily required to reapply for a new implementing said code. Taxability of
permit to use cash register or POS income and deductibility of expense shall
machines with the proper BIR office be determined strictly in accordance with
having jurisdiction over the said machine the provisions of the tax code and the
upon effectivity of the regulations and rules and regulations issued implementing
thereafter shall be valid until revoked by the said Tax Code. However the recording
the commissioner. of financial transactions and preparation
of financial statement for businesses are
COMPUTERIZED ACCOUNTING SYSTEM done in accordance with generally
accepted accounting principles. In many
Computerized Accounting System (CAS) is cases, these financial accounting
the integration of different component principles may be different from the tax
system to produce computerized books of accounting rules. In case of difference
accounts and computer generated between the provisions of the Tax Code
accounting records and documents. Its and the rules and regulations
components are as follows: implementing the Tax Code on one hand
and the generally accepted accounting
1. General Journal and other principles and the generally accepted
subsidiary records auditing standards, on the other hand, the
2. Sales book, Purchase Book, provisions of the Tax Code and the rules
Accounts Receivable Book, and regulations issued implementing the
Accounts Payable Book, said Tax Code shall prevail.
Inventory Book, Payroll
Ledgers, Subsidiary Ledgers

Book Summary
INDEPENDENT CERTIFIED PUBLIC

ACCOUNTANT
The term “Independent Certified Public

Accountant” means an accountant who
possesses the independence as defined in
the rules and regulations of the Board of
Accountancy promulgated pursuant to
P.D. 692, otherwise known as the Revised
Accountancy Law, as amended by R.A.
929.

Book Summary
MARRIED INDIVIDUALS who do not derive

income from purely compensation income
Chapter 8 shall file a SINGLE return to include the
income of both spouses. When it is
Filing of Income and Withholding
IMPRACTICABLE, each spouse may file a
Tax Returns separate return but the same shall be
Deogracias Natividad CONSILIDATED by the BIR.
INTRODUCTION Income of UNMARRIED MINORS derived

from the property received from a living
Justice Learned Hand: parent SHALL BE INCLUDED IN THE
“Anyone may so arrange his affairs that RETURN OF THE PARENT, except:
his taxes shall be low as possible, he is not (1) Donor’s tax has been paid on such
bound to choose that pattern which best property
pays the treasury. Everyone does it, rich (2) When the transfer of such property
and poor alike, and all do right, for nobody is exempt from donor’s tax
owes any public duty to pay more than the
law demands.” PERSON UNDER DISABILITY or unable to
make his own return, maybe made by his
Yutivo and Sons Hardware vs. CTA: duly AUTHORIZED AGENT or
“While the taxpayer has the legal right to REPRESENTATIVE or other PERSON
eliminate or reduce his tax liability, it is CHARGED WITH THE CARE OF HIS PERSON
assumed that he follows lawful means.” OR PROPERTY – the latter shall assume
responsibility for erroneous, false or
Tax evasion vs. Tax Avoidance fraudulent returns.
“A man approaches a river which can be
crossed by two bridges: one a toll bridge Persons acting in FIDUCIARY CAPACITY
and the other, a free bridge. If he follows shall render in duplicate a return of the
the toll bridge and fails to pay the toll, this income of the person, trust or estate for
is tax evasion. If, however, he crosses by whom or which they act. The return shall
way of free bridge, this is tax avoidance.” be under oath that he has sufficient
knowledge of the affairs of such person,
INCOME TAX trust or estate and that the same is to the
best of his knowledge, true and correct.
A. INDIVIDUALS
The fact that an individual’s name is
The following are required to file an signed to a filed return shall be PRIMA
income tax return in duplicate: FACIE evidence for all purposes that the
(a) Every Filipino citizen residing in the return was actually signed by him.
Philippines on his income from all
sources; Individuals NOT REQUIRED to file a return:
(b) Every Filipino citizen residing
outside the Philippines on his (a) Individual whose gross income
income derived from sources does not exceed hid total personal
within the Philippines; and additional exemptions for
(c) Every alien residing in the dependents EXCEPT citizen or alien
Philippines on income derived engaged in business or practice of
from sources within the profession within the Philippines
Philippines; (b) Individual with respect to pure
(d) Every non-resident alien engaged compensation income, derived
in trade or business or in the from sources within the Philippines,
exercise of profession in the the income tax which has been
Philippines, on his income derived correctly withheld, EXCEPT in case
from sources within the of two or more employers at any
Philippines; time during the taxable year AND

Book Summary
when pure compensation income applied as credit against quarterly income

exceeds 60, 000. tax liabilities for the taxable quarters of
(c) Individual whose sole income has immediately succeeding year.
been subjected to final withholding
tax Estimated tax means the amount which
(d) Individual exempt from income tax the individual declared as income tax in
his final adjusted and annual income tax
SUBSTITUTED FILING INCOME TAX return for the preceding taxable year
RETURNS minus the sum of credits allowed. It is paid
- arises when the employer’s annual in four installments (April 15[time of
return maybe considered as substitute declaration in return], August 15,
income tax return of employee inasmuch November 15 and on or before end of
as the information provided in his ITR calendar year or April15).
would exactly be the same information
contained in the employer’s annual return. The reason for estimated income tax is the
It applies only to INDIVIDUALS who meet inherent difficulty of designing a system of
ALL the following conditions: withholding for income on agriculture,
(a) Employee receives PURELY business and investment income, and
COMPENSATION income; professional fees.
(b) Receives the same from ONE
Employer; Since the taxpayer cannot foresee any
(c) The amount of tax due EQUALS the year’s income, it is usually determined by
amount of tax withheld; reference to the preceding year.
(d) Employee’s spouse complies with
ALL the three conditions mentioned Passive income is excluded from the
above; estimate.
(e) Employer files the Annual
Information Return; (2) Individuals who derive capital gains
(f) Employer issues the employee of subject to final tax
the written statement (BIR Form (a) Sale of stock of domestic
2316). corporation NOT traded thru local
stock exchange – within THIRTY
WHEN TO FILE ITR DAYS after each transaction AND a
(1) Income subject to global tax system – Final Consolidated Return on or
ON OR BEFORE THE 15TH DAY OF APRIL. before 15th of April
(b) Sale or disposition of real property
Individuals are taxed always on the basis in the Philippines – within THIRTY
of CALENDAR YEAR DAYS following each sale or
disposition
Self-employment income consists of the
earnings derived by the individual from PLACE OF FILING
the practice of profession or conduct of With the authorized agent bank (AAB),
trade or business carried on by him as Revenue District Office (RDO), Collection
sole proprietor of by general professional Agent or duly authorized treasurer of the
partnership of which he is a member. city or municipality in which such person
has legal residence, OR if there be no
In case of quarterly payments or legal residence, with the Office of the
instalment plan, the deductions that shall Commissioner. If there are no accredited
be allowed for the first three quarters shall banks, with the collection officer or
not be allowed for the personal and authorized municipal treasurer.
additional exemptions of the individual. It
is allowed only in the last quarter. Filing of ITR on improper venue is subject
to 25 percent surcharge.
Excess of total quarterly payments maybe,
at the option of the taxpayer, (1) issued a PRIVILEGE STORES a.k.a TIANGGE
refund or tax credit certificate or (2) (a) A stall or outlet,

Book Summary
(b) NOT REGISTERED with the BIR, presentation of their TIN and proof
(c) NOT PERMANENTLY fixed to the of ACTUAL withholding tax due on
ground, its income tax payment or the
(d) normally set up in places like ADVANCE PERCENTAGE tax due
shopping malls, hospitals, office (5) MONITOR compliance of the
buildings, hotels, villages or privilege store operators/ owners of
subdivisions, churches, parks, their responsibilities under the BIR
sidewalks, streets and other public regulations.
places,
(e) For the purpose of selling a variety PRIVILEGE STORE OPERATOR is the person
of goods and services for SHORT leasing from the lessor or the owner or
DURATIONS. subleasing from the exhibitor. Obligations
include:
Should the duration EXCEED SIX MONTHS (1) To DEDUCT and WITHHOLD the
in any taxable year, then it shall NOT be EXPANDED WITHHOLDING TAX at
considered a privilege store. the rate of FIVE PERCENT on
LEASE/ RENTAL payments made to
A TRADE FAIR or EXHIBIT, for the purpose the exhibitor/ organizer for sub-
of showcasing Philippine products, either leased property OR to the
for domestic and international domestic lessor/owner of leased property
market, where there is NO SALE of goods and REMIT the same, ON or
or services done BUT orders are taken BEFORE the 10th DAY of the
without the issuance of the corresponding FOLLOWING MONTH except for the
invoice or receipt, shall NOT be considered month of December which shall be
a privilege store. filed on or before the 15th of
January of the following year [using
EXHIBITOR or ORGANIZER refers to the the Monthly Remittance Return of
primary lessee of the entire space where Creditable Income Taxes Withheld]
operations of the privilege stores are held (2) To pay ADVANCE INCOME TAX and
by virtue of a lease contract between the ADVANCE VAT or PERCENTAGE TAX
owner of the leased property and the said to the AAB or RDO having
organizer or exhibitor. Obligations include: jurisdiction over the place of event
(1) Posting of Certificate of or activity ON or BEFORE the 1st
Registration; [must register with day of operation and the 1st day of
the BIR at least 15 days from the every month thereafter;
event or activity] (3) To register with the RDO where
(2) To DEDUCT and WITHHOLD the their principal place of business is
EXPANDED WITHHOLDING TAX at located as stated in the articles of
the rate of FIVE PERCENT on LEASE incorporation or where the books of
payments to the lessor of the account are kept.
property and REMIT the same, ON
or BEFORE the 10th DAY of the Unless the activity covers a lesser period,
FOLLOWING MONTH except for the the PERCENTAGE tax imposed and
month of December which shall be collected on a monthly basis from the
filed on or before the 15th of PRIVILEGE STORE OPERATORS are as
January of the following year [using follows:
the Monthly Remittance Return of (1) P 150/ day or P 4,500/ month – in
Creditable Income Taxes Withheld] air conditioned place in a City of 1st
(3) To SUBMIT to the respective RDO a Class Municipality;
LIST the names, addresses and (2) P 100/ day or P 3, 000/ month - in a
other pertinent information of the NON - air conditioned place in a
participating privilege store owners City of 1st Class Municipality;
or operators PRIOR to the said (3) P 75/ day or P 2,500/ month – in air
activity or event conditioned place in a Municipality
(4) To DEMAND from the participant other than 1st Class Municipality;
privilege store operators the

Book Summary
(4) P 150/ day or P 1, 500/ month - in a accounting period without the prior
NON - air conditioned place in a approval of the Commissioner.
Municipality other than 1st Class
Municipality. If the SUM of the Quarterly Tax Payments
Made during the said taxable year is NOT
Advance payments shall be credited equal to the total tax due on the entire
against the actual business tax and taxable income the corporation shall
income tax due. For VAT purposes, either:
advance VAT is likewise allowed as credit (1) PAY the balance of the tax still due;
against output tax for the month the (2) CARRY-OVER the excess credit; or
advance payment was made. (3) Be CREDITED or REFUBDED with
the excess amount paid
The BIR may deploy Revenue Officers to
the place of activity to monitor and ensure Once the OPTION to Carry-Over and apply
compliance with BIR regulations. the excess quarterly income tax against
the income tax due for the taxable years
When the tax due is in excess of P 2,000, has been made, such option shall be
the taxpayer may elect to pay in two considered IRREVOCABLE for that taxable
equal installments. The 1st installment to period and NO application for Cash Refund
be paid at the time he return is filed and or issuance of Tax Credit Certificate shall
the 2nd installment to be paid on or before be allowed.
15th of July following the close of the
calendar year. Subic Bay Distribution vs. Commissioner
(CTA Case [2004])
B. CORPORATIONS “... The amendment of the company’s
income tax return for the succeeding
Every corporation subject to tax, except taxable year in order to remove from that
foreign corporations not engage in trade year’s available tax credit, prior year’s
or business in the Philippines shall render, excess credits sought to be refunded
in duplicate, a true and accurate cannot be availed of... If the second
QUARTERLY Income Tax Return and a amendment were allowed, it would
FINAL or ADJUSTMENT Return. amount to the taxpayer being allowed to
change the option it had already
The return must be FILED by the exercised.”
PRESIDENT, VICE-PRESEIDENT or other
PRINCIPAL OFFICER and shall be SWORN Within THIRTY DAYS after the adoption by
by such officer and by the TREASURER or the corporation a resolution or plan for its
Assistant Treasurer. DISSOLUTION or for the LIQUIDATION of
the whole or part of its capital stock,
Quarterly summary declarations of income including a corporation notified of possible
and deductions are computed on a INVOLUNTARY DISSOLUTION, or for its
CUMULATIVE basis. REORGANIZATION, it shall render a correct
return, verified under oath, setting forth
The amount so computed shall be the terms of such resolution or plan. Such
DECREASED by the amount of tax corporation, prior to the issuance of
previously paid or assessed during the Certificate of Dissolution or
preceding quarters and shall be paid NOT Reorganization, shall secure a certificate
LESS THAN SIXTY DAYS from the close of of TAX CLEARANCE from the BIR and
each of the first three (3) quarters of the submit the same to the SEC.
taxable year, whether calendar or fiscal
year. RECEIVERS, TRUSTEES or ASSIGNEES of
the property or business of a corporation,
A corporation may employ either shall make returns of the net income on
CALENDAR or FISCAL year as basis for behalf of the latter. The tax due on income
filing of its annual ITR. However, the as returned by them shall be assessed and
corporation shall NOT CHANGE the collected in the same manner as if

Book Summary
assessed directly against the corporation therein is legally entitled to a tax credit,
whose property or business they have the money value of which may be used in
custody or control. payment of his internal revenue tax
liability OR maybe converted into a cash
The quarterly income tax declarations and refund.
final adjustment return shall be filed with
the AAB, RDO, Collection Agent or TCC may be applied against ANY internal
authorized Treasurer of the City or revenue taxes EXCEPT withholding taxes,
Municipality having jurisdiction over the for which the taxpayer is DIRECTLY liable,
location of the PRINCIPAL OFFICE of the provided the original copy of the TCC
corporation filing the return OR where its showing a creditable balance is
MAIN BOOKS OF ACCOUNTS and other surrendered to the appropriate revenue
data which the return is PREPARED and officer.
KEPT.
TAX CREDIT shall refer to the amount due
Quarterly ITR – filed within SIXTY days to a taxpayer resulting from overpayment
following the close of each of the first of tax liability or erroneous payment of tax
three (3) quarters of the taxable year. due, such as:
(1) Excess in quarterly income taxes
Final Adjustment Return – filed ON or paid reflected in the Final
BEFORE the 15th day of APRIL, OR on or Adjustment Return;
BEFORE the 15th day of the FOURTH (2) Over-withholding tax at source of
MONTH following the close of the fiscal income taxes to the extent of the
year. amount of overpayment;
(3) Input taxes on zero-rated and
The tax due shall PAID at the time the effectively zero-rated sales;
declaration or return is filed. (4) Unused input taxes resulting from
cessation or retirement of business
In case of TRAMP VESSELS and SHIPPING of a VAT-registered person
AGENTS, Bureau of Customs is authorized (5) Excise Taxes paid on products sold
to hold the vessel and prevent its to tax-exempt entities;
departure until proof of payment of tax is (6) Erroneously or illegally paid taxes
presented or a sufficient bond is filed to and/or penalties.
answer the tax due.
TAX DEBIT MEMO is acknowledgment from
In case of INSURANCE COMPANIES, the the BIR that the taxpayer has paid his
filing of returns, the payment of PREMIUM internal revenue tax liability using the
tax, DOCUMENTARY STAMP tax, VAT, and TCC. The amount shown therein shall be
income tax shall be serviced by bank charged against and deducted from the
nearest to the office of the Insurance credit balance of the aforesaid TCC.
Commissioner – the Land Bank Branch at However, it is not acceptable as payment
U.N. Avenue, Manila. in the following tax liabilities:
(1) Withholding tax, including fringe
Traditionally, taxes are paid through (a) benefit tax;
over-the-counter payments, (b) bank debit (2) Those arising from tax amnesty;
system, and (c) check payment system. (3) Payment of deposits on withdrawal
However, accommodation checks, second of excisable articles;
endorsed checks, stale checks, post dated (4) Those not administered/ collected
checks, unsigned checks, and checks with by the BIR;
alterations or erasure are NOT allowed. (5) Documentary Stamp tax
(6) Compromise penalty;
TAX CREDIT CERTIFICATE (7) Those fees, taxes and charges
A certification, duly issued to the taxpayer collected under special schemes of
named therein, by the Commissioner or the BIR;
his duly authorized representative,
acknowledging the grantee-taxpayer

Book Summary
Taxpayer holds the TCC in the concept of (6) Documentary Stamp Tax paid or
an OWNER and hence may TRANSFER or payable of at least P 1 Million/ year;
ASSIGN the same subject to the following
conditions: [B] As to financial condition and results of
(1) It is made with the APPROVAL of operation, taxpayers with:
the Commissioner or duly (1) Total annual Gross Sales or
authorized representative to verify Receipts of at least P 1 Billion;
validity of TCC; (2) Total Net Worth of at least P300
(2) It is transferred ONLY ONCE; Million at the end of the year;
(3) It is made STRICTLY in PAYMENT of
his DIRECT INTERNAL REVENUE C. GENERAL PROFESSIONAL
TAX LIABILITY; PARTNERSHIPS
(4) Transferred TCC CANNOT anymore
be converted to cash; Every general professional partnership
shall file, in duplicate, a return of its
TCC which shall remain UNUTILIZED after income, except income exempt setting
FIVE years from date of issue, UNLESS forth the items of GROSS INCOME,
revalidated, would be considered as DEDUCTIONS, and the NAMES, TIN,
INVALID and the unutilized amount shall ADDRESSES, and SHARES of EACH of the
REVERT to the general fund of the PARTNERS.
Government. The REVALIDATED TCC shall
be valid for another FIVE years from date Any declaration, return and other
of issue. statements required under the Tax Code,
shall, in lieu of an oath, contain a written
CONVERSION of TCC into a CASH REFUND statement that they are made UNDER the
may be allowed for the duration of validity penalties of PERJURY.
of the TCC. A REFUND CHECK or
TREASURY WARRANT which shall remain CAPITAL GAINS TAX
UNCASHED or UNCLAIMED within FIVE Corporation deriving capital gains from
years from date of issue, mailing or Sale of stock of domestic corporation NOT
delivery, whichever is later, shall be traded thru local stock exchange – within
forfeited in favor of the Government. THIRTY DAYS after each transaction AND a
Final Consolidated Return on or before 15th
ELECTRONIC FILING and PAYMENT DAY of the FOURTH MONTH following the
SYSTEM close of the taxable year.
A system developed by the BIR for
electronically filing returns and paying Sale or disposition of real property in the
taxes due thereon; an alternative mode of Philippines – within THIRTY DAYS following
filing returns and payment of taxes which each sale or disposition made by the
deviates from the manual process of SELLER to an AAB located within the RDO
paper-bound tax returns. having jurisdiction over the PLACE WHERE
THE PROPERTY BEING TRANSFERRED IS
LARGE TAXPAYERS are taxpayers who LOCATED.
satisfy any of the following criteria:
WITHHOLDING TAXES
[A] As to tax payment,
(1) VAT paid or payable of at least P Employer delinquency id more
100, 000 per quarter; reprehensible that other tax delinquency
(2) Excise Tax paid or payable of at because the employer deprives the
least P 1 Million/ year; government of funds to which he never
(3) Income Tax paid or payable of at had a right. He holds such fund IN TRUST
least P 1 Million/ year; for the government.
(4) Withholding Tax paid or payable of
at least P 1 Million/ year; If an employer or other payroll officer fails
(5) Percentage Tax paid or payable of to fulfil his obligation either to withhold
at least P 100, 000 per quarter; taxes or to report the payment of income,

Book Summary
that person may become liable for BOTH items of income payable to natural or
taxes that should been withheld and other juridical persons, residing in the
penalties. Philippines, by payor – corporation or
persons as provided by law, at the rate of
The fact that a FOREIGN Corporation does NOT LESS THAN ONE PERCENT BUT NOT
not engage business here and had no MORE THAN THIRTY PERCENT thereof,
office or agent is the very reason why its which shall be credited against the income
income is subject to withholding tax. tax liability of the taxpayer for the taxable
year.
The withholding agent is constituted as
agent of BOTH the government and the For both large and non-large taxpayers,
taxpayer. With respect to the collection the withholding tax return shall be filed
and/ or withholding the tax, he is the and payments should be made WITHIN
government’s agent. In regard to filing of TEN DAYS AFTER THE END OF EACH
the necessary income tax return and the MONTH, except for taxes withheld FOR
payment of the tax to the government, he THE MONTH of December which shall be
is the agent of the taxpayer. filed on or before JANUARY 15 of the
following year.
In any case where bonds, mortgages,
deeds of trust or other similar obligations Final Capital Gains Tax on the onerous
of domestic or resident foreign disposition of a Real Property classified as
corporations, the OBLIGOR shall deduct Capital Asset, which shall be taken and
and withhold a tax equal to THIRTY withheld by the BUYER and remitted
percent of the interest on other payments WITHIN THIRTY DAYS from date of
on the bonds, mortgages, deeds of trust or notarization of the transfer document.
other similar obligations, whether the
interest or other payments are payable In case of disposition of Real Property
annually or a shorter or longer periods, classified as Capital Asset in favor of the
whether the bonds, securities or Government, the tax imposed subject
obligations had been issued or marketed, either to the (1) graduated income tax
and interest or other payment thereon rates OR (2) to the final tax of six percent
paid, within or without the Philippines, if at the option of the taxpayer. Hence, if the
the interest or other payment is payable seller chooses the first option, the buyer
to a non-resident alien or citizen of the does NOT have to withhold the six percent
Philippines. BUT no Certificate Authorizing Registration
shall be issued for the transaction until the
Taxes deducted and withheld shall be filed presentation of ITR actually filed.
and paid where the withholding has his
LEGAL RESIDENCE or PRINCIPAL PLACE of With respect to taxpayers availing the
business. EFPS, deadline for filing withholding taxes
shall be FIVE days LATER that that
The return for final withholding tax shall prescribed.
be filed and the payment made within
TWENTY FIVE days from the close of each REQUIREMENTS OF DEDUCTIBILITY
calendar quarter, while the return for the Any income payment which is otherwise
creditable withholding taxes shall be filed deductible shall be allowed as deduction
and the payment made NOT LATER THAN from the payor’s gross income ONLY if it is
THE LAST DAY OF THE MONTH shown that the income tax required to be
FOLLOWING THE CLOSE OF THE QUARTER withheld has been PAID to the BIR.
during which the withholding was made.
A deduction will also be ALLOWED in cases
WITHHOLDING CREDITABLE TAX AT where NO withholding of tax was made
SOURCE BUT
The Secretary of Finance may, upon (a) Payee reported the income and
recommendation of the Commissioner, pays the tax due thereon and the
require the withholding of a tax on the withholding agent-taxpayer pays

Book Summary
the tax including interest incident

to failure to withhold and Income upon which any creditable tax is
surcharge, at the time of audit or required to be withheld at source shall be
reinvestigation; included in the return of the recipient. The
(b) Recipient payee failed to report the EXCESS shall be refunded to him BUT if
income on due date BUT the LESS that the tax due, the difference shall
withholding agent-taxpayer pays be paid by the withholding agent.
the tax including interest incident
to failure to withhold and In cases of BROKER in any exchange or
surcharge, at the time of audit or board or other similar place of business,
reinvestigation; he shall render a correct return showing
(c) Withholding agent erroneously the names of customers for whom he has
under withheld the tax BUT pays transacted business, with details of profits,
the difference between the correct losses and other pertinent information
amount and the tax withheld required by the Commissioner.
including interest incident to failure
to withhold and surcharge, at the In cases of FOREIGN CORPORATION, any
time of audit or reinvestigation. attorney, accountant, fiduciary, bank, trust
company, financial institution or other
Government officials required by law to person, who aids, assists, counsels or
withheld taxes are PERSONALLY charged advises in, or with respect to, the
with the duty to correctly withhold the formation, organization, or reorganization
taxes on compensation, expanded and of any foreign corporation, shall WITHIN
final withholding tax as well as THIRTY DAYS thereafter, file the return
government money payments and the with the Commissioner.
timely remittance of the same. They shall
be equally liable to the penalized
prescribed in the Tax Code.
Every withholding agent required to

deduct and withhold taxes shall FURNISH
EACH RECIPIENT a written statement
showing the income or other payments
made by the withholding agent during
such quarter or year, the amount of tax
deducted and withheld, SIMULTANEOUSLY
upon payment at the request of the
payee,
(1) not later that the 20th day following
the close of the quarter in case of
corporate payee,
(2) or not later than March 1 of the
following year, in case of individual
payee
(3) final withholding taxes, the
statement should be given on or
before January 31 of the
succeeding year
Every withholding agent required to

deduct and withhold taxes SUBMIT TO THE
COMMISSIONER an Annual Information
Return containing the list of payees and
income payments, amount of taxes
withheld from each payee and such other
pertinent information.

Book Summary
• Deductions claimed and allowable;

• Previous net gifts made during the
calendar year;
Chapter 9 • Name of donee; and
• Further info as may be required.
Filing of Transfer and
Business Tax Returns Value Added Tax
Sean Buensuceso Every person liable to pay the VAT shall
file a quarterly return of the amount of his
Estate Tax gross sales or receipts within 25 days
Identify: following the close of each table quarter
1) Cases of transfers subject to estate prescribed for each taxpayer. However,
tax; VAT registered persons shall pay the VAT
2) Gross value of the estate exceeds o a monthly basis.
200,000 (even if exempt from tax);
or Any person, whose registration has been
3) Regardless of value, where estate cancelled in accordance with section 236,
consists of registered or registrable shall file a return and pay the tax due
property or other similar property thereon within 25 days from the date of
which needs BIR clearance before cancellation of registration. Only one
transfer of ownership may be consolidated return shall be filed by the
effected; taxpayer for his principal place of business
or head office and all branches.
Executor, administrator or any legal heirs,
as the case may be. Shall file a return Vat on Imported Goods
under oath in duplicate, setting forth:
• Value of gross estate at the time of Imported goods shall be covered by an
death or that part of his gross Internal Revenue Import Entry Declaration
estate situated in the Phils if non- to be filed with the BOC and the tax due
resident, non-citizen; thereon shall be paid before withdrawal of
• Deductions allowed from gross the imported goods from customs
estate in determining the gross custody.
estate as per section 86;
Any person found in possession of
• Any info and supplemental data
imported goods, the value added tax or
necessary to establish correct
excise tax on which has not been paid,
taxes.
shall be deemed the importer thereof.
But if gross value exceeds 200,000, the
Withholding Value Added Tax
estate tax return shall be supported with a
statement duly certified by a CPA
The government shall, before making
containing the following:
payment on account of each purchase of
• Itemized assets with corresponding
goods from sellers and services rendered
gross value at the time;
by contractors which are subject to the
• Itemized deductions; and value added tax imposed in sections 106
• Amount of tax due whether paid or and 108, deduct and withhold the VAT due
still due and outstanding at the rate of 3% of the gross payment for
the purchase of goods and 6% on gross
Donor’s Tax receipts for services rendered by
Identify: contractors on every sale or installment
Any individual who makes any transfer by payment which shall be creditable against
gift except those under section 101. He the VAT liability of the seller or contractor.
makes a return under oath in duplicate:
• Each gift made during the calendar For government contractors, the
year to be included in computing withholding rate shall be 8 ½ %. However,
net gifts; the payment for the lease or use of
Book Summary
properties or property rights to Filing of returns – Any person liable to pay

nonresident owners shall be subject to specific tax shall file in triplicate a
10% withholding tax at the time of consolidated return and supporting
payment. For this purpose, the payor or attachments setting forth the registered
person in control of the payment shall be brand names and brand codes, total
considered as the withholding agent. production during the return period, the
quantity to be removed and the excise tax
Other Percentage Taxes due.
Every person liable to the percentage
taxes shall file a quarterly return of the Payment – paid before the removal from
amount of his gross sales, receipts or the place of production or by the person
earning and pay the tax due thereon who is found in possession of untaxed
within 25 days after the end of each domestically produced cigars and
taxable quarter. In the case of a person cigarettes/alcohol products.
whose VAT registration is cancelled and
who becomes liable to the tax imposed in Advance payment or deposit – he may be
section 116, the tax shall accrue from the allowed to effect removals of excisable
date of cancellation and shall be paid in articles without prior filing provided he has
accordance with the provisions of this sufficient balance of deposits with the BIR
section. to cover full payment of the excise tax due
on said removals.
The commissioner may, by the rules and
regulations, prescribe: (a) the time for Where to file and pay – the excise tax
filing the return at intervals other than the return and all the supporting attachments
time prescribed in the preceding shall be filed with and the specific tax due
paragraphs for a particular class or classes thereon paid to a bank duly accredited
of taxpayers, after considering such located in the revenue district where such
factors as volume of sales, financial person is registered or required to
condition, adequate measures of security, register.
and such other relevant information
required to be submitted under the For Imported Cigars and cigarettes
pertinent provisions of this code; and (b)
the manner ad time of payment of Filing of return – In general, prior to the
percentage taxes other than hereinabove approval of the importer’s application to
prescribed, including a scheme of tax import cigar and cigarettes, he shall be
repayment. required to pay the specific tax on his
importation and for this purpose, the
Except as the commissioner otherwise importer shall file in triplicate a
permits, every person liable to the consolidated return and supporting
percentage tax may, at his option, file a attachments setting forth the brand name
separate return for each branch or place total number of packs/cartons/kegs to be
of business, or a cconsolidated return for imported and the suggested net retail
all branches or places of business with the price for cigars or retail price for alcohol
authorized agent bank, RDO, collection products.
agent or duly authorized treasurer of the
city or municipality where said business or Where to file – The excise tax return shall
principal place of business is located, as be filed with the RDO having jurisdiction
the case may be. (See page 310) over the head office of the importer and
the specific tax due thereon paid to a bank
Excise Taxes duly accredited located in the revenue
 Excise tax on domestic articles; district where such person is registered or
Cigarettes and alcohol; Distilled required to register.
spirits, wines and fermented liquors
Petroleum Products
Locally Manufactured/Produced

Book Summary
Locally manufactured petroleum products The provisions of PD 1045

– the specific tax on petroleum products notwithstanding, any person liable to pay
locally manufactured or produced in the DSR upon any document subject to tax
Philippines shall be paid by the under Title VII shall file a tax return and
manufacturer, producer, owner or person pay the tax in accordance with the rules
having possession of the petroleum and regulations to be prescribed by the
products, and such tax shall be paid within Finance Secretary, upon recommendation
15 days from date of removal from te of the Commissioner.
place of production. Subsequently, the
excise tax shall be paid before the Nature of tax and persons liable for the
removal from the place of production. tax
The payment of the DST due on any
On imported petroleum products – The taxable document or transaction,
specific tax on imported products shall be irrespective of the amount thereof, shall
paid by the owner or importer before their be made by the filing of a tax return and
release from customs custody, or by the the payment of the tax in accordance with
person who are found in possession of the existing rules and regulations. If the
petroleum products which are exempt DST amount due is 15 or less the taxpayer
from specific tax other than those legally has the option to pay the DST due by way
entitled to exemption. of purchasing loose documentary stamps.
Indigenous petroleum – The ad valorem on Constructive stamping of DST on the

indigenous petroleum shall be paid by the taxable document or facility evidencing
buyer or purchaser for the first taxable the transaction, or receipt system: general
slae, barter, exchange or similar manner of payment whereby constructive
transactions, within 15 days from the date affixture is done by affixing to the taxable
of actual or constructive delivery to the document or facility evidencing the
said buyer or purchaser. transaction the duplicate copy or certified
true copy of the DST return or proof of
payment of DST hence, advance purchase
for future application is not allowed.
Excise taxes on imported articles Exceptions: in lieu of constructive

stamping, section 200(D) allows payment
Excise taxes on imported articles shall be of DST either through purchase and actual
paid by the owner or importer to the affixture of loose DS or by imprinting of
Customs Officer, conformably with the stamps through a documentary metering
regulations of the Department of Finance machine of the proper value to the
and before the release of such articles document or facility evidencing a
from the customs house or by the person transaction sought to be taxed, subject to
who is found in possession of articles the following conditions:
which are exempt from excise taxed other • Purchase and actual affixture of
than those legally entitled to exemption. loose DS; purchase DS not
exceeding P200 for future
For tax-free articles brought or imported application provided DST does not
into the Philippines by tax-exempt exceed P15.
persons, entities which are subsequently • Imprinting/affixture of DST through
sold, transferred or exchanged in the DS metering machine
Philippines to non-exempt persons,
entities shall be considered the importers Mode of payment and remittance of the
thereof and shall be liable for the duty of tax
internal revenue tax due on such
importation. Unless otherwise provided in these
regulations, any of the aforesaid parties to
Documentary Stamp Tax the taxable transaction shall pay and
remit the full amount of the tax in

Book Summary
accordance with the provisions of section i. A bank, quasi bank or non-bank

200 of the code. financial intermediary, a
finance company or an
Exceptions: insurance, a surety, a fidelity or
1. If one of the parties to the taxable annuity company;
transaction is exempt from tax, the ii. The proprietor or operator of Jai
other non-exempt party shall be alai, horse racing, lotto and
the one directly liable for the tax other authorized numbers
who will pay and remit the same. games, as provided in these
2. If said tax-exempt party is one of regulations.
the persons enumerated in Section iii. The PSE, in the case of shares
3(c)(4) hereof, he shall be of stock and other securities
constituted as agent of the traded in the local stock
Commissioner for the collection of exchange;
the tax, in which case, he shall iv. A pre-need company on sale of
remit the tax so collected. Failure pre-need plans as provided
to collect would make him under section 186 of the Tax
personally liable for the tax plus code;
penalties. v. An educational institution in
3. The said tax-exempt party, who is respect of issuance of taxable
constituted as agent for the certificates;
collection of the DST, shall issue an vi. Warehouse operators in respect
acknowledgement receipt in of warehouse receipts taxable
respect of the DST so collected and under section 189;
the same shall be remitted. vii. The corporation vis-à-vis the
stamp tax on proxies in the
Persons liable to remit DST exercise of the stockholder’s
voting right, taxable under
In general, the full amount of the tax section 192 of the tax code;
imposed under Title VII of the code may viii.Transportation contractor vis-à-
be remitted by any of the party to the vis the bills of lading or receipts
transaction, except in the ff. cases: taxable under section 191;
1. Stamp tax on bonds, debentures, ix. Franchise grantees and other
certificates of indebtedness, taxpayers paying a fixed
deposit substitute, or other similar percentage of the prescribed
instruments; remitted by the taxable base in lieu of all
person who issued. internal revenue taxes.
2. Stamp tax on original issue of
shares of stock in a corporation;
Remitted by the corporation which
issued the shares of stock.
3. Stamp tax on Jai alai, horse race,
lotto or other authorized umbers
games; Remitted by the proprietor
or operator and if he is tax exempt
then collect the same from the
other non-exempt party.
4. The one of the parties to the
taxable document or transaction is
included in any of the entities
enumerated below, such entity is
exempt from the tax herein
imposed, it shall remit the tax as a
collecting agent:

Book Summary
2. Pre-audit activities
(a) Processing of tax returns
Chapter 10 (b) Preparation of Audit
Program
Tax Audit Programs i. Revenue District Office
Grace Sarah Tria ii. Large Taxpayers Service
iii. Enforcement Service
BIR puts more emphasis on tax iv. Office Audit Section,
consciousness and education than tax Assessment Division
enforcement.
3. Issuance of authority to examine
Commissioner has to examine or not books and records
to examine tax returns of taxpayers 4. Conduct of tax audits
5. Submission of written report of
• In ascertaining the correctness of any examination
return, or in making a return when 6. Review of report examination
none has been made, or in 7. Filing of protest and supplemental
determining the liability of any person, memorandum by taxpayer
or in collecting any such liability, or in 8. Issuance of revised assessment
evaluating tax compliance, the and/or denial of protest by the
Commissioner is authorized to Regional Director
examine any book, paper, record or 9. Administrative appeal to the
other data which may be relevant to Commissioner
such inquiry 10. Filing of appeal to the Court of Tax
• Impliedly, the Commissioner has also Appeals by the taxpayer
the power not to examine the returns
of taxpayers not selected for tax audit Filing of tax returns and payment of
taxes
The Commissioner may • The Philippines adopts the self-
(a) prepare and file a tax return in the assessment system: taxpayer
name of a taxpayer who did not file initially determines his own tax
such tax return as required by law liability, files his tax return, and pays
(b) examine the tax return, if any, the tax as shown in his tax return
books of accounts and accounting within the prescribed period at the
record of the taxpayer for: proper revenue office or authorized
a. ascertaining the correctness agent bank
of the tax return filed
b. determining tax liability of Pre-audit activities
the person
c. verifying taxpayer’s 1. Processing of tax returns
compliance with existing  One important activity that the
laws Commissioner should do after
(c) decide to suspend the examination the filing and processing of tax
of all tax returns for a limited returns is that all tax returns
period or not to authorize the filed by taxpayers either
examination of certain tax returns directly with the BIR or its
authorized agents must be
Significance of Tax Audit accounted for by the persons
• acts as a strong deterrent against who received them and
lowering voluntary tax payments by transmitted and received by the
taxpayers in their tax returns proper revenue offices that are
responsible for their encoding,
ASSESSMENT PROCESS safekeeping and storage.
1. Filing of tax returns and payment 2. Preparation of Audit Programs

of taxes

Book Summary
SELECTION CRITERIA – the objective • For purposes of the Tax Fraud

of the selective audit program is to Program, a criminal tax case to be
create an impact on the taxpayers in developed must be limited to
general that will compel them to (a) categorical findings of non-
declare voluntarily their correct tax declaration or
liability due to the awareness that if underdeclaration of taxable
their tax returns are selected in the gross receipts; and
future for thorough audit and it will be (b) current taxable year and
found that they have willfully unverified prior years
underdeclared their taxable base, they • In developing tax fraud cases, the RDO
will be subjected to the civil and and SID should resort to investigation
criminal sanctions approaches
• Preliminary investigation – before a
Factors in the Selection of Returns for taxpayer will be subjected to a formal
Detailed Audit audit, a preliminary investigation must
a. Sector/industry or line of business first be conducted to determine the
of the taxpayer existence of prima facie evidence of
b. Income level of taxpayer fraud
c. Static declaration of taxable base
• The Revenue Officer shall report his
- a taxpayer whose taxable recommendation whether or not a
base is not significantly
formal investigation is warranted
increasing despite brisk within thirty (30) days from the time
business, or one whose
the case is assigned for preliminary
reported sales declaration is investigation.
not comparable to other
engaged in similar business • Letter of Authority – in every case
may be singled out for selective where formal investigation is
and prioritized audit warranted, a Letter of Authority/ Audit
d. Geographical factors Notice to be signed by the
e. Results of surveillance Commissioner or the Regional Director
f. Other factors shall be issued for each taxpayer
subject to audit
AUDIT PROGRAMS FOR LARGE
TAXPAYERS OFFICE AUDIT PROGRAM
• The Large Taxpayers Service (LTS) • The Office Audit Program shall
collects about 60% of the total cover the audit of tax returns of
collection of the BIR. individual and corporate taxpayers,
estates and trusts within the
Types of Audit: Region covering taxable year.
1. Mandatory Audit
2. Short Audit – audit of cases focused
on certain issues that need
immediate resolution to provide
taxpayers certainty as to its tax
treatment
3. Package Audit – audit that converts

all types of taxes, such as income
tax, withholding taxes, VAT,
percentage taxes, excise taxes,
and documentary stamp taxes
AUDIT PROGRAM FOR THE

ENFORCEMENT SERVICE

Book Summary
filed by informers and

selected machine-generated
Chapter 11 cases
b. Special Investigation
Audit Notices to Examine Division (SID)
Books and Records Jurisdiction over tax fraud
Diana Grace Lopez cases
c. Revenue District Officer
Audit Jusrisdiction (RDO)
• explained in appropriate revenue If indications of fraud are
issuances promulgated periodically by discovered, RDO must
the Commissioner for the purpose of transmit the records of the
avoiding double or multiple case to SID and provide
examination of taxpayer’s books and assistance in the formal
records; investigation
• Letters of Authority are issued by
Special Investigation Units or Revenue 3. Collective Service
District Offices to investigate liabilities Withholding Tax division is authorized
of corporations; to check the accuracy of declarations
• To avoid duplicity of letters of made by taxpayers
authority, the Commissioner directed
all revenue officers to comply with the 4. Regional Service/ Revenue District
following instructions: a) any Offices
investigation that has already been Jurisdiction over:
commenced by revenue officers should a. Claims for tax refund or issuance of
be immediately discontinued and the tax credit certificate or in cases of
returns should be forwarded to the income tax returns showing carry-
Assistant Commissioner for transmittal over of excess withholding tax or
to the respective audit divisions; b) if quarterly income tax payments,
the investigation has already been which will require the
completed, the report of investigation audit/verification of all internal
should likewise be forwarded to revenue tax liabilities for the
Assistant Commissioner; covered period;
b. VAT returns showing excess input
• Should the taxpayer still receive more
tax at the end of the taxable
than one letter of authority, the
period, which will require the
taxpayer must verify from the Office of
specific audit/verification of the
the Commissioner which tax audit
VAT liabilities only for the covered
office shall undertake the
period;
determination of his tax liability;
c. Estate tax returns, donor’s tax
returns, capital gains tax
1. Large Taxpayers Service
returns/expanded withholding tax
 Shall have audit jurisdiction
returns and documentary stamp
over the large taxpayers
tax returns unless no LA/AN/TVN is
identified
required before verification can be
 made of such returns pursuant to
2. Enforcement Service the provisions or rules prescribed
a. National Investigation in the RMO on one-time
Division (NID) transactions (ONETT);
Jurisdiction to conduct d. Request for tax clearance of
investigation over: false or taxpayers due to
fraudulent return was filed, retirement/cessation of business
cases emanating from which will require the
OPRES, SENATE, HOR, audit/verification of all internal
Departments of Executive revenue tax liabilities for the
Brach, cases covered by immediately preceding year and
confidential information
Book Summary
the year of retirement of the must be properly shown in the

taxpayer pursuant to Section 52 of letter of authority
the Code; 3. Information about the revenue
e. Request for tax clearance of officer
taxpayers undergoing  It is important that the data
merger/consolidation/ split-up/spin- regarding the revenue officer
off and other types of corporate authorized to conduct the tax
reorganizations which will require audit
the audit/verification of all internal  Other revenue officers whose
revenue tax liabilities for the name do not appear in said
immediately preceding year and letter of authority are not
the year of retirement of the allowed to assist revenue
taxpayer, specifically, those whose officers named is said letter of
juridical personality will cease; and authority
f. Other cases as may be directed 4. Information about the scope of tax
and approved by the audit
Commissioner.  Scope of tax audit refers to the
kind of taxes and taxable
Preparatory Activities periods covered by the
1. Revenue officers shall submit an examination
inventory of their pending cases as of  Issuance of a letter of authority
December 31 of the preceding year to covering more than one taxable
their respective Revenue District year is prohibited except tax
Officers; fraud cases or excise tax cases
2. All revenue officers shall submit  A letter of authority shall
their reports of investigation on all specify the kinds of taxes to be
terminated cases to their respective covered in the tax audit
Revenue District Officers so that
assessment notices and letters of Signatories to letters of authorities
demand could be issued; The authorized signatories are as follows:
3. All monthly reports of 1. ACIR (Large taxpayers service) – large
accomplishments must have been taxpayers for examination by revenue
submitted; officers assigned at LTAID I and II and
4. A certification shall be given by the LTDO – Makati City and Cebu City
Revenue District Officer to the 2. DCIR (Legal and Inspection Group) –
Regional Director that the conditions tax fraud and policy cases identified by
referred to in nos. 1 to 3 have been the Commissioner or Deputy
fully satisfied; Commisioner
LETTERS OF AUTHORITY
In issuing the letters of authority, the Post-signing activities
following rules shall be observed:  The date of issue of the letter of
1. Information about the BIR form authority must be typed or
 Proper BIR form would depend stamped on its face and must be
on the office and type of tax served within 30 days from such
and transaction covered by the date of issue
examination  Service of the letter of authority is
 As a general rule, the form to done by acknowledging receipt of
use is the Letter of Authority the original copy of the letter of
however there are cases where authority
special forms are allowed to be  Constructive service may also be
used resorted by leaving of the original
2. Information about the taxpayer copy of letter of authority with the
 The correct information about taxpayer or his representative
the taxpayer’s registered name,
complete address, and TIN
Book Summary
 After service the relevant

information in the LA register must
be filled up
Revalidation of letters of authority

An LA which is over 120 days from the
date of issue loses its validity and must be
revalidated. The rules are:
1. Revalidated by the Regional Directors
when there is an attached progress
report
2. Revalidation shall be limited to only
once in the regional office and twice in
the National Office
3. Revalidation shall be covered by the
issuance of a new Letter of Authority
under the name of the same
investigating officer and the
superseded LA shall be attached to the
ne LA issued
4. Requests shall be supported with a
progress report on the case and a
justification for said revalidation
5. It shall be the duty of the Division
Chief/RDO to immediately report any
tax case for which no report of
investigation has been rendered 120
days after the issuance of an LA
Tax Verification Notice

The rules on the issuance of LA are usually
followed for TVNs except in some
particular situations. The following
guidelines and procedure are prescribed in
the issuance of TVNs and CARs: (Please
see LONG enumeration on pages 397-
400)

Book Summary
The following offices are authorized to

conduct ordinary tax examinations:
Chapter 12 National Office – a) Large Taxpayer’s Audit
Conduct of Tax Audit and and Investigation Division (LTAID) I; b)
LTAID II (Excise). National Investigation
Reporting Requirements Division is authorized to conduct tax fraud
Melanie Valenciano investigation.
Office Audit – the taxpayer requested to Package Audit Policy – in examination

bring to the tax office the data necessary of various tax liabilities this policy is
to verify certain items. adopted whereby simultaneous
Field Audit- the most effective audit and examination of all the tax returns filed by
thus the method to be used for the returns a particular taxpayer for the taxable year
requiring a careful check at the taxpayer’s covered. Purpose: facilitate the discovery
place of business. of any discrepancy or scheme that may
have been employed by the taxpayer to
Purpose of Tax Audit reduce tax liabilities.
The fundamental goal of enforcement
activities is not only to increase Regional Offices – a) Large Taxpayer’s
enforcement revenue but also to improve District Office (LTDO); b.) Revenue District
overall voluntary tax compliance and to Office (RDO); c.) Special Investigation
collect the correct amount of taxes from Division (SID); c.) Office Audit Section ,
taxpayers. Assessment Division.
The purpose of tax audit is to determine TAX EVASION

the taxpayer’s substantially correct tax  Tax Fraud or Evasion – means the
liability. Therefore, to accomplish this, elimination or reduction of one’s
quality audit must be performed. correct and proper tax by fraudulent
means.
Quality Audit – the examination of the  The fraud contemplated is actual not
taxpayer’s books abd records in sufficient constructive; and intentional consisting
depth to ascertain the correctness and of deception willfully and deliberately
validity of entries thereon and the done or resorted to in order to induce
propriety of application of tax laws. It another to give some legal right.
embraces the following:  In realm of tax law, fraud constitutes
1) the taxpayer’s books and records will deceit, trickery, intention, perversion
be reviewed in sufficient depth to of truth for some evil motive or with
reach a supportable conclusion intent to evade taxes.
regarding all items of a material tax
consequence; Factors in Fraud or Evasion: the
2) appropriate income investigations will following elements must be proven by
be performed, where warranted to competent evidence
ensure the proper and complete 1) The end to be achieved – the objective
reporting of income regardless of is to pay an amount of tax that is less
source; than that known by the taxpayer to be
3) the responsibilities if the taxpayer legally due.
regarding the filing of all tax and 2) The accompanying state of mind – the
information returns have been state of mind is variously described as
ascertained; being “evil,” “in bad faith,” “deliberate
4) conclusions expressed are and not accident,” or “willful”. The
documented in sufficient detail to exact term used is not too important.
enable the reader to comprehend the 3) the overt act done or scheme used by
process whereby such a conclusion the taxpayer – the act or scheme must
was reached. be tinged with some elements of
deceit, misrepresentations, trick,
TAX AUDIT OFFICES device, concealment or dishonesty.
Book Summary
3) There is less inclination for the

Burden of Proof in establishing Fraud revenue officer to recommend criminal
 the burden of proof is on the BIR. action, if he believes that the
 Presumption that an officer of the taxpayer’s counsel is knowledgeable in
government is regularly performing his the fraud area and capable of fully
duty is NOT applicable in fraud cases. exploiting weak points in the
 In criminal cases, the burden of proof government’s case, with the result
is on the prosecution and it is still that somewhere along the escalator of
required to establish proof beyond review, the recommendation will be
reasonable doubt. reversed.
4) Finally, at least on paper, the crucial
test is the factor of the degree of
burden of proof required. In criminal
case, the guilt must be proof beyond
Types of Tax Fraud Cases reasonable doubt, in civil it must be
1) Criminal Fraud - a criminal tax fraud clear and convincing evidence.
case results when all the elements of
fraud can be proven beyond Sources of Fraud Cases:
reasonable doubt. 1) From routine examination of returns:
a) keeping no records or inadequate
2) Civil Fraud – When all the elements of
records despite substantial
fraud cannot be proven beyond
transactions reflected in the returns; b)
reasonable doubt but these elements
standard of living of the taxpayer such
can be established by clear and
as possession of cars or jewelries;
convincing evidence(stronger than
mansions or properties exceeding
mere preponderance of evidence)
probable source of income; c) records
amounting to more than a mere
verified were not properly declared per
preponderance of evidence, civil fraud
return; c) records verified were not
exists. The taxpayer is liable here
property declared for tax purposes; d)
aside from the deficiency taxes only to
false vouches and receipts which were
the civil penalties.
verified in the course of the routine
examination.
Guidelines suggested on whether the
2) From information furnished by: a) an
revenue officer should recommend civil or
informant who has knowledge of the
criminal fraud:
transactions of the taxpayer which
1) If the evidence points to negligence or
were not properly declared for tax
carelessness in the light of age,
purposes; b) referrals from other
education, business experience, tax
government offices or from other
knowledgeableness, and a general
investigating units of the BIR.
appraisal of the taxpayer himself,
3) Thru initiative of the investigating
including his reputation for honest
officers: a) from newspaper reports; b)
dealings, the inclination of the revenue
thru research of available government
officer would be to close the case with
records such as from offices of the
no recommendation for criminal
Register of Deeds, Bureau of Highways
action.
and other government offices; and c)
2) If there is doubt as to whether the
in relation to an investigation of
evidence points toward negligence or
another taxpayer, where suspects that
fraud, but there is strong evidence that
certain transactions were not declared
the taxpayer relied on the erroneous
for tax purposes.
advice of others, and that as a result of
such reliance, there is nevertheless an
PROCEDURES FOR TAX FRAUDS
understatement of income, the
I. Preliminary Investigation must first be
revenue officer would be inclined to
conducted to establish the indication
give the taxpayer the benefit of the
of fraud.
doubt, there being good faith than evil
motives connoting willfulness.  this includes the verification of the
allegations in the confidential

Book Summary
information and/or complaints filed, Commissioner or the Assistant

the determination of the schemes Commissioner, Enforcement
and probable extent of fraud Service, as the case may be,
perpetrated by the subject the Assessment Notice and the
taxpayers through access to Letter of Demand shall be
records and surveillance without immediately served to the
contact, personal or otherwise with taxpayer concerned;
the taxpayer. c) In cases where the tax liabilities
II. The formal tax fraud investigation – have been fully paid, the docket
includes the examination of the books of the case shall be forwarded
of accounts through the issuance of a to the Records Division of the
Letter of Authority, shall be conducted National Office for safekeeping.
only after the existence of indications Where the taxpayer fails or
of fraud have been confirmed by the refuses to pay the assessment
Regional Tax Fraud Committee. within the prescribed period,
III. Letter of Authority issued by the ACIR- the docket shall be forwarded
Enforcement Service shall to the Collection Division of the
automatically supersede all previously Revenue Region concerned for
issued Letter s of Authority shall be the application of the civil
issued for any taxpayer already remedies under the Tax Code
covered by a Letter of Authority issued for the collection of taxes.
by the ACIR-Enforcement Service. 2) Special Investigation Division
A. The Chief of the SID shall issue the
1) National Investigation Division corresponding Letter of Authority, if
A. Cases recommended for criminal indications of fraud have been
prosecution established, and the same has
Cases recommended for criminal been confirmed by the Regional
prosecution by the revenue officer Tax Fraud Committee.
conducting the tax audit must B. Thereafter, a photocopy of the LA
substantiate his findings with issued shall be immediately
original copy of documentary furnished the RDO. The RDO in
evidence necessary for such return shall desist from issuing any
criminal prosecution. He should Letter of Authority to the taxpayer
remember that the burden of proof concerned and shall transmit to the
needed for such criminal SID all the documents in its
prosecution belongs to the possession relative thereto within
government, and the degree of five (5) days from receipt of the LA
proof required to get a conviction is furnished him by the SID.
proof beyond reasonable doubt. C. Where indications of fraud have
B. Cases not recommended for been established by the SID
criminal prosecution against a taxpayer who is or has
In reports of cases not been the subject of an on going or
recommended for criminal terminated investigation by the
prosecution, the following shall be RDo, the SID shall forward the
observed: records of the case for evaluation
a) In cases where the evidence of to the RTFC.
fraud does not warrant criminal Effects of Fraud
prosecution of the case, 1) Civil fraud results in the imposition of
investigation shall be pursued the 50% surcharge, to be imposed by
and the report thereof shall be the BIR;
submitted to the Commissioner 2) Criminal fraud involves the imposition
or Assistant Commissioner, of penal sanction to be imposed by the
Enforcement Service, for RTC or the CTA, depending on the
approval; amount of basic tax, upon conviction;
b) The final report of investigation 3) The power of the Commissioner to
having been approved by the assess the tax is extended to ten (10)

Book Summary
years from date of discovery of the 4) Donor’s tax

falsity of fraud. a) Failure to file donor’s tax return
4) Cases involving fraud cannot be the b) Filing of returns within the same
subject of compromise as mandated year in various jurisdictions to
by Section 204 of the Tax Code. evade the payment of the higher
5) The fact of fraud shall be judicially graduated tax
taken cognizance of in the civil or c) Willful omission of prior donations
criminal action for the collection of a made during the same taxable
fraud assessment that has become year;
final and executor on the 5) Excise Taxes
administrative level; a) Misclassification of articles subject
6) Suspension and temporary closure of to excise tax by making it appear
the business operations of a taxpayer that a particular manufactured
under Section 116 of the Tax Code, for articles falls within a lower tax
violation of the VAT Provisions. classification;
b) Illegal manufacture of articles
Methods of Proving Frauds subject to excise tax;
I. Direct Approach or Evidence c) Unlawful possession or removal of
Method – proof of fraudulent acts are articles subject to excise tax, and
adduced by specific items of for which no tax has been paid;
fraudulent transactions. It is that 6) Documentary Stamp Tax
method whereby the existence of the a) Non-affixture of the correct
principal or ultimate fact is proven documentary stamps on pertinent
without any interference ore documents and papers.
presumption. 7) Withholding Taxes
Failure to withhold the correct taxes as
Example: withholding agent under the pertinent
1) Income Tax- omission or provisions of the Tax Code.
understatement of taxable income
a) failure to file income tax return II. Indirect Method – this relies upon
b) Items of income and expenses, circumstantial evidence of determining
assets or liabilities have been the correct income or transaction of a
omitted or falsely claimed in the taxpayer. “Circumstantial” is that
accounting records or return or in which tends to prove the existence of
order to minimize or reduce taxes. the disputed fact by proof of other
c) misclassification of accounts facts which have a legitimate tendency
d) sales/income of domestic braches to lead the mind to a conclusion that
purportedly shown as income of the fact exists which is sought to be
the foreign head office; established.
2) Business Taxes: VAT and Percentage
Taxes The legal basis for this approach is
a) Omission or understatement of anchored in Sections 6 of the Tax Code.
taxable income/sales 1) Net worth or Inventory Method
b) Keeping falsified books of This method of reconstructing income
accounts. based on the theory that if the
3) Estate Tax taxpayer’s net worth has increased in
a) Failure to file estate tax return a given year in an amount larger than
b) Filing of estate tax returns in his reported income, he had
different jurisdictions to avoid understated his income for that year.
payment of the higher graduated
tax, as in the case where the
deceased owned properties in
various places;
c) Willful under-valuation of the
market values of the market values
of the properties of the estate;

Book Summary
handles by the taxpayer and also when

Formula: he knows the price or profit charged
Increase in Net worth per unit. Examples: 1) records of sugar
Add: Non-deductible Item milled by sugar central; 2) records of
Less: Non-taxable income or receipts fish production to the Bureau of
subjected to final tax transfer taxes Fishery and Aquatic Resources.
Taxable Net Income 5) Joint and Coordinated
Less: Personal and additional Examination- the following guidelines
exemptions are followed:
NET INCOME SUBJECT TO TAX a) identification of Taxpayers Covered
– the Commissioner shall within 10
2) Expenditure Method days from issuance of RMO,
It proceeds on the theory that where identify large taxpayers and
the amount of money which a taxpayer related groups of companies.
spends during a given year exceeds b) Creation of Audit Team
his reported income, and the source of c) Coverage – prior to 1997
such money is otherwise unexplained, d) Letter of Authority (LA) and
it may be inferred that such Assessment Notice signed by
expenditures represent unreported Commissioner
income. e) LAs issued prior to the Order
f) Completion date – not later than 6
Formula: months from issuance of Revenue
Declared yearly income Special Order for creation of Audit
Less: Aggregate Yearly Expenditures team
NET INCOME SUBJECT TO TAX
Non-Contact Approach
3) Percentage Method Designed in order for the BIR not to have a
This method is a computation whereby direct face to face contact with the
determinations are made by the use of taxpayer. This is made possible by state of
percentages or ratios considered the art centralized Data Warehouse
typical of the business under geared towards enhancing revenue
investigation. By reference to similar collection.
business or situations, percentage
computations are secured to This system which stands for
determine sales, gross profit or even “Reconciliation of Listing for Enforcement
net profit. (RELIEF) ” can detect tax leaks by
matching the data available under the
This method is of little value in criminal BIR’s Integrated Tax System (ITS) with
cases, it is useful in test-checking or data gathered from third party sources.
corroborating the results obtained by
some other means of proof such as This approach includes the process of
specific items, net worth and computerized matching of sales and
expenditure methods and for purchase data contained in the Schedules
evaluating allegations from of Sales and Domestic Purchases and
information regarding unreported Schedule of Importation submitted by VAT
profits or income. Taxpayers.
4) Unit and Value Method REVIEW OF REPORTS OF

The determination of gross receipts INVESTIGATION
may be computed by applying price To prescribe reporting procedures and
and profit figures to the known internal controls in the review and
ascertainable quality of business done reporting of cases, in preparation,
by taxpayer. approval and issuance of pre-assessment
notices, assessment notices and demand
It is feasible when the investigation letters and the preparation of Form 40, the
can ascertain the number of units
Book Summary
Commissioner has prescribed the

following policies:
1) Reports of investigation shall be
reviewed by the Enforcement Service
2) The Commissioner shall be the
approving officer for all reports of
investigation.
3) Pre-assessment notices, letters of
demand or assessment notices shall
be prepared and issued by the
Enforcement Service for duly approved
reports showing a) the facts, b) the
law, jurisprudence, rules, regulations
on which the recommended deficiency
tax assessment is based.
4) Protests and requests for
reinvestigation or reconsideration shall
be filed with the Enforcement Service.
Form 40 (Monthly Summary of Taxes
Assessed) and Form 1758 (Authority to
Cancel Assessment) shall be accomplished
by the Enforcement Officer.

Book Summary
telecommunications/telephone/te
legraph/radio firms per company;
Chapter 13 3. Bangko Sentral ng
Pilipinas: amount of interest
Third Party Information income and other income of
Paul Isaac Barrameda
banks and their balances per
company;
Introduction
4. All departments,
- To determine the correctness of
agencies and
books and records by the taxpayer
instrumentalities of the
under tax audit, BIR can compare the
Government including
declarations of the taxpayer under
GOCC’s: contracts entered into
audit with the information such
with private contractors;
taxpayer has with his suppliers and
customers, which may be obtained by 5. SEC: names and addresses
the Commissioner. of all active registered
- Under the program of the BIR, corporations and partnerships
information obtained from third party with their financial statement.
sources will be referred to the Revenue - LGUs, GOCCs and other
District Offices for audit, the results of Government agencies and
which will be monitored and analyzed instrumentalities shall, without
to determine whether a program of hesitation, immediately comply with a
non-government third party request from the BIR for information
information should be operated on a relevant to its mission of effectively
continuous basis. implementing the revenue laws.
- Each BIR Team organized for the
audit will be responsible for the Register of Deeds and Assessors
preparation of “ACCESS TO RECORDS”
letters, service of letters, conduct of Monthly schedules submitted by RD to the
interviews and securing of the BIR:
requested information. The team may
ask for the assistance of a computer In order to validate that no transfer of real
advisor from the Management property has escaped taxation, the LRA
Oversight Group. shall provide the BIR National Office (Asset
- In general, “Access to records” evaluation Division or its equivalent
letters shall specify: Office) with the following monthly
1. Name and address of schedules on or before the 15th day of the
purchaser/lessor/lessee, member following month:
of the club, etc. and the TIN; 1. Summary list of blank
2. Date of transaction; OCT/TCT/CCTs issued to all RDs, with
3. Total amount of the mention of the sequential serial
transaction or instalment number;
payments, membership fees, etc. 2. Summary schedules of all transfers
in the year of transaction. for a particular month of titled real
properties effected by each RD;
Executive Order No. 53 3. Summary schedule of transferred
untitled real properties which have
- The following agencies shall been entered in the Primary Book of
provide the following data to the BIR Entry and the Book of Registration, for
on a regular basis: transfers of real properties under Act
No. 3344.
1. DTI: Production and sales
manufacturing companies per
Documents to be submitted by RDO to
industry;
LRA and RD:
2. DOTC: (a) gross receipts of
land, sea and air transport firms
and company; and (b) revenue of

Book Summary
In order to ensure that CARs presented to persons as may be designated by the

the RDs by taxpayers are authentic as to Committee.
form and substance, the RDO shall: C. Only those personnel authorized by
1. Furnish the LRA/RD, in advance the the committee to receive and or
serial numbers of all blank CARs deliver information from/to the
assigned to them; Assessors and Treasury Offices shall
2. Furnish, on a monthly basis, the be assigned to do the work; a Non-
LRA/RD within their jurisdiction the disclosure statement shall be signed
“Summary List of CARs Issued;” and by all persons having access to the
3. Furnish the LRA/RD with pertinent information.
copies of revenue regulations, D. All records, documents, data or
revenue memorandum orders, information received from the BLGF
revenue memorandum circulars and shall be utilized for BIR’s Tax Mapping
other revenue issuances relative to Operations and program to increase
transfers affecting real properties. the revenue base and improve tax
collection efficiency.
Issuance of CAR E. As agreed upon by the BIR-BLGF
- The CAR shall be signed by the Task Force under DO No.34-95, the
Revenue District Officer of the district reports, data and information to be
having the jurisdiction over the furnished the BIR by the (1)
transferred property, in case of Assessor’s Office are (a) Assessment
onerous transfer; and, in case of Roll of Taxable Real Properties for the
gratuitous transfers, by the RDO of the year; (b) Tax Maps with corresponding
district which processes the tax TMCR; (2) Treasurer’s Office are (a)
returns but should be countersigned Quarterly Listing of Income Tax Filers;
by the RDO of the district which has (b) Monthly Listing o Professional Tax
jurisdiction over the location of the Filers; (c) Monthly Listing of Franchise
property transferred. Tax Filers; (d) Monthly Listing of
- The issued CAR shall have a Amusement Tax Filers.
validity period of one year for purposes F. All RDOs shall require the
of presenting the same to the RD. In taxpayers to indicate the amount
case of failure to present the same date, place of payment and number of
within the validity period, the same CTC in their ITR upon filing thereof;
may still be revalidated, but the total G. RDOs shall provide the
period of validity cannot exceed two provincial/city/municipal treasurers
years counted from the date of and assessors offices with the
issuance of the CAR. necessary materials (e.g. primers,
flyers, etc.) to be distributed to local
Bureau of Local Government Finance taxpayers as part of the BIR
Information and education campaign.
Revenue Memorandum Order No. 23-95
circularizes the MOA between the BIR and Department of Interior and Local
BLGF: Government
A. All Revenue District Offices shall
provide the BLGF, through its As embodied in the MOA, all Provincial
designated offices, the data and Governors, City Mayors, Municipal Mayors
information enumerated under Sec. 5 and Punong Barangays, or through their
of the MOA. authorized local personnel are enjoined to:
B. All RDO shall coordinate with the 1. Provide the BIR with an annual
provincial or municipal assessors and alphabetical list of taxpayers, whether
treasurers within their respective individuals or corporations, who are
jurisdiction to set up a BIR-BLGF Local issued with business permits;
Committee composed of the RDOs, 2. Require the presentation of (a) ITRs
Municipal/City/Provincial Assessors of preceding quarter(s) and/or year;
and Treasurers and such other (b) VAT or Percentage Tax Returns;
(c) BIR Registration Certificate and (d)

Book Summary
Annual Registration Fee Payment, transmitted by an external

prior to renewal of business permit; government agency.
3. Furnish the concerned RDO with a - The Data Warehouse System is
quarterly list of contractors who are geared towards meeting the
engaged in government contracts challenges presented by a diminishing
every 15th day of the month revenue collection and increased
immediately following the end of the incidence of tax evasion.
quarter; - Discrepancy report generated by
4. Include the TIN as a part of the the Data Warehouse System provide
essential requirements in all management with information to
applications for government permits, determine levels and trends on non-
licenses, clearances, official papers compliance and allow management to
and documents, as well as in CTCs; formulate guidelines on the
5. Ensure the withholding of correct investigation of taxpayers deliberately
taxes and the remittance thereof; misleading the importations to evade
6. Submit an update of the current taxes.
fair market value of a property to the
BIR Assessment Service; Sugar Regulatory Administration
7. Submit to the concerned RDO an (SRA)
annual alphabetical list of In order to ensure the prompt assessment
professionals who are issued with and collection of correct internal revenue
Professional or Occupation Tax taxes from persons engaged in the sugar
Receipts (PTR/OTR), every 31st day of industry:
January of the ensuing year. 1. The BIR, through the SRA, shall
8. Assist in the dissemination of tax require the sugar mill companies and
reminders; refineries to indicate the TIN of the
9. Assist the BIR in promoting its owners and/or sellers of sugar on the
programs and other reminders or quedan permits, refined sugar release
campaigns on the issuance of Ors for orders or similar instruments in
every purchase made by the accordance with Sec.1(a) of E.O. 52;
taxpayers; 2. The SRA shall provide the following
10. Submit to the BIR Revenue date of the BIR in prescribed forms on
Accounting Division the requirements or before the 30th day of each month:
useful in the computation and (a) list of sugar mill companies and
issuance of certain Certificates, such refineries with serial numbers of
as 40% mining taxes, franchise taxes quedan permits issued and reported
paid by the Manila Jockey Club and to SRA during each crop year for the
the Phil. Racing Club, and Special processing and manufacture of raw
Privilege Tax; and refined sugar; (b) weekly reports
11. Assist the concerned RDO in by sugar mill companies and
locating unregistered taxpayers and refineries; and list of export clearance
delinquent taxpayers; and issued to exporters of sugar and or
12. Allow the BIR authorized molasses.
personnel access to assessment,
collection and remittance records, Failure to obey summons
subject to pertinent provisions of - Any person who, being duly
applicable laws, rules and regulations. summoned to appear to testify, or to
appear and produce books of
accounts, records, memoranda or
Bureau of Customs other papers, or to furnish information
- The Third-Party Information-BOC as required under the pertinent
Data Warehouse Facility was provisions of the Tax Code, neglects to
developed, with the main objective of appear or to produce such books of
addressing the voluminous data accounts, records, memoranda or
clogging the Integrated Tax System other papers, or to furnish such
infrastructure and to handle data

Book Summary
information, shall, upon conviction, be

punished (Sec. 266, NIRC)
Subpoena Duces Tecum

- Revenue Audit Memorandum Order
No. 3-82 seeks to define the sequential
actions to be undertaken in the
enforcement of the visitorial power
vested upon the BIR with respect to
the books of accounts and other
accounting records of a taxpayer, as
well as the power of the Commissioner
to implement the provisions of Sec. 71
of the NIRC. Subpoenas to be issued
are to be captioned Subpoena Duces
Tecum for uniformity.
- Only the following revenue officials
are authorized to issue subpoena: (a)
National Office – Assistant
Commissioner, Legal Service; (b)
Regional Office – Director, or in his
absence, Assistant Director, or Chief,
Legal Division, only as an alternate
signatory as may be authorized by the
Regional Director through a Regional
Assignment Order.
Assessment of Deficiency Taxes

Based on “Best Evidence Obtainable”
- In the absence of accounting
records or other documents necessary
for the proper determination of the
taxpayer’s internal revenue tax
liability, Section 6(B) of the NIRC
authorizes the assessment of the tax
based on the “best evidence
obtainable.”
- An assessment based on best
evidence obtainable is justified when
any of the grounds provided by law is
clearly established: (a) the report or
records requested from the taxpayer
are not forthcoming (i.e. the records
are lost; refusal of the taxpayer to
submit such records); or (b) the report
submitted is false, incomplete or
erroneous.

Book Summary
The exemption of non-stock, non-

profit educational institutions refers
Chapter 14 to internal revenue taxes imposed
by the National Government on all
Assessment: Income and revenues and asses used actually,
Withholding Taxes directly and exclusively for
Rowell Ilagan educational purposes.
Question of fact or law b. Exemptions under

the tax treaties
-There is a “question of fact” when the
doubt or difference arises as to the truth i. Business profits from sources
or falsehood of the alleged facts. On the within the Philippines of a non-
other hand, there is a “question of law” resident foreign corporation,
when the doubt or difference arises as to whose employees or
what the law is on a certain state of facts. consultants stay in the
Philippines for an aggregate
Who is the taxpayer? period of less than one hundred
eighty three days during the
To whom income is taxable – Income, gain taxable year, received from a
or profit from sale or other disposition of domestic corporation.
goods or properties, including rights
thereto, is taxable to the owner-seller of ii. Capital gains form the
the goods or properties. But income from alienation of any property other
sale of services is taxable to the person than capital gains from
who renders the services. alienation of immovable
property, movable property
-Family control of a college by itself is not forming part of the business
sufficient ground to disregard corporate property of a permanent
personality and to consider its income as establishments, ships and
belonging to controlling members. aircraft operated in
-10% final tax on interest income from international traffic shall be
loans to resident borrowers is a direct taxable only in the contracting
liability of the FCDU state of which the alienator is a
resident. In this case, the
ITEMS OF INCOME provisions of the tax treaty
shall prevail over the provisions
1. Amounts represent capital or income - of the Tax Code.
The importance of whether the amount
received is or represents capital or c. Exemptions under
income lies in the fact that return of the Tax Code
capital is not subject to income tax,
while income, gain or profit is i. Interest income of a non-
generally subject to tax. resident foreign entity from
foreign currency deposits with
2. Amount of income, gain or profit, but it an FCDU or OBU in the
is expressly exempt from income tax Philippines;
under the Constitution, tax treaties,
Tax Code or other general or special ii. Interest income on long-term
law, or the law that allows the tax to deposits or investments of a
be deferred and paid later time. resident citizen;
a. Exemptions under iii. Prizes or winning of a Filipino

the 1987 fighter, provided that the fight
Constitution is approved by the international
organization;

Book Summary
System and Social Security System to

iv. Tax exemptions of non-stock, their respective member-employees
non-profit corporations under under the Act shall also be exempt
Section 30. from gross receipts tax.
d. Exemptions under Who can register as a BMBE?

special laws
i. Engaged in the production,
Local water districts- are now subject processing or
to income taxes and franchise taxes. manufacturing of products
The exemption privilege (income and or commodities, including
franchise taxes) granted to local water agro-processing, trading
districts was limited to a period of five and services, and which
years from the effectivity of RA No. activities are barangay-
7109. based and micro-business
in nature and scope.
Arms-length price –the price an
unrelated party would have paid under ii. Whose total assets, real or
similar circumstances for the property personal, inclusive of those
involved in a transaction between two arising from loans but
or more businesses owned directly or exclusive of the land on
indirectly by the same interests. which the particular
business entity’s office,
plant and equipment are
Barangay Micro Business Enterprise situated shall not be more
(BMBE) than Three million pesos or
as may be adjusted by the
Declaration of Policy- It is the policy Small and Medium
of the State to hasten the country’s Enterprises Development
economic development by Council as mandated under
encouraging the formation and growth RA 6977 as amended by RA
of barangay micro business 8289.
enterprises which effectively serve as
seedbeds of Filipino entrepreneurial 3. Non-or under-declaration of taxable
talents and integrations those in the income
informal sector with the mainstream
economy, through the rationalization Income reported in the tax return is
of bureaucratic restrictions, the active less than the amount expected by BIR
intervention of the government in relation to income reported by the
specially in the local level, and the similar establishments. Examples of
granting of incentives and benefits to business establishments where
generated much-needed employment experience dictates lower reported
and alleviate poverty. gross income or gross receipts are
night clubs, massage parlors, motels
Exemption from taxes and fees etc. To establish a reasonable tax base
All BMEs shall be exempted from of these establishments, the BIR is
income tax for income arising from the authorized to place such business
operation of the enterprise. establishments under surveillance and
to use presumed income based on the
Interest, commissions and discounts results of their surveillance.
derived from the loans by the Land
Bank of the Philippines, Development Special Operation on Business Not
Bank of the Philippines, People’s Credit Paying Income Tax
and Finance Corporation granted to a. All Regional Directors and
BMBEs as well as loans extended by Revenue District Officers are
the Government Service Insurance hereby directed to take

Book Summary
measures to achieve the the net taxable income of a

objectives of the RMO. domestic corporation if they are
b. All Regional and District offices derived from the ordinary
must undertake massive conduct or in the active pursuit
Taxpayer Compliance of business of the subsidiaries,
Verification Drive (TVCD) resellers, or distributors. When
focused on establishments making payments to the local
without record of tax payments. subsidiaries, resellers or
The operations must include on distributors, the end-user shall
the distribution of BIR appeal withhold two percent income
letters to pay taxes and of tax of the gross amount of the
income tax declaration forms. payments, which shall be
c. Handholding of the new payees, creditable against the tax due
by the TCVD teams as in filling on the taxable income of the
up of the declaration and local subsidiaries, resellers, or
payment forms and in guiding distributors required to withhold
the taxpayers to the closest such tax.
agent bank. The Regional ii. If the payments made by
Director may create BIR on the end user will not result in
Wheels Team with one of its an income derived from the
members a representative of a ordinary conduct or active
government agent bank to pursuit of business of the
receive payment on site should resellers, such payments as
there be a necessity to extend royalties are treated as passive
such service to achieve the income.
objectives of this Order.
b. directly from the foreign owner
4. Reporting of income in another year and/or licensor of the software
i. payments made by the end-
Delay in reporting income is usually user to the licensor-owner as
resorted to by the taxpayer because royalties are subject to 32%
he expects a higher amount of income tax based on the gross
deduction sin the succeeding year amount thereof as that imposed
when the income is reported. on royalties derived by a
nonresident foreign
5. Income is active or passive corporation, withheld and
collected by the end-user
Software is generally assimilated as making payments. However, if
literary, artistic or scientific work the foreign licensor or owner is
protected by the copyright laws of a resident of a country which
various countries including the has an existing tax treaty with
Philippines, thus, payments in the Philippines, royalties paid
consideration for the use of, or right to thereto are subject to the
use, a copyright or a copyrighted reduced tax rates on royalties
article relation to software are under the relevant tax treaty,
generally royalties. provided the conditions
prescribed therein are complied
Modes of acquiring software with by the licensor or owner.
a. from local subsidiaries, resellers ii. After-sales service-payments as
and distributors consideration for after-sales
i. payments made by the end- service in a mixed contract are
user to the local subsidiaries, not royalties alone, but will
resellers, or distributors as include income from services.
royalties are treated as
business income subject to 32% 6. Rate of tax applicable
income tax as that imposed on

Book Summary
Sale of factory and other building by a be between related

PEZA-registered company prior to the taxpayers;
start of its commercial operations shall g. The interest is not
be subject to 6% capital gains tax. A expressly disallowed by
PEZA registered company can only law to be deducted from
avail of the benefits and incentives the taxpayer’s gross
under the PEZA law if has commenced income; and
operations. h. The amount of interest
deducted from gross
Items of Deductions income does not exceed
the limit set forth in the
1. Business expenses law.
a. The business expense
must be ordinary and 3. Taxes
necessary; a. Payment must be for
b. The compensation paid taxes;
must be reasonable in b. Taxes are imposed by
amount law upon the taxpayer;
c. The business expense is c. Taxes must be paid or
paid or incurred during accrued during the
the taxable year taxable year in
d. The expense is paid or connection with the
incurred in carrying on taxpayer’s trade,
or which is directly business or profession;
attributable to the and
development, d. Taxes are not
management, operation specifically excluded by
and/or conduct of the law from being deducted
trade or business, or from the taxpayer’s
exercise of profession gross income.
e. The expense is
supported by adequate 4. Losses
invoices or receipts a. the loss must be that of
f. The expense must not the taxpayer;
be contrary to law, b. the loss is actually
public policy and morals sustained and charged
off within the taxable
2. Interest year;
a. There must be a valid c. the loss is evidenced by
and existing a closed and completed
indebtedness; transaction;
b. The indebtedness must d. the loss is not claimed
be that of the taxpayer; as a deduction for estate
c. The interest must be tax purposes;
legally due and e. the loss is not
stipulated in writing; compensated for by
d. The interest expense insurance or otherwise;
must be paid or incurred f. In the case of an
during the taxable year; individual, the loss must
e. The indebtedness must be connected with this
be connected with the trade, business or
taxpayer’s trade, profession or incurred in
business or exercise of any transaction entered
profession; into for profit though not
f. The interest payment connected with his
arrangement must not

Book Summary
trade, business or
profession; and
g. In the case of casualty
loss, it has been
reported to the BIR
within forty-five days
from date of occurrence
of the loss.
5. Bad debts
a. there must be an existing
indebtedness due to the taxpayer,
which must be valid and legally
demandable;
b. the same must be connected with
the taxpayer’s trade, business or
practice of profession;
c. the same must not be sustained in
a transaction entered into between
related parties
d. the same must be actually
ascertained to be worthless and
uncollectible as well as actually
charged off the books of accounts
of the taxpayer as of the end of the
taxable year.
6. Depreciation
a. the allowance for depreciation
must be reasonable
b. it must be for property arising out
of its use in the trade or business,
or out of its not being used
temporarily during the year; and
c. it must be charged off during the
taxable year from the taxpayer’s
books of accounts

Book Summary
reciprocity provided for under Section

104 of the Tax Code.
Chapter 15
Valuation of the Gross Estate
Assessment: Transfer and • The properties comprising the gross
Business Taxes estate shall be valued based on their
Margaret Joyce Reyes fair market value as of the time of the
death
ESTATE TAX • If the property is a real property, the
fair market value shall be the fair
Rate of Estate Tax market value determined by the
Commissioner or the fair market value
If the Net Estate is: as shown in the schedule of values
fixed by the provincial and city
But over Over The Tax Of the Over assessors, whichever is higher.
shall be excess
plus • In the case of shares of stocks, the fair
_______ P Exempt _____ ________ market value shall depend on whether
200,000 the shares are listed or unlisted in the
P 500,000 0 5% P stock exchanges.
200,000 200,000
500,000 2,000,00 P 8% 500,000
0 15,000 1. Unlisted common shares are valued
2,000,00 5,000,00 135,000 11% 2,000,00 based on their book value
0 0 0 2. Unlisted preferred shares are valued at
5,000,00 10,000,0 465,000 15% 5,000,00
0 00 0 par value
10,000,0 And over 1,215,0 20% 10,000,0 3. Shares which are listed in the stock
00 00 00 exchanges, the fair market value shall
be the arithmetic mean between the
• The application of the rates herein highest and lowest quotation at a date
prescribed and the procedures in of the death, if none is available on the
determining the estate tax due shall date of the death of itself.
apply to estate taxes falling due or
have accrued beginning January 1, Computation of the net estate of a
1998, the effectivity date of R.A. 8424. decedent who is either a citizen or
• Estate taxation is governed by the resident of the Philippines. The value
statute in force at the time of the of the net estate of a citizen or resident
death of the decedent. The estate tax alien of the Philippines shall be
accrues as of the death of the determined by deducting from the value
decedent and the accrual of the tax is of the gross estate the following items of
distinct from the obligation to pay the deductions:
same.
I. Expen
Composition of the Gross Estate. – ses,
The gross estate of a decedent shall be losses
comprised of the following properties and indeb
interest therein at the time of his death, tedne
including revocable transfers and transfers ss,
for insufficient consideration: and
1. Residents and citizens – all properties, taxes.
real or personal, tangible or intangible, – Such
wherever situated. amoun
2. Non-residents aliens – only properties ts for:
situated in the Philippines, provided,
that, with respect to intangible 1. Actual funeral expenses
personal property, its inclusion in the (whether paid or unpaid) up to
gross estate is subject to the rule of the time of interment, or an
amount equal to 5% of the
Book Summary
gross estate, whichever is e. Cost of preserving and

lower, but in no case to exceed distributing the estate
P200,000. f. Costs of storing or maintaining
property of the estate
The term “funeral expenses” is not g. Brokerage fees for selling
confined to its ordinary or usual property of the estate
meaning. It includes:
3. Claims against the estate
a. The mourning
apparel of the surviving spouse Requisites for deductibility of
and unmarried minor children Claims Against the Estate
of the deceased bought and
used on the occasion of the a. The liability
burial; represents a personal
b. Expenses for the deceased’s obligation of the deceased
wake, including food and existing at the time of his death
drinks; except unpaid obligations
c. Publication charges for incurred incident to his death
death notices; such as unpaid funeral
d. Telecommunications expenses.
expenses incurred in informing b. The liability
relatives of the deceased; was contracted in good faith
e. Cost of burial plot, and for adequate and full
tombstones, monument or consideration in money or
mausoleum but not their money’s worth;
upkeep. In case the deceased c. The claim
owns a family estate or several must be a debt and claim which
burial lots, only the value is valid in law and enforceable
corresponding to the plot where in court;
he is buried is deductible; d. The
f. Interment and/or cremation indebtedness must not have
fees and charges; and been condoned by the creditor
g. All other expenses incurred or the action to collect from the
for the performance of the rites decedent must not have
and ceremonies incident to prescribed.
internment.
Substantiation Requirements
• Expenses incurred after the 1. In case of
internment, such as for prayers, simple
masses, entertainment, or the like loan
are not deductible. (including
• The expenses must be duly advances)
supported by receipts or invoices or a. The debt instrument must be
other evidence to show that they duly notarized at the time the
were actually incurred. indebtedness was incurred,
expect for loans granted by
2. Judicial expenses of the financial institutions where
testamentary or intestate notarization is not part of the
proceedings business practice or policy of
Judicial expenses may include: the financial institution-lender;
a. Fees of executor or b. Duly notarized certification
administrator from the creditor as to the
b. Attorney’s fees unpaid balance of the debt,
c. Appraiser’s fees including interest as of the time
d. Clerk hire of the death.

Book Summary
The one who should certify must not degree, either by consanguinity
be a relative of the borrower within or affinity, except when the
the fourth civil degree, either by lender who is a relative of the
consanguinity or affinity, except debtor in the degree mentioned
when the lender who is a relative of filed with the RDO having
the debtor in the degree mentioned jurisdiction over the borrower, a
filed with the RDO having jurisdiction copy of the promissory note or
over the borrower, a copy of the other evidence of the
promissory note or other evidence of indebtedness, with fifteen days
the indebtedness, with fifteen days from execution thereof.
from execution thereof.
c. Certified true copy of the latest
c. Proof of financial capacity of the audited balance sheet of the
creditor to lend the amount at creditor with the detailed
the time the loan was granted, schedule of its receivable
as well as its latest audited showing the unpaid balance of
balance sheet with a detailed the decedent-debtor. Moreover,
schedule of its receivable a certified true copy of the
showing the unpaid balance of updated latest subsidiary
the decedent-debtor. ledger or records of the debt of
d. A statement under oath the debtor-decedent should
executed by the administrator likewise be submitted.
or executor of the estate
reflecting the disposition of the 3. Where the
proceeds of the loan if the loan settlemen
was contracted within 3 years t is made
prior to the death of the through
decedent. the Court
in a
2. If the testate or
unpaid intestate
obligation proceedin
arose g,
from pertinent
purchase document
of goods s filed
or service: with the
Court
a. Pertinent documents evidencin
evidencing the purchase of g the
goods or services, as duly claims
acknowledged, executed and against
signed by decedent-debtor, and the
creditor, and statement of estate,
account given by the creditor and the
as duly received by the Court
decedent-debtor; Order
b. Duly notarized certification approving
from the creditor as to the the said
unpaid balance of the debt, claims, if
including interest as of the time already
of the death. issued, in
addition
• The one who should certify to the
must not be a relative of the document
borrower within the fourth civil s

Book Summary
mentione usly
d in the taxed.
preceding
paragraph III. Transf
s ers
for
4. Claims of the deceased public
against insolvent persons use.
where the value of the
decedent’s interest therein IV. The
is included in the value of Famil
the gross estate y
5. Unpaid mortgages, taxes Home
and casualty losses
• Conditions for the allowance of
a. Unpaid mortgages upon, or any family home as deductions
indebtedness in respect to, from the gross estate.
property where the value of the
decedent’s interest therein, a.
undiminished by such mortgage The family home must be the
or indebtedness, is included in actual residential home of the
the value of the gross estate. decedent and his family at the
b. Taxes which have accrued as of time of his death, as certified
the death of the decedent by the Barangay Captain of the
which were unpaid as of the locality where the family home
time of the death. is situated;
b.
• The total value of the family
This deduction will not include home must be included as part
income tax upon income of the gross estate of the
received after death, or decedent; and
property taxes not accrued c.
before his death, or the estate Allowable deductions must be
tax due from the transmission in an amount equivalent to the
of his estate. current fair market value of the
c. There shall also be deducted family home as declared or
losses incurred during the included in the gross estate, or
settlement of estate arising the extent of the decedent’s
from fires, storms, shipwreck, interest (whether conjugal or
or other casualties, or from community, or exclusive
robbery, theft or property), whichever is lower,
embezzlement, when such but not exceeding P1,000,000.
losses are not compensated for
by insurance or otherwise, and V. Stand
if at the time of the filing of the ard
return such losses have not Deduc
been claimed as deductions for tions
income tax purposes in an
income tax return and provided • A deduction in the amount of
that such losses were incurred P1,000,000 shall be allowed as
not later than the last day for an additional deduction without
the payment of the estate tax. need of substantiation.
II. Prope VI. Medic

rty al
previo

Book Summary
Expen unity
ses prope
rty.
• All medical expenses incurred
(whether paid or unpaid) within • After deducting the allowable
1 year before the death of the deductions appertaining to the
decedent shall be allowed as a conjugal or community
deduction, provided that the properties included in the gross
same are duly substantiated estate, the share of the
with official receipts for services surviving spouse must be
rendered by the decedent’s removed to ensure that only
attending physicians, invoices, the decedent’s interest in the
statements of account duly estate is taxed.
certified by the hospital, and
such other documents in
support thereof and provided, DONOR’S TAX
further, that the total amount
thereof, whether paid or Rates of Donor’s Tax
unpaid, does not exceed
P500,000. If net gift is:
VII. Amou Of the

But not The Tax
nt Over
over shall be
Plus Excess
receiv over
100,000 Exempt
ed by
100,000 200,000 0 2% 100,000
heirs 200,000 500,000 2,000 4% 200,000
under 1,000,0
500,000 14,000 6% 500,000
R.A. 00
4917 1,000,00 3,000,0
44,000 8%
1,000,00
0 00 0
3,000,00 5,000,0 3,000,00
• Any amount received by the 204,000 10%
0 00 0
heirs from the decedent’s 5,000,00 10,000, 5,000,00
employer as a consequence of 404,000 12%
0 00 0
the death of the decedent- 10,000,0 1,004,0 10,000,0
15%
employee in accordance with 00 00 00
R.A. 4917 is allowed as a
deduction provided that the • The application of the rates as
amount of the separation provided above is imposed on
benefit is included as part of donations made beginning
the gross estate of the January 1, 1998, which the
decedent. effectivity date of R.A. 8424
VIII. Net
share Tax payable by the donor if the
of the donee is a stranger.
surviv
ing • When the donee or beneficiary is a
spous stranger, the tax payable by the
e in donor shall be 30% of the net
the gifts. For purposes of the donor’s
conju tax, a “stranger” is a person who is
gal NOT a:
partn
ership a) Brother, sister (whether by
or whole or half blood), spouse,
comm

Book Summary
ancestor, and lineal descendants; • Renunciation by the surviving

or spouse of his/her share in the
b) Relative by consanguinity in conjugal partnership or absolute
the collateral line within the community after the dissolution of
fourth degree of relationship. the marriage in favor of the heirs of
the deceased spouse or any other
• A legally adopted person/s is subject to donor’s tax,
child is entitled to all the whereas general renunciation by
rights and obligations an heir including the surviving
provided by law to a spouse, of his/her share in the
legitimate children, and hereditary estate left by the
therefore, donation to him decedent is not subject to donor’s
shall not be considered as tax, unless specifically and
donation made to stranger. categorically done in favor of
• Donation made identified heir/s to the exclusion or
between business disadvantage of the other co-heirs
organizations and those made in the hereditary estate.
between an individual and a • Where property, other than a real
business organization shall be property that has been subjected
considered as donation made to the final capital gains tax, is
to a stranger. transferred for less than an
adequate and full consideration in
Contribution for election campaign. money or money’s worth, then the
amount by which the fair market
• Any contribution in cash or in kind value of the property at the time of
to any candidate, political party or the execution of the contract to sell
coalition of the parties for or execution of the deed of sale
campaign purposes, shall be which is not preceded by a
governed by the Election Code, as contract to sell exceeded the value
amended. of the agreed or actual
consideration or selling price shall
Law that governs the imposition of be deemed a gift, and shall be
donor’s tax. included in computing the amount
of gifts made during the calendar
• The donor’s tax is not a property year.
tax, but it is a tax imposed on • If a mortgaged property is
transfer of property by way of gift transferred as a gift, but imposing
inter vivos. upon the donee the obligation to
• The donor’s tax shall not apply pay the mortgage liability, then the
unless and until there is a net gift is measured by deducting
completed gift. from the fair market value of the
• The law in force at the time of the property the amount of the
perfection or completion of the mortgage assumed.
donation shall govern the
imposition of donor’s tax. VALUE ADDED TAX
• A gift that is incomplete because of
reserved powers, becomes Proper tax due- VAT or Other
complete when either: (1) the Percentage Tax?
donor renounces the power; or (2)
his right to exercise the reserved a) Pawnshops
power ceases because of the
happening of some event or • A “pawnshop” is defined as
contingency or the fulfillment of a person or entity engaged in
some condition, other than the business of lending money
because of the donor’s death. on personal property delivered
as security for loans and shall
Book Summary
be synonymous, and may be it does so only foe its hotel

used interchangeably, with guests and not to the public in
pawnbroker or pawn brokerage. general. Respondent is thus
• The VAT law applies to all correct in subjecting these
persons who render service. revenues to the value added
The phrase “sale or exchange tax (Manila Mandarin Hotel vs.
of services” has been defined Commissioner)
as the performance of all kinds
of services for others for a fee, d) Hotel services
remuneration or consideration.
Hence, regardless of whether or • The sale of drugs and other
not pawnshops are considered pharmaceutical items to
lending investors for tax inpatients of the hospital is a
purposes, pawnshops would be VAT-exempt transaction. The
subject to value added tax maintenance and operation of a
because the law imposes tax on pharmacy or drugstore by a
any person who renders hospital is a necessary and
services enumerated therein essential service or facility
and similar services for a fee, rendered by any hospital for its
remuneration or consideration. patients. However, the dale of
The act of lending money at drugs and other pharmaceutical
interest constitutes a items to outpatients of the
performance of a service, hospital I subject to value
remuneration or consideration. added tax.
b) Gross receipts of HMO excludes Bases of Tax

amounts paid to hospitals and
clinics a) Customs brokers
the membership fees in connection • The advances for expenses

with prepaid group practice health payable to the government
care program are subject to value entities and/or government
added tax. The revenues of health controlled corporations and
care providers are actually derived trucking, transportation, petty,
from the application and representations and other
membership fees being paid by miscellaneous expenses related
their members. Thus, the basis of to shipping, are excludible from
computing the tax shall be the the taxable gross receipts of a
gross receipts, which in this case customs broker if: (a) if the
shall be the payments for medical advances are billed separately
plans and application fees actually and a non-VAT receipt is issued
received from the members, to client for total amount of
undiminished by any amount paid advances; and (b) each person
or payable to owners or operators or entity who directly renders
of hospitals, clinics and medical service to the broker’s client
and dental practitioners. whom he advanced payment,
issues a receipt or invoice in
c) Hotel is not a common carrier the name of the client.
• The petitioner is not a b) Media advertising

common carrier subject to the
3% common carrier’s tax. On • The tax base on media
the occasion when the transactions is: (a) the amount
petitioner extends transport of gross receipts representing
services like providing agency commissions received
limousine service and the like, by an advertising agency for

Book Summary
services it performed as a insured; (b) premiums on

broker for the media and the reinsurance of a company that
advertisers; and (b) the amount has already paid the tax; (c)
representing gross receipts premiums on account of any
derived by the media from its reinsurance, if the risk insured
advertising service. against covers property located
outside the Philippines; and (d)
c) Travel agency documentary stamp tax and
local tax passed on by the
• The value added tax on insurance company to the
travel agent is based on his insured. Premiums collected
gross receipts which will not from crop insurance, life and
include the (a) cost of airline or disability insurance, and health
ship tickets; and (b) the and accident insurance policies
reimbursements of expenses are excluded from the tax base.
for services rendered by third
party other than the travel Effectively zero-rated sales
agent and paid to such party.
• Service charges to foreign
d) Hotel. Restaurant and caterer vessels engaged in international
shipping is zero-rated.
• The tax base includes • Effectively zero-rated sales
charges for rooms, laundry and to PEZA and BOI registered firms.
valet service, food and beverage • Sale of service to National
consumption, corkage, handling Power Corporation is effectively
charges for providing telephone, zero-rated.
telex, cable, or fax services, cake
shop sales, lease to Input Tax
concessionaires, compensation and
other services fees. It does not • In a claim for refund of unutilized
include (a) service charges billed input tax arising from zero-rated
separately and actually distributed sale of services, said input tax
to waiters and employees; (b) should be supported by proper VAT
actual cost of long distance and invoices or official receipts.
overseas telephone call, fax, cable, • Input tax shall be disallowed for
telex and charges of refund if:
telecommunication companies a) The invoice is not under the
collected by the establishment name of the petitioner;
from the customers for the b) The invoice or official
concerned telecommunications receipt cannot be presented;
companies, which are earmarked c) Input tax is evidenced only
for payment to the latter; and (c) by provisional receipts and
local taxes charged. statements of accounts;
d) Input tax is supported by
e) Non-life insurance company non-VAT invoice or receipts;
e) Invoices and official receipts
• Tax base consists of the were printed before July 31,
total premiums collected 1991 with only TAN and VAT
whether such premiums are number, without TIN-V/VAT.
paid in money, notes, credits or
any substitute for money. It • Input taxes passed
does not include (a) premiums on by taxable sellers of goods and
refunded within six months services to the buyer subject to the
after payment on account of value added tax are creditable
rejection of risk or returned for against said buyer’s output taxes
other reasons to the person for the taxable quarter, provided
Book Summary
that the sales are evidenced by creditable VAT withheld by the

VAT invoices or receipts, while payors for the 3 months of the
input taxes passed on by taxable quarter.
sellers of goods and services to the
buyer who is exempt from value DOCUMENTARY STAMP TAX
added tax become part of cost or
operating expenses of said exempt Persons liable to documentary stamp
buyer. tax
• The allocation of • The tax is imposed on any person

input-taxes is necessary where the making, signing, issuing, accepting
taxpayer-seller (a) has both taxable or transferring an obligation, right
and exempt transactions (e.g. or property and payable at the time
bookstore selling school supplies); of the transaction is had or
(b) engaged in taxable sales accomplished.
subject to zero percent (e.g. export • Established market practice
sales) and sales subject to 10% shifting the payment of
(e.g. domestic sales) documentary stamp tax to the
buyer is not binding upon the BIR.
Philippine Ports Authority To allow such shifting of payment
of documentary stamp tax would
• All fees and charges collected by be inconsistent with the well-
the PPA are subject to value added established tax principle that taxes
tax. are the lifeblood of the government
• The PPA shall, for every sale, issue and should be collected without
invoice or receipt which shall unnecessary hindrance.
contain, in addition to the
information required under Sec. When is the tax imposed?
237 of the Tax Code, the following
information: (1) a statement that • The documentary stamp tax is an
PPA is a VAT-registered person, excise tax. It is a tax on the
followed by its TIN, (2) the total privilege to enter into a
amount which the purchaser pays transaction. The tax is designed to
or is obligated to pay to the seller raise revenues and not to render
with the indication that such the document void.
amount includes the value added • The amount of documentary stamp
tax. tax imposed is determined on the
• The PPA shall file a quarterly return face of the instrument. It is not
of the amount of his quarterly affected by proof of facts outside of
gross sales or receipts within 25 the instrument itself, nor is it
days following the close of the affected by the validity or invalidity
taxable quarter using the latest of the transaction. Consequently,
version of the Quarterly VAT when the transaction is invalidated
Return. and declared void, there can no
• The PPA shall pay the tax monthly longer be a refund of the taxes
based on the taxable gross sales or already paid.
receipts for the month, using the
VAT declaration from within 20 Shares of Stocks
days after the end of each month.
The VAT payable or excess input • The documentary stamp tax on
tax (output tax less input tax) for shares of stocks is imposed on the
each taxable quarter shall be privilege of issuing shares of stock.
reduced by the total amount of The shares are considered issued
taxes previously paid for the upon the acquisition by the
immediately preceding 2 months, stockholders of the attributes of
and the advance payments and ownership over the shares, which
Book Summary
acquisition of such attributes of name of the cestui que trust or the

ownership shall be manifested by resigned trustee so that the new
the acceptance by the corporation trustee is constituted as a mere
of the stockholder’s subscription to depository of the stock, such
its shares of stock. transfer is not taxable. Provided,
• The entire shares of stock however, that transfer of shares to
subscribed are considered issued “nominees” to qualify them to sit
for purposes of the documentary in the board or to qualify them to
stamp tax, even if not fully paid. perform any act in relation to the
The delivery of the certificates of corporation shall not be subject to
stock to stockholders is not the tax provided herein only upon
essential for the tax to accrue. proof of a duly executed nominee
• In all cases where the issued agreement, showing the purpose
shares are with par value, the of the transfer; that the transfer is
basis of the tax shall be the par without consideration other than
value thereof. For shares of stock the undertaking of the nominee to
without par value, the basis shall only represent the beneficial
be the actual consideration for the owner of the stock; and the
shares of stock. However, in a case transfer is in trust.
where the shares of stocks without • Agreements to sell shares of
par value are issued as stock stocks are also subject to
dividends, the basis of the tax documentary stamp tax. However,
shall be the actual value if the tax has been paid on the
represented by each share. agreement to sell or memoranda
• Deposit on stock subscription of sale, the actual or transfer of
should not be treated as the stocks pursuant to the
subscribed capital stock subject to agreement will no longer be
the payment of documentary subject to tax.
stamp tax. Deposit on stock
subscription refers to an amount of For purposes of determining whether
money transmitted by a a certificate or document evidencing
stockholder to a corporation on deposits is subject to tax, the
deposit with the possibility of the following rules shall apply:
same being later subscribed in the
company’s capital. 1) Any deposit
• All transfer of shares of stocks of a bearing interest, irrespective of
domestic corporation are subject the nomenclature and whether
to documentary stamp tax upon covered by a certificate,
the execution of the deed passbook or any other evidence
transferring ownership or rights of deposit, where the interest is
thereto, or upon delivery, significantly higher than the rate
assignment or indorsement of such given to regular savings deposits,
shares in favor of another. No shall be subject to the new rate
transfer of shares shall be of tax imposed on debt
recorded, unless documentary instruments;
stamp tax thereon has been duly 2) All types of
paid. deposit accounts with a higher
• For a sale or exchange to be interest yield than tat given to
taxable, there must be an actual or savings deposit or where the
constructive transfer of beneficial interest rate by such deposit is
ownership of shares from one reduced upon pretermination, are
person to another. likewise subject to new rate of
tax herein imposed;
• If by the transfer of certificates of
3) All interest of
stock from a resigned trustee to a
a particular bank or financial
newly appointed trustee such
institution shall be considered
certificate of stock remain in the
Book Summary
“significantly higher” if it is at maturity which comes in

least 50% higher than the lowest the form of reduced
interest rate given by that bank interest.
or financial institution on any of
its deposit, whether the same be • The following are the distinct
savings or demand deposit. A features of a certificate of deposit:
regular savings or demand
deposit is that which is 1) A minimum deposit
withdrawable upon demand by requirement;
the depositor and is earning rate 2) Stated maturity period;
of interest prevailing for a regular 3) Interest rate is higher than the
savings or demand deposit, ordinary savings account;
irrespective of the amount 4) Not payable on sight or
deposited. demand, but upon maturity or
4) Any deposit in case of pretermination, prior
bearing interest, irrespective of notice is required; and
the nomenclature and whether 5) Early withdrawal penalty in the
covered by a certificate, form of partial loss or total loss
passbook or any other evidence of interest in case of
of deposit is considered to be pretermination.
with a maturity date, and subject
to tax as imposed upon debt • If the written
instruments, if (a) there is a instrument or document
predetermined or defined specific meets the above-mentioned
maturity or end date to the essential elements/features
deposit as agreed to by the then such instrument will be
depositor, or (b) absent a specific considered a “certificate of
maturity date, there is a defined deposit” for which a
program of enjoyment of higher documentary stamp tax
interest rate or enjoyment of a shall be imposed.
privilege or other benefit to be
extended by the bank or financial Derivatives
institution, if the said deposit is to
be maintained by the depositor • Derivatives exempted from
for a definite period of time. documentary stamp tax under
Section 199(h) of the Tax Code
Certificate of Deposit shall refer only those derivatives
issued by entities duly licensed by
• The essential elements of a the BSP to issue and trade in
certificate of deposit are as derivatives, and whose issuance is
follows: duly authorize by the BSP.
1) The bank receives money Tax on life insurance policies

for deposit
2) The bank acknowledges the • The tax shall be assessed only on
receipt of the deposit life insurance policies that were
through the issuance of a issued on or after March 20, 2004,
written document the day R.A. 9243 took effect. The
3) The bank promises to pay tax due on life insurance policy
the depositor or bearer or shall be due and collected every
to some other person or time there is an insurance premium
order the deposit upon collection on such policy, including
maturity premiums paid or collected beyond
4) The bank imposes an early the year the policy was taken out.
withdrawal penalty in case “Insurance premium collection”
of withdrawal prior to shall include not only those
Book Summary
premiums paid or remitted by the • The following are the

insured directly, but shall also characteristics of a cooperative
include premiums paid for by association:
applying cash surrender value,
dividend earned, other modes of 1) It is managed by members;
payment, whether on the original 2) It is operated with money
policy or amendments thereto. collected from members;
3) It has for its main purpose
Tax on non-life insurance policy the mutual protection of
members and not for profit.
• The documentary stamp tax must
be affixed to the insurance policy, Policies of annuities and pre-need
which is a contract in itself, on the
date it is issued even if no • On policies of annuities, the tax is
premium has been paid. This is now based on the “premium or
because the stamp tax accrues the installment payment or contract
moment such policy is issued or price collected” and the new tax
when the privilege is exercised. rate is “P0.50 on each P200” or
The payment or non-payment of fractional part thereof, of the
premiums by the insurants is premium or installment payment or
immaterial since the documentary contract price collected”.
stamp taxes are in the nature of an • On pre-need plans, the tax is now
“exercise upon the facilities used in based on the “premium or
the transaction of the business”. contribution collected” and the new
rate is “P0.20 on each P200 of the
Agreement between HMO and premium or contribution collected”.
members
• The membership agreement

between a Health Maintenance
Organization (HMO) and its
members is not a contract of
insurance and, is therefore, not
subject to the documentary stamp
tax on insurance policies. A
contract of insurance is an
agreement whereby one
undertakes for a consideration to
indemnify another against the loss,
damage or liability arising from an
unknown or contingent event.
Under the HMO membership
agreement, an enrolled member
may avail of the medical benefits
anytime, even in the absence of
peril on their part.
Cooperative companies or
associations
• Are conducted by the members

thereof with the money collected
from among themselves and solely
for their own protection and not for
profit.

TAX RIGHTS AND REMEDIES by Atty. Victorino C. Mamalateo
Book Summary
Chapter 16 that the taxpayer is retiring from

business subject to tax; or
Administrative Remedies b. Is intending to leave the
of Government Philippines; or
Claribelle S. Bautista c. To remove his property therefrom;
or
Types of Taxes d. To hide or conceal his property; or
e. Is performing any act tending to
I. Self-assessing tax which do not obstruct the proceedings for the
require issuance of assessment collection of the tax for the past or
to create liability current year or to render the same
totally or partially ineffective
Internal revenue taxes are self-assessing unless such proceedings are begun
and no further assessment by the immediately.
government is required to create tax
liability. The Commissioner shall declare the tax
period terminated at anytime and shall
Pay-as-you-file System – the collection of send the taxpayer a notice of such
such unpaid taxes (like income tax) shown decision, together with a request for
in the return filed may proceed without immediate payment of the tax for the
any further assessment by the period so declared terminated and said
government, and the five year prescriptive taxes shall be due and payable
period to collect the unpaid delinquent tax immediately and shall be subject to all
applies. penalties prescribed unless paid within the
time fixed in the demand made by the
The date of assessment in case of self- Commissioner.
assessed taxes would be the date of
actual filing of the return as it is on such 2. Deficiency tax liability arising from tax
when the tax is said to have been audit conducted by the BIR
assessed.
In order to determine the correctness of
The assessment made by the taxpayer of the computation of the tax liability made
his tax liability is in effect the assessment by the taxpayer in his return, the BIR is
adopted by the government. granted the right to conduct a tax audit
within the prescriptive period.
II. Taxes which require
assessment to establish Tax Audit – examination of books of
liability accounts and accounting records of
General Rule: taxes are self-assessing and taxpayer under audit as well as the
do not require the issuance of an records of third parties who are suppliers
assessment notice in order to establish tax or customers of the taxpayer under audit
liability of a taxpayer. or the government.
The following are the exceptions to the No contact audit – tax liability of the
said general rule because an assessment taxpayer is determined by comparing the
must be issued by the BIR in order to information reflected in the tax returns
establish the taxpayer’s liability: filed by the taxpayer with the other
documents or information obtained by the
1. Tax period of the taxpayer is BIR from third parties, and any variance
terminated between the two figures are assessed by
the BIR.
Grounds for termination:
a. When it shall come to the Deficiency means:
knowledge of the Commissioner a. The amount by which the tax
imposed by law as determined by

Book Summary
the Commissioner or his authorized formally organized and did not commence
representative exceeds the operations.
amount shown as tax by the
taxpayer upon his return; Assessment Process
b. If no amount is shown as tax by
the taxpayer upon his return, or if The role of the government in the
no return is made is made by the assessment process includes:
taxpayer, then the amount by
which tax determined by the I. Examination of books of
Commissioner or his authorized accounts and other accounting
representative exceeds the records of the taxpayer by
amount previously assessed or revenue officers to determine
collected with assessment. his correct tax liability
3. Tax lien When Commissioner or his authorized

representative may make an examination:
If any person is liable to pay any internal 1. In ascertaining the correctness of any
revenue tax, neglects or refuses to pay return; or
the same after demand, the amount shall 2. In making a return when none was
be a lien in favor of the Government of the made; or
Philippines from the time the assessment 3. In determining the liability of any
was made by the Commissioner until paid person; or
(together with interests, penalties, and 4. In collecting any such liability; or
costs) upon all property and rights 5. In evaluating tax compliance
belonging to the taxpayer.
N.B. The books to examined may be in
N.B. A tax lien shall not be valid against the possession of the taxpayer subject to
any mortgagor, purchaser or judgment audit or in the possession of third person
creditor until notice of such lien shall be such as but not limited to:
filed in the Office of the Register of Deeds 1. The national and local governments,
of the province or city where the property 2. Government agencies and
of the taxpayer is located. instrumentalities, and
3. Government owned and controlled
4. Dissolving Corporation corporations.
If the said taxpayer or third parties do not
Every corporation, within 30 days after submit the documents or information
the adoption of: requested by the BIR, the person may be
a. Resolution or plan for dissolution; required to testify or the document may
or be summoned and required to be
b. For the liquidation of the whole or presented to the BIR.
any part of its capital stock;
c. Corporation which has been Last Priority - the audit and investigation
notified by the SEC of possible of returns shall be conducted only when
involuntary dissolution authorized by the Commissioner subject to
d. Or for possible reorganization the condition that the taxpayer pays an
must render a correct return to the amount or additional amount that is
Commissioner. higher by a certain percentage ove his last
year’s tax payment and the filing of
A certificate of tax clearance must be certain return or supplementary
secured from the BIR before the SEC statements that would allow the
issues the Certificate of Dissolution or Commissioner to verify the correctness of
Reorganization. the taxpayer’s declaration.
N.B. The said tax clearance is not required Purposes:

of corporations which have not been

Book Summary
1. To encourage voluntary tax N.B. Deficiency interest starts to run from

compliance; the time the tax is due up to the date of
2. To reduce administrative costs; actual payment thereof.
3. To minimize irritants incident to
investigation of taxpayers. III. Issuance of Preliminary
Assessment Notice (PAN)
When last priority does not apply:
1. When there is a strong evidence 1. If after the review of the Assessment
showing the commission of fraud; Division of the Revenue Regional
2. Where verification is necessary for the Office or the Commissioner or his
Commissioner to obtain information authorized representative, there is
relevant to the tax liability of another sufficient basis to assess the taxpayer
taxpayer; of the deficiency, it shall issue a
3. Where the taxpayer requests for Preliminary Assessment Notice to the
refund or credit of any taxes paid. taxpayer by registered mail. The PAN
is a proposed assessment showing in
II. Notice of Informal Conference detail the facts and the law, rules and
regulations and jurisprudence on which
Process after audit: the proposed assessment is based;
1. The Revenue Officer who audited the 2. The taxpayer has 15 days from notice
taxpayer’s records shall state whether to respond.
or not the taxpayer agrees with his 3. IF THE TAXPAYER FAILS TO RESPOND –
findings that the taxpayer is liable for he shall be considered in default. A
deficiency tax or taxes. formal letter of demand or assessment
2. IF TAXPAYER IS AMENABLE – the notice shall be issued by the
taxpayer pays the deficiency tax; Assessment Division of the Revenue
3. IF THE TAXPYER IS NOT AMENABLE – Regional Office or the Commissioner or
the taxpayer shall be informed in his authorized representative.
writing by the Revenue District Office
or by the Special Investigation Division There are exceptions to the issuance
(Regional Offices), as the case may be, of PAN. In the following cases, the
or by the Chief of Division concerned issuance of a formal assessment notice
of any discrepancy in the taxpayer’s shall be sufficient:
payment of his internal revenue taxes a. The fining of deficiency tax is the
for purposes of Informal Conference in result of a mathematical error in
order to afford the taxpayer with an the computation of the tax
opportunity to present his side of the appearing on the face of the tax
case. return filed by the taxpayer;
4. The taxpayer has to respond within 15 b. The discrepancy has been
days from the date of receipt of the determined between the tax
notice of an informal conference. withheld and the amount actually
5. IF THE TAXPAYER DOES NOT RESPOND remitted by the withholding agent.
– he shall be considered in default, in c. When the taxpayer who opted to
which case, the RDO, or Chief of claim a refund or tax credit of
Special Investigation Division, or Chief excess creditable withholding tax
of Division in the National office shall for a taxable period which was
indorse the case to the Assessment determined to have carried over
Division of the Revenue Regional and automatically applied the
Office or the Commissioner of his same amount claimed against the
authorized representative for review estimated tax liabilities for the
and issuance of deficiency tax taxable quarter or quarters of the
assessment. succeeding taxable year;
d. When the excise tax due on
excisable articles has not been
paid; or

Book Summary
e. When an article locally purchased Reply Protest

or imported by an exempt person, taxpayer. on a timely
manner.
such as, but not limited to,
vehicles, capital equipment,
machineries and spare parts, has Time to reply; venue for filing reply
been sold, traded or transferred to 1. Regional Office Cases
non-exempt person. a. Time: The reply must be filed
within 15 days from receipt of pre-
N.B. If the BIR issues a FAN before the assessment notice. Extension may
lapse of the 15-day period from notice of be granted in meritorious cases but
receipt of PAN, the taxpayer may raise this the extension cannot exceed 10
as an issue in his reply as a violation of a days.
provision of law regarding due process. b. Venue – Office of the Regional
Director, Attention: Chief of
IV. Reply Assessment Division of the
Regional Office
For purposes of contesting a PAN, the 2. National Office Cases
regulations used the word reply to a. Time: 15 days from receipt of pre-
distinguish it from the written objections assessment notice. Upto 10 days
to a FAN wherein the generic word protest extension in meritorious cases;
or specific term request for b. Venue: Revenue officer who signed
reconsideration or request for the assessment notice and letter of
reinvestigation is used. demand, Attention: Chief of the
Division who conducted the tax
Distinctions between a reply and protest: audit. With regard the PAN sent by
Reply Protest the Withholding Tax Division, the
Period to file 15 days from 30 days from reply shall be filed with the same.
receipt of PAN receipt of FAN
Manner Due to the A protest is
Examination of Records
shorter time usually sufficient
given to the and The taxpayer who filed a reply is allowed
taxpayer to comprehensive to examine the records of the case so that
make a reply, a to explain the he can validly object against the proposed
taxpayer legal and factual
assessment and present documentary
generally does bases why the
not respond in assessment is evidence and arguments. Generally, the
an adequate incorrect. amount of deficiency tax recommended in
manner to the Documentary the FAN and demand letter is reduced.
specific evidence not
findings of the presented during
When the amount in the PAN is the same
revenue preliminary with the FAN it is usually due to the late
officers. assessment submission of the reply and supporting
stage is document.
presented.
Person usually Usually the The taxpayer is
making the taxpayer represented by V. Issuance of Formal Assessment
Reply or the tax agent or Notice (FAN) and letter of
Protest consultant demand
Failure to file Failure to file a Failure to protest
within the reply a FAN make it
period authorizes the final and The letter of demand calling for payment
BIR to issue a executory and of the taxpayer’s deficiency tax shall state
FAN but NO the taxpayer the facts, the law, rules and regulations, or
liability for loses his right to jurisprudence on which the assessment is
additional or contest the
deficiency tax assessment at based, otherwise, the formal letter of
arises. the demand shall be void.
In view of this, administrative
it can be said and judicial The FAN must be sent by registered mail
that the filing levels. The filing
of a reply is of a protest is or by personal delivery. If sent by
directory on mandatory and personal delivery, the taxpayer or his
the part of the had to be made

Book Summary
authorized representative shall Delinquency Deficiency

acknowledge receipt thereof in the for the collection of the at the CTA or ordinary
delinquent tax in the CTA court during the
duplicate copy of the letter of demand. or ordinary court is a pendency of the protest
proper remedy. may be a subject of a
The FAN and demand letter should motion to dismiss. In
always go together. Since the law addition a petition for
review must be filed by
requires that the factual and legal bases the taxpayer in the CTA
of the assessment must be stated, this within 30 days in case of
requirement is not satisfied by the denial of protest.
issuance of FAN alone. A letter of demand Subject to delinquency Deficiency interest and
interest. compromise penalty.
fills up the void and explains to the
taxpayer how the deficiency assessment
was arrived at, including the reasons and Stages in the Collection Process
legal bases for the assessment.
I. Filing of administrative protest
The rule requiring the BIR to inform the by the taxpayer against the
taxpayer of the laws and the facts on assessment
which the assessment is made runs
parallel to the due process clause. Time to file: 30 days from receipt of FAN
and demand letter.
Collection Process
Mode:
Tax Delinquency and Tax Deficiency 1. Request for reconsideration –
refers to a plea of reevaluation of the
Delinquency Deficiency assessment based on existing records
A taxpayer is considered Deficiency means: without need of additional evidence. It
delinquent in the 1. The amount by may involve question of fact or law or
payment of his tax when: which the tax
1. The self-assessed imposed by law as
both.
tax per return filed determined by the 2. Request for reinvestigation – refers
by the taxpayer in Commissioner to a plea of re-evaluation of the
the prescribed date exceeds the amount assessment on the basis of newly
was not paid at all or shown by the
was partially paid; taxpayer in his discovered evidence that the taxpayer
2. The deficiency tax return; intends to present in the investigation.
assessed by the BIR 2. If no amount is sown It may involve question of fact or law
became final and as the tax by the or both.
executory. taxpayer upon his
return, or if no
return is made by The request must be accompanied by a
the taxpayer, then Waiver of Statute of Limitations in
the amount by which favor of the government.
the tax as
determined by the
Commissioner or his Date of receipt by the taxpayer of the
authorized assessment is the reckoning point for the
representative
counting of the 30-day period to file a
exceeds the
amounts previously protest.
assessed (or
collected without Assessment covers several issues
assessment) as a
If there are several issues involved in the
deficiency.
Can immediately be Can also be collected formal letter of demand and assessment
collected administratively or by but the taxpayer only disputes or protests
administratively or by judicial action but has to against the validity of some of the issues
judicial action. go through the process raised, the taxpayer shall be required to
of filing the protest by
the taxpayer against the pay the deficiency tax attributable to the
assessment and the undisputed issue.
denial of such protest by
the BIR.
The filing of a civil action The filing of civil action

Book Summary
 No action shall be taken on the 3. The taxpayer submits a supplemental

taxpayer’s disputed issues until the memo earlier than the lapse of the 60
taxpayer has paid the deficiency tax day period.
or taxes attributable to the said
undisputed issues. The prescriptive The legal issue has been interpreted by
period for the assessment and collection the CTA as follows: Since the petitioner did
of the tax or taxes attributable to the not submit any documents in support of
disputed issues shall be suspended. its protest within 60 days from the filing of
the protest, the counting of the 180 day
The taxpayer shall state the facts, period was from the filing of the protest.
applicable law, rules and regulations or Accordingly, when respondent failed to
jurisprudence on which his protest is render his decision within 180 days from
based, otherwise, his protest shall be the filing of his protest, petitioner has 30
considered void and without force and days therefrom to file an appeal with the
effect. CTA.
Failure to file a protest within 30-day III. Issuance of Revised

period, the assessment shall be final and Assessment
executory. The BIR can collect the taxes
administratively or by judicial action. After the submission of the protest letter
and supplemental memo, there are 3
II. Submission of Documentary possible situations that may happen:
Evidence and Arguments 1. The revenue officer recommends the
(a.k.a. supplemental memo) cancellation of the entire assessment;
2. The revenue officer recommends the
 The taxpayer shall submit the required issuance of a revised assessment;
documents in support of his protest within 3. The revenue officer recommends the
60 days from the filing of his letter of denial of all the items in the protest.
protest otherwise the assessment shall
become final and executory and In No. 1, the issuance of an Authority to
demandable. (60 day period) Change Assessment (ATCA) might be
necessary to remove the receivable
The Tax Code provides that the account from the taxpayer.
Commissioner has 180 days to act on the
protest. There is no uniformity of opinion In No. 2, the issuance of ATCA is
among tax experts when the 180-day necessary only with respect to the items
period starts to run. Any of the following of income or deductions that have been
could happen: deleted from the original assessment on
1. The taxpayer does not submit account of the additional evidence
supplemental memo after the filing of presented by the taxpayer.
protest because he believes the
documentary evidence and legal Issuance by the BIR of a revised
authorities submitted in the protest assessment effectively extends the
letter are already complete and period to collect the assessed tax
adequate; counted from the date of revised
2. The taxpayer submits supplemental assessment.
memo after the 60 day period either
because: The Commissioner can revise assessment
a. Additional evidence or authorities as long as it is within the prescriptive
are discovered during this period; period to make assessments and even
or while the appeal of the taxpayer from the
b. To comply with the specific request original assessment is still pending in the
made by the revenue officer after Court of Tax Appeals so as to avoid
the 60-day period; multiplicity of suits.

Book Summary
IV. Denial of Protest by the The assessment shall not become final
Commissioner or his authorized and executory merely because the
representative taxpayer chooses to wait for the decision
of the Commissioner on his protest.
The decision of the Commissioner shall:
1. State the facts, the applicable law, NOTE: Since the cases are on appeal to
rules and regulations, or the higher court, it might be risky for the
jurisprudence on which such taxpayer to rely on the ruling of the CTA,
decision is based, otherwise the particularly if the deficiency tax
decision shall be void; and assessment involves substantial amount
2. That the same is his final decision. or significant tax issues.
If the protest is denied by the Administrative Remedies

Commissioner – appeal to the Court of
Appeals within 30 days from date of Tax Lien
receipt of the said decision of the decision,
otherwise the assessment shall become Tax Lien – legal claim or charge on
final, executory and demandable. property, either real or personal, as
security for the payment of some debt or
If the protest was denied by a revenue obligation.
officer lower than Commissioner – elevate
his protest to the Commissioner within 30 Nature and extent of tax lien – When a
days from date of receipt of the decision. taxpayer neglects or refuses to pay his
This is known as administrative appeal. internal revenue tax liability after demand,
the amount so demanded shall be a lien in
V. Appeal by the taxpayer of the favor of the government from the time
final decision of the assessment was made by the
Commissioner or his authorized Commissioner until paid with interest,
representative on the disputed penalties and costs that may accrue in
assessment to the Court of Tax addition thereto upon all property and
Appeals rights to property belonging to the
taxpayer.
If the Commissioner or his authorized
representative fails to act on the Tax lien shall be valid against mortgagee,
taxpayer’s protest within 180 days from purchaser or judgment creditor until
date of submission by the taxpayer of the notice of such lien filed by the
required documents in support of his Commissioner in the office of the Register
protest, the taxpayer may appeal to the of Deeds of the province or city where the
Court of Tax appeals within 30 days from property of the taxpayer is situated or
the lapse of the said 180-day period; located.
otherwise, the assessment shall become
final, executory and demandable. A valid tax assessment is required to be
issued before a tax lien shall be annotated
The CTA ruled in Lascona Realty at the proper registry of property.
Corporation vs. Commissioner that the
taxpayer has 2 options: The Register of Deeds shall perform the
1. Appeal to the CTA within 30 days following activities:
from the lapse of 180 days after 1. Register documents upon
submission of the documents presentation of Certificate
supporting the protest at the BIR Authorizing Registration (CAR) or
level; OR Certificate of Tax Clearance (CTC);
2. Wait until the Commissioner 2. Annotate at the back of the
decides on the protest before Transfer Certificate of Title the
elevating the case to the CTA. exchange transaction (tax-deferred

Book Summary
transaction) under Section 40(c)(2) Two Types of Distraint

and (6)(c); 1. Actual Distraint – resorted to when
3. Annotate tax-exempt sale or at the time required for payment, a
transaction; person fails to pay his delinquent
4. Assist the BIR in identifying the real tax obligation. Distraint consists in
properties of delinquent taxpayers the actual seizure and taking
for proper entry and annotation of possession of personal property.
the notice of tax lien and/or levy 2. Constructive Distraint – may be
issued on the certificate of title. availed of in the following
5. Register the Notice of Tax Lien filed circumstances:
by the Commissioner. a. When the taxpayer is retiring
from any business subject to
Tax lien is superior to claim of a private tax;
litigant predicated on a judgment – The b. He intends to leave the
tax claim must be given in preference Philippines;
over any other claim of any other creditor, c. He removes his property
in respect of any and all properties of the therefrom;
insolvent. d. He performs any act tending to
obstruct the proceedings for
The tax lien attaches not only from the collecting the tax due or which
service of the warrant of distraint of may be due from him
personal property but from the time the It may be effected by requiring the
tax became due and payable. taxpayer or any person having
possession or control of the
Claim for unpaid tax is preferred over personal property to sign a receipt
claim for unpaid wages – The claim of the covering the property distrained
government for unpaid taxes is generally and obligate himself to preserve
preferred over the claims of labourers for the same intact and unaltered and
unpaid wages. Article 110 of the Labor not to dispose of the some in any
Code which gives preference over claims manner whatever without the
of labourers’ applies only in case of express authority of the
bankruptcy or liquidation of the Commissioner.
employer’s business.
Procedure for distraint and garnishment
Distraint and/or Levy 1. The officer serving the warrant
shall make an account of the goods
• May be pursued simultaneously distrained. A copy signed by him
with civil or criminal action; shall be left with the owner or to
• Distraint and levy shall be availed the person in possession of the
of where the amount of tax goods to which list shall be added a
involved is not more than one statement of the sum demanded
hundred pesos. and note of the time and place of
sale.
Distraint of Personal Property 2. Stocks and securities – warrant of
distraint shall be served upon the
Distraint – remedy whereby the taxpayer and upon the president,
collection of delinquent taxes is enforced manager, treasurer or other
on the goods, chattels or effects and other responsible officer of cooperation,
personal property of whatever character company or association, which
of the taxpayer, including stocks and other issued the said stocks.
securities, debts, credits, bank accounts 3. Debts and Credits – serving the
and interest in and rights to personal warrant of distraint upon the
property. taxpayer and the person owing
such debts. Such warrant is
sufficient authority to the person

Book Summary
owning the debts or having inclusion in BIR Form 40 involving

possession or under his control any less than P 1 million pesos;
credits. The warrant of distraint is 7. Chief, National Investigation
sufficient authority to such person Division - recommend the approval
to pay the Commissioner; of ATCA on cases disposed
4. Bank Accounts – serving the pursuant to Section 204 of the Tax
warrant upon the taxpayer and Code prior to their inclusion in BIR
upon the president, manager, Form 40 involving less than P 1
treasurer and other responsible million pesos;
officer of the bank. Upon receipt of 8. Revenue District Officer – sign
the warrant, the bank shall turn WDL, lifting of tax liens involving
over to the Commissioner the amount of P 100,000 and below.
amount sufficient to satisfy the
claim. Levy of Real Property
Officials authorized to sign WDL Levy – remedy whereby the collection of

(Warrant of Distraint and Levy), tax delinquent taxes is enforced on the real
liens, and ATCA (Authority to Change property belonging to the delinquent
Assessment) taxpayer
1. Commissioner – if the amount
involved is one million pesos and 1. Real property may be levied upon
above; after the expiration of the time
2. Deputy Commissioner required to pay the delinquent tax;
a. Sign the WDL for amounts 2. Levy may be made before,
involving P500,000 but not over simultaneously, or after the
one million; distraint of personal property.
b. Approve the ATCA in accounts 3. A duly authenticated certificate
receivable involving P 1 million showing the name of the taxpayer
and above; and the tax and penalty due from
3. Assistant Commissioner for him shall be prepared by the BIR.
Collection Service Such certificate shall operate with
a. Sign the WDL for amounts legal force of execution throughout
involving P300,000 but not the Philippines.
P500,000; 4. Levy shall be effected by writing
b. Recommend the approval of the description of the property in
the ATCA in accounts the certificate. At the same time, a
receivable involving P 1 million written notice of levy shall be
and above; mailed to or served upon the
4. Regional Director Register of Deeds.
a. Sign the WDL for amounts 5. The Commissioner or his duly
involving P 100,000 but not authorized representative shall
over P 300,000. have the authority to lift warrants
b. Approve ATCA in cases of of levy issued.
Accounts Receivable involving 6. Levy may be repeated if necessary
below P 1 million. until the full amount due, including
5. Chief, Collection Division, Regional all expenses collected. REASON: If
Offices – recommend approval full discharge of the tax liability is
ATCA in accounts receivable to be the result of the distraint and
involving less than one million levy, this would permit a clever
pesos. taxpayer who is able to conceal
6. Chief, Assessment Division, most of the valuable part of his
Regional Offices – recommend the property from the revenue officers
approval of ATCA on cases to escape payment of his tax
disposed pursuant to Section 204 liability, by sacrificing an
of the Tax Code prior to their insignificant portion of his holdings.

Book Summary
3. Right of Pre-emption – At any time

Sale of Property before the day fixed for the sale,
the taxpayer may discontinue all
Sale of Distrained Properties proceedings by paying the taxes,
1. Notice of the sale must specify the penalties, and interest.
time and place of sale and the 4. 5 days after the sale, a return by
articles distrained; the distraining or levying officer of
2. The Notice must be exhibited in not the proceedings shall be entered
less than 2 public places; one of upon the records of the Revenue
such places shall be at the Office of Collection Officer (RCO), the RDO
the Mayor; and Revenue Regional Director.
3. The time of sale shall not be less 5. A certificate of sale shall be
than 20 days after notice to the delivered to the purchaser.
owner or possessor of the property 6. Excess of the proceeds of the sale
and the publication or posting of shall be delivered to the taxpayer.
such notice.
4. The sale shall be at public auction Resale of Real Estate taken for Taxes
to the highest bidder for cash or Real estate taken by the Government for
with the approval of the satisfaction of taxes, penalties or costs
Commissioner, through duly may be resold after giving of not less than
licensed commodity or stock 20 days notice. Such sale must be with
exchanges. prior approval of the Secretary of Finance.
5. In case of stocks or securities, the The proceeds of the sale shall be
officer making the sale shall deposkted with the National Treasury
execute a bill of sale which shall
deliver to the buyer and a copy Sale of Forfeited Property – The
thereof furnished the corporation, following policies shall be observed in the
company, or association which sale of forfeited property:
issued the stocks or other 1. All acquired or forfeited real
securities. property, transferred in the name
6. Residue over and above what is of the Republic of the Philippines,
required to pay the entire claim, having passed the one-year
including expenses, shall be redemption shall be converted into
returned to the owner of the cash from the date of acquisition or
property sold. forfeiture;
2. The sale of acquired or forfeited
Advertisement and Sale of Real Property real property shall be by sealed
bids in public auction to be
1. Twenty days after levy, the officer witnessed by a representative of
conducting the proceedings shall the Commission on Audit;
proceed to advertise the property 3. The Notice of Sale of the acquired
or a usable portion thereof as may real property shall be published
be necessary to satisfy the claim once a week for 2 consecutive
and cost of the sale and such weeks in a newspaper of general
advertisement shall be for a period circulation in the Philippines which
of at least 30 days. must be completed within 20 days
2. The notice of sale shall: prior to the date of such public
a. Be posted at the main entrance auction.
of the municipal building; and 4. The minimum bid floor price shall
b. public and conspicuous place in be the latest fair market value as
the barrio or district; and determined by the Commissioner
c. be published once a week for or the fair market value shown in
three consecutive weeks in a the latest tax declaration,
newspaper of general whichever is higher.
circulation.

Book Summary
5. Anyone could bid except foreign market value of the articles for
nationals and those disqualified sale;
under the law;
6. Bidders shall post a bond in cash or The property purchased may be resold by
manager’s check in an amount the Commissioner or his deputy.
10% of the minimum bid price at
least 1 day before the scheduled Forfeiture of Property for Want of Bidder
public auction. In the instances mentioned above, the
7. The winning bidder shall pay the property shall be declared forfeited to the
full amount of his bid within 2 days Government in satisfaction of the claim in
after receipt of notice of award; question and within 2 days shall make a
8. All taxes and expenses relative to return of his proceedings and the
the sale shall be borne by the forfeiture shall b spread upon the records
winning bidder; of his office.
9. The winning bidder shall be
responsible for the ejectment of The Register of Deeds shall register the
squatters. property in the name of Government
10. Negotiated or private sale shall be without necessity of an order from a
resorted to as a consequence of competent court upon presentation of the
failed public bidding for 2 declaration of forfeiture.
consecutive times;
11. Negotiated sales shall be approved The owner of the property may redeem
by the Secretary of Finance; said property one year from registration
12. Public auction sale shall be by paying the taxes due, penalties, costs,
approved by the Commissioner or and expenses. If not redeemed, forfeiture
his authorized representative; becomes absolute.
13. The Government reserves the right
to reject or cancel any or all bids. The forfeitures does not operate as full
satisfaction of the government’s claim if
Right of Redemption the value of the property is less than the
 The owner shall not be deprived of amount of the claim. There would only be
the possession of the property a discharghe pro tanto of the tax
during the period of redemption liabilities.
and shall be entitled to the rents
and other income thereof until the Compromise
expiration of the time allowed for
redemption. Compromise – contract whereby the
 Period of redemption is one year to parties, by making reciprocal concessions,
be counted from the date of avoid litigation or put an end to one
registration of the certificate of already commenced.
sale, in accordance with the rule
that it is the act of registration that The Commissioner may compromise any
binds the land. national internal revenue tax, when:
1. There is reasonable doubt as to the
Purchase by government or validity of the claim against the
Forfeiture taxpayer;
2. The financial position of the
Purchase by government at sale upon taxpayer demonstrates a clear
distraint inability to pay the tax assessed.
1. When the amount for the bid
property under distraint is not Minimum Compromise Amounts:
equal to the amount of the tax; 1. Financial incapacity – 10% of the
2. When the amount for the bid is basic tax assessed;
very much less than the actual 2. Other cases – 40% of the basic tax
assessed

Book Summary
requirements to present his

When approval of Evaluation Board books of accounts and/or
necessary: pertinent records or to
1. The basic tax involved exceeds one substitute all or any of the
million pesos; deductions, exemptions, or
2. Where the settlement offered is credits claimed in his return;
less than the prescribed minimum b. Assessment seems to be
rate. arbitrary in nature, appearing
to be based on presumptions
When may criminal violations be and there is reason to believe
compromised? Criminal violations may be that it is lacking in legal and/or
compromised EXCEPT: factual basis;
1. Those already filed in court; c. Failure to file administrative
2. Those involving fraud. protest was due to failure to
receive notice and there is
A taxpayer must execute a waiver of RA reason to believe that the
1405 (Bank Secrecy Law) and such waiver assessment is lacking in legal
constitute the authority of the and/or factual basis;
Commissioner to inquire into bank d. Failure to file protest within 30
deposits of the TP. days and there is reason to
believe that the assessment is
Cases that may be compromised lacking in legal and/or factual
1. Delinquent accounts; basis;
2. Cases under administrative protest e. Failure to elevate protest to the
after the issuance of final CTA and there is reason to
assessment notice to the taxpayer believe that the assessment is
which are still pending in the lacking in legal and/or factual
Regional Offices. basis;
3. Civil tax cases being disputed f. Assessments were issued on or
before the courts; after January 1, 1998 where the
4. Collection cases filed in courts; demand notice allegedly failed
5. Criminal violations, other than to comply with the formalities
those cases filed in court or those prescribed under Sec. 228 of
violations involving criminal tax the Tax Code.
fraud; g. Assessments made based on
the best evidence obtainable
Exceptions: See list p. 672 rule and there is reason to
believe that the same can be
Bases for Acceptance of Compromise disputed by sufficient and
Settlement competent evidence.
1. Doubtful validity of the assessment h. The assessment was issued
a. The delinquent account is one within the prescriptive period
resulting from jeopardy for assessment as extended by
assessment. the taxpayer’s execution of
Jeopardy Assessment – tax Waiver of the Statute of
assessment which was Limitations, the validity or
assessed without the benefit of authenticity of which is being
complete or partial audit by an questioned and there is strong
authorized revenue officer, who reason to believe and evidence
has reason to believe that the to prove that it is not authentic.
assessment and collection of a 2. Financial incapacity – the offer to
deficiency tax will be compromise based on financial
jeopardized by delay because incapacity may be accepted upon
of taxpayer’s failure to comply showing that:
with audit and investigation

Book Summary
a. The corporation ceased =10%; is less than 3

operation or is already years = 20%
dissolved; v. Surplus or earnings
b. The taxpayer is suffering from deficit resulting to
surplus or earnings deficit impairment in the
resulting to impairment in the original capital by at
original capital by at least 50%; least 50% = 40%
c. Taxpayer is suffering from vi. Declared insolvent or
networth deficit. bankrupt = 20%
d. Taxpayer is a compensation 2. For cases of doubtful validity
income earner with no other a. A minimum compromise rate
source of income and the equivalent to 40% of the basic
family’s gross monthly tax assessed;
compensation income does not b. The taxpayer may request for a
exceed the levels of compromise rate lower that
compensation income provided 40% provided he shall be
for the regulations. required to submit his request
e. Taxpayer has been declared by in writing stating therein the
competent tribunal as bankrupt reasons, legal and/or factual.
or insolvent. This is subject to the approval
of the National Evaluation
Taxpayer has pending claim for refund or Board.
tax credit
The Commissioner shall not consider any In all cases of offer based on
offer for compromise settlement on the financial incapacity, Waiver of the
ground of financial incapacity of a Secrecy of Bank Deposit under R.A.
taxpayer with Tax Credit Certificate on 1405 and Sworn Statement saying
hand or in transit or with pending claim for that he has no Tax Credit
tax refund or credit with the BIR. Certificate on hand or in transit
shall be submitted.
Prescribed Minimum Percentage Abatement of Taxes

1. For case of financial incapacity
a. If the taxpayer is an individual When can there be abatement of taxes?
whose only source of income is 1. When the tax appears to be
from employment with a unjustly or excessively assessed;
monthly salary of P 10,500 or 2. When the administration and
less (single) or P21,000 or less collection costs involved do not
(if married) and it appears that justify the collection of the amount
the taxpayer has no other due;
leviable assets – 10%
b. Taxpayer is an individual The power to compromise or abate shall
without any source of income – not be delegated by the Commissioner
10% except in the following cases:
c. Where the taxpayer is under 1. Assessments issued by the
any of the following conditions: Regional Offices involving basic tax
i. Zero networth – 10% of P 500,000 or less;
ii. Negative networth – 2. Minor criminal violations
10%
iii. Dissolved corporations – See list in book of examples of cases of
10% abatement under the two grounds
iv. Non-operating provided in law
companies for a period
of 3 years or more Authority to Abate

Book Summary
The authority of the Commissioner to

abate taxes is generally applicable to only
to surcharge and compromise
penalty. In meritorious cases, the
Commissioner may likewise abate the
interest as well as the basic tax provided
the case is coursed through the (1) Deputy
Commissioner for Operations Group and
(2) Deputy Commissioner for Legal and
Inspection Group.
Penalties and Fines
Similarities between compromise and

compromise penalty:
1. By mutual agreement.
2. The right to enter into an
agreement is discretionary on the
part of the taxpayer or
Commissioner.
Differences:
Compromise Compromise
Penalty
Amount paid by the Amount of money
taxpayer to settle paid by a taxpayer
his civil liability for to compromise a
tax and penalties tax violation that he
assessed by the has committed
government. which may be the
subject of criminal
prosecution.
The basis of the The basis of the
amount paid is the amount paid is the
basic tax assessed. gross sales or
receipts.
In compromise, the The amount
law sets a limit to depends on the
the amount that nature of the tax
may be accepted by violation and the
the government, minimum amount is
depending on the generally not less
legal grounds used than P 1,000.
by the taxpayer.

Book Summary
 FAN may be protested

administratively by filing a
Chapter 17 reconsideration or
reinvestigation within 30 days
Judicial Remedies of from receipt of assessment.
Government Otherwise, it shall become final.
Katrina Montserrat Aznar  When assessments become
final and executor, the same
The BIR’s function is to raise taxes for the may be collected by summary
operation of the government. remedy of distraint or levy.
• Civil and Criminal actions shall be 3. Non-compliance with the condition
brought in the name of the Philippines. laid in the approval of protest
• No Civil or Criminal actions for the  Protest letter(PL) must not be
recovery of taxes or the enforcement pro forma
thereof shall be file in court without  PL generally approved by
the approval of the Commissioner. Commissioner
 In cases where conditions are
Civil Actions required by Commissioner and
1. By filing a civil case for the taxpayer failed to comply, it is
collection of sum of money with the as if no protest was filed
proper court 4. Failure to file a timely appeal to the
2. By filing an answer to the petition CTA on the final decision of the
for review filed by the taxpayer Commissioner or his authorized
with the CTA representative on the disputed
assessment
• If Commissioner files the case-  SC ruled that the taxpayer’s
Republic of the Phils. is the party failure to appeal the decision of
plaintiff; when it is the taxpayer who the CTA deprived him of the
files a petition for review in CTA, the right to question the
respondent is the Commissioner. Commissioner’s authority to
collect the tax within the
Jurisdiction: prescriptive period provided by
• If case involves collection of assessed law
principal taxes amounting to 1M or  The taxpayer’ failure to appeal
more- CTA make the assessment final
• If lower than 1M- RTC and other lower  The answer filed by the
courts government in the CTA us
tantamount to the filing of a
Collection of tax through civil action: civil action for the collection in
1. Self Assessed tax shown in the the regular court.
return was not paid within the date
prescribed When to go to the ordinary court?
 Taxes are self-assessing and no General Rule: BIR can file civil action for
further assessment is needed the collection within 5 years from the date
 The tax payer is immediately of the assessment
considered as delinquent, in
case where taxpayer merely • The Commissioner is not required
filed his return showing amount to rule first on the taxpayer’s request
without paying the same, from for reinvestigation before he can go to
the date the tax is due and court for the purpose of collecting the
demandable. tax assessed (Republic vs. Lim Tian
2. Final assessment is not protested Teng Sons); such is indicative of the
administratively within 30 days decision against reinvestigation
from date of receipt

Book Summary
• However, where the assessment • If appeal is not necessary, the

made by the BIR is disputed by the recommendation not to appeal must
taxpayer at the opportune time, it may be immediately prepared
not ignore the positive dispute against • In the meantime, a motion for
the assessment by immediately reconsideration must be filed in order
bringing an action to collect in court to suspend period of appeal
thus depriving the taxpayer of his right
to appeal the disputed assessment Criminal Actions
• Another exceptions relates to an
action to collect on the bonds which is • The filing of a criminal actions is
an action separate and distinct from generally resorted to by the BIR when
the action to collect tax; must be the summary remedies for the
brought in 10 years collection of taxes have proven
ineffective and futile
Who approves filing of civil action?
Important principles involving
General Rule: Commissioner criminal actions:
Exceptions: Regional Director may
approve if expressly delegated; • The action cannot be file in court
Complaints in civil actions for the without the approval of the
collection of delinquent taxes are required Commissioner
to be approved • Such actions must be brought in
the name of the government of the
Respondents in a civil case for the Philippines and shall be conducted by
collection of tax the legal officers if the BIR
• The grant of a motion to dismiss a
• Must be included in an assessment criminal case must be based upon the
to be respondents judge’s own personal conviction that
• Stockholders of a corporation that there was no case against the accused
has tax delinquency cannot be made • The acquittal of the taxpayer does
liable for the obligations of the not necessarily result in exoneration of
corporation; however, they may be civil liability to pay taxes
held personally liable in cases of • The judgment in the criminal case
defunct corporation as when the shall not only impose the penalty but
assets of the corporation have passed shall also order payment of taxes
into the hands of its stockholders • The obligation to pay the tax is not
a mere consequence of the felonious
Appeal from adverse court decisions: act, nor is it a mere civil liability
derived from the crime
• Decision in assessment cases or • All violations of the penal provision
refund cases when there is an of the tax code shall prescribe after 5
administrative decision denying claim years
must be appealed.
• It shall run from the day of the
• Decisions involving purely legal commission, and if not known, from
issues or mixed legal or factual issues the discovery and the institution of
must be appealed judicial proceedings for its
• Decisions involving purely factual investigation and punishment
cases may not be appealed except • A petition for reconsideration of an
when there are compelling factual assessment may affect the suspension
grounds for an appeal of the prescriptive period for the
• Petition for review must be collection of taxes, but not the
submitted to the Commissioner at prescriptive period of a criminal action
least 7 working days before the due • In cases of false or fraudulent
date of filing thereof return, the subsequent satisfaction of

Book Summary
the tax liability by payment or

prescription will not operate to
extinguish the taxpayer’s criminal
liability
• If a person convicted has no
property, he shall be subject to a
subsidiary personal liability
• If the Commissioner is convinced
that the taxpayer is criminally liable,
he should institute a criminal
proceedings and not arbitrarily impose
a penalty
• Procedural rules should not be
applied with rigidity if it would result in
manifest injustice
Filing of criminal action during the

pendency of protest
• Will depend on whether or not the

crime is complete when the violator
has knowingly and willfully filed a
fraudulent return with intent to evade
and defeat a part or all of the tax
• In other word, there must be a
prima facie showing of a willful
attempt to evade taxes
• While there can be no civil action
to enforce collection before the
assessment procedures has been
followed, there is no requirement for
the precise computation and
assessment of tax before there can be
criminal prosecution (Ungab vs. Cusi)
• An assessment is not necessary
before a criminal action can be filed.
The criminal charge need only prove
by a prima facie showing of failure to
file a required tax return and such fact
need not be proved by an assessment
(Commissioner vs. Pascor Realty and
Devt. Corp)

Book Summary
3. Failure to pay the deficiency

tax within the time prescribed for its
Chapter 18 payment
4. Failure to pay the full or
Civil and Criminal part of the amount of tax shown on
Penalties any return required to be filed.
Art Ryan Seachon
 50% – A penalty
Introduction equivalent to 50%
of the amount due
Penalties have the function of deterring (tax or deficiency
tax evasion and the objective of “keeping tax, as the case
complying taxpayers satisfied with their may be) shall be
compliance.” This satisfaction may at least imposed in the
to some extent a matter of retribution, a following cases, in
familiar aspect of criminal law. addition to the tax
required to be
In Taxation Law, the two types of paid:
penalties- civil monetary penalties and
criminal penalties- are not alternatives. 1. Willful neglect to file the
Where criminal action is taken, the return within the period prescribed
offending taxpayer should also be by the Tax Code
required to pay the tax and the 2. False or fraudulent return
accompanying civil penalty. willfully made
• Prima Facie Evidence of a False or
Civil Penalty Fraudulent Return:
a. Substantial
Civil Penalties- a generic term used to underdeclaration of taxable sales,
refer to receipts, or income- Failure to report
1. Surcharges, sales, income, or income in an
2. Deficiency and amount exceeding 30% of that
Delinquency Interests, and declared per return, or
3. Compromise penalties for b. Substantial
violation of certain provisions of the overstatement of deductions- claim
Tax Code. of deductions in an amount
exceeding 30% of actual deductions
A. Surcharges
A.1. Surcharge Rates • The filing of amended return after

service of letter authority does not
 25%– There shall be imposed, in negate taxpayer’s liability for
addition to the tax required to be surcharge.
paid, a penalty equivalent to 25%
of the amount due in the following If upon investigation, it is determined that
cases: the taxpayer’s originally filed tax return is
false or fraudulent, such taxpayer shall
1. Failure to file any return and remain liable to the 50% civil penalty,
pay the tax due thereon whether or not the taxpayer has filed his
2. Unless otherwise by the amended return, if the said amended
Commissioner, filing a return with an return was filed only after issuance of the
internal revenue officer other than Latter of Authority for the investigation of
those with whom the return is taxpayer’s tax return. See Sec. 6(A) of the
required to be filed. Code.

Book Summary
• Additions to the basic tax like the c

surcharge are not penalties but civil h
administrative sanctions, provided a
primarily as a safeguard for the protection r
of the state revenue and to reimburse the g
government for the heavy expense of e
obligation and the loss resulting from the s
taxpayer’s fraud. h
al
l
A.2. Procedures in Computing Tax and b
Surcharge (See the detailed illustrations e
on pages 716-722) i
m
1. p
Late o
fi s
li e
n d
g f
a o
n r
d la
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a e
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t n
a a
x n
- d
O la
n t
ly e
o p
n a
e y
2 m
5 e
% n
s t
u o
r f

Book Summary
t r
h o
e t
t h
a e
x r
. t
h
2. a
Tax n
r t
e h
t o
u s
r e
n w
i it
s h
fi w
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d m
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ti e
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it i
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a o
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e fi
v l
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u -
e 2
o 5
ff %
i s
c u
e r

Book Summary
c r
h n
a
r 3.
g Late
e fi
s li
h n
al g
l a
b n
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i l
m a
p t
o e
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t x
a p
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, s
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s il
s lf
t u
a l
t n
e e
d g
i l
n e
t c
h t
e -
r 5
e 0
t %
u s
u

Book Summary
r r
c n
h
a 4.
r Pen
g a
e lt
s i
h e
al s
l f
b o
e r
i D
m e
p fi
o c
s i
e e
d n
o c
n y
t T
h a
e x
i -
n A
c s
o a
m r
e u
t le
a ,
x n
d o
u s
e u
, r
a c
s h
s a
t r
a g
t e
e is
d i
i m
n p
t o
h s
e e
r d
e o
t n
u d

Book Summary
e p
fi e
ci n
e al
n ti
c e
y s
t is
a n
x o
a t
n p
d ai
o d
n o
t n
h o
e r
b b
a e
si f
c o
t r
a e
x t
. h
H e
o d
w u
e e
v d
e a
r, t
if e
t s
h t
e a
a t
m e
o d
u o
n n
t t
d h
u e
e d
i e
n m
cl a
u n
si d
v le
e tt
o e
f r,

Book Summary
t i
h e
e n
c c
o y
rr t
e a
s x
p a
o s
n s
d e
i s
n s
g e
s d
u -
r I
c n
h g
a e
r n
g e
e r
s al
h ,
al t
l h
b e
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i e
m fi
p ci
o e
s n
e c
d y
. t
5. a
Lat x
e a
p s
a s
y e
m s
e s
n e
t d
o s
f h
a al
d l
e b
fi e
c p

Book Summary
ai O
d t
b h
y e
t r
h w
e is
t e
a ,
x s
p u
a c
y h
e t
r a
w x
it p
h a
i y
n e
t r
h s
e h
ti al
m l
e b
p e
r li
e a
s b
c le
ri f
b o
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d t
i h
n e
t ci
h vi
e l
n p
o e
ti n
c al
e ti
a e
n s
d i
d n
e ci
m d
a e
n n
d t
. t

Book Summary
o t
la o
t f
e 2
p 0
a %
y
m p
e e
n r
t. a
n
B. Deficiency and Delinquency n
Interests u
m
1. Deficiency interest – for purposes of (
income tax is the interest due on any s
amount of tax due or installment thereof u
which is not paid on or before the date c
prescribed for its payment computed at h
the rate of 20% per annum (or such h
higher rate as may be prescribed by the i
rules and regulations), from the date g
prescribed for its payment until it is fully h
paid. e
r
2. r
Deli a
n t
q e
u a
e s
n m
c a
y y
i b
n e
t p
e r
r e
e s
s c
t ri
– b
is e
t d
h b
e y
i t
n h
t e
e r
r u
e le
s s

Book Summary
a c. a deficiency
n tax or any surcharge or interest
d thereon on the due date appearing in
r the notice and demand of the
e Commissioner.
g
u  The surcharge and/or interest shall apply
la to all taxes, fees, and charges imposed
ti under the Code which shall be collected
o at the same time, in the same manner,
n and as part of the tax.
s
)  In case the tax due from the taxpayer is
r paid on a partial or installment basis, the
e interest on the deficiency tax or on the
q delinquency tax liability shall be
u imposed from the due date of the tax
ir until full payment thereof. The interest
e shall be computed based on the
d diminishing balance of the tax inclusive
t of interests.
o
b  Public policy demands that the date
e within which the correct taxes as well as
p the surcharges and interests in case of
ai delinquency, are payable, being
d specifically fixed by the law, should not
i be moved or changed or made subject
n to the discretion of the Commissioner.
c
a  Neither should the accrual of interests
s be made dependent on the final
e outcome of an action contesting the
o correctness of the assessment of
f deficiency tax by the Commissioner.
f
ai • The justification for the imposition of
l interest charges is the right of the
u government to a just compensation
r for the delay in the payment of the
e tax and for the concomitant use by
t the taxpayer of the funds that
o rightfully should be in the
p government’s hands.
a
y
• Liability of the Government to pay
:
Interest
a. the amount of
1.
the tax due on any return required to
In
be filed, or
t
b. the amount of
h
tax due for which no return is
e
required, or
a
b

Book Summary
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Book Summary
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Book Summary
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Book Summary
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Book Summary
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Book Summary
ai r
n n
t s
e .
d Each failure to –
w a. file an information
it return, statement, or list, or
h b. keep any record,
a or
r c. supply any
b information required by this Code or
it by the Commissioner on the date
r prescribed therefor –
a
ri unless such failure is due to reasonable
n cause and not to willful neglect shall be
e paid by the person failing to file, keep, or
s supply the same P1,000.00, provided hat
s the aggregate amount to be imposed for
. all such failures during a calendar year
shall not exceed P25, 000.00
• Fines and other civil penalties 2.

Failure of a withholding tax agent
1. to collect and remit tax.
Fail Any person required to withhold,
u account for and remit any tax imposed by
r the Code who willfully –
e a. Fails to withhold such tax,
t or account for, and remit such tax, or
o b. Aids or abets in any manner
fi to evade any such tax or payment
l thereof –
e
c shall be liable upon conviction to penalty
e equal to the total amount of the tax not
r withheld or not accounted for, and
t remitted, in addition to other penalties
a provided by law.
i
n 3.
i Failure of a withholding agent to
n refund excess withholding tax.
f – Any employer/ withholding agent who
o fails or refuses to refund excess
r withholding tax shall, in addition to the
m penalties provided in this title, be liable to
a a penalty equal to the total amount of
ti funds which was not refunded to the
o employee resulting from any excess of the
n amount withheld over the tax actually due
r on their return.
e
t
u

Book Summary
Compromise Penalties
Crimes, Other Offenses, and
Compromise Penalty is a certain Forfeitures
amount of money which the taxpayer pays
to compromise a tax violation that may be A. General
the subject of criminal prosecution. provisions
 A compromise implies mutual consent. 2. Any person convicted of

Hence, a compromise penalty cannot be a crime penalized by the
imposed in the absence of a showing NIRC shall, in addition to
that the taxpayer consented thereto. being liable for the payment
of the tax, be subject to the
 If the Commissioner’s offer of penalties imposed by the
compromise is rejected by the taxpayer, Code. Payment of the tax
the Commissioner cannot enforce it. But due after apprehension shall
he may file a criminal action against the not constitute a valid
taxpayer for the tax violation. A penalty defense in any prosecution
can be imposed only on a finding of for violation of any provision
criminal liability. of the Code or in any action
for the forfeiture of untaxed
 Without the agreement, BIR cannot articles.
collect compromise penalty. –The
Commissioner has no power to impose 3. Any person who willfully
and collect the compromise penalties in aid in or abets in the
the absence of a compromise agreement commission of a crime
validly entered into between the penalized herein or who
taxpayer and the Commissioner. causes the commission
of any such offense by
However, where in an appeal to CTA, another shall be liable in
the taxpayer has expressed his the same manner as the
willingness to pay compromise penalty, principal.
said amounts may be collected as part
of the judgment. 4. If the offender is not a
citizen of the Philippines,
 Suggested compromise penalty in he shall be deported
extrajudicial settlement of a immediately after serving
taxpayer’s criminal violation. – In the sentence without further
general, the taxpayer’s criminal liability proceedings for deportation.
arising from his violation of the pertinent
provision of the Code may be settled If he is a public officer or employee,
extrajudicially instead of the BIR the maximum penalty prescribed for the
instituting against the taxpayer a criminal offense shall be composed and in addition,
action in Court. he shall be dismissed from the public
service and perpetually disqualified from
 A compromise in extrajudicial settlement holding any public office, to vote and to
of the taxpayer’s criminal liability for his participate in any election.
violation is consensual in character.
If the offender is Certified Public
 While the BIR may suggest schedule of Accountant, his certificate as a CPA shall,
compromise penalties for different upon conviction, be automatically be
violations of Tax Code provisions, these revoked or cancelled
are primarily suggested amounts that may
not be imposed upon taxpayers without 5. In the case of
their consent. associations,
partnerships, or

Book Summary
corporations, the penalty found to have

shall be imposed on the made a
partner, president, general double or
manager, branch manager, multiple
treasurer, officer-in-charge, claims for tax
and employees responsible credit shall be
for the violation. subjected to
civil and/or
6. The Miranda warning criminal
must be given to a taxpayer actions as
under criminal provided for
investigations by the tax under
authority for possible Sections 228,
criminal prosecution 248, 249, and
254 of the tax
 Persons Code.
liable for
criminal E.g. The VAT taxpayer cannot file all at the
prosecution. same time: (a) a claim for Tax Credit
– A Certificate (TCC) pursuant to the Omnibus
corporation Investments Code of 1987; (b) a TCC with
can act only the One-Stop Shop Inter-Agency Tax credit
through its and Duty Drawback Center of the
officers and Department of Finance pursuant to
agents and Administrative Order No. 266; (c) a claim
where the for TCC or refund with the BIR pursuant to
business itself Sec. 112 of the Tax Code; and (d) apply
involves a the same amount against the output tax
violation of liability.
the law, the
correct rule is  The general
that all rule is that a
(individuals) taxpayer may
who avail of tax
participate in incentives
it are liable. granted under
one law and
 Multiple cannot
claims of straddle
input tax between and
credit enjoy the
attributable incentives
to zero- extended
rated sales. under more
The VAT than one
taxpayer incentive law.
cannot file
multiple A. Specific Crimes
claims for and Other Offenses
credit of input
tax The offenses enumerated in the NIRC and
attributable their respective penalties are merely
to zero-rated reproduced in this chapter. Thus, I have
sales. Any only included “Attempt to Evade or
taxpayer

Book Summary
Defeat Tax”, as it is the only crime which

the Atty. Mamalateo discusses.
Tax Avoidance v. Tax Evasion
 Tax avoidance – is the tax saving

device within the means sanctioned by
law.
− This method should be used by the

taxpayer in good faith and at arms
length.
 Tax Evasion – is a scheme used outside

of those lawful means. When availed of,
it usually subjects the taxpayer to
further or additional civil or criminal
liabilities.
− Tax Evasion connotes the integration of

three factors:
1. The end to
be achieved; i.e., the payment of
less than that known by the taxpayer
to be legally due, or the non-
payment of tax when it is shown that
a tax is due;
2. An
accompanying state of mind
which is described as being
“evil,” “in bad faith, ”willful,”
“deliberate,” and not accidental;
and
3. A course of
action or failure of action which
is unlawful.
Subsidiary Penalty
If the person convicted for violation of any
of the provisions of the Code has no
property with which to meet the fine
imposed upon him by the court, or is
unable to pay such fine, he shall be
subject to a subsidiary personal liability at
the rate of one (1) day for each P8.50,
subject to the rules established in Article
39 of the Revised Penal Code.

Book Summary
a. File a written claim for refund or

tax credit
Chapter 19 b. Redeem property sold to settle tax
Administrative Remedies delinquency – see Section 214 NIRC
of Taxpayers Judicial Remedies

Manolito Tiuseco 1. Appeal to the Court of Tax Appeals
General Classification: See Section 228 NIRC

1. Administrative
2. Judicial Where a taxpayer filed a valid protest
3. Procedural within 30 days from the date of receipt
of the assessment notice AND on the
Administrative remedies same day also files a petition for
1. Before payment of deficiency tax review with the CTA,
assessment
There is yet no decision of the
a. written protest - See Section 228 Commissioner that is appealable to the
NIRC CTA (filing of the petition is premature;
a violation of the principle of
Before the enactment of R.A. 8424, exhaustion of remedies).
the protest filed must not be pro
forma, i.e. sufficient in form and 2. Mandamus against the Commissioner –
substance. If pro forma, the does not lie against the discretionary
“protest” will not suspend the 30- powers of the Commissioner.
day period within which to file
protest. 3. Injunction to restrain collect of tax
R.A. 8424 grants the taxpayer an See Section 218 NIRC

additional 60 days from the filing of
the protest to submit additional Exception: CTA, expressly authorized
evidence (the requirement on pro by law (R.A. 1125)
forma protest is modified impliedly)
Substantive Remedies
b. Question the tax audit or the 1. Questioning the constitutionality or
proposed deficiency tax validity of tax statutes or regulations
assessment
i. Based on the fact that he is Grounds for attack:
not entitled to be examined, a. Non-observance or violation of
after validly availing of a tax constitutional limitations
amnesty or voluntary b. Non-observance or violation of
assessment program of the procedure laid down by the
government. fundamental law on the enactment
ii. Based on the fact that the of legislation.
amount of tax being collected is
too high, confiscatory or Tax statutes enjoy the presumption of
excessive. validity and constitutionality
c. Completely settle tax liability thru 2. Non-retroactivity of rulings

compromise or abatement
See Section 246 NIRC
2. After payment of the tax voluntarily
made or deficiency tax assessment Ways by which the modification or
revocation of a ruling may be effected:

Book Summary
a. by notice to a taxpayer to whom The procedure prescribed by the law and

the ruling was originally issued; regulations in the assessment of taxes and
b. by a revenue ruling or other the collection of the assessed taxes.
statement published in the Internal
Revenue Bulletin or Journal. Obvious violation of the prescribed
procedures may be used by the taxpayer
3. Failure to inform the taxpayer in as a ground for the cancellation of an
writing of the legal and factual bases assessment, as it may violate the due
of assessment process clause of the Constitution.
See Section 228 ASSESSMENT
Renders the assessment void; The notice that the amount therein stated
is due as a tax, with a demand for
It is only through a detailed appraisal payment within a stated period of time.
of its basis that a taxpayer may be
able to dispute the imposition or agree The official action of the administrative
with it. officer in determining the tax due from a
taxpayer.
There may not have been a specific The following are NOT considered
mention of the applicable Tax Code assessments:
provision, but an indication therein of 1. A letter containing a computation of
the kind of tax liability (e.g. capital supposed liabilities, giving the
gains tax) is substantial compliance taxpayer an opportunity to show the
with the requirement. incorrectness of the findings, or urging
the taxpayer to produce his books or
As long as the taxpayer is informed of records for verification, or to present
how the assessment was arrived at, his side.
Section 228 is not violated. 2. A letter-notice that did not provide,
even in a general way, reasons why
If petitioner had already been informed deficiency taxes were being collected
of the law and the facts during the 3. An affidavit by a revenue officer
preliminary stage, then it could not stating the tax liabilities of a taxpayer
insist that it was not informed. and attached to a criminal complaint
for tax evasion.
4. Preservation of books of accounts and 4. A pre-assessment notice signed by a
records; once a year examination revenue official.
5. A deficiency assessment outside the
See Section 235 NIRC scope of the letter of authority (a
nullity).
One way to prevent an exam is to avail
of tax amnesty, or “no audit program” The following may be considered
and other similar programs granting assessments:
the benefit of last priority in tax audit. 1. A letter from the Commissioner
demanding the amount of a rubber
5. Publication of administrative issuances check previously paid by a taxpayer, if
Tanada vs. Tuvera: Administrative it declares the tax to be payable and
rules and regulations must also be demands the settlement thereof.
published if their purpose is to enforce 2. A preliminary collection letter, if it was
or implement existing law pursuant to the initial notice received by the
a valid delegation. taxpayer regarding his internal
revenue tax liabilities,
Procedural Remedies • AND if it can be proven that
the taxpayer did not receive any
assessment notice,

Book Summary
• AND no follow up letter was Necessarily anterior to the date of

sent nor was a preliminary conference actual release or mailing; NOT the
arranged. reckoning point in prescription.
Significance of Assessment 2. Date of Service or Mailing

An assessment is deemed made when
An assessment is relevant: notice to that effect is released,
1. as an essential step towards the mailed, or sent to the taxpayer.
initiation of administrative proceeding
or judicial action to collect taxes, Thus, it is considered made even if
2. to enforce taxpayer liabilities and received by the taxpayer after the
matters relating to it (imposition of expiration of the prescribed period.
surcharges and interest),
3. to apply the statute of limitations, Government enjoys the presumption of
4. to the establishment of tax liens, receipt.
5. in estimating the revenues that may
be collected by the government in the But, if the taxpayer makes a direct
coming year. denial of receipt, such denial shifts the
burden to the Government to prove
Forms of Assessment that the letter was indeed received by
1. Formal Assessment Notice (FAN) – the taxpayer.
comes in a serially numbered,
accountable form of the government,  When an estate is under
or its equivalent administration, the notice of
(but a post-reporting notice or pre- assessment must be sent to the
assessment notice issued by a revenue administrator.
official preparatory to the issuance if a
formal or final assessment notice is  Mere notations of mailing on the
not, legally speaking, an assessment). records of the tax collector do not
2. Informal written notice – assessment in suffice to prove that the notice was
the form of a letter or less formal sent and received.
communication to the taxpayer.
 There is a difference between
When must an assessment be made? receiving a second final notice, and
receiving a final notice for the second
See Section 203 NIRC (general rule), time (Nava vs. Commissioner)
Section 222 (a) (exception: in case of a  It is important that the correct address
false or fraudulent return with intent to of the taxpayer is indicated in the demand
evade tax, or failure to file a return). letter or notice, and that it was in fact
If a date on which the assessment is due mailed (to make presumption of receipt
to prescribe falls on a Saturday, the applicable).
following day being a Sunday
• The government has until the next 3. Date of Receipt.
succeeding business day or Monday The law does not require that he demand
within which to assess the tax. or notice be received within the
prescriptive period.
Leap years – The Administrative Code Receipt by the taxpayer’s attorney-in-fact
explicitly ordains that the term “year” is binding on the taxpayer.
shall be understood to have 365 days.
Who may sign an assessment notice?
Important dates to consider in cases The Commissioner is specified in law as
of assessments the one empowered to make assessments.
1. Issue date But the signing of a notice may be
delegated to subordinate officers.

Book Summary
Thus, an assessment signed by the Chief assessment, but also calling attention to
of the Income Tax Division or the RDO the facts or arguments disregarded in the
with delegated powers is a valid decision of the BIR, is a valid protest (not
assessment. considered pro forma).
PROTEST When to file administrative protest?

If the assessment is not protested, the See Section 228 NIRC
CTA has no jurisdiction over the case. The Inaction of the Commissioner on the
taxpayer’s failure constitutes a waiver of disputed assessment during the 180-day
any defenses which he could have set up. period
But, in case of a void assessment (i.e. R.A. 9282: Construed as a denial of the
failure to state the law and the facts) the protest. Interpreted to mean that it is thus
CA has held that the CTA does not lose prudent for the taxpayer to file his appeal
jurisdiction. No rights will ripen in favour of with the CTA within 30 days from the
the government. lapse of the 180-day period.
Types of protest A case decided by the CTA providing that

1. Request for reconsideration the taxpayer has the option to wait for the
final decision of the Commissioner and file
The protest is anchored on documents, an appeal within 30 days from said
arguments, and legal authorities decision was on appeal to the CA at the
already submitted or presented to the time the Mamalateo book was published.
BIR.
See RCBC case
Important: distinguish between a valid
protest, and one that is merely pro Section 228 requires that the taxpayer be
forma (a protest that merely reiterates informed about the law and the facts on
the ground already stated in the first which the assessment is made.
request for cancellation of the
assessment). The requirement is deemed complied with
if:
2. Request for reinvestigation 1. computations are attached to the pre-
assessment notice, clearly showing the
The protest is anchored on new law and the facts on which the
documents, arguments, and legal assessment is made,
authorities not yet submitted or 2. during the informal conference, the
presented to the BIR. taxpayer is able to submit a written
comment on the issues raised in the
But, a request for a copy of the report of investigation (which he could
computation is not a request for not have done if he were unaware of
investigation, and does not suspend the law and the facts on which the
the prescriptive period to collect. assessment is made),
3. the report of investigation on which
Neither is a letter that states that it is the assessment was based was sent to
not a request for reinvestigation. the taxpayer and said report details
the law and the facts on which the
 A valid protest of an assessment notice assessment is made. Especially if he is
is one that assails the formal assessment able to file a letter of protest based on
notice, not the preliminary assessment the said report.
notice, and the letter of demand (the
protest referred to in Section 228 NIRC Contents of protest
and reg rev 12-99). 1. Name and address of taxpayer for the
 A letter reiteration the grounds stated in immediate past 3 taxable years,
the first request for cancellation

Book Summary
2. Whether reinvestigation or Civil Code, since the action is for

reconsideration enforcement of a contractual obligation.
3. taxable periods covered,
4. date of receipt of assessment notice or Benefits of the Statute of Limitation
demand letter, 1. to the Government – the tax officers
5. statement of the findings to which the would be obliged to collect the tax
taxpayer agrees, and which should be promptly
paid immediately upon filing, 2. to the citizens – a feeling of security
6. statement of findings to which the against unscrupulous tax agents who
taxpayer does not agree, molest peaceful, law-abiding citizens.
7. statement of the facts and law to
support the protest. Construction of law on prescription
Since the law is a remedial measure, it
Denial of Protest should be liberally construed to afford
Express provisions of existing regulations such protection. Thus, exceptions to the
mandates that the Commissioner shall law should be strictly construed.
deny the protest in clear and unequivocal • Negligence or oversight on the part
terms (Section 3 Rev. Reg. 12-99) of the BIR cannot prejudice
taxpayers.
Failure to state the factual and/or legal
basis of his assessment does not start the Prescriptive Periods under the Tax
30 day period to appeal to the CTA, unless Code
the 180 period has lapsed (ibid). The general rule is found in Section 203
and 222 NIRC (3 or 10 years).
If the Commissioner does not rule of the
motion for reconsideration, the period to If the law does not provide for any
appeal will not legally commence, and it is prescriptive period, then the tax sought to
only when the taxpayer received be assessed becomes imprescriptible.
summons on the civil action for collection
that the period to appeal commenced to 1. Period to Assess
run. See Sections 203 and 222(a) NIRC
Indirect denial of protest The clause “the tax may be assessed

The courts considered the following, under at any time within 10 years after date
the old law and regulations, as indirect of discovery of fraud, falsity or
denial: omission” in Section 222(a) means the
1. Referral by the Commissioner of the BIR cannot assess taxes against the
request for reinvestigation to the citizen for the next succeeding 10
Solicitor General; insistence to collect years after the discovery.
the tax is indicative of the Collector’s
decision against the reinvestigation. Mamalateo believes that to allow the
2. A letter reiterating the demand for BIR to make an assessment for the
immediate payment of the deficiency next ten years from the date of
tax, due to taxpayer’s continued discovery would lead to absurdity.
refusal to execute waiver of the period
of limitation. Thus, if the fraud is discovered in
2005, the BIR may not assess a
PRESCRIPTION taxpayer for the next 10 years (or up
Tax Code provisions (special law) prevail to 2015) for a violation that was
over Civil Code provisions (general law) on committed in 1985 (20 years before
prescription. discovery), but only the any year
But, when the government proceeds by covering 1996 to 2005.
court action to forfeit a bond, the
prescriptive period is 10 years under the Revised Assessment

Book Summary
The Commissioner has the power to make The validity of any revised assessment
subsequent assessments or modify or made nor the right to enforce it by court
revise the original assessment to collect proceedings is not affected – where no
additional sums return for the said tax had been filed.
• As long as the modification is done
within the prescriptive period for 3. Period to File Criminal Action
making assessment (and even while See Section 281 NIRC
the appeal of the original
assessment is pending before the Waiver of the defense of prescription
CTA. The said waiver is actually an agreement
between the taxpayer and the BIR that the
Basis: Section 6 (B) NIRC: best evidence period to issue an assessment and to
rule collect is extended to a certain date. The
written agreement is the so-called “Waiver
 The period between the request for of the Statute of Limitations”.
reinvestigation or reconsideration
(approved by the BIR) and the revised If the waiver does not specify the kind and
assessment (pursuant to such approved amount of taxes covered – the waiver is
protest) must be subtracted from the total not valid. However, valid if at the time it
prescriptive period in Section 223 NIRC. was executed, the BIR had not yet come
When the assessment is reconsidered, it is up with preliminary findings (the kind and
the date the taxpayer is notified of the amount of tax due is still unascertainable).
reconsideration that tolls the 3 year period The waiver does not mean that the
of limitation. (Reason: An assessment that taxpayer relinquishes the right to invoke
is set aside or cancelled is no assessment the prescription unequivocally.
at all)
Prescription as a defense is waived if not
 A revised assessment must be seasonably interposed (e.g. failure to
separately protested within the same 30 allege it in the Answer)
day period allowed under the law.
A taxpayer cannot question the validity of
Burden of Proof the waiver if he already paid some of the
a. to show submission of return (and deficiency taxes covered by the waiver.
consequently, the start of the period to
assess) A waiver signed by the Comptroller of the
• Falls on the taxpayer corporation is valid, even without a letter
b. that there was fraud, for the purpose of authority, as provided by RMO 20-90
of applying Section 222 (a) (any of the corp.’s responsible officials
may sign).
• Falls on the government, to be
established by clear and convincing
Prescription in relation to acts or
proof
delays of taxpayer
A taxpayer may be prevented from setting
2. Period to Collect
up the defense of prescription, even if he
See Section 222 (c)
has not previously waived it in writing,
Where a withholding agent fails to file a • When by his repeated requests or
withholding tax return positive acts, the government has
The proceeding in court for the collection been, for good reasons, persuaded
of such tax may be begun without to postpone collection (e.g. protest
assessment, within 10 years after the against the original assessment
discovery of the omission. resulted in several reinvestigations)
Where a court action for the collection of Extension of Prescriptive Period

fixed tax was instituted more than 5 years See Section 223 NIRC
after the period to which it refers

Book Summary
Extension results from an agreement by * If not indicated, there was no agreement

the Commissioner and the taxpayer in to speak of.
writing to assessment and collection after
the statutory period. Illustrative cases (doctrines)
1. Waiver must be in writing and signed
If the taxpayer does not sign the waiver by both the Commissioner and the
FAN will likely issue and the remedy of the taxpayer; Tax Code is clear and
taxpayer is to file a protest. To be able to specific.
cancel the assessment made, it is 2. Waiver must be signed by one who is
incumbent upon the taxpayer to produce duly authorized; if an Assistant
documentary evidence and legal Revenue Service Chief signed an
arguments. assessment of P16 million, waiver was
invalid.
If the taxpayer signs the waiver 3. Unsigned first waiver is not a valid
A revised preliminary assessment may be agreement; period to assess was not
issued or the complete withdrawal of the suspended by the first waiver. Second
proposed assessment may be had at the waiver extending the period provided
administrative level. in the first is also invalid.
However, the running of the deficiency Interruption of the Prescriptive

interest (20% p.a of the basic tax) is not Period
suspended. See Section 223 NIRC
Revenue Officials authorized to sign The voluntary and unilateral act of the BIR
waivers in inviting the taxpayer to air its objections
Depending on the amount of tax sought to to the proposed assessment could not be
be collected (national office), or if the tax construed to suspend the period to assess
case is still pending investigation and the the tax.
period to assess is about to expire,
regardless of the amount (regional Section 223 (a): “When the Commissioner
offices); See RMO-200-90, page 798 is prohibited from making the assessment
Mamalateo or beginning distraint and levy or a
Form of the waiver proceeding in court and for 60 days
1. Duly notarized by a notary public thereafter;”
2. Indicating: Examples:
a. Definite expiration date 1. Pendency of the taxpayer’s appeal in
agreed upon to assess or collect the CTA and in the Supreme Court had
 Failure of the parties to set or state the the effect of temporarily staying the
extended period of prescription in the hands of the Commissioner, who is
waiver invalidates the waiver. prevented from filing an ordinary
b. Date of acceptance by the action to collect the tax in regular
BIR courts.
 Without the date, it cannot be 2. Failure by the taxpayer to give the BIR
determined whether the waiver was written notice of his change of address
actually accepted before the expiration of
the 3-year assessment period. A mere request for reinvestigation or
c. Fact of receipt by the reconsideration of an assessment does not
taxpayer of his copy of the have the effect of suspension. There must
accepted waiver (indicated in the be a written agreement for extension.
original) – to give notice of the • The rule is in accord with the general
acceptance of the BIR and the law on prescription requiring a
perfection of the agreement. written acknowledgement of the
d. A statement of the kind of debtor to renew the cause of action
tax and the amount of tax due or to interrupt the running of the
limitation period (Article 1155 NCC)

Book Summary
Refers to the form prescribed by the BIR:

Where the reinvestigation requested by 1. showing the basic information about
the taxpayer was not conducted because the taxpayer
neither the taxpayer nor his counsel 2. showing the computation of his tax
appeared liability
• the prescriptive period remains 3. used as the basis for payment of tax
suspended until the BIR issues a assessed by the taxpayer
warrant of distraint and levy (an  There is a separate form for each kind
unequivocal act of the government of tax
showing that the assessment of  To be considered as a tax return for
deficiency taxes was final). purposes of prescription, it is not always
required that the prescribed BIR forms be
Distinction between extension and used and filed by the taxpayer
interruption of prescriptive periods • A document showing all the
Extension Interruption necessary information that would
Written Agreement allow the BIR to compute and assess
The Commissioner No written the tax liability is considered a tax
and the taxpayer agreement is return.
sign a written signed.
waiver extending Either the taxpayer It is sufficient that the document filed
the period requested for complies substantially with the law. There
reinvestigation, is substantial compliance when:
which was granted, 1. The return is made in good faith and is
or a warrant of not false or fraudulent;
distraint or levy was 2. It covers the entire period involved;
issued and no and
property of the 3. When it contains information as to the
taxpayer could be various items of income, deductions,
located. and credits with such definiteness
Grounds permitting the computation of the tax.
Grounds are found Grounds are found
in Section 222 (b) to in Section 223 Where an income tax return is filed based
(e) on “tentative” financial statements
Time period prepared by an independent CPA
To validly extend Actions of the containing no opinion as to the financial
the period, the taxpayer and the statements
signing of the BIR are taken after • The return is a tax return that starts
waiver must be the issuance, the running of the period within
before the release and mailing which the BIR may make an
expiration of the of the assessment assessment.
time prescribed to notice and demand But when the amended return is
assess or collect letter. filed together with the audited
Effect financial statements, the
Extends the period The period during prescriptive period commences from
within which the which any of the the date of filing of the amended tax
Commissioner may enumerated return
assess or collect conditions in
taxes Section 223 exists is The court did not consider the return or
deducted from the document filed as appropriate tax returns
total period; the (ten year prescrip period applies) in the
period to assess or following instances:
collect is not 1. Transcript sheets – do not contain the
extended. necessary information to permit the
computation of tax
TAX RETURN

Book Summary
2. A return filed that is not for the 1. Simple statement in the letter that the
particular tax to be paid; a wrong returns were not fraudulent is not
return sufficient to overthrow the findings of
When there is no provision in the law the Commissioner;
requiring the filing of a return but such tax 2. Substantial underdeclaration of income
is such that its amount cannot be for six consecutive years
ascertained without pertinent data 3. Presence of fictitious expenses claimed
• The Commissioner may, by as deductions from gross income, with
appropriate regulations, require the no evidence presented to show that
filing of the necessary returns the return was no fraudulent.
Effect of filing an amended return Circumstances not considered fraud:

See Section 6(a) NIRC: the right of the 1. Where the taxpayer has sufficiently
taxpayer to amend his return shown that the non-reporting of
income was based on the reliance on
The prescriptive period for assessment several provisions, rulings, and
starts from the filing of the original return accepted principles, and may thus be
– if the same is sufficiently complete to considered based on “honest belief”;
enable the Commissioner to intelligently 2. Possibility that real property is sold for
determine the proper amount of tax. less than adequate consideration due
to a bona fide business purpose; or an
However, where the amended return is “arm’s length transaction”;
substantially different from the original 3. When the trial court found the non-
return – the right to assess starts from the existence of fraud (fraud is a serious
filing of the amended tax return. charge and is never imputed);
4. Where a taxpayer placed a notation on
Reason: If the assessment is counted from his income tax return that he was the
the original return, taxpayers can evade recipient of some money from abroad
taxes by reporting heavy losses in their which he presumed to be a gift, but
original return and amending the same which later turned out to be an error,
after the lapse of the prescriptive period and is now subject of litigation
to assess. (taxpayer literally laid his cards on the
table);
False or Fraudulent Return 5. Where the BIR itself was “not too sure”
See Section 222 (a) and 248 (B) NIRC as to the real amount of the taxpayer’s
net income; BIR arrived at highly
False return – implies a deviation from the different computations at three
truth, whether intentional or not. different occasions;
6. Where the BIR concedes that the
Fraudulent return – implies intentional or assessments were based on mere
deceitful entry in the books with intent to inferences and presumptions, or
evade the taxes due. approximations and calculations. Thus,
fraudulent intent was based on mere
A false return within the meaning of surmises and conjectures;
Section 222 - there appears a design to
mislead or deceive, or at least culpable When to raise the issue of prescription
negligence. Both the government and the taxpayer
must raise the issue at the administrative
Mere falsity does not merit the application level. Thus, for the government to avail of
of the 10-year prescrip period; the the ten year period in Section 222 (a), the
element of fraud must be clearly assessment must impute fraud, and a
established. surcharge for fraud must be imposed, or
do so in the answer to the petition for
Circumstances showing fraud: review filed by the taxpayer.

Book Summary
In a case where the issue of prescription

was not raised in the letter-protest
because the taxpayer had executed a
supposedly valid “waiver of the defense of
prescription”, which later turned out to be
invalid (after perusal of BIR records),
• The taxpayer may invoke
prescription for the first time during
trial at the CTA.
Effect of fraud assessments which are final

and executory
See Section 222 (a): “xxx fact of fraud
shall be judicially taken cognizance of in
the civil or criminal action for the
collection xxx”
Republic vs. Ker & Co.: Commissioner
contends that since the 50% fraud penalty
was imposed in an assessment which has
become final and executory, his finding as
to the existence of fraud need not be
proved. HELD: The contention fails to
consider the settled principle that fraud is
a question of fact which must be alleged
and proved. Accordingly, the allegation
and proof must have been done in the
lower court.

Book Summary
should be unjustly enriched at the

expense of another) under the NCC shall
Chapter 20 be applicable.
Tax Refund or Credit Principle of Exhaustion of Administrative
Benedicto Bienvenido Claravall Remedies
The filing of an administrative claim for
Tax Credit refund with the BIR is necessary in order:
A written claim for the issuance of a tax 1. to afford the Commish an
credit certificate, showing an amount opportunity to consider the claim and
owed by the government to the taxpayer to have a chance to correct the errors
which the latter is legally authorized to of subordinate officers and
credit or offset against national internal 2. to notify the Govt that such taxes
taxes payable by him, except withholding have been questioned and the notice
taxes. should be borne in mind in estimating
the revenue available for expenditure.
Tax Refund
A written claim for the payment if cash for Exceptions:
taxes erroneously or illegally paid by the 1. where the question in
taxpayer to the government. Requires a dispute is purely a legal one
physical return of an amount of money 2. where the act is patently
erroneously paid. illegal or was performed without
justification or without or in excess of
Note: a claim for refund takes more time jurisdiction
to process and approve than a claim for 3. where the respondent is a
tax credit. This is because it must be first Department Secretary who acts as an
approved by the Commissioner, then it alter ego of the President.
must be appropriated by Congress in the 4. where the circumstances
national budget, and it must also involve a indicate the urgency of judicial
pre-audit and post-audit by the COA intervention
When is tax credit or refund Procedural laws can be applied
available? retroactively
When the taxpayer erroneously or illegally
paid the tax: Laws prescribing the method of obtaining
1. pursuant to a valid or invalid a tax refund or credit and the
assessment or without an assessment requirements for entitlement to said
at all; or remedy are procedural laws and,
2. with or without any protest of the therefore, can be applied retrospectively
assessment; to actions still pending and undetermined
3. correctly, but payment at the time of their passage.
subsequently became erroneous or
illegal; The right to refund or credit being in the
4. voluntarily or involuntarily made; nature of tax exemption must be
or construed strictly against the taxpayer.
5. under duresss or threat
Option to carry forward or refund is
Principle of Solutio Indebiti irrevocable only for one taxable period
In determining whether a claim for refund Section 76 (final adjustment return) of the
under the EPZA law was timely filed, the Tax Code allows corporations who are
six year period under the NCC shall apply. entitled to refund of the excess estimated
Reason: it is an exception to the general quarterly income taxes paid, to carry-over
rule (2 years) because the EPZA law itself or credit said excess against the
is silent on the matter and therefore, the estimated quarterly income tax liabilities
priciple of Solutio Indebiti (no person

Book Summary
for the taxable quarters of the succeeding 2. The claim was filed with the BIR within
taxable year. the prescriptive period.
Excess tax credits are applied on first-in, The two year period is counted from
first-out basis the date of payment of the tax or
penalty, regardless of any supervening
Remedy of tax credit is not an absolute cause that may arise after payment.
right. While a taxpayer is given the choice
whether to claim for refund or have its Exceptions:
excess taxes applied as tax credit for the a. Corporate Income taxes - counted
succeeding taxable year, such election is from the filing of the annual
not final. Prior verification and approval by corporate income tax return
the Commissioner is required. It does not b. Income tax paid in Instalments -
confer an absolute right on the taxpayer counted from the date when the
to avail of the tax credit scheme if it so last instalment was paid.
chooses. Neither does it impose a duty on
the part of the government to sit back and Moreover, even if the two-year period
allow an important facet of tax collection has already lapsed, the same is not
to be at the sole control and discretion of jurisdictional and may be suspended
the taxpayer. for reasons of equity and other special
considerations.
Legal basis for tax refund or credit
3. The taxpayer erroneously or illegally
I. Income paid the taxes to the government,
Tax which is evidenced by a tax return or
declaration and an official receipt or
Summary of conditions for claim for acknowledgement receipt issued
refund or tax credit of income tax:
1. The taxpayer filed a written claim for 4. A petition for review was filed by the
refund or tax credit with the BIR or taxpayer with the CTA within the
other proper government agency or prescriptive period (two years from the
unit, stating the legal and/or factual payment of the tax or penalty)
bases thereof.
Inaction of the Commissioner does
The filing of written claim with the not toll prescriptive period. The
BIR is Mandatory and is a Condition taxpayer must therefore file the court
Precedent. Non-compliance bars the action (with the CTA) without waiting
action (in the CTA) and subjects the for the action of the Commish on the
claim to dismissal. admin claim.
Letter tendering payment of tax is not In case the Commissioner rules of such
a claim. claim, it must be appealed to the CTA
Where the protested assessment by within 30 days, otherwise the same
BIR was paid by taxpayer to forestall becomes final and executory.
WDL, later need not file a separate
claim for refund or credit. 5. There is no deficiency tax assessment
against the taxpayer.
The claim for refund at the
administrative level and filing a claim II. Withhold
for tax credit at the judicial level ing Tax;
Requisite
The proper person to claim refund is s
the person on whom the tax is 1. the claim was filed within the two-year
imposed by the statute. prescriptive period

Book Summary
2. the fact of withholding is established for it to sell its raw materials to export-
by a copy of a statement duly issued oriented BOI-registered enterprises
by the payor (withholding agent) to the whose export sales exceed 70% of
payee total annual production
3. the income upon which the taxes were Sales to a PEZA-registered enterprise
withheld was included in the return of is subject to zero percent
the recipient.
IV. Documen
III. Value tary
Added Stamp
Tax Tax
(in order to be entitled to refund or tax To question assessment through

credit of Unutilized Input Tax Payments prescription, taxpayer must not pay
directly attributable to zero-rated sales) assessed tax. If petitioner really believes
that the waivers were not valid and the
(see also: Sec 112 of the Tax Code); subject assessments were issued by the
petitioner must prove that: respondents out of time, then it should not
1. Both the administrative and judicial have made any payments. Its act of
claims for refund were filed within two paying the assessed taxes covered by the
years upon filing of the quarterly VAT same waivers is conclusive that the
returns. assessments were valid.
At the administrative level, the two-
year period for the filing of a written Penalties Imposed on Public Officers
claim with the BIR is counted from the • Violations committed by Government
close of the taxable quarter when the Enforcement Officers (Sec. 269 of the
sales or importation or purchase was Tax Code)
made. At the judicial level, the two- • Unlawful Divulgence of Trade Secrets
year period for filing of a petition for (Sec. 270)
review with the CTA shall be counted • Unlawful Interest of Revenue Law
from the date of filing of the VAT Enforcers in Business (Sec 271)
return and payment of the tax. • Violation of Withholding Tax Provision
2. The claimed input VAT payments were (Sec. 272)
not applied against any output tax • Penalty for Failure to Issue and
during the period covered by the claim Execute Warrant (Sec. 272)
and in the succeeding periods
• Penalty for failure to act on Taxpayer's
3. The claimed input VAT payments are
Written Communication - a taxpayer
directly attributable to zero-rated
can file a complaint against a revenue
sales;
officer who does not ac t on his written
4. the claimed input VAT payments are
communication within fifteen days
duly supported by VAT invoices or
from the date of receipt (Code of
official receipts.
Conduct for Government Officials)
5. Failure of the taxpayer to deduct from
its VAT return the input tax being  END 
claimed as refund is fatal to its claim
(The purpose of this requirement is to
avoid double deduction.)
6. The taxpayer-claimant must be a VAT-
registered person and the supplier
thereof.
Invoices and receipts dated earlier
than claim cannot be claimed for
refund
To avail of zero-rating of input taxes,
the only requirement to be complied is

Tax Rights and Remedies

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abandonment of procedures requiring

BIR Organizational Structure - specialize on tax fraud and policy

3 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

through private persons either

4 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

directly related to the assessment and

The power to interpret the provisions of precedents, laws, regulations,

d. Revenue Memorandum Inventory-taking of the goods of any

6 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

a. the taxpayer is retiring from

Upon termination of the taxable year, the

10. Power to prescribe real property values

The Commissioner is authorized to divide

With the approval of the Secretary of

7 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

Authority to assign internal revenue

9 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

The Commissioner or the Deputy  Appeal from adverse action by the

10 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

be in charge of CAR issuance to Commissioner through RDO No. 39,

11 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

12 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

wherein CARs issued for every completed

Power to Suspend Business

The temporary closure of the

13 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

3. Registration of each type of

What are required to be registered?  Update of registration information

14 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

registration can he file his tax sales/commercial invoices and official

TAXPAYER IDENTIFICATION NUMBER

ANNUAL REGISTRATION FEE

15 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

Vendors in public markets – Filipinos

All corporations, companies, partnership Journal – is a book of original entry in

16 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

17 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

18 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

Tax-exempt organizations and grantees of times in his place of business, is

19 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

20 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

Foreign currency means currency other

21 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

Sales invoice –is an evidence of sale;

22 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

• When consignment invoice is used to issue duly registered receipts or

otherwise to the revenue district officer in

The fact that tickets to a particular

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11. Gasoline Stations

25 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

26 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

c. The imprint on the customers and principal place of business of the

27 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

use the machine solely for “internal and other accounting

Validity of prior permit- All taxpayers METHODS OF ACCOUNTING

28 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

INDEPENDENT CERTIFIED PUBLIC

The term “Independent Certified Public

29 4-C AY 2009-2010 [United, we STAND; Divided, we FALL]

MARRIED INDIVIDUALS who do not derive

INTRODUCTION Income of UNMARRIED MINORS derived