Professional Documents
Culture Documents
SCOPE
INCOME TAX
WITHHOLDING TAX
TAX ADMINISTRATION
POWERS AND DUTIES OF BIR POWERS OF BIR COMMISSIONER
TAX REMEDIES
REMEDIES OF GOVERNMENT REMEDIES OF TAXPAYERS
CORPORATE TAXPAYERS
DOMESTIC CORPORATION
SUBSIDIARY AFFILIATE FOREIGN BRANCH OF DOMESTIC CORP
FOREIGN CORPORATION
RESIDENT FOREIGN CORPORATION
PHIL BRANCH OF FOREIGN CORPORATION
TYPES OF BRANCHES
REGULAR BRANCH
35% ON NET INCOME FROM SOURCES WITHIN THE PHIL
SPECIAL BRANCHES (TAXABLE) ENTERPRISES WITHIN ECOZONE (RA 7916) OR FREEPORT ZONE (RA 7227) 5% FINAL TAX ON GROSS INCOME REGIONAL OPERATING HEADQUARTERS (RA 8756)-10% PETROLEUM CONTRACTORS/SUB-CONTRACTORS (PD 1354) 8% FINAL TAX OFFSHORE BANKING UNITS 10% TAX ON FOREX INTERNATIONAL CARRIERS 2.5% ON GPB SPECIAL BRANCHES (EXEMPT) REPRESENTATIVE OFFICE REGIONAL HEADQUARTERS (RHQ)
INCOME TAX
OFF-LINE INTERNATIONAL AIR CARRIER IS A RESIDENT FOREIGN CORPORATION
SOLD TICKETS IN THE PHIL THRU LOCAL AGENTS LIAISON OFFICE, AGENCY, OR BRANCH 2.5% TAX ON GROSS PHIL BILLINGS
SOURCE OF INCOME
ACTIVITY (SALE OF TICKETS) IN THE PHIL ENUMERATION IN SEC 37(A) NOT EXCLUSIVE
INCOME TAX
JOINT VENTURE/PARTNERSHIP
POOL OF MACHINERY INSURERS IS A PARTNERSHIP TAXABLE AS CORP
COMMON FUND EXECUTIVE BOARD POOLS WORK IS INDISPENSABLE, BENEFICIAL AND ECONOMICALLY USEFUL TO BUSINESS OF CEDING COMPANIES
POOLS REMITTANCES ARE DIVIDENDS PRESCRIPTION IS NOT TOLLED, SINCE TAXPAYER CANNOT BE FOUND IN ADDRESS GIVEN IN INFORMATION RETURN
INCOME TAX
YMCA, AS NON-STOCK, NON-PROFIT ASSOCIATION, IS SUBJECT TO INCOME TAX ON INCOME FROM PROPERTY AND ON ACTIVITY CONDUCTED FOR PROFIT STRICT INTERPRETATION OF TAX EXEMPTION LAWS COURTS CANNOT RULE ON THE WISDOM OR PROPRIETY OF LEGISLATION. THAT POWER BELONGS TO CONGRESS
INCOME TAX
INTEREST INCOME FROM LONG-TERM DEPOSITS, INVESTMENTS/BONDS
EXEMPT, IF RECEIVED BY INDIVIDUAL TAXABLE, IF RECEIVED BY CORPORATION
GAIN FROM SALE OF LONG-TERM BONDS AND CERT. OF INDEBTEDNESS IS EXEMPT FROM INCOME TAX, REGARDLESS OF RECIPIENT (INDIVIDUAL OR CORP)
INCOME TAX
TAXATION OF STOCK DIVIDENDS
GEN RULE: EXEMPT FROM INCOME TAX EXCEPTION: REDEMPTION OF STOCK DIVIDEND, DEPENDING ON TIMING AND MANNER, MAY BE TREATED AS CASH DIVIDEND; HENCE, SUBJECT TO TAX
Stock Dividends
Stock dividend which represents transfer of surplus to capital stock is not subject to income tax. Stock dividend may constitute taxable income to recipients if it gives the shareholder an interest different from that which his former stockholdings represented. A stock dividend does not constitute income if the new shares confer no different rights or interests than did the old the new certificates plus the old representing the same proportionate interest in the net assets of the corporation. The receipt of tax-free stock dividends by the stockholder will reduce his cost or adjusted basis of the stocks in determining the gain or loss upon the subsequent sale or transfer thereof. If a corporation cancels or redeems stock issued as a dividend at such time and in such manner as to make the distribution or cancellation, in whole or in part, essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock shall be considered as taxable income to the extent it represents a distribution of earnings or profits (CIR vs. CA and A. Soriano, 301 SCRA 152)
CIR vs. S.C. Johnson & Sons GR 127105, June 25, 1999
The purpose of most-favored-nation clause in tax treaty is to grant to the other contracting state tax treatment that is no less favorable than that which is granted to most favored among other countries. Phil-Germany Tax Treaty imposes 10% on royalty, provided that it is paid under similar circumstances to a resident of a third state. Matching credit of 20% is granted against German income. Respondent: It refers to payment of royalty, not to payment of tax, since the phrase paid under similar circumstances is followed by phrase to a resident of a third state. This construction is based on sentence structure.
Coca-Cola Export Corp vs. CIR CTA Case 6861, Nov 22, 2005
Phil, as state of source, and U.S., as state of residence, are permitted to tax royalties. There is double taxation. U.S. allows tax relief from double taxation, subject to limitation. Phil may impose 25%, 15%, or 10% tax rate on royalty. RP-Russia and RP-China Tax Treaties reveal similar provisions on relief from double taxation as those in RP-US Tax Treaty. There is no provision on matching credit similar to that in RP-Germany Tax Treaty.
RMC 46-2002
PHIL-CHINA TAX TREATY (effective Jan. 1, 2002). The tax on royalties shall not exceed:
15% for royalties arising from the use of, or right to use, any copyright of literary, artistic or scientific work, incl. cinematographic films or tapes for television or broadcasting; or 10% for royalties arising from the use of, or right to use, any patent, trade mark, design or model, plan, secret formula or process, or from the use, or right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. Considering that the treaty with China does not contain a matching credit provision similar to that found in the treaty with Germany, tax on royalty payments to residents of China can be considered paid under similar circumstances to a resident of the U.S. and the mostfavored-nation clause in the RP-US Tax Treaty (RMC 46-2002, Sept. 2, 2002).
SOURCES OF INCOME
REAL PROPERTY PERSONAL PROPERTY
TANGIBLE
PRODUCED WITHIN THE PHIL AND SOLD WITHOUT OR VICE-VERSA PURCHASE WITHIN THE PHIL AND SALE WITHOUT
INTANGIBLE
SHARES OF STOCK
DOMESTIC CORPORATION FOREIGN CORPORATION
SOURCES OF INCOME
INTERESTS DIVIDENDS
PAID TO DOMESTIC CORP AND RFC PAID TO NON-RESIDENT FOREIGN CORP
OTHER INCOME
PREMIUM ON INSURANCE TRANSPORT INCOME
INCOME TAX
EXCESS WITHHOLDING (INCOME) TAX
FOR 1997
MAY BE CARRIED OVER ONLY TO 1998 1977 TAX CODE APPLIES EVEN IF ITR FILED IN 1998
FOR 1998
MAY BE CARRIED OVER TO SUCCEEDING YEARS 1997 TAX CODE APPLIES OPTION TO CARRY OVER EXCESS WITHHOLDING TAX IS IRREVOCABLE DURING THE LENGTH OF THE NEXT TAXABLE YEAR ONLY; THEREAFTER, HE MAY FILE CLAIM FOR REFUND OR TAX CREDIT
Advertising Expenses
An expense is ordinary when it connotes a payment, which is normal in relation to the business of the taxpayer and the surrounding circumstances. An expense is necessary where the expenditure is appropriate or helpful in the development of taxpayers business or that the same is proper for the purpose of realizing a profit or minimizing a loss. P9.4 M paid in 1985 for advertising a product was staggering incurred to create or maintain some form of goodwill for the taxpayers trade or business or for the industry or profession of which the taxpayer is a member. Goodwill generally denotes the benefit arising from connection and reputation, and efforts to establish reputation are akin to acquisition of capital assets. Therefore, expenses related thereto are not business expenses but capital expenditures (CIR vs. General Foods Phi., GR No. 143672,
Apr. 24, 2003).
Donation
Irrespective of the accounting method used, donation is recognized as a deduction from gross income in the year such donation was actually paid or made, not in the year the deed of donation was perfected. The deductibility of donation is not governed by the ordinary rules on deductibility of the expense. Donation must be both perfected and consummated before it can be allowed as a deduction.
(Phil. Stock Exchange vs. CIR, CTA Case No. 5995, Oct. 15, 2002)
(ING Bank, Manila Branch vs. CIR, CTA Case No. 6017, Mar. 11, 2002)
INCOME TAX
DOUBLE TAXATION
COMPARABLE OR SAME TAXES ARE IMPOSED BY TWO OR MORE STATES ON SAME TAXPAYER ON SAME SUBJECT MATTERS AND FOR IDENTICAL PERIODS
TAX ADMINISTRATION
ESTOPPEL
ESTOPPEL DOES NOT APPLY TO GOVT
STATE CANNOT BE ESTOPPED BY THE MISTAKE OR NEGLECT OF ITS AGENTS & OFFICERS ERRONEOUS APPLICATION OF LAW BY PUBLIC OFFICERS DO NOT BLOCK SUBSEQUENT CORRECT APPLICATION OF STATUTES ESTOPPEL DOES NOT APPLY TO PRECLUDE SUBSEQUENT FINDING OF TAXABILITY NOR TO DEPRIVE GOVT OF ITS RIGHT TO RAISE DEFENSES EVEN IF RAISED ONLY FOR THE FIRST TIME ON APPEAL
INJUNCTION
NO COURT HAS AUTHORITY TO GRANT INJUNCTION TO RESTRAIN COLLECTION OF TAXES, EXCEPT WHEN COLLECTION WILL JEOPARDIZE INTEREST OF GOVERNMENT OR TAXPAYER APPEAL TO CTA DOES NOT SUSPEND COLLECTION OF TAX
INJUNCTION
NO COURT HAS AUTHORITY TO GRANT INJUNCTION TO RESTRAIN COLLECTION OF TAXES, EXCEPT WHEN COLLECTION WILL JEOPARDIZE INTEREST OF GOVERNMENT OR TAXPAYER APPEAL TO CTA DOES NOT SUSPEND COLLECTION OF TAX
REMEDIES OF GOVERNMENT
COMPROMISE PENALTY
COMPROMISE PENALTY
AMOUNT WHICH TAXPAYER PAYS TO COMPROMISE TAX VIOLATION THAT MAY BE SUBJECT OF CRIMINAL PROSECUTION MUTUAL AGREEMENT; MAY NOT BE IMPOSED BY BIR, IF TAXPAYER DOES NOT AGREE THERETO IF TAXPAYER HAS EXPRESSED WILLINGNESS TO PAY COMPROMISE PENALTY IN AN APPEAL TO CTA, AMOUNT MAY BE COLLECTED AS PART OF JUDGMENT
CIVIL ACTION
COLLECTIBILITY OF DELINQUENT TAX
FINAL ASSESSMENT IS NOT PROTESTED WITHIN 30 DAYS FROM DATE OF RECEIPT, OR PROTESTED BUT BIR CONDITIONS ARE NOT COMPLIED WITH BY TAXPAYER SELF-ASSESSED TAX SHOWN IN RETURN IS NOT PAID WITHIN DATE PRESCRIBED BY LAW PROTEST AGAINST ASSESSMENT IS DENIED BY BIR OR 180 DAY PERIOD LAPSES AND TAXPAYER FAILED TO APPEAL TO CTA WITHIN 30 DAYS FROM DATE OF RECEIPT OR FROM LAPSE OF 180 DAY PERIOD
CIVIL ACTION
WHO APPROVES?
CIR OR REGIONAL DIRECTOR SOLGEN, OR BIR SPECIAL ATTORNEYS OUTSIDE METRO MANILA, AFFIRMED BY SOLGEN
CIVIL ACTION
WHEN TO GO TO RTC?
PRO FORMA PROTEST FILED
BIR IS NOT REQUIRED TO RULE FIRST ON TAXPAYERS REQUEST FOR REINVESTIGATION BEFORE INITIATION JUDICIAL ACTION TO COLLECT; DECISION OF CIR MAY BE INFERRED FROM HIS REFERRAL OF CASE TO SOL GEN
CRIMINAL ACTION
NO CRIMINAL ACTION SHALL BE BEGUN WITHOUT THE APPROVAL OF COMMISSIONER CRIMINAL ACTIONS FOR VIOLATIONS OF TAX CODE OR OTHER LAWS ENFORCED BY BIR MUST BE BROUGHT IN THE NAME OF THE GOVERNMENT AND CONDUCTED BY ITS LEGAL OFFICERS
CRIMINAL ACTION
PENAL CODE
EVERY PERSON CRIMINALLY LIABLE FOR A FELONY IS ALSO CIVILLY LIABLE
TAX CODE
CIVIL LIABILITY TO PAY TAX ARISES NOT BECAUSE OF ANY FELONY BUT UPON TAXPAYERS FAILURE TO PAY TAX CRIMINAL LIABILITY ARISES AS A RESULT OF ONES LIABILITY TO PAY HIS TAX SEC. 73 PROVIDES IMPOSITION OF IMPRISONMENT OR FINE, OR BOTH, BUT FAILED TO PROVIDE COLLECTION OF TAX IN CRIMINAL PROCEEDINGS
CRIMINAL ACTION
ACQUITTAL OF TAXPAYER IN CRIMINAL ACTION DOES NOT NECESSARILY RESULT IN EXONERATION FROM CIVIL LIABILITY
CIVIL LIABILITY IS NOT DEEMED INCLUDED IN CRIMINAL ACTION DUTY TO PAY TAX IS IMPOSED BY STATUTE PRIOR TO AND INDEPENDENTLY OF ANY ATTEMPT BY TAXPAYER TO EVADE PAYMENT TAX LIABILITY IS NOT CONSEQUENCE OF FELONIOUS ACTS CHARGED IN CRIMINAL PROCEEDING NOR IS IT MERE CIVIL LIABILITY ARISING FROM CRIME THAT COULD BE WIPED OUT BY JUDICIAL DECLARATION OF NON-EXISTENCE OF CRIMINAL ACTS CHARGED
CRIMINAL ACTION
SUBSEQUENT PAYMENT OF TAX LIABILITY OR EXTINGUISHMENT OF TAX LIABILITY THRU PRESCRIPTION WILL NOT OPERATE TO ABSOLVE TAXPAYERS CRIMINAL LIABILITY SUBSIDIARY IMPRISONMENT CANNOT BE IMPOSED IN CASE OF INSOLVENCY OF TAXPAYER AS REGARDS TAX HE IS SENTENCED TO PAY PENALTY SHALL BE IMPOSED ON PARTNER, PRESIDENT, GM, TREAS., OR OFFICER RESPONSIBLE FOR VIOLATION
CRIMINAL ACTION
FILING OF CRIMINAL ACTION DURING PENDENCY OF PROTEST
ASSESSMENT IS NOT NECESSARY TO CRIMINAL PROSECUTION FOR WILLFUL ATTEMPT TO EVADE TAX CRIME IS COMPLETE WHEN VIOLATOR HAS KNOWINGLY AND WILLFULLY FILED FRAUDULENT RETURN WITH INTENT TO EVADE TAX WHAT IS INVOLVED HERE IS NOT COLLECTION OF TAXES WHERE ASSESSMENT MAY BE REVIEWED BY RTC BUT CRIMINAL PROSECUTION FOR VIOLATION OF CODE
CRIMINAL ACTION
CRIMINAL CHARGE WITHOUT ASSESSMENT
ASSESSMENT IS NOT NECESSARY BEFORE CRIMINAL CHARGE IS FILED CRIMINAL CHARGE NEED ONLY BE PROVED BY PRIMA FACIE SHOWING OF FAILURE TO FILE REQUIRED RETURN AND SUCH FACT NEED NOT BE PROVED BY AN ASSESSMENT ISSUANCE OF ASSESSMENT IS DIFFERENT FROM FILING OF COMPLAINT FOR CRIMINAL PROSECUTION
CRIMINAL ACTION
FOR CRIMINAL PROSECUTION TO PROCEED BEFORE ASSESSMENT, PRIMA FACIE SHOWING OF WILLFUL ATTEMPT TO EVADE TAX MUST EXIST FORTUNES SITUATION IS FACTUALLY APART FROM UNGAB
REG. WHOLESALE PRICE APPROVED BY BIR PRESUMED ACTUAL PRICE NOT FRAUDULENT UNLESS BIR HAS FINAL DETERMINATION OF WHAT IS CORRECT TAX PREL. INV. MAY BE ENJOINED UNDER EXCEPTIONAL CIRCUMSTANCES
SURCHARGE
RATES:
50% - FALSE OR FRAUDULENT RETURN OR WILLFUL NEGLECT TO FILE RETURN 25% - OTHER CASES
TAX LAWS IMPOSING PENALTIES ON DELINQUENCIES ARE INTENDED TO HASTEN TAX PAYMENTS OR TO PUNISH EVASION OR NEGLECT OF DUTY
INTEREST
JUST COMPENSATION TO THE STATE FOR DELAY IN PAYING TAX AND FOR USE OF FUNDS THAT BELONGS TO GOVERNMENT 20% DEFIENCY INTEREST PER ANNUM FROM THE DATE TAX IS DUE UP TO DATE OF PAYMENT COLLECTED AT THE SAME TIME, SAME MANNER, AND AS PART OF TAX
INTEREST
JUST COMPENSATION TO THE STATE FOR DELAY IN PAYING TAX AND FOR USE OF FUNDS THAT BELONGS TO GOVERNMENT 20% DEFIENCY INTEREST PER ANNUM FROM THE DATE TAX IS DUE UP TO DATE OF PAYMENT COLLECTED AT THE SAME TIME, SAME MANNER, AND AS PART OF TAX
REMEDIES OF TAXPAYERS
ASSESSMENT
WHAT IS AN ASSESSMENT?
NOTICE THAT TAXPAYERS OWES GOVERNMENT A SUM OF MONEY CONTAINS COMPUTATION OF TAX LIABILITY AND DEMAND FOR PAYMENT OF TAX WITHIN
PURPOSE OF ASSESSMENT
TO ESTABLISH TAX LIABILITY
MANDATORY REQUIREMENT
TAXPAYER IS INFORMED IN WRITING OF FACTUAL AND LEGAL BASIS OF ASSESSMENT
ASSESSMENT NOTICE
Sec. 228 of Tax Code requires BIR to inform taxpayer in writing of the laws and facts on which assessment is made. Failure to do so shall void the assessment. Rule runs parallel to the due process clause. Insufficiency of assessment notice may be cured by the demand letter which shows the legal and factual basis relied upon in issuance of assessment
(PNZ Marketing vs. CIR, CTA Case No. 5726, Dec. 14, 2001).
Assessment Notice
Preliminary collection letter presupposes the existence of valid assessment notice. Preliminary collection letter shall serve as assessment notice, if it was initial notice received by taxpayer, taxpayer did not receive any assessment notice, and no follow-up letter was sent or preliminary conference was arranged. 30-day period to protest shall commence from date of receipt of preliminary collection letter.
(United International Pictures vs. CIR, CTA Case No. 5884, Jan. 5, 2002)
ASSESSMENT
FORMS OF ASSESSMENT
FORMAL ASSESSMENT NOTICE LETTER DEMANDING PAYMENT OF ERRONEOUSLY REFUNDED AMOUNT OR AMOUNT PAID BY BOUNCING CHECK LETTER FROM REVENUE OFFICER GRANTING OPPORTUNITY TO DISPROVE FINDINGS OR SHOW CAUSE LETTER FOLLOW-UP LETTER DULY RECEIVED BY TAXPAYER WITHIN PRESCRIPTIVE PERIOD. (TAXPAYER DENIED RECEIPT OF ORIGINAL DEMAND LETTER AND ASS. NOTICE)
ASSESSMENT
WHEN MUST ASSESSMENT BE MADE?
RETURN IS FILED
NOT FALSE OR FRAUDULENT 3 YRS FROM FILING FALSE OR FRAUDULENT 10 YRS FROM DATE OF DISCOVERY OF FILING OF FALSE OR FRAUDULENT RETURN
NO RETURN IS FILED
10 YEARS FROM DATE OF DISCOVERY OF OMISSION
IF ASSESSMENT DUE DATE FALLS ON A SATURDAY, GOVERNMENT HAS NEXT BUSINESS DAY WITHIN WHICH TO ASSESS
ASSESSMENT
WHEN IS ASSESSMENT DEEMED MADE?
ISSUE DATE OF ASSESSMENT NOTICE IS NOT RECKONING POINT FOR PRESCRIPTION DATE ASSESSMENT NOTICE AND DEMAND LETTER IS RELEASED, MAILED OR SENT TO TAXPAYER CONSTITUTES ACTUAL ASSESSMENT PRESUMPTION OF RECEIPT IN REGULAR COURSE OF MAIL APPLIES, IF PROPERLY ADDRESSED, POSTAGE PREPAID, AND WAS MAILED
ASSESSMENT
ASSESSMENT IS MADE WHEN SENT WITHIN THE PRESCRIBED PERIOD, EVEN IF RECEIVED BY TAXPAYER AFTER EXPIRATION OF PRESCRIPTIVE PERIOD RELEASE AND MAILING SHOULD BE SATISFACTORILY PROVED MERE NOTATIONS ON RECORDS OF BIR OF MAILING, MADE WITHOUT TAXPAYERS INTERVENTION OR CONTROL, AND WITHOUT SUPPORTING EVIDENCE CANNOT SUFFICE
ASSESSMENT
WHERE TAXPAYER DENIES RECEIPT OF MAILED DEMAND LETTER, BIR MUST PROVE RECEIPT BY TAXPAYER WHERE THERE IS NO BASIS FOR ASSESSMENT OF TAX, SENDING OF ASSESSMENT NOTICE AND ASSESSMENT DID NOT PRODUCE LEGAL EFFECT THAT WOULD WARRANT COLLECTION OF THE TAX
IF ASSESSMENT NOTICE AND DEMAND LETTER ARE NOT RECEIVED OR IMPROPERLY ADDRESSED TO ANOTHER, 30-DAY PERIOD STARTS FROM DATE OF RECEIPT OF WDL OR NOTICE FROM RTC OR SOL GEN
Valid protest
Valid protest of an assessment is one assailing the formal assessment notice (FAN) and the letter of demand, not the preliminary assessment notice (PAN). PAN is required merely to inform the taxpayer of the proposed assessment. Failure to protest within 30 days will make the formal assessment notice final and executory. Failure to respond to PAN within 15 days will render taxpayer in default and a FAN would subsequently be issued (Cebu Rosver Pawnshop vs. CIR, CTA Case No. 6425, Mar. 17, 2003).
Requisites of waiver
Waiver must be in the form identified in RMO 20-90; Expiry date of period agreed upon is indicated in the waiver; Waiver form requires statement of the kind of tax and amount of tax due; if not indicated in the waiver, there is no agreement; Waiver is signed by taxpayer or his authorized representative. In case of corporation, waiver is signed by any responsible official. CIR or his authorized representative shall sign waiver indicating that BIR has accepted and agreed to the waiver; Date of acceptance by BIR is indicated; Date of execution and acceptance by BIR should be before expiration of prescriptive period; Waiver is executed in 3 copies; second copy is for taxpayer. Fact of receipt by the taxpayer should be indicated in the original copy.
(Pfizer, Inc. vs. CIR, CTA Case No. 6135, Apr. 21, 2003; FMF Dev. Corp. vs. CIR, CTA Case No. 6153, Mar. 20, 2003)
Validity of waiver
Waiver is not valid if signed only by the taxpayer and attested to by a RDO, not by the Commissioner, or signed after the lapse of the 3-year period (Mirant Navotas Corp. vs. CIR, CTA Case No.
5949, Feb. 3, 2003).
INDIRECT
FILING OF CIVIL CASE IN RTC WITHOUT RULING FIRST ON VALID PROTEST TIMELY FILED BY TAXPAYER ISSUANCE OF WDL OR FINAL NOTICE BEFORE SEIZURE REFERRAL OF CASE TO SOL GEN LETTER REITERATING DEMAND FOR IMMEDIATE PAYMENT OF TAX
PRESCRIPTION
PRESCRIPTION OF GOVERNMENTS RIGHT
TO ASSESS
3 YEARS FROM DATE OF FILING THE RETURN 10 YEARS FROM DATE OF DISCOVERY
TO COLLECT
5 YEARS FROM DATE OF ASSESSMENT 10 YEARS (COURT ACTION TO FORFEIT BOND)
Prescription
The 3-year period within which to assess any deficiency tax commences after the last day prescribed by law for the filing of the return. For VAT, each taxable quarter shall have its own prescriptive period. VAT return is filed quarterly and a final return is not required at the end of the year. In case of creditable withholding taxes, the 3-year period shall be counted shall be counted from the last day required by law for filing monthly remittance return. Each monthly return is already a complete return. The annual information return submitted to BIR is just an annual report of income payments and taxes withheld and is not in the nature of a final adjustment return.
(HPCO Agridev Corp. vs. CIR, CTA Case No. 6355, July 18, 2002)
PRESCRIPTION
TAX CODE (SPECIAL LAW) PROVISIONS PREVAIL OVER CIVIL CODE (GENERAL LAW) PROVISIONS ON PRESCRIPTION TO AVAIL OF 3-YEAR PRESCRIPTIVE PERIOD, TAXPAYER MUST ALLEGE AND PROVE THAT HE FILED RETURN FOR THE 10-YEAR PERIOD TO APPLY, GOVT MUST ALLEGE AND ESTABLISH FRAUD
PRESCRIPTION
PRESCRIPTIVE PERIOD MAY BE EXTENDED BY MUTUAL AGREEMENT IN WRITING BEFORE THE LAPSE OF THE PROPER PRESCRIPTIVE PERIOD WAIVER MUST BE IN WRITING AND SIGNED BY BOTH CIR AND TAXPAYER WAIVER IS INEFFECTIVE IF EXECUTED BEYOND THE PRESCRIPTIVE PERIOD LAW DOES NOT AUTHORIZE EXTENSION ONCE PRESCRIPTION HAS SET IN
TAX RETURN
TRANSCRIPT SHEETS ARE NOT RETURNS (INCOMPLETE INFO TO COMPUTE SPECIFIC TAX) INCOME TAX RETURN FILED CANNOT BE CONSIDERED RETURN FOR COMPENSATING TAX THERE IS NO OMISSION TO FILE RETURN WHERE TAXPAYER FAILED TO INCLUDE CERTAIN ITEMS, NOT DUE TO WILLFUL OMISSION OR FRAUD
AMENDED RETURN
AMENDED RETURN IS SUBSTANTIALLY DIFFERENT FROM ORIGINAL RETURN, GOVTS RIGHT TO ASSESS IS COUNTED FROM FILING OF AMENDED RETURN IF ORIGINAL RETURN IS SUFFICIENTLY COMPLETE TO MAKE AN ASSESSMENT, SUBSEQUENT FILING OF AMENDED RETURN NEITHER STARTS ANEW RUNNING OF STATUTE OF LIMITATIONS NOR EXTENDS PRESCRIPTIVE PERIOD
Amended return
The 1997 Tax Code authorizes the filing of amended return even after the filing of a claim for refund, both in the administrative and judicial levels, there being no provision prohibiting the amendment of a return once a claim for refund has been filed. Amendment is prohibited only if made beyond the 3-year period allowed by law, and provided that no notice for audit or investigation of such return, statement or declaration has, in the meantime, been actually served upon the taxpayer (CIR vs. Citicorp
Capital Philippines, CA-GR SP No. 68554, Apr. 12, 2002).
Fraud
BIR may assess tax in case of filing of false or fraudulent return within 10 years from date of discovery (Sec. 222, NIRC) Mere failure to report certain income or the filing of false return are not sufficient basis for application of 10-year period. Apart from the element of mistake, a clear, unequivocal and willfull intention to evade the tax must be proven. There is no fraud if BIR did not present evidence supporting allegation of fraud; taxpayer has sufficiently shown that non-reporting of income was based on its reliance on several provisions, rulings and accepted tax principles. Existence of fraud is never presumed (Ayala Hotels vs. CIR, CTA Case No.
6002, Jan. 10, 2002).
FRAUD
FRAUD MUST BE THE PRODUCT OF A DELIBERATE INTENT TO EVADE TAX
MERE UNDERSTATEMENT IN TAX RETURN OF 7 PROPERTY WILL NOT NECESSARILY IMPLY FRAUD SALE OF PROPERTY FOR PRICE LESS THAN ITS DECLARED FAIR MARKET VALUE ALONE DID NOT BY ITSELF JUSTIFY FINDING OF FALSE RETURN WHICH CONTAINS WRONG INFORMA-TION DUE TO MISTAKE, CARELESSNESS OR IGNORANCE
FRAUD
THERE IS NO FRAUD IN FILING RETURN WHERE TAXPAYER PLACED A NOTATION THAT MONEY RECEIVED WAS PRESUMED GIFT BUT TURNED OUT AN ERROR AND NOW SUBJECT OF LITIGATION. SUCH NOTATION WAS PRACTICALLY AN INVITATION FOR INVESTIGATION BY BIR. FRAUD IS NEVER IMPUTED AND COURTS NEVER SUSTAIN FRAUD UPON CIRCUMSTANCES WHICH CREATE ONLY SUSPICION. UNDERSTATEMENT OF TAX IS NOT ITSELF PROOF OF FRAUD FOR THE PURPOSE OF TAX EVASION.
Fact of withholding is established by a copy of statement duly issued by payor (withholding agent) to the payee, showing amount paid and tax withheld; and Income upon which taxes were withheld were included in the return of recipient.
(Banco Filipino Savings & Mortgage Bank vs. CIR, CTA Case No. 6374, Apr. 3, 2003)
CTA
EXERCISES EXCLUSIVE APPELLATE JURISDICTION TO REVIEW BY APPEAL DECISIONS OF THE CIR AND COC APPEAL MUST BE FILED WITHIN 30 DAYS FROM DATE OF RECEIPT OF DECISION ON DISPUTED ASSESSMENT. THIS IS JURISDICTIONAL. IF DECISION IS NOT DISPUTED, ORDINARY ACTION MAY BE FILED WITH RTC APPEAL TO CTA ON PROTEST CASES ALLOWED EVEN WITHOUT DECISION OF COLL. OF CUSTOMS DUE TO INACTION FOR UNREASONABLE LENGTH OF TIME
END OF PRESENTATION