TAXPAYERS BILL OF RIGHTS AND REMEDIES

Atty. Vic C. Mamalateo

February 28, 2007

PICPA TAX SEMINAR

BILL OF RIGHTS AND REMEDIES

ASSESSMENT
BEFORE TAX AUDIT DURING TAX AUDIT AFTER TAX AUDIT

COLLECTION
WITH ASSESSMENT WITHOUT ASSESSMENT

BEFORE TAX AUDIT

POWER TO CONDUCT
INVENTORY TAKING SURVEILLANCE

POWER TO PRESCRIBE GROSS SALES/ RECEIPTS POWER TO OBTAIN INFORMATION

ACCESS TO RECORDS OF TAXPAYER

DURING TAX AUDIT

POWER TO EXAMINE BOOKS AND ACCOUNTING RECORDS
SERVICE OF AUDIT NOTICE
COPY OF INCOME TAX RETURN CHECKLIST OF REQUIREMENTS

CONDUCT OF TAX AUDIT

START OF TAX AUDIT TERMINATION OF TAX AUDIT EXTENSION OF TAX AUDIT

CONDUCT OF AUDIT
WORKSHEETS, ANALYSIS AND RECONCILIA-TION STATEMENTS
BASIC REQUIREMENTS

BOOKS AND OTHER ACCOUNTING RECORDS

EXTERNAL AUDITOR SUBPOENA DUCES TECUM

PLACE OF AUDIT: TAXPAYER OR BIR SUBMISSION OF DOCUMENTS

ORIGINAL DOCUMENTS ACKNOWLEDGMENT RECEIPT/LOGBOOK PRESENCE OF TAXPAYERS STAFF DURING AUDIT

WORK PLACE, SNACKS/MEALS

AFTER TAX AUDIT

INFORMAL CONFERENCE
AGREEMENT FORM CONFIRMATION LETTER TERMINATION LETTER

PRELIMINARY ASSESSMENT NOTICE (PAN) REPLY TO PAN FINAL ASSESSMENT NOTICE (FAN) PROTEST AGAINST FAN SUPPLEMENTAL PROTEST

NO PRE-ASSESSMENT NOTICE REQUIRED

DEFICIENCY TAX IS THE RESULT OF MATHEMATICAL ERROR DISCREPANCY IS BETWEEN AMOUNT WITHHELD AND AMOUNT REMITTED TAXPAYER WHO OPTED TO CLAIM REFUND/TAX CREDIT ALSO CARRIED OVER AND APPLIED SAME AGAINST TAX OF NEXT TAXABLE QUARTER EXCISE TAX DUE HAS NOT BEEN PAID CONSTRUCTIVE IMPORTATION (Sec. 228, NIRC)

ASSESSMENT
WHEN MUST ASSESSMENT BE MADE?
(Sec. 203 & 222, NIRC)

RETURN WAS 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 WAS FILED

10 YEARS FROM DATE OF DISCOVERY OF OMISSION

IF ASSESSMENT DUE DATE FALLS ON SATURDAY, GOVERNMENT HAS NEXT BUSINESS DAY WITHIN WHICH TO ASSESS (CIR v. Western Pacific Corp) NORMAL YEAR HAS 365 DAYS; LEAP YEAR, 366 DAYS (CIR v.
NAMARCO)

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 (Republic v. Limaco & de
Guzman)

PRESUMPTION OF RECEIPT IN REGULAR COURSE OF MAIL APPLIES, IF IT WAS PROPERLY ADDRESSED, POSTAGE WAS PREPAID, AND WAS MAILED. IF ONE ELEMENT IS ABSENT, PRESUMPTION DOES NOT LIE (Enriquez v. Sunlife of Canada)

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 (Republic v. Limaco & de
Guzman)

PRESUMPTION OF RECEIPT IN REGULAR COURSE OF MAIL APPLIES, IF IT WAS PROPERLY ADDRESSED, POSTAGE WAS PREPAID, AND WAS MAILED. IF ONE ELEMENT IS ABSENT, PRESUMPTION DOES NOT LIE (Enriquez v. Sunlife of Canada)

FORMS OF PROTEST
REQUEST FOR RECONSIDERATION REQUEST FOR ITEMIZED INFO ON DISALLOWED ITEMS (CIR v. Capital Subdivision) REQUEST FOR REINVESTIGATION DATE OF RECEIPT OF ASSESSMENT NOTICE ITEMS ADMITTED OR PROTESTED BY TAXPAYER STATEMENT OF FACTS AND APPLICABLE LAW, RULES AND JURISPRUDENCE SUPPORTING DOCUMENTARY EVIDENCE PRO-FORMA PROTEST LETTER REQUEST FOR COPY OF COMPUTATION IS NOT A PROTEST THAT SUSPENDS PRESCRIPTIVE PERIOD
(CIR v. Atlas Consolidated Mining)

EFFECTS OF FAILURE TO FILE TIMELY

VALID PROTEST
ASSESSMENT BECOMES FINAL AND UNAPPEALABLE ASSESSMENT CANNOT BE DISPUTED IN THE CIVIL ACTION PRESCRIPTION OF RIGHT TO ASSESS CANNOT BE RAISED IN COURT NO INQUIRY CAN BE MADE AS TO THE MERITS OF THE CASE OR JUSTNESS OF JUDGMENT RELIED UPON, EXCEPT JURISDICTION, COLLUSION & FRAUD

AFTER TAX AUDIT

BIR ACTION
CANCELL ENTIRE ASSESSMENT, OR COMPLETELY DENY PROTEST, OR ISSUE REVISED ASSESSMENT
DECREASING ASSESSMENT INCREASING ASSESSMENT

ISSUE BIR FORM 0605 FOR DEFICIENCY TAX

BIR INACTION
WAIT FOR FINAL DECISION ON DISPUTED ASSESSMENT FILE AN APPEAL TO CTA

FORMS OF DENIAL OF PROTEST

DIRECT
FORMAL DECISION OF DENIAL BY BIR COMMISSIONER CIR SHOULD STATE IN DENIAL LETTER THAT IT IS HIS FINAL DECISION (Union Shipping Corp v. CIR)

INDIRECT
FILING OF CIVIL CASE IN RTC WITHOUT RULING FIRST ON VALID PROTEST TIMELY FILED BY TAXPAYER [Yabes v. Flojo
(1982)]

ISSUANCE OF WDL OR FINAL NOTICE BEFORE SEIZURE (CIR vs. Isabela

Cultural Corp, 361 SCRA 71)

REFERRAL OF CASE TO SOL GEN (Republic v. Lim Tian Teng & Sons) LETTER REITERATING DEMAND FOR IMMEDIATE PAYMENT OF TAX (CIR v. Ayala Securities Corp)

PRESCRIPTION
PRESCRIPTION OF GOVERNMENTS RIGHT
TO ASSESS 3 YEARS FROM DATE OF FILING THE RETURN IF RETURN FILED BEFORE DEADLINE, LAW PRESUMES RETURN FILED ON LAST DAY FOR FILING RETURN 10 YEARS FROM DATE OF DISCOVERY OF NON-FILING OR FILING OF FALSE OR FRAUDULENT RETURN (Sec. 203 & 222, NIRC) TO COLLECT 5 YEARS FROM DATE OF ASSESSMENT (Sec. 222(c ), NIRC) 10 YEARS (COURT ACTION TO FORFEIT BOND) FROM TIME RIGHT OF ACTION ACCRUES (Republic v. Dorego)

PRESCRIPTION
TO FILE CRIMINAL ACTION
5 YEARS FROM COMMISSION OF VIOLATION OF LAW. IF VIOLATION IS NOT KNOWN AT THE TIME, FROM DISCOVERY THEREOF AND INSTITUTION OF JUDICIAL PROCEEDINGS FOR INVESTIGATION AND PUNISHMENT
(Sec. 281, NIRC)

PRESCRIPTION IS INTERRUPTED WHEN PROCEEDINGS ARE INSTITUTED AGAINST GUILTY PERSONS AND BEGINS TO RUN AGAIN IF PROCEEDINGS ARE DISMISSED FOR REASONS NOT CONSTITUTING JEOPARDY PRESCRIPTION DOES NOT RUN WHEN OFFENDER IS ABSENT FROM THE PHILIPPINES

STATUTE OF LIMITATION IS EXTENDED

BEFORE EXPIRATION OF TIME PRESCRIBED FOR ASSESSMENT, CIR AND TAXPAYER AGREED IN WRITING PERIOD TO ASSESS AGREED UPON MAY BE EXTENDED BY SUBSEQUENT WRITTEN AGREEMENT MADE BEFORE EXPIRY DATE TAX TIMELY ASSESSED MAY BE COLLECTED WITHIN PERIOD AGREED UPON IN WRITING BEFORE EXPIRATION OF FIVE YEAR PERIOD COLLECTION PERIOD MAY BE EXTENDED BY SUBSEQUENT WRITTEN AGREEMENT MADE BEFORE EXPIRY DATE (Sec. 222, NIRC)

PRESCRIPTION
WAIVER MUST BE IN WRITING AND SIGNED BY BOTH CIR AND TAXPAYER MERE STATEMENT IN LETTER ABOUT INTENTION OF WAIVING IS NOT WAIVER WAIVER NOT SIGNED BY CIR IS NOT VALID [CIR v. Carnation (1999)] WAIVER SIGNED BY ASST. COMMISSIONER WHERE AMOUNT INVOLVED IS P16 M IS NOT VALID [PBCom v. CIR (1999)] RDO WHO ATTTESTED IN WAIVER DID NOT SIGN FOR CIR [CIR v. Solano (1958)]

PRESCRIPTION
RMO 20-90, Apr 4, 1990
WAIVER IS IN FORM PRESCRIBED BY BIR PHRASE BUT NOT LATER THAN ____ SHOULD BE FILLED UP WAIVER IS SIGNED BY TAXPAYER OR HIS DULY AUTHORIZED REPRESENTATIVE WAIVER SHOULD BE NOTARIZED WAIVER MUST INDICATE DEFINITE EXPIRATION DATE AGREED UPON BY CIR AND TAXPAYER WAIVER MUST STATE DATE OF ACCEPTANCE BY BIR

PRESCRIPTION
WAIVER IS NOT UNILATERAL ACT OF TAXPAYER FACT OF RECEIPT OF TAXPAYERS COPY MUST BE INDICATED IN ORIGINAL COPY THERE IS COMPLIANCE OF RMO 20-90 ONLY AFTER TAXPAYER RECEIVED COPY OF WAIVER ACCEPTED BY BIR (Phil Journalist vs. CIR, GR 162852, Dec 16, 2004)

PRESCRIPTION
WAIVER IS INEFFECTIVE IF EXECUTED BEYOND THE PRESCRIPTIVE PERIOD LAW DOES NOT AUTHORIZE EXTENSION ONCE PRESCRIPTION HAS SET IN WAIVER THAT HAS NO PERIOD OR THERE IS NO PERIOD FOR SUBSEQUENT EXTENSION IS INVALID [Central Cement Corp v. CIR, CTA
(1997)]

FIRST WAIVER, NOT SIGNED BY CIR, IS INEFFECTIVE; SECOND WAIVER SIGNED BY BOTH PARTIES IS OF NO CONSEQUENCE [Luzon
Packaging Products v. CIR, CTA (1997)]

FIRST WAIVER THAT DID NOT INDICATE AMOUNT AND KIND OF TAX ASSESSED, DATE OF ACCEPTANCE BY CIR AND FACT OF RECEIPT OF COPY BY TAXPAYER IN ACCEPTED WAIVER IS INEFFECTIVE; SECOND WAIVER HAS NO BASIS [Solid Cement v. CIR, CTA
(1999)]

STATUTE OF LIMITATIONS IS SUSPENDED

PERIOD DURING WHICH CIR IS PROHIBITED FROM MAKING ASSESSMENT OR BEGINNING WDL OR PROCEEDING IN COURT AND FOR 60 DAYS THEREAFTER TAXPAYERS REQUEST FOR REINVESTIGATION IS GRANTED BY CIR TAXPAYER CANNOT BE LOCATED IN ADDRESS SHOWN IN HIS TAX RETURN WDL SERVED AND NO PROPERTY CAN BE LOCATED TAXPAYER IS OUT OF THE PHILIPPINES (Sec. 223, NIRC)

TAX RETURN
TRANSCRIPT SHEETS ARE NOT RETURNS INCOMPLETE INFORMATION FOR BIR TO COMPUTE SPECIFIC TAX DUE)
[Alca v. CIR, CTA (1964)]

SUBSTANTIALLY DEFECTIVE RETURN FILED IS CONSIDERED AS NO RETURN AT ALL (CIR v. Gonzales) INCOME TAX RETURN FILED CANNOT BE CONSIDERED RETURN FOR COMPENSATING TAX [Butuan Sawmill v. CIR (1996)] THERE IS NO OMISSION TO FILE RETURN WHERE TAXPAYER FAILED TO INCLUDE CERTAIN ITEMS, NOT DUE TO WILLFUL OMISSION OR FRAUD RETURN MUST BE SUBSTANTIALLY COMPLETE AS TO DETAILS TO SERVE AS STARTING POINT [Republic v. Marsman Dev
Corp)

AMENDED RETURN
AMENDED RETURN IS SUBSTANTIALLY DIFFERENT FROM ORIGINAL RETURN, GOVERNMENTS 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 THE RUNNING OF STATUTE OF LIMITATIONS NOR EXTENDS PRESCRIPTIVE PERIOD [Ammen Transport Co. v. CIR,
CTA (1965)]

APPEAL TO CTA
APPEAL TO CTA
GROUNDS
DENIAL BY CIR OF PROTEST, OR INACTION OF CIR ON PROTEST WITHIN 180 DAYS AFTER SUBMISSION OF REQUIRED DOCUMENTS (SUPPLEMENTAL PROTEST)

TIME
WITHIN 30 DAYS FROM DATE OF RECEIPT OF DENIAL OR AFTER THE LAPSE OF 180 DAYS

COLLECTION
ADMINISTRATIVE
WDL GARNISHMENT COMPROMISE OR ABATEMENT

JUDICIAL
CIVIL CRIMINAL

END OF PRESENTATION
V.C. MAMALATEO & ASSOCIATES Atty. Vic C. Mamalateo
Mobile No.: 0918-9037436 E-mail: Vic.Mamalateo@vcmlaw.com.ph Tel. No.: 3729224 Fax No.: 3729267