[0:20:15-0:40:31]

Alright, the other thing is Informer's Reward, so please take note that the following
requirements are imposed so that an informer's reward is deemed to be due to whoever
it is that provides the information. One is that it must be substantial evidence that's
provided for by the informer. Secondly is that the informer must not be disqualified. A
disqualified informer is one who is, of course, a BIR official or employee, or who may be
a relative of said BIR official or employee within the sixth degree. Layo na noon, ano yun,
second cousin? [IRRELEVANT [0:21:02-0:21:08] within the paragraph] So you will be
disqualified if you're an informer but you have a relative within the sixth degree. The
information must not have been in the possession of the BIR yet when you provided that
said information to the BIR. And of course, the most important requirement is that the
information that you supplied to the BIR must lead to actual collection. So this is only on
the basis of what was actually collected upon which the informer's reward will be
calculated. The informer's reward is 10% or 1 million---10% of what was collected or 1
million, whichever is lower. So those are the requirements under the informer's reward.
It also covers cases when the offender, who was caught by virtue of the informer's
information, entered into a compromise agreement with the BIR.
Okay, under Government Remedies, so the government can likewise suspend
business operations and temporary close the business establishment, therefore failure to
register as required under Section 236 and the duration of the temporary closure shall be
for a period of not less than five days. So again, if the question is, "What are the
remedies?" but are immediate remedies that could be taken by the BIR, so this is one
thing that you can provide as an answer. We have talked about the non-availabilities of
injunction to restrain the collection of taxes, and we said that as a general rule under
Section 219 of your Tax Code, no court can issue an injunction to restrain the collection
of taxes, but more specifically, but more specific provision appears, however, in RA 9282,
which is your CTA law, which allows the CTA, when, in its opinion, the collection of taxes
may jeopardize either the interest of the government or the taxpayer, then they can order
the suspension of the collection of taxes, right? This is premised, however, on the posting
of a deposit or a bond by the taxpayer requesting for the suspension of taxes, and in that
regard, the CTA has provided the rules to limit the meaning of the amount laid to the
principal amount of the divisions in taxes only, excluding penalties, interest, and
surcharges. Again, because the amount must not be doubled than the principal amount
or the amount claimed. So in determining what is that amount that is to be covered by the
bond, you have to exclude the incremental charges, which is the surcharge interest and
the compromised penalties. And you may have been told about these two somewhat
relatively recent cases of Pacquiao v. CK and Tridharma Marketing, where the specific
issue revolved around posting of a bond in relation to a tax assessment. So in both these
cases, what was involved were billion peso assessments against both Tridhama
Marketing and I think you probably are aware of the previous assessment against Manny
Pacquiao. So what had happened was that they wanted to suspend the collection of taxes,
specifically Pacquiao wanted this trait on his bank accounts be lifted, so therefore the
remedy was to go to the CTA and ask for the suspension of the collection of taxes. Since
it is a provisional remedy, the CTA very quickly ruled upon the request for the suspension
of taxes and ordered that a bond be put up to the extent of 150% of the deficiency
assessment levied against these tax payers. I think for Pacquiao, this assessment was 2
billion, so the bond being required was 3 billion. For Tridharma, the assessment was 4.5
billion and the bond that was being required was 6 billion. So while they did get a favorable
action from the CTA, they felt that the amount of bond that was being required of them
was very prohibitive so therefore, they elevated it to the Supreme Court, and asked the
Supreme Court to rule in the same. The Supreme Court said that the CTA was erroneous,
in not even at least preliminarily determining the soundness of the assessment. So while
saying that the issue at hand was just, you know, whether the CTA can order the
suspension of the collection of taxes, it was incumbent upon the CTA to at least ask basic
and preliminary questions on the assessment so that they can determine whether there
was, in fact, basis for the assessment, which should have been the basis for it to, in fact,
establish the amount of the bond. So ultimately, the Supreme Court remanded these
cases back to the CTA for a re-determination of the appropriate amount of bond.
Okay, and the last part with respect to remedies under the Tax Code are the refunds. So
the statutory basis for tax refunds are as follows: so they could be based on
1. taxes erroneously or illegally, collected; penalties imposed without authority;
2. sums alleged to have been excessively or wrongfully collected;
3. refunds of the internal revenue stamps or redeem or change a new stamps which
are rendered unfit for use and refund their value.
Of course, most of the refunds would really belong to the first one, which are taxes
erroneously or illegally received, and the requirements for the same are follows:
1. the indispensability of the written claim; there must be a categorical demand that
claim must be filed within 2 years;
2. it must be substantiated; and finally,
3. you should be able to point to a legal basis for the said refund.
As far as the first requirement is concerned, the necessity of a written claim, as you all
know, the Tax Code provides that the same can be dispensed with only in the situation
where the refund is manifest on the phase of the return is being filed, and the only instance
that I know that that is satisfied by just the return itself is when you file an income tax return
and you check the box at the bottom, right, when you have excess creditable withholding
tax or excess quarterly payments and you have the option to either carry it over, file a
claim for refund, or file a tax---an application for a tax credit. If you check the box of a
refund or a tax credit, the necessity of a written claim is dispensed with. In all other
instance, there is that requirement to actually file for a written claim. But please take note
of the case of Felisa Vda. de San Agustin v. CIR. What had happened in this case was
there was an estate tax assessment against the, well, the estate of the deceased, wanting
to have the assets of the deceased released, the heirs paid the assessment in protest,
and said that, "Well you know, we don't believe in the deficiency assessment, but we are
nevertheless paying precisely because we'd want the assets to already be distributed to
us." Thereafter, after they made the payment, they went directly to the CTA to file a claim
for refund, using as basis that they had made on the---which was equal to the deficiency
estate tax that was levied against them. The CIR sought to dismiss the claim that was
filed---claim for refund that was filed with the CTA, claiming precisely the requirement that
there be a previous written claim that should have been filed with the CIR. The Supreme
Court ruled that this is an exceptional situation because to require that the taxpayer go
through the process of filing a written claim with the CIR is a needless ceremony, and
those were the words of the Supreme Court in saying that we would treat this as an
exception because precisely, the BIR had already determined that they are, in fact, liable
for it because what the origin of this case was really a deficiency assessment. So again,
the Supreme Court recognized that to ask them to comply strictly with this requirement
would just be a useless and needless ceremony.
Okay, statutory basis for refund, who may claim, it would, of course, the statutory
tax payer, the withholding agent is allowed to file a claim for refund, we will talk about in a
bit, and a corporate tax payer, we will also address a little later in applying Section 76,
when you can file a claim for refund or avail of a tax credit. In the case of CIR v. Smart
Communications, what had happened here was Smart entered into an agreement with
Prism, which was a company that was domiciled in Malaysia. Believing that their payments
would have been subjected to the Tax Code, they used a tax rate that was consistent with
the Tax Code, which is I think, at 30% on their payments of royalties to Prism.
Subsequently realizing that the RP-Malaysia Tax Treaty allowed them to utilize a lower
rate of 15%, they found that the initial payment that they made was an erroneous payment.
So what Smart did was that it filed a claim for refund. Now, questioning the personality of
Smart to file the claim for refund, the BIR sought again to dismiss the said action for refund.
The Supreme Court upheld Smart's entitlement to file the claim for refund, citing the
previous case of Procter&Gamble saying that, "The withholding agent has personality."
Because, in a situation where the withholding agent fails to withhold, it is also the one that
will be liable for deficiency withholding, conversely, therefore, in situations where there's
an overpayment, the withholding agent must also be capacitated to file the claim for
refund. It did specifically stipulate, which it did not do so in previous decisions, the
Supreme Court said that, "The obligation of Smart, however, is to turn over what was
refunded to it by the government to Prism, as in when, if and when, in fact, the refund is
deemed to be with legal basis." Okay, of course, please take note that the tax refund
partakes the nature of an exemption is therefore strictly construed, the burden of proof
rests with the tax payer, and just some thoughts about the nature of erroneously paid
taxes or illegally assessed---taxes are illegally collected when payments are under duress,
or when there is an awareness on the part of the tax payer, but please take note as is
provided in the last bullet point, refunds for input VAT are not in the nature of erroneously
paid tax, illegally assessed, or collected. Which is why, as we distinguished, VAT refunds
are based---the two-year period to file claims for VAT refund is not based on the date of
payment precisely because they are not treated in the same way as erroneous or illegal
payments. Of course, as with any remedial issue, we must bear in mind the prescriptive
period for tax refund, and the application must be filed within two years after the payment,
right? So that's the important thing as distinguished from the VAT refunds, this is really
the general rule, because this applies to all types of tax payments with the exception of
input VAT refunds. So again, the requirement is two years after the payment of the tax
penalty, right? And no other, it will not be entertained after the expiration of the said two
years, regardless of any [IRRELEVANT [0:34:31-0:34:35]] supervening cause, that may
arise after the payment, right? So the two years will---is a hard and fast rule and does not
entertain any supervening [IRRELEVANT [0:34:47]] cause. Again, the returned file
showing an overpayment shall be considered a written claim for tax refund. In the case of
CIA v. Meralco, again involving a situation where a local company, which is, interestingly,
a part of the MVP group, took out a loan from a Singapore company, and again was
making payments on the basis of what's provided for in the Tax Code, realizing, again,
subsequently, that it is entitled to the Tax Treaty Preferential Rates under the RP-
Singapore Tax Treaty. It requested for the BIR to issue a ruling confirming the lower rate,
which I think was at 10%. So let's assume that it filed the final withholding tax on, let's say,
today, August--ah no, let's say end of this month, which is August 31, 2019. It requested
for a ruling on September 15, 2019, and then it got the ruling on October 15, 2019, so paid
August 31, requested for a ruling, September 15, got the ruling, October 15. When do
you reckon the two-year period? The Supreme Court said it cannot be any other date
except August 31. The fact that there was, in fact, a ruling that was asked by the tax payer,
the ruling is merely confirmatory in nature, and it will not serve to move the start of the
running of the prescriptive period, because very clearly, statute or the Tax Code clearly
provides that it is reckoned on the date of payment. Nevertheless, please take note that
there have been exceptional cases where the two-year period was deemed not to be
jurisdictional, and those are: number one, when the BIR and the tax payer agreed to wait
for a case that was pending in court to determine the tax payer's entitlement to the refund.
So there is a---the tax payer was wanting to file a claim for refund, but then its legal basis
was dependent on a case that was pending in court. In that situation, since the BIR and
the tax payer agreed in writing to wait for a decision in that case, then it will be considered
as not strictly imposing the two-year period within which time to file the claim for refund.
And the other case is when the CIR initially agreed in writing to grant the claim for refund
but subsequently recanted on the same. That situation again, because the BIR was
deemed to have been in bad faith, the Supreme Court allowed that the two-year period be
relaxed. Other than that, there are no other situations where you are allowed to file a claim
for refund beyond the two-year period.
Okay? So therefore, please remember, very important, that the general rule is for
all taxes, the requirement is that you file your administrative claim for refund and your
judicial claim both within the two-year period. The exception to that rule, of course, is the
input VAT refund that we had discussed, was it last week or---well, the last time that we
looked at this discussion. Which is to say that even if it means that your judicial claim
would be filed beyond the two-year period, you would be allowed to do so because you
are allowed by law for unutilized input VAT refund to wait for a decision of your
administrative claim, or to wait for the lapse of the ninety-day period, which will be shown
in a slide a little later. Or maybe we'll go to that? This is what we're talking about, right?
So in the first illustration, on the top part, right, we're seeing that the judicial claim, which
is---sorry, the administrative claim which is the claim filed with the BIR, is within the two-
year period. Since you received your denial still within the two-year period, the only thing
that you need to comply with additionally, is to make sure that you file your appeal to the
CTA within 30 days. On the other hand, the other situation has a---has you receiving your
denial very close to the expiry of the two-year period, and as you can see, as in the
rightmost arrow that's pointing down, the appeal to the CTA must be within two years. You
need not---you are not allowed to juts observe the thirty-day period because the two-year
requirement is an absolute requirement for your judicial claims. Okay? So it can happen
that your administrative claim for refund is filed one year and 364 days from the date of
payment, and your judicial claim for refund is paid the following---your judicial claim for
refund is filed the following day.