RIGHTS AND REMEDIES OF GOV’T

Requirements of Informer’s Reward:

1. Qualified Person (Not Internal Revenue Officer, other public officer, or his relative within the 6th degree
of consanguinity);
2. Definite and sworn information;
3. Information not yet in BIR’s possession;
4. Reward is based on amount actually recovered or collected;
5. 10% or P1M, whichever is lower.

BIR may terminate taxable period:

1 If TP is retiring from business;
2 If TP is intending to leave PH;
3 If TP remove or Conceal property;
4 If TP performed any act to obstruct proceedings for collection of tax for current or past quarter or year.

CIR may inquire into bank deposits:

1 To determine gross estate of decedent;
2 For TP applying for compromise on the ground of financial incapacity.

An assessment is a written notice and demand for the settlement of a due tax liability that is definitely set and
fixed. It must be received by taxpayer and it must demand payment within a prescribed period.

Rationale for Best Evidence Obtainable Rule – swift collection of revenues and to encourage taxpayers to
maintain adequate records.
1. Cannot rely on mere presumption;
2. Does not include mere photocopies of records/documents

Instances when constructive distraint may be availed of:

1. TP is retiring from any business subject to tax;
2. TP intends to leave PH;
3. TP intends to remove his property from PH;
4. TP intends to hide or conceal his property;
5. TP performs act tending to obstruct the proceedings for collecting the tax due.

Willful Blindness Doctrine – Neglect or omission to ensure filing of ITR, to know how much taxes are due, or
inquire on the facts surrounding the ITR is tantamount to deliberate ignorance or conscious avoidance.

Two main grounds for compromise:

1. Doubtful validity of assessment – minimum compromise rate of 40% of basic tax assessed.
2. Financial Incapacity – minimum rate of 10%.

CIR may cancel or abate tax when:

1. Tax or portion thereof appears to be unjustly or excessively accessed;
2. Administrative and collections costs involved do not justify the collection of the amount due.
25% surcharge:
1. Failure to file return and pay tax due;
2. Filing with another revenue officer, unless authorized by CIR;
3. Failure to pay deficiency tax within time prescribed in the notice of assessment;
4. Failure to pay tax shown on return on or before date required for its payment;
5. Failure to pay tax which no return is required to be filed on or before required date of payment.

50% surcharge:
1. Willful neglect to file return within prescribed period;
2. False or fraudulent return is willfully made. (Prima facie evidence for substantial
overstatement/under-declaration – more than 30%)

Exceptions to imposition of 25% surcharge:

1. TP mistakes arising from difficult interpretation of law;
2. Change in BIR payment policies resulting in confusion;
3. Other justifiable circumstances.

Criminal violations may be compromised, except:

1. Those already filed in court; and
2. Fraud.
Rights and Remedies of TP:

Conditions to amend return as a matter of right:

1. Within 3 years from filing of return; and
2. No notice for investigation or audit of such return, statement or declaration has been actually served
upon the TP.

Procedure for protesting an assessment:

1 NIC – informal conference to be held not more than 30 days from receipt of NIC. If TP still liable for
deficiency, endorse case to assessment division within 7 days from conclusion of IC.
2 PAN – TP to respond within 15 days, otherwise considered in default. FLD and assessment notice shall
be issued. If TP reply, FAN/FLD shall be issued.
3 FAN – TP must protest within 30 days, otherwise become final, executory, and demandable.
a. Relevant supporting documents must be filed within 60 days from filing of protest, otherwise,
final, executory, and demandable. (applicable only to reinvestigation)
4 Must appeal to CTA within 30 days from denial of protest or within 30 days from lapse of 180 days
from submission of relevant supporting documents, otherwise, final.
5 MR within 15 days with CTA division
6 Appeal within 15 days with CTA en Banc.

Exceptions to Notice of Informal Conference and PAN:

1. Mathematical Error;
2. Discrepancy between amount withheld and amount remitted;
3. Double Claim (refund or credit, but already carried over);
4. Non-payment of excise tax; and
5. Exempt person transfers articles to non-exempt person.

Scope of Jurisdiction of the CTA:

1. Decisions of CIR on disputed assessments, refunds, and other matters arising under NIRC or other tax
laws or Inaction;
2. RTC decisions on local tax cases;
3. Decisions of COC on cases involving liability for duties and taxes, seizure, detention, and release of
property, and other matters arisng under the TCCP and other customs law.
4. Decisions of CBAA on appeal for RPT;
5. Decisions of DOF and DTI on certain matters;
6. Tax and Customs criminal offense (Original if 1M or more, appellate if less than 1M)
7. Tax Collection Cases (Original and appellate)

Generally, FDDA constitutes denial of process, exceptions are:

1. Issuance of revised assessment upon reinvestigation;
2. Final notice before seizure;
3. Final demand letter;
4. Filing of collection suit?
5. Warrant of Distraint or Levy.
Suspension of prescriptive Period for assessment, WDL, and collection suit:
1. CIR prohibited from assessing or collecting+60 days;
2. Request for reinvestigation by TP;
3. TP cannot be located in address given in return;
4. No property to satisfy WDL;
5. TP is out of PH.

Changes of in RR has no retroactive effect when it is prejudicial to taxpayers, except:

1. TP deliberately misstates or omits material facts from return or any documents;
2. Facts subsequently gathered by BIR are materially different from facts on which the ruling is based; or
3. TP acted in bad faith.
Estate Tax:

Elements of Revocable Transfer (Section 85 C)

1. Transfer or property;
2. Enjoyment was subject to change through exercise of a power
3. Power exercised is power to amend, alter, revoke, or terminate or where any such power is
relinquished in contemplation of death.

Requisites for inclusion of property passing under GPA:

1. Existence of GPA;
2. Exercise of such power by decedent by will or by deed in certain cases in contemplation of death, or
taking effect at death, or with retained interest; and
3. Passing of property by virtue of such exercise.

Exempt Transfers:
1. Merger of usufruct in the owner of the naked title;
2. Transmission of inheritance of fiduciary heir to fideicommissary;
3. Transmission from 1st hear to another beneficiary, in accordance with will of predecessor;
4. Bequests, devises, legacies to social welfare, cultural, and charitable institutions. (30% rule)

Deductions for Citizen and Residents:

1. SD -5M
2. Claims against estate;
3. Claims against insolvent persons;
4. Unpaid mortgages, taxes, and Casualty Losses
5. Vanishing Deduction
6. Transfers for public Use
7. Family Home
8. Benefits received from employer by reason of death;
9. Sharee in conjugal property.

Deductions for NRA:

1. SD – 500K
2. Prorated claims against estate and unpaid mortgages;
3. Vanishing deduction
4. Transfers for public use
5. Share in conjugal property

Requisites for Claims against estate

1. Personal obligation existing at time of death;
2. Contracted in good faith and for adequate consideration
3. Valid and enforceable;
4. Not condoned and not yet prescribed.
5. If simple loan, notarized.
6. If contracted within 3 years, statement by E/A showing disposition of proceeds.
Requisites for Casualty Losses:
1. Arising form fire, storm, shipwreck or other casualties, or robbery theft, or embezzlement;
2. Not compensated by insurance
3. Not deducted for income tax purpose;
4. Incurred not later than time to pay estate tax.

Conditions for Vanishing deductions:

1. Present decedent died within 5 years from receipt of property;
2. Property located in PH;
3. Property formed part of taxable estate of prior decedent or donor;
4. Previous Estate tax or donor’s tax paid.
5. Property is identified as one from prior decedent or donor;
6. No vanishing deduction was allowed to estate of prior decedent.
Donor’s Tax:

Intangible personal property located in PH:

1. Franchises must be exercised in PH;
2. Shares obligations or bonds by DC;
3. Shares obligations of bonds by FC, 85% of business is located in PH;
4. Shares obligations or bonds by FC if such acquired a business situs in PH;
5. Shares or right in any partnership, business, or industry established in PH.

Deductions from Gross Gifts:

1. Made to National Government not conducted for profit;
2. Gift to educational, charitable, or religious corporation. (30% rule)
VAT:

Deemed Sale Transactions:

1. Transfer, use or consumption of things for sale or use in business;
2. Distribution to shareholders as share in profits of vat registered TP or creditors in payment of debt;
3. Consignment if actual sale is not made within 60 days;
4. Retirement or cessation of business.

Zero Rated Sale:

1. Actual export Sale (BSP);
2. Sale of raw material or packaging materials to nonresident for delivery to a resident local export
oriented enterprise (BSP);
3. Sale of raw material or packaging to export-oriented enterprise (70% of total annual production);
4. Export sales under Omnibus Investment Code;
5. Sale of goods, supplies, equipment and fuel to international vessels or air carries must be used in
international shipping or air transport;
6. Effectively Zero Rated under Special Laws.

Zero Rated Services:

1. Processing, manufacturing or repacking for persons doing business outside PH which goods are
subsequently exported. (BSP)
2. Other services to non-residents; (BSP)
3. Effectively zero rated under special laws;
4. Services to international vessels or air carriers provided exclusive for international shipping or air
transport;
5. Services by contractors or subcontractors in processing, converting, or manufacturing goods for export
oriented enterprises (70%)
6. Transport passengers and cargo by domestic air or sea vessels from PH to foreign country;
7. Sale of power or fuel generated through renewable sources of energy.

Check Page 59 for Vat Exempt.

Local Government:

Fundamental Principles:
1. Uniformity;
2. Local Exactions shall:
a. Be equitable;
b. Be for Public purpose;
c. Not be unjust, excessive, oppressive or confiscatory;
d. Not contrary to law, public policy, national economic policy, or in restraint of trade;
3. Collections not be let to private persons;
4. Accrue exclusively to LGU;
5. Progressive.

LGU taxing power shall not extend to:

1. Income tax, except banks and other FIs;
2. DST
3. Transfer Taxes
4. Custom Fees
5. TFC on goods passing through territorial jurisdiction of LGU
6. TFC on agricultural or aquatic products when sold by marginal farmers or fishermen
7. Business tax on BOI, PEZA, SBMA registered entities;
8. Excise tax or TFC on petroleum products
9. VAT or any percentage tax;
10. Common Carriers tax
11. Taxes on reinsurance premiums
12. TFC on registration of motor vehicles, except tricycles;
13. TFC on export products;
14. TFC on country side, BMBE, or cooperatives registered with CDA
15. TFC on national government or LGUs.

Generally, Assessment take effect on Jan. 1 of following year, Except:

1. Partial or total destruction;
2. Major Change in actual use;
3. Sudden inflation or deflation of RP values;
4. Gross illegality of assessment or any abnormal cause
5. Previously undeclared RP.

Taxes LGU may levy on RP:

1. Basic RPT;
2. 1% special education fund;
3. 5% tax on idle land;
4. Special levy due to improvements.

Exempt properties from RPT:

1. Owned by Gov’t;
2. ADE used for religious, charitable, educational purposes.
3. Machineries and equipment ADE used by LWDs and GOCCs in supply of water and electricity;
4. RP owned by cooperatives registered with CDA;
5. Machinery and equipment used for pollution control and environmental protection.