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Pasion
PRELIM
INCOME TAXATION
BSA 4/ BSA 2
INCOME TAXATION
When a Sovereign State is born, it exists with indispensable powers necessary for its survival.
These powers are called “inherent powers”. They naturally exist as essential force in order that
a government can command, maintain peace and order, and survive, irrespective of any
Constitutional provision.
The three inherent powers of the of the Sovereign State are summarized as follows:
IN H E R E N T P O W E R O F
S O V E R E IG N S T A T E
police power
eminent domain
taxation power
Police power refers to the inherent power of the sovereign state to legislate for the protection
of health, welfare and morals of the community. It exercised usually to guard against excesses
or abused of individual liberty.
This power is restricted by them “due process clause” of the Constitution which provides that no
person maybe deprived of “life, liberty, or property, without due process of law.
The police power of the State maybe exercised through taxation maybe levied for the
promotion of the welfare of the public.
Examples of police power are preservation of natural resources, segregation of lepers from the
public, imprisonment of convicted criminals, and regulation of various professions.
Eminent Domain refers to the power of the sovereign state to take private property for public
purpose. It is founded upon the idea that the common necessities and interests of the
community transcend individual rights in property.
Consequently, the state may expropriate private property when it is necessary in the interest of
national welfare. Since eminent domain is inherent in sovereignty, pertinent provisions in the
Constitution are not grants of the power, but rather limitations upon its exercise
The Constitution limits the exercise of the power by providing that property may not be taken
without just compensation.
“Just compensation” means paying the owner the full monetary equivalent of the property
taken for public use.
TAXATION DEFINED
Taxation defined as
1. A power by which and Independent State, through its lawmaking body, raises and
accumulates revenue from its inhabitants to pay the necessary expenses of the government.
As a process, it passes a legislative undertaking through the enactment of tax laws by the
Congress which will be implemented by the executive Branch of the government through its
Bureau of Internal Revenue (BIR) to raise revenue from the inhabitants in order to pay the
necessary expenses of the government.
3. a means by which the Sovereign State through its law-making body demands for revenue in
order to support its existence and carry out its legitimate objectives.
As a means, it is a way of collecting and apportioning the cost of government among those who
are privileged to enjoy its benefits.
The power to tax is an attribute of sovereignty that is exercised by the government of the
people within its jurisdiction whose interest should be served, enhance and protected.
Taxation is as old as government itself. Its existence commences concurrently with the four
elements of a state - people, territory, sovereignty and government.
From the moment a state is born, it automatically possesses the power to collect taxes
from its inhabitants.
The government having sovereignty can enforce contributions upon its citizens even without
a specific provision in the Constitution authorizing it. It is so because the state has the
supreme power to command and enforce obedience to its will from the people within its
jurisdiction.
Any provision in the Constitution regarding taxation does not create rights for the
sovereignty to have the power to tax but it merely constitutes limitations upon the
supremacy of tax power.
Only the national government exercises the inherent power of taxation of the state. Local
government units do not possess the inherent power.
In order for these government units or political subdivisions to have the power to tax, there
must be:
. valid delegation of tax power through the statute from the national legislature granting
local government units or political subdivisions to exercise such power (i.e., Local
Government Code of the Philippines), in the absence of a Constitutional provision,
The law-making body of the government and its political subdivisions exercise the power
of taxation. The powers to enact laws and ordinances, and to impose and collect taxes
are given to Congress.
Non-delegation of Legislative Power to Tax. In its strict sense, the power to make tax
Laws cannot be delegated to other branches of the government. Since peculiarly and
exclusively legislative in nature, the power to make tax laws cannot be exercised by
the executive or judicial branch of the government.
Therefore, when the power to tax is delegated to the local government units (LGU), only the
legislative branch of the LGU can exercise the power. Also, if delegated to the President, it is
limited to administrative discretion subject to valid standards.
b. Determining the nature and purposes for which taxes shall be collected;
What may not be delegated is the power to make laws to a non-legislative body. If the
powers delegated are ministerial and advisory (such as power to value property, asses and
collect taxes), they shall be allowed since they are not legislative but only administrative in
nature.
Therefore, whenever the delegation of legislative power is the issue, it is important to know
the distinction between tax delegation and tax administration. This is so because if what is
delegated is tax legislation, the delegation is invalid, but if what is involved is only tax
administration, the non-delegability rule is not violated.
The power of taxation flows forth from the legitimate objective of supporting the services of
the government.
Public taxes are public money, they must be used to finance recognized public needs. Taxes
are used to finance constructions and maintenance of roads; healthcare, education, security,
promotion of science, commerce, industry and others for the welfare of the general public.
The Supreme Court also held that the legislature, has no power to appropriate public
revenues for anything but for public purpose – general welfare of the nation.
Thus, in order to consider appropriation of taxes valid, it must be for the common good of
the people. No individual or private shall primarily be enriched or benefitted by the public
funds.
It has been held that tax has been utilized for public purpose if the welfare of the nation or
the greater portion of its population has benefitted with its use.
Territorial in Operation
The taxing authority must observe “tax situs” because the country’s tax laws are effective
and enforceable only within its territorial limits.
As a rule, the power to tax can only be exercised within the territorial jurisdiction of a taxing
authority, except when there exists a “privity of relationship” between the taxing State and
the object of tax based on the tax principle of reciprocal duties.
This relationship implies contractual support or duty of care afforded by the Government to
its citizen residing outside the country.
Where privity of relationship exists, the state can still exercise its taxing powers over its
citizen outside its territory. It is because the fundamental basis of the right to tax is the
capacity of the government to provide benefits and protection to the object of the tax.
The State cannot tax property wholly and exclusively within the jurisdiction of another state
since it does not afford protection on property beyond its territorial boundaries for which a
tax is supposed to compensate.
Taxation is bound to observe International Comity. This is the courteous recognition, friendly
agreement, interaction and respect accorded by one nation to the laws and institutions of
another.
As a matter of international courtesy, property of one foreign state may not be taxed by
another because of the principle of sovereign equality among states under international law.
Since one State cannot exercise its sovereign dominion over another, a nation cannot impose
taxes to the properties of other nations.
An example of international comity limitation on the power of taxation is the tax exemption
of properties used by diplomats or head of states in exercise of sovereign powers and
diplomatic functions.
The state cannot be taxed without its consent; otherwise, such is derogation to its
sovereignty.
Tax exemption applies only to government entities through which the government
immediately and directly exercises its government functions like the Armed Forces of the
Philippines(AFP).
If, however, the government entities are performing proprietary functions such as Philippine
National Railways (PNR) and National Power Corporation (NPC) they are generally subject to
tax in the absence of tax exemption provisions in their charters of the law creating them.
Agencies performing governmental functions are exempt from tax unless expressly taxed,
and those performing proprietary functions are subject to tax unless expressly exempted.
Taxation power is the strongest of all inherent powers of the government because, without
money, the government can neither survive nor dispense any of its other powers and
functions effectively.
The similarities among the three inherent powers of the State are as follows:
1. They are inherent in sovereignty (they can be exercised even without being expressly
granted in the Constitution);
2. They are all necessary attributes of sovereignty because there can be no effective
government without them;
3. They constitute the three ways by which the state interferes with the private rights and
Property;
6. The provisions in the Constitution are just limitations on the exercise of these powers.
IMPORTANCE OF TAXATION
Taxation power exists inseparably with the State. It is essential for the existence of the
government.
Taxation is very important for the continuous existence of a nation. It is the primary source of
government revenue that is used to effectively and permanently perform government functions.
Taxation is exercise to raise revenue for the very existence of the government to serve the
people for whose benefit taxes are collected. These reasons make the payment of taxes
compulsory.
Without taxation, the other inherent powers (police and eminent domain powers) would be
paralyzed. For this reason, even the police power of the government may be exercised through
taxation power.
Without revenue, there can be no continuing government. Without government, there can be
no civilization.
BASIS OF TAXATION
Taxation is basically established based on the principle of (a) necessity, and (b) reciprocal
duties for protection and support between the state and inhabitants.
Based on the Principle of Necessity. The government has a right to compel all its citizens,
residents and property within its territory to contribute money. It is because the government
cannot exist without any means to pay its expenses- a necessary burden to preserve the State’s
sovereignty.
Taxation is the “lifeblood” or the “bread and butter” of the government and every citizen must
pay his taxes
PURPOSE OF TAXATION
1. Revenue Purpose- the primary purpose of taxation is to raise revenue by collecting funds or
property for the support of the government in promoting the general welfare and protecting
its inhabitants
2. Regulatory Purpose- also known as Sumptuary, is a secondary objective of imposing tax.
This objective is accomplished to
a. Regulate inflation
b. Achieve economic and social stability, and
c. Serve as key instrument for social control.
3. Compensatory Purpose- A tax may be used to make up for the benefits received. For
example, an excise tax on gasoline consumed is imposed on vehicle owners using roads. In this
case, the tax is compensatory for the use of road.
OBJECTS OF TAXATION
Objects of taxation may refer to the subject to which taxes are imposed. Generally, taxes are
imposed on the following:
c. Tangible properties – that which may be felt or touched and are necessarily
corporeal, either real or personal properties.
d. Intangible properties – properties that are “rights” rather than physical objects.
Example are patents, stocks, bonds, goodwill, trademarks, franchises and
copyrights.
In the absence if limitations provided by the Constitutional, the power to tax is unlimited,
complete (plenary), with wide extent of application (comprehensive) and with highest degree
(supreme). If there is any limitation at all, it is the sense of responsibility by the member of the
law-making body to the people that restricts its exercise.
Our constitution assumes the existence of taxation and it also provides some provision to limit
the exercise of tax power. Its main purpose is to protect the objects of taxation against its
abusive implementation.
Therefore, if tax law violates the Constitution, such law shall be declared null and void
Any tax law that contradicts the limitation of taxation is also unconstitutional.
Inherent Limitations
Inherent limitations are the natural restriction to safeguard and ensure that the power of
taxation shall be exercised by the government only for the betterment of the people whose
interest should be served, enhance and protected.
Constitutional Limitations
The Constitutional provisions that limit the exercise of the power to tax are as follows:
4. Non-impairment of contracts;
8. Majority of all the members of the Congress required in granting tax exemption;
9. The Congress may not deprive the Supreme Court of its jurisdiction in all cases
involving the legality of any tax, impost or assessment or toll or any penalty imposed in
relation to tax.
11. Tax collection shall generally be treated as general funds of the government.
Art III, Section 1 of the Constitution provides that “No person shall be deprived of life, liberty,
or property without due process of law, nor shall any person be denied the equal protection of
the laws.”
“Equal protection of law” means that all persons subject to legislation shall be treated alike
under similar circumstances and conditions both in the privileges conferred and liabilities
imposed.
A tax is said to be uniform in application if it operates with the same force and effect in every
place where the subject may be found, not when it singles out one particular class for taxation
or exemption.
The progressive system of taxation means that the tax laws shall give emphasis on the ability-
to-pay principle of taxation whereby more direct rather than indirect taxes are impose. An
example of this kind is the current individual income tax system that impose rates progressing
upwards as the tax base (taxpayer’s taxable income) increases.
The non-impairment clause, which provides that no laws impairing the obligation of valid
contracts shall be passed, is limited in application to laws that derogate from prior acts or
contracts by enlarging, abridging or in any manner changing the intention of the parties.
“Every bill passed by the Congress shall, before it becomes a law be presented to the President.
If he approves the same, he shall sign it; otherwise, he shall veto it and return the same with
his objections al large in its journal and proceed to reconsider it….”
Art. VI, Section 28, par 3 of the Constitutional provides that “Charitable institutions, churches,
parsonages or convents appurtenant thereto, mosques and non-profit cemeteries and all lands,
buildings and improvements actually, directly and exclusively used for religious, charitable or
educational purposes shall be exempt from taxation.”
Art. VI, Section 29 of the Constitutional provides that “No public money or property shall ever
be appropriated, applied, paid or used directly or indirectly for the use, benefit, or support of
any sect, church, denomination, sectarian, institution, or system of religion, or for the use,
benefit or support of any priest, preacher, minister, or other religious teacher or dignitary as
such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces,
or to any penal institution, or government orphanage or leprosarium
Art. VI, Section 28, par 4 of the Constitutional provides that “No law grandtying any tax
exemption shall be passed without concurrence of a majority of all members of the Congress.”
The Supreme Court shall have the power to review, revise, reverse, modify or affirm on
appeal or certiorari, as the laws of the Rules of Court may provide, final judgments anmd orders
of lower courts in all cases involving the legality of any tax, impost, assessment, or toll or any
penalty imposed in relation thereto.”
The Power of Judicial Review in taxation is limited only to the interpretation and application
of tax laws.
The term “poll tax” means a tax imposed on a person as a resident within a territory of the
taxing authority without regard to his property, business or occupation. A good example of a
poll tax is community tax or “cedula”.
Art. VI, Section 29, par 3 of the Philippine Constitution states that “All money collected on
any tax levied for a special purpose shall be treated as a special fund and paid out for such
purpose only. If the purpose for which a special fund was created has been fulfilled or
abandoned, the balance, if any, shall be transferred to the general funds of the Government.”
Levy
Levy or imposition of taxes involves the passage of tax laws or ordinances through the
legislature.
Assessment
Assessment involves the set of administration and implementation of the tax laws by the
executive through its administrative agencies such as the BIR or Bureau of Customs.
Payment of Tax
Payment of tax is a process involving the act of compliance by the taxpayer in contributing his
share to defray the expenses of the government.
Tax Evasion
Under this method, the taxpayer uses unlawful means to evade or lessen this payment of tax.
This form of tax dodging is prohibited and therefore subject to civil and/or criminal penalties.
Tax Avoidance
This is also called tax minimization. It is reducing of totally escaping payment of taxes through
legally permissible means.
Situs of Taxation
Situs of taxation refers to the place of taxation or the state or political unit which has
jurisdiction to impose tax over its inhabitants.
1. Enforced Contribution. The imposition shall not be dependent upon the will of the taxpayer.
2. Imposed by the legislative body. The congress makes tax laws.
3. Proportionate in character. The ability to pay principle. Is the basic rule in collecting taxes.
Those who earn more contribute to the government’s coffer more than those with lesser
earnings.
4. Payable in the form of money. Money is the preferred payment of taxes. If property is taken
to satisfy tax liability, the property is sold through public auction to satisfy the tax
obligation.
5. Imposed for the purpose of raising revenue. Taxes are the primary source of government
funds to finance its expenditures and project
6. Used for a public purpose. Money is taken from the public so it can be returned to them in
the form of public benefits
7. Enforced on some persons, properties or rights. Objects of taxation are either tangible or
intangible properties, including business transactions.
8. Commonly required to be paid at regular intervals. The dates for paying of taxes are fixed
by the law to comply with the principle of administrative feasibility
9. Imposed by the sovereign state within its jurisdiction. The enforcement of tax is subject to
territorial jurisdiction and international comity.
Name:___________________________________________
Course and Year___________________________________
Subject__________________________________________
Date____________________________________________
1. The State can enforce contributions upon its citizens in the form of taxes even without a
constitutional provision authorizing it.
3. Taxation is considered as the lifeblood of the government and every government unit must
exercise this power.
5. Taxation is the primary source of government revenue. Hence, all government funds come
from revenue.
6. Sovereign equality dictates that a nation cannot impose taxes on the property of another
country
7. The state can still exercise its taxing powers over its citizen, even if he resides outside the
taxing State’s territory
8. Revenues derived from taxes cannot be used for the exclusive use of private persons.
9. Eminent domain and police power can effectively be performed even without taxation.
10. A non-resident alien is liable to pay transfer taxes for properties within and outside the
Philippines.
1. Taxation co-exist with the four elements of the state which includes all, except
a. government c. sovereignty
b. property d. territory
4. One of the following is not among the basic jurisdiction for taxation
a. Taxation is based on necessities
b. Taxation is the lifeblood theory of the government
c. Taxation is the bread and butter of the government.
d. Taxation is a voluntary contribution for the benefits received
6. This refers to the process of taxation to determine the amount of tax based on existing tax
law.
a. levying b. imposition c. assessment d. collection
7. The statement that “he who received more should give more” is based on this basic tax
principles
a. fiscal adequacy c. theoretical justice
b. administrative feasibility d. due process of law
8. All of the following are inherent restrictions on the exercise of taxation power, except
a. rule of uniformity c. territorial jurisdiction
b. for public purpose d. international comity
Tax Administration is a system of collecting taxes in accordance with the country’s tax policies.
It involves enforcement of taxes through the following aspects of taxation (a) assessment and
(b) collections
It also includes the execution of judgment and capacity to act in all tax cases decided by the
court in favor of the BIR
The Department of Finance (DOF) is principally responsible for the fiscal policies and general
management of the Philippine Government’s financial resources. It has executive supervision
and control over other agencies, such as:
1. Bureau of Internal Revenue (BIR)- is the government agency primarily in charge to assess
and collect all taxes and charges imposed by the NIRC, other tax laws and regulations.
2. Bureau of Customs (BC) and the Tariff Commission (TC)- the main agencies tasked to
enforce the tariff and customs code (TCC). The BC also collects the taxes on imports
embodied in the NIRC.
3. Land transportation office (LTO)- the office responsible to collect registration fees and
motor vehicle tax.
4. Duly and lawfully authorized collectors- these are persons, agencies or duly accredited
banks authorized by the BIR, BC, TC and LTC to collect taxes.
Other governmental offices, private entities and individuals that may have incidental functions
regarding tax enforcement are as follows:
1. The Secretary of Justice, as the Chief Legal Officer of the government, has the authority to
ascertain the validity of tax laws subject to review by the Court of Justice.
2. Various offices that indirectly provide assistance in the collection of taxes are the following:
a. The courts
b. Register of deeds
c. Secretary of Public works and highways offices
d. Philippine Economic Zone Authority
e. Board of Investments
f. City Fiscals; and
g. Notaries Public
3. The head of the appropriate government office and his subordinates, with respect to the
collection of energy tax;
Banks duly accredited by the BIR Commissioner with respect to receipt of payments of
internal revenue taxes.
The BIR is principally tasked with the enforcement of the NIRC. The following list are BIR
officers:
1. The commissioner of the Internal Revenue
2. Deputy Commissioners of Internal Revenue
3. Revenue Regional Director
4. Revenue District Officer
5. Revenue Examiners and Officers
6. Division Chiefs of the BIR; and
7. BIR collections agents
1. To assess and collect all national internal revenue taxes, fees and charges;
2. To enforce all forfeitures, penalties and dines connected with the above.
3. To execute judgments in all cases decided in its favor by the Court of Tax Appeals and the
ordinary courts; and
4. To administer, supervise and effect police powers authorized by the NIRC and other laws,
such as:
a. Assigning Internal Revenue Officers to establishments where articles subject to exercise
tax are produced;
b. Providing and distributing forms, receipts, certification, stamps and other BIR documents
to concerned officials;
c. Issuing receipts for tax collected; and
d. Submitting annual report and pertinent information to the congress
b. Authority to
1) Conduct inventory and surveillance, and prescribe presumptive gross sales
and receipts
2) Terminate taxable period
The BIR Commissioner shall declare the tax period terminated, and demand
for immediate payment of the tax due when the taxpayers
Retires from business subject to tax
Intends to leave the Philippines
Removes his property from the Philippines
Hides or conceals his property; and
Perform any act tending to obstruct the proceedings of the collection
of tax for the past or current quarter, or renders the same totally or
partially inefficient
3) Prescribe real property values
4) Inquire into bank deposit accounts
5) Accredit and register tax agents
The CIR shall accredit and register based on their professional competence,
6) Prescribe additional procedural or documentary requirements
The BIR Commissioner may compromise, abate, refund or credit the payment of any internal
revenue tax when:
1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or
2) The tax or any portion thereof appears to be unjustly or excessively assessed; or
3) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax
4) The administration and collection costs involved do not justify the collection of the amount
due
The BIR Commissioner may credit or refund taxes erroneously or illegally received or penalties
imposed without authority
a. Credit or refund taxes erroneously or illegally received or penalties imposed without
authority
b. Refund the value of internal revenue stamps when they are returned in good
condition by the purchaser
c. Redeem or change unused stamps that have been rendered unfit for use and refund
their value upon proof of destruction
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.
The BIR Commissioner may delegate the powers vested upon him under the pertinent
provisions of the Tax Code to any subordinate official with a rank equivalent to a division chief
or higher, subject to such limitations and restrictions as may be imposed under the rules and
regulations to be promulgated by the Secretary of Finance, upon the recommendation of the
Commissioner.
1. The power to recommend the promulgation of rules and regulations by the Secretary of
Finance;
2. The power to issue first interpretation regarding rulings, or to reverse, revoke or modify any
existing rules of the Bureau;
3. The power to assign or re-assign internal revenue officers to establishment where articles
subject to excise tax are produced or kept; and
ADMINISTRATIVE PROVISIONS
For purposes of effectively and efficiently performing tax collection, the Tax Code provides the
following requirements for compliance by the taxpayer employed or engaged in business, as the
case may be:
1. Registration;
Registration Requirements
A person subject to any internal revenue tax shall register once with the appropriate revenue
office.
Any person required to file a tax return, statement or document shall be registered and
assigned a Tax Identification Number (TIN).
Only one TIN shall be assigned to a taxpayer. Any person who shall secure more than one TIN
shall be criminally liable.
Exception:
1. When a foreign currency deposit unit, which is merely a division of a local or foreign bank in
the Philippines, is assigned another TIN by the BIR, for purposes of filling its tax returns and
paying final tax on its foreign currency transactions. The peso and other transactions of the
regular banking unit of the bank shall be declared in its regular corporate income tax return
(BIR Form 1702), using its other TIN.
2. In cases where a registered taxpayer dies, the administrator or executor shall register the
estate of the decedent and a new TIN shall be supplied to the “Estate of the Deceased
Person.”
Registration Period. Every person subject to any internal revenue tax shall register once with
the appropriate Revenue District Officer (RDO)
Annual Registration fee. The annual registration fee is P500 for every separate or distinct
establishment or place of business, paid upon registration and every year transactions occur. It
shall be paid upon registration and every year thereafter on or before the last day of January.
Cooperatives, individuals earning purely compensation income and overseas contract workers
are not liable to the registration fee herein imposed.
BIR Form. The BIR Form that are needed for registration are the following:
1. BIR Form 1901 – For registration of self-employed, mixed income individuals, estates and
trusts.
4. BIR Form 1904 – For registration of one-time taxpayer and persons registering under E. O.
No. 98 (securing TIN to be able to transact with any government agencies).
5. BIR Form 1905 – For updating/ cancellation of registration, cancellation of TIN, new copy
of certificate of registration.
Any person maintaining a head office, branch or facility shall register with the RDO having
jurisdiction over the head office, branch or facility.
1. Upon payment of annual registration fee for new business and for renewals on or before
January 31, every year.
2. Upon receipt of a demand letter / assessment notice and / or collection letter from the BIR.
Any person registered in accordance with Sec. 236 of NIRC shall, whenever applicable, update
his registration information with the Revenue District Office where he is registered, specifying
therein any change in tax type and other taxpayer details. This taxpayer is required to file BIR
Form 1905.
Transfer of Ownership. When any individual who has paid the annual registration fee dies, and
the same business is continued by other person on persons interested in his estate, the
following rules shall be observe:
1. No additional payment shall be required for the remaining period within which the tax was
paid;
2. The person who will continue the business should submit inventories of goods or stocks to
BIR within 30 days from the death of the decedent.
Transfer of Business Place. In case a registered person decides to transfer his place of business
or his head officer or branches, it shall be his duty to update his registration status by filing an
application for registration information update.
The transfer of registration requires no additional registration fee to be paid by the taxpayer.
Before a taxpayer transfer his place of business to another revenue district office, he must
secure the necessary tax clearance from the RDO where the head office or branch is presently
registered.
Any tax return currently due must still be filed with the RDO where the taxpayer is presently
registered in order to avoid any 25% surcharge for filing of the tax return in a wrong RDO.
Cancellation of Registration. The registration of any person who ceases to be liable to a tax type
shall be canceled upon filing with the RDO where he is registered and where he applies for
registration information update in a prescribed form.
“Sales” or “Commercial Invoice” is a document issued by the seller of goods to the buyer.
“Receipt” is a document issued for sales of services.
The requirements before receipts, sales or commercial invoice are printed are as follows:
All persons who are engaged in business shall secure from the BIR an Authority to Print receipts
or sales or commercial invoice before a printer can print the same.
BIR FORM 1906 is to be accomplished by all taxpayer every time printing of receipts and invoice
is needed. Such form is to be accomplished with RDO having jurisdiction over the head office or
branch.
2. Other requirements
a. Be serially numbered;
b. Contain the name, business style, TIN and business address of the person or entity to use
such receipts or invoice; and
c. Contain information that may be required by rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
1. The time for issuance of receipts or invoices should be the time when transaction is
effected.
2. All persons subject to any internal revenue tax are required to issue receipts or sales
invoice when the value of merchandise sold or service rendered is twenty-five pesos
(P25.00) or more.
a. When the value of the merchandise sold or service rendered is less than twenty-five
(P25.00); and
5. The receipt should indicate the name, business (if any), address of the purchaser, customer
or client when
b. The sale is made by a person liable to VAT to another person also liable to VAT
the phrase “in the case of sales, receipts or transfers in the amount of P100 or more, or
regardless of amount, where the sale or transfer is made by a person liable to value-added tax
to another person also liable to value-added tax” WAS DELERED under R.A 9337 of 2005.
6. The original receipt shall be issue to the purchaser, the issuer shall keep the duplicate in
this place of business for three years.
7. The purchaser or the issue should keep his copy of receipts for a period of three years in
his place of business from the close of the taxable year in which such invoice or receipt was
made.
BUYER
PURCHASE
INVOICE OR
RECEIPTS
Issues VAT sales
invoice
VAT registered SP + 12%
business
Gross Sales ˃ P3M
issues vat Receipt
GI + 12%
seller/ business
registration
issues sales invoice
for sales ogf goods
non- VAT registered
business
Gross Sales≤P3,000
issueds receipt for
sales of services.
Name:___________________________________________
Course and Year___________________________________
Subject__________________________________________
Date____________________________________________
3. Which of the following is not among the administrative powers of the Bureau of internal
revenue?
a. Compromise tax assessments
b. Distraint of personal property of delinquent taxpayer
c. Render court decision concerning tax dispute
d. Levy of real property of delinquent taxpayer
4. Which of the following is not within the scope of the authority of the BIR Commissioner?
a. To exercise the levying function of taxation
b. To interpret tax laws
c. To assess and collect BIR taxes
d. To decide cases involving National Internal Revenue taxes
5. Which of the following is within the scope of the authority of the BIR Commissioner?
a. To inquire into bank deposit accounts
b. To terminate taxable period
c. To prescribe real property values
d. All of the above