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PM Reyes Notes On Taxation Ii: Remedies: Composition, Powers, and Duties of The BIR
PM Reyes Notes On Taxation Ii: Remedies: Composition, Powers, and Duties of The BIR
The powers and duties of the BIR shall comprehend: Q5.What is the authority given to a Revenue
Officer
1. The assessment and collection of all national
internal revenue taxes, fees and charges The Revenue Officer, pursuant to a LOA, may
2. The enforcement of all forfeitures, penalties examine taxpayers within the jurisdiction of the
and fines connected therewith district to collect the correct amount of tax or to
3. Including the execution of judgments in all recommend the assessment of any deficiency tax.
cases decided in its favor by the CTA and the (see SECTION 13, T AX CODE)
ordinary courts
4. The Bureau shall give effect to and Q6.Who promulgates revenue rules and
administer the supervisory and police powers regulations?
conferred to it by this Code or other laws
(see SECTION 2, T AX CODE)
The Secretary of Finance, upon recommendation of
the CIR, shall promulgate all needful rules and
regulations for the enforcement of tax laws. (see
SECTION 244, T AX CODE)
Special thanks to BUTCH RAMIRO for assisting me in synthesizing the doctrines of the cases in the discussion of the jurisdiction of the CTA.
This reviewer is a compilation of personal notes in Taxation Two and notes and lectures from Atty. Gruba, Atty. Montero and Atty. Mamalateo.
References have also been made to the following books: DE LEON & DE LEON, JR. THE FUNDAMENTALS OF TAXATION (2012); DE LEON & DE
LEON, JR. COMPREHENSIVE REVIEW OF TAXATION (2010); VITUG & ACOSTA. TAX LAW AND JURISPRUDENCE (2006); DOMONDON, TAXATION VOLUME
II: INCOME TAX (2009); CO-U NTIAN, JR. TAX DIGEST (2009); MAMALATEO, REVIEWER ON TAXATION (2008). This reviewer is best used with
SACDALAN-CASASOLA, NIRC AND OTHER LAWS (2012).
Possessors are granted the right to reproduce and distribute this reviewer as well as the right to convert the work to any medium for the
purpose of preservation and/or continued distribution provided that the author’s name remains clearly associated with the work and that no
alterations of the form and content are made.
Updated 22 Mar 2013
PM REYES NOTES ON TAXATION II:
REMEDIES
from regular supplier of goods and 2% from services and void ab initio.
from top 10,000 private corporations to top 20,000 Revenue are issuances that publish
private corporations Memorandum pertinent and applicable
Circular (RMCs) portions, as well as
RR 16-2002 [OCTOBER 11, 2002] amplifications, of laws, rules,
Amends RR4-97 on provisions relating to acceptable regulations and precedents
modes of payment of internal revenue taxes coursed issued by the BIR and other
through authorized agent banks, the recording of agencies/offices.
such payments and issuance of validated BIR- Revenue Bulletins refer to periodic issuances,
prescribed deposit slips and the control mechanisms (RB) notices and official
to deter and detect diversion of tax payments. announcements of the
Commissioner of Internal
Q7.Enumerate and define the tax-related Revenue that consolidate the
administrative issuances Bureau of Internal Revenue’s
positions of the Tax Code,
relevant tax laws and other
Revenue are issuances signed by the
issuances for the guidance of
Regulations (RRs) Secretary of Finance, upon
the public.
recommendation of the
BIR Rulings are official position of the
Commissioner of Internal
Bureau to Queries raised by
Revenue, the specify,
taxpayers and other
prescribe or define rules and
stakeholders relative to
regulations for the effective
clarification and interpretation
enforcement of the provisions
of tax laws.
of the National Internal
BIR ITAD Rulings are issued by the BIR
Revenue Code (NIRC) and
International Tax Affairs
related statutes.
Division to rule on certain
Revenue are issuances that provide
issues relating to
Memorandum directives or instructions;
interpretations of international
Orders (RMOs) prescribe guideline; and
tax treaty provision under
outline processes, operations,
which certain taxpayers or
activites, workflows, methods
transactions can avail of tax
and procedures necessary in
exemptions or preferential tax
the implementation of stated
rates.
policies, goals, objectives,
plans and programs of the
Bureau in all areas of 2. CIR’s Powers and Duties
operations, except auditing.
Revenue are rulings, opinions and (Read Sections 4-8, Tax Code)
Memorandum interpretations of the
Rulings (RMRs) Commissioner of Internal Q8.What are the powers of the CIR?
Revenue with respect to the
provisions of the Tax Code 1. To interpret tax laws and to decide cases
and other tax laws, as applied 2. To obtain information and to summon,
to a specific set of facts, with examine and take testimony of persons
or without established 3. To make assessment and prescribe
precedents, and which the additional requirements for tax administration
Commissioner may issue from and enforcement
time to time for the purpose of 4. To delegate power
providing taxpayers guidance 5. To ensure the provision and distribution of
on the tax consequences in forms, receipts, certificates, and appliances
specific situations. BIR and acknowledgment of payment of taxes
Rulings, therefore, cannot
contravene duly issued RMRs;
otherwise, the Rulings are null
To interpret tax laws and decide cases In BIR RULING NO. 370-2011 [OCTOBER 7, 2011], the
CIR affirmed its position that the Poverty Alleviation
Q8.1. Differentiate the power of the CIR and Eradication Certificates (PEAce) Bonds are not
tax-exempt and subject to a 20% FWT. Previously,
to interpret tax laws and the power
2001 BIR Rulings have considered such instruments
to decide tax cases. as tax-exempt. The CIR concluded that no right has
been vested by virtue of the 2001 Rulings as they
The power to interpret tax laws is under the exclusive were null and void for being contrary to law.
and original jurisdiction of the CIR, subject to the
review by the Secretary of Finance
Q8.2.2. What is the effect of RR 5-2012
On the other hand, the power to decide tax cases,
[April 5, 2012] on rulings issued
while vested also in the CIR, is subject to the prior to January 1, 1998?
exclusive appellate jurisdiction of the CTA.
RR 5-2012 [APRIL 5, 2012] provides that all rulings
Q8.1.1. Can the Secretary of Finance issued prior to January 1, 1998 will no longer have
any binding effect. They can no longer be invoked as
motu proprio review a ruling
basis for any current business transaction/s or as a
of the CIR? basis for securing legal tax opinions and rulings.
Yes. DOF ORDER NO. 007-02 [MAY 7, 2002] provides RMC 22-2012 [MAY 7, 2012] clarified that BIR Rulings
that the Secretary of Finance may, of his own accord, prior to January 1, 1998 remains valid:
review a ruling issued by the CIR.
1. To the taxpayer who was issued the ruling
Q8.2. Explain the rule on non- 2. Covering the specific transaction which is
retroactivity of rulings subject of the ruling
Exception to the Exception: Even if prejudicial Yes. As ruled in FITNESS BY DESIGN V. CIR [OCTOBER
to the taxpayer, they shall have retroactive effect 17, 2008], the BIR can obtain all relevant records and
in the following cases – data in the person of the taxpayer without his consent
1. The taxpayer deliberately misstates or omits Q8.4. Does the CIR’s power to obtain
material facts information include the power to
2. The facts subsequently gathered are different inquire into bank deposits?
from the facts on which the ruling was based
3. The taxpayer acted in bad faith No as a general rule. However, the CIR is authorized
to inquire into the bank deposits of:
Q8.2.1. If a ruling was subsequently
found by the CIR to be null 1. A decedent to determine his gross estate
and void, does the non- 2. Any taxpayer who has filed an application for
retroactivity principle still compromise of his tax liability under Section
204(A)(2) of the Tax Code by reason of
apply?
financial incapacity to pay his tax liability.
No. The non-retroactivity principle does not apply In addition as provided under RA 10021 (Exchange
when the ruling involved is null and void for being of Information on Tax Matters Act of 2009) –
contrary to law.
Once filed, the taxpayer may no longer withdraw it RR 11-2006 [JUNE 15, 2006] defines a tax
but he may amend it subject to the following practitioner/agent as those who are:
requirements:
1. engaged in the regular preparation,
1. It is made within 3 years from filing certification, audit and filing of tax returns,
2. No notice for audit or investigation has been information returns or other statements or
actually served to him reports
2. engaged in the regular preparation of
Q8.5.2. Explain the best obtainable requests for ruling, petitions for
evidence rule. reinvestigation, protests, requests for refund
or tax credit certificates, compromise
The rule is that an assessment must made based on settlement and/or abatement of tax liabilities
the best evidence obtainable. In CIR V. HANTEX and other official papers and correspondence
T RADING [MARCH 31, 2005], the Supreme Court 3. regularly appear in meetings, conferences,
opined that assessments must be based on actual and hearings before any office of the BIR
officially on behalf of a taxpayer or client in all
3
For income tax returns it shall be upon order of the President.
The taxpayer is correct. In CIR V. PRIMETOWN General Rule: There must be an assessment within
PROPERTY [AUGUST 28, 2007], the Supreme Court the 3 year period.
held that there exists a manifest incompatibility
between the manner of computing legal periods Exceptions: Section 222, Tax Code provides for the
under the Civil Code and the Administrative Code. following instances –
Given that the Administrative Code is the more recent
law, its treatment of a year governs the computation 1. A false or fraudulent return is filed with intent
of legal periods. to evade tax
2. There is a failure to file a return
Q13.2. The last day of the 36th calendar
In such cases, the tax may be assessed or a
month falls on a Saturday. Can the proceeding in court for collection may be filed without
BIR issue the assessment on assessment at any time within 10 years from
Monday instead? discovery of the falsity, fraud, or omission.
Q14.4. Is there a need to prove that the Q14.6. What is the significant of the
taxpayer actually received the taxpayer’s indicating in the
assessment notice within the previous year’s ITR its new
prescriptive period? address?
No. As a general rule, the assessment is deemed As held in CIR V. BPI AS LIQUIDATOR OF PARAMOUNT
made once the notice is mailed.15 (see BASILAN ACCEPTANCE CORP [SEPTEMBER 23, 2003], any
ESTATES V. CIR [SEPTEMBER 5, 1967]). service of assessment notice on the old address
subsequent to such previous year invalidates the
assessment.
14
An example would be when an injunction is allowed under the Q14.7. What is the reckoning point with
CTA law is availed of
15
respect to amended returns?
RR 12-99 [SEPTEMBER 6, 1999] provides that if the notice to the
taxpayer is served by registered mail and no response is received
from the taxpayer within the prescribed period from date of the
posting thereof in the mail, the same shall be considered actually
16
or constructively received by the taxpayer. Further, if the same is Also important to note in this case is the ruling that a follow-up
personally served and the taxpayer refuses to acknowledge receipt letter which reiterates demand for payment of taxes is considered
thereof, the same shall be constructively reserved on the taxpayer. a notice of assessment.
Q14.8. What if the return is incomplete, No. In CIR V. KUDOS METAL CORPORATION [MAY 5,
will the prescriptive period to 2010], the Supreme Court held that the doctrine of
assess run? estoppels cannot be applied as an exception to the
statute of limitations on the assessment of taxes
No. As held in REPUBLIC V. MARSMAN DEVELOPMENT considering that there is a detailed procedure for the
COMPANY [APRIL 27, 1972], in order that the filing of a proper execution of the waiver.
return may serve as a starting point of the period for
making an assessment, the return must be as 4. Imposition of Penalties
substantially complete as to include the needed
details on which the full assessment may be made. (Read Section 247-252, Tax Code and RR 12-
99 and RMO 19-2007 [August 10, 2007]19)
Q14.9. Can an income tax return be
deemed a return of sales tax Q15. What are the civil penalties under the
purposes? Tax Code and in what instances are
they imposable?
No. As held in BUTUAN SAWMILL V. CTA [FEBRUARY
28, 1966], an income tax return cannot be considered
1. 25% surcharge, which is imposable in case
as a return for compensating tax or sales tax
of:
purposes. The taxpayer must file a return for the
a. Failure to file a return and pay tax
particular tax required by law in order to avail himself
due thereon
of the benefits of the law.
b. Filing with unauthorized revenue
office
Q14.10. What are the requirements of a c. Failure to pay within time prescribed
valid waiver of the statute of in assessment notice
limitations?18 d. Failure to pay part of the amount
shown in ITR
1. The specified period
2. Signature of the proper authority (for Php 1 2. 20% interest, which is imposable in all
million or above, the CIR must sign) abovementioned cases except letter (d).
17
3. 50% surcharge, which is imposable in case
Note that the case was governed under the old law which
of:
provides for 6 tears to assess and another 5 years to collect.
18
RMC No. 29-2012 [June 29, 2012] provides for the form to be
19
used for waiver of the defense of prescription under the Statute of This RMO contains the Consolidated Revised Schedule of
Limitations. Compromise Penalties for Violations of the Tax Code.
5. Criminal Action and other penalties This was likewise reiterated in Adamson v. CA [May
21, 2009] where the Court held that there is no need
(Read Sections 253-280, Tax Code) for precise computation and formal assessment in
order for criminal complaints can be filed against the
taxpayer. An assessment is not necessary for a
Q16. Does the dismissal of a civil acion carry
criminal prosecution for willful attempt to defeat and
with it the dismissal of the civil aspect evade the income tax.
of tax collection?
Q18. What are the elements of a violation of
No. The proceedings in tax cases are different since
Section 255 of the Tax Code for failure
the tax liability is not deemed included in criminal
cases filed. In REPUBLIC V. PATANAO [JULY 21, 1967], to make or file a return?
the Supreme Court held that since the taxpayer’s civil
liability is not included in the criminal action, his 1. The accused is a person required to make or
acquittal in the criminal proceeding does not file a return
necessarily entail exoneration from his liability to pay 20
The Court also stressed that a criminal complaint is instituted not
taxes. His legal duty to pay taxes cannot be affected to demand payment, but to penalize the taxpayer for violation of
by his attempt to evade taxes. Said obligation is not a the Tax Code.
(see PEOPLE V. KINTANAR [CTA CRIM . CASE NO. 006, Yes. In LIM, SR. V. CA [OCTOBER 18, 1990], the
DECEMBER 3, 2010]) Supreme Court held adopted the view of the Solicitor
General to the effect that, in addition to the fact of
Q18.1. Define “willful” in the context of discovery, there must be a judicial proceeding for the
the third element of a violation of investigation and punishment of the tax offense
the Tax Code for failure to make before the five-year limiting period begins. Also,
or file the return?
Q19.2. In what instances is the
In PEOPLE V. KINTANAR [CTA CRIM . CASE NO. 006, prescriptive period interrupted?
DECEMBER 3, 2010, affirmed by the Supreme Court
in a minute resolution [G.R. 196340] dated 1. When proceedings are instituted against the
February 2012], the Supreme Court defined “willful” guilty persons (and shall run again if the
in this light: “willful in the tax crimes statutes means proceedings are dismissed for reasons not
voluntary, intentional violation of a known legal duty, constituting jeopardy)
and bad faith or bad purpose need not be shown. 2. When the offender is absent from the
Further, the Supreme Court stated that an act or Philippines
omission is "willfully" done if done voluntarily and
intentionally and with specific intent to do something 7. Informer’s Reward
the law forbids, or with specific intent to fail to do
something the law requires to be done; that is, with
(Read Section 282, Tax Code)
bad purpose to either disobey or disregard the law. A
willful act may be described as one done
intentionally, knowingly and purposely, without Q20. What is the reward given to persons
justifiable excuse.” instrumental to the discovery of
violations of the Tax Code?
6. Prescription of Criminal Action
A sum equivalent to 10% of the revenues,
surcharges, or fees recovered and/or fine or penalty
(Read Section 281, Tax Code)
imposed and collected or P1 million, whichever is
lower.
Q19. What is the prescriptive period for
violations of the Tax Code? Entitlement to
Informer’s Reward
All violations of any provision of the Tax Code shall The offender offered to Yes
prescribe after 5 years. compromise
No revenue, surcharges or No
Q19.1. When does the prescriptive fees were actually
period begin? recovered
The information refers to No
Prescription shall begin to run from: case already pending or
previously investigated
1. The day of the commission of the violation
2. If the same is not known, from the discovery Q20.1. Who are disqualified from
and the institution of judicial proceedings for availing of the informer’s
its investigation and punishment. reward?
Q19.1.1. In addition to discovery, must 1. A BIR official or employee or any other
there be a judicial proceeding incumbent public official or employee;
for the investigation and
(Read Section 205, Tax Code) Yes. As held in CIR V. HAMBRECHT & QUIST
PHILIPPINES [NOVEMBER 17, 2010], the Supreme
Court held that the fact that an assessment has
Q22. What is the effect of the failure of the become final for failure of the taxpayer to file a
taxpayer to appeal the denial of the protest within the time allowed only means that the
protest by the CIR to the CTA in due validity or the correctness of the assessment may no
time? longer be questioned on appeal. However, the
validity of the assessment itself is a separate and
Failure of the taxpayers to appeal to the CTA in due distinct issue from the issue of whether the right of
time make the assessments in question, final, the CIR to collect the validly assessed tax has
executory and demandable. (see DAYRIT V. CRUZ prescribed.
23
[SEPTEMBER 26, 1988]).
Q22.3. May an assessment for
Q22.1. Which court has exclusive deficiency estate tax attain
original jurisdiction in tax finality when there is a pending
collection cases involving final case in the probate court?
In PROTECTOR’S SERVICES V. CA [APRIL 12, 2000], the No. As held explained by the Supreme Court in
Supreme Court held that the act of a taxpayer in filing REPUBLIC V. ARCACHE [FEBRUARY 29, 1964]: “While
a petition before the CTA to prevent the collection of we may argue with the Court of Tax Appeals that a
the assessed deficiency tax and in elevating the case mere request for re-examination or re-investigation
to the Supreme Court for review after the CTA may not have the effect of suspending the running of
dismissed the petition suspended the running of the the period of limitation for in such a case there is
statute of limitations. need of a written agreement to extend the period
between the Collector and the taxpayer, there are
Q32.7. An informer filed a case with the cases however where a taxpayer may be prevented
CTA against the taxpayer and BIR. from setting up the defense of prescription even if he
The informer was seeking to (1) has no previously waived it in writing as when by his
declare the taxpayer as having an repeated requests or positive acts the Government
has been, for good reasons, persuaded to postpone
assessment; and (2) as a
collection to make him feel that the demand was not
consequence, to collect his unreasonable or that no harassment or injustice is
informer’s reward. This case was meant by the Government.
filed by the informer within 3 years
from the time that the taxpayer Q32.8.2. What happens if the CIR does
filed his return. However, apart not consider or act upon the
from this action initiated by the request for reinvestigation?
informer, no other action was filed
by the government seeking to As there was no evidence that the request was
collect against the taxpayer. Has considered or acted upon, it did not suspend the
running of the period for filing an action for collection
the right to collect already
(see REPUBLIC V. ABECEDO [MARCH 29, 1968])
prescribed?
In BPI v. CA [OCTOBER 17, 2005] as reiterated in BPI
No. In PNOC V. CA [APRIL 26, 2005], the Supreme V. CA [M ARCH 17, 2008], the Supreme Court
Court held that the BIR is deemed to be compliant emphasized that the BIR must first grant the request
with the requirement that collection be made within for reinvestigation as a requirement for the
the 5 years from time of assessment since if the suspension of the statute of limitations.
informant won, the CTA would have ordered the
erring parties to pay the tax. At the very least, the Q32.8.3. What is the difference between a
filing by the informer of the case would have request for reinvestigation and a
suspended the running of the period because the BIR request for reconsideration for
is prohibited from making collection because there purposes of tolling the running
was a pending case.
through a useless and neddelss ceremony that would 2. If from CBAA or RTC in the exercise of their
only delay disposition of the case. An appeal is appellate jurisdiction, Rule 43 (to be heard en
allowed from the decision of the CIR on a disputed banc)
assessment as distinguished from a decision 3. From CTA division to en banc –petition
involving refunds of internal revenue taxes. review
4. From the CTA en banc to the Supreme Court
12. CTA – petition for review on certiorari under Rule
45
(Read RA 9282, as amended by RA 9503; and
A.M. No. 05-11-07-CTA “Revised Rules of the Q35.2. When is a decision appealable to the
Court of Tax Appeals [November 22, 2005]) CTA?
Q35. What is the jurisdiction of the Court of So long as the tenor of the decision is that the
Tax Appeals dispute of the taxpayer is denied, it is appealable. To
let the taxpayer defer the period is to unduly put in his
hand the collection of taxes. The CIR should always
A. Exclusive Appellate Jurisdiction
indicate in clear language the decision of the BIR
(see SURIGAO ELECTRIC V. CTA [JUNE 28, 1974])
3. Decisions of the CIR
4. Inaction of the CIR
Q35.2.1. Name some communications sent
5. Decisions of the RTC on Local Tax Cases
by the CIR to taxpayers that are
6. Decisions of the BOC/COC
deemed appealable to the CTA.
7. Decisions of the CBAA (in exercise of appeal
over RPT cases decided by the LBAA
8. Decisions of the DOF on Customs cases As provided in Surigao ELECTRIC V. CTA [JUNE 28,
elevated to him on automatic review due to 1974]:
adverse decision vs. the Government
9. Decisions of the DTI (on non-agri products) 1. a letter which stated the result of the
and DA (on agri. Products) involving dumping investigation requested by the taxpayer and
and countervailing duties the consequent modification of the
assessment;
B. Over Criminal Offenses 2. letter which denied the request of the
taxpayer for the reconsideration cancellation,
1. Original – For criminal acts under the Tax or withdrawal of the original assessment
Code and Tariffs and Customs Code 3. a letter which contained a demand on the
involving an amount of 1 million or above taxpayer for the payment of the revised or
2. Appellate – If the amount is less than 1 reduced assessment; and
million or no specified amount.43 4. a letter which notified the taxpayer of a
revision of previous assessments
C. Over Tax Collection Cases
Q35.3. Is the final demand letter issued by
1. Original – if the amount is 1 million or above the BIR reiterating the demand for
2. Appellate – if the amount is less than 1 immediate payment considered a
44
million final decision appealable to the
CTA?
43
Regular courts first; if from RTC, appeal to the CTA/ if from MTC,
then RTC, then file a petition for review with the CTA
44
Regular courts first; if from RTC, appeal to the CTA/ if from
45
MTC, then RTC, then file a petition for review with the CTA RA 9282 elevates CTA to CA level