Taxation II

Part I- A. True or False

1. The first offense for unmarked fuel products is 5,000,000.00. False

2. Sweetened beverage using stevia is subject to excise tax. True
3. Abatement covers reduction of tax liability by applying 40% of the basic tax for jeopardy
assessment. False
4. Forfeited property for absence of bidder is subject to one year redemption period. True
5. Prescription of Collection under the local Government Code is 5 years. True
6. Constructive distraint requires an account to be delinquent before applying it as remedy.
False
7. A lien annotated at the back of the title binds only the taxpayer to whom the assessment was
issued.
8. Indigenous Petroleum is a mineral product.
9. Only Vapor products that contain nicotine as ingredient is subject to excise tax.
10. Distilled spirit is subject to ad valorem and specific tax.

11. The period to appeal the decision of the local treasurer to the local Board of Assessment is 60
days from receipt of decision.
12. The Bureau of Custom has jurisdiction over PEZA enterprises as foreign territory.
13. Documentary stamp tax shall be paid for transactions/documents transferring property by
way of donation.
14. Summary detention of package shall be limited only to 20 days if no intervention by
authorized officer.
15. Notary public has the option not to affix documentary stamps on documents where he added
his jurat.
16. Distraint of personal property is a judicial remedy. True
17. The Court of Tax Appeal is higher than the Court of Appeal.
18. Failure to register as taxpayer is a ground for closure of business.
19. Packaging of heated cigarettes must conform with the Graphic Health Warnings Law.
20. 25% Surcharge is impossible as penalty for willful neglect to file return.

Part I- B. Enumeration

1-2 Kinds of cases in the Bureau of Customs

3-5 Powers of the Court of Tax Appeals

Administer oaths;
Receive evidence;
Summon witnesses by subpoena;
Require the production of papers or documents by subpoena decus tecum;
Punish for contempt
Promulgate rules and regulations for the conduct of its business
Assess damage against the appellant if the appeal to the CTA is found to be frivolous or
dilatory
 6-7 Taxing Power of the Barangay.
(1) Taxes – on stores or retailers with fixed business establihments with gross sales of
P50,000 or less.
(2) Services fees or charges
(3) Barangay Clearance
(4) Other fees or charges

8-10 Requirements for appealing denial of tax refund by BIR.

11-13 Procedure/Process in Selling levied Properties.

Seized properties will be sold at auction sales if the taxpayer did not settle the delinquent tax.
Within 20 days from levy, the revenue officer conducting the proceeding shall advertise the property
for auction sale for at least 30 days. The property shall be awarded to the highest bidder.
The proceeds of the sale shall be used to satisfy the taxpayer’s unpaid tax liabilities. The
excess proceeds of the sale will be returned to the taxpayer.

14-15 Methods of Custom Valuation.

16-18 Limitations on the taxing power of LGU.

The exercise of the taxing powers of provinces, cities, municipalities, and barangay shall not
extend to the imposition of the following:
(1) Documentary Stamp Tax;
(2) Income Tax, except when levied on banks and other financial institutions;
(3) Taxes on estates, inheritance, gifts, legacies, and other acquisitions mortis causa

19-20 Discuss the process of issuing decisions and appeals within the CTA.
Appeal shall be made by filing a petition for review under a procedure analogous to that
provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within 30 days from
the receipt of the decision or ruling or in the case of inaction, from the expiration of the period fixed
by law to act thereon.

21-23. Prohibited Importations

24-25. Discuss the dual status of Local Governments.

(1) In their public or governmental aspect. – They are agents of the state and for that purpose
exercise by delegation a part of the sovereignty of the state such as in the imposition and
collection of taxes, preservation of peace and order, and the establishment of schools
(2) In their private or corporate aspect. – They are mere legal entities performing functions
not strictly governmental. They act for their own purposes and not as subdivisions of the
state.
26-30. Discuss the remedies of the taxpayer after payment.

Part II. Problem Solving

 1) XYZ Corporation is a manufacturer of Fermented Alcohol with Production Plant at Sta.
Barbara, Pangasinan. From January to April 2021, the corporation produced 25,000 bottles
and transferred 20,000 bottles to their sales outlet in Urdaneta. At the end of April, only
10,000 bottles were sold. The management insist that tax payment for VAT and Excise must
be based on the number of bottles sold considering the minimal sales due to the Covid-19
limitation on product consumption.

If you are the consultant, discuss your recommendation for the following:
a. Basis of the tax payment for VAT as compared to Excise.
OUTPUT VAT – the vat on the vatable sales or receipts. The output VAT is presumed
passed on by the seller on his sales or receipts.
12% VAT imposed on domestic sales or receipts

Specific Tax – Excise Tax imposed based on weight or volume capacity or any other
physical unit of measurement

b. Period/Frequency of Payment for VAT and Excise Tax.

EXCISE – before removal from the place of production, in case of locally manufactured products.
Before release from the custom’s custody, in case of imported products.

VAT - VAT in the Philippines must be filed and paid on a monthly basis through the submission of
BIR Form 2550M (Monthly Value-Added Tax Declaration). This must be filed within 20 days from
the end of the month to which the VAT applies. Form 2550M will include all of the VAT payable for
the particular month.

A VAT Return must also be filed and paid quarterly through BIR Form 2550Q (Quarterly Value-
Added Tax Return). This must be filed within 25 days from the end of the relevant quarter. Form
2550Q will include the cumulative VAT amount payable for the quarter.

2) PRD filed his 2015 tax return on April 1, 2016 declaring a gross sales of ₱10,000,000.
During the data gathering in November 15,2020, it was discovered that his actual sales with
PEZA enterprises amounted to ₱18,000,000 from March to December, 2015. The BIR issued
a notice of discrepancy imposing a 50% surcharge on December 10,2020.

The accountant and Lawyer of PRD protested the issued notice as a means of harassment
since the right of the BIR to assess has prescribed. As Legal Officer of the BIR, justify the
issuance of the assessment and the imposed surcharge for not less than 6 sentences.

 An assessment must be made within three (3) years from the last day
prescribed by law for
the filing of the tax return, for the tax that is being subjected to assessment or from the day
the return was filed, if filed late. (Section 203, NIRC). However, in case of false or fraudulent
return, or of failure to file a return, the Bureau has ten (10) years from the date of discovery
of such falsity, fraud, or omission within which to make the assessment. (Section 222,
NIRC).
The period to assess may be extended through the execution by the taxpayer of a written
 Waiver of the Statute of Limitations before the expiration of the prescriptive period to
assess. (Section 222, NIRC)

3) SRP filed a claim for refund on April 16,2021 for an alleged VAT erroneously paid on April
20, 2018. On July 10, 2020, SRP received a notice denying the claim for refund. On August
15, 2020, SRP decided to appeal the denial to CTA. Determine the following:

1. Is the filing of the claim for refund within the reglementary period? Justify your answer.
NO. The taxpayer may file a written claim for refund, with the Commissioner
of Internal Revenue, with a categorical demand for the recovery of
erroneously or illegally collected taxes, within two (2) years from the date of
payment of the tax or penalty sought to be refunded. Failure of the taxpayer to
file such claim within this prescribed period shall result in the forfeiture of his
right to the refund or tax credit.
2. Is the decision to file an appeal appropriate? Discuss your answer.
NO.
The taxpayer can file an appeal in one of two ways: (1) file the judicial claim
within thirty days after the Commissioner denies the claim within the 120-day
period, or (2) file the judicial claim within the thirty days from the expiration
of the 120-day period if the Commissioner does not act within the 120-day
period.
As a general rule, the 30-day period to appeal is both mandatory and
jurisdictional.

3. Differentiate claim for refund from claim for Tax Credit Certificate.
TCC is a certification issued to a taxpayer by the Commissioner of Internal
Revenue (CIR) acknowledging that the taxpayer is legally entitled to a tax credit,
which may be used in payment of internal revenue tax liabilities, or may be converted
as a cash refund.

The claim for refund of excessively or erroneously collected taxes under

Section 229 should be made within two (2) years from the date the taxes are paid.
Both the administrative and judicial claims should be brought within the two (2)- year
prescriptive period. Otherwise, they shall forever be barred.

4) An intelligence report was received by the Customs Police on June 15, 2021 for unloading of
imported fuel product within Bataan area by Carp Shipping Lines. An enforcement was
undertaken for the apprehension of the transport vessel on June 17, 2021. Fortunately, the
Customs Police manage to capture the vessel outside the Philippines water territory. A
proceeding was conducted for the seizure of the products and the vessel but such was
protested by the Lawyer of Carp Shipping Lines as an abused of authority on the part of the
Customs Police since they are no longer authorized to exercise their authority in the high
seas.

1. Prepare your response/argument for not less than 6 sentences.

2. Define smuggling and discuss its impact on taxation.