to the tax or deficiency tax shall pee apply to all Pinder the Code 1 Renee so added to the tax shallbee abe manera = part of the subject tx, Te atthe same he tax req to be paid, a penalty equivalent to 25% rae eee 'e amount due 's, fees and charges ition to uel any return and pay the tax due thereon as requredon the j i: \e date prescribed; unless otherwise authorized by the Commissioner, filing a return with ee Uniérother than those with whom the return is required tobe fied ag or fature to pay the deficiency tax within the time prescrited for its payment in th in the notice of " gssessment; OF J 4, falure to pay the full or part of the amount of tax shown on any return required to be fil athe full amount of the tax due for which no return Is required to be filed, on or cae 5 e fate prescribed for its payment. penalty of 50% of the tax or of the deficiency tax is imposed under the following cases: 4, Willful neglect to file the return on the date prescribed. Willful neglect on the part of the o file his return after a considerable length of taxpayer is presumed when he was unable t time. ion of sales, receipts OF ‘a facie evidence ofa yount . Willful filing of a false or fraudulent return. substantial underdeclarati income and substantial overstatement of deductions constitute prim: fae or fraudulent return. Failure to report sales, receipts or in exceeding 30% of that declared per return, and a claim of deductions 30% of actual deductions shall render the taxpayer liable for substantial overstatement, as the case may be- come in an am in amount exceeding | underdectaration oFis ce 2 amount of the tax due on any return required to be filed. _ The amount of tax due for which no return is required. $ ‘The deficiency tax, or any surcharge or interest thereon on the due date app se notice and demand of the Commissioner. ‘ zs TRAIN Law or RA 10963 The TRAIN Law amends the interest rate under Section 249 of the NIRC from 205, annum to double the legal interest rate for loans or forbearance of any money in, absence of an express stipulation as set by the BSP; it also provides that defcieny ng delinquency interests shall not be imposed simultaneously: Sec. 249. Interest. — There shall be assessed and collected on any unpaid amount of (A) In General. tax, interest at the rate of double the legal interest rate for loans or forbearance By of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully & paid: Provided, That in no case shall the deficiency and the delinquency interest prescribed under Subsections (B) and (C) hereof, be imposed simultaneously. 1 (B) Deficiency Interest.— Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the Commissioner of Internal Revenue, whichever comes earlier. (C) Delinquency Interest.— xx x Baex a 452 | Transfer and Business Taxationager ovr Tax code, the Commissioner may c, snabie doubt as to the validity of the c, fe raxpayer demonstrates a clear inabil af “any portion thereof appeai re ta OF PeArS tO be unjust Ieee meso ete ea ity to " Pay the assessed tax. He may abat - cet arse arg es mount due, o : ot jc case dwn “a mae fu sforementioned Circumstances, th 7 ne VAT lability inclusive of surcharge and interest shall be paid with, id within six months from the rom the date or release each vessel Computation of which sas Follows i Basic tax due \ / Less: Downpayment °2,400,115.96 Balance VAT lability ___ 00,000.00 Surcharge (P1,900,115.96 x 25%) 71,300,115.95 | Interest (1,900,115.96 x 20% x6/12) eae Total balance tobe pal onthe 2 and soni 39 final installment an or before 6 mos 2,565 156.52 Transpacific was also required by the BIR to submit a suréty band twice the total balance to g jance to guarantee the payment of remaining VAT liability Criminal Penalties The fines to be imposed for any violation of the Code shall not be lower than P30,000 or twice the amount of taxes, interest, and surcharges due from the taxpayer, whichever is higher. Any person convicted of a crime penalized by the Code shall be liable not only for the payment of the tax but for the penalties imposed as well. Any person who willfully aids or abets in the commission of such crime or who causes the commission of any offense by another, shall be equally liable as the principal. all be deported immediately after serving the sentence without further proceedings for deportation if he is 2 mle officer or employee, the maximum penalty prescribed for the offense shal be impose and, in addition, he shall be dismissed from public service and shall be perpetually He is likewise disqualifi disqualified from holding any public office. Participate in any election. If the offender is not a citizen of the Philippines, he sh ied to vote and Penalties and Remedies | 453Il suffer imprison rs. The conviction or acquittal obtained shal ‘the collection of taxes. TRAIN Law or RA 10963 The TRAIN Law amends Sections 254, 264 and 269, and adds new provisions in Section, 264(A), 264(B), and 265-A, all of the NIRC: Sec. 254. Attempt to Evade or Defeat Tax.— Any person who willfully attempts in any manner to evade or defeat any tax imposed under this Code or the payment thereof shall, in addition to other penalties provided by law, upon conviction thereof, be punished with a fine of not less than Five hundred thousand pesos (P500,000) but not more than Ten million pesos (P10,000,000), and imprisonment of not less than six (6) years but not more than ten (10) years: Provided, That the conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for the collection of taxes. Sec. 264. Failure or Refusal to Issue Receipts or Sales or Commercial Invoices, Violations Related to the Printing of such Receipts or Invoices and Other Violations. — (a) xxx (b) Any person who commits any of the acts enumerated hereunder shall be penalized with a fine of not less than Five hundred thousand pesos (P500,000) but not more than Ten million pesos (P10,000,000), and imprisonment of not less than six (6) years but not more than ten (10) | years: | (1) xxx; (2) xxx; (3) xxx; or (4) Printing of other fraudulent receipts or sales or commercial invoices. Sec. 264-A. Failure to Transmit Sales Data Entered on Cash Register Machine (CRM)/Point of Sales System (POS) Machines to the BIR’s Electronic Sales Reporting System.— Any taxpayer required to transmit sales data to the Bureau's electronic sales reporting system but fails to do so, shall pay, for each day of violation, a penalty amounting to one-tenth of one percent (?/10 of 1%) of the 454 | Transfer and Business Taxationsec. 264-8. Purchase, Use, Possession pdate, Urarade, Keeping or Maint erson who shall purchase, use, update, upgrade, keep, ae io, y ble of: (a) suppressi ‘| capal ing the creati em that a taxpayer is required to keep unc of electron Pay (b) modifying, hiding, or deleting ele. providing a ready means of access to th than Five hundred thousand pesos (P500 000) pesos (P10,000,000), and suffer imprisonment i ) F no bless tl 3 not more than four (4) years: Provided, That a aan two (2) years but (tq electronic sales record in excess of the amount Peete AG of ‘Fifty million pesos (P50,000,000) shall be considered as economi : ies the maximum penalty provided for under this prwsioe nn Pe punished in Sec. 265-A. Offenses Relating to Fuel Marking.— All offenses relati marking shall, in addition to the penalties imposed under Title Monten as amended, Section 1401 of Republic Act No. 10863, otherwise known IRC, @ ‘Customs Modernization and Tarif Act (CMTA},’and other relevant laws ie punishable as follows: laws, be (a) Any person who is found to be engaged in the sale, trade, delivery, distribution or transportation of unmarked fuel in commercial quantity held for domestic use or merchandise shall, upon conviction, suffer the penalties of: (1) For the first offense, a fine of Two million five hundred thousand pesos (2,500,000); (2) For the second offense, a fine of Five million pesos (P5,000,000); and (3) For the third offense, a fine of Ten million pesos (P-10,0 and revocation of license to engage in any trade or business. 100,000) official fuel marking agent jon of fuel intended for sale storage, transfer or (b) Any person who causes the removal of th from marked fuel, and the adulteration or dilut to the domestic market, or the knowing possession, Penalties and Remedies | 455 ent ‘tax Assessment Operation — A systematic method of assess 2 Includes the appraisal of all items of real property at current market vane annie tniform application of assessment levels. Surrestteer hat aM CoS oc is ‘ 4) Tox Records Management System — Through tox de ax declarations, TPeroperty tax assessments are monitored. The Local Asessor maintain records forthe Continued accountability as to property ownership sneer 4) Tax Collection System ~ This is to ensure that the government is abe to collet al of th all of the real property taxes and penalties due it through the enforcement of tax a nt ws. fundamental Principles The appraisal, assessment, levy and collection of real property tax shall be guided by the following fundamental principles: eal property shall be appraised* at its current and fair market value eal property shall be classified” for assessment purposes on the basis ofits actual use; on the basis of a uniform classification within each local 1) 2) Nderstandy 3) Real property shall be assessed” € Philipp ines government unit; 4 Appraisal is the act or process of determining the value of property as of a specific date for a specific purpose. all real property, whether taxable or exempt, shal be appraised at the current and fair market value (EMV) prevailing in the locality where the property is situated. FMI isthe price 3t which a property may be sold by a seller who is not compelled to sell and bought by a buyer who's rot compelled to buy. The my ofa real property is declared by the owner subject to final determination by the assessor. For purposes of assessment, real property shall be classified as residential, agricultural, comm industrial, mineral, timberland or special. Real property shall be classified, valued and assessed on the basts of its actual use regardless of where located, whoever owns it, and whoever uses it, Actual use means the panes for which the property is principally or predominantly utilized by the person in possession thereof. Assessment isthe act or process of determining the value of property as of a specific date for a speci purpose. An assessment fixes and determines the tax liability f 2 t@xP2VEr sor ott of whe ych facto condi ercial, Local Direct Taxes \4mandate extends to territoria, uniformly applied to aj or Province. It is nop and provinces, cee be taxed at the same rate. This constitutional 3 an of local government units. Thus, a tax rate must be taxable subjects of the same class within each city, municipality, mandatory that the same tax rate be applied to ail cities, municiPalitieS Equity in taxation is achie table distribution oF the fox Dursen. ved through the equitable distribu In this vein, the LGC provides that the appraisal and assessment Of real property shall be equitable. There are two generally accepted principles of distributing the t2X load: the e ability to pay and the benefits received principles. 41) Abllity to Pay — One measure of a person’s ability to pay his tax liability is his Income, Other hs factors to consider are family obligations, marital status and dependency respensibilties, Some types of property may not be easily converted into money OF do not currently produce income. Although there is no income earned it is believed that a person who has a property having economic value is better able to make a tax contribution than he who has not, Benefits Received ~ Revenue from real property taxes finance local government services such as police protection, fire protection, and flood control, among others. The property ‘owner is a direct beneficiary of these services. 2) Power of Local Government Units to Levy and Administer Real Property Tax The 1987 Constitution empowers local government units (provinces, cities, municipalities and barangays) to create their own sources of revenue and to levy taxes, subject to such limitations as may be provided by law (Art. 10, Sec. 4) Under the Local Government Code of 1991, a province, a city, or a municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements. They are also primarily responsible for the proper, efficient and effective administration of the real property tax. 472 | Transfer and Business Taxationf rs and responsibiticn hae paar 4 classify lands 5 residential, agricultural Be cece beet ‘enact by ordinance the schedule of fair market en re. the: 1% re eceret esse of el property stusted nthe sneer to fx by ordinance the assessment levels to be ay 3) 10 My to determine its assessed value, " ix a uniform rate of basic real property tax applicable to th ective locatt prope! cable to their respective k es; 4 4 Togranta tax discount for advance and prompt payment, 4 Tocondone or reduce real property taxes and interests affected by a cal Y a calamity; 4) Toenact a tax ordinance imposing a special levy; and te funds to defray ex ) To appropria 'Y expenses incident to the Beneral revision of real Property assessments. suthority of the Local Treasurer to Collect The collection of the real property tax with interest thereon and related expenses, and , an the enforcement of the remedies are the responsibilities of the provincial, city, or municipal treasurer concerned. He may deputize the barangay treasurer to collect all taxes on real property located in the barangay, Powers and Duties of the Local Assessor The provincial, city or municipal assessor has the following powers and duties under the LGC: To declare the real property in the name of a defaulting owner or an unknown owner and y) assess the same for taxation; 2) To prepare and maintain an assessment roll that lists all real property located within the territorial jurisdiction of the local government unit; To establish a uniform classification system under which all declarations of real property 3) shall be kept and filed; asses of real property for To prepare a schedule of fair market values for the different cl enactment by ordinance before any general revision of property assessment; property; To obtain information on which to base the market value of any real 5 to correct errors in valuation in the sched 4) 5) 6) Torecommend to the sanggunian amendment me of fair market values; Local Direct Taxes | 473Metropolitan Manila Area (MMA) are - provinces, cities, and municipalities within the on real property: ‘authorized to levy, assess, and collect the following taxes ‘ax at a uniform rate applicable to their respective 4) An annual basic real property t localities: (a) In the case of a province, at the rate not assessed value of the real property; (b) Inthe case of a city, or municipality within the MMA, at the rate not exceeding two ret percent (2%) of the assessed value of the real property. t exceeding one percent (1%) of the 2) special levies (in addition to the basic real property t2%) within their respective territorial jurisdiction: {a) Annual Tax of one percent (1%) of the assessed value of the real property to accrue to the Special Education Fund (SEF)’. (b) Annual Tax on Idle Land of not exceeding five percent (5%) of the assessed value of the property. ATaxon Land Specially Benefited by Public Works Projects of the local government e actual cost of such projects and improvements. (o) of not exceeding 60% of thi Computation of Real Property Tax The determination of the real property tax involves the following procedures: | 1) The property is appraised by the Local Assessor at its fair market value; | 2) The fair market value is multiplied by the appropriate assessment level” in order to get | the assessed value’ of the property; and ae SEF isto be utilized for public educational purposes as may be determined by the Local School Boards. ‘Assessment level is the percentage applied to the market value to determine the assessed value of the property. The maximum rates of the assessment levels as prescribed in Section 218 of the LGC (see Appendix) shall be applied initially during the first general revision of real property assessments. The 474 | Transfer and Business TaxationMultiply by Assessment Levey Assessed Value Multiply by Tax Rate Real Property Tax Tax Year Fair Market Value Assessment Level “This rate is verifiable in the appendix of this chapter. Tax Rates Basic Real Property Tax (RPT) SEF The real property tax due is computed as follows. * Fair Market Value 1,384,028 ety, Multiply by Assessment Level ____ 359 “| Assessed Value 484,410 a Multiply by Basic Tax Rate ee bs Basic RPT 4,844.10 ‘Add: SEF Tax (same compu- tation as basic RPT) 4,844.10 9,688.20 Total Tax Due s to be assessment levels for the different classes of real property may be increased or decreased at rates fixed by ordinance. level. tis * Assessed value is the fair market value (FMV) of the real property multiplied by Oe eer ie synonymous to taxable value. It is merely a percentage of the FMV depending on the ass the property, joes not apply, » The formula applies to the basic real property tax, SEF tax and tax on idle lands; it ds however, to tax on land specially benefited by public works projects. Local Direct Taxes | 475Sr ames rues , and ‘and all lands, buildings, and improvements actually, /- and exclusively used for religious, charitable or educational PUrPO=SS: tly and exclusively used by local water o s engaged in the supply ang ; pi 3) All machi 'achineries and equipment that are actually, dite dist mane ne) government-owned or controlled corporation: ution of water and/or generation and transmission of electric POWEE: and 4 ) All eal property owned by duly registered cooperatives as provided for under ae won : | 5) Machinery and equipment used for pollution control and environment protection: eee Upon the effectivity of the Local Government Code of 1994, exemptions from payment on (OF real property tax previously granted to all persons, government-owned oF controlled eer corporations (GOCCs) included, have been withdrawn. aot oa pete Date of Accrual of Tax The real property tax for any year shall accrue on the first (1") day of January. From that day on, it shall constitute a lien? on the property which shall be superior to any other lien, mortgage, or encumbrance. Such lien shall only be extinguished upon payment of the delinquent tax. “Accrual of tax” is to be distinguished from “time or period of payment of tax’. Although the tax becomes due as it accrues, there is a provision as to the time or period on or within which such tax may be paid without penalty. Payment of Real Property Tax in Instalments erty tax and the additional tax for Special Education Fund (SEF) may 1. However, the taxpayer has the option to al quarterly instalments The basic real prop be paid in lump sum on or before March 3: pay the same without interest in four (4) equ 41 properties exempt from payment of the basic real property tax are likewise exempt from the additional ‘one percent (1%) SEF Tax. 2 {A tax lien is a legal claim or charge on property (whether real or personal) established by law as 2 sort of security for the payment of tax obligations. 476 | Transfer and Business Taxationent for real property taxes shall first be 4 ssts, and penalties, if any. Only afte sents be eredited to the current period. PPLIED to prior yo, "Said delinquencies wee piscount for Advance and Prompt Payment differs from prompt ‘Advance payment Prompt payment. Advance paym mfr to these made before the accrual ofthe tax In the ghey pe oe accrues on January 1, payment must be made before the Eee y Said date to Hi payment. “Advance payments” may be entitled to the mayne jay asadvance percent (20%). mum discount of twenty lustration: The following data pertain to improve A onary Baile cy: provements made on a commercial Tax Year 2008 Date Real Property Tax is Paid Dec. 13, 2007 Fair Market Value 448,920 Assessment Level 35%* “This rate is verifiable in the appendix of this chapter, Tax Rates Basic Real Property Tax (RPT) 2% SEF 1% Advance Discount Rate 20% Fee per P.D. 1185 (Fire Code of 1977) 01% of assessed value (AV) Local Direct Taxes | 477Add: Fee per P.D. 1185 (01% x Av) oa Total Tax Due 3,786.64, 0 i at and the additional SEF tax are YS There aw oy Prompt payment if the basic real property t@ Faeren Of Before the deadlines set forth thet is, on ° ferly instalments starting March 31. “Prompt payme” ten percent (10%). Mlustration: Improvements have been made on Below are other pertinent data: Tax Quarter Date real property taxis paid Fair Market Value Assessment Level *This rate is verifiable in the appendix of this chapter. Tax Rates Basic Real Property Tax (RPT) SEF Prompt Discount Rate Fee per P.D. 1185 (Fire Code of 1977) The real property tax due is presented as follows: Fair Market Value Multiply by Assessment Level Assessed Value (AV) Multiply by Basic Tax Rate 478 | Transfer and Business Taxation 1 before ‘a. commercial Prope’ ‘March 31, oF in four te’ may be given a discount of ty in Manila City, 4s" quarter, 2008 March 25, 2008 392,805 35%" 2% 1% 10% .01% of assessed value (AV) 392,805 pans 5%) 137,482 2hyer must pay the tax first before hi )) days from payment of the tax, er from receipt. $e decided in favor of the taxpayer, the amount protested shall be 1) refunded to him, or 2) credited against his existing or future tax liabilities If protest is denied or upon the lapse of the 60-da the Local Board of Assessments Appeal (LBA) Assessments Appeal (CBAA) yy period, the taxpayer may appeal to A), then to the Central Board of Interest on Unpaid Real Property Tax A taxpayer who fails to pay the real property tax upon the expiration of the period set forth in the LGC or when due shall pay interest at two percent (2%) per month on the Unpaid amount until the delinquent tax shall have been fully paid, but in no case to exceed thirty six (36) months. Real property taxes are payable in four equal instalments. Delinquency for non-payment begins only after the lapse of each instalment period when no tax was paid. Should the taxpayer fail to pay the first quarter instalment of the real property tax on time, such failure shall constitute a waiver on the part of the property owner-taxpayer to settle his annual real property tax obligation in four equal instalments without penalty. If a portion of the teal property tax due for the first quarter is not paid on ee the 31* day of March, interest shall be reckoned from the 1* day of eu st) y month of delinquency based on the amount due for the whole year. For an iment Phy Local Direct Taxes |Tax Rates Basic Real Property Tax (RPT) SEF Prompt Discount Rate The computation ofthe real property tax due flO" ah eran Sub Basic penalty ub re Tax Penalty Tax count) total 1 in Year Quarter pus (Oscoun pues (De ‘ 2006 all 311.10 74.66 2007 Ast __ 77.78 __(7.78)_ 388.88 66.88 ee Total Tax Due Supporting computations: 0 x 20% = P20,740 ‘Assessed Value (AV) = FMV x AL = P103,70 Tax Basic SEF Year Quarter Tax Due Penalty (Disc.) Tax Due Penalty (Disc) 2006 All 20,740x1.5% 311.10%24% 20,740 1% 207.40x24% 2007 Ast 20,740 x 1.5% +4 (77.78 x 10%) 20,740 x 1% +4 (51.85 x 10%) Period within which to Collect Real Property Taxes s shall be collected within five (5) years from the date they become no action for the collection of the tax shall be initiated Real property taxe: ax, the period is withinte due. After this period expires, However, in case of fraud or intent to evade payment of the t (10) years from the discovery thereof. 480 | Transfer and Business Taxationhe local government 7 Feal property or by j ie e court of inistrative remedies which are summary in nature 4) Levy onreal property, and 2) Sale of real property at public auction, the administrative and judicial remedies are Cumulative, simultaneous lane i unconditional, that is, any or all of the remedies or Combination thereof may be "resorted to, and the use or non-use of one remedy shall Not be a bar against the institution of the others. Formal demand for the payment of the delinguent taxes and ties, The notice of delinqueney required Psettion 254 of the LGC shall be sufficient for the purpose, General Revision of Assessments and Property Classification The primary purpose of the general revision of real Property assessments is to update valuations. The process allows the assessor to rediscover Properties that have been lost fables the assessor to remove from from the assessment roll. Likewise, the revision en: the roll properties that have been doubly assessed and those which had already been destroyed. The provincial, city, or municipal assessor shall undertake a general revision of real Property assessments within two (2) years after the effectivity of the LGC and every | three (3) years thereafter. The general revision of assessments and property classification shall commence upon the enactment of an ordinance by the sanggunian concerned adopting the schedule of fair market values but not later than two years from the effectivity of the LGC, Thereafte) r, the Provincial, city or municipal assessor shall undertake the general revision of real Property assessments and property classification once every three years. Local Direct Taxes | 481ls to be applied to the fair market value of real property to value shall be fixed by ordinances of the songguniang panlungsod or sangguniang bayan of a municipality within Area, at the rates not exceeding the following 2 Assessment : Glass Levels Residential 20% Agricultural 405 ‘Commercial 50% Industral 50% Mineral SON Timberland 20% Fair Market Value Assessment Over Not Over Levels Z ® 175,000.00 0% 2 P 175,000.00 300,000.00 10% 300,000.00 500,000.00 20% i 500,000.00 750,000.00 5% 750,000.00 4,000,000.00 30% 31,000,000.00 2,000,000.00 asm. 2,000,000.00 5,000,000.00 40% 5,000,000.00 _10,000,000.00 50% 110,000,000.00 60% 2) Agricutural Fair Market Value Assessment Over Not Over Levels 300,000.00 25% 300,000.00 500,000.00 30% $500,000.00 750,000.00 35% 750,000.00 1,000,000.00 40% 1,000,000.00 2,000,000.00 45% 2,000,000.00 50% 2,000,000.00 5,000,000.00 110,000,000.00 (8) Timberland Falr Market Value over 300,000.00 ‘500,000.00 750,000.00 4,000,000.00 2,000,000.00 (2) On Machineres: lass ‘Agriculeural Residential ‘Commercial Industral (3) On special Classes: The assessment levels forall ands, buildings, machineries and other improvements: ‘Actual Use Cultural Scientific Hospital Local water distriets Government-owned or controlled corporations engaged inthe supply and distribution of water , and/or generation and transmission of electric power