Please enable JavaScript.

Coggle requires JavaScript to display documents.

Tax Week 9 - III. REMEDIES OF THE GOVERNMENT, Scope of Authority (Sec. 6) …

- - - - 2. Procedures in preparing assessments
        
        Assessment Proper (Sec. 228, NIRC; RR 12-99, as amended by RR 18-13 and RR 7-2018)
        
        Notice of discrepancy (RR 12-99, as amended by RR 18-13, RR 7-2018 and RR No. 22-2020)
        
        Preliminary assessment notices (PAN) Sec. 228, NIRC; Sec. 3.1.1, RR 12-99 as amended by RR 18-13, RR 7-2018
        
        When is PAN not necessary (Sec. 228, NIRC
        
        Response of Taxpayer to PAN, 15 days from receipt, RR 18-13
        
        Formal Letter of Demand/Final Assessment Notices (FLN/FAN) (Sec. 3.1.3,
        
        Protest of taxpayer (Sec. 228, NIRC; RR 18-13)
        
        2 more items...
        
        3. Due Process in Assessment
        
        4. Presumption of Regularity of Assessment
        
        5. Assessments deemed made
        
        6. Imposition of Civil Penalties
        
        7. Collection of Delinquent Taxes
        
        Consequences of Non-Payment of Donor's Tax - Can be subdivided into the following:
        
        Civil Liabilities -
        
        Interest
        
        Compromise Penalties
        
        Other Penalties
        
        2 more items...
        
        Requirements
      - Kinds of Assessment -
        
        Self-Assessment – when the taxpayer computes his own liability, files his return, and pays the tax based on his computation [Section 56(A)].
        
        Deficiency assessment – occurs upon discovery of the BIR that the self-assessment was either deficient, or when no return was made by the taxpayer.
        
        Importance of Demand - Since it is a demand to pay, the final assessment notice (FAN) must indicate the definite amount of tax to be paid and the due date for the payment.
        
        Without the definite amount or the date when the tax must be paid, it is NOT a valid demand and is therefore an invalid assessment. [CIR v. Fitness by Design (2016)]
        
        Form and Content - must be in writing and must inform the taxpayer of the law and the facts on which the assessment is made. Otherwise, considered void.
        
        By Whom made - CIR, but may authorize any revenue officer to conduct an examination or assessment, through a Letter of Authority (LOA).
        
        How Served - the notices (PAN, FLD, FAN, FDDA) may be served in the following modes
        
        (1) Personal service – the preferred mode of service
        (2) Substituted service – by leaving the notice with someone at the taxpayer’s known address
        (3) Service by mail – service to the tax agent shall be deemed service to the taxpayer
  - - - b. Period within which to amend a Return
        
        GR - Any return, statement or declaration filed in any office authorized to receive the same shall not be withdrawn.
        
        BUT, within 3 years from the date of such filing, the same may be modified, changed, or amended.
        
        Requirement: no notice for audit or investigation of such return, statement or declaration has, in the meantime, been actually served upon the taxpayer
      - Requirement of LOA -
        
        GR - The issuance of an LOA is a mandatory statutory requirement. Thus, any assessment without LOA is a violation of the taxpayer's right to due process and deemed void.
        
        XCPN -
        
        a. Cases involving civil or criminal tax fraud which fall under the jurisdiction of the Tax Fraud Division of the Enforcement Services, and
        
        b. Policy cases under audit by the special teams in the National Office. [RMO 36-99]
        
        Letter Notice - A Letter Notice (LN) is not found in the NIRC and is not an authority to conduct an audit. The LN is merely a notice to the taxpayer that a discrepancy is found based on the BIR’s third party information data matching programs. Thus, an LOA must still be secured before proceeding with the further examination and assessment of the taxpayer. [Medicard Philippines, Inc. v. CIR, G.R. No. 222743 (2017)]
        
        Notice for Informal Conference - If the taxpayer is not amenable, based on the said Officer’s submitted report of investigation, the taxpayer shall be informed, in writing, of the discrepancies in the taxpayer’s payment of his internal revenue taxes for the purpose of “Informal Conference,” in order to afford the taxpayer with an opportunity to present his side of the case.
        
        Tax Audit -process of examining, going over or scrutinizing the books and records of the taxpayer to ascertain the correctness of the tax declared and paid by the taxpayer
        
        Period for Audit - A Revenue Officer is allowed only 120 days from the date of receipt of an LOA by the taxpayer to conduct the audit and submit the required report of investigation
        
        If unable to, then must submit a progress report to
        his Head of Office, and surrender the LOA for revalidation. [BIR’s General Audit Procedures and Documentation]
    - - a. Keeping of Books of Accounts (Sec. 232(A); RMC 29-19; RMC 68-17) - Books of Accounts shall be kept at all times in the place of business of the taxpayer. Such books and registers, together with records, vouchers, and other supporting papers and documents prescribed by the BIR, kept by taxpayers shall be preserved intact, unaltered and unmutilated. Keeping of two or more sets of records or books of accounts is prohibited.
        
        b. Preservation of Books (Sec. 235, NIRC; RR 09-09) - Books shall be preserved for a period beginning from last entry in each book until last period in Sec. 203.
        
        c. Examine any relevant books or documents (Sec. 5(A))
        
        d. Third Party information (Sec. 5(B))
        
        e. Subpoena Duces Tecum and Ad Testificandum (Sec. 5(C) and (D), NIRC)
        
        f. Best Evidence Obtainable (Sec. 6(B), NIRC; RMC 23-00)
        
        1 more item...
        
        When Inspection Made -
        
        GR - That for income tax purposes, such examination and inspection shall be made only once in a taxable year.
        
        XCPN - in the ff cases:
        
        (a) Fraud, irregularity or mistakes, as determined by the Commissioner;
        
        (b) The taxpayer requests reinvestigation;
        
        (c) Verification of compliance with withholding tax laws and regulations;
        
        (d) Verification of capital gains tax liabilities
        
        (e) In the exercise of the Commissioner's power under Section 5(B) to obtain information from other persons in which case, another or separate examination and inspection may be made.
        
        How Inspection made - shall be done in the
        taxpayer's office or place of business or in the office of the Bureau of Internal Revenue
        
        Forms of Books of Account (RMC 29-19) - may be in the following forms:
        
        (1) Manual Books of Accounts;
        
        (2) Loose leaf Books of Accounts (with Permit to Use);
        
        (3) Computerized Books of Accounts (with Permit to Use).
        
        When Registered - anual books of accounts shall be registered before the deadline for filing of the first quarterly income tax return or the annual income tax return whichever comes earlier.
        
        Retention period - All taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records, for a period of ten (10) years reckoned from:
        
        the day following the deadline in filing a return, or
        
        if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts:
        
        Provided that, within the first five (5) years reckoned from the day following the deadline in filing a return or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts,
        
        the taxpayer shall retain hardcopies of the books of accounts, including subsidiary books and other accounting records.
        
        Thereafter, the taxpayer may retain only an electronic copy of the hardcopy (paper) of the books of accounts, subsidiary books and other accounting records in an electronic storage system which is compliant with the requirements set forth under Section 2-A, of RR 5-2014.