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Tax - Week 8 - TAX REMEDIES UNDER THE NIRC; CTA - Coggle Diagram

- - - - 1. Interpret tax laws and decide cases
        
        Sec. 4, NIRC
        
        DOF Department Order No. 7-2002
        
        RMC 44-2001 (see for reference RMO 9-2014)
        
        2. Obtain information (Sec. 5, NIRC; RMC 12-18; RM) 10-13, as amended by RMO 08-14)
        
        To examine material and/or relevant info
        • To obtain information from a third party re-investigation
        • To summon taxpayer to produce documents
        • To take testimony
        • To conduct surveillance, inventory taking, prescribe presumptive
        Gross sales and receipts
        • To terminate taxable period
        • To prescribe real property values
        
        3. Make assessments and prescribe additional requirements for tax administration and enforcement (Sec. 6, NIRC)
        
        4. Delegate power (Sec. 7, NIRC) - Commissioner may delegate the power to assess taxes to his subordinates (Section 7, NIRC); to approve the filing of criminal cases.
        
        5. Ensure the provision and distribution of forms, receipts, certificates and appliances and the acknowledgment of payment of taxes (Sec. 8, NIRC; RA 10351, implemented by RR 17-12; RR 07-14, as amended by RR Nos. 08-14, 09-14, 09-15, 06-17; RMO 33-16) -
        
        6. Assign revenue officers to perform specific functions (Secs. 16 and 17, NIRC)
        
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        Duty of CIR to prescribe, provide, and distribute the following:
        
        Requisite Licenses
        
        Internal Revenue Stamps
        
        unique, secure and nonremovable identification markings (hereafter called unique identification markings - such as codes or stamps, be affixed to or form part of all unit packets and packages and any outside packaging of cigarettes and bottles of distilled spirits; labels and other forms; certificates; bonds; records; invoices; books; receipts; instruments; appliances and apparatus used in administering the laws falling
        
        Non-Delegable Powers -
        
        (1) To recommend the promulgation of rules and regulations by the Secretary of Finance;
        
        (2) To issue rulings of first impression or to reverse, revoke or modify any existing BIR ruling
        
        (3) To compromise or abate any tax liability
        
        a. But if P500,000 or less, he can delegate
        
        (4) To assign or reassign officers to establishments where excise tax articles are produced or kept.
        
        Requirement of Letter of Authority - Any assessment of tax made by the CIR revenue officer without a letter of authority are considered nullities.
        
        Such LOAs must cover a taxable period NOT exceeding 1 year.
        
        W/N Marcos tax liability assessed on best evidece obtainabkle
        
        Scope of Authority - CIR authorized to:
        
        (A) Examination - Authorize the examination of any taxpayer and the assessment of the correct amount of tax. Regardless, if return has been filed or not.
        
        (B) Best Evidence Obtainable - Where report has not been filed, is false, incomplete, or erroneous, CIR shall assess the proper tax on the best evidence obtainable.
        
        (C) Miscellaneous - may order the following:
        
        Conduct Inventory-taking of goods of any taxpayer as basis for tax liabilities
        
        place the business under observation or surveillance if reason to believe not declaring correct income
        
        Prescribe minimum amount of gross receipts if failed to issue receipts and invoices or, reason to believe misdeclaration.
        
        (D) Terminate Taxable Period - If taxpayer retiring or intending to leave PH or, remove property, or any act obstructing tax collection, CIR shall declare the tax period of such taxpayer terminated at any time and shall send the
        taxpayer a notice of such decision.
        
        (E) Real Property - CIR may determine market value of real properties in zones it has determined.
        
        (F) Inquire Into Bank Deposits
        
        (G) Register Agents -
        
        (H) Prescribe Additional Procedural or Documentary Requirements
        
        Determination of Zonal Value - This must be done upon consultation with competent appraisers both from the public and private sectors [CIR v. Aquafresh Seafoods, Inc. (2010
        
        Best Evidence Obtainable Rule - Where tax report required by law is unavailable such as incomplete or fraudulent, may make assessment on the basis of best evidence. Can cover 3rd party information.
        
        When Bank Deposits may be Inquired Into -
        
        (1) A decedent to determine his gross estate
        
        (2) Any taxpayer who has filed an application for compromise based on financial incapacity, or
        
        (3) Pursuant to an international convention or tax
        
        To inquire into bank deposits and info held by financial institutions
        
        To accredit and register tax agents
        
        To prescribe additional or procedural requirements
        
        71/270 of the NIRC - Provisions on disclosures by the BIR, specifically those on request for information of foreign authority.
      - D. Authority of Revenue District Officers and Other Internal Revenue Officers
        
        1. Examine taxpayers pursuant to a Letter of Authority (Sec. 13, NIRC) - examine taxpayers within the jurisdiction of the district in order to collect the correct amount of tax, or to recommend the assessment of any deficiency tax due in the same manner that the said acts could have been performed by the Revenue Regional Director himself.
        
        2. Administer oaths and take testimony (Sec. 14, NIRC) - the power to administer oaths and to take testimony in any official matter or investigation conducted by them regarding matters within the jurisdiction of the Bureau.
        
        3. Make arrests and seizures (Sec. 15, NIRC) - shall have authority to make arrests and seizures for the violation of any penal law, rule or regulation administered by the Bureau of Internal Revenue. Any person so arrested shall be forthwith brought before a court, there to be dealt with according to law.
        
        E. Agents and Deputies for Collection of National Internal Revenue Taxes (Sec. 12, NIRC; RMO 30-01, as amended by RMO Nos. 11-08 and 42-11; RR 03-16)
        
        F. Rule-making authority of the Secretary of Finance (Secs. 244-246, NIRC)
        
        Contents of Rules and Regulations - rules and regulations of the Bureau of Internal Revenue shall, among other things, contain provisions specifying, prescribing or defining:
        
        Non-Retroactivity of Rulings - Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers.
        
        Exceptions - May be made retroactive where:
        
        (a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue;
        
        (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or
        
        (c) Where the taxpayer acted in bad faith.
        
        Enumeration of Agents -
        
        (a) The Commissioner of Customs and his subordinates with respect to the collection of national internal revenue taxes on imported goods;
        
        (b) The head of the appropriate government office and his subordinates with respect to the collection of energy tax; and
        
        (c) Banks duly accredited by the Commissioner with respect to receipt of payments of internal revenue taxes authorized to be made thru banks.
        
        Liability for Penalties - Any officer or employee of an authorized agent bank assigned to receive internal revenue tax payments and transmit tax returns or documents to the Bureau of Internal Revenue shall be subject to the same sanctions and penalties prescribed in Sections 269 and 270 of this Code.
    - - Retroactive Application (ABS-CBN v. CTA) - Rulings or circulars promulgated by the CIR have no retroactive application where to so apply them would be prejudicial to taxpayers.
  - - - B. Period of Limitation to Assess (Sec. 203, NIRC)
        
        In General - Internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return,
        
        a. Counting of the 3-Year Period - Section 31, Administrative Code of 1987. Legal Periods. -
        
        Year shall be understood to be twelve calendar months;
        
        Month of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains;
        
        "Day," to a day of twenty-four hours; and
        
        "Night," from sunset to sunrise.
        
        Date for Prescription - date when the demand letter or notice is released, mailed or sent by the CIR to the taxpayer [Basilan Estates v. CIR (1967)].
        
        The prescriptive period should be counted from the date
        that the BIR assessed the income tax return of the taxpayer
        
        Requirement of Evidence - Substantial evidence is NEEDED to be proven by the CIR to show that the assessment notice was mailed before prescription sets in.
        
        Presumption of correctness will not set in absent substantial evidence to prove the same.
        
        Form of Return Filed -
        
        An income tax return cannot be considered as a return for compensating tax for purposes of computing the period of prescription under Section 331 of the Tax Code, - The taxpayer must file a return for the particular tax required by law in order to avail himself of the benefits of Section 331 of the Tax Code
        
        Amended Returns - when a taxpayer files an amended return which is substantially different from the original return, the period of prescription should be counted from the filing of the amended return. [CIR v. Phoenix Assurance Co. (1965)]
        
        No Return Filed - If the taxpayer files the wrong return, it is as if he has filed no return at all. The 10-year prescriptive period will apply. [Butuan Sawmill v. CA (1966)]
        
        Exceptions
        
        a. False, Fraudulent or Failure to File a Return (Sec. 222(a), NIRC) -
        
        False Return - Contains wrong information due to mistake, carelessness or ignorance
        
        Fraudulent Return - Made with intent to evade taxes due
        
        Failure to File a Return - Omission to file a return within the time prescribed by law
        
        Surcharge - Generally, no 50% surcharge unless done willfully.
        
        Definition of Fraud - question of fact and the circumstances constituting fraud must be alleged and proved in the court. Fraud is never lightly to be presumed because it is a serious charge.
        
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        Prima Facie Presumption of Fraud (248B) - A substantial underdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall constitute prima facie evidence of a false or fraudulent return.
        
        When Assessment Made - Assessment may be made within 10 years after discovery of the falsity, fraud or omission
        
        Effect of Failure to Report - Failure to report sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of deductions in an amount exceeding thirty percent (30%) of actual deductions à taxpayer liable for substantial underdeclaration of sales, receipts or income or for overstatement of deductions.
        
        b. Waiver of Prescription (Sec. 222(b), NIRC) - The taxpayer and the CIR may agree in writing, BEFORE the expiration of the time prescribed in Sec. 203, to extend the period of assessment. [Sec. 222(b), NIRC]
        
        Interpretation of Waiver - A waiver of the statute of limitations is a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed.
        
        However, the waiver does not mean that the taxpayer relinquishes the right to invoke the defense of prescription unequivocally particularly where the language of the document is equivocal. [Philippine Journalists Inc. v. CIR, G.R. No. 162852 (2004)]
        
        Requisites for Valid Waiver (RMO 14-2016)
        
        Must be in writing,
        
        Executed before the expiration of the prescriptive period. The date of execution shall be indicated.
        
        Signed by the taxpayer himself or his authorized representative. In a corporation, it must be signed by its responsible officials
        
        expiry date of the period agreed upon to assess/collect the tax after the regular 3-year period of prescription should be indicated.
        
        Except for waiver of collection of taxes which shall indicate the particular taxes assessed, the waiver need not specify the particular taxes to be assessed nor the amount thereof, and it may simply state “all internal revenue taxes”.
        
        May or may not be notarized.
        
        CIR or designated officials or the concerned revenue district officer or group supervisor must indicate acceptance by signing the same before the expiration of the period to assess or collect taxes, or before the lapse of the period agreed upon in a prior agreement.
        
        The taxpayer has the duty to retain a copy of the accepted waiver.
        
        Material Date Requirements - Must be present on the waiver
        
        The date of execution of the waiver by the taxpayer or its authorized representative; and
        
        The expiry date of the period the taxpayer waives the statute of limitations
        
        Effect of Non-Compliance With Requisites -
        
        GR - VALID and INEFFECTIVE to extend the prescriptive period to assess taxes.
        
        XCPN - When both the BIR and the taxpayer are in pari delicto or “in equal fault” BIR’s lapses were allowed to pass and consequently uphold the validity of the waivers in order to support the principle that taxes are the lifeblood of the government. [CIR v. Next Mobile, Inc., G.R. No. 212825 (2015)]
        
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        C. Period of Limitation to Collect (Secs. 203, 202(c) and 222(d), NIRC) -
        
        GR - the prescriptive period to collect the taxes due is 5 years from the date of assessment.
        
        XCPN -
        
        (1) False or fraudulent return with intent to evade taxes:
        within 10 years from discovery without need for prior
        assessment.
        
        (2) Failure or omission to file a return: within 10 years from
        discovery without need for assessment.
        
        (3) Waiver in writing executed before the five-year period
        expires: period agreed upon.
        
        Period of Assessment v. Collection -
        
        3 years for prescription to assess,
        
        5 years for
        prescription to collect.
        
        When Deemed Collected - Depends of mode of collection.
        
        Summary Remedies - Such as distraint and levy, then begun by the issuance of the warrant and service thereof to the taxpayer
        
        Judicial Remedies - Filing before court.
        
        D. Suspension of Running of Prescription Period (Sec. 223, NIRC)
        
        E. Prescription for Violation of Any Provision of the Tax Code, Criminal Cases (Sec. 281, NIRC) - All violations of any provision of this Code shall prescribe after Five (5) years.
        
        Tolling of Period - Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.
        
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        Requisites for Suspension of Period to Enforce Collection (223) -
        
        (a) That the taxpayer requests for reinvestigation, and
        
        (b) that petitioner grants such request.
        The mere filing of a protest letter which is not granted does not operate to suspend the running of the period to collect taxes.
        
        Where prescriptive period for both the power to assess and power to collect can be suspended
        
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        Return Filed beyond Prescriptive Period - Where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed.
        
        For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
        
        Dates of Filing Returns -
        
        Income Tax – April 15
        
        VAT – 25 days from the end of the taxable quarter
        
        Effect of Assessments Beyond Period - Assessments made beyond the prescriptive period are not binding on the taxpayer. [Tupaz v. Ulep (1999)]
        
        Definition of Assessments - The notice to the effect that the amount therein stated is due from a taxpayer as a tax with a demand for payment of the same within a stated period of time. [CIR v. CTA, G.R. No. L-21483 (1969)]
        
        Final assessment is the reckoning period, not preliminary assessment.
        
        Presumption of Correctness - An assessment is presumed correct and made in good faith in the performance of official duties and failure to present proof of error will prosper such assessment. [Atlas Consolidated Mining and Development Corp. v. CA, G.R. No. 104151 and 105563 (1995)].
        
        Exercise of Right to Assess - Generally, there must be assessment before collection.
        
        GR - The right to assess must be exercised within 3 year, whichever is later from
        
        The day the return was actually filed, or
        
        From the last day for filing the return (if the return was filed before the last day prescribed by law),
        
        XCPN - Section 222(A), NIRC herein judicial action to
        collect is permitted even without an assessment when the
        taxpayer files a false or fraudulent return with intent to evade
        the tax or fails to file a return. Collection must be done within 10 years after the discovery.
      - Interpretation - The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficient purpose of affording protection to the taxpayer within the contemplation of the Commission which recommended the approval of the law. [Republic of the Philippines v. Ablaza]
- - - - Improperly Accumulated Earnigns taxes - prescribe, because as of 2000 there are alreayd tax returns for the payment of these.
        
        Note that CREATE act repealed these provisions. But, there are pending cases involving taxpayers prior to create act where asessemnets were issued for this.