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MSJG TAX 1 Chap 2

Mar Sean Jan Gabiosa


Chapter Notes
Income Taxation 7th edition Valencia and Roxas
Chapter 2 Tax Administration
Tax Administration

} Assessment and
} Collection
Department of Finance is responsible for the fiscal policies and general
management of Phil Gov. financial resources.
DOF has executive supervision and control over: BIR, BC, LTO, Authorized
Collectors, and Local Offices.
Other Tax enforcers
Secretary of Justice (Chief Legal Officer)
Various Offices such as Register of Deeds, City Fiscal, Board of Investments
Head of appropriate gov. agencies
Banks duly accredited
BIR tasked with the enforcement of NIRC
BIR has 6 Deputy Commissioners
The Commissioner of Internal Revenue (CIR) is the chief official.
Taxpayer may appeal to the CTA (Court of Tax Appeals) within 30 days.
Letter of Authority used by BIR to access taxpayers tax returns
Authority to make tax assessment can be delegated to subordinate officers.
Taxpayer should be informed of the assessment otherwise it shall be void.
Registration Requirements
Only one TIN shall be assigned to a taxpayer, otherwise he shall be criminally
liable.
BIR Forms for registrations:
Form 1901 self-employed, mixed income individuals
1902 purely compensation income
1903 corporations and partnerships
1904 person under E.O. 98 (one-time taxpayer for
securing to transact with government).
1905 updating/cancellation/new copy of TIN.
BIR Form 605 - upon payment of reg fee for new business or renewal;
upon notice from BIR; and every time tax liability or penalty is due or advance
payment is made.
EFPS- Electronic Filing and Payment System

In case of Transfer of Ownership, when an individual dies who has paid the
annual registration fee; and Change name of a business:
Both (a) the same business is continued with no additional payment required for
the remaining period.

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MSJG TAX 1 Chap 2

(b) the person should submit inventories of god or stock to BIR within 30 days
from the death of decedent.
Transfer of location or place of business or his head office or branch, a taxpayer
requires no additional payment, but:
(a) must secure necessary tax clearance from the RDO (Revenue District
Officer).
(b) tax return still due must be paid to original places RDO.
Sales/Commercial Invoice issued by the seller of goods to buyer
Receipt - sales of services.
Issuance Of Receipts, Sales Or Commercial Invoice
Time of issuance of receipts should be the time when transaction is effected.
All person subject to internal revenue tax are required to issue receipts/invoice
when good or services rendered 25(twenty-five pesos) or more.
Regardless of amount, a receipt must be issued when:
a) rentals, commissions, compensation or fees;
b)VAT-registered person makes the sale to another VAT-registered person.
The issuer of receipt shall keep the duplicate for 3 years.
Tax returns refers to a formal report prepared by the taxpayer or his agent in a
prescribed form showing an enumeration of taxable amounts and description of
taxable transactions, allowable deductions, amount of tax and tax payable to the
government.
Tax returns BIR Forms:
1700 and 1701 Annual Income Tax Returns for Individual
1702 Annual Tax Return for Corporations and Partnerships
1800 Donors Tax return
1801 Estate tax return
Tax remedies are procedures available to both government to collect taxes and
taxpayer to avoid abuses in payment of taxes.
Tax assessment is a formal letter made by the BIR demanding the taxpayer to
settle his liability. Not yet an action for collection but an introduction to that
purpose.
Kinds of Assessment:
Self-Assessment
Prospective Assessment (Preliminary Assessment Notice[PAN])
Disputed Assessment
Final Assessment
Deficiency Assessment
Jeopardy Assessment
Illegal or Void Assessment
FLD (forma letter of demand) and FAN (final assessment notice) shall be issued by
BIR when:
a) taxpayer fails to respond within 15 days from date of receipt of the PAN; or
b) disagrees with the findings of deficiency tax.
Way to Contest the Validity of an Assessment

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MSJG TAX 1 Chap 2

a) Motion for Reconsideration


- review again without additional
evidences
b) Motion for Reinvestigation
- review again with new evidences
(submitted within 60 days)
c) Motion for Withdrawal
- withdrawal of a tax plea bargain
d) Motion for Cancellation
- stop the tax assessment of BIR due to
prescription and violation of due process of law by
Administrative remedies for the collection of delinquent taxes are: Distraint of
personal property; Levy of real property; and others.
Judicial remedies are means of enforcing tax collection through court litigations:
Civil action or Criminal action.
Distraint of personal property and Levy of Real property shall not be availed of if
the amount of tax involved is not more than 100.
Any excess proceed of the sale of both personal or real property shall be returned
to the owner of the property.
Other collection remedies are some:
Imposition of Injunction
- restraining order
Enforcement of tax lien
- property is to be seized (any excess from sale is returned to owner) or
forfeited
Enforcement of forfeiture
Entering into compromise of tax case
Requiring the filing of bonds
Requiring proof of filing of income tax returns
Giving rewards to informers
Making arrest, search and seizure
Deportation of aliens
Inspection of books of accounts
Use of national tax register
Imposition of civil and criminal action
Compromise is a contract whereby the parties, by reciprocal concessions, avoid
litigation or end to one already commenced. Authority is vested exclusively to BIR
Commissioner for government compromise.
Where actual payment of tax is not readily done and will cause delays, a bond can
be secured instead. Posting of bonds is mostly applicable to customs duties and
excise tax.
Before renewal of business license or profession, proof of filing income tax return
may be done.
Informers reward
For violation of NIRC
Except revenue official, public officer or his relative within 6 th degree of
consanguinity, any person shall be rewarded:
10% of revenue, surcharges and fees recovered; or
1,000,000 per case
Whichever is lower if:
a) Voluntarily and BIR has no evidence yet

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b) Said information leads to the discovery of the fraud
c) The discovery resulted in recovery of revenues.

For discovery and seizure of smuggled goods


10% of the fair market value of goods; or
1,000,000 per case
Whichever is lower
Tax fraud and evasion case is basically a criminal case. Fraud is never presumed; it
must be proven
Due Dates
Some:
a) Income tax (employee)
April 15 (BIR Form 1700)
b) Income tax (business/profession)
First quarter (Jan-Mar) April 15
Second qtr. (Apr-June) August 15
Third qtr. (July-Sept) November 15
Annual April 15 Succeeding year
(Form 1701)
Surcharges and Interest may impose by the government to ensure tax collection.
BIR is not vested the authority to waive the collection of surcharges, it is
mandatory.
Tax surcharges are classified as simple neglect and willful neglect.
Simple neglect 25% surcharge
Separate violations(which means one violation can be still be added):
a) Fails to file on due date
b) File the tax to officer whom is not required to be filed
c) Fail to pay deficiency
d) Fails to pay full or part(before notice)
Willful neglect - 50% surcharge
a) Presents false return
b) Intentional neglect to file tax return within prescribed time(after
notice)

30% means False or Fraudulent return.


Failure to report sales/income amount exceeding 30% per declared tax
return; and
Claim of deductions in an amount exceeding 30% of actual dedecution.
Interest is 20% per annum on basic tax unpaid after due date.
Before any BIR assessment is made, late payment is considered simple neglect.
Installment Payment of Tax
a) When request is made within the date prescribed.
b) When tax due is in excess of 2,000, taxpayer other than corporation may
elect to pay in two equal installments
c) When deadline is extended, no 25% surcharge is imposed but with interest
(20% per annum)

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d) When request for extension is made after deadline, 25% surcharge and
interest is imposed.
Deficiency is amount still due and collectible, any surcharge and interest applies
only to the tax due. While
Delinquency is nonpayment after FLD and FAN, delinquency interest (20% per
annum) is an additional fee for tax due, surcharges and interest from the due date.
Remedies to Taxpayer
Administrative Remedies
Tax Avoidance
Amendment of Tax Returns
Demand for the Letter of Authority
Protesting an Assessment
Applying for No Audit Program (NAP)
Entering into Compromise
Filing for Claim for Tax credit
Filing of Claim for Refund
Judicial Remedies
Civil Action
Appeal to CTA
Secure injunction order from CTA
Appeal from CTA to Supreme Court
Criminal Action
Other Judicial Remedies
Action for damages against Revenue Officers
Action for Contest Forfeiture of Chattel