National Internal Revenue Code of 1997

- It is embodied under Section 3 of RA 8424,

entitled "An Act Amending the National
Internal Revenue Code, as Amended, and for
Other Purposes," which is otherwise known as
the "Tax Reform Act of 1997

- it took effect on January 1, 1998.

1
RULE-MAKING AUTHORITY OF THE
SECRETARY OF FINANCE
Authority of Secretary of Finance to
Promulgate Rules and Regulations

- The Secretary of Finance, upon

recommendation of the Commissioner,
shall promulgate all needful rules and
regulations for the effective enforcement of
the provisions of the NIRC.
2
 A revenue regulation is binding on the
courts as long as the procedure fixed for
its promulgation is followed. Even if the
courts may not be in agreement with its
stated policy or innate wisdom, it is
nonetheless valid, provided that its scope
is within the statutory authority or standard
granted by the legislature. Specifically,
3
the regulation must be:

(1) be germane to the object and purpose of the law;

(2) not contradict, but conform to, the standards the

law prescribes; and

(3) be issued for the sole purpose of carrying into

effect the general provisions of our tax laws.

[Commissioner of Internal Revenue v. Solidbank

4
Corp., 418 SCRA 436 (2003)]
 As the government agency charged with the enforcement
of the law, the opinion of the Commissioner of Internal
Revenue, in the absence of any showing that it is plainly wrong,
is entitled to great weight. Indeed, the ruling was made by the
Commissioner of Internal Revenue in the exercise of his power
under the NIRC, Section 245 to “make rulings or opinions in
connection with the implementation of the provisions of
internal revenue laws, including rulings on the classificiation of
articles for sales tax and similar purposes. [Misamis Oriental
Association of Coco Traders, Inc. v. Department of Finance
Secretary, 238 SCRA 63 (1994)]
5
Specific Provisions to be Contained in Rules
and Regulations

The rules and regulations of the BIR shall, among other

things, contain provisions specifying, prescribing or defining:

(a) The time and manner in which Revenue Regional Director

shall canvass their respective Revenue Regions for the
purpose of discovering persons and property liable to
national internal revenue taxes, and the manner in which their
lists and records of taxable persons and taxable objects shall
be made and kept;
6
Specific Provisions to be Contained in Rules
and Regulations

(b) The forms of labels, brands or marks to be required on

goods subject to an excise tax, and the manner in which
the labelling, branding or marking shall be effected;

(c) The conditions under which and the manner in which

goods intended for export, which if not exported would be
subject to an excise tax, shall be labelled, branded or
marked;

7
Specific Provisions to be Contained in Rules
and Regulations
(d) The conditions to be observed by revenue officers respecting
the institutions and conduct of legal actions and proceedings;

(e) The conditions under which goods intended for storage in

bonded warehouses shall be conveyed thither, their manner of
storage and the method of keeping the entries and records in
connection therewith, also the books to be kept by Revenue
Inspectors and the reports to be made by them in connection
with their supervision of such houses;

8
Specific Provisions to be Contained in Rules
and Regulations
(f) The conditions under which denatured alcohol may be
removed and dealt in, the character and quantity of the
denaturing material to be used, the manner in which the
process of denaturing shall be effected, so as to render the
alcohol suitably denatured and unfit for oral intake, the
bonds to be given, the books and records to be kept, the
entries to be made therein, the reports to be made to the
Commissioner, and the signs to be displayed in the
business or by the person for whom such denaturing is
done or by whom, such alcohol is dealt in;
9
(g) The manner in which revenue shall be collected and
paid, the instrument, document or object to which
revenue stamps shall be affixed, the mode of
cancellation of the same, the manner in which the
proper books, records, invoices and other papers
shall be kept and entries therein made by the person
subject to the tax, as well as the manner in which
licenses and stamps shall be gathered up and
returned after serving their purposes;
10
(h) The conditions to be observed by revenue officers
respecting the enforcement of Title III imposing a tax
on estate of a decedent, and other transfers mortis
causa, as well as on gifts and such other rules and
regulations which the Commissioner may
consider suitable for the enforcement of the said Title
III;

11
(i) The manner in which tax returns, information and
reports shall be prepared and reported and the tax
collected and paid, as well as the conditions under
which evidence of payment shall be furnished the
taxpayer, and the preparation and publication of tax
statistics;

12
(j) The manner in which internal revenue taxes, such
as income tax, including withholding tax, estate and
donor's taxes, value-added tax, other percentage
taxes, excise taxes and documentary stamp taxes
shall be paid through the collection officers of the
Bureau of Internal Revenue or through duly authorized
agent banks which are hereby deputized to receive
payments of such taxes and the returns, papers and
statements that may be filed by the taxpayers in
13
connection with the payment of the tax: Provided,
however, That notwithstanding the other provisions of
this Code prescribing the place of filing of returns and
payment of taxes, the Commissioner may, by rules
and regulations, require that the tax returns, papers
and statements that may be filed by the taxpayers
in connection with the payment of the tax. Provided,
however, That notwithstanding the other provisions of
this Code prescribing the place of filing of returns and

14
payment of taxes, the Commissioner may, by rules
and regulations require that the tax returns, papers
and statements and taxes of large taxpayers be filed
and paid, respectively, through collection officers or
through duly authorized agent banks: Provided,
further, That the Commissioner can exercise this
power within six (6) years from the approval of
Republic Act No. 7646 or the completion of its
comprehensive computerization program, whichever

15
 comes earlier: Provided, finally, That separate venues for
the Luzon, Visayas and Mindanao areas may be
designated for the filing of tax returns and payment of
taxes by said large taxpayers.

For the purpose of this Section, "large taxpayer" means a

taxpayer who satisfies any of the following criteria;

(1) Value-Added Tax (VAT). - Business establishment with VAT

paid or payable of at least One hundred thousand pesos
(P100,000) for any quarter of the preceding taxable year;
16
(2) Excise Tax. - Business establishment with excise tax
paid or payable of at least One million pesos (P1,000,000)
for the preceding taxable year;

(3) Corporate Income Tax. - Business establishment with

annual income tax paid or payable of at least One million
pesos (P1,000,000) for the preceding taxable year; and

17
(4) Withholding Tax. - Business establishment with
withholding tax payment or remittance of at least One
million pesos (P1,000,000) for the preceding taxable year.

Provided, however, That the Secretary of Finance, upon

recommendation of the Commissioner, may modify or add
to the above criteria for determining a large taxpayer after
considering such factors as inflation, volume of business,
wage and employment levels, and similar economic
factors.
18
The penalties prescribed under Section 248 of this Code
shall be imposed on any violation of the rules and
regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, prescribing the
place of filing of returns and payments of taxes by large
taxpayers.

19
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.

20
EXCEPTIONS:

(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.

21
 In ABS-CBN Broadcasting Corp. v. Court of Tax
Appeals, 108 SCRA 142 (1981), the Court held that
under Section 246 of the 1997 Tax Code, the
Commissioner of Internal Revenue is precluded from
adopting a position contrary to one previously taken
where injustice would result to the taxpayer. Hence,
where an assessment for deficiency withholding taxes
was made, three years after a new BIR Circular reversed
a previous one upon which the taxpayer had relied upon,
22
such assessment was prejudicial to the taxpayer. To
rule otherwise, opined the Court, would be contrary to
the tenets of good faith, equity, and fair play.
(Commissioner of Internal Revenue v. Philippine Health
Care Providers, Inc., 522 SCRA 131 [2007]

23
 Let us first distinguish between two kinds of
administrative issuances: the legislative rule and the
administrative rule.

A legislative rule is in the nature of subordinate

legislation, designed to implement a primary
legislation by providing the details thereof.

An interpretative rule, on the other hand, is designed

to provide guideline to the law which the
administrative agency is in charge of enforcing. 24
 When an administrative rule is merely interpretative in
nature, its applicability needs nothing further than its bare
issuance, for it gives no real consequence more than what the law
itself has already prescribed. When, on the other hand, the
administrative rule goes beyond merely providing for the means
that can facilitate or render least cumbersome the
implementation of the law but substantially increases the burden
of those governed, it behooves the agency to accord at least to
those directly affected a chance to be heard, and thereafter to be
duly informed, before that new issuance is given the force and
effect of law. (Commissioner of Internal Revenue v. Michael J.
Lhuillier Pawnshop, Inc., 406 SCRA 178 (2003) 25
 Under the National Internal Revenue Code,
Section 246, rulings of the BIR may not be given
retroactive effect, if the same is prejudicial to the
taxpayer. (Commissioner of Internal Revenue v.
Telefunken Semiconductor Philippines, Inc., 249
SCRA 401(1995)

26
 It is a well-entrenched rule that rulings and
circulars, rules and regulations promulgated by
the Commissioner of Internal Revenue would
have no retroactive application if to so apply
them would be prejudicial to the taxpayers.
(Commissioner of Internal Revenue v. Court of
Appeals, 267 SCRA 557 (1997)

27
Powers and Duties of the BIR

- The BIR shall be under the supervision and control of

the Department of Finance.

- its powers and duties shall comprehend the

assessment and collection of all national internal
revenue taxes, fees, and charges, and the enforcement
of all forfeitures, penalties, and fines connected
therewith, including the execution of judgments in all
cases decided in its favor by the Court of Tax Appeals
and the ordinary courts.
28
Powers and Duties of the BIR

- The Bureau shall give effect to and administer the

supervisory and police powers conferred to it by
this Code or other laws.

29
- It is not the Department of Justice which is the
government agency tasked to determine the amount of
taxes due upon the subject estate, but the BIR, whose
determination and assessments are presumed correct,
and made in good faith. The taxpayer has the duty of
proving otherwise. In the absence of proof of any
irregularities in the performance of official duties, an
assessment will not be disturbed.

30
- Even an assessment based on estimates is prima facie valid
and lawful where it does not appear to have been arrived at
arbitrarily or capriciously. The burden of proof is upon the
complaining party to show clearly that the assessment will justify
the judicial affirmance of said assessment. In this instance,
petitioner has not pointed out one single provision in the
memorandum of the special audit team which give rise to the
questioned assessment, which bears mainly on the alleged
improbable and unconscionable amount of the taxes charged.
But mere rhetoric cannot supply the basis for the charge of
impropriety of the assessment made. (Marcos v. Court of
Appeals, 273 SCRA 47 (1997) 31
Chief Officials of the BIR

The Bureau of Internal Revenue shall have a:

- chief to be known as Commissioner of Internal

Revenue
- four (4) assistant chiefs to be known as Deputy
Commissioners.

32
Power of the Commissioner to Interpret
Tax Laws and to Decide Tax Cases

The power to interpret the provisions of the

NIRC and other tax laws shall be under the exclusive
and original jurisdiction of the Commissioner, subject
to review by the Secretary of Finance.

33
Power of the Commissioner to Interpret
Tax Laws and to Decide Tax Cases

The power to decide disputed assessments, refunds

of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under
the NIRC or other laws or portions thereof administered by
the Bureau of Internal Revenue is vested in the
Commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals.

34
- It is a basic rule in taxation that the factual
findings of the Court of Tax Appeals, when
supported by substantial evidence, will not be
disturbed on appeal unless it is shown that
the said court committed gross error in the
appreciation of facts.

35
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., vs.
THE COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 168856 August 29, 2012

Section 244 of the NIRC explicitly grants the

Secretary of Finance the authority to promulgate the
necessary rules and regulations for the effective
enforcement of the provisions of the tax code. Such
rules and regulations "deserve to be given weight and
respect by the courts in view of the rule-making
authority given to those who formulate them and their
specific expertise in their respective fields."
36
All rulings and issuances of the Commissioner of Internal
Revenue that pertain to the implementation and
interpretation of the Tax Code of 1997 and other tax laws
are valid.

However, the Secretary of Finance has the power to affirm,

revise, modify or set aside rulings and issuances of the
Bureau of Internal Revenue (BIR) concerning such
implementation and application of the provisions of the
Tax Code of 1997 and other tax laws.
37
The exercise of such power under Section 4 of the Tax
Code of 1997, however, does NOT cover disputed
assessments, refunds of internal revenue taxes, fees or
other charges, and penalties imposed in relation thereto, or
other matters arising under the Tax Code or other laws or
portions thereof administered by the BIR. In these
instances, the Court of Tax Appeals has the exclusive
appellate jurisdiction pursuant to the second paragraph of
the same Section 4.
38
Neither shall the power be exercised to apply to rulings that
are deemed void ab initio because they contradict duly
issued Revenue Regulations, Revenue Memorandum
Orders, Revenue Memorandum Rulings, and Revenue
Memorandum Circulars.

It is important to note that only the FINAL adverse decision

of the Commissioner may be brought to the Department of
Finance (DOF) for review.
39
Notwithstanding, the Secretary of Finance may
review motu proprio the rulings and issuances of the
Bureau of Internal Revenue concerning such
implementation and application of the provisions of the
Tax Code of 1997 and other tax laws.

Legal Reference.
First paragraph of Section 4, tax Code of 1997
40
BIR’s power to interpret tax laws is not absolute
Inherent in the three branches of our government are
three core powers granted by the 1987 Philippine
Constitution.

1. The authority to make laws and to alter or repeal

them is conferred on the Legislative Department.

2. The implementation of laws is charged to the

Executive Department.
41
BIR’s power to interpret tax laws is not absolute
3. The power to interpret laws, to hear and decide
cases when disputes arise, lies with the Judiciary.

The existence of these independent co-equal bodies

is a fundamental characteristic of a democratic
government.

42
As part of the Executive Department, the BIR is vested
with powers to assess and collect taxes. To some
extent, it also exercises quasi-judicial and subordinate
legislative functions.

The Tax Code authorizes the Commissioner of

Internal Revenue (“Commissioner”) to interpret tax
laws, subject to review by the Secretary of Finance.

43
Government agencies like the BIR also have the
power of subordinate legislation to aid in the
implementation of tax laws. In exercising these
functions, the Commissioner recommends the
promulgation of Revenue Regulations (RRs) and
issues tax rulings and other revenue issuances such
as Revenue Memorandum Circulars (RMCs), Revenue
Memorandum Orders (RMOs), Revenue Audit
Memorandum Orders (RAMOs) and Revenue
Memorandum Rulings (RMRs), among others. 44
These issuances have different purposes and
functions according to the BIR.

Revenue Regulations (RRs) are issued by the

Secretary of Finance, upon the recommendation of
the Commissioner. They prescribe or define rules and
regulations for the effective enforcement of the
provisions of the Tax Code and related statutes.

45
Tax rulings are official positions of the BIR on
inquiries of taxpayers who request clarification on
certain provisions of the Tax Code, other tax laws, or
their implementing regulations, usually to seek tax
exemptions.

Revenue Memorandum Circulars (RMCs) contain

pertinent and applicable portions, as well as
amplification of laws, rules, regulations and
precedents issued by the BIR and other
agencies/offices. 46
Revenue Memorandum Orders (RMOs) provide
directives or instructions, prescribe guidelines and
outline processes, operations, activities, workflows,
methods and procedures necessary in the
implementation of stated policies, objectives, plans
and programs of the BIR in all areas of operations,
except audit.

47
Revenue Memorandum Rulings (RMRs) are rulings,
opinions and interpretations of the Commissioner
with respect to the provisions of the Tax Code and
other tax laws, as applied to a specific set of facts,
with or without established precedents, and which the
Commissioner may issue from time to time to inform
taxpayers of the tax consequences on specific
situations.
48
On the BIR’s power of subordinate legislation, the
Supreme Court (SC) has explained that although the
power to legislate is non-delegable and belongs
exclusively to Congress, such authority may be
delegated to implement laws and effectuate policies
whenever Congress finds it impracticable, if not
impossible, to anticipate situations that may be met
in carrying the law into effect. It is required, however,

49
that the regulations be germane to the objects and
purposes of the law, and conform to the prescribed
standards of the law. Although courts usually accord
these regulations with great respect, such
interpretation is not conclusive and will be ignored if
judicially found to be erroneous.

50
To safeguard taxpayers from the implications of
erroneous administrative rulings, the non-retroactivity
rule under Section 246 of the Tax Code provides that
modifications or reversals of any BIR rules,
regulations and rulings shall not be given retroactive
application if it will be prejudicial to the taxpayers,
subject to certain exceptions (e.g., deliberate

51
omission of certain facts, taxpayers acted in bad
faith, and material facts subsequently gathered by the
BIR are different from the facts presented in its
ruling). It is derived from a statutory presumption that
all laws should be interpreted to have only future
effects unless expressly stated otherwise.

52
Power of the Commissioner to Obtain
Information, and to Summon, Examine,
and Take Testimony of Persons.
In ascertaining the correctness of any return, or in making a
return when none has been made, or in determining the
liability of any person for any internal revenue tax, or in
collecting any such liability, or in evaluating tax
compliance, the Commissioner is authorized:

(A) To examine any book, paper, record, or other data

which may be relevant or material to such inquiry;
53
(B) To obtain on a regular basis from any person other
than the person whose internal revenue tax liability is
subject to audit or investigation, or from any office or
officer of the national and local governments,
government agencies and instrumentalities, including
the Bangko Sentral ng Pilipinas and government-
owned or -controlled corporations, any information
such as, but not limited to, costs and volume of
production, receipts or sales and gross incomes of

54
taxpayers, and the names, addresses, and financial
statements of corporations, mutual fund companies,
insurance companies, regional operating
headquarters of multinational companies, joint
accounts, associations, joint ventures of consortia
and registered partnerships, and their members;

55
TRAIN
Additional provision:

The Cooperative Development Authority shall submit

a report on tax incentives availed by cooperatives to
the BIR and DOF.

These information shall be included in the Tax

Incentives Management and Transparency Act
(TIMTA) database.

56
(C) To summon the person liable for tax or required to file
a return, or any officer or employee of such person, or
any person having possession, custody, or care of the
books of accounts and other accounting records
containing entries relating to the business of the
person liable for tax, or any other person, to appear
before the Commissioner or his duly authorized
representative at a time and place specified in the
summons and to produce such books, papers,
records, or other data, and to give testimony;
57
(D) To take such testimony of the person concerned,
under oath, as may be relevant or material to such
inquiry; and

(E) To cause revenue officers and employees to make a

canvass from time to time of any revenue district or
region and inquire after and concerning all persons
therein who may be liable to pay any internal revenue
tax, and all persons owning or having the care,
management or possession of any object with
respect to which a tax is imposed. 58
The provisions of the foregoing paragraphs
notwithstanding, nothing in this Section shall be
construed as granting the Commissioner the
authority to inquire into bank deposits other than as
provided for in Section 6(F) of the NIRC.

59
 In San Carlos Milling Co., Inc. v. Commissioner of
Internal Revenue, 228 SCRA 135 (1993), the Court held
that the internal revenue branch of government must
investigate and confirm the claims for tax refund or
credit before taxpayers may avail themselves of this
option. The grant of a refund is founded on the
assumption that the tax return is valid, that is, the facts
stated therein are true and correct.

60
In fact, even without petitioner’s tax claim, the
commissioner can proceed to examine the books,
records of the petitioner –bank, or any data which may be
relevant or material in accordance with the NIRC, Section
16, now Section 5. (Citibank, N.A. v. Court of Appeals,
280 SCRA 459 (1997)

61
Power of the Commissioner to Make
Assessments and Prescribe Additional
Requirements for Tax Administration and
Enforcement. -
(A) Examination of Return and Determination of Tax
Due. After a return has been filed as required under
the provisions of the NIRC, the Commissioner or his
duly authorized representative may authorize the
examination of any taxpayer and the assessment of

62
the correct amount of tax: Provided, however, That
failure to file a return shall not prevent the
Commissioner from authorizing the examination of
any taxpayer.

The tax or any deficiency tax so assessed shall be

paid upon notice and demand from the
Commissioner or from his duly authorized
representative.
63
Any return, statement of declaration filed in any
office authorized to receive the same shall not be
withdrawn: Provided, That within three (3) years
from the date of such filing, the same may be
modified, changed, or amended: Provided, further,
That no notice for audit or investigation of such
return, statement or declaration has in the
meantime been actually served upon the
taxpayer.
64
(B) Failure to Submit Required Returns, Statements,
Reports and other Documents. - When a report
required by law as a basis for the assessment of any
national internal revenue tax shall not be forthcoming
within the time fixed by laws or rules and regulations
or when there is reason to believe that any such
report is false, incomplete or erroneous, the
Commissioner shall assess the proper tax on the best
evidence obtainable.
65
In case a person fails to file a required return or other
document at the time prescribed by law, or willfully or
otherwise files a false or fraudulent return or other
document, the Commissioner shall make or amend
the return from his own knowledge and from such
information as he can obtain through testimony or
otherwise, which shall be prima facie correct and
sufficient for all legal purposes.

66
(C) Authority to Conduct Inventory-taking, Surveillance
and to Prescribe Presumptive Gross Sales and
Receipts. - The Commissioner may, at any time during
the taxable year, order inventory-taking of goods of
any taxpayer as a basis for determining his internal
revenue tax liabilities, or may place the business
operations of any person, natural or juridical, under
observation or surveillance if there is reason to
believe that such person is not declaring his

67
correct income, sales or receipts for internal revenue
tax purposes. The findings may be used as the basis
for assessing the taxes for the other months or
quarters of the same or different taxable years and
such assessment shall be deemed prima facie
correct.

68
When it is found that a person has failed to issue
receipts and invoices in violation of the requirements
of Sections 113 and 237 of this Code, or when there
is reason to believe that the books of accounts or
other records do not correctly reflect the declarations
made or to be made in a return required to be filed
under the provisions of the NIRC, the Commissioner,
after taking into account the sales, receipts, income
or other taxable base of other persons engaged in
69
similar businesses under similar situations or
circumstances or after considering other relevant
information may prescribe a minimum amount of
such gross receipts, sales and taxable base, and such
amount so prescribed shall be prima facie correct for
purposes of determining the internal revenue tax
liabilities of such person.

70
(D) Authority to Terminate Taxable Period. - When it shall
come to the knowledge of the Commissioner that a
taxpayer is retiring from business subject to tax, or is
intending to leave the Philippines or to remove his
property therefrom or to hide or conceal his property,
or is performing any act tending to obstruct the
proceedings for the collection of the tax for the past
or current quarter or year or to render the same totally

71
or partly ineffective unless such proceedings are
begun immediately, the Commissioner shall declare
the tax period of such taxpayer terminated at any
time and shall send the taxpayer a notice of such
decision, together with a request for the immediate
payment of the tax for the period so declared
terminated and the tax for the preceding year or
quarter, or such portion thereof as may be unpaid,
and said taxes shall be due and payable immediately
72
and shall be subject to all the penalties hereafter
prescribed, unless paid within the time fixed in the
demand made by the Commissioner.

73
(E) Authority of the Commissioner to Prescribe Real
Property Values. -

In exercising this authority, the following shall be

observed:

1. Mandatory consultation with both private and

public competent appraisers before division of the
Philippines into zones.
74
 2. Prior notice to affected taxpayers before the
determination of fair market values of the real properties.

3. Publication or posting of adjustments in zonal

value in a newspaper of general circulation in the province,
city or municipality concerned.

4. The basis of valuation and records of consultation

shall be public records open to the inquiry of any taxpayer.
75
 5. Zonal valuations shall be automatically adjusted
once every three years.

76
For purposes of computing any internal revenue tax, the
value of the property shall be, whichever is the higher of:

(1) The fair market value as determined by the

Commissioner; or

(2) The fair market value as shown in the schedule of

values of the Provincial and City Assessors.

77
(F) Authority of the Commissioner to Inquire into Bank
Deposit Accounts and Other Related information held by
Financial Institutions. - Notwithstanding any contrary
provision of Republic Act No. 1405, Republic Act No. 6426,
otherwise known as the Foreign Currency Deposit Act of
the Philippines, and other general or special laws, the
Commissioner is hereby authorized to inquire into the bank
deposits and other related information held by financial
institutions of:
78
(1) A decedent to determine his gross estate; and

(2) Any taxpayer who has filed an application for

compromise of his tax liability under Section 204(A)(2) of
the NIRC by reason of financial incapacity to pay his tax
liability.

79
In case a taxpayer files an application to compromise the
payment of his tax liabilities on his claim that his financial
position demonstrates a clear inability to pay the tax
assessed, his application shall not be considered unless
and until he waives in writing his privilege under Republic
Act No. 1405, Republic Act No. 6426, otherwise known as
the Foreign Currency Deposit Act of the Philippines, or

80
under other general or special laws, and such waiver shall
constitute the authority of the Commissioner to inquire into
the bank deposits of the taxpayer.

(3) A specific taxpayer or taxpayers subject of a request for

the supply of tax information from a foreign tax authority
pursuant to an international convention or agreement on
tax matters to which the Philippines is a signatory or a
party of: Provided, That the information obtained from the
81
banks and other financial institutions may be used by the
Bureau of Internal Revenue for tax assessment, verification,
audit and enforcement purposes.

In case of a request from a foreign tax authority for tax

information held by banks and financial institutions, the
exchange of information shall be done in a secure manner
to ensure confidentiality thereof under such rules and
regulations as may be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner.
82
The Commissioner shall provide the tax information
obtained from banks and financial institutions
pursuant to a convention or agreement upon request
of the foreign tax authority when such requesting
foreign tax authority has provided the following
information to demonstrate the foreseeable relevance
of the information to the request:

83
(a) The identity of the person under examination or
investigation;

(b) A statement of the information being sought, including

its nature and the form in which the said foreign tax
authority prefers to receive the information from the
Commissioner;

84
(c) The tax purpose for which the information is being
sought;

(d) Grounds for believing that the information requested is

held in the Philippines or is in the possession or control of
a person within the jurisdiction of the Philippines;

85
(e) To the extent known, the name and address of any
person believed to be in possession of the requested
information;

(f) A statement that the request is in conformity with the

law and administrative practices of the said foreign tax
authority, such that if the requested information was within
the jurisdiction of the said foreign tax authority then it

86
would be able to obtain the information under its laws or in
the normal course of administrative practice and that it is
in conformity with a convention or international agreement;
and

(g) A statement that the requesting foreign tax authority

has exhausted all means available in its own territory to
obtain the information, except those that would give rise to
disproportionate difficulties.
87
The Commissioner shall forward the information as
promptly as possible to the requesting foreign tax
authority. To ensure a prompt response, the
Commissioner shall confirm receipt of a request in
writing to the requesting tax authority and shall notify
the latter of deficiencies in the request, if any, within
sixty (60) days from receipt of the request.

88
If the Commissioner is unable to obtain and provide
the information within ninety (90) days from receipt
of the request, due to obstacles encountered in
furnishing the information or when the bank or
financial institution refuses to furnish the information,
he shall immediately inform the requesting tax
authority of the same, explaining the nature of the
obstacles encountered or the reasons for refusal.

89
The term "foreign tax authority," as used herein, shall
refer to the tax authority or tax administration of the
requesting State under the tax treaty or convention to
which the Philippines is a signatory or a party of.

90
(G) Authority to Accredit and Register Tax Agents. - The
Commissioner shall accredit and register, based on
their professional competence, integrity and moral
fitness, individuals and general professional
partnerships and their representatives who prepare
and file tax returns, statements, reports, protests, and
other papers with or who appear before, the Bureau
for taxpayers. Within one hundred twenty (120) days

91
from January 1, 1998, the Commissioner shall create
national and regional accreditation boards, the
members of which shall serve for three (3) years, and
shall designate from among the senior officials of the
Bureau, one (1) chairman and two (2) members for
each board, subject to such rules and regulations as
the Secretary of Finance shall promulgate upon the
recommendation of the Commissioner.

92
Individuals and general professional partnerships and
their representatives who are denied accreditation by
the Commissioner and/or the national and regional
accreditation boards may appeal such denial to the
Secretary of Finance, who shall rule on the appeal
within sixty (60) days from receipt of such appeal.
Failure of the Secretary of Finance to rule on the
Appeal within the prescribed period shall be deemed
as approval of the application for accreditation of the
appellant.
93
(H) Authority of the Commissioner to Prescribe
Additional Procedural or Documentary
Requirements. - The Commissioner may prescribe the
manner of compliance with any documentary or
procedural requirement in connection with the
submission or preparation of financial statements
accompanying the tax returns.

94
Examination of Returns and Determination
of Tax Due

With regard to the accuracy of the

assessment on deficiency sales tax, the Court rules
that the examiner’s assessment should be given
full weight and credit, in the absence of proof
submitted by Wyeth Suaco to the contrary. This is
in line with our ruling in several cases where the
Court previously said that tax assessments by tax
examiners are presumed correct and made in good
faith. The taxpayer has the duty to prove otherwise.
In the absence of proof of any irregularities in the 95
Examination of Returns and Determination
of Tax Due
performance of duties, an assessment duly made by
a BIR examiner and approved by the superior officers
will not be disturbed. All presumptions are in favor of
the correctness of tax assessments. (Commissioner
of Internal Revenue v. Wyeth Suaco Lab. Inc., 202
SCRA 125 (1991)

96
Examination of Returns and Determination
of Tax Due
In the case of Atty. Zialcita, he rendered
government service from 13 March 1962 up to 15
February 1990. The next day, or on 16 February 1990,
he reached the compulsory retirement age of 65
years. Upon his compulsory retirement, he is entitled
to the commutation of his accumulated leave credits
to its money value. Within the purview of the
provisions of the NLRC, compulsory retirement may
be considered as a “cause beyond the control of the
said official or employee”. (Re: Request of Atty. 97
Examination of Returns and Determination
of Tax Due
Bernardo Zialcita, 190 SCRA 850 (1990)

A government employee is taxed on the

entirety of his salaries without any deductions for any
leaves not utilized. It follows then that the money
values corresponding to these leave benefits both the
used and unused have already been taxed during the
year that they were earned. To tax them again when
the retiring employee receives their money value as a
form of government concern and appreciation plainly98
Examination of Returns and Determination
of Tax Due
constitutes an attempt to tax the employee a second
time. This is tantamount to double taxation.

99
Authority of the Commissioner to Delegate Power
The Commissioner may delegate the powers vested
in him under the pertinent provisions of the NIRC to
any or such subordinate officials with the rank
equivalent to a division chief or higher, subject to
such limitations and restrictions as may be imposed
under rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the
Commissioner:

100
The following powers of the Commissioner
shall NOT be delegated:

(a) The power to recommend the promulgation of rules

and regulations by the Secretary of Finance;

(b) The power to issue rulings of first impression or to

reverse, revoke or modify any existing ruling of the
Bureau;

101
(c) The power to compromise or abate, under Sec. 204
(A) and (B) of this Code, any tax liability: Provided,
however, That assessments issued by the regional
offices involving basic deficiency taxes of Five
hundred thousand pesos (P500,000) or less, and
minor criminal violations, as may be determined by
rules and regulations to be promulgated by the
Secretary of finance, upon recommendation of the

102
Commissioner, discovered by regional and district
officials, may be compromised by a regional
evaluation board which shall be composed of the
Regional Director as Chairman, the Assistant Regional
Director, the heads of the Legal, Assessment and
Collection Divisions and the Revenue District Officer
having jurisdiction over the taxpayer, as members;
and

103
(d) The power to assign or reassign internal revenue
officers to establishments where articles subject to
excise tax are produced or kept.

104
Duty of the Commissioner to Ensure the Provision
and Distribution of Forms, Receipts, Certificates,
and Appliances, and the Acknowledgment of
Payment of Taxes

(A) Provision and Distribution to Proper-Officials. - Any

law to the contrary notwithstanding, it shall be the
duty of the Commissioner, among other things, to
prescribe, provide, and distribute to the proper
officials the requisite licenses; internal revenue

105
stamps; unique, secure and non-removable
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

106
administering the laws falling within the jurisdiction
of the Bureau. For this purpose, internal revenue
stamps, or other markings and labels shall be caused
by the Commissioner to be printed with adequate
security features.

Internal revenue stamps, whether of a bar code or

fuson design, or other markings shall be firmly and

107
conspicuously affixed or printed on each pack of
cigars and cigarettes and bottles of distilled spirits
subject to excise tax in the manner and form as
prescribed by the Commissioner, upon approval of
the Secretary of Finance.

To further improve tax administration, cigarette and

alcohol manufacturers shall be required to install
automated volume-counters of packs and bottles to
deter over-removals and misdeclaration of removals.
108
(B) Receipts for Payment Mode. - It shall be the duty of
the Commissioner or his duly authorized
representative or an authorized agent bank to whom
any payment of any tax is made under the provisions
of this Code to acknowledge the payment of such tax,
expressing the amount paid and the particular
account for which such payment was made in a form
and manner prescribed therefor by the
Commissioner.
109