General Powers of the CIR (Section 4 to 8, NIRC)

1. Power to interpret the tax code and other tax laws (executive and original
jurisdiction)
2. To obtain information and to summon, examine and take testimony of
persons
3. To make assessment and prescribe additional requirements for tax
administration and enforcement
4. To conduct inventory taking, surveillance and to prescribe presumptive gross
sales and receipts
5. To terminate taxable period
6. To prescribe real property values
7. To inquire into bank deposit accounts
8. To accredit and register tax agents
9. To prescribe additional procedural or documentary requirements
10.To delegate power to subordinates

Assess the proper tax

Concept of assessment
Assess means to impose a tax; to charge with a tax; to declare a tax to be
payable; to apportion a tax to be paid or contributed, to fix a rate; to fix or
settle a sum to be paid by way of tax
An assessment is 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.
Requisites for a valid assessment:
a. The taxpayer shall be informed in writing of the law and the facts on which
the assessment is made
b. An assessment contains not only a computation of tax liability but also a
demand for payment within a prescribed period
c. An assessment must be served and received by the taxpayer
How to assess the tax?
a. Best evidence obtainable
b. Use of the Net Worth Method (an extension of the basic accounting formula:
Asset (A) = Liabilities (L) + Equity (E)
Conditions (use of the Net Worth Method):
1. No books of accounts or
The books do not reflect the correct income or
Refuses to produce the books or
Books were destroyed
2. There is evidence of possible sources of income causing an increase in net
worth

3. There is fix or opening net worth

4. The method reflects taxpayers income with accuracy and certainty after
various adjustment

Conduct inventory taking, surveillance and to prescribe

presumptive gross sales and receipts
Types of surveillance:
a. Covert surveillance surreptitious and undercover watch on business
b. Over surveillance comments from inventory taking of the business
document, then actual business observation and close monitoring of activities
c. Short duration surveillance (Tax Compliance Check)
May the BIR also conduct Benchmarking aside from surveillance? Yes.
Benchmarking Guidelines:
a.
b.
c.
d.

Shall be separate for corporations and individuals

Per area, per line of industry and per tax type basis
Done per RDO by preparing taxpayers profile per taxable year
Based on tax returns and data from other sources within and outside the
Bureau, RDOs shall determine the specific industry coverage
e. If LOA was issued, it will only be closed upon consideration of the prescribe
benchmarks

General Rule: BIR assessment only upon full audit

Exception: Jeopardy Assessment

Jeopardy Assessment
-

A tax assessment made by an authorized Revenue Officer without the benefit

of a complete or partial audit in light of the Revenue Officers belief that the
assessment and collection of the deficiency tax will be jeopardized by delay
to taxpayers failure tax
a. Comply with audit and investigation requirements to present his books
and/or pertinent records; or
b. Substantiate all or any of the deduction, exemption or credit claimed in his
return

Authority to terminate taxable periods

Instances when tax periods may be terminated:
a.
b.
c.
d.

Intending to leave the Philippines

Retiring from business
Intends to remove/hide/conceal his properties in the Philippines
Taxpayer is performing an act tending to obstruct proceeding for collection of
the tax for past or current quarter or year or to render the same ineffective
(total or partially)

Prescribe real property values (Zonal Valuation)

Inquire into bank deposits
General Rule: Bank Secrecy Law
Exceptions:
a. Power to inquire into bank deposits of a decedent for purpose of determining
his gross estate, determining the correct estate tax due to the government
b. In an application for tax compromise of tax liability due to financial incapacity
to pay tax liability
c. Exchange of information by the BIR on tax matters pursuant to internationally
agreed standards (RA10012 and FATCA)

Accredit and register tax agents

Prescribe additional procedural or documentary
requirements

Does the CIR have the power to prescribe penalties for violation of the regulations?
-

No, it is the Secretary of Finance who issues the revenue regulations, ergo, it
is the Secretary of Finance who may prescribe penalties, the CIR may only
recommend.

Authority of the Commissioner to delegate power

Exception: Non-delegable Powers (RICA)
a. To recommend the promulgation of the rules and regulations to the Secretary
of Finance
b. To issue rulings of first impression or to reverse, revoke, modify any existing
ruling
c. To compromise or abate any tax liability (except assessment issued by the
regional offices involving basic deficiency taxes of P500,000 or less, and
minor criminal violations)
d. Power to assign or reassign internal revenue officers to establishment where
articles subject to excise tax are produced or kept

Authority to make arrest and seizure

Responsible officers:
-

CIR
Deputy commissioners
Regional directors
Revenue District Officers

Reason: violation of penal laws and rules or regulations administered by the BIR
Proceedings: Before a competent court to be dealt with according to law

Authority to assign internal revenue officers

a. Those involved in excise tax functions
Limitation: up to two (2) years
b. Assignment to other special duties
Limitation:
o Internal revenue officers assigned to perform assessment or collection
function shall not remain assignment for more than 3 years
o Assignment to special duties shall not exceed 1 year

Authority to impose duties on certain officers

Unless there is a certification (CAR)

a. Register of Deeds no registration of transfer in the Registry of Property
transferring real rights or any other mortgage
b. Debtor of the decease shall not pay to the administrator, heirs, legatee,
executor, administrator
c. Bank shall not allow withdrawal
d. Lawyer, notary public, or any government officer must furnish copies with BIR

Authority to suspend business operation of the taxpayer

RMO 3-2009: Oplan Kandado
-

The closure of the business shall last for a period of no less than 5 days and
shall be in force until the violation is rectified

RATE: Run Against Tax Evaders

4 Deputy Commissioners plus 2

1.
2.
3.
4.
5.
6.

Operations Group
Legal and Inspection Group
Resource Management Group
Information Systems Group
Tax Reform Administration Group (new)
Special Concerns Group (new)

Officials of the BIR

1.
2.
3.
4.
5.
6.
7.

CIR
Deputy Commissioners
Assistant Commissioners
Head Revenue Executive Assistant
Regional Director
Revenue District Officers
Revenue Enforcement Officers or Examiners

Field Service (Regional Offices as headed by the Regional

Directors)
Powers and duties of the Regional Director (Section 10, NIRC)
1. Implements laws, policies, plans, programs, rules and regulations of the
department or agencies in the regional area

2. Administer and enhance internal revenue laws and rules and regulations,
including the assessment and collection of all internal revenue taxes, charges
and fees
3. Issues Letter of Authority (LOA) for the examination of taxpayers within the
regions
4. Provide economical, efficient and effective service to the people in the area
5. Coordinate with the Local Government in the area
6. Coordinate with other regional offices or other departments, bureaus and
agencies in the area
7. Exercise control and supervision over the officers and employees within the
region
8. Performs such other functions as may be provided under the law and as may
be delegated by CIR

Revenue District Officers

-

Implements programs, methods and procedure necessary for the efficient,

effective and economical assessment and collection of internal revenue taxes
in the revenue district

Composition of the RDOs:

a. Field men and examiners
b. Collection agents and clerks
Duties and functions of RDOs:
a. Examine taxpayers within the jurisdiction of the district in order to collect
amount o tax
b. Recommend the assessment of any deficiency tax
Pursuant to a LOA issued by the Regional Director

NIRC REMEDIES
Remedies of the Government

When assessment is made? Exceptions:

a. Prescriptive period for assessment (Section 203, NIRC)
o If the taxpayer filed a return: the internal revenue taxes shall be
assessed within 3 years after the last day prescribed by law for the
filing of the return
o If a returned is filed beyond the period prescribed by law: the 3 years
period shall be counted from the day the return was filed

Exception: (Section 222, NIRC)

1. False return
2. Fraudulent return
3. Fraudulent return with intent to evade tax
4. Failure to file a return

General Rule: Tax are self-assessing

Exceptions: (when there is a need for assessment)
a.
b.
c.
d.

Tax period is terminated (Section 60)

Deficiency tax liability arising from a tax audit by BIR (Section 56B)
Tax lien (Section 219)
Dissolving corporations (Section 52C)

Principles governing tax assessments

a.
b.
c.
d.
e.

Presumed in favor of a tax assessment

Must be based on actual facts not on presumptions
Discretionary upon the commissioner
The authority to assess may be delegated
Must be directed to the right party

Kinds of assessment
a.
b.
c.
-

By the taxpayer
Self-assessment
By the BIR, without authority
Illegal and void assessment
By the BIR, with authority
Deficiency assessment
Erroneous assessment
Jeopardy assessment
Disputed assessment