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CHAPTER 2 TAX ADMINISTRATION Part 1

TAX ADMINISTRATION
- It involves a.) Assessment and B.) Collection
- Includes EXECUTION OF JUDGMENT decided by court IN FAVOR of THE BIR

TAX ADMINISTRATIVE AGENCIES


The DEPARTMENT OF FINANCE (DOF) is the PRINCIPALLY responsible for the fiscal policies and general management of
the Phils financial resources.

1. BIR- primarily in charge to assess and collect all taxes and charges imposed by the NIRC( National Internal
Revenue Code)
2. Bureau of Customs (BoC) and Tariff Commission (TC)
- The main agencies tasked to enforce TARIFF and CUSTOMS CODE
- BoC also collects the taxes on IMPORTS embodied in the NIRC
3. Land Transportation Office (LTO)
- Office responsible to the collection of REGISTRATION FEEs and MOTOR VEHICLE TAX
4. Duly and lawfully authorized collectors
- These are persons, agencies OR duly accredited banks authorized by the BIR, BC, TC, and LTO to collect taxes
5. Local Offices in charge to enforce local taxation
a. Prov, city, municipal and brgy treasurer
b. Prov and city assessors
c. Prov and city board assessment appeals
d. Central board of assessment appeals

THE BUREAU OF INTERNAL REVENUE


The NIRC list the following BIR officers:

1. The Commissioner of the Internal Revenue


2. Deputy Commissioners of Internal Revenue
3. Revenue Regional Director
4. Revenue District Officer RDO
5. Revenue Examiners and Officers
6. Division Chiefs of the BIR
7. BIR collection agents

POWERS AND DUTIES OF THE BIR


SECTION 2 OF THE NIRC provides the following powers of the BIR

1. To ASSESS and COLLECT all national revenue taxes, fees and charges
2. To ENFORCE all forfeitures, penalties and fines connected with the above,
3. To EXECUTE JUDGMENTS in all cases decided in its favor
4. To ADMINISTER, supervise and EFFECT POLICE POWER authorized by the NIRC, such as:
a. Assigning internal revenue officer to establishments where articles SUBJECT TO EXCISE tax are produced
b. Providing and distributing BIR DOCUMENTS
c. Issuing RECEIPTS for tax collected
d. Submitting annual reports

POWERS OF THE BIR COMMISSIONER (7)

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-the COMMISSIONER is the CHIEF OFFICIAL of the BIR

1. INTERPRET tax laws

- the CIR has the original and exclusive power to INTERPRET provisions of the NIRC. SUBJECT to REVIEW by the SEC OF
FINANCE.

- the CIR is the only EXECUTIVE OFFICIAL who has the POWER TO INTERPRET LAWS

- if BIR ruling issued by CIR are prejudicial to taxpayers it may be appealed within a specified period FOR REVIEW by the
SECRETARY OF FINANCE

2. DECIDE disputed tax assessments

-tax assessments issued by RD, Ass Comm, and Deputy Com may be appealed to the CIR

-IF decision of CIR ADVERSELY affected the taxpayer he is given 30 days to appeal in CTA
IF ADVERSE Decision of
Assessment by DECISION CTA may be
Taxpayer can taxpayer is
RD, Ass Com and appealed to
APPEAL TO CIR given 30 days
Dep Com SC 15 days
to appeal to after CTA
CTA decision is
3. SUMMON and OBTAIN INFORMATION or testimony of persons. received

-this is to ASCERTAIN correctness of tax returns (by examining taxpayers records, financial info etc)

4. MAKE ASSESSMENTS and PRESCRIBE additional tax requirement

- the power incudes the ff:

a. Examination of returns (determination of tax dues and documents not submitted.

- this power may be delegated to subordinate officers

b. conduct inventory and prescribe gross sales and receipts if there is reason to believe that the taxpayer is not
declaring his correct income, sales, or receipts for tax purposes

c. demand for immediate payment of tax if there is reason to believe that taxpayer is trying to escape from his liability
to pay tax. (e.g trying to leave the country, removes or hides his property in the Philippines

d. prescribe real property value by zoning

e. Inquire into bank deposits PROVIDED that the BANK SECRECY LAW IS NOT VIOLATED

- CIR may inquire the bank account of the DECEDENT or if the taxpayer has filed for tax COMPROMISE

f. Accredit tax agents

g. prescribe the manner of compliance with any documentary or procedural requirements in connection to submission
or preparation of FS accompanying the tax returns.

5. COMPROMISE, abate and REFUND or CREDIT taxes

-abate = lessen, reduce, or remove

- the CIR may do the above if

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a. there is a reasonable doubt as to the validity of the claim against the tax payer

b. the tax appears to be unjustly assessed

c. it is clear that the taxpayer has inability to pay the assessed tax

d. the costs will not justify the amount to be collected( cost benefit analysis :D)

6. SUSPEND the business of the taxpayer

- CIR or his Auth Rep may suspend business operation and temporarily close the taxpayers business IF:

a. for VAT registered persons ( with gross sales or receipts of more than 1,919,500)

- failed to issue receipts(services) or invoices (goods)

- failure to file a vat return ( monthly vat return- 20th day of the succeeding month, quarterly return 25th day after the
end of the quarter = ***BIR form 2550 ***

-understatement of sales or receipts by atleast 30% of his taxable sale for the quarter

b. Failure by any person to register as required under SEC 236 of NIRC

SECTION 236. Registration Requirements. -

"(A) Requirements. - Every person subject to any internal revenue tax shall register once with the appropriate Revenue District
Officer:

"(1) Within ten (10) days from date of employment, or

"(2) On or before the commencement of business, or

"(3) Before payment of any tax due, or

"(4) Upon filing of a return, statement or declaration as required in this Code.

7. DELEGATE POWERS

The CIR may delegate the powers vested upon him to == ANY SUBBORDIANTE OFFICIAL, WITH RANK EQUIVALENT TO
DIVISION CHIEF OR HIGHER SUBJECT TO LIMITATIONS==

POWERS THAT MAY NOT BE DELEGATED:

1. Power to PROMULGATE RULES


2. Power to ISSUE FIRST INTERPRETATION
3. REVERSE, REVOKE, OR MODIFY rulings of the Bureau
4. power to COMPROMISE OR ABATE

ADMINISTRATIVE PROVISIONS
REGISTRATION REQUIREMENTS

1. the person must only be registered ONCE


2. the person required to pay tax shall be assigned with a TIN
3. only one TIN shall be assigned to a taxpayer EXCEPT:

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a. When a FOREIGN CURRENCY DEPOSIT UNIT is assigned with another TIN by the BIR for purposes of filing its
income tax returns..
Q: What are FCDUs?

A: FCDU, or Foreign Currency Deposit Unit, refers to that unit of a thrift bank or commercial bank
organized under Philippines laws, or a local branch of a foreign bank doing business in the Philippines which
have been authorized by the Bangko Sentral ng Pilipinas (BSP) to engage in foreign-currency denominated
transactions.
b. In case of ESTATE OF A DECEASED person. Diff TIN with that of the decedent.

REGISTRATION PERIOD

SECTION 236. Registration Requirements. -

"(A) Requirements. - Every person subject to any internal revenue tax shall register once with the appropriate Revenue District
Officer:

"(1) Within ten (10) days from date of employment, or

"(2) On or before the commencement of business, or

"(3) Before payment of any tax due, or

"(4) Upon filing of a return, statement or declaration as required in this Code.

ANNUAL REGISTRATION FEE = P 500, to be paid UPON REGISTRATION (BIR FORM 0605) and every year thereafter on or
before January 31.

BIR FORMS NEEDED FOR REGISTRATION

1. 1901 self employeed, mixed income individuals, estates and trusts


2. 1902 individuals earning PURELY COMPENSATION income
3. 1903 corporations and partnerships
4. 1904 one time taxpayer and those who are just securing a TIN in order to transact with government
agencies
5. 1905 updating/ cancellation of registration, cancellation of TIN, or new copy of COR

CONTENTS

BIR FORM 0605 PAYMENT FORM

- Shall be used for payment of annual reg fee, or every tax liab or penalty, TO BE APPROVED BY A REVENUE
OFFICER

APPLICATION OF EFPS paperless submission and payment of tax returns

Rules on TRANSFER OF OWNERSHIP

(If the person paying annual registration fee DIES, and the same business is CONTINUED BY ANOTHER PERSON OR
just simple change of ownership or change of name of the business )

1. No additional payment is required for the remaining time of the year where the payment was made
2. Person continuing SHOULD SUBMIT an inventory of goods to BIR WITHIN 30 days from death of the decedent

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TRANSFER OF BUSINESS PLACE

- it shall be the duty of the duly registered person to update his registration status BY FILING AN APPLICATION
FOR REGISTRATION INFORMATION UPDATE (BIR FORM 1905 2 copies)
- he must secure a tax clearance from his home RDO before he can transfer

PRINTING OF RECEIPTS

- BIR Authority to Print


- Receipts SALES INVOICE= goods,
- OFFICIAL RECEIPTS= services

ISSUANCE OF RECEIPTS, SALES INVOICE

- TIME FO ISSUANCE OF RECEIPT OR INVOICE = time when transaction is EFFECTED


- Required to issue receipt = P25 or more , however you can issue a single receipt for the accumulated sale of the
day if the products you sold are less than P25 each.
- The ORIGINAL RECEIPT shall be given to the purchaser
- ISSUER should keep the receipt in his PLACE OF BUSINESS FOR 3 YEARS

TAX RETURNS-

- These are formal report PREPARED BY THE TAXPAYER OR HIS AGENT in prescribed form showing taxable
amounts, allowable deductions and tax due to the government.
- (you can see diff tax returns in eBIRforms)
- Eg. 1701 annual ITR, 1701q Quarterly Income tax return, 1702 annual ITR Corp and part, 1800 Donors tax
return, 1801 Estate tax return

CERTIFICATE OF PAYMENT- shall be kept in PLAINVIEW, Or in case of PEDDLER = kept in POSSESSION of the holder, and
shall be PRESENTED UPON DEMAND.

ASSESSMENT
- DETERMINING THE CORRECTNESS of TAX DUE and
- Giving a WRITTEN NOTICE of the FINDING to the taxpayer.
- ISSUING A DEMAND FOR PAYMENT of a tax LIABILITY OF DEFICIENC

TAX ASSESSMENT formal letter made by the BIR demanding the taxpayer to settle his liability within an indicated
period

Who makes assessment? CIR or his duly authorized representative

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ASSESSMENT PERIOD-

-refers to a span of time allowed by law to investigate a taxpayers discrepancy.

PRESCRIPTIVE PERIODS OF TAX ASSESSMENT

INCOME TAX RETURNED


FILED ASSESSMENT PERIOD
VIOLATION
1. REGULAR RETURN
within 3 years from the filing of the ITR or its
SIMPLE NEGLECT amendment
*ITR WITHOUT FRAUD
within 10 years FROM THE DISCOVERY of
2. FRAUDULENT RETURN fraud or omission
(willful neglect) OR
ITR with FRAUD, failure to file
return or with SUBSTANTIAL
omission no assessment needed
court proceeding for tax collection within 10
years FROM THE DISCOVERY of fraud or
omission

NB.

FOR SIMPLE NEGLECT

1. The BIR and the taxpayer may agree on the assessment period before the expiration of the 3 yr period
2. The return may be changed or amended within 3yrs from date of filing AS LONG AS NO TAX INVESTIGATION
has been served
3. if the return was filed after the due date, the prescriptive period will start from the date the return was filed
4. if return is SUBSTANTIALLY AMENDED, the period starts from the DATE OF AMENDMENT

FOR WILLFUL NEGLECT

1. the tax may be assessed or a PROCEEDING IN COURT for the collection of such tax WITHOUT assessment within
10 years FROM THE TIME OF DISCOVERY
2. ASSESSMENT IS NOT A PREREQUISITE for Criminal Action for tax evasion

IMPORTANT: IF THE GOVERNMENT FAILED TO ASSESS OR TO FILE A CASE WITHIN THE ASSESSMENT PERIOD, THE
TAXPAYER IS DEEMED TO HAVE PAID THE CORRECT AMOUNT OF TAX.

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