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GENERAL PRINCIPLES
2. What is taxation?
Taxation is the power to impose burden, exercised by the legislative as an
inherent power of sovereignty upon persons, property, or other objects within the
territorial jurisdiction of the Philippines, in order to raise revenue and defray the
necessary expenses of the government, for the benefit of the general welfare.
7. What are the canons of taxation or basic principles of sound tax system?
a) Fiscal Adequacy – the source of revenue should be sufficient to meet the
demands of public expenditure;
As to burden or incidence
a) Direct – one that is demanded from the person who also shoulders the
burden of tax.
b) Indirect – one which is shifted by the taxpayer to someone.
As to tax rates
a) Specific – tax of a fixed amount imposed by the head or number, or by some
standard of weight or measurement.
b) Ad valorem – tax based on the value of the property with respect to which
the tax is assessed.
c) Mixed
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As to purposes
a) General / Fiscal Revenue – tax imposed solely for the general purpose of
the government.
b) Special / Regulatory or Sumptuary – tax levied for specific purpose.
As to Graduation
a) Progressive – tax that increases as the tax base or bracket increases.
b) Regressive – tax decreases as the tax base or bracket increases.
c) Proportionate – tax of a fixed percentage of amounts of the base.
EXCEPTIONS:
a) Rule of reciprocity;
b) Inconsistency with the express provisions of law; and
c) Justice demands that it should not be, as where the property in fact has a
situs elsewhere.
14. What are the intangible properties that are considered situated here in
the Philippines?
a) Franchise which must be exercised in the Philippines;
b) Shares, obligations, or bonds issued by any corporation or sociedad anonima
organized or constituted in the Philippines in accordance with its laws;
c) Shares, obligations, or bonds issued by any foreign corporation whose 85% of
the business is located in the Philippines;
d) Shares, obligations, or bonds issued by any foreign corporation if such shares,
obligations, or bonds have acquired business situs in the Philippines; and
e) Shares or rights in any partnership, business, or industry established in the
Philippines.
15. What is the difference between tax exemption and tax amnesty?
20. When an item of income is taxed in the Philippines and the same income
is taxed in another country, is there a case of double taxation?
Yes, although it is only a case of indirect duplicate taxation which is not legally
prohibited because the taxes are imposed by different taxing authorities.
21. What does “the power to tax involves power to destroy” mean?
It describes not the purposes for which the taxing power may be used but the
extent to which it may be employed in order to raise revenues. Thus, even if a
tax should destroy a business, such fact alone could not invalidate the tax.
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22. What is the difference between tax evasion and tax avoidance?
Taxpayer is subject to civil and criminal No civil or criminal liability on the part
liabilities. of the taxpayer.
EXCEPTION: In case of solutio indebiti and if the case involves local government
taxes.
corporations generally within the same state or taxing district are obliged to
pay.
Tax which is demanded from the person Tax wherein the incidence/liability for
who also shoulders the burden of the tax; the payment falls on one person but
taxpayer is directly or primarily liable the burden can be shifted or passed
which he cannot shift to another. on to another.
EXCEPTION: If in the opinion of the Court of Tax Appeals, the collection would
jeopardize the interest of the Government and/or the taxpayer, it could suspend
the collection and require the taxpayer either to deposit the amount claimed or to
file a surety bond for not more than double the amount of the tax assessed.
30. Does a BIR ruling have a retroactive effect, considering the principle
that tax exemptions should be interpreted strictly against the taxpayer?
GENERAL RULE: No. A BIR ruling cannot be given retroactive effect if it would be
prejudicial to the taxpayer.
32. The Commissioner of the U.S. Internal Revenue Service (IRS) requested
the CIR to get the information from a bank in the Philippines, regarding
the deposits of a U.S. Citizen residing in the Philippines, pursuant to the
US-Philippine Tax Treaty and other existing laws. Should the BIR
Commissioner agree to obtain such information from the bank and
provide the same to the IRS?
Yes. The Commissioner should agree to the request pursuant to the principle of
international comity. The Commissioner of Internal Revenue has the authority to
inquire into bank deposits accounts and related information held by financial
institutions of a specific taxpayer subject of a request for the supply of tax
information from a foreign tax authority pursuant to an international convention
or agreement to which the Philippines is a signatory or party of. [Section 3, RA
10021]
INCOME TAXATION
NOTE: A non-resident alien individual who has stayed for an aggregate period of
more than 180 days during the calendar year is deemed to be a non-resident
alien doing business in the Philippines.
36. Who are the individual taxpayers exempt from filing income tax?
The following are exempt from filing income tax:
a) Minimum wage earners;
b) Those whose gross income does not exceed the personal and additional
exemptions dictated by BIR. All taxpayers are entitled to P50,000 personal
exemption, while those with dependents have additional exemption of
P25,000 for each qualified dependent (but it should only up to 4 dependents);
c) Those whose annual salary from just one employer will not exceed P60,000;
d) Those whose income has been subjected to final withholding tax filed by the
employer; and
e) Those who are qualified under “substituted filing.” Substituted filing is when
the employer's annual tax return may be considered as the “substitute” ITR
as they contain the same information.
As to rates One set of tax rates Graduated or flat income tax rate
38. What are the general classifications of income for income tax purposes?
where he
resides vs. PE
in the
Philippines
25%
of
Income
Gross
Non-resident Alien from
Income
NOT ENGAGED in sources Not Allowed Not Allowed
(Final
trade or business within the
Withhol
Philippines
ding
Tax)
40. What are the tax rates on certain passive income? (subject to final
withholding tax)
PASSIVE INCOME (derived RES. CIT.
NONRES. NRA
from sources within the & RES. NRAETB
CIT NETB
Philippines) ALIEN
Interests from any currency bank 20% 20% 20% 25%
deposits and yield or any other
monetary benefit from deposit
substitutes and from trust funds
and similar arrangements
Royalties, except on books, as 20% 20% 20% 25%
well as other literary works and
musical compositions
Royalties on books as well as 10% 10% 10% 25%
other literary works and musical
compositions
Prizes, except prizes amounting 20% 20% 20% 25%
to P10,000 or less. Prizes
amounting to P10,000 or less is
subject to 5%-32%
Other winnings, except PCSO and 20% 20% 20% 25%
Lotto winnings
Interest income from a 7 1/2% None None None
depository bank under the
Expanded Foreign Currency
Deposit System
Interest income from long-term Exempt Exempt Exempt 25%
deposit or investment in the form
of savings, common or individual
trust funds, deposit substitutes,
investment management
accounts and other investments
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41. What are the income tax rates and base for ordinary income of domestic
corporations?
TAXPAYER TAX BASE TAX RATES
Ordinary
Taxable income Effective January 1, 2009 – 30% RCIT
domestic
Gross income On the 4th year of operations – 2% MCIT
corporation
Proprietary non- GENERAL RULE: 10%
profit EXCEPTION: If gross income from unrelated
educational Taxable income trade, business or other activity exceeds
institutions and 50% - 30%, RCIT shall be imposed on the
hospitals entire taxable income.
Same rate of tax upon their taxable income as are imposed upon
GOCCs, agencies, corporations or associations engaged in a similar business,
instrumentalities industry or activity. EXEMPT: GSIS, SSS, PCSO, Philippine
Health Insurance Corp.
42. What are the income tax rates and base of domestic corporations for
certain passive income derived from sources within the Philippines?
PASSIVE INCOME TAX BASE TAX RATES
Interest on currency bank deposit and yield or any
other monetary benefit from deposit substitutes and Interest income 20%
from trust funds and similar arrangements
Interest income derived from a depositary bank under
Interest income 7.5%
the expanded foreign currency deposit system (EFCDS)
Royalties Gross Royalty 20%
Not over
P100,000 –
Capital gains from the sale, exchange or other
5%
disposition of shares of stocks in a domestic Net capital gain
Amount in
corporation.
excess –
10%
Income derived by a depositary bank under the
expanded foreign currency deposit system from foreign
currency transactions with non-residents, offshore Income EXEMPT
banking units (OBU) in the Philippines, local
commercial banks, including branches of foreign banks
Interest income from foreign currency loans granted by
such depositary banks under EFCDS to residents other Interest income 10%
than OBU or other depositary banks under EFCDS
Intercorporate dividends, i.e., dividends received by a
domestic corporation from another domestic Dividend income EXEMPT
corporation
Capital gains realized from the sale, exchange or Presumed gain
6%
disposition of lands and/or buildings treated as capital i.e., Gross Selling
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43. What are the income tax rates and base for resident foreign
corporations in terms of ordinary income?
TAX BASE TAX RATES
Effective
January 1,
Taxable income 2009 – 30%
Resident Foreign
RCIT
Corporation Gross income On the 4th year
of operations –
2% MCIT
International Carrier,
2 ½% as a
e.g., Air carrier and Gross Philippine Billings
general rule
shipping lines
Offshore Banking Units Income from foreign currency transactions EXEMPT
(OBU) with non-residents, other offshore banking
units, local commercial banks, including
branches of foreign banks. Final tax of
10%
Interest income from foreign currency
loans granted to residents, other than
RCIT 30%
OBUS.
Other income
Foreign Branch (except Taxable income 30% RCIT
those activities which are 2% MCIT
Gross income
registered with PEZA) Branch Profits
Profit remittance Remittance
Tax – 15%
Regional or Area
Headquarters of
Not Applicable EXEMPT
Multinational
Companies
Regional Operating
Headquarters of
Taxable Income 10%
Multinational
Companies
44. What are the income tax rates and base of a resident foreign
corporation in certain types of income?
TAX
PASSIVE INCOME TAX BASE
RATES
Interest on currency bank deposit and yield or any other
Interest
monetary benefit from deposit substitutes and from trust funds 20%
income
and similar arrangements
Interest income derived from a depositary bank under the Interest
7.5%
expanded foreign currency deposit system (EFCDS) income
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Gross
Royalties 20%
Royalty
Not
over
P100,00
Capital gains from the sale, exchange or other disposition of Net capital 0 – 5%
shares of stocks in a domestic corporation gain Amount
in
excess –
10%
Income derived by a depositary bank under the expanded foreign
currency deposit system from foreign currency transactions with
Income EXEMPT
non-residents, offshore banking units (OBU) in the Philippines,
local commercial banks, including branches of foreign banks
Interest income from foreign currency loans granted by such
Interest
depositary banks under EFCDS to residents other than OBU or 10%
income
other depositary banks under EFCDS
Intercorporate dividends, i.e., dividends received by a resident Dividend
EXEMPT
foreign corporation from another domestic corporation income
45. What are the income tax rates and bases of non-resident foreign
corporations in terms ordinary income?
TAX BASE TAX RATES
Final tax of
Non-resident foreign corporation Gross income
30%
Non-resident cinematographic film owner, Final tax of
Gross income
lessor or distributor 25%
Non-resident owner or lessor of vessels Gross rentals, lease or Final tax of
chartered by Philippine nationals charter fees 4 ½%
Non-resident owner or lessor of aircraft, Gross rentals and other Final tax of
machineries and other equipment fees 7 ½%
47. What are the income tax exempt corporations under the Tax Code?
a) Labor, agricultural or horticultural organization not organized principally for
profit;
b) Mutual savings bank not having a capital stock represented by shares, and
cooperative bank without capital stock organized and operated for mutual
purposes and without profit;
c) A beneficiary society, order or association, operating for the exclusive benefit
of the members such as a fraternal organization operating under the lodge
system, or a mutual aid association or a non-stock corporation organized by
employees providing for the payment of life, sickness, accident, or other
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49. What comprises gross income from sources with situs within the
Philippines?
a) Interests;
b) Dividends from:
i. Domestic corporation;
ii. Foreign corporation – only in an amount which bears the same ratio to
such dividends as the gross income of the corporation for such period
derived from sources within the Philippines bears to its gross income
from all sources;
c) Services (compensation for labor/ personal services);
d) Rentals and royalties from property or use of property located in the
Philippines, or interest therein;
e) Gains, profits and income from the sale of real property located in the
Philippines;
f) Gains, profits and income from the sale of personal property whereby the
place of sale is in the Philippines, although the place of purchase is abroad.
50. What are the allowable deductions from gross income for individuals?
a) Business expenses and expenses from practice of profession;
b) Special deduction for actual premium payments for health and/or
hospitalization insurance provided that:
i. The taxpayer’s family gross income does not exceed P250,000 in a
taxable year;
ii. The amount deductible should only be limited to P2,400 per family or
P200 per month; and
iii. In case of married taxpayer, this can only be claimed by the spouse
claiming the additional exemption.
ii. Income derived by the government or its political subdivisions from any
public utility or from the exercise of any essential governmental function
accruing to the Government of the Philippines or to any political
subdivision thereof.
iii. Prizes and awards made primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic achievement, provided
that:
1. The recipient was selected without any action on his part to enter the
contest or proceeding; and
2. The recipient is not required to render substantial future services as a
condition to receiving the prize or award;
iv. Prizes and awards in sports competition – all prizes and awards granted
to athletes in local and international sports competitions and tournaments
whether held in the Philippines or abroad and sanctioned by their national
sports associations;
v. 13th Month Pay and other benefits received by officials and employees of
public and private entities, provided that, the total exclusion shall not
exceed P30,000;
vi. GSIS, SSS, Medicare and other contributions;
vii. Gains from the sale of bonds, debentures or other certificate of
indebtedness with a maturity of more than 5 years; and
viii. Gains from Redemption of Shares in Mutual Fund.
tax liability and to minimize tax evasion, thus resulting in a more efficient tax
collection system.
b) Property held by the taxpayer primarily for sale to customers in the ordinary
course of business or trade;
c) Other property of a kind which would properly be included in the inventory of
the taxpayer if on hand at the close of the taxable year;
d) Property used in the trade or business of a character which is subject to the
allowance of depreciation.
Capital assets, on the other hand, pertain to properties held by the taxpayer
whether or not connected with his trade or business which is not ordinary asset.
62. Is actual gain required for the imposition of capital gains tax?
No. Actual gain is not required for the imposition of capital gains tax. It is
imposed on income presumed to have been realized which is the fair market
value, selling price thereof, whichever is higher. It is the gain by fiction of law
which is taxable.
The rate of 6% CGT is based on the higher amount between gross selling price or
fair market value. In computing the CGT, you simply determine the higher value
of the property, and simply multiply by 6%. It would not matter how much the
seller actually earned because the tax is based on gross amount.
For sale of shares of stock of a domestic corporation held as capital asset (not
traded through the stock exchange), the tax is based on the net capital gains.
This means that the cost of the shares is deductible from the selling price in order
to arrive at the taxable gain. Rates: 5% for the first 100k and 10% in excess of
100k.
NOTE: If the FMV is higher than the selling price, the difference is deemed a
donation subject to donor’s tax.
The tax rate is 2% of the gross income except income exempt from income tax
and income subject to final withholding tax.
individual capacity, and are thus required to report as gross income his
distributed share actually or constructively received in the net income of the
partnership.
66. Distinguish exclusions from gross income and deductions from gross
income.
EXCLUSION DEDUCTION
67. What are the differences between allowable deductions and personal
exemptions?
As to
Pertains to personal
nature Constitute business expense.
expenses.
deducted from gross income but which were subsequently refunded or credited
by the BIR.
NOTE: Unless the taxpayer signifies in his return his intention to elect the OSD,
he shall be considered as having availed himself of the itemized deductions. Such
election is irrevocable for the taxable year for which the return is made.
70. What are the requisites for valid deduction of bad debts from the gross
income?
a) Existing indebtedness due to the taxpayer which must be valid and legally
demandable;
b) Connected with the taxpayer’s trade, business or practice of profession;
c) Not be sustained in a transaction entered into between related parties
enumerated under Sec. 36(B) of the Tax Code of 1997;
d) Actually charged off the books of accounts of the taxpayer as of the end of
the taxable year; and
e) Actually ascertained to be worthless and uncollectible as of the end of the
taxable year.
Before a taxpayer may charge off and deduct a debt, he must ascertain and be
able to demonstrate with reasonable degree of certainty the uncollectibility of the
debt.
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Within 45 days from the date of the event causing the loss, a sworn declaration
of loss must be filed with the nearest BIR RDO in the BIR-prescribed format,
stating the nature of the event that gave rise to the loss and time of its
occurrence; description and location of damaged properties; items needed to
compute the loss such as the cost or other basis of the properties, any
depreciation allowed, value of properties before and after the event, and cost of
repair; and the amount of insurance or other compensation received or
receivable.
TRANSFER TAXES
77. What are the deductions on gross estate that are applicable to resident
aliens and citizens?
a) Vanishing deduction;
b) Ordinary deductions;
i. Funeral expenses – actual amount of 5% of the gross estate, but must
not exceed P200,000;
ii. Judicial expenses of the testamentary or intestate proceedings;
iii. Claims against the estate;
iv. Claims against insolvent persons;
v. Unpaid mortgages;
vi. Losses;
vii. Taxes.
c) Transfer for public use;
d) Family home;
e) Standard deduction equivalent to one million pesos (P1,000,000);
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f) Medical expenses incurred by the decedent within one (1) year prior to his
death which must not exceed five hundred thousand (P500,000);
g) Amounts received by heirs under RA 4917 (Retirement Benefits); and
h) Net share of the surviving spouse in the conjugal or community property.
79. What are the deductions from gross estate that are applicable to non-
resident aliens?
a) Ordinary deductions;
b) Transfer for public use;
c) Vanishing deduction on property in the Philippines; and
d) Conjugal share of the surviving spouse.
81. What are the donations exempt from payment of donor’s tax?
If gifts are made by a resident:
a) Dowries or gifts made on account of marriage and before its celebration or
within one year thereafter by parents to each of their legitimate, illegitimate,
or adopted children to the extent of the first P10,000;
b) Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit; and
c) Gifts in favor of educational, charitable, religious, cultural or social welfare
corporation, institutions, accredited NGOs, provided that not more than 30%
of said gifts shall be used by such donee for administration purposes.
Notice Requirement
GR: Notice of donation is not required. Notice of death required in the
XPNs: following cases:
a) Donations to NGO worth at least P50, a) Transaction subject to estate tax.
000. Provided, not more than 30% of b) Transaction exempt from estate tax
which will be used for administration but exceeds P20,000.
purposes.
b) Donation to any candidate, political
party, or coalition of parties.
Notice, When Filed
Within 2 months after the decedent’s
death or after qualifying as executor
or administrator.
Filing of Return
A transfer subject to donor’s tax. a) A transfer subject to estate tax.
b) Exempt from tax but the gross
estate exceeds P200,000.
c) Estate consists of registered or
registrable property, regardless of
value of gross estate.
Contents of Return
a) Each gift made during the calendar
year which is to be included in
computing net gifts; a) Value of the gross estate;
b) The deductions claimed and allowable; b) Deductions under Sec. 86, NIRC;
c) Any previous net gifts made during the c) Other pertinent information;
same calendar year; d) If gross estate exceeds P2M,
d) The name of the donee; certified by a CPA as to assets,
e) Such further information as may be deductions, tax due, whether paid
required by rules and regulations or not.
made pursuant to law.
Extension of Payment
None GR: Extension of payment is not
allowed.
XPN: When it would impose undue
hardship upon the estate or any of
the heirs, extension may be allowed
but not to exceed 5 years in case of
judicial settlement or 2 years in case
of extra-judicial settlement.
XPN to XPN: When taxpayer is guilty
of:
a) Negligence;
b) Intentional disregard of rules and
regulations; or
c) Fraud.
Requirement for grant of extension of payment
Bond not exceeding double the
amount of the tax and with such
sureties as the Commissioner deems
necessary.
VALUE-ADDED TAX
89. What is the difference between output tax and input tax?
OUTPUT TAX INPUT TAX
VAT due from or paid by a VAT-registered
VAT due on the sale or lease of
person in the course of his trade or
taxable goods or properties or
business on importation of goods or local
services by any person registered or
purchase of goods or services, from VAT-
required to register under NIRC.
registered person.
c) Consignment of goods if actual sale is not made within 60 days following the
date such goods were consigned; and
d) Retirement from or cessation of business, with respect to inventories of
taxable goods existing as of such retirement or cessation.
95. What will be the treatment of sale, barter, exchange or lease of goods,
properties and sale or exchange of services to a registered Freeport
Zone enterprise by sellers/contractors from the Customs Territory?
If the seller is a VAT taxpayer, such sale, barter or exchange shall be subject to
VAT at zero (0%) percent. If the seller is a non-VAT taxpayer, the transaction
shall be exempt from VAT.
96. What is the tax treatment of sale, barter or exchange of goods and
properties by Freeport Zone-registered enterprises to a buyer from the
customs territory?
The sale, barter or exchange shall be treated as a technical importation made by
the buyer in the customs territory. The buyer shall be treated as the importer
and shall be imposed the corresponding import taxes and duties prior to release
of the goods or merchandise from customs custody. Any unpaid taxes thereon,
aside from being the prime liability of the buyer importer, shall constitute a lien
on such goods or merchandise imported from the Freeport Zone.
98. What is the basis of the VAT on taxable sales of real property?
The basis of the VAT on taxable sale of real property is “Gross Selling Price"
which is either the selling price stated in the sale document or the “Zonal Value,"
whichever is higher. In the absence of zonal values, the gross selling price shall
refer to the market value as shown in the latest tax declaration or the
consideration, whichever is higher.
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99. When can an appeal be filed with the CTA in case of full or partial denial
of the written claim for refund or excess input tax directly attributable
to zero-rated sales, or failure on the part of the Commissioner to act on
the application within 120 days from date of submission of complete
documents?
Within 30 days from the receipt of the decision denying the claim or after the
expiration of the 120-day period.
Failure to comply with the 12-day waiting period violates a mandatory provision
of law and renders the petition premature, thus without cause of action, with the
effect of the CTA acquiring no jurisdiction over the taxpayer's petition.
100. What is the prescriptive period for claiming unutilized or excess input
taxes?
It must be claimed within two years:
a) Reckoned from the close of the taxable quarter; or
b) Reckoning frame.
PERCENTAGE TAX
EXCISE TAX
LOCAL TAXATION
113. What are the properties exempt from real property tax under the LGC?
a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, non-profit or religious cemeteries and all lands, buildings,
and improvements actually, directly, and exclusively used for religious,
charitable or educational purposes;
c) All machineries and equipment that are actually, directly and exclusively used
by local water districts and government owned or controlled corporations
engaged in the supply and distribution of water and/or generation and
transmission of electric power;
d) All real property owned by duly registered cooperatives as provided for under
RA 6938; and
e) Machinery and equipment used for pollution control and environmental
protection.
114. The Provincial Board passed an Ordinance increasing the rate of basic
real property tax from 0.0055 to 1% of the assessed value of the
property effective February 24, 2005. Residents protested as there was
no public hearing conducted, hence, the increase is void. Is the
residents’ contention correct?
No. Public hearing is not required before the enactment of a local ordinance
levying the real property tax. [Art. 324, LGC Regulations, UP Law Complex,
2007]
EXCEPTION: In cases where there are mixed land uses, the predominant use
shall be the basis.
127. What is the nature of forfeiture proceedings under the Tariff and
Customs Law?
Forfeiture proceedings are purely civil and administrative in character, the main
purpose of which is to enforce the administrative fines or forfeiture incident to
unlawful importation of goods or their deliberate possession. The penalty in
seizure cases is distinct and separate from the criminal liability that might be
imposed against the indicted importer or possessor and both kinds of penalties
may be imposed. Underdeclaration of value is a ground for forfeiture.
143. What are the degrees of culpability for failure to pay correct duties and
taxes on imported goods?
a) Negligence – when a deficiency results from an offender’s failure to exercise
reasonable care and competence to ensure that a statement made is correct.
b) Fraud – when the material false statement or act in connection with the
transaction was committed or omitted knowingly, voluntarily and
intentionally, as established by clear and convincing evidence.
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TAX REMEDIES
147. What are the grounds for filing a claim for tax refund or tax credit?
The grounds are as follows:
a) Tax is collected erroneously or illegally;
b) Penalty is collected without authority; and
c) Sum collected is excessive or in any manner wrongfully collected.
148. What are the remedies of the BIR and the Bureau of Customs in
collecting taxes due to the government?
Administrative
a) Compromise;
b) Distraint;
c) Levy;
d) Tax lien;
e) Forfeiture of property;
f) Suspension of business operation in violation of VAT;
g) Giving of reward to informers who give information as to tax violations; and
h) Enforcement of administrative fines, surcharges and penalties.
Judicial
a) Civil action; and
b) Criminal action.
Substantive
a) Imposition of withholding tax on certain income payments;
b) Issuance of revenue regulations by administrative agency;
c) Failure to obey summons; and
d) Declaration under penalties of perjury.
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150. What are the prescriptive periods for assessment and collection of
taxes?
For Assessment:
GENERAL RULE: Within 3 years from due date of filing of return if return is filed
on or before due date, or 3 years from date of actual filing if filed beyond due
date.
EXCEPTIONS:
a) Failure to file a return: 10 years from the date of the discovery of the
omission to file the return.
b) False or fraudulent return with intention to evade tax: 10 years from the date
of discovery of the falsity or fraud.
c) Agreement in writing to the extension of the period to assess between the
CIR and the taxpayer before the expiration of the 3-year period.
For Collection:
a) 5 years from the date of assessment by administrative or judicial action.
b) In case of non-filing, false or fraudulent return:
i. 10 years from discovery if proceeding for collection is made without
assessment; or
ii. 5 years from date of assessment if BIR chooses to make assessment
after discovery of the non-filing, false, or fraudulent return.
c) Agreed period pursuant to agreement in writing: before the expiration of the
5-year period.
151. What is the prescriptive period for the taxpayer’s administrative claim?
The administrative claim must be filed within 2-year period, regardless of any
supervening cause. The 2-year prescriptive period will commence from the
following:
a) In overpaid quarterly income taxes, from the date the final adjustment return
is filed after the end of taxable year;
b) When the final adjustment return was actually filed before the last day
prescribed by law for filing, from the date of actual filing;
c) For taxes sought to be refunded is illegally and erroneously collected, from
the date the tax was paid;
d) When tax is paid on installments, from the date of last installment;
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e) When taxpayer merely made a deposit, from the time the deposit was
converted to payment;
f) For taxes withheld from source, from the date it falls due at the end of
taxable year; and
g) In corporate dissolution, 30 days from the approval by the SEC for such
dissolution.
156. Does the satisfaction of civil liability extinguish the taxpayer’s criminal
liability under the Tax Code?
No. The satisfaction of the civil liability is not one of the grounds for the
extinction of criminal action instituted against a taxpayer for violation of the Tax
Code. The payment of the tax due after apprehension shall also not constitute a
valid defense in any prosecution for violation of any provision of the Tax Code. If
items were seized from the taxpayer, such may be returned to him if he has
settled the taxes assessed against him.
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161. What is the difference between deficiency tax and delinquency tax?
162. What is the difference between fraudulent return and false return?
NIRC REMEDIES
Assessment Process and Taxpayer’s Remedies from Tax Assessment – NIRC
Appeal to Supreme Court within 15 days from the receipt of the decision of CTA En
Banc or a petition for certiorari, prohibition or mandamus in cases of grave abuse of
discretion, lack or excess of jurisdiction
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If the delinquent tax is more than P1M, CIR seizes sufficient personal property to satisfy the tax, charge and
expenses of seizure. (NIRC, Sec. 207[A])
If the delinquent tax is not more than P1M, Revenue District Officer seizes sufficient personal property to satisfy
the tax, charge and expenses of seizure. (NIRC, Sec. 207[A])
The distraining officer accounts for the goods distrained. (NIRC, Sec. 208)
RDO posts notice in atleast 2 public places in the municipality/ city where the distraint is made. One place of
posting must be at the mayor’s office. Time of sale shall not be less than 20 days after the notice. (NIRC, Sec.
209)
If the bid is not equal to the amount of tax or very much less than the FMV of the goods distrained, the CIR may
purchase property in favor of the National Government. The property may be resold and the net proceeds shall
be remitted to the National Treasury as internal revenue. (NIRC, Sec. 212)
If the bid is just right, the officer sells the goods to the highest bidder for cash or with the CIR’s approval,
through commodity/ stock exchanges. (NIRC, Sec. 209)
Excess proceeds over the entire claim shall be returned to the owner. No charge shall be imposed for the
services of the officer. (NIRC, Sec. 209)
Within 2 days after sale, officer shall report to CIR (NIRC, Sec. 211). Within 5 days after the sale, distraining
officer shall enter return of proceedings in the record of Revenue, Collection Officer, RDO, and the Revenue
Regional Director. (NIRC, Sec. 213)
Real property may be levied on, before, simultaneously, or after the distraint of personal property. (NIRC,
Sec. 207[B])
Internal revenue officer, designated by the CIR, shall prepare a certificate with the force of a nationwide legal
execution. (NIRC, Sec. 207[B])
Levy shall be effected by writing upon said certificate a description of the property. Notice of the levy shall be
served upon the Register of Deeds of LGU where the property is located and upon the owner. (NIRC, Sec.
207[B])
Within 10 days after the receipt of the warrant, levying officer shall report to the CIR who shall have the authority
to lift the warrant of levy. (NIRC, Sec. 207[B])
Within 20 days after the levy, officer shall post notice at the main entrance of the municipality/ city hall and in a
public place in the barrio/ district where the real estate for at least 30 days and publish it once a week for 3
weeks. Owner may prevent sale by paying all charge. (NIRC, Sec. 213)
If there is no bidder or the highest bid is insufficient, the If there is a bidder and the highest bid is
officer conducting the sale shall forfeit the property to sufficient, excess of the proceeds of sale over
the government. Within 2 days, he shall make a return claim and cost of sale shall be turned over to the
of the forfeiture. The Registrar of Deeds shall transfer owner. Within 5 days after sale, levying officer
title to the government without need of a court order, shall enter return of the proceedings upon the
upon registration or forfeiture. Within 1 year from records of the RCO, RDO, RRD. (NIRC, Sec.
forfeiture, taxpayer may redeem said property by 213)
paying full amount of the taxes and charges (NIRC, Within 1 year from sale, owner may redeem by
Sec. 215). CIR may, after 20 day-notice, sell property paying to RDO amount of the taxes, penalties
at public auction or at a private sale with approval of and interest from date of delinquency to the date
SOF. Proceeds shall be deposited with the National of sale, and 15% per annum interest on the
Treasury. (NIRC, Sec. 216) purchase price from date of purchase to date of
redemption. Owner shall not be deprived of
possession and shall be entitled to the fruits until
1 year expires. (NIRC, Sec. 214)
Levy and distraint may be repeated until the full
amount due and all expenses are collected.
(NIRC, Sec. 217)
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LGC REMEDIES
Taxpayer’s Remedies Against Collection
NIRC REMEDIESof Real Property Taxes (LGC)
Assessment NIRC REMEDIES
ES ES
LT issues notice of deadline for payment:
a) Posting at a conspicuous place at the LGU
Assessor submits assessment roll to the Local hall; OR
Treasurer (LT) b) Publication in a newspaper of general
circulation in the LGU once a week for 2
consecutive weeks.
Within 60 days from receipt of protest, LT decides Does LT grant the protest?
YES NO
Taxpayer may
appeal within 60
days from receipt of
Amount of tax notice (or expiration
Refund or tax credit must be claimed within 2 of 60 days) to the
protested shall be
years from the date of entitlement. Local Board of
refunded or applied
as tax credit. Assessment Appeals
(LBAA).
* same procedure if
Within 60 days LT acts on claim for refund or tax LT did not act upon
credit. protest
Does LT grant the claim? LBAA decides within 120 days from
receipt of appeal.
YES NO
Taxpayer may appeal within 60 days from receipt If LBAA rejects protest OR claim
of notice (or expiration of 60 days) to the Local for refund or tax credit, owner may
Board of Assessment Appeals. appeal to the CBAA w/in 30 days
from receipt of notice.
END
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Real Property Tax Levy for Satisfying Real Property Taxes (LCC)
Delinquency
Sanggunian may, by
The price paid and the
LT reports the sale to the ordinance, sell and
2% interest per month
Sanggunian 30 days dispose of the real
are returned to the
after the sale. property acquired
buyer.
through public auction.
ES
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