the philippines: tax assessment, appeal and dispute...

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The Philippines: Tax Assessment, Appeal and Dispute Resolution

Presentation made for

The ASEAN Tax System Seminar September 15 to 17, 2010 Bangkok, Thailand

Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]

The Philippine Tax Office: BIR

DEPARTMENT OF FINANCE

Bureau of Internal

Revenue

Bureau of Customs

Bureau of Treasury

Bureau of Local

Government Finance

2 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]

Chiefs Officials of the BIR

Commissioner of Internal Revenue

Deputy Commissioner – Operations Group

Deputy Commissioner – Legal & Inspection Group

Deputy Commissioner – Resource

Management Group Deputy Commissioner –

Information Systems Group


Large Taxpayers Offices

LT Audit Offices

Group (Assistant Commissioners

Regular & Excise)

CIR 1

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Regional & District Offices

District Offices

Regions

DCIR - OG 1

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Powers & Duties of the BIR

  Assess and collect of all internal revenue taxes, fees, and charges, and

  Enforce all forfeitures, penalties, and fines connected with the assessment & collection function

  Execute favorable judgments the Court of Tax Appeals and the ordinary courts.


Powers of the Commissioner of BIR

  Interpret:   exclusive and original jurisdiction to interpret the

provisions tax laws (subject to review by the Secretary of Finance)

  Decide:   To decide on, (subject to the exclusive appellate

jurisdiction of the Court of Tax Appeals)   disputed assessments   refunds of internal revenue taxes, fees or other

charges, penalties imposed in relation thereto,


Power of Commissioner of the BIR

  Examination   Notice of Audit, Letters of Authority, Tax Verification

Notice, Letter Notice   Obtain information

  Request for Third Party Information, Data-Linkage   Summon any person

  Subpoena Duces Tecum   Take testimony

  Subpoena Ad Testificandum   To order canvass [survey or surveillance]

  Mission Orders


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Audit Notice

  Issuance of Audit Notice   Letter of Authority   Letter Notice of Discrepancy

  Burden of proof is upon the taxpayer to show clearly that the assessment is wrong and without basis or is erroneous.

  Failure to do so on the part of the taxpayer justify the judicial affirmation of the assessment


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Audit and Investigation

  Audit and Investigation Proper   Actual audit of taxpayer’s books of account   Use of third party information to check on

accuracy of reporting   Revenue Officers who audit the taxpayer shall

prepare a report of discrepancies noted with a report of possible tax deficiency assessment

  Average: 120 days to conduct audit & investigation


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Informal Conference

  Notice of Informal Conference   A Notice of Informal Conference is an invitation by

the Revenue District Office (RDO) to a taxpayer under audit to visit the tax office to hear all the discrepancies noted by the Revenue Officer who audited their books of accounts with a computation of possible tax deficiency assessment


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Informal Conference

  Notice of Informal Conference   An Informal Conference affords the taxpayer with

an opportunity to present his side of the case   After service of a Notice of Informal Conference,

taxpayer is given fifteen (15) days from date of receipt to appear before the tax agency, otherwise he shall be considered in default.


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Preliminary Assessment Notice (PAN)

  Preliminary Assessment Notice (PAN)   After an Informal Conference, taxpayer is given

reasonable time to present documentary evidence or explanation on the discrepancies noted and to rebut the deficiency tax assessment against them

  If still there exist a sufficient basis to assess or after the taxpayer has been declared in default in an informal conference a PAN shall be issued against a taxpayer


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Preliminary Assessment Notice (PAN)

  Preliminary Assessment Notice (PAN)   A PAN is issued and served either personally or

by registered mail to the taxpayer   It contains a explanation of the deficiency tax

assessment, showing in details the facts and the laws and rules and regulations or jurisprudence on which the proposed assessment is based

  Taxpayer is given fifteen (15) days to respond to said PAN otherwise they are considered in default


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Final Assessment Notice (FAN) and Formal Letter of Demand   Final Assessment Notice (FAN) and Formal

Letter of Demand   After giving opportunity to the taxpayer to rebut

the PAN and still there are basis to assess deficiency taxes or there are still unexplained issues or after they have been in default, a Final Assessment Notice shall be issued against them with a Formal Letter of Demand calling for the payment of the computed deficiency tax assessment


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Exceptions to Prior Notice of Assessment

  When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return by the taxpayer; or

  When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or


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  When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter/s of the succeeding taxable year; or


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  When the excise tax due on excisable articles has not been paid; or

  When an article locally purchased or imported by an exempt person, such asm but not limited to vehicles, capital equipment, machineries, and spare parts, has been sold, traded or transferred to non-exempt persons


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Final Assessment Notice (FAN) and Formal Letter of Demand   Final Assessment Notice (FAN) and Formal

Letter of Demand   Issued by the Commissioner or his authorized

representative   It must state the facts, the laws, rules and

regulations, or jurisprudence on which the assessment is made, otherwise the letter of demand and assessment notice shall be void

  Sent to taxpayer by mail or by personal service


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Disputed Tax Assessment

  A taxpayer may protest administratively within thirty (30) days from receipt of the formal letter of demand and assessment notice

  If there are several issues involved in the formal letter of demand and assessment notice but the taxpayer only disputes or protests validity of some issues raised, the taxpayer shall be required to pay the deficiency tax on undisputed tax assessments


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  Taxpayer’s failure to present facts, laws, rules and jurisprudence to support his protest on an issue will likewise make such issue undisputed thus collectible

  A collection letter shall be issued to the taxpayer calling for the payment of the said deficiency tax, inclusive of the applicable penalties on the undisputed assessment


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  Taxpayer who administratively protest an assessment is required to submit required documents within sixty (60) days from filing of letter of protest, otherwise, the assessment becomes final, executory and demandable

  Also, if the taxpayer fails to file a timely protest, the assessment becomes final, executory and demandable


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Final Decision on Disputed Assessment (FDDA)   Within 180 days, the protest may be denied

in whole or in part by the Commissioner of his authorized representative through the issuance of a Final Decision on Disputed Assessment (FDDA), where taxpayer is given thirty (30) days to administratively appeal or judicially make an appeal


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Administrative Appeal

  Within thirty (30) days from receipt of FDDA taxpayer may file an appeal before the Commissioner on matters involving question of law or before the assessing office on matters involving question of facts, otherwise, the assessment becames final, executory and demandable


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Judicial Appeal

  In alternative, within thirty (30) days from receipt of FDDA taxpayer may opt to file an appeal before the Court of Tax Appeals (CTA)


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Administrative Decision on Appeal

  The CIR is expected to render a decision which shall state the facts, the applicable law, rules and regulations or jurisprudence on which the decision is made, otherwise such a decision shall be considered void

  Likewise it should state that such is a final decision

  Thereafter, taxpayer may make a judicial appeal before the Court of Tax Appeals (CTA)


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Judicial Decision on Appeal

  Decision rendered by the Court of Tax Appeals (CTA) may be appealed before CTA on motion for reconsideration, then it can still be further appealed before the CTA En Banc, then finally before Supreme Court


Court of Tax Appeals

  Composed of nine (9) justices   Divided into three (3) branches   Makes a decision either

  En Banc   Branch (consisting of 3 justices each)

Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand] 28

Appellate Jurisdiction of CTA   By law has exclusive appellate jurisdiction to

review by appeal   Decision of the CIR   Inaction of the CIR   Decisions of lower court on local tax cases   Decision of Commissioner of Customs   Decisions of real property taxes   Decisions of Finance on cases elevated to them

by automatic review   Decisions of Department of Trade & Agriculture

involving dumping and countervailing duties

Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand] 29

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