Powers of the BIRSEC. 2. Powers and Duties of the Bureau of Internal Revenue. - The Bureau of Internal Revenue shall beunder the supervision and control of the Department of Finance and its powers and duties shall comprehend theassessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of allforfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided inits favor by the Court of Tax Appeals and the ordinary courts. The Bureau shall give effect to and administer thesupervisory and police powers conferred to it by this Code or other laws.The BIR has the power and dutyo to assess and collect all taxes, fees and charges,o to enforce all forfeitures, penalties and fines in connection therewith, this includes execution of judgments in all cases decided in its favorSEC. 3. Chief Officials of the Bureau of Internal Revenue. - The Bureau of Internal Revenue shall have a chiefto be known as Commissioner of Internal Revenue, hereinafter referred to as the Commissioner and four (4)assistant chiefs to be known as Deputy Commissioners.SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power tointerpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of theCommissioner, subject to review by the Secretary of Finance. The power to decide disputed assessments, refundsof internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arisingunder this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in theCommissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.When it comes to rulings, the Secretary of Finance can review the rulings of of the CIRor his deputies.o The taxpayer must go to the Sec of Finance within 30 days. (RMC 44-2001) Not sure where you go from here, baka CTA.o In fact, the Secretary of Finance can motu propio review rulings and issuances ofthe BIR. (BIR Website)When it comes to assessments, refunds, penalties and other matters, recourse should bedone to the CTA.o See CTA rules.SEC. 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and TakeTestimony of Persons. - In ascertaining the correctness of any return, or in making a return when none has beenmade, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, orin 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;(B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability issubject to audit or investigation, or from any office or officer of the national and local governments, governmentagencies and instrumentalities, including the Bangko Sentral ng Pilipinas and government-owned or -controlledcorporations, any information such as, but not limited to, costs and volume of production, receipts or sales andgross incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual fundcompanies, insurance companies, regional operating headquarters of multinational companies, joint accounts,associations, joint ventures of consortia and registered partnerships, and their members; (C) To summon the person liable for tax or required to file a return, or any officer or employee of such person, orany person having possession, custody, or care of the books of accounts and other accounting records containingentries relating to the business of the person liable for tax, or any other person, to appear before theCommissioner or his duly authorized representative at a time and place specified in the summons and to producesuch books, papers, records, or other data, and to give testimony;+amdg 70(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 regionand inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and allpersons owning or having the care, management or possession of any object with respect to which a tax isimposed. The provisions of the foregoing paragraphs notwithstanding, nothing in this Section shall be construedas granting the Commissioner the authority to inquire into bank deposits other than as provided for in Section 6(F)of this Code.The Commissioner is authorized by law to do a whole host of things (see codal) ino ascertaining the correctness of any return, oro making a return when none has been made, oro collecting any such liability, oro evaluating tax compliance, oro in determining the liability of any person for tax.Take note of Sec 5 (b): the BIR can issue access letters addressed to a 3rd party inrelation to the investigation of a taxpayer.The law allows the BIR access to all relevant or material records and data in the personof the taxpayer. In fact, the BIR can accept documents which cannot be admitted in ajudicial proceeding where the Rules of Court are strictly observed. (Fitness by Design vCIR)The rule on the best evidence obtainable applies when a tax report is required by lawfor the purpose of assessment and it is not available or when the tax report isincomplete or fraudulent. (Sy Po v CTA)The failure of the taxpayers to present their books of accounts for examination is areason for the CIR to resort to his powers.SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements forTax Administration and Enforcement. -(A) Examination of Returns and Determination of Tax Due. - After a return has been filed as required under theprovisions of this Code, the Commissioner or his duly authorized representative may authorize the examination ofany taxpayer and the assessment of the correct amount of tax: Provided, however; That failure to file a returnshall not prevent the Commissioner from authorizing the examination of any taxpayer.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, oramended: Provided, further, That no notice for audit or investigation of such return, statement or declaration hasin the meantime been actually served upon the taxpayer.(B) Failure to Submit Required Returns, Statements, Reports and other Documents. - When a report required bylaw as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the timefixed by laws or rules and regulations or when there is reason to believe that any such report is false, incompleteor erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable.In case a person fails to file a required return or other document at the time prescribed by law, or willfully orotherwise files a false or fraudulent return or other document, the Commissioner shall make or amend the returnfrom his own knowledge and from such information as he can obtain through testimony or otherwise, which shallbe prima facie correct and sufficient for all legal purposes.(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 abasis 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 declaringhis correct income, sales or receipts for internal revenue tax purposes. The findings may be used as the basis forassessing the taxes for the other months or quarters of the same or different taxable years and such assessmentshall be deemed prima facie correct.When it is found that a person has failed to issue receipts and invoices in violation of the requirements of Sections113 and 237 of this Code, or when there is reason to believe that the books of accounts or other records do notcorrectly reflect the declarations made or to be made in a return required to be filed under the provisions of thisCode, the Commissioner, after taking into account the sales, receipts, income or other taxable base of otherpersons engaged in similar businesses under similar situations or circumstances or after considering other relevantinformation may prescribe a minimum amount of such gross receipts, sales and taxable base, and such amount soprescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of suchperson.+amdg 71(D) Authority to Terminate Taxable Period. - When it shall come to the knowledge of the Commissioner that ataxpayer is retiring from business subject to tax, or is intending to leave the Philippines or to remove his propertytherefrom or to hide or conceal his property, or is performing any act tending to obstruct the proceedings for thecollection of the tax for the past or current quarter or year or to render the same totally or partly ineffective unlesssuch proceedings are begun immediately, the Commissioner shall declare the tax period of such taxpayerterminated at any time and shall send the taxpayer a notice of such decision, together with a request for theimmediate 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 and shall besubject to all the penalties hereafter prescribed, unless paid within the time fixed in the demand made by theCommissioner.(E) Authority of the Commissioner to Prescribe Real Property Values. - The Commissioner is hereby authorized todivide the Philippines into different zones or areas and shall, upon consultation with competent appraisers bothfrom the private and public sectors, determine the fair market value of real properties located in each zone or area.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.(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts andOther Related Information Held by Financial Institutions. - Notwithstanding any contraryprovision of Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act ofthe Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bankdeposits and other related information held by financial institutions of:(1) A decedent to determine his gross estate.(2) Any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A)(2) reason offinancial incapacity to pay his tax liability.In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financialposition demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless anduntil he waives in writing his privilege under Republic Act No. 1405, Republic Act No. 6426, otherwise known as theForeign Currency Deposit Act of the Philippines, or under other general or special laws, and such waiver shallconstitute 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 taxauthority pursuant to an international convention or agreement on tax matters to which the Philippines is asignatory or a party of: Provided, That the information obtained from the banks and other financial institutions maybe used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes."In case of request from a foreign tax authority for tax information held by banks and financial institutions, theexchange of information shall be done in a secure manner to ensure confidentiality thereof under such rules andregulations as may be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.The Commissioner shall provide the tax information obtained from banks and financial institutions pursuant to aconvention or agreement upon request of the foreign tax authority when such requesting foreign tax authority hasprovided the following information to demonstrate the foreseeable relevance of the information to the request:"(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 taxauthority prefers to receive the information from the Commissioner;"(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 controlof a person within the jurisdiction of the Philippines;"(e) To the extent known, the name and address of any person believed to be in possession of the requestedinformation;"(f) A Statement that the request is in conformity with the law and administrative practices of the said foreign taxauthority, such that if the requested information was within the jurisdiction of the said foreign tax authority then itwould be able to obtain the information under its law or in the normal course of administrative practice and that itis 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 toobtain the information, except those that would give rise to disproportionate difficulties."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 taxauthority and shall notify the latter of deficiencies in the request, if any, within sixty (60) days from the receipt ofthe request.If the Commissioner is unable to obtain and provide the information within ninety (90) days from the receipt of therequest, due to obstacles encountered in furnishing the information or when the bank or financial institution+amdg 72refuses to furnish the information, he shall immediately inform the requesting tax authority of the same, explainingthe nature of the obstacles encountered or the reasons of refusal."The term 'foreign tax authority', as used herein, shall refer to the tax authority or tax administration of therequesting State under the tax treaty or convention to which the Philippines is a signatory or a party of.(G) Authority to Accredit and Register Tax Agents. - The Commissioner shall accredit and register, based on theirprofessional competence, integrity and moral fitness, individuals and general professional partnerships and theirrepresentatives who prepare and file tax returns, statements, reports, protests, and other papers with or whoappear before, the Bureau for taxpayers. Within one hundred twenty (120) days from January 1, 1998, theCommissioner 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 uponthe recommendation of the Commissioner.Individuals and general professional partnerships and their representatives who are denied accreditation by theCommissioner and/or the national and regional accreditation boards may appeal such denial to the Secretary ofFinance, who shall rule on the appeal within sixty (60) days from receipt of such appeal. Failure of the Secretary ofFinance to rule on the Appeal within the prescribed period shall be deemed as approval of the application foraccreditation of the appellant.(H) Authority of the Commissioner to Prescribe Additional Procedural or Documentary Requirements. - TheCommissioner may prescribe the manner of compliance with any documentary or procedural requirement inconnection with the submission or preparation of financial statements accompanying the tax returns.Take note of the amendment by RA 10021 to Subsection F.o Bank deposits can be examined by the CIR, in the following instances: A decedent to determine his gross estate, or Any taxpayer who has filed an application for compromise, or Pursuant to an international convention or tax agreement, which thePhilippines is a signatory of.Read with the amendment to Sec 71 and Sec 270.20SEC. 7. Authority of the Commissioner to Delegate Power. - The Commissioner may delegate the powersvested in him under the pertinent provisions of this Code to any or such subordinate officials with the rankequivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rulesand regulations to be promulgated by the Secretary of finance, upon recommendation of the Commissioner:Provided, however, That 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;20 SEC. 71. Disposition of Income Tax Returns, Publication of Lists of Taxpayers and Filers. - After the assessmentshall have been made, as provided in this Title, the returns, together with any corrections thereof which may havebeen made by the Commissioner, shall be filed in the Office of the Commissioner and shall constitute public recordsand be open to inspection as such upon the order of the President of the Philippines, under rules and regulations tobe presented by the Secretary of Finance, upon recommendation of the Commissioner."The Commissioner may, in each year, cause to be prepared and published in any newspaper the lists containingthe names and addresses of persons who have filed income tax returns."Income tax returns of specific taxpayers subject of a request for exchange of information by a foreign taxauthority pursuant to an international convention or agreement on tax matters to which the Philippines is asignatory or a party of, shall be open to inspection upon the order of the President if the Philippines under rulesand regulations as may be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.SEC. 270. Unlawful Divulgence of Information. - Except as provided in Sections 6(F) and 71 of this Code andSection 26 of Republic Act No. 6388, any officer or employee of the Bureau of Internal Revenue who divulges toany person or makes known in any other manner than may be provided by law information regarding the business,income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer orproducer, or confidential information regarding the business of any taxpayer, knowledge of which was acquired byhim in the discharge of his official duties, shall, upon conviction for each act or omission, be punished by a fine ofnot less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or sufferimprisonment of not less than two (2) years but not more than five (5) years, or both."Any officer or employee of the Bureau of Internal Revenue who divulges or makes known in any other manner toany person other than the requesting foreign tax authority information obtained from banks and financialinstitutions pursuant to Section 6(F), knowledge or information acquired by him in the discharge of his officialduties, shall, upon conviction, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not morethan One hundred thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not morethan five (5) years, or both+amdg 73(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau;(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 thousandpesos (P500,000) or less, and minor criminal violations, as may be determined by rules and regulations to bepromulgated by the Secretary of finance, upon recommendation of the Commissioner, discovered by regional anddistrict officials, may be compromised by a regional evaluation board which shall be composed of the RegionalDirector as Chairman, the Assistant Regional Director, the heads of the Legal, Assessment and Collection Divisionsand the Revenue District Officer having jurisdiction over the taxpayer, as members; and(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise taxare produced or kept.The CIR may delegate the power to assess taxes to his subordinates. (Republic v Hizon)o But he cannot delegate the power: To recommend the promulgation of rules and regulations by the Sec ofFinance, To issue rulings of first impression or to reverse, revoke or modify anyexisting ruling of the bureau, To compromise or abate any tax liabilitybut if P500,000 or less, he can delegate To assign or reassign officers to establishments where excise tax articlesare produced or kept.Tax AssessmentSEC. 56. Payment and Assessment of Income Tax for Individuals and Corporation. -(A) Payment of Tax. -(1) In General. - The total amount of tax imposed by this Title shall be paid by the person subject thereto at thetime the return is filed. In the case of tramp vessels, the shipping agents and/or the husbanding agents, and intheir absence, the captains thereof are required to file the return herein provided and pay the tax due thereonbefore their departure. Upon failure of the said agents or captains to file the return and pay the tax, the Bureau ofCustoms is hereby authorized to hold the vessel and prevent its departure until proof of payment of the tax ispresented or a sufficient bond is filed to answer for the tax due.(2) Installment of Payment. - When the tax due is in excess of Two thousand pesos (P2,000), the taxpayer otherthan a corporation may elect to pay the tax in two (2) equal installments in which case, the first installment shallbe paid at the time the return is filed and the second installment, on or before July 15 following the close of thecalendar year. If any installment is not paid on or before the date fixed for its payment, the whole amount of thetax unpaid becomes due and payable, together with the delinquency penalties.(3) Payment of Capital Gains Tax. - The total amount of tax imposed and prescribed under Section 24 (c), 24(D),27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the date the return prescribed therefor is filed by the personliable thereto: Provided, That if the seller submits proof of his intention to avail himself of the benefit of exemptionof capital gains under existing special laws, no such payments shall be required : Provided, further, That in case offailure to qualify for exemption under such special laws and implementing rules and regulations, the tax due on thegains realized from the original transaction shall immediately become due and payable, subject to the penaltiesprescribed under applicable provisions of this Code: Provided, finally, That if the seller, having paid the tax,submits such proof of intent within six (6) months from the registration of the document transferring the realproperty, he shall be entitled to a refund of such tax upon verification of his compliance with the requirements forsuch exemption.In case the taxpayer elects and is qualified to report the gain by installments under Section 49 of this Code, the taxdue from each installment payment shall be paid within (30) days from the receipt of such payments.No registration of any document transferring real property shall be effected by the Register of Deeds unless theCommissioner or his duly authorized representative has certified that such transfer has been reported, and the tax herein imposed, if any, has been paid.(B) Assessment and Payment of Deficiency Tax. - After the return is filed, the Commissioner shall examine it andassess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice anddemand from the Commissioner.As used in this Chapter, in respect of a tax imposed by this Title, the term "deficiency" means:(1) The amount by which the tax imposed by this Title exceeds the amount shown as the tax by the taxpayer uponhis return; but the amount so shown on the return shall be increased by the amounts previously assessed (orcollected without assessment) as a deficiency, and decreased by the amount previously abated, credited, returned or otherwise repaid in respect of such tax; or(2) If no amount is shown as the tax by the taxpayer upon this return, or if no return is made by the taxpayer,then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a+amdg 74deficiency; but such amounts previously assessed or collected without assessment shall first be decreased by theamounts previously abated, credited returned or otherwise repaid in respect of such tax.An assessment is an official action by an administrative officer to determine the tax dueof the taxpayer.It consists of:o a computation of the amount of tax that must be paid by the taxpayer,o coupled with a demand to pay the tax within a specified period of time.There are two kinds of assessment:1. Self-assessment (Section 56 (A))a. This is when the taxpayer files his return and pays2. Deficiency assessment (Section 56 (B)a. This occurs upon discovery of the BIR that the self-assessment was eitherdeficient, or when no return was made by the taxpayer1. Tax assessment by tax examiners are presumed correct and made in good faith. Thetaxpayer has the duty to prove otherwise. (Sy Po v CTA)2. However, assessments cannot be based on mere presumptions on the part of thegovernment. There must be a minimum effort on the government before thepresumption of correctness sets in. (CIR v Benipayo, wherein the Court said that acharge of fraud against a taxpayer is a serious one and must be supported by clear andconvincing proof).3. Mandamus does not lie to compel the CIR to impose a tax assessment not found by himto be proper. (Meralco Securities v Savellano, a case where an informer wanted hisreward)4. The assessment must always be addressed to the proper party.Ok, youve got a deficiency tax assessment, what happens now? (RR 12-99, Reyes)1. The revenue officer who audited the taxpayers records shall state in his reportwhether or not the taxpayer agrees with his findings that the taxpayer is liable fordeficiency taxes2. The BIR will inform the taxpayer of the discrepancies and will call the taxpayer for aconference, using a Notice of Informal Conference.a. Taxpayer has 15 days from receipt of the Notice to respond. If he doesnt,default3. The finding of the examiner and the response of the taxpayer will be reviewed by theAssessment Division of the Revenue District Officer4. If there is sufficient basis for an assessment, the BIR will issue a pre-assessmentnotice (PAN) stating the facts, laws, rules, regs, and jurisprudence on which theproposed assessment is baseda. Taxpayer has 15 days from receipt of the PAN to respond. If he doesnt,default.5. If the taxpayer is in DEFAULT or his response is NOT meritorious, the BIR will issue aformal letter of demand and assessment. It too will state the facts, laws, etc etc.6. The taxpayer must file a letter of protest within 30 days thereof. He too should statethe laws, facts, etc etc.a. For issues which he did not raise, a collection letter shall be issue telling thetaxpayer to pay up.b. For issues protested, the prescriptive period on assessment and collection willbe suspended.c. If the taxpayer failed to file a valid protest within the period, the assessmentwill become final, executory and demandable. (yari ka boy!)+amdg 757. The taxpayer must submit supporting documents within 60 days from filing his letterof protest. If he doesnt, assessment shall become Final. Executory. And.Demandable!!!!!!!!8. If the protest is denied in whole or in part, appeal to the CTA within 30 days fromdate of receipt of decisiona. But if the denial was by an agent of the Commissioner, protest first to theCommissioner within 30 days.b. If the commissioner or his agent fails to act on the taxpayers protest within180 days from the submission of documents, the taxpayer has to appeal tothe CTA within 30 days from the lapse of the 180 day period. If not, yari kana naman.9. Within 15 days from receipt of the decision of the CTA, appeal it to the SC.Filing of tax return a BIR finds deficiencya Notice of Informal Conference (15 days to respond)a PAN (15 days to respond)a Formal Assessment (30 days to protest)a Taxpayer Protest Letter a Submit Supporting Documents (60 days from time ofprotest letter)a BIR Decision a Appeal to CTA (within 30 days from decision)a BIR no decision in 180 days a Appeal to CTA (within 30 days from lapse of180 days)When is the PAN not needed? (Formal Assessment enough)1. Any deficiency tax is the result of mathematical error in the computation of the taxevident on the face of the return2. Discrepancy between the tax withheld and the amount actually remitted by thewithholding agent3. Taxpayer opted to claim a refund or tax credit for excess creditable withholding taxcarried it over and automatically applied the amount claimed against the estimatedtax liabilities for the taxable quarter of the succeeding taxable year4. Excise tax due on excisable articles has not been paid5. When an article locally purchase or imported by an exempt person has been sold,traded or transferred to non-exempt personRemedies of the GovernmentThe government has the following tax remedies for its tax collection and taxenforcement:1. Compromise and abatement2. Tax lien3. Distraint and levy4. Forfeiture5. Civil penalties and interests6. Civil action7. Criminal actionThe government can avail of these remedies of collection when the assessment hasbecome final, executory and demandable.o When does that happen? Um, read the previous section.