Basic Tax Finals

Question 1

Composition of the BIR

Answer 1

The BIR shall have a chief to be known as Commissioner of Internal Revenue hereinafter referred to as the Commissioner, and four assistant chiefs to be known as deputy commissioners.

The groups are as follows:

Operations Group

Legal Group

Information Systems Group

Resource Management

Question 2

Powers of the Commissioner

Answer 2

Interpret tax laws and to decide tax cases (EO Jurisdiction)

Subject to review by the Sec. of Finance

Decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising in the NIRC.

Subject to exclusive appellate jurisdiction of the CTA (Section 4)

( Section 5) Obtain information and to summon, examine and take testimony of persons

In ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized:

to EXAMINE any book, paper, record, or other data which may be relevant or material to such inquiry

to OBTAIN on a regular basis from any person other than the person whose internal revenue tax liability is subject to investigation or audit

To SUMMON the person liable for tax or required to file a return, or any officer or employee of such person, or any person having custody, possession or care of the books of accounts and other accounting records containing entries relating to the business of other person liable for tax or any other person to appear before the Comm. or his duly authorised rep.

To TAKE such testimony of the person concerned, under oath, as may be relevant and material to such inquiry

to CAUSE revenue officers and employees to make a canvas from time to time of any revenue district or region and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax and all persons wning or having the care, management or possession of any object with respect to which a tax is imposed.

Question 3

Who are agents of the Commissioner

Answer 3

The following are hereby constituted agents of the Commissioner:

Comm. of Customs and his subordinates with respect to the collection of national internal revenue taxes on imported goods

The head of the appropriate government office and his subordinates with respect to the collection of the energy tax ;

Banks duly accredited by the commissioner with respect to receipt of payments internal revenue taxes authorized to be made through banks

Any officer or employee of an authorized agent bank assigned to receive internal revenue tax returns or documents to the Bureau of Internal Revenue shall be subject to the same sanctions and penalties under Secs. 269 and 270.

Question 4

Powers and duties of the BIR

Answer 4

Section 3

The BIR shall be under the supervision and control of the DOF.

Its powers and duties shall comprehend the:

1. assessment and collection of all national internal revenue taxes, fees, and charges
2. enforcement of all forfeitures, penalties and fines connected therewith;
3. execution of judgment in all cases decided by the CTA and ordinary courts in its favor ;
4. The BIR shall give effect to and administer the supervisory and police powers conferred to it by the BIR

Question 5

Prescriptive period for criminal action

Answer 5

All violations of any provision of the NIRC
shall prescribe after 5 years:
o from the day of the commission of
the violation, or
o if not known at the time, from the
discovery thereof and the
institution of judicial proceedings
for its investigation and punishment
(Section. 281, NIRC).

Question 6

When prescription is interrupted

Answer 6

➢ When proceedings are instituted against
the guilty persons and the period shall run
again if the proceedings are dismissed for
reasons not constituting jeopardy; or
➢ When the offender is absent from the
Philippines.

Question 7

Is Assessment necessary before filing a criminal
charge for tax evasion

Answer 7

An assessment is not necessary before a
criminal charge can be filed. The criminal
charge need only be proved by a prima
facie showing of a willful attempt to file
taxes, such as failure to file a required tax
return. [CIR v. Pascor, G.R. No. 128315
(1999)]

Question 8

Fundamental Principles of taxation of real property

Answer 8

1. RP shall be appraised at its current and FMV
2. RP shall be classified for assessment purposes on the basis of its actual use
3. RP shall be assessed on the basis of a uniform classification within each local political subd.
4. The appraisal, assessment and levy of RP for tax and the collection thereof shall NOT be let to any private person
5. ppraisal and assessment of real property shall be equitable

Question 9

Actual Use Doctrine

Answer 9

Actual use refers to the principal and predominant utilization of the property by the person in possession thereof. Hence, even if the user of the property is not the owner, government property being leased to private persons may still be subject to RPT

Question 10

Exemptions of RPT

Answer 10

1. RP owned by the Republic of the PH or any of its political subdivisions, except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person
2. Charitable institutions, churches, parsonages or convents and all lands, buildings and improvements ADE used for RCE purposes
3. All machineries and equipments that are ADE used by local water districts and GOCC engaged in the distribution of water or electricity
4. All property owned by duly registered cooperatives
5. Machinery and equipment used in pollution control and environmental protection

Question 11

Remedies available for LGC’s to enforce collection of taxes, fees and charges

Answer 11

1. Extrajudicial remedy of levy
2. Judicil Action
3. Enforcement of civil action in any court with competent jurisdiction

Question 12

Prescriptive Period for collection of RPT

Answer 12

5 years from the date they become due.

In case of fraud or intent to evade payment, 10 years from discovery of such fraud or intent to evade payment

Question 13

Question of Fact vs. Question of Law

Answer 13

F: When the doubt or difference arises as to the truth or falsehood of the alleged facts

L: When the doubt arises as to what the law is on a certain state of facts

Question 14

Examination of book of accounts and other accounting records

Answer 14

In order to ascertain the correctness of any return OR in making a return when none has been made, the CIR or his authorized reps have the power to examine any Book, Paper, Record or other data which may be relevant to assess the correct tax liability

Question 15

Best Evidence obtainable

Answer 15

When
1. a report required by law as basis for the assessment of any tax shall not be forthcoming within the time fixed by law or

2. there is reason to believe that sycg report is false, incomplete or erroneous,

The CIR shall assess the proper tax on the best evidence obtainable

Question 16

Process of PAN

Answer 16

After review and evaluation by the BIR, it is determined that theer exists sufficient basis to assess the taxpayer for any deficiency taxes the office shall

1. Issue the PAN, at least be registered mail
2. It must show the facts, law, R&R or jurisprudence on which it is based
3. TP may file reply thereto within 15 days of issuance
4. Failure of TP to file reply renders him in default - in which the FDL FLAN shall be issued

Question 17

PAN shall not be required in the following instances

Answer 17

1. When the finding for any deficiency tax is the result of mathematical error in the computation of tax as appearing on the face of the return
2. When a discrepancy has been determd b/n tax withheld and amount actually remitted by withholding agent
3. When a TP who opted to claim a refund/tax credit was determined to have carried over automatically applied the same amount claimed against the estimated tax liabilities
4. When te excise tax due on excisable articles has not been paid
5. When an article locally purchased or imported by an exempt person has been sold, traded or transferred to non-exempt persons

Question 18

Process of FLD/FAN

Answer 18

1. FLD/FAN must be issued by CIR or his duly authorized rep.
2. It must state the facts, law, R&R or jurisprudence on which it is based
3. It must be sent to the taxpayer or his authorized rep.
4. It must be sent by registered mail or personal delivery ONLY

Question 19

Requisites when FLD FAN sent by personal delivery

Answer 19

1. Must be sent to TP or authorized rep.
2. It must show the ff:
   a. Name
   b. Signature
   c. Designation and Authority
   d. Date of receipt

Question 20

Effects of the issuance of FLD FAN

Answer 20

2. It creates a tax liability of the TP whicch is being demanded
3. If the TP files a timely protest against the FLD FAN, the assessment does not become final and executory. TP may file a supplemental protest within 60 days of filing the protest letter
4. TP does not baveto pay deficiency tax assessment in filing the protest letter, nut the 20% interest per annumshall start to run from the date the tax is due up to its payment
5. Business of the TP does not become illegal by reason of nonpayment of the assessed NATIONAL tax, unlike local tax which must be paid upon protest

Question 21

Filing of admin protest by the TP against assessment

Answer 21

May file protest against FLD FAN wihtin 30 days from receipt thereof.

Question 22

Reinvestigation vs. Reconsideration

Answer 22

As to nature:
Reconsideration - A plea of re-evaluation of an assessment on the basis of existing records without need of additional evidence. May be both Q of F/L

Reinvestigation - Plea of re-evaluation of an assessment on the basis of newly discovered evidence or additional evidence that a TP intends to present in reinvestigation. May be both a Q of F/L

As to prescriptive period:
Rec - It does not toll the running of the PP for collection
Rei- tolls the prescriptive period to collect if the request for reinvestigation is granted by BIR

As to evidence
Rec - limited to evidence at hand
Rei - entails reception and evaluation of additional evidence. Relevant docs must be filed within 60 days from filing request for reinvestigation

Question 23

Remedy when the protest is denied in whole or in part, by the CIR’s duly authorized rep.

Answer 23

1. Appeal to the CTA within 30 days from receipt of such decision
2. elevate his protest through a request for reconsideration to the CIR within 30 days of receipt.

Note: No request for reinvestigation shall be allowed in admin appeals and only issues raised in the decision of the CIR’s rep shall be entertained by the CIR

Question 24

Remedy of TP from final decision of the CIR

Answer 24

1. If the protest or appeal is denied or not acted upon within 180 days from submission, the TP may:
   a. appeal to CTA within 30 days of receipt of decision
   b. appeal to CTA after lapse of 180 day period
   c. Otherwise, decision is final and executory
2. If the protest or admin appeal is deined, the TP may:
   a. appeal to the CTA within 30 days from date of recept of decision
   b. An MR shall not toll the 30 day period to appeal
3. If

Question 25

Zero rated transactions vs. Effectively zero rated transactions

Answer 25

ZRT - Immune from the imposition of VAT - Sales of goods or properties is a taxable transaction but VAT rate is at 0%. EZRT - Limited in its context because it does not cover export sales - Refers to sale of local goods or supply of services by a VAT-registered person to persons who were granted exemption form direct andindrect taxes

Question 26

When should VAT refunds be filed and paid?

Answer 26

VAT returns shall be filed and paid every quarter within 25 days following the close of each taxable quarter when the transaction transpired

Question 27

What is a letter of authority

Answer 27

It is the authority given to the appropriate revenue officer assigned to perform assessment functions. It enables the RO to examine the books of account and other accounting records of a tax payer

Question 28

Effect pf tax assessment if it was conducted without a valid LOA

Answer 28

Assessment will be nullified for having been conducted who are not duly authorized.

Question 29

Notice of Discrepancy

Answer 29

If a TP is found to be liable for deficiency tax in the course of investigation by an RO, the TP shall be noticed through a NOD

Question 30

What is a PAN

Answer 30

A written communcation issued by the commissioner of internal revenue or his duly authorized representative informing a taxpayer who has been audited of his deficiency taxes. It must state the IN DETAIL the: 1. facts 2. law 3 rules and regulations 4. jurisprudence on which it is based

Question 31

Remedy of TP when he disagrees with the PAN

Answer 31

File a written reply contesting the proposed assessment within 15 days from his receipt of the PAN

Question 32

When is the issuance of a PAN not required?

Answer 32

1. Finding for any deficiency tax is the result of mathematical error in the computation of the tax 2. Discrepancy has been determined between tax withheld and amount remitted by withholding agent 3. TP who opted to claim a tax refund or credit was determined to have carried over and applied to the amount claimed 4. excise tax due on excisable articles has not been paid 5. an article locally purchased or imported by an exempt person has been sold to non-exempt persons

Question 33

What is a FAN/FLD

Answer 33

Written demand to pay deficiency taxes issued to a taxpayer who fails to respond to a PAN within the prescriptive period or whose reply to the PAN is without merit It shall state the 1. facts 2. law 3. rules and regulations 4. jurisprudence on which it is based

Question 34

When should the FLD/FAN be served to the taxpayer?

Answer 34

TP has 15 days from date of receipt of PAN to respond to the said notice. Only after receiving the taxpayer's response or in case of defualt may the BIR issue the FANFLD

Question 35

Requisites of a valid assessment

Answer 35

1. The TP shall be informed in writing of the law and the facts on which the assessment is amde 2. assessment shall contain not only a computation of tax liabilities, but also a demand for payment within a prescribed period 3. assessment must be served on and received by the taxpayer 4. Assessment must be issued within prescriptive period for the issuance of assessments

Question 36

Best Evidence Obtainable

Answer 36

CIR may usethe ebst evidence obtainable to issue an assessment under the following circumstances: 1. When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations; or 2. When there is reason to believe that any such report is false, incomplete or erroneous.

Question 37

Tax Delinquency vs Tax Deficiency

Answer 37

Delinquency - amount by which the tax imposed or required to be paid exceeds the tax actually paid and shown in the taxpayer's return - if TP disagrees with the assessmentm he must file a protest with the BIR (admin appeal) and in case of denial, an appeal to CTA (judicial appeal) Deficiency - arises when the TP's protest against a disputed assessment has already been denied by the CIR in whole or in part - tax is immediately final, executory and demandable

Question 38

Prescriptive Period for an ASSESSMENT

Answer 38

GR: internal revenue taxes shall be assessed within 3 years after the last day prescribed by law for the filing of the return - where a return was filed beyond the prescriptive period, the three year period shall be counted from the day the return was filed XP: 1. In case of false, or fraudulent return with intent to evade tax or failure to file a return with intent to evade tax or failure to file a returnm the assessment may be made at any time within 10 years of the discovery of the falisty, fraud or the omission 2. If before the expiration of the three year prescriptive period, both the CIR and TP have agreed in writing to its assessment after such period.

Question 39

When is an assessment deemed made?

Answer 39

When notice to this effect is released, mailed, or sent by the BIR to the taxpayer within the prescriptive period. It is not required that the TP receive the assessment before the lapse of the prescriptive period for assessment.

Question 40

Effect of waiver of statute of limitations

Answer 40

It is not a waiver to the right to invoke the defense prescription. It is merely an agreement that the period to assess and collect taxes is extended to a certain date. If prescription has already set in by the time the the waiver is made, the TP may still raise the defense of prescription.

Question 41

False return vs Fraudulent vs. Non filing

Answer 41

REFER TO MCDO AND AZNAR CASES

Question 42

Period to file protest

Answer 42

after the issuance of FLD/FAN, the TP may protest the assessment within 30 days from receipt thereof by filing an admin protest in the form of either a requests for reinvesigation or reconsideration

Question 43

What is the effect of failure to file a protest

Answer 43

TP's liability becomes fixed and subject to collection as the assessment becomes final and collectible

Question 44

Actions of the CIR on the admin. protest of the TP

Answer 44

1. Express Denial - CIR issues Final Decision on Disputed Assessment. It shall state th facts, law, rules and regulations or jurisprudence on which it is based and THAT IT IS HIS FINAL DECISION 2. Implied Denial - Filing of collection suit against the TP, Issuacne of warant of distraint and levy, issuance of a final demand letter from BIR for collection of deficiency tax. 3. Denial by inaction - Protest not acted upon within the 180 day period, the inaction of the CIR is considered a denial of the protest

Question 45

Remedies of the taxpayer on the denial of the protest

Answer 45

1. File a pet. for rev. before the CTA DIVISION within 30 days from the expiration of the 180 day period to act on the assessment 2. Await for the final decision of the CIR on the assessment and appeal such decision to the CTA DIVISION within 30 days from receipt thereof. THESE ARE MUTUALLY EXCLUSIVE OPTIONS.

Question 46

Comrpomise vs. Abatement of taxes

Answer 46

Compromise - Remedy of TP to reduce tax liability for the ff grounds: 1. reasonable doubt exists as to the validity of the claim against the TP exists; or 2. Financial position of the TP shows a clear inability to pay the assessed tax Abatement - cancellation of tax liability for any of the ff grounds: 1. the tax or any portion thereof appears to be unjustly or excessively assessed; 2. Administration and colelctions costs involved do not justify the collection of the amount due

Question 47

May criminal violations of tax laws be subject to compromise

Answer 47

Yes, except: 1. those already filed in court, 2. those involving fraud

Question 48

Requisistes fr the government to exercise its remedies for collection of delinquent taxes

Answer 48

1. The TP's protest against the FLD/FAN has been denied by the BIR 2. Collection must be made before the lapse of the prescriptive period

Question 49

Prescriptive period for collection of assessed deficiency taxes

Answer 49

When the BIR validly issues an assessment within the 3 year period, it has another 3 years to collect the tax due by levy, distraint or court proceeding. (Assessment is the day the notice has been releaseed, mailed or sent)

Question 50

Instances when the ordinary prescriptive for collection NOT be applied?

Answer 50

When any internal revenue tax has been asssessed within the 10 year prescriptive period may be collected within FIVE (5) years following the assessment of the tax

Question 51

Fundamental Principles of real property taxation CAUPE

Answer 51

1. Real property shall be appraised at its CURRENT and fair market value 2. RP shall be classified for assessment purposes on the basis of its ACTUAL use 3. RP shall be assessed on the basis of a UNIFORM classification within each local subdivision 4. The appraisalm assessment and levy of RP for taxation purposes and the collection of real property shall shall not be let to any PRIVATE persons 5. The appraisal and assessment of real property shall be EQUITABLE

Question 52

Actual Use as basis

Answer 52

Basis of RPT is on the actual use, even if the use is not the owner. Refers to the principal and predominant utilization of the property by the person is possession thereof.

Question 53

What property are exempted from RPT under the LGC?

Answer 53

1. RP owned by the Republic of the PH or ant of its political subdivisions XP when beneficial use thereof has been granted to a taxable person 2. Charitable institutions, churches, parsonages, or cconvents and all lands, buildings and improvements ADE used for charitable, religious or educational purposes 3. All machineries and equipment that are ADE used by local water districits or GOCC engaged in the distribtuion water or electricity 4. All RP owned by duly registered cooperatives 5. Machinery and equipment used for pollution control and envi. protection

Question 54

When may the doctrine of exhaustion of admin. remedies be set aside?

Answer 54

when the issue involved is purely a legal question or when there are circumstances indicating the urgency of judicial intervention -as in this case where membership fees, assessment dues, and the like of all recreational clubs would be imminently subjected to income tax and VAT – then the doctrine of exhaustion of administrative remedies may be relaxed.

Question 55

Who can hear tax cases regarding local tax laws?

Answer 55

: The Regional Trial Court is a court of competent jurisdiction who can hear cases regarding local tax laws in its ORIGINAL JURISDICTION.

Question 56

Are the pieces of gas station equipment and machinery subject to realty tax

Answer 56

Yes. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax Code. Under, Sec. 38 of the said law: Machinery shall embrace machines, mechanical contrivances, instruments, appliances and apparatus attached to the real estate.

Question 57

Tax Credit vs Tax Refund

Answer 57

As to definition R - Actual reimbursement of the tax C - Refers to the amount of tax due to a taxpayer resulting from overpayment of a tax liability or erroneous payment of tax As to purpose R - The taxpayer asks for restitution of the money paid as tax. There is actual reimbursement. C - The taxpayer asks that the money paid be applied to his existing tax liability except withholding taxes As to reckoning point R - 2-year period to file the claim with the CIR starts after the payment of the tax penalty C - 2-year period starts from the date such credit was allowed – in case credit is wrongly made

Question 58

Prescriptive Period to avail of a tax credit or refund

Answer 58

two years from payment of the tax, regardless of any supervening event. Payment in the context of the NIRC is when the return was filed.

Question 59

Requisites for a Claim of Tax Refund or Tax Credit

Answer 59

There is tax collected erroneously or illegally, or a penalty collected without authority, or a sum excessively or wrongfully collected There must be a written claim for refund filed by the taxpayer with the CIR

Question 60

Appelate Jurisdiction of CTA

Answer 60

1

Question 61

Appelate Jurisdiction of CTA

Answer 61

1. Decisions of the CIR in cases involving disputed assessments, refunds of internal revenue taxes or OTHER MATTERS ARISING under the NIRC 2. Inaction by the commissioner of cases involving disputed assessments, refunds of internal revenue taxes, charges or other fees 3. Decisions, orders or reslutions of the RTC in local tax cases in exercise of their origial jurisdiction

Question 62

Exclusive jurisdiction of CTA Division

Answer 62

1. Original Juris in tax collection cases over final and executory assessment for taxe where the principal amon, exclusive of charges and penalties, is one million or more 2. Appelate jurisdiction over judgments of the RTC originally decided by them in their respective territorial juris

Question 63

Will an indepent SCA for prohibition under CTA propser?

Answer 63

No SCA will not prosper bc CTA has no jurisdiction to issue the same.

Question 64

Will an indepent SCA for prohibition under CTA propser?

Answer 64

No SCA will not prosper bc CTA has no jurisdiction to issue the same.

Question 65

When may the govt resort to judicial action for collecting taxes?

Answer 65

1. When a tax liability becomes collectible which means an assessment was made and such assessment becomes final and unappelable. - No protest was filed - If a protest was filed, it was either denied in whole or in part by the CIR or it was not appealed to CTA within 30 days fromm receipt

Question 66

Mode of appeal under Rule 42

Answer 66

Petition for review Filed by any person adversely affected by the decision/inaction of: CIR, BOC, DOF, DTI, DA or RTC FIled within 30 days of receipt of decision

Question 67

Mode of appeal under Rule 42

Answer 67

Petition for review Filed by any person adversely affected by the decision/inaction of: CIR, BOC, DOF, DTI, DA or RTC FIled within 30 days of receipt of decision

Question 68

Mode of Appeal under Rule 43 with CTA En Banc

Answer 68

Pet for Rev. Filed by any person adversely affected by decision of: CBAA, RTC in exercise of its APPELLATE juris. Filed withi 30 days from receipt

Question 69

How to appeal a CTA Division decision?

Answer 69

FIled by any person adversely affected by a decision of CTA Division on an MR Filed within 15 days from receipt

Question 70

Effect of appeal taken to the CTA

Answer 70

It shall ot suspend the payment, levy, distraint, and/or sale of any proeprty of the TP for the satisfaction of te tax liability. XP: Motion for suspension of the collection of tax liability

Question 71

Requisites for suspension of collection of tax

Answer 71

1. CTA has jurisdictio over the case 2. Collection of tax may PREJUDICE the interest of the GOVT or TAXPAYER 3. The TP is willing to deposit the amount claimed or to file a surety bond for an amount no more than double the amount to be fixeed by the court

Question 72

Is a hearig necessary for the suspension of collection?

Answer 72

Yes. A preliminary hearing may be conduvted to determine if there are grounds to suspend the collection of the deficiency assessment on the groun that it would prejudice the interest of the TP

Question 73

May a TP immediately file an appeal to the CTA en banc after an adverse CTA Division?

Answer 73

No. Proper remedy is to file an MR before the CTA division within 15 days from receipt of division.

Question 74

Remedy of a party adversely affected by thedecision of the CTA en banc?

Answer 74

May appeal therefrom by fling with the SC a verified pet. for rev. on certiorari under Rule 45 within 15 dys from receipt of such decision. Subject to Neypes Rule