TAXA TAXATION: TION: San Beda College of LAW – ALABANG
d. in the rea& rea& of tax tax exeptions and tax re&iefs, for instance, the purpose is to %rant incenti$es or exeptions in order to encoura%e in$estents and there!" proote the countr"s econoic %ro#th.
, it is a eans !" #hich the so$erei%n, throu%h its &a#'a(in% !od", raises re$enue to defra" the necessar" expenses of the %o$ernent. It is ere&" a #a" of apportionin% the costs of %o$ernent aon% those #ho in soe easures are pri$i&e%ed to en)o" its !enefits and ust !ear its !urdens. , taxation refers to the inherent po#er of the state to deand enforced contri!utions for pu!&ic purpose or purposes.
e. in soe iportant sectors of the econo", as in the case case of forei% forei%nn ipor iportat tatio ions, ns, taxes taxes soet soeti ies es pro$i pro$ide de protection to &oca& industries &i(e protecti$e tariffs and custos.
Taxes are the enforced proportiona& contri!utions fro persons and propert" &e$ied !" the &a#'a(in% !od" of the State !" $irtue of its so$erei%nt" for the support of %o$ernent and for pu!&ic needs. @ ; LE?P S <
The Supree Court he&d: *It is said that taxes are #hat #e pa" for ci$i&i+ed societ". ithout taxes, the %o$ernent #ou&d !e para&"+ed for &ac( of the oti$e po#er to acti$ate and operate it. -ence, despite the natura& re&uctance to surrender part of ones hard'earned incoe to the taxin% authorities, e$er" person #ho is a!&e ust contri!ute his share in the runnin% of the %o$ernent. The %o$ernent for its part is expected to respond in the for of tan%i!&e and intan%i!&e !enefits intended to ipro$e the &i$es of the peop&e and enhance their ora& and ateria& $a&ues. The and shou&d dispe& the erroneous notion that it is an ar!itrar" ethod of exaction !" those in the seat of po#er. Taxation is a s"!iotic re&ationship, #here!" in exchan%e for the protection that the citi+ens %et fro the %o$ernent, taxes are paid./ 0Coissioner of Interna& Re$enue $s A&&e%re, Inc.,et a&., L' 12234, 5e!. 67, 63228
6. to pro$ide funds or propert" #ith #hich the State prootes the %enera& #e&fare and protection of its citi+ens. 1.
1
;PR EP<
a. Taxation a" !e used as an ip&eent of po&ice po#er in in order to proote the %enera& #e&fare of the peop&e. ;see Lut+ $s Araneta 032 Phi& 6=28 and 9se>a $s 9r!os 0G.R. No. 33224, ?ar. @6, 633@8< !. As in the case of taxes &e$ied on excises and pri$i&e%es &i(e those iposed in to!acco or a&coho&ic products or auseent p&aces &i(e ni%ht c&u!s, ca!arets, coc(pits, etc. In the case of Ca&tex Phi&s. Inc. $s C9A 0G.R. No. 312, ?a" 2, 63318, it #as he&d that taxes a" a&so !e iposed for a re%u&a re%u&ator tor"" purpos purposee as, as, for instan instance, ce, in the reha!i reha!i&i&itat tation ion and sta!i&i+ation of a threatened industr" #hich is affected #ith pu!&ic industr" &i(e the oi& industr". c. this this is ade possi!& possi!&ee throu%h the pro%ressi$e s"ste of taxation #here the o!)ecti$e is to pre$e pre$ent nt the under' under'con conce centr ntrati ation on of #ea&t #ea&thh in the hands hands of fe# indi$idua&s.
6. It is is &e$ &e$ie iedd !" !" tthe he of the State The po#er to tax is a &e%is&ati$e po#er #hich under the Constitution on&" Con%ress can exercise throu%h the enactent of &a#s. Accordin%&", the o!&i%ation to pa" taxes is a statutor" &ia!i&it". 1. It is is an contri!ution A tax is not a $o&untar" pa"ent or donation. It is not dependent on the #i&& or contractua& assent, express or ip&ied, of the person taxed. Taxes are not contracts !ut positi$e acts of the %o$ernent. @. It is %enera %enera&&&&"" pa"a!& pa"a!&ee in Tax is a pecuniar" !urden an exaction to !e dischar%ed a&one in the for of one" #hich ust !e in &e%a& tender, un&ess Bua&ified !" &a#, such as RA @= #hich a&&o#s !ac(pa" certificates as pa"ent of taxes. =. It is in character ' It is ordinari&" !ased on the taxpa"ers a!i&it" to pa" . pa" . . It is &e$i &e$ied ed on A tax a" a" a&so !e iposed iposed on acts, transactions, ri%hts or pri$i&e%es. 4. It is is &e$ &e$ie iedd for for Taxation in$o&$es, and a tax constit constitute utes, s, a !urden !urden to pro$i pro$ide de incoe incoe for pu!&i pu!&icc purposes. 7. It is is &e$ &e$ie iedd !" !" tthe he #hich has )urisdiction o$er the persons or propert". ' The persons, propert" or ser$ice to !e taxed ust !e su!)ect to the )urisdiction of the taxin% state.
Taxes proceed upon the theor" that the existence of the %o$ernent is a necessit" that it cannot continue #ithout the eans to pa" its expenses and that for those eans, it has the ri%ht to cope& a&& citi+ens and properties #ithin its &iits to contri!ute. In a case, the Supree Court he&d that: 1
TAXA TAXATION: TION: San Beda College of LAW – ALABANG Taxati Taxation on is a po#er po#er eanatin eanatin%% fro necessit" necessit".. It is a necessar" !urden to preser$e the States so$erei%nt" and a eans to %i$e the citi+enr" an ar" to resist a%%ression, a na$" to defend its shore shoress fro fro in$asi in$asion, on, a corps corps of ci$i& ci$i& ser$an ser$ants ts to ser$e, ser$e, pu!&ic pu!&ic ipro$eents desi%ned for the en)o"ent of the citi+enr" and those #hich coe #ith the States territor" and faci&ities, and protection #hich a %o$ernent is supposed to pro$ide. 0Phi&. Guarant" Co., Inc. $s Coissioner of Interna& Re$enue, 6@ SCRA 778.
The !asis of taxation is the reciproca& dut" of protection !et#een the state and its inha!itants. In return for the contri!utions, the taxpa"er recei$es the %enera& ad$anta%es and protection #hich the %o$ernent affords the taxpa"er and his propert".
1. The po#er to tax is exc&usi$e&" &e%is&at &e%is&ati$e i$e and cannot cannot !e exercise exercisedd !" the executi$ executi$ee or )udicia& )udicia& !ranch of the %o$ernent. @. A&thou%h in one decided case the Supree Court ca&&ed it an a#esoe po#er, the po#er of taxation is su!)ect to certain &iitations. ?ost of these &iitatio &iitations ns are specific specifica&&" a&&" pro$ided in the Constitu Constitution tion or ip&ied ip&ied therefro #hi&e the rest are inherent and the" are those #hich sprin% fro the nature of the taxin% po#er itse&f a&thou%h, the" a" or a" not !e pro$ided in the Constitution.
;S1 A P A ?< 6. to !e taxed8
a. It does does not ean ean that that on&" those those #ho #ho are a!&e a!&e to pa" and do pa" taxes can en)o" the pri$i&e%es and protection %i$en to a citi+en !" the %o$ernent. !. 5ro the the contri!utio contri!utions ns recei$ed recei$ed,, the %o$erne %o$ernent nt renders renders no specia& or coensurate !enefit to an" particu&ar propert" or person. c. The on&" on&" !enefit !enefit to #hich #hich the taxpa"er taxpa"er is entit& entit&ed ed is that deri$e deri$edd fro his en)o"ent of the pri$i&e%es of &i$in% in an or%ani+ed societ" esta!&is esta!&ished hed and safe%uard safe%uarded ed !" the de$otion de$otion of taxes taxes to pu!&ic pu!&ic purposes. 0Goe+ $s Pa&oar, 1 SCRA 2138 d. A taxpa" taxpa"er er cannot cannot o!)ect o!)ect to or resist resist the pa"ent pa"ent of taxes so&e&" !ecause no persona& !enefit to hi can !e pointed out as arisin% fro the tax. 0Loren+o tax. 0Loren+o $s Posadas, 4= Phi& @@8
Taxes are the &ife!&ood of the %o$ernent, !ein% such, their propt propt and certain a$ai&a!i&i a$ai&a!i&it" t" is an iperious iperious need. need. 0Co&&ector of Interna& Re$enue $s. Goodrich Internationa& Ru!!er Co., Sept. 4, 6348 ithout ithout taxes, the %o$ernent #ou&d !e para&"+ed for &ac( of oti$e po#er to acti$ate and operate it.
6. The po#er of taxation is inherent in so$erei%nt" as an incident or attri!ute thereof, !ein% essentia& to the exis existe tenc ncee of e$er e$er"" %o$e %o$ern rne ent nt.. It can can !e exer exerci cise sedd !" the the %o$ernent e$en if the Constitution is entire&" si&ent on the su!)ect. a. Constitut Constitutiona iona&& pro$ision pro$isionss re&atin% n% to the po#er po#er of taxation taxation do not operate as %rants of the po#er to the %o$ernent. The" ere&" const constitu itute te &iit &iitati ations ons upon upon a po#er po#er #hich #hich #ou&d #ou&d other# other#ise ise !e practica&&" #ithout &iit. !. hi&e hi&e the the po#er to tax is not expres express&" s&" pro$i pro$ided ded for in our constitutions, constitutions, its existence is reco%ni+ed !" the pro$isions re&atin% to taxation. In the case of ?actan Ce!u Internationa& Airport Authorit" $s ?arcos, Sept. 66, 6334, as 6334, as an incident of so$erei%nt", the po#er to tax has !een descri!ed as *un&iited in its ran%e, ac(no#&ed%in% in its $er" nature no &iits, so that securit" a%ainst its a!use is to !e found on&" in the responsi!i&it" of the &e%is&ati$e #hich iposes the tax on the constituenc" #ho are to pa" it./
0the persons, propert" or occupation etc.
In the case of Churchi&&, et a&. $s Concepcion 0@= Phi& 3438 it has !een ru&ed that: The po#er to ipose taxes is one so un&iited in force and so searchin% in extent so that the courts scarce&" $enture to dec&are that it is su!)ect to an" restriction #hate$er, except such as rest in the discre discretio tionn of the author authorit" it" #hich #hich exerc exercise ise it. No attri! attri!ute ute of so$erei%nt" is ore per$adin%, and at no point does the po#er of %o$ernent affect ore constant&" and intiate&" a&& the re&ations of &ife than throu%h the exaction ade under it. And in the nota!&e case of ?cCu&&och $s ?ar"&and, Chief ustice ?arsha&& &aid do#n the ru&e that the . Accordin% to an authorit", authorit", the a!o$e princip&e is pertinent on&" #hen there is no po#er to tax a particu&ar su!)ect and has no re&ation to a case #here such ri%ht to tax exists. This opt'Buoted axi instead of !ein% re%arded as a !&an(et authori+ation of the unrest unrestrai rained ned use of the taxin% taxin% po#er for an" and a&& purpose purposes, s, irresp irrespect ecti$ i$ee of re$enu re$enue, e, is ore ore reason reasona!& a!&"" constr construed ued as an epi%raatic stateent of the po&itica& and econoic axio that since the financia& needs of a state or nation a" outrun an" huan ca&cu&ation, so the po#er to eet those needs !" taxation ust not !e &ii &iite tedd e$en e$en thou thou%h %h the the taxe taxess !eco !ecoe e !urd !urden enso soe e or confiscator". To sa" that *the po#er to tax is the po#er to destro"/ is to descri!e not the purposes for #hich the taxin% po#er a" !e used !ut the de%ree of $i%or #ith #hich the taxin% po#er a" !e ep&o"ed in order to raise re$enue 0I Coo&e" 673'6268
hi&e taxation is said to !e the po#er to destro", it is !" no eans un&iited. It is eBua&&" correct to postu&ate that the * ,/ 2
TAXA TAXATION: TION: San Beda College of LAW – ALABANG !ecause of the constitutiona& restraints p&aced on a taxin% po#er that $io&ated fundaenta& ri%hts. In the case of Roxas, Roxas, et a& $s CTA 0Apri& 14, 63428 , 63428 , the SC reinds us that a&thou%h the po#er of taxation is soeties ca&&ed the po#er to destro", in order to aintain the %enera& pu!&ics trust and confidence in the Go$ernent, this po#er ust !e used )ust&" and not treacherous&". The Supree Court he&d: *The po#er of taxation is soeties ca&&ed a&so the po#er to destro". Therefore it shou&d !e exercised #ith caution to inii+e in)ur" to the proprietar" ri%hts of a taxpa"er. It ust !e exercised fair&", eBua&&" and unifor&", &est the tax co&&ector (i&& the J hen that &a"s the %o&den e%% .. And, in order to aintain the %enera& pu!&ic trust and confidence in the Go$ernent this po#er ust !e used )ust&" and not not treacherous&". treacherous&".// The The doct doctri rine ne see( see(ss to desc descri ri!e !e,, in an extr extre ee, e, the the conseBuentia& conseBuentia& nature of taxation and its resu&tin% ip&ications, to #it: a. The po#er po#er to tax ust ust !e exerci exercised sed #ith #ith caution caution to ini inii+e i+e in)ur" to proprietar" ri%hts of a taxpa"er !. If the tax tax is &a#fu& &a#fu& and and not $io&at $io&ati$e i$e of an" an" of the inhere inherent nt and constitutiona& constitutiona& &iitations, the fact a&one that it a" destro" an acti$it" or o!)ect of taxation #i&& not entire&" perit the courts to afford an" re&ief and c. A su!)e su!)ect ct or o!)ect o!)ect that that a" not !e destro" destro"ed ed !" the taxin% taxin% authorit" a" not &i(e#ise !e taxed. 0e.%. exercise of a constitutiona& ri%ht8
The courts cannot re$ie# the #isdo or ad$isa!i&it" or exped expedien ienc" c" of a tax. tax. The The court courts s po#er is &iit &iited ed on&" on&" to the app&ication app&ication and interpretation of the &a#. udicia& action is &iited on&" to re$ie# #here in$o&$es: 6. The dete deterrina inati tioon of $a&i $a&idi dit" t" on the tax in re& re&ati ation to constitutiona& constitutiona& precepts or pro$isions. 1. The deteri deterinatio nation, n, in an appropriat appropriatee case, of the the app&icati app&ication on of the &a#.
6. deterination of the persons, propert" or excises to !e taxed, taxed, the su or sus sus to !e raised, the due date thereof and the tie and anner of &e$"in% and co&&ectin% taxes 0strict&" spea(in%, such refers to taxation8 1. consi consists sts of the anner anner of enforc enforcee eent nt of the o!&i%ation on the part of those #ho are taxed. 0this inc&udes pa"ent !" the taxpa"er and is referred to as tax adinistration8 The t#o t#o proces processe sess to%eth to%ether er consti constitut tutee the * /. ;5AT< 6. the sources of tax re$enue shou&d coincide #ith, and approxiate the needs of %o$ernent expenditure. Neither an exces excesss nor a defic deficien ienc" c" of re$enu re$enuee $is'K $is'K'$i '$iss the needs needs of %o$ernent #ou&d !e in (eepin% #ith the princip&e. 1. tax &a#s shou&d !e capa!&e of con$enient, )ust and effecti$e adinistration. adinistration.
@. the tax !urden shou&d !e in proportion to the taxpa"e taxpa"ers rs a!i&it" a!i&it" to pa" 0a!i&it"'to'pa" princip&e8 . The The 6327 6327 Constitution reBuires taxation to !e eBuita!&e and unifor.
.
A.
6. taxes of fixed aount upon a&& persons of a certain c&ass #ithin the )urisdiction of the taxin% po#er #ithout re%ard to the aount of their propert" or occupations or !usinesses in #hich the" a" !e en%a%ed in. exap&e: counit" tax 1. taxes on thin%s or propert" of a certain c&ass #ithin the )urisdiction of the taxin% po#er. exap&e: rea& estate tax @. char%es iposed upon the perforance of an act, the en)o"ent of a pri$i&e%e, or the en%a%in% in an occupation. exap&es: exap&es: incoe tax, $a&ue'add $a&ue'added ed tax, estate tax or donors tax
B.
6. taxes #herein !oth the *incidence/ as as #e&& as the *ipact/ or or !urden of the tax faces on one person. exap&es: incoe tax, counit" tax, donors tax, estate tax 1. taxes #herein the incidence of or the &ia!i&it" for the pa"ent of the tax fa&&s on one person, !ut the !urden thereof can !e shifted or passed to another person. exap&es: AT, percenta%e taxes, custos duties excise taxes on certain specific %oods
: 6. hen the consuer or end'user of a anufacturer product is tax'exept, such exeption co$ers on&" those taxes for #hich such consu consuer er or end'us end'user er is direct direct&" &" &ia!& &ia!&e. e. Indire Indirect ct taxes taxes are not inc&uded. -ence, the anufacturer cannot c&ai exeption fro the pa"ent of sa&es tax, neither can the consuer or !u"er of the product deand the refund of the tax that the anufacturer i%ht ha$e passed on to hi. 0Phi&. Acet"&ene Acet"&ene Co. inc. $s Coissioner of Interna& Re$enue et. a&., L'6377, Au%.67, 63278 1. hen the transaction itse&f is the one that is tax'exept !ut throu%h error the se&&er pa"s the tax and shifts the sae to the !u"er, the se&&er se&&er %ets %ets the refund, refund, !ut ust ho&d it in trust trust for !u"er. !u"er. 0Aerican Ru!!er Co. case, L'634@, Apri& @, 634@8 @. here the exeption fro indirect tax is %i$en to the contractee, !ut the e$ident intention is to exept the contractor so that such contractor a" no &on%er shift or pass on an" tax to the contractee, 3
TAXA TAXATION: TION: San Beda College of LAW – ALABANG the the cont contra ract ctor or a" a" c&ai c&ai tax tax exe exept ptio ionn on the the tran transa sact ctio ionn 0Coissioner of Interna& Re$enue $s ohn Gotaco and Sons, Inc., et.a&., L'@631, 5e!. 17, 63278 =. hen hen the &a# %ranti %rantin% n% tax exept exeption ion speci specific fica&& a&&"" inc&ud inc&udes es indirect taxes or #hen it is c&ear&" anifest therein that &e%is&ati$e intention to exept e!races indirect taxes, then the !u"er of the product or ser$ice so&d has a ri%ht to !e rei!ursed the aount of the tax taxes that hat the the se&& se&&er erss pass passed ed on to hi. i. 0?aced 0?acedaa $s ?acarai%,supra8
C.
6. tax iposed for the %enera& purposes of the %o$ernent, i.e., to raise re$enues for %o$ernenta& needs. Exap&es: incoe taxes, AT, and a&ost a&& taxes 1. tax iposed for specia& purposes, i.e., to achie$e soe socia& or econoic needs. Exap Exap&es &es:: educa educatio tiona& na& fund fund tax under under Rea& Rea& Pr Prope opert" rt" Taxation D.
6. tax iposed per head, unit or nu!er, or !" soe standard of #ei%ht or easureent and #hich reBuires no assessent !e"ond a &istin% and c&assification of the su!)ects to !e taxed. Exap&es: taxes on disti&&ed spirits, #ines, and ferented &iBuors 1. tax !ased on the $a&ue of the artic&e or thin% su!)ect to tax. exap&e: rea& propert" taxes, custos duties
exap&es: nationa& interna& re$enue taxes, custos duties 1.
tax iposed !" Loca& Go$ernent units. exap&es: rea& estate tax, professiona& tax
A re%ressi$e tax, ust not !e confused #ith re%ressi$e s"ste of taxation. tax the rate of #hich decreases as the tax !ase increases. focuses focuses on indirect indirect taxes, it exists #hen there are ore indirect taxes iposed than direct taxes.
a. su of one" for the use of soethin%, %enera&&" app&ied to the consideration #hich is paid for the use of a road, !rid%e of the &i(e, of a pu!&ic nature.
6. deand of so$erei%nt" 1. paid paid for for the supp suppor ortt of the the %o$ernent @. %enera&&", no &iit as to aount iposed =. iposed %o$ernent
on&"
!"
the
6. deand of proprietorship 1. paid paid for for the use use of anot anothe hers rs propert" @. aoun aountt depen depends ds on on the the cost cost of construct construction ion or aintenan aintenance ce of the pu!&ic ipro$eent used =. ipo ipose sedd !" the the %o$er %o$ern nen entt or pri$ate indi$idua&s or entities
!. an" sanctions iposed as a punishent for $io&ations of &a# or acts deeed in)urious.
E.
6. the rate or the aount of the tax increases as the aount of the incoe or earnin% 0tax !ase8 to !e taxed increases. exap&es: incoe tax, estate tax, donors tax 1. the tax rate decreases as the aount of incoe or earnin% 0tax !ase8 to !e taxed increases. Note: e ha$e no re%ressi$e taxes 0this is accordin% to De Leon8 @. re%ressi$e. =.
tax rates are part&" part&" pro%ress pro%ressi$e i$e and part&" part&"
tax rates are fixed fixed on a f&at tax tax !ase. exap&es: rea& estate tax, AT, and other percenta%e taxes
F.
6.
tax iposed !" the Nationa& Go$ernent. Go$ernent.
6. %ene %enera ra&&&&"" inte intend nded ed to rais raisee re$enue 1. iposed on&" !" the %o$ernent
6. desi% desi%ned ned to to re%u&a re%u&ate te condu conduct ct 1. ipo ipose sedd !" the the %o$er %o$ern nen entt or pri$ate indi$idua&s or entities
c. an enfo enforc rced ed prop propor ortition ona& a& contri!ution fro o#ners of &ands especia&&" or pecu&iar&" !enefited !" pu!&ic ipro$eents.
6. iposed on persons, propert" and excise 1. persona& &ia!i&it" of the person assessed
@. !ase !asedd on neces necessi sit" t" as #e&& #e&& as on !enefits recei$ed =. %ener enera& a& app& pp&icati ation 0see 0see
6. &e$i &e$ied ed on& on&"" on &and &and 1. not a perso persona& na& &ia! &ia!i&i&it" it" of of the person assessed, i.e. his &ia!i&it" is &iited ited on&" on&" to the the &and and in$o&$ed @. !ased !ased #ho& #ho&&" &" on on !ene !enefit fitss =. excepti eptioona& na& !oth oth as ti tie and and 4
TAXA TAXATION: TION: San Beda College of LAW – ALABANG Aposto&ic Prefect $s Treas. 9f p&ace a%uio, 76 Phi& =78
re$enue is a&so o!tained does not a(e the iposition of a tax. 0see Pro%ressi$e De$e&opent Corp. $s Fue+on Cit", 671 SCRA 4138 e.
6. Since specia& assessents are not taxes #ithin the constitutiona& or statut statutor" or" pro$i pro$isio sions ns on tax exep exeptio tions, ns, it fo&&o# fo&&o#ss that that the exeption under Sec. 120@8, Art. I of the Constitution does not app&" to specia& assessents. 1. -o#e$er -o#e$er,, in $ie# of the exeptin% exeptin% pro$iso pro$iso in Sec. 1@= of the Loca& Go$ernent Code, properties #hich are actua&&", direct&" and exc&usi$e&" used for re&i%ious, charita!&e and educationa& purposes are not exact&" exept exact&" exept fro rea& propert" taxes !ut are exept fro the iposition of specia& assessents as #e&&.0 see A!an8 @ .The %enera& ru&e is that an exeption fro taxation does not inc&ude exeption fro specia& assessent. d. is a char%e iposed under the po&ice po#er for the purposes of re%u&ation.
6. enforced contri!ution assessed !" so$erei%n authorit" to defra" pu!&ic expenses 1. for re$enue purposes @. an exerc ercise of the tax taxin% po#er =. %enera&&" no &iit in the aount of tax to !e paid
6. &e%a& copensation or re#ard of an officer for specific purposes 1. for re%u&ation purposes @. an exerc ercise of the po&i o&ice po#er =. aount is &iited to the necessar" expenses of inspection and re%u&ation . ipos posed ed a&so on pers ersons . iposed on the ri%ht to and propert" exercise pri$i&e%e 4. non'pa"ent does not 4. non' non'pa pa" "en entt a(es a(es the act act nece necess ssar ari&i&"" a(e a(e the the act act or or !usiness i&&e%a& !usiness i&&e%a&
De!t is !ased upon )uridica& tie, created !" &a#, contracts, de&icts or Buasi'de&icts !et#een parties for their pri$ate interest or resu&tin% fro their o#n acts or oissions. oissions.
6. !ased on &a# 1. %enera&&", cannot !e assi%ned @. %ener enera& a&&" &" pa" pa"a!& a!&e in one" one" =. %ene %enera ra&&&&"" not su!)e su!)ect ct to set' set' off or copensation . ipr ipris ison one ent nt is a sanc sanctition on for non'pa"ent non'pa"ent of tax except po&& tax 4. %o$erned !" specia& prescripti$e periods pro$ided for in the Tax Code 7. does not dra# interest except on&" #hen de&inBuent
6. !ased on contracts, express or ip&ied 1. assi%n i%na!&e a!&e @. a" !e paid aid in (ind =. a" a" !e su!) su!)ec ectt to set'o set'off ff or copensation . no ip ipris rison onent for non' on' pa"ent of de!t 4. %o$er o$erne nedd !" the the ordi ordinnar" ar" periods of prescriptions 7. dra#s interest #hen so stipu&ated, or in case of defau&t
Taxes xes are are not not su!)e u!)ect ct to set'o et'off ff or &e%a &e%a&& copensation. The %o$ernent and the taxpa"er are not creditors and de!tors or each other. 9!&i%ations in the nature of de!ts are due to the %o$ernent in its corporate capacit", #hi&e taxes are due to the %o$ernent in its so$erei%n capacit" 0 Phi&ex ?inin% Corp. $s CIR, 13= SCRA 427 Repu!&ic $s ?a!u&ao Lu!er Co., 4 SCRA 4118 here here !oth !oth the c&ais c&ais of the %o$ern %o$ernent ent and the taxp taxpa" a"er er a%ai a%ains nstt each each othe otherr ha$e ha$e a&re a&read ad"" !eco !ecoe e due due and and deanda!&e as #e&& as fu&&" &iBuated. 0see Doin%o $s Gar&itos, L' 623=, une 13, 634@8
6. Licenses Licenses for for the re%u&at re%u&ation ion of usefu& usefu& occupa occupation tions. s. 1. Lice Licens nses es for for the the re%u re%u&a &atition on or rest restri rict ctio ionn of non' non'us usef efu& u& occupations or enterprises @. Licens Licenses es for for re$e re$enue nue on&" on&" G.R. No. 617=, Au%. 12, 6332
6. Soe &iitations app&" on&" to one and not to the other, and that exeption fro taxes a" not inc&ude exeption fro &icense fees. 1. The po#er to re%u&ate as an exercise of po&ice po#er does not inc&ud inc&udee the po#er to ipos iposee fees fees for re$enue re$enue purpos purposes. es. 0see Aerican ?ai& Line $s Cit" of utuan, L'614=7, ?a" @6, 6347 and re&ated cases8 @. An extraction, ho#e$er, a"!e considered !oth a tax and a &icense fee. =. ut a tax a" ha$e on&" a re%u&ator" purpose. . The %enera& ru&e is that the iposition is a tax if its priar" purpose is to %enerate re$enue and re%u&ation is ere&" incidenta& !ut if re%u&ation is the priar" purpose, the fact that incidenta&&"
The Supree Court he&d that: *e ha$e consistent&" ru&ed that there can !e no offsettin% of taxes a%ainst the c&ais that the taxpa"er a" ha$e a%ainst the %o$ernent. A person cannot refuse to pa" a tax on the %round that the %o$ernent o#es hi an aount eBua& to or %reater than the tax !ein% co&&ected. The co&&ection of a tax cannot a#ait the resu&ts of a &a#suit a%ainst the %o$ernent./ f. 6. a pecuniar" aid direct&" %ranted !" the %o$ernent to an indi$idua& or pri$ate coercia& enterprise deeed !eneficia& to the pu!&ic.
5
TAXATION: San Beda College of LAW – ALABANG 1. refers to a&& the funds or incoe deri$ed !" the %o$ernent, #hether fro tax or fro #hate$er source and #hate$er anner. @. taxes iposed on %oods exported fro or iported into a countr". The ter taxes is !roader in scope as it inc&udes custos duties. =.
it a" !e used in @ senses: a. As a !oo( of rates dra#n usua&&" in a&pha!etica& order containin% the naes of se$era& (inds of erchandise #ith the correspondin% duties to !e paid for the sae. !. As duties pa"a!&e on %oods iported or exported 0PD No. 1@8 c. As the s"ste or princip&e of iposin% duties on the iportationMexportation of %oods. . refers to taxes iposed !" the &e%is&ati$e other than duties or iports and exports. 4. currenc".
a currenc" easure desi%ned to sta!i&i+e the
7. s"non"ous #ith tax taxation ip&ies tri!ute fro the %o$erned to soe for of so$erei%nt". 2. in its %enera& sense, it si%nifies an" tax, tri!ute or dut". In its &iited sense, it eans a dut" on iported %oods and erchandise.
6. Po&ice Po#er 1. Po#er of Einent Doain @. Po#er of Taxation
PRP9SE ' &e$ied for the exercised to purpose of proote pu!&ic raisin% re$enue #e&fare thru re%u&ations A?9NT 95 EOACTI9N ' no &iit ' &iited to the cost of re%u&ations, issuance of the &icense or sur$ei&&ance ENE5ITS RECEIED ' no specia& or ' no direct direct !enefits !enefits !ut a recei$ed !ut the hea&th" econoic en)o"ent of standard of the pri$i&e%es of societ" or &i$in% in an *danu or%ani+ed a!sBue in)uria/ is societ" attained
N9N'I?PAIR?ENT 95 C9NTRACTS ' the ipairent ' contract a" !e ' contracts a" !e ru&e su!sist ipaired ipaired TRANS5ER 95 PR9PERT RIG-TS ' taxes paid ' no transfer !ut ' propert" is ta(en !" !ecoe part of on&" restraint on the %o$t upon pu!&ic funds the exercise of pa"ent of )ust propert" ri%ht copensation exists SC9PE ' affects a&& ' affects a&& ' affects on&" the persons, persons, particu&ar propert" propert" and propert", coprehended excise pri$i&e%es, and e$en ri%hts ASIS ' pu!&ic ' pu!&ic necessit" 'pu!&ic necessit", necessit" and the ri%ht of pri$ate propert" is the state and the ta(en for pu!&ic use pu!&ic to se&f' protection and se&f'preser$ation AT-9RIT -IC- EOERCISES T-E P9ER ' on&" !" the ' on&" !" the ' a" !e %ranted to %o$ernent or %o$ernent or its pu!&ic ser$ice, its po&itica& po&itica& copanies, or pu!&ic su!di$isions su!di$isions uti&ities
a. or those #hich restrict the po#er a&thou%h the" are not e!odied in the Constitution ;P N I T E<
' ta(in% of propert" for pu!&ic use
6. 1. @. =. .
Purpose of Taxes 'de&e%a!i&it" of the Taxin% Po#er or the Situs of Taxation of the Go$ernent fro taxes Coit"
!. or those express&" found in the constitution or ip&ied fro its pro$ision ' no exaction, copensation paid !" the %o$ernent
' direct !enefit resu&ts in the for of )ust copensation
6. process of &a# 1. protection of &a# @. 5reedo of and of the press =. of re&i%ious freedo . of contracts 4. for de!t or non'pa"ent of po&& tax 7. 9ri%in of , Re$enue and Tariff i&&s 2. , EBuita!i&it" and Pro%ressiti$it" of Taxation 3. of Le%is&ati$e Authorit" to 5x Tariff Rates, Iport and Export Fuotas 6. Tax Exeption of Actua&&", Direct&", and Exc&usi$e&" used for Re&i%ious Charita!&e 66. otin% reBuireents in connection #ith the Le%is&ati$e of Tax Exeption 61. Non'ipairent of the Supree )urisdiction in Tax Cases 6
TAXATION: San Beda College of LAW – ALABANG 6@. Tax exeption of and Assets, inc&udin% Grants, Endo#ents, Donations or Contri!utions to Education Institutions c. 6. and Tit&e of i&&s 1. Po#er of the to eto an ites in an Appropriation, Re$enue or Tariff i&& @. Necessit" of an ade !efore one" =. of Pu!&ic ?one" . Taxes Le$ied for Purposes 4. A&&otent to
A. a. If taxation is for a pu!&ic purpose, the tax ust !e used: a.68 for the support of the state or a.18 for soe reco%ni+ed o!)ects of %o$ernents or a.@8 direct&" to proote the #e&fare of the counit" 0taxation as an ip&eent of po&ice po#er8 The ter *pu!&ic purpose/ is s"non"ous #ith *%o$ernenta& purpose/ a purpose affectin% the inha!itants of the state or taxin% district as a counit" and not ere&" as indi$idua&s. b.
c. A tax &e$ied for a pri$ate purpose constitutes a ta(in% of propert" #ithout due process of &a#. d. The purposes to !e accop&ished !" taxation need not !e exc&usi$e&" pu!&ic. A&thou%h pri$ate indi$idua&s are direct&" !enefited, the tax #ou&d sti&& !e $a&id pro$ided such !enefit is on&" incidenta&. e. The test is not as to #ho recei$es the one", !ut the character of the purpose for #hich it is expended not the iediate resu&t of the expenditure !ut rather the u&tiate. %. In the iposition of taxes, pu!&ic purpose is presued.
!. tax &a#s shou&d !e capa!&e of con$enient, )ust and effecti$e adinistration. c. the tax !urden shou&d !e in proportion to the taxpa"ers a!i&it" to pa" 0a!i&it"'to'pa" princip&e8 . The 6327 Constitution reBuires taxation to !e eBuita!&e and unifor.
. 6.
Doctrine of Separation of Po#ers Taxation is pure&" &e%is&ati$e, Con%ress cannot de&e%ate the po#er to others.
a. De&e%ation to the President 0Art.I. Sec. 12018 6327 Constitution8 The po#er %ranted to Con%ress under this constitutiona& pro$ision to authori+e the President to fix #ithin specified &iits and su!)ect to such &iitations and restrictions as it a" ipose, tariff rates and other duties and iposts inc&ude tariffs rates e$en for re$enue purposes on&". Custos duties #hich are assessed at the prescri!ed tariff rates are $er" uch &i(e taxes #hich are freBuent&" iposed for !oth re$enue'raisin% and re%u&ator" purposes 0Garcia $s Executi$e Secretar", et. a&., G.R. No. 6617@, u&" @, 63318 !. De&e%ations to the Loca& Go$ernent 0Art. O. Sec. , 6327 Constitution8 It has !een he&d that the %enera& princip&e a%ainst the de&e%ation of &e%is&ati$e po#ers as a conseBuence of the theor" of separation of po#ers is su!)ect to one #e&&'esta!&ished exception, nae&", that &e%is&ati$e po#er a" !e de&e%ated to &oca& %o$ernents. The theor" of non'de&e%ation of &e%is&ati$e po#ers does not app&" in aters of &oca& concern. 0Pepsi'Co&a ott&in% Co. of the Phi&, Inc. $s Cit" of utuan, et . a&., L'1126=, Au%. 12, 63428 c. De&e%ation to Adinistrati$e A%encies #ith respect to aspects of Taxation not &e%is&ati$e in character. exap&e: assessent and co&&ection
1. a. #hether the thin% to !e threatened !" the appropriation of pu!&ic re$enue is soethin% #hich is the dut" of the State, as a %o$ernent. !. #hether the &a# pro$idin% the tax direct&" prootes the #e&fare of the counit" in eBua& easure.
a. the sources of tax re$enue shou&d coincide #ith, and approxiate the needs of %o$ernent expenditure. Neither an excess nor a deficienc" of re$enue $is'K'$is the needs of %o$ernent #ou&d !e in (eepin% #ith the princip&e.
a. It sha&& not contra$ene an" Constitutiona& pro$isions or inherent &iitations of taxation !. The de&e%ation is effected either !" the Constitution or !" $a&id&" enacted &e%is&ati$e easures or statute and c. The de&e%ated &e$" po#er, except #hen the de&e%ation is !" an express pro$ision of Constitution itse&f, shou&d on&" !e in fa$or of the &oca& &e%is&ati$e !od" of the &oca& or unicipa& %o$ernent concerned. =. E$er" s"ste of taxation consists of t#o parts: a. the e&eents that enter into the iposition of the tax ;S 1 A P A ?<, or tax re%u&ation and !. the steps ta(en for its assessent and co&&ection or tax adinistration
7
TAXATION: San Beda College of LAW – ALABANG If #hat is de&e%ated is tax &e%is&ation, the de&e%ation is in$a&id !ut if #hat is in$o&$ed is on&" tax adinistration, the non' de&e%a!i&it" ru&e is not $io&ated.
C.
a. Territoria&it" or Situs of Taxation eans *p&ace of taxation/ dependin% on the nature of taxes !ein% iposed. !. It is an inherent andate that taxation sha&& on&" !e exercised on persons, properties, and excise #ithin the territor" of the taxin% po#er !ecause: !.68 Tax &a#s do not operate !e"ond a countr"s territoria& &iit. !.18 Propert" #hich is #ho&&" and exc&usi$e&" #ithin the )urisdiction of another state recei$es none of the protection for #hich a tax is supposed to !e copensation.
6. a. The propert" of a forei%n state or %o$ernent a" not !e taxed !" another. !. The %rounds for the a!o$e ru&e are: !.68 so$erei%n eBua&it" aon% states !.18 usa%e aon% states that #hen one enter into the territor" of another, there is an ip&ied understandin% that the po#er does not intend to de%rade its di%nit" !" p&acin% itse&f under the )urisdiction of the &atter !.@8 forei%n %o$ernent a" not !e sued #ithout its consent so that it is use&ess to assess the tax since it cannot !e co&&ected !.=8 reciprocit" aon% states
6. c. -o#e$er, the fundaenta& !asis of the ri%ht to tax is the capacit" of the %o$ernent to pro$ide !enefits and protection to the o!)ect of the tax. A person a" !e taxed, e$en if he is outside the taxin% state, #here there is !et#een hi and the taxin% state, a pri$it" of re&ationship )ustif"in% the &e$".
a. (ind and C&assification of the Tax !. &ocation of the su!)ect atter of the tax c. doici&e or residence of the person d. citi+enship of the person e. source of incoe f. p&ace #here the pri$i&e%e, !usiness or occupation is !ein% exercised
D.
a. Sec. 6 Art. @ *No person sha&& !e depri$ed of &ife, &i!ert" or propert" #ithout due process of &a# x x x./
6. The interest of the pu!&ic %enera&&" as distin%uished fro those of a particu&ar c&ass reBuire the inter$ention of the state 1. The eans ep&o"ed ust !e reasona!&" necessar" to the accop&ishent for the purpose and not undu&" oppressi$e @. The depri$ation #as done under the authorit" of a $a&id &a# or of the constitution and =. The depri$ation #as done after cop&iance #ith fair and reasona!&e ethod of procedure prescri!ed !" &a#. In a strin% of cases, the Supree Court he&d that in order that due process of &a# ust not !e done in an ar!itrar", despotic, capricious, or #hisica& anner. 1.
a.68 To &e$" tax upon pu!&ic propert" #ou&d render necessar" ne# taxes on other pu!&ic propert" for the pa"ent of the tax so &aid and thus, the %o$ernent #ou&d !e taxin% itse&f to raise one" to pa" o$er to itse&f a.18 In order that the functions of the %o$ernent sha&& not !e undu&" ipede and a.@8 To reduce the aount of one" that has to !e handed !" the %o$ernent in the course of its operations. 1. n&ess other#ise pro$ided !" &a#, the exeption app&ies on&" to %o$ernent entities throu%h #hich the %o$ernent iediate&" and direct&" exercises its so$erei%n po#ers 0Infantr" Post Exchan%e $s Posadas, = Phi& 2448 @. Not#ithstandin% the iunit", the %o$ernent a" tax itse&f in the a!sence of an" constitutiona& &iitations. =. Go$ernent'o#ned or contro&&ed corporations, #hen perforin% proprietar" functions are %enera&&" su!)ect to tax in the a!sence of tax exeption pro$isions in their charters or &a# creatin% the.
a. Sec.6 Art. @ * xxx Nor sha&& an" person !e denied the eBua& protection of the &a#s. : 6. EBua& protection of the &a#s si%nifies that a&& persons su!)ect to &e%is&ation sha&& !e treated under circustances and conditions !oth in the pri$i&e%es conferred and &ia!i&ities iposed 1. This doctrine prohi!its c&ass &e%is&ation #hich discriinates a%ainst soe and fa$ors others. !. ReBuisites for a a&id C&assification 6. ?ust not !e ar!itrar" 1. ?ust not !e !ased upon su!stantia& distinctions @. ?ust !e %erane to the purpose of &a#. =. ?ust not !e &iited to exitin% conditions on&" and . ?ust p&a" eBua&&" to a&& e!ers of a c&ass. @.
E. 8
TAXATION: San Beda College of LAW – ALABANG a. Sec. 12068 Art. I. The ru&e of taxation sha&& !e unifor and eBuita!&e. The Con%ress sha&& e$o&$e a pro%ressi$e s"ste of taxation. !. 6. 0eBua&it" or eBua& protection of the &a#s8 eans a&& taxa!&e artic&es or (inds or propert" of the sae c&ass sha&& !e taxed at the sae rate. A tax is unifor #hen the sae force and effect in e$er" p&ace #here the su!)ect of it is found. 1. eans fair, )ust, reasona!&e and proportionate to ones a!i&it" to pa". @. p&aces stress on direct rather than indirect taxes, or on the taxpa"ers a!i&it" to pa" =. IneBua&it" #hich resu&ts in sin%&in% out one particu&ar c&ass for taxation or exeption infrin%es no constitutiona& &iitation. 0see Coissioner $s. Lin%a"en Gu&f E&ectric, 64= SCRA 178 . The ru&e of uniforit" does not ca&& for perfect uniforit" or perfect eBua&it", !ecause this is hard&" attaina!&e. =. a. Sec. = Art. III. No &a# sha&& !e passed a!rid%in% the freedo of speech, of expression or of the pressx x x * !. 6. There is curtai&ent of press freedo and freedo of thou%ht if a tax is &e$ied in order to suppress the !asic ri%ht of the peop&e under the Constitution. 1. A !usiness &icense a" not !e reBuired for the sa&e or contri!ution of printed ateria&s &i(e ne#spaper for such #ou&d !e iposin% a prior restraint on press freedo @. -o#e$er, an annua& re%istration fee on a&& persons su!)ect to the $a&ue'added tax does not constitute a restraint on press freedo since it is not iposed for the exercise of a pri$i&e%e !ut on&" for the purpose of defra"in% part of cost of re%istration. . a. Sec. Art. III. *No &a# sha&& !e ade respectin% an esta!&ishent of re&i%ion or prohi!itin% the free exercise thereof. The free exercise and en)o"ent of re&i%ious profession and #orship, #ithout discriination or preference, sha&& !e fore$er !e a&&o#ed. x x x/ !. 6. License feesMtaxes #ou&d constitute a restraint on the freedo of #orship as the" are actua&&" in the nature of a condition or perit of the exercise of the ri%ht. 1. -o#e$er, the Constitution or the 5ree Exercise of Re&i%ion c&ause does not prohi!it iposin% a %enera&&" app&ica!&e sa&es and use tax on the sa&e of re&i%ious ateria&s !" a re&i%ious or%ani+ation. 0see To&entino $s Secretar" of 5inance, 1@ SCRA 4@8 4. a. Sec. 6 Art. III. *No &a# ipairin% the o!&i%ation of contract sha&& !e passed./ !. 6. A &a# #hich chan%es the ters of the contract !" a(in% ne# conditions, or chan%in% those in the contract, or dispenses #ith those expressed, ipairs the o!&i%ation.
1. The non'ipairent ru&e, ho#e$er, does not app&" to pu!&ic uti&it" franchise since a franchise is su!)ect to aendent, a&teration or repea& !" the Con%ress #hen the pu!&ic interest so reBuires.
7. a. Sec. 1 Art. III. *No person sha&& !e iprisoned for de!t or non'pa"ent of po&& tax./ !. 6. The on&" pena&t" for de&inBuenc" in pa"ent is the pa"ent of surchar%e in the for of interest at the rate of 1=Q per annu #hich sha&& !e added to the unpaid aount fro due date unti& it is paid. 0Sec. 646, LGC8 1. The prohi!ition is a%ainst *iprisonent/ for *non'pa"ent of po&& tax/. Thus, a person is su!)ect to iprisonent for $io&ation of the counit" tax &a# other than for non'pa"ent of the tax and for non'pa"ent of other taxes as prescri!ed !" &a#. 2. a. Sec. 1= Art. I. *A&& appropriation, re$enue or tariff !i&&s, !i&& authori+in% increase of the pu!&ic de!t, !i&&s of &oca& app&ication, and pri$ate !i&&s sha&& ori%inate exc&usi$e&" in the -ouse of Representati$es, !ut the Senate a" propose or concur #ith aendents./ !. nder the a!o$e pro$ision, the Senators po#er is not on&" to !ut a&so *to propose aendents/. 0To&entino $s Sec. of 5inance, supra8 3.
a. Sec. 12018 Art. I *x x x The Con%ress a", !" &a#, authori+e the President to fix #ithin specified &iits, and su!)ect to such &iitations and restrictions as it a" ipose, tariff rates, iport and export Buotas, tonna%e and #harfa%e dues, and other duties or iposts #ithin the frae#or( of the nationa& de$e&opent pro%ra of the %o$ernent. 6.
a. Sec. 120@8 Art. I. *Charita!&e institutions, churches and parsona%es or con$ents appurtenant thereto, osBues, non'profit ceeteries, and a&& &ands, !ui&din%, and ipro$eents actua&&", direct&" and exc&usi$e&" used for re&i%ious, charita!&e or educationa& purposes sha&& !e exept fro taxation./ !. 6. Lest of the tax exeption: the use and not o#nership of the propert" 1. To !e tax'exept, the propert" ust !e actua&&", direct&" and exc&usi$e&" used for the purposes entioned. @. The #ord *exc&usi$e&"/ eans *priari&".
9
TAXATION: San Beda College of LAW – ALABANG =. The exeption is not &iited to propert" actua&&" indispensa!&e !ut extends to faci&ities #hich are incidenta& to and reasona!&" necessar" for the accop&ishent of said purposes. . The constitutiona& exeption app&ies on&" to propert" tax. 4. -o#e$er, it #ou&d see that under existin% &a#, %ifts ade in fa$or or re&i%ious charita!&e and educationa& or%ani+ations #ou&d ne$erthe&ess Bua&if" for donors %ift tax exeption. 0Sec. 660380@8, NIRC8 66.
a. Sec. 120=8 Art. I. *No &a# %rantin% an" tax exeption sha&& !e passed #ithout the concurrence of a a)orit" of a&& the e!ers of the Con%ress./ !. The a!o$e pro$ision reBuires the concurrence of a a)orit" not of attendees constitutin% a Buoru !ut of a&& e!ers of the Con%ress. 61.
a. Sec. 018 Art. III. *The Con%ress sha&& ha$e the po#er to define, prescri!e, and apportion the )urisdiction of the $arious courts !ut a" not depri$e the Supree Court of its )urisdiction o$er cases enuerated in Sec. hereof./ Sec. 01!8 Art. III. *The Supree Court sha&& ha$e the fo&&o#in% po#ers: x x x018 Re$ie#, re$ise, odif" or affir on appea& or certiorari x x x fina& )ud%ents and orders of &o#er courts in x x x a&& cases in$o&$in% the &e%a&it" of an" tax, ipost, assessent, or to&& or an" pena&t" iposed in re&ation thereto./
c.
The fo&&o#in% are soe of the hi%h&i%hts of the D95 order %o$ernin% the tax exeption of non'stoc(, non'profit educationa& institutions: 6. The tax exeption is not on&" &iited to re$enues and assets deri$ed fro strict&" schoo& operations &i(e incoe fro tuition and other isce&&aneous feed such as atricu&ation, &i!rar", R9TC, etc. fees, !ut it a&so extends to incidenta& incoe deri$ed fro canteen, !oo(store and doritor" faci&ities. 1. In the case, ho#e$er, of incidenta& incoe, the faci&ities entioned ust not on&" !e o#ned and operated !" the schoo& itse&f !ut such faci&ities ust !e &ocated inside the schoo& capus. Canteens operated !" ere concessionaires are taxa!&e. @. Incoe #hich is unre&ated to schoo& operations &i(e incoe fro !an( deposits, trust fund and sii&ar arran%eents, ro"a&ties, di$idends and renta& incoe are taxa!&e. =. The use of the schoo&s incoe or assets ust !e in consonance #ith the purposes for #hich the schoo& is created in short, use ust !e schoo&'re&ated, &i(e the %rant of scho&arships, facu&t" de$e&opent, and esta!&ishent of professiona& chairs, schoo& !ui&din% expansion, &i!rar" and schoo& faci&ities.
6. *E$er" i&& passed !" Con%ress sha&& e!race on&" one su!)ect #hich sha&& !e expressed in the tit&e thereof./ in the To&entino E'AT case, supra, the E'$at, or the Expanded a&ue Added Tax La# 0RA 77648 #as a&so Buestioned on the %round that the constitutiona& reBuireent on the tit&e of a !i&& #as not fo&&o#ed.
6@.
a. Sec. =0=8 Art. OI. *Su!)ect to the conditions prescri!ed !" &a#, a&& %rants, endo#ents, donations or contri!utions used actua&&", direct&" and exc&usi$e&" for educationa& purposes sha&& !e exept fro tax./ !. 6. The exeption %ranted to non'stoc(, non'profit educationa& institution co$ers incoe, propert", and donors taxes, and custo duties. 1. To !e exept fro tax or dut", the re$enue, assets, propert" or donation ust !e used actua&&", direct&" and exc&usi$e&" for educationa& purpose. @. In the case or re&i%ious and charita!&e entities and non'profit ceeteries, the exeption is &iited to propert" tax. =. The said constitutiona& pro$ision %rantin% tax exeption to non'stoc(, non'profit educationa& institution is se&f'executin%. . Tax exeptions, ho#e$er, of proprietar" 0for profit8 educationa& institutions reBuire prior &e%is&ati$e ip&eentation. Their tax exeption is not se&f'executin%. 4. Lands, ui&din%s, and ipro$eents actua&&", direct&", and exc&usi$e&" used for educationa& purposed are exept fro propert" tax, #hether the educationa& institution is proprietar" or non'profit.
1.
*The President sha&& ha$e the po#er to $eto an" particu&ar ite or ites in an Appropriation, Re$enue or Tariff !i&& !ut the $eto sha&& not affect the ite or ites to #hich he does not o!)ect./ @.
*No one" sha&& !e paid out of the Treasur" except in pursuance of an appropriation ade !" &a#./ =.
/No pu!&ic one" or propert" sha&& !e appropriated, app&ied, paid or ep&o"ed, direct&" or indirect&" for the use, !enefit, 10
TAXATION: San Beda College of LAW – ALABANG support of an" sect, church, denoination, sectarian institution, or s"ste of re&i%ion or of an" priest, preacher, inister, or other re&i%ious teacher or di%nitar" as such except #hen such priest, preacher, inister or di%nitar" is assi%ned to the ared forces or to an" pena& institution, or %o$ernent orphana%e or &eprosariu./ .
*A&& one" co&&ected or an" tax &e$ied for a specia& purpose sha&& !e treated as a specia& fund and paid out for such purpose on&". It the purpose for #hich a specia& fund #as created has !een fu&fi&&ed or a!andoned the !a&ance, if an", sha&& !e transferred to the %enera& funds of the %o$ernent./ An exap&e is the 9i& Price Sta!i&i+ation 5und created under P.D. 634 to sta!i&i+e the prices of iported crude oi&. In a decide case, it #as he&d that #here under an executi$e order of the President, this specia& fund is transferred fro the %enera& fund to a *trust &ia!i&it" account,/ the constitutiona& andate is not $io&ated. The 9PS5, accordin% to the court, reains as a specia& fund su!)ect to C9A audit 0 9se>a $s 9r!os, et a&., G.R. No. 33224, ?ar. @6, 633@8
of taxation of persona&t" in the p&ace #here it has its actua& situs and the reBuisite &e%is&ati$e )urisdiction exists. shares of stoc( a" ha$e situs for purposes of taxation in a state in #hich the" are peranent&" (ept re%ard&ess of the doici&e of the o#ner, or the state in #hich he corporation is or%ani+ed.
If no constitutiona& pro$isions are $io&ated, the po#er of the &e%is&ati$e to fix situs is undou!ted. our &a# fixes the situs of intan%i!&e persona& propert" for purposes of the estate and %ift taxes. 0see 8 In those cases #here the situs for certain intan%i!&es are not cate%orica&&" spe&&ed out, there is roo for app&"in% the o!i&ia ru&e. =.
0see &ater topic8
4.
*Loca& Go$ernent units sha&& ha$e a )ust share, as deterined !" &a#, in the nationa& taxes #hich sha&& !e autoatica&&" re&eased to the./
a. Po&& tax a" !e &e$ied upon persons #ho are residents of the State. !. is su!)ect to taxation in the State in #hich it is &ocated #hether the o#ner is a resident or non'resident, and is taxa!&e on&" there.
c. taxa!&e in the state #here it has actua& situs #here it is ph"sica&&" &ocated. A&thou%h the o#ner resides in another )urisdiction.
6. &itera&&" eans the 1. state #here the su!)ect to !e taxed has a situs a" ri%htfu&&" &e$" and co&&ect the tax
A &e%a& situs cannot !e %i$en to propert" for the purpose of taxation #here neither the propert" nor the person is #ithin the protection of the taxin% state In the case of ?ani&a E&ectric Co. $s atco 043 Phi& 238 , the Supree Court ru&ed that insurance preiu paid on a fire insurance po&ic" co$erin% propert" situated in the Phi&s. are taxa!&e in the Phi&s. E$en thou%h the fire insurance contract #as executed outside the Phi&s. and the insurance po&ic" is de&i$ered to the insured therein. This is !ecause the Phi&ippines Go$ernent ust %et soethin% in return for the protection it %i$es to the insured propert" in the Phi&s. and !" reason of such protection, the insurer is !enefited there!".
d. situs or persona& propert" is the doici&e of the o#ner, in accordance #ith the princip&e , said princip&e, ho#e$er, is not contro&&in% #hen it is inconsistent #ith express pro$isions of statute or #hen )ustice deands that it shou&d !e, as #here the propert" has in fact a situs e&se#here. 0see e&&s 5ar%o an( $. Co&&ector 7 P-IL @1 Co&&ector $. 5isher L'66411, anuar", 63468 e. proper&" exacted fro persons #ho are residents or citi+ens in the taxin% )urisdiction and e$en those #ho are neither residents nor citi+ens pro$ided the incoe is deri$ed fro sources #ithin the taxin% state. f. po#er to &e$" an excise tax depends upon the p&ace #here the !usiness is done, of the occupation is en%a%ed in of the transaction not p&ace.
1. Accordin% to this axi, #hich eans /o$a!&e fo&&o# the person,/ the situs of persona& propert" is the doici&e of the o#ner. This is ere&" a fiction of &a# and is not a&&o#ed to stand in the #a"
%. transission of propert" fro donor to donee, or fro a decedent to his heirs a" !e su!)ect to taxation in the state #here the transferor #as a citi+en or resident, or #here the propert" is &ocated. 11
TAXATION: San Beda College of LAW – ALABANG 1. an aount su!tracted fro an indi$idua&s or entit"s tax &ia!i&it" to arri$e at the tota& tax &ia!i&it" There is u&tip&icit" of situs #hen the sae su!)ect of taxation, &i(e incoe or intan%i!&e, is su!)ect to taxation in se$era& taxin% )urisdictions. This happens due to: a. ariance in the concept of *doici&e/ for tax purposes !. ?u&tip&e distinct re&ationship that a" arise #ith respect to intan%i!&e persona&it" and c. The use to #hich the propert" a" ha$e !een de$oted, a&& of #hich a" recei$e the protection of the &a#s of )urisdiction other than the doici&e of the o#ner taxation )urisdiction a" pro$ide: a. Exeption or a&&o#ance of deductions or tax credit for forei%n taxes !. Enter into treaties #ith other states
6. 0Dou!&e taxation in its strict sense8 ' In the o!)ectiona!&e or prohi!ited sense eans that the sae propert" is taxed t#ice #hen it shou&d !e taxed on&" once.
6. 1. @. =. . 4.
Sae propert" is taxed t#ice Sae purpose Sae taxin% authorit" ithin the sae )urisdiction Durin% the sae taxin% period Sae (ind or character of tax
1. 0Dou!&e taxation in its !road sense8 This is the opposite of direct dou!&e taxation and is not &e%a&&" o!)ectiona!&e. The a!sence of one or ore of the fore%oin% reBuisites of the o!noxious direct tax a(es it indirect.
A deduction differ fro a tax credit in that a deduction reduces taxa!&e incoe #hi&e credit reduces tax &ia!i&it"
@. =. .
#ith other States
Dou!&e Taxation in its stricter sense is undou!ted&" unconstitutiona& !ut that in the !roader sense is not necessari&" so. 9ur Constitution does not prohi!it dou!&e taxation hence, it a" not !e in$o(ed as a defense a%ainst the $a&idit" of tax &a#s. a. here a tax is iposed !" the Nationa& Go$ernent and another !" the cit" for the exercise of occupation or !usiness as the taxes are not iposed !" the sae pu!&ic authorit" 0 Cit" of a%uio $s De Leon, 9ct. @6, 63428 !. hen a Rea& Estate dea&ers tax is iposed for en%a%in% in the !usiness of &easin% rea& estate in addition to Rea& Estate Tax on the propert" &eased and the tax on the incoe desired as the" are different (inds of tax c. Tax on anufacturers products and another tax on the pri$i&e%e of storin% exporta!&e copra in #arehouses #ithin a unicipa&it" are iposed as first tax is different fro the second d. here, aside fro the tax, a &icense fee is iposed in the exercise of po&ice po#er. Dou!&e Taxation #hi&e not for!idden, is soethin% not fa$ored. Such taxation, it has !een he&d, shou&d, #hene$er possi!&e, !e a$oided and pre$ented. a. Dou!ts as to #hether dou!&e taxation has !een iposed shou&d !e reso&$ed in fa$or of the taxpa"er. The reason is to a$oid in)ustice and unfairness. !. The taxpa"er a" see( re&ief under the niforit" Ru&e or the EBua& Protection %uarantee.
1.
6. A tax on the ort%a%e as persona& propert" #hen the ort%a%ed propert" is a&so taxed at its fu&& $a&ue as rea& estate 1. A tax upon a corporation for its capita& stoc( as a #ho&e and upon the shareho&ders for their shares @. A tax upon a corporation for its capita& stoc( as a #ho&e and upon the shareho&ders for their shares =. A tax upon depositions in the !an( for their deposits and a tax upon the !an( for their propert" in #hich such deposits are in$ested . An excise tax upon certain use of propert" and a propert" tax upon the sae propert" and 4. A tax upon the sae propert" iposed !" t#o different states.
2. 3. 4. 5. 6.
hiftin% apita&i+ation ransforation $asion $oidance xeption
6. Transfer of the !urden of a tax !" the ori%ina& pa"er or the one on #ho the tax #as assessed or iposed to another or soeone e&se is the point at #hich a tax is ori%ina&&" iposed. is the point on #hich a tax !urden fina&&" rests or sett&es do#n.
6. taxa!&e incoe
su!traction fro %ross incoe in arri$in% a
the ipact is the initia& phenoenon, the shiftin% is the interediate process, and the incidence is the resu&t. 12
TAXATION: San Beda College of LAW – ALABANG
a. the !urden of tax is transferred fro a factor of production throu%h the factors of distri!ution unti& it fina&&" sett&es on the u&tiate purchaser or consuer !. effected #hen the !urden of tax is transferred fro the consuer or purchaser throu%h the factors of distri!ution to the factor of production c. this occurs #hen the tax is shifted t#o or ore ties either for#ard or !ac(#ard
6. It is ere&" a persona& pri$i&e%e of the %rantee 1. It is %enera&&" re$oca!&e !" the %o$ernent un&ess the exeption is founded on a contract #hich is protected fro ipairent, !ut the contract ust contain the other essentia& e&eents of contracts, such as, for exap&e, a $a&id cause or consideration. @. It ip&ies a #ai$er on the part of the %o$ernent of its ri%ht to co&&ect #hat other#ise #ou&d !e due to it, and in this sense is pre)udicia& thereto. =. It is not necessari&" discriinator" so &on% as the exeption has a reasona!&e foundation or rationa& !asis.
1. defined the reduction in the price of the taxed o!)ect eBua& to the capita&i+ed $a&ue of future taxes #hich the purchaser expects to !e ca&&ed upon to pa"
C.
@. The ethod #here!" the anufacturer or producer upon #ho the tax has !een iposed, fearin% the &oss of his ar(et if he shou&d add the tax to the price, pa"s the tax and endea$ors to recoup hise&f !" ipro$in% his process of production there!" turnin% out his units of products at a &o#er cost. =. is the use of the taxpa"er of i&&e%a& or fraudu&ent eans to defeat or &essen the pa"ent of a tax.
a. 5ai&ure to dec&are for taxation purposes true and actua& incoe deri$ed fro !usiness for t#o consecuti$e "ears, and b. Su!stantia& underdec&aration of incoe tax returns of the taxpa"er for four consecuti$e "ears coup&ed #ith o$erstateent of deduction. E$asion of the tax ta(es p&ace on&" #hen there are no proceeds. E$asion of Taxation is tantaount, fisca&&" spea(in%, to the a!sence of taxation.
. is the use !" the taxpa"er of &e%a&&" perissi!&e a&ternati$e tax rates or ethod of assessin% taxa!&e propert" or incoe in order to a$oid or reduce tax &ia!i&it". Tax A$oidance is not punisha!&e !" &a#, a taxpa"er has the &e%a& ri%ht to decrease the aount of #hat other#ise #ou&d !e his taxes or a&to%ether a$oid !" eans #hich the &a# perits.
Pu!&ic interest #ou&d !e su!ser$ed !" the exeption a&&o#ed #hich the &a#'a(in% !od" considers sufficient to offset onetar" &oss entai&ed in the %rant of the exeption. 0CIR $s othe&o Shippin% Corp., L'164@@, une 13, 6347 CIR $s PAL, L'134, 9ct. @6, 63428 D. 6. ?a" !e !ased on a contract in #hich case, the pu!&ic represented !" the Go$ernent is supposed to recei$e a fu&& eBui$a&ent therefore 1. ?a" !e !ased on soe %round of pu!&ic po&ic", such as, for exap&e, to encoura%e ne# and necessar" industries. @. ?a" !e created in a treat" on %rounds of reciprocit" or to &essen the ri%ors of internationa& dou!&e or u&tip&e taxation #hich occur #here there are an" taxin% )urisdictions, as in the taxation of incoe and intan%i!&e persona& propert" E. There is no tax exeption so&e&" on the %round of eBuit", !ut eBuit" can !e used as a !asis for statutor" exeption. At ties the &a# authori+es condonation of taxes on eBuita!&e considerations. 0Sec 174, 177, Loca& Go$ernent Code8 5. 6.
As to
a. #hich ori%inate fro the Constitution !. Le%is&ation
Iunities fro taxation Those #hich eanate fro
1.
accop&ished !" !rea(in% the &etter of the &a#
accop&ished !" &e%a& procedures or eans #hich a"!e contrar" to the intent of the sponsors of the tax &a# !ut ne$erthe&ess do not $io&ate the &etter of the &a#
A. is a %rant of iunit", express or ip&ied, to particu&ar persons or corporations fro the o!&i%ations to pa" taxes. .
As to a. hene$er express&" %ranted !" or%anic or statute of &a# !. Exist #hene$er particu&ar persons, properties or excises are deeed exept as the" fa&& outside the scope of the taxin% pro$ision itse&f @.
As to
a. !. tax is dispensed #ith
Connotes a!so&ute iunit" 9ne #here co&&ection of a part of the
G. 6. Exeptions fro taxation are hi%h&" disfa$ored !" &a#, and he #ho c&ais an exeption ust !e a!&e to )ustif" !" the c&earest %rant of or%anic or statute of &a#. 0Asiatic Petro&eu $s L&anes, =3 13
TAXATION: San Beda College of LAW – ALABANG P-IL =44 Co&&ector of Interna& Re$enue $s. ?ani&a oc(e" C&u!, 32 P-IL 478 1. -e #ho c&ais an exeption ust )ustif" that the &e%is&ati$e intended to exept hi !" #ords too p&ain to !e ista(en. 0isa"an Ce!u Terina& $s CIR, L'63@, 5e!. 17, 6348 @. -e #ho c&ais exeptions shou&d con$incin%&" pro$ed that he is exept =. Tax exeptions ust !e strict&" construed 0Phi&. Acet"&ene $s CIR, L'6377, Au%. 67, 63478 . Tax Exeptions are not presued. 0Lea&da E&ectric Co. $s CIR, L'64=12, Apr. @, 634@8 4. Constitutiona& %rants of tax exeptions are se&f'executin% 09pinion No. 6@, 6327, Sec. 9f ustice8 7. Tax exeption are persona&. 2. Deductions for incoe tax purposes parta(e of the nature of tax exeptions, hence, the" are strict&" construed a%ainst the tax pa"er 3. A tax anest", uch &i(e a tax exeption is ne$er fa$ored or presued !" &a# 0CIR $s CA, G.R. No. 6274, an. 1, 63338 6. The ru&e of strict construction of tax exeption shou&d not !e app&ied to or%ani+ations perforin% strict&" re&i%ious, charita!&e, and educationa& functions
It pro$ides that a c&ai for refund !arred !" prescription a" !e a&&o#ed to offset unsett&ed tax &ia!i&ities shou&d !e pertinent on&" to taxes arisin% fro the sae transaction on #hich an o$erpa"ent is ade and underpa"ent is due. This doctrine, ho#e$er, #as re)ected !" the Supree Court, sa"in% that it #as not con$inced of the #isdo and proprietar" thereof, and that it a" #or( to tept !oth the co&&ectin% a%enc" and the taxpa"er to de&a" and ne%&ect their respecti$e pursuits of &e%a& action #ithin the period set !" &a#. 0Co&&ector $s ST, 6= P-IL 6418 It is on&" #hen an act cop&ained of, #hich a" inc&ude &e%is&ati$e enactent, direct&" in$o&$es the i&&e%a& dis!urseent of pu!&ic funds deri$ed fro taxation that the taxpa"ers suit a" !e a&&o#ed.
6. 9n the interpretation and construction of tax statutes, &e%is&ati$e intention ust !e considered. 1. In case of dou!t, tax statutes are construed strict&" a%ainst the %o$ernent and &i!era&&" construed in fa$or of the taxpa"er.
Taxes ust on&" !e iposed prospecti$e&" The &an%ua%e of the statute c&ear&" deands or express that it sha&& ha$e a retroacti$e effect .
6. In order to dec&are a tax trans%ressin% the due process c&ause of the Constitution it ust !e so harsh and oppressi$e in its retroacti$e app&ication 05ernande+ $s 5ernande+, 33 P-IL3@=8 1. Tax &a#s are neither po&itica& nor pena& in nature the" are deeed &a#s of the occupied territor" rather than the occup"in% ene". 0-i&ado $s Co&&ector, 6 P-IL 1228 @. Tax &a#s not !ein% pena& in character, the ru&e in the Constitution a%ainst the passa%e of the ex post facto &a#s cannot !e in$o(ed, for the pena&t" iposed.
Taxes are iprescripti!&e
@. The ru&e of strict construction a%ainst the %o$ernent is not app&ica!&e #here the &an%ua%e of the tax &a# is p&ain and there is no dou!t as to the &e%is&ati$e intent. =. The exeptions 0or eBui$a&ent pro$isions, such as tax anest" and tax condonation8 are not presued and #hen %ranted are strict&" construed a%ainst the %rantee. . The exeptions, ho#e$er, are construed &i!era&&" in fa$or of the %rantee in the fo&&o#in%: a. hen the &a# so pro$ides for such &i!era& construction !. Exeptions fro certain taxes %ranted under specia& circustances to specia& c&asses of persons c. Exeptions in fa$or of the Go$ernent, its po&itica& su!di$isions d. Exeptions to traditiona& exeptees, such as, those in fa$or of charita!&e institutions. 4.
The tax &a#s are presued $a&id.
7.
The po#er to tax is presued to exist.
hen pro$ided other#ise !" the tax &a# itse&f. Exap&e: NIRC pro$ides for statutes of &iitation in the assessent and co&&ection of taxes therein iposed
6. The &a# on prescription, !ein% a reedia& easure, shou&d !e &i!era&&" construed to afford protection as a coro&&ar", the exceptions to the &a# on prescription !e strict&" construed. 0CIR $s CA. G.R. No. 6=676, 5e!. 1=, 63338
14
TAXATION: San Beda College of LAW – ALABANG
6.
1.
ureau of Interna& Re$enue and the ureau of Custos for interna& re$enue and custos &a# enforceent. It is note#orth" to note that the IR is &ar%e&" decentra&i+ed in that a %reat extent of tax enforceent duties are de&e%ated to the Re%iona& Directors and Re$enue District 9fficers. Pro$incia&, Cit" and ?unicipa& assessors and treasures for &oca& and rea& propert" taxes.
It is a sett&ed ru&e of &a# that in the perforance of its %o$ernenta& functions, the state cannot !e estopped !" the ne%&ect of its a%ents and officers. No#here is it ore true than in the fie&d of taxation 0CIR $s . A!ad, et. a&., L'63417, une 17, 6342 8. Estoppe& does not app&" to prec&ude the su!seBuent findin%s on taxa!i&it" 0I!id.8 The princip&e of tax &a# enforceent is:
0E. Rodri%ue+, Inc. $s. Co&&ector of Interna& Re$enue, L' 1@=6, u&" @6, 6343.8 Sii&ar&", estoppe& does not app&" to depri$e the %o$ernent of its ri%ht to raise defenses e$en if those defenses are !ein% raised on&" for the first tie on appea& 0CIR $s Procter Ga!&e Phi&. G.R. No. 442@2, 6 Apri& 6322.8
nder Sec. 61 of the 6337 NIRC, the fo&&o#in% are constituted as a%ents of the Coissioner: a.
!.
c.
The Coissioner of Custos and his su!ordinates #ith respect to the co&&ection of nationa& interna& re$enue taxes on iported %oods The head of the appropriate %o$ernent office and his su!ordinates #ith respect to the co&&ection of ener%" tax and an(s du&" accredited !" the Coissioner #ith respect to receipt of pa"ents of interna& re$enue taxes authori+ed to !e ade throu%h !an(s.
a.
!. c. d. e. f.
Exc&usi$e and ori%ina& po#er to interpret pro$isions of the NIRC and other tax &a#s, su!)ect to re$ie# !" the Secretar" of 5inance Assessent and Co&&ection of a&& nationa& interna& re$enue taxes, fees and char%es Enforceent of a&& forfeitures, pena&ties and fines connected there#ith Execution of )ud%ent in a&& cases decided in its fa$or !" the Court of Tax Appea&s and the ordinar" courts. Effectin% and adinisterin% the super$isor" and po&ice po#ers conferred to it !" the Tax Code or other &a#s. 9!tainin% inforation, suonin%, exainin% and ta(in% testion" of persons for purposes of ascertainin% the correctness of an" return or in deterinin% the &ia!i&it" of an" person for an" interna& re$enue tax, or in co&&ectin% an" such &ia!i&it".
The Court ru&ed in Coissioner of Interna& Re$enue $s. C.A., et. a&. G.R. No. 667321, 4 5e! 6337 that &i(e other princip&es of &a#, the non'app&ication of estoppe& to the %o$ernent
hi&e the princip&e of estoppe& a" not !e in$o(ed a%ainst the %o$ernent, this is not necessari&" true in case of the taxpa"er. In CIR $s. Su"ac, 6= Phi& 263 , the taxpa"er ade se$era& reBuests for the rein$esti%ation of its tax &ia!i&ities such that the %o$ernent, accedin% to the taxpa"ers reBuest, postponed the co&&ection of its &ia!i&it". The taxpa"er cannot &ater on !e peritted to raise the defense of prescription inasuch as his pre$ious reBuests for rein$esti%ation ha$e the effect of p&acin% hi in estoppe&.
0isa"a Land Transportation Co. $s CIR, 6 Phi& 6@@28
Tax is assessed !" the taxpa"er hise&f. The aount is ref&ected in the tax return that is fi&ed !" hi and the tax is paid at the tie he fi&es his return. 0Sec. 4 ;A< 6<, 6337 NIRC8 ' This is an assessent ade !" the tax assessor #here!" the correct aount of the tax is deterined after an exaination or 15
TAXATION: San Beda College of LAW – ALABANG in$esti%ation is conducted. The &ia!i&it" is deterined and is therefore, assessed for the fo&&o#in% reasons: 6. The aount ascertained exceeds that #hich is sho#n as tax !" the taxpa"er in his return 1. No aount is sho#n in the return or @. The taxpa"er did not fi&e an" return at a&&. 0Sec. 4 ;< <6< and ;1< 6337 NIRC8 This is an assessent #herein the tax assessor has no po#er to act at a&& 0ictorias ?i&&in% $s. CTA, L'1=16@, 6@ ?ar 63428 This is an assessent #herein the assessor has the po#er to assess !ut errs in the exercise of that po#er 0I!id.8
=. The authorit" $ested in the Coissioner to assess taxes a" !e de&e%ated.
Cit" Lu!er $s. Doin%o, L'62466, @ an 634=8.
. Assessents ust !e directed to the ri%ht part".
Repu!&ic $s. de&a Raa, L'1662, 13 No$. 63448
The taxpa"er has the dut" of pro$in% other#ise 0Interpro$incia& Auto!us $s. CIR, 32 Phi& 138 In the a!sence of an" proof of an" irre%u&arities in the perforance of officia& duties, an assessent #i&& not !e distur!ed. 0S" Po. s. CTA, G.R. No 26==4, 2 Au% 6322 A&& presuptions are in fa$or of tax assessents 0Da"rit $s. Cru+, L'@336, 14 Sept. 63228 5ai&ure to present proof of error in the assessent #i&& )ustif" )udicia& affiration of said assessents. 0CIR $s C.C. G.R. No. 6=66 and 64@, 6 ?ar 6338 A part" cha&&en%in% an appraisers findin% of $a&ue is reBuired to pro$e not on&" that the appraised $a&ue is erroneous !ut a&so #hat the proper $a&ue is 0Ca&tex $s. C.C. G.R. No. 6=726, 6 u&" 63328
1. Assessents shou&d not !e !ased on presuptions no atter ho# &o%ica& the presuption i%ht !e. In order to stand the test of )udicia& scrutin" .
@. Assessent is discretionar" on the part of the Coissioner.
?era&co Secuirities Corp. $s. Sa$e&&ano, L'@4626 and L'@47=2, 1@ 9ct 63318.
The Tax Code reBuires that after the return is fi&ed, the Coissioner or his du&" authori+ed representati$e sha&& exaine the sae and assess the correct aount of tax. The tax or the deficienc" of the tax so assessed sha&& !e paid upon notice and deand fro the Coissioner or fro his du&" authori+ed representati$e. An" return, stateent or dec&aration fi&ed in an" office authori+ed to recei$e the sae sha&& not !e #ithdra#n. -o#e$er, #ithin three 0@8 da"s fro the date of such fi&in%, the sae a" !e odified, chan%ed or aended, pro$ided that no notice for audit or in$esti%ation of such return, stateent or dec&aration has in the eantie !een actua&&" ser$ed upon the taxpa"er. 0Sec 4;A<, 6337 NIRC8 A&thou%h Sec. 76 of the 6337 NIRC pro$ides that tax returns sha&& constitute pu!&ic records, it is necessar" to (no# that these are confidentia& in nature and a" not !e inBuired into in unauthori+ed cases under pain of pena&t" of &a# pro$ided for in Sec 17 of the 6337 NIRC. The aforesaid ru&e, ho#e$er, is su!)ect to certain exceptions. In the fo&&o#in% cases, inBuir" into the incoe tax returns of taxpa"ers a" !e authori+ed: 6. 1. @.
Except:
=. ?aceda $s. ?acarai%, G.R. No. 2213, 2 une 633@
hen the inspection of the return is authori+ed upon the #ritten order of the President of the Phi&ippines. hen inspection is authori+ed under the 5inance Re%u&ation No. @@ of the Secretar" of 5inance. hen the production of the tax return is ateria& e$idence in a criina& case #herein the Go$ernent is interested in the resu&t. 0Cu n)ien%, et. a&. $s. Posadas, etc, 2 Phi& @48 hen the production or inspection thereof is authori+ed !" the taxpa"er hise&f 0era $s Cusi L' @@66, 13 une 63738. 16
TAXATION: San Beda College of LAW – ALABANG a !asis for assessin% the taxes for the other onths or Buarters of the sae or different taxa!&e "ears. 0Sec. 4 ;C<, 6337 NIRC8
The &a# authori+es the Coissioner to assess taxes on the !asis of the !est e$idence o!taina!&e in the fo&&o#in% cases: 6. 1.
if a person fai&s to fi&e a return or other docuent at the tie prescri!ed !" &a# or he #i&&fu&&" or other#ise fi&es a fa&se or fraudu&ent return or other docuent.
hen the ethod is used, the Coissioner a(es or aends the return fro his (no#&ed%e and fro such inforation as he can o!tain throu%h testion" or other#ise. Assessents ade as such are deeed pria facie correct and sufficient for a&& &e%a& purposes. 0Sec. 4 ;<, 6337 NIRC8 refers to an" data, record, papers, docuents, or an" e$idence %athered !" interna& re$enue officers fro %o$ernent offices or a%encies, corporations, ep&o"ers, c&ients or patients, tenants, &essees, $endees and fro a&& other sources, #ith #ho the taxpa"er had pre$ious transactions or fro #ho he recei$ed an" incoe, after ascertainin% that a report reBuired !" &a# as !asis for the assessent of an" interna& re$enue tax has not !een fi&ed or #hen there is reason to !e&ie$e that an" such report is fa&se, incop&ete or erroneous. A case in point on the use of the !est e$idence o!taina!&e is S" Po $s CTA. In that case, there #as a deand ade !" the Coissioner on the Si&$er Cup ine Copan" o#ned !" petitioners deceased hus!and Po ien Sen%. The deand #as for the taxpa"er to su!it to the IR for exaination the factor"s !oo(s of accounts and records, so IR in$esti%ators raided the factor" and sei+ed different !rands of a&coho&ic !e$era%es. The in$esti%ators, on the !asis of the #ines sei+ed and the s#orn stateents of the factor"s ep&o"ees on the Buantit" of ra# ateria&s consued in the anufacture of &iBuor, assessed the correspondin% deficienc" incoe and specific taxes. The Supree Court, on appea&, uphe&d the &e%a&it" of the assessent.
The Coissioner is authori+ed at an" tie durin% the taxa!&e "ear to order the in$entor"'ta(in% of %oods of an" taxpa"er as a !asis for assessent. If there is reason to !e&ie$e that a person is not dec&arin% his correct incoe, sa&es or receipts for interna& re$enue tax purposes, his !usiness operation a" !e p&aced under o!ser$ation or sur$ei&&ance. The findin% ade in the sur$ei&&ance a" !e used as
The Coissioner sha&& dec&are the tax period of a taxpa"er terinated at an" tie #hen it sha&& coe to his (no#&ed%e: a. !. c. d.
That the taxpa"er is retirin% fro !usiness su!)ect to tax That he intends to &ea$e the Phi&ippines or reo$e his propert" therefro That the taxpa"er hides or concea&s his propert" or That he perfors an" act tendin% to o!struct the proceedin%s for the co&&ection of the tax for the past or current Buarter or "ear or to render the sae tota&&" or part&" ineffecti$e un&ess such proceedin%s are !e%un iediate&".
The #ritten decision to terinate the tax period sha&& !e accopanied #ith a reBuest for the iediate pa"ent of the tax for the period so dec&ared terinated and the tax for the precedin% "ear or Buarter, or such portion thereof as a" !e unpaid. Said taxes sha&& !e due and pa"a!&e iediate&" and sha&& !e su!)ect to a&& the pena&ties prescri!ed un&ess paid #ithin the tie fixed in the deand ade !" the Coissioner 0Sec. 4 ;d<, 6337 NIRC 8
5or purposes of coputin% an" interna& re$enue tax, the $a&ue of the propert" sha&& !e #hiche$er is the hi%her of : 068 the fair ar(et $a&ue as deterined !" the Coissioner or 018 the fair ar(et $a&ue as sho#n in the schedu&e of $a&ues of the Pro$incia& and Cit" Assessors for rea& tax purposes 0Sec 4 ;E<, 6337 NIRC8.
Exaination of !an( deposits ena!&es the Coissioner to assess the correct tax &ia!i&ities of taxpa"ers. -o#e$er, !an( deposits are confidentia& under R.A. 6=. Not#ithstandin% an" contrar" pro$isions of R.A. 6= and other %enera& or specia& &a#s, the Coissioner is authori+ed to inBuire into the !an( deposits of 6.
a decedent to deterine his %ross estate and
1. an" taxpa"er #ho has fi&ed an app&ication for coproise of his tax &ia!i&it" under Sec. 1= 0A8 08 of the Tax Code !" reason of his financia& incapacit" to pa" his tax &ia!i&it". In this case, the app&ication for coproise sha&& not !e considered un&ess and unti& he #ai$es in #ritin% his pri$i&e%e under R.A. 6=, or under other %enera& or specia& &a#s, and such #ai$er sha&& constitute 17
TAXATION: San Beda College of LAW – ALABANG the authorit" of the Coissioner to inBuire into !an( deposits of the taxpa"er 0Sec. 4;5<, 6337 NIRC8.
The !asis of usin% the Net orth ?ethod of in$esti%ation is . This ethod of in$esti%ation, other#ise (no#n as *in$entor" ethod of incoe tax $erification/ is a $er" effecti$e ethod of deterinin% taxa!&e incoe and deficienc" incoe tax due fro a taxpa"er.
asic Concept and Theor" The ethod is an extension of the !asic accountin% princip&e: assets inus &ia!i&ities eBua&s net #orth . The taxpa"ers net #orth is deterined !oth at the !e%innin% and at the end of the sae taxa!&e "ear. The increase or decrease in net #orth is ad)usted !" addin% a&& non'deducti!&e ites and su!tractin% therefro non' taxa!&e receipts. The theor" is that the unexp&ained increase in net #orth of a taxpa"er is presued to !e deri$ed fro taxa!&e sources.
In a&& &eadin% cases on this atter, courts are unanious in ho&din% that #hen the tax case is ci$i& in nature, direct proof of sources of incoe is not essentia&'that the %o$ernent is not reBuired to ne%ate a&& possi!&e non'taxa!&e sources of the a&&e%ed net #orth increases. The !urden of proof is upon the taxpa"er to sho# that his net #orth increase #as deri$ed fro non'taxa!&e sources. As stated !" the Supree Court, in ci$i& cases, the assessor need not pro$e the specific source of incoe. This reasona!&e on the !asic assuption that ost assets are deri$ed fro a taxa!&e source and that #hen this is not true, the taxpa"er is in a position to exp&ain the discrepanc". 0Pere+ $s. CTA, supra 8 -o#e$er, #hen the taxpa"er is criina&&" prosecuted for tax e$asion, the need for e$idence of a &i(e&" source of incoe !ecoes a prereBuisite for a successfu& prosecution. The !urden of proof is a&#a"s #ith the Go$ernent. Con$iction in such cases, as in an" criina& case, rests on proof !e"ond reasona!&e dou!t.
The Coissioners authorit" to use the net #orth ethod and other indirect ethods of esta!&ishin% taxa!&e incoe is found in Sec. =@, 6337 NIRC. This authorit" has !een uphe&d !" the courts in a &on% &ine of cases, nota!&e aon% #hich is the &eadin% case of Pere+ $s. CTA, 6@ Phi& 6647 . The ethod is a practica& necessit" if a fair and efficient s"ste of co&&ectin% re$enue is to !e aintained.
?oreo$er, Sec. 4;<, 6337 NIRC, pro$ides for a !road and %enera& in$esti%ator" po#er to assess the proper tax on the !est e$idence o!taina!&e #hene$er a report reBuired !" &a# as !asis for the assessent of an" nationa& interna& re$enue tax sha&& not !e forthcoin% #ithin the tie fixed !" &a# or re%u&ation, or #hen there is reason to !e&ie$e that an" such report is fa&se, incop&ete or erroneous.
This is an essentia& condition, considered to !e the cornerstone of a net #orth case. If the startin% point or openin% net #orth is pro$en to !e #ron%, the #ho&e superstructure usua&&" fai&s. The courts ha$e unifor&" stressed that the $a&idit" of the resu&t of an" in$esti%ation under this ethod #i&& depend entire&" upon a correct openin% net #orth.
The Go$ernent a" !e forced to resort to the net #orth ethod of proof #here the fe# records of the taxpa"er #ere destro"ed for, to reBuire ore #ou&d !e tantaount to ho&din% that s(i&&fu& concea&ent is an ine$ita!&e !arrier to proof. 18
TAXATION: San Beda College of LAW – ALABANG Proper ad)ustents for non'deducti!&e ites ust !e ade. The fo&&o#in% non'deducti!&es, as the case a" !e, ust !e added to the increase or decrease in the net #orth:
6. 1. @.
persona&, &i$in% or fai&" expenses preius paid on an" &ife insurance po&ic" &osses fro sa&es or exchan%es of propert" !et#een e!ers of the fai&" =. incoe taxes paid . estate, inheritance and %ift taxes 4. other non'deducti!&e taxes 7. e&ection expenses and other expenses a%ainst pu!&ic po&ic" 2. non'deducti!&e contri!utions 3. %ifts to others 6. net capita& &oss, and the &i(e 9n the other hand, non'taxa!&e ites shou&d !e deducted therefro. These ites are necessar" ad)ustents to a$oid the inc&usion of #hat other#ise are non'taxa!&e receipts. The" are:
6. 1. @. =. . 4.
inheritance, %ifts and !eBuests recei$ed non'taxa!&e capita& %ains copensation for in)uries or sic(ness proceeds of &ife insurance po&icies s#eepsta(es #innin%s interest on %o$ernent securities and the &i(e
Increase in net #orth are not taxa!&e if the" are sho#n not to !e the resu&t of unreported incoe !ut to !e the resu&t of the correction of errors in the taxpa"ers entries in the !oo(s re&atin% to inde!tedness to certain creditors, erroneous&" &isted a&thou%h a&read" paid. 05ernande+ -eranos Inc. $s. CIR, L'166, @ Sept. 63438
Additions to the tax are increents to the !asic tax incident due to the taxpa"ers non'cop&iance #ith certain &e%a& reBuireents, &i(e the taxpa"ers refusa& or fai&ure to pa" taxes andMor other $io&ations of taxin% pro$isions.
Additions to the tax consist of the:
068 ci$i& pena&t", other#ise (no#n as surchar%e, #hich a" either !e 1Q or Q of the tax dependin% upon the nature of the $io&ation
018 interest either for a deficienc" tax or de&inBuenc" as to pa"ent
0@8 other ci$i& pena&ties or adinistrati$e fines such as for fai&ure to fi&e certain inforation returns and $io&ations coitted !" #ithho&din% a%ents. 0Secs. 1=7 to 11, 6337 NIRC8
a. Additions to the tax or deficienc" tax app&" to a&& taxes, fees, and char%es iposed in the Tax Code.
!. The aount so added to the tax sha&& !e co&&ected at the sae tie, in the sae anner, and as part of the tax.
c. If the #ithho&din% a%ent is the %o$ernent or an" of its a%encies, po&itica& su!di$isions or instruenta&ities, or a %o$ernent o#ned or contro&&ed corporation, the ep&o"ee thereof responsi!&e for the #ithho&din% and reittance of the tax sha&& !e persona&&" &ia!&e for the additions to the tax prescri!ed 0Sec. 1=7;!<, 6337 NIRC8 such as the 1Q surchar%e and the 1Q interest per annu on the de&inBuenc" 0Secs. 1=2 and 1=3 ;C<, 6337 NIRC8
The pa"ent of the surchar%e is andator" and the Coissioner of Interna& Re$enue is not $ested #ith an" authorit" to #ai$e or dispense #ith the co&&ection thereof. In one case, the Supree Court he&d that the fact that on account of riots directed a%ainst the Chinese on certain dates, the" #ere pre$ented fro pa"in% their interna& re$enue taxes on tie, does not authori+e the Coissioner to extend the tie prescri!ed for the pa"ent of taxes or to accept the #ithout the additiona& pena&t" 0Li Co Chui $s. Posadas, =7 Phi& =48
The Coissioner is not $ested #ith an" authorit" to #ai$e or dispense #ith the co&&ection therof. 0CIR $s. CA, supra8. The pena&t" and interest are not pena& 19
TAXATION: San Beda College of LAW – ALABANG !ut copensator" for the concoitant use of the funds !" the taxpa"er !e"ond the date #hen he is supposed to ha$e paid the to the Go$ernent.0Phi&ippine Refinin% Copan" $s. C.A., G.R. No. 662273=, 2 ?a" 63348.
An" deficienc" in the tax due, as the ter is defined in this code, sha&& !e su!)ect to the interest of 1Q per annu, or such hi%her rate as a" !e prescri!ed !" ru&es and re%u&ations, #hich sha&& !e assessed and co&&ected fro the date prescri!ed for its pa"ent unti& the fu&& pa"ent thereof 0Sec. 1=3 ;<, 6337 NIRC8
An extension of tie to pa" taxes %ranted !" the Coissioner does not excuse pa"ent of the surchar%e 0CIR $s. Cu n)ien%, L'14243, 4 Au%. 6378 This (ind of interest is iposed in case of fai&ure to pa": The fo&&o#in% cases, ho#e$er, sho# the instances #hen the iposition of the 1Q surchar%e had !een #ai$ed:
6.
1.
@.
=.
here the taxpa"er in %ood faith ade a ista(e in the interpretation of the app&ica!&e re%u&ations there!" resu&tin% in de&a" in the pa"ent of taxes. 0Conne& ros. Co. $s. CIR, L'6=7, 14 Dec. 634@8 A Su!seBuent re$ersa& !" the IR of a prior ru&in% re&ied upon !" the taxpa"er a" a&so !e a %round for dispensin% #ith the 1Q surchar%e. 0CIR $s. Repu!&ic Ceent Corp., L'@477, 6 Au%. 632@8 here a dou!t existed on the part of the ureau as to #hether or not R.A. =@6 a!o&ished the incoe tax exeptions of corporations 0inc&udin% e&ectric po#er franchise %rantees8 except those exept under Sec. 17 0no#, Sec. @, 6337 NIRC8, the iposition of the surchar%e a" !e dispensed #ith 0 Ca%a"an E&ectreic Po#er Li%ht Co. $s CIR, G.R. No. 4614, 1 Sept. 6328 In the case of fai&ure to a(e and fi&e a return or &ist #ithin the tie prescri!ed !" &a#, not due to #i&&fu& ne%&ect, #here such return or &ist is $o&untari&" fi&ed !" the taxpa"er #ithout notice fro the CIR or other officers, and it is sho#n that the fai&ure to fi&e it in due tie #as due to a reasona!&e cause, no surchar%e #i&& !e added to the aount of tax due on the return. In such case, in order to a$oid the iposition of the surchar%e, the taxpa"er ust a(e a stateent sho#in% a&& the facts a&&e%ed as reasona!&e causes for fai&ure to fi&e the return on tie in the for of an affida$it, #hich shou&d !e attached to the return.
This is an increent on an" unpaid aount of tax, assessed at the rate of t#ent" percent 01Q8 per annu, or such hi%her rate as a" !e prescri!ed " ru&es and re%u&ations, fro the date prescri!ed for pa"ent unti& the aount is fu&&" paid. 0Sec. 1=3 ;A<, 6337 NIRC8
068 The aount of the tax due on an" return reBuired to !e fi&ed, or 018 The aount of the tax due for #hich no return is reBuired, or 0@8 A deficienc" tax, or an" surchar%e or interest thereon on the due date appearin% in the notice and deand of the Coissioner.
Iposed #hen a person reBuired to pa" the tax is Bua&ified and e&ects to pa" the tax on insta&&ent under the pro$isions of the Code, !ut fai&s to pa" the tax or an" insta&&ent thereof, or an" part of such aount or insta&&ent on or !efore the date prescri!ed for its pa"ent, or #here the Coissioner has authori+ed an extension of tie #ithin #hich to pa" a tax or a deficienc" tax or an" part thereof. 0Sec. 1=3;d<, 6337 NIRC8
6. 5ai&ure to 5i&e Certain Inforation Returns 1. 5ai&ure of a ithho&din% A%ent to Co&&ect and Reit Taxes @. 5ai&ure of a ithho&din% A%ent to Refund Excess ithho&din% Tax
6. 1. @. =. . 4. 7.
RE?EDIES 95 T-E G9ERN?ENT
Interest is c&assified into:
Incoe tax Estate Tax and donor tax AT 9ther percenta%e taxes Excise tax Docuentar" stap taxes 9ther as iposed and pro$ided !" IR
Enueration of the Reedies I. Adinistrati$e 6. Distraint of Persona& Propert" 1. Le$" of Rea& Propert" 20
TAXATION: San Beda College of LAW – ALABANG @. =. . 4.
Tax Lien Coproise 5orfeiture 9ther Adinistrati$e Reedies
Procedure: 6. 1.
II. udicia& 6. 1.
Ci$i& Action Criina& Action
@. =.
Distraint of Persona& Propert"
Distraint' Sei+ure !" the %o$ernent of persona& propert", tan%i!&e or intan%i!&e, to enforce the pa"ent of faces, to !e fo&&o#ed !" its pu!&ic sa&e, if the taxes are not $o&untari&" paid. INDS a.
!.
Actua& There is ta(in% of possession of persona& propert" out of the taxpa"er into that of the %o$ernent. In case of intan%i!&e propert". Taxpa"er is a&so di$erted of the po#er of contro& o$er the propert" Constructi$e The o#ner is ere&" prohi!ited fro disposin% of his persona& propert".
Actua& $s. ?ade on the propert" on&" of a de&inBuent taxpa"er.
Constructi$e Distraint ?a" !e ade on the propert" of an" taxpa"er #hether de&inBuent or not There is actua& ta(in% or Taxpa"er is ere&" prohi!ited possession of the propert". fro disposin% of his propert". Effected !" ha$in% a &ist of the Effected !" reBuirin% the distraint propert" or !" ser$ice or taxpa"er to si%n a receipt of the #arrant of distraint or propert" or !" &ea$in% a &ist of %arnishent. sae An iediate step for co&&ection Such iediate step is not of taxes #here aount due is necessar" tax due a" not !e definite. definite or it is !ein% Buestioned.
ho a" effect distraint 6. coissioner or his authori+ed representati$e 1. RD9
Taxpa"er is de&inBuent in the pa"ent of tax. Su!seBuent deand for its pa"ent. Taxpa"er ust fai& to pa" de&inBuent tax at tie reBuired. Period #ith in to assess or co&&ect has not "et prescri!ed. In case of constructi$e distraint, reBuisite no. 6 is not essentia& 0see Sec. 14 TC8
hen reed" not a$ai&a!&e: here aount in$o&$ed does not exceed P6 0Sec. 1 TC8. In (eepin% #ith the pro$ision on the a!ateent of the co&&ection of tax as the cost of sae i%ht e$en !e ore than P6.
due
Aount In$o&$ed In excess of P6,,. P6,,. or &ess
-o# Actua& Distraint Effected 6.
In case of Tan%i!&e Propert": a.
!. c. 1.
Cop" of an account of the propert" distrained, si%ned !" the officer, &eft either #ith the o#ner or person fro #ho propert" #as ta(en, at the d#e&&in% or p&ace of !usiness and #ith soeone of suita!&e a%e and discretion Stateent of the su deanded. Tie and p&ace of sa&e.
In case of intan%i!&e propert": a.
Stoc(s and other securities Ser$in% a cop" of the #arrant upon taxpa"er and upon president, ana%er, treasurer or other responsi!&e officer of the issuin% corporation, copan" or association.
!.
De!ts and credits 6. Lea$in% a cop" of the #arrant #ith the person o#in% the de!ts or ha$in% in his possession such credits or his a%ent. 1. arrant sha&& !e sufficient authorit" for such person to pa" CIR his credits or de!ts. an( Accounts %arnishent 6. Ser$e #arrant upon taxpa"er and president, ana%er, treasurer or responsi!&e officer of the !an(. 1. an( sha&& turn o$er to CIR so uch of the !an( accounts as a" !e sufficient.
c.
ReBuisites: 6. 1. @. =.
Ser$ice of #arrant of distraint upon taxpa"er or upon person in possession of taxpa"ers persona& propert". Postin% of notice is not &ess than t#o p&aces in the unicipa&it" or cit" and notice to the taxpa"er specif"in% tie and p&ace of sa&e and the artic&es distrained. Sa&e at pu!&ic auction to hi%hest !idder Disposition of proceeds of the sa&e.
-o# constructi$e Distraint Effected 6.
ReBuire taxpa"er or person in possession to a. Si%n a receipt co$erin% propert" distrained !. 9!&i%ate hi to preser$e the sae properties. c. Prohi!it hi fro disposin% the propert" fro disposin% the propert" in an" anner, #ith out the authorit" of the CIR. 21
TAXATION: San Beda College of LAW – ALABANG 1.
here Taxpa"er or person in possession refuses to si%n: a. 9fficer sha&& prepare &ist of the propert" distrained. !. In the presence of t#o #itnesses of sufficient a%e and discretion, &ea$e a cop" in the preises #here propert" is &ocated.
!.
c. d.
Grounds of Constructi$e Distraint 6. 1. @. =. .
Taxpa"er is retirin% fro an" !usiness su!)ect to tax. Taxpa"er is intendin% to &ea$e the Phi&ippines or To reo$e his propert" there fro. Taxpa"er hides or concea&s his propert". Taxpa"er acts tendin% to o!struct co&&ection proceedin%s.
Distraint and Le$" copared
Note: 6.
1.
@.
6. 1. an( accounts a" !e distrained #ith out $io&atin% the confidentia& nature of !an( accounts for no inBuir" is ade. IR sip&" sei+es so uch of the deposit #ith out ha$in% to (no# ho# uch the deposits are or #here the one" or an" part of it cae fro. If at an" tie prior to the consuation of the sa&e, a&& proper char%es are paid to the officer conductin% the sae, the %oods distrained sha&& !e restored to the o#ner. hen the aount of the !id for the propert" under distraint is not eBua& to the aount of the tax or is $er" uch &ess than the actua& ar(et $a&ue of artic&es, the CIR or his deput" a" purchase the distrained propert" on !eha&f of the nationa& %o$ernent.
Tie to redee: one "ear fro date of sa&e or forfeiture e%ins fro re%istration of the deed of sa&e or dec&aration of forfeiture. Cannot !e extended !" the courts. Possession pendin% redeption o#ner not depri$ed of possession Price: Aount of taxes, pena&ties and interest thereon fro date of de&inBuenc" to the date of sa&e to%ether #ith interest on said purchase price at 6Q per annu fro date of purchase to date of redeption.
@. =.
.
Note: 6.
Le$" of Rea& Propert" 1.
Le$" Act of sei+ure of rea& propert" in order to enforce the pa"ent of taxes. The propert" a" !e so&d at pu!&ic sa&e, if after sei+ure the taxes are not $o&untari&" paid. The reBuisites are the sae as that of distraint.
oth are suar" reedies for co&&ection of taxes. oth cannot !e a$ai&ed of #here aount in$o&$ed is not ore than P6. Distraint persona& propert" Le$" rea& propert" Distraint forfeiture !" %o$ernent, not pro$ided Le$" forfeiture !" %o$ernent authori+ed #here there is no !idder or the hi%hest !id is not sufficient to pa" the taxes, pena&ties and costs. Distraint Taxpa"er no %i$en the ri%ht of redeption Le$" Taxpa"er can redee properties &e$ied upon and so&dMforfeited to the %o$ernent.
It is the dut" of the Re%ister of Deeds concerned upon re%istration of the dec&aration of forfeiture, to transfer the tit&e to the propert" #ith out of an order fro a copetent court The reed" of distraint or &e$" a" !e repeated if necessar" unti& the fu&& aount, inc&udin% a&& expenses, is co&&ected.
Enforceent of Tax Lien
Procedure: Tax Lien: 6.
1. @.
=. . 4.
Internationa& Re$enue officer sha&& prepare a du&" authenticated certificate sho#in% a. Nae of taxpa"er !. Aount of tax and c. Pena&t" due. enforcea!&e throu%h out the Phi&ippines 9fficer sha&& #rite upon the certificate a description of the propert" upon #hich &e$" is ade. Ser$ice of #ritten notice to: a. The taxpa"er, and !. RD #here propert" is &ocated. Ad$ertiseent of the tie and p&ace of sa&e. Sa&e at pu!&ic auction to hi%hest !idder. Disposition of proceeds of sa&e. The excess sha&& !e turned o$er to o#ner.
Redeption of propert" so&d or forfeited a.
Person entit&ed: Taxpa"er or an"one for hi
A &e%a& c&ai or char%e on propert", either rea& or persona&, esta!&ished !" &a# as a securit" in defau&t of the pa"ent of taxes. 6. Nature: A &ien in fa$or of the %o$ernent of the Phi&ippines #hen a person &ia!&e to pa" a tax ne%&ects or fai&s to do so upon deand. 1. Duration: Exists fro tie assessent is ade !" the CIR unti& paid, #ith interests, pena&ties and costs. @. Extent: pon a&& propert" and ri%hts to propert" !e&on%in% to the taxpa"er. =. Effecti$it" a%ainst third persons: 9n&" #hen notice of such &ien is fi&ed !" the CIR in the Re%ister of Deeds concerned. Extin%uishent of Tax Lien 6.
Pa"ent or reission of the tax 22
TAXATION: San Beda College of LAW – ALABANG 1. @. =.
Prescription of the ri%ht of the %o$ernent to assess or co&&ect. 5ai&ure to fi&e notice of such &ien in the office of re%ister of Deeds, purchases or )ud%ent creditor. Destruction of the propert" su!)ect to the &ien. In case Nos. 6 and 1, there is no ore tax &ia!i&it". nder nos. @ and =, the taxpa"er is sti&& &ia!&e.
Enforceent of Tax Lien $s. Distraint A tax &ien is distin%uished fro disttraint in that, in distraint the propert" sei+ed ust !e that of the taxpa"er, a&thou%h it need not !e the propert" in respect to the tax is assessed. Tax &ien is directed to the propert" su!)ect to the tax, re%ard&ess of its o#ner. Note: 6. 1.
This is superior to )ud%ent c&ai of pri$ate indi$idua&s or parties Attaches not on&" fro tie the #arrant #as ser$ed !ut fro the tie the tax #as due and deanda!&e.
Coproise
Coproise: A contract #here!" the parties, !" reciproca& concessions, a$oid &iti%ation or put an end to one a&read" coenced.
GR: The po#er to coproise or a!ate sha&& not !e de&e%ated !" the coissioner. E: The Re%iona& E$a&uation oard a" coproise the assessent issued !" the re%iona& offices in$o&$in% !asic taxes of P or &ess. Reed" in case of fai&ure to cop&": The CIR a" either: 6. enforce the coproise, or 1. Re%ard it as rescinded and insists upon the ori%ina& deand. Coproise Pena&t" 6. It is a certain aount of one" #hich the taxpa"er pa"s to coproise a tax $io&ation. 1. It is pain in &ieu of a criina& prosecution. @. Since it is $o&untar" in character, the sae a" !e co&&ected on&" if the taxpa"er is #i&&in% to pa" the.
5orfeiture: Ip&ies a di$estiture of propert" #ith out copensation, in conseBuence of a defau&t or offense. Inc&udes the idea of not on&" &osin% !ut a&so ha$in% the propert" transferred to another #ith out the consent of the o#ner and #ron%doer.
ReBuisites:
6.
6. 1.
1.
@.
Taxpa"er ust ha$e a tax &ia!i&it". There ust !e an offer !" taxpa"er or CIR, of an aount to !e paid !" taxpa"er. There ust !e acceptance of the offer in sett&eent of the ori%ina& c&ai.
hen taxes a" !e coproised: 6. 1. @.
A reasona!&e dou!t as to the $a&idit" if the c&ai a%ainst the taxpa"er exists The financia& position of the taxpa"er deonstrates a c&ear ina!i&it" to pa" the assessed tax. Criina& $io&ations, except: a. Those a&read" fi&ed in court !. Those in$o&$in% fraud.
Liitations: 6.
1.
?iniu coproise rate: a. 6Q of the !asic tax assessed in case of financia& incapacit". !. =Q of !asic tax assessed other cases. Su!)ect to appro$a& of E$a&uation oard a. hen !asic tax in$o&$ed exceeds P6,,. or !. here sett&eent offered is &ess than the prescri!ed iniu rates.
Enforceent of forfeiture
@.
=.
Effect: Transfer the tit&e to the specific thin% fro the o#ner to the %o$ernent. hen a$ai&a!&e: a. No !idder for the rea& propert" exposed for sa&e. !. If hi%hest !id is for an aount insufficient to pa" the taxes, pena&ties and costs. ith in t#o da"s thereafter, a return of the proceedin% is du&" ade. -o# enforced: a. In case of persona& propert" !" sei+ure and sa&e or destruction of the specific forfeited propert". !. In case of rea& propert" !" a )ud%ent of condenation and sa&e in a &e%a& action or proceedin%, ci$i& or criina&, as the case a" reBuire. hen forfeited propert" to !e destro"ed or so&d: a. To !e destro"ed !" order of the CIR #hen the sa&e for consuption or use of the fo&&o#in% #ou&d !e in)urious to the pu!&ic hea&th or pre)udicia& to the enforceent of the &a#: 0at &east 1 da"s after sei+ure8 6. disti&&ed spirits 1. &iBuors @. ci%ars =. ci%arettes, and other anufactured products of to!acco . p&a"in% cards 4. A&& apparatus used in or a!out the i&&icit production of such artic&es.
De&e%ation of Po#er to Coproise 23
TAXATION: San Beda College of LAW – ALABANG !.
.
4.
7.
To !e so&d or destro"ed depends upon the discretion of CIR 6. A&& other artic&es su!)ect to exercise tax, 0#ine, autoo!i&e, inera& products, anufactured oi&s, isce&&aneous products, non'essentia& ites a petro&eu products8 anufactured or reo$ed in $io&ation of the Tax Code. 1. Dies for printin% or a(in% IR staps, &a!e&s and ta%s, in iitation of or purport to !e &a#fu& staps, &a!e&s or ta%s. here to !e so&e: a. Pu!&ic sa&e: pro$ided, there is notice of not &ess than 1 da"s. !. Pri$ate sa&e: pro$ided, it is #ith the appro$a& of the Secretar" of 5inance. Ri%ht of Redeption: a. Persona& entit&ed taxpa"er or an"one for hi !. Tie to redee #ith in one 068 "ear fro forfeiture c. Aount to !e paid fu&& aount of the taxes and pena&ties, p&us interest and cost of the sa&e d. To #ho paid Coissioner or the Re$enue Co&&ection 9fficer e. Effect of fai&ure to redee forfeiture sha&& !ecoe a!so&ute. Note: The Re%ister of Deeds is dut" !ound to transfer the tit&e of propert" forfeited to the %o$ernent #ith our necessit" of an order fro a copetent court. 9ther Adinistrati$e Reedies 6.
1.
@.
=. .
4.
ReBuirin% fi&in% of !onds in the fo&&o#in% instances: a. Estate and donors tax !. Excise taxes c. Exporters !ond d. ?anufacturers and iporters !ond ReBuirin% proof of fi&in% incoe tax returns efore a &icense to en%a%e in trade, !usiness or occupation or to practice a profession can !e issued. Gi$in% re#ard to inforers Su eBui$a&ent to 6Q of re$enues, surchar%es or fees reco$ered andMor fine or pena&t" iposed and co&&ected or P6, ,. per case, #hiche$er is &o#er. Iposition of surchar%e and interest. ?a(in% arrest, search and sei+ure Liited to $io&ations of an" pena& &a# or re%u&ation adinistered !" the IR, coitted #ith in the $ie# of the Interna& Re$enue 9fficer or EE. Deportation in case of a&iens on the fo&&o#in% %rounds a. no#in%&" and fraudu&ent&" e$ades pa"ent of IR taxes.
!.
7.
2. 3. 6. 66.
61. 6@.
6=.
i&&fu&&" refuses to pa" such tax and its accessor" pena&ties, after decision on his tax &ia!i&it" sha&& ha$e !ecoe fina& and executor". Inspection of !oo(s oo(s of accounts and other accountin% records of taxpa"er ust !e preser$ed, %enera&&" #ithin three "ears after date the tax return #as due or #as fi&ed #hiche$er is &ater. se of Nationa& Tax Re%ister 9!tainin% inforation on tax &ia!i&it" of an" person In$entor" Ta(in% of stoc('in'trade and a(in% sur$ei&&ance. Prescri!in% presupti$e %ross sa&es or receipt: a. Person fai&ed to issue receipts and in$oices !. Reason to !e&ie$e that records do not correct&" ref&ect dec&aration in return. Prescri!in% rea& propert" $a&ues InBuirin% into !an( deposit accounts of a. A deceased person to deterine %ross estate !. An" taxpa"er #ho fi&ed app&ication for coproise !" reasons of financia& incapacit" his tax &ia!i&it". Re%istration of Taxpa"ers.
udicia& Reedies
Ci$i& and Criina& Actions: 6. rou%ht in the nae of the Go$ernent of the Phi&ippines. 1. Conducted !" Le%a& 9fficer of IR @. ?ust !e #ith the appro$a& of the CIR, in case of action, for reco$er" of taxes, or enforceent of a fine, pena&t" or forfeiture. A. Ci$i& Action Actions instituted !" the %o$ernent to co&&ect interna& re$enue taxes in re%u&ar courts 0RTC or ?TCs, dependin% on the aount in$o&$ed8 hen assessent ade has !ecoe fina& and executor" for fai&ure or taxpa"er to: a. Dispute sae !" fi&in% protest #ith CIR !. Appea& ad$erse decision of CIR to CTA .
Criina& Action A direct ode of co&&ection of taxes, the )ud%ent of #hich sha&& not on&" ipose the pena&t" !ut a&so order pa"ent of taxes. An assessent of a tax deficienc" is not necessar" to a criina& prosecution for tax e$asion, pro$ided there is a pria facie sho#in% of #i&&fu& attept to e$ade.
Effect of AcBuitta& on Tax Lia!i&it":
24
TAXATION: San Beda College of LAW – ALABANG Does not exonerate taxpa"er his ci$i& &ia!i&it" to pa" the tax due. Thus, the %o$ernent a" sti&& co&&ect the tax in the sae action. Reason: Tax is an o!&i%ation, does not arise fro a criina& act.
6. 1.
Effect of Satisfaction of Tax Lia!i&it" on Criina& Lia!i&it" i&& not operate to extin%uish taxpa"ers criina& &ia!i&it" since the dut" to pa" the tax is iposed !" statute, independent of an" attept on past of taxpa"ers to e$ade pa"ent. This is true in case the criina& action is !ased on the act to taxpa"er of fi&in% a fa&se and fraudu&ent tax return and fai&ure to pa" the tax.
Note:
The satisfaction of ci$i& &ia!i&it" is not one of the %rounds for the extinction of criina& action. PRESCRIPTIE PERI9DSMSTATTE 95 LI?ITATI9N
Purpose: 5or purposes of Taxation, statue of &iitation is priari&" desi%ned to protect the ri%hts of the taxpa"ers a%ainst unreasona!&e in$esti%ation of the taxin% authorit" #ith respect to assessent and co&&ection of Interna& Re$enue Taxes. I. Prescription of Go$ernents Ri%ht to Assess Taxes: A. Genera& Ru&e: Interna& Re$enue Taxes sha&& !e assessed #ithin three 0@8 "ears after the &ast da" prescri!ed !" &a# for the fi&in% of the return or fro the da" the return #as fi&ed, in case it is fi&ed !e"ond the period prescri!ed thereof. 0Section 1@ of the Tax Code8
Note: A return fi&ed !efore the &ast da" prescri!ed !" &a# for the fi&in% thereof sha&& !e considered as fi&ed on such &ast da". In case a return is su!stantia&&" aended, the %o$ernent ri%ht to assess the tax sha&& coence fro the fi&in% of the aended return 0CIR $s. Phoenix, ?a" 1, 634 ei Co. $s. Co&&ector, = SCRA 2718 In coputin% the prescripti$e period for assessent, the &atter is deeed ade #hen notice to this effect is re&eased, ai&ed or sent !" the Coissioner to the correct address of the taxpa"er. -o#e$er, the &a# does not reBuire that the deandMnotice !e recei$ed #ithin the prescripti$e period. 0asi&an Estates, Inc. $s. Coissioner 16, SCRA 67 Repu!&ic $s. CA Apri& @, 63278 An affida$it executed !" a re$enue office indicatin% the tax &ia!i&ities of a taxpa"er and attached to a criina& cop&aint for tax e$asion, cannot !e deeed an assessent. 0 CIR $s. Pascoi Rea&t" Corp. une 13, 63338 A transcript sheets are not returns, !ecause the" do not contain inforation necessar" and reBuired to perit the coputation and assessent of taxes 0Sinforo A&ca $s. Coissioner, Dec. 13, 634=8
.8 Exceptions: 0Sec. 111 ic8
5raudu&ent return
$s.
5a&se return The fi&in% thereof is intended and It ere&" ip&ies a Deceitfu& #ith the ai of e$adin% the de$iation fro truth of correct tax due. fact #hether intentiona&.
Note:
here no return #as fi&ed ' #ithin ten 068 "ears after the date of disco$er" of the oission. here a return #as fi&ed !ut the sae #as fa&se or fraudu&ent #ithin ten 068 "ears fro the disco$er" of fa&sit" or fraud.
@.
Nature of 5raud: a. 5raud is ne$er presued and the circustances consistin% it ust !e a&&e%ed and pro$ed to exist !" c&ear con$incin% e$idence 0Repu!&ic $s. eir, Sept. @, 63448 !. The fraud contep&ated !" &a# is actua& and not constructi$e. It ust aount to intentiona& #ron%doin% #ith the so&e o!)ect of a$oidin% the tax. A ere ista(e is not a fraudu&ent intent. 0A+nar case, Au%. 1@, 637=8 c. A fraud assessent #hich has !ecoe fina& and executor", the fact of fraud sha&& !e )udicia&&" ta(en co%ni+ance of in the ci$i& or criina& action for the co&&ection thereof. 0Sec. 111 para%raph 0a88 5raud a" !e esta!&ished !" the fo&&o#in% : 0ad%es of 5raud8 a. Intentiona& and su!stantia& understateent of tax &ia!i&it" of the taxpa"er. !. Intentiona& and su!stantia& o$erstateent of deductions of exeption c. Recurrence of the fore%oin% circustances. InstancesMCircustances ne%atin% fraud: a. hen the Coissioner fai&s ipute fraud in the assessent noticeMdeand for pa"ent. !. hen the Coissioner fai&ed to a&&e%e in his ans#er to the taxpa"ers petition for re$ie# #hen the case is appea&ed to the CTA. c. hen the Coissioner raised the Buestion of fraud on&" for the first tie in his eorandu #hich #as fi&ed the CTA after he had rested his case. d. here the IR itse&f appeared, *not sure/ as to the rea& aount of the taxpa"ers net incoe. e. A ere understateent of incoe does not pro$e fraud, un&ess there is a sufficient e$idence sha$in% fraudu&ent intent. here the coissioner and the taxpa"er, !efore the expiration of the three 0@8 "ear period of &iitation ha$e a%ree in #ritin% to the extension of said period. 25
TAXATION: San Beda College of LAW – ALABANG 1. Note: Liitations: a. The a%reeent extendin% the period of prescription shou&d !e in #ritin% and du&" si%ned !" the taxpa"er and the coissioner. !. The a%reeent to extend the sae shou&d !e ode !efore the expiration of the period pre$ious&" a%reed upon. =.
@.
here there is a #ritten #ai$er or renunciation of the ori%ina& @'"ear &iitation si%ned !" the taxpa"er.
Note: Liitations: a. The #ai$er to !e $a&id ust !e executed !" the parties !efore the &apse of the prescripti$e period. !. A #ai$er is inefficient I it is executed !e"ond the ori%ina& three "ear. c. The coissioner can not $a&id a%ree to reduce the prescripti$e period to &ess than that %ranted !" &a#.
hen the taxpa"er oits to fi&e a return a court proceedin% for the co&&ection of such tax a" !e fi&ed #ithout assessent, at an"tie #ithin 6 "ears after the disco$er" of the oission. ai$er of statute of &iitations an" interna& re$enue tax, #hich has !een assessed #ithin the period a%reed upon, a" !e co&&ected !e distinct or &e$" of !" a proceedin% in court #ithin the period a%reed upon in #ritin% !efore the expiration of '"ear period.
Note: Distinction a. A%reeent to extend period of !. A%reeent renouncin% Prescription. It ust !e ade !efore the period of prescription Expiration of the period a%reed upon to a%reeent #ai$in% the defense of !e $a&id. Prescription is ti&& !indin% to the
$s.
an
Taxpa"er a&thou%h ade !e"ond such
C8 Iprescripti!&e Assessents: 6. here the &a# does not pro$ide for an" particu&ar period of assessent, the tax sou%ht to !e assessed !ecoes iprescripti!&e. 1. here no return is reBuired !" &a#, the tax is iprescripti!&e. @. Assessent of unpaid taxes, #here the !ases of #hich is not reBuired !" &a# to !e reported in a return such as excise taxes. 0Caren $s. A"a&a Securities Corp., No$. 16, 6328 =. Assessent of copensatin% and docuentar" stap tax.
prescripti$e period. =.
here the %o$ernent a(es another assessent on the !asis of rein$esti%ation reBuested !" the taxpa"er the prescripti$e period for co&&ection shou&d !e counted fro the &ast assessent. 0Rep. $s. Lope+, ?arch @, 634@8
.
here the assessent is re$ised !ecause of an aended return the period for co&&ection is counted fro the &ast re$ised assessent.
4.
here a tax o!&i%ation is secured !" a suret" !ond the %o$ernent a" proceed thru a court action to forfeit a !ond and enforce such contractua& o!&i%ation #ithin a period of ten "ears.
7.
here the action is !rou%ht to enforce a coproise entered into !et#een the coission and the taxpa"er the prescripti$e period is ten "ears.
II. Prescription of Go$ernents Ri%ht to Co&&ect Taxes A.
.
Genera& Ru&e: 6. here an assessent #as ade An" interna& re$enue tax #hich has !een assessed #ithin the period of &iitation a" !e co&&ected !" distraint or &e$" or !" proceedin% in court #ithin "ears fo&&o#in% the date of assessent. 1. here no assessent #as ade and a return #as fi&ed and the sae is not fraudu&ent or fa&se' the tax shou&d !e co&&ected #ithin @ "ears after the return #as due or #as fi&ed, #hiche$er is &ater. Exceptions: 6. here a fraudu&entMfa&se return #ith intent to e$ade taxes #as fi&ed a proceedin% in court for the co&&ection of the tax a" !e fi&ed #ithout assessent, at an"tie #ithin ten "ears after the disco$er" of the fa&sit" or fraud. Note: The 6'"ear prescripti$e period for co&&ector thru action does not app&" if it appears that there #as an assessent. In such case, the ordinar" '"ear period 0no# @ "ears8 #ou&d app&" 0Rep. $s. Ret., ?arch @6, 63418
C.
hen tax is deeed co&&ected for purposes of the prescripti$e period. 6.
1.
Co&&ection !" suar" reedies It is effected !" suar" ethods #hen the %o$ernent a$ai& of distraint and &e$" procedure. Co&&ection !" )udicia& action The co&&ection !e%ins !" fi&in% the cop&aint #ith the proper court. 0RTC8 26
TAXATION: San Beda College of LAW – ALABANG @.
here assessent of the coissioner is protected appea&ed to the CTA the co&&ection !e%in #hen the %o$ernent fi&e its ans#er to taxpa"ers petition for re$ie#.
Section 66 of RA 661 upon proof that its co&&ection a" )eopardi+es the %o$ernent and Mor the taxpa"er. !.
III. Ru&es of Prescription In Criina& Cases A.
Ru&e: A&& $io&ations of an" pro$ision of the tax code sha&& prescri!e after fi$e 08 "ears.
Note: A ere reBuest for rein$esti%ation #ithout an" action or the part of the Coissioner does not interrupt the runnin% of the prescripti$e period. The reBuest ust not !e a ere pro' forer. Su!stantia& issues ust !e raised.
Note:
hen it shou&d coenceH : The fi$e 08 "ear prescripti$e period sha&& !e%in to run fro the a. Da" of the coission of the $io&ation, if (no#. !. If not (no#n, fro the tie of disco$er" and the institution of )udicia& proceedin% for its in$esti%ation and punishent. hen it is interrupted: a. hen a proceedin% is instituted a%ainst the %ui&t" person !. hen the offender is a!sent fro the Phi&ippines. hen it shou&d run a%ain : hen the proceedin% is disissed for reason not Constitutin% )eopard". hen does the defense of prescription a" !e raised: a. In ci$i& case If not raised in the &o#er court, it is !ai&ed peranent&". If can not !e raised for the first tie on appea&. !. In criina& case It can !e raised e$en if the case has !een decided !" the &o#er court !ut pendin% decision on appea&.
c.
1.
here !efore the expiration of the tie prescri!ed for the assessent of the tax, !oth the coissioner and the taxpa"er ha$e consented in #ritin% to its assessent after such tie, the tax a" !e assessed prior to the expiration of the period a%reed upon. The runnin% of statute of &iitations on a(in% an assessent and the !e%innin% of distraintM&e$" or a proceedin% in court for co&&ection sha&& !e suspended for the period. a.
Durin% #hich the Coissioner is prohi!ited fro a(in% the assessent or !e%innin% distraintM&e$" or a proceedin% in court and for 4 da"s thereafter e.%. 5i&in% a petition for re$ie# in the CTA fro the decision of the Coissioner. The coissioner is pre$ented fro fi&in% an ordinar" action to co&&ect the tax. hen CTA suspends the co&&ection of tax &ia!i&it" of the taxpa"er pursuant to
hen the taxpa"er cannot !e &ocated in the address %i$en !" hi in the return.
Note: If the taxpa"er infors the Coissioner of an" chan%e in address the statute #i&& not !e suspended. d. hen the #arrant of distraint or &e$" is du&" ser$ed upon an" of the fo&&o#in% person: 6. taxpa"er 1. his authori+ed representati$e @. ?e!er of his househo&d #ith sufficient discretion and no propert" cou&d !e &ocated. e.
I. Interruption of the Prescripti$e Period 6.
hen the taxpa"er reBuests for rein$esti%ation #hich is %ranted !" coissioner.
@.
hen the taxpa"er is out of the Phi&ippines.
In criina& cases for $io&ation of tax code the period sha&& not run #hen the offender is a!sent fro the Phi&ippines.
Note: A petition for reconsideration of a tax assessent does not suspend the criina& action. Reason: No reBuireent for assessent of the tax !efore the criina& action a" !e instituted.
Nota ene: 6. The &a# on prescription reedia& easure shou&d !e interpreted &i!era&&" in order to protect the taxpa"er. 1. The defense of prescription ust !e raised !" the taxpa"er on tie, other#ise it is deeed #ai$ed. @. The Buestion of prescription is not )urisdictiona&, and as defense it ust !e raised reasona!&" other#ise it is deeed #ai$ed. =. The prescripti$e pro$ided in the tax code o$er ride the statute of non'c&ais in the sett&eent of the deceaseds estate. . In the e$ent that the co&&ection of the tax has a&read" prescri!ed, the %o$ernent cannot in$o(e the princip&e of 27
TAXATION: San Beda College of LAW – ALABANG EBuita!&e recu!ent !" settin%' off the prescri!ed tax a%ainst a tax refused to #hich the taxpa"er is entit&ed.
nder Sec. 112 of the 6337 NIRC a Pre'Assessent Notice sha&& not !e reBuired in the fo&&o#in% cases:
TAOPAERS RE?EDIES a.
068 efore Pa"ent a.
!.
5i&in% of a petition or reBuest for reconsideration or rein$esti%ation 0Adinistrati$e Protest8 Enterin% into coproise
018 After Pa"ent a. 5i&in% of c&ai for tax refund and !. 5i&in% of c&ai for tax credit
!.
c.
d. e.
068 Ci$i& action a. !. c.
Appea& to the Court of Tax Appea&s Action to contest forfeiture of chatte& and Action for Daa%es
018 Criina& Action a.
5i&in% of cop&aint a%ainst errin% ureau of Interna& Re$enue officia&s and ep&o"ees.
' a p&ea for the re'e$a&uation of an assessent on the !asis of existin% records #ithout need of additiona& e$idence . It a" in$o&$e a Buestion of fact or &a# or !oth. ' a p&ea for rein$esti%ation of an assessent on the !asis of ne#&"'disco$ered or additiona& e$idence that a taxpa"er intends to present in the rein$esti%ation. It a" a&so in$o&$e Buestion of fact or &a# or !oth.
Issuance of Assessent
Procedure
hen the findin% for the deficienc" tax is the resu&t of atheatica& error in the coputation of the tax as appearin% on the face of the return or hen a discrepanc" has !een deterined !et#een the tax #ithhe&d and the aount actua&&" reitted !" the #ithho&din% a%ent or hen a taxpa"er #ho opted to c&ai a refund or tax credit of excess credita!&e #ithho&din% tax for a taxa!&e period #as deterined to ha$e carried o$er and autoatica&&" app&ied the sae aount c&aied a%ainst the estiated tax &ia!i&ities for the taxa!&e Buarter or Buarters of the succeedin% taxa!&e "ear or hen the excise tax due on excisa!&e artic&es has not !een paid or hen an artic&e &oca&&" purchased or iported !" an exept person, such as, !ut not &iited to, $ehic&es, capita& eBuipent, achineries, and spare parts, has !een so&d, traded or transferred to non'exept persons.
If the taxpa"er fai&s to respond #ithin fifteen 068 da"s fro the date of receipt of the PAN, he sha&& !e considered in defau&t, in #hich case, a fora& &etter of deand and assessent notice sha&& !e caused to !e issued, ca&&in% for pa"ent of the taxpa"ers tax &ia!i&it", inc&usi$e of the app&ica!&e pena&ties
[email protected]. Re$enue Re%u&ations No. 61'33 dated Sept. 4, 63338.
Issuance of a 5ora& Letter of Deand and Assessent Notice issued !" the Coissioner or his du&" authori+ed representati$e. Sha&& state the facts, the &a#s, ru&es and re%u&ations, or )urisprudence on #hich the assessent is !ased, other#ise, the fora& &etter of deand and assessent notice sha&& !e $oid.
5ora& Letter of Deand and Assessent Notice sha&& !e sent to the taxpa"er on&" !" re%istered ai& or persona& de&i$er".
If sent !" persona& de&i$er", the taxpa"er or his du&" authori+ed representati$e sha&& ac(no#&ed%e receipt thereof in the dup&icate cop" of the &etter of deand sho#in% the fo&&o#in%: 0a8 his nae 0!8 si%nature 0c8 desi%nation and authorit" to act for and in !eha&f of the taxpa"er if ac(no#&ed%ed or recei$ed !" a person other than the taxpa"er hise&f and 0d8 date of receipt thereof.
[email protected].=. Re$enue Re%u&ations No. 61'33 dated Sept. 4, 63338.
Issuance of #ritten a Pre&iinar" Assessent Notice 0PAN8 after re$ie# and e$a&uation !" the Assessent Di$ision or !" the Coissioner or his du&" authori+ed representati$e, as the case a" !e. A $a&id PAN sha&& !e in #ritin% statin% the &a# and facts on #hich the assessent is ade. 0Sec. 112 of the 6337 NIRC8 28
TAXATION: San Beda College of LAW – ALABANG Taxpa"er or his du&" authori+ed representati$e a" adinistrati$e&" protest a%ainst a 5ora& Letter of Deand and Assessent notice #ithin thirt" 0@8 da"s fro date of receipt thereof.
If the protest is denied in #ho&e or part, or is not acted upon #ithin one hundred ei%ht" 0628 da"s fro su!ission of docuents, the taxpa"er ad$erse&" affected !" the decision or inaction a" appea& to the CTA #ithin @ da"s fro receipt of the said decision, or fro &apse of the one hundred 0628'da" period: other#ise, the decision sha&& !ecoe fina& and executor"
Se$era& issues in the assessent notice !ut taxpa"er on&" disputesMprotests $a&idit" of soe of the issues
Taxpa"er reBuired to pa" the deficienc" tax or taxes attri!uta!&e to the undisputed issues. Co&&ection &etter to !e issued ca&&in% for the pa"ent of deficienc" tax, inc&udin% app&ica!&e surchar%e andMor interest. No action sha&& !e ta(en on the disputed issues unti& pa"ent of deficienc" taxes on undisputed issues Prescripti$e period for assessent or co&&ection of taxes on disputed issues sha&& !e suspended.
assessent sha&& !ecoe fina& 0Re$enue Re%u&ation No. 61'2, dated No$. 17, 632.8 A reBuest for reconsideration or rein$esti%ation of an assessent sha&& !e accopanied !" a #ai$er of the Statute of Liitations in fa$or of the Go$ernent. Effect of taxpa"ers fai&ure to fi&e an adinistrati$e protest or to appea& IRs decision to the CTA
As pro$ided in Sec. 112 of the Tax Code, if the taxpa"er fai&s to fi&e an adinistrati$e protest #ithin the re%&eentar" @'da" fro receipt of the assessent notice, assessent !ecoes fina&. After the &apse of the @'da" period, the assessent can no &on%er !e disputed either adinistrati$e&" or )udicia&&" throu%h an appea& in the CTA. Assessed a&read" tax co&&ecti!&e.
Le%a& asis
5ai&ure of taxpa"er to state the facts, the app&ica!&e &a#, ru&es and re%u&ations, or )urisprudence on #hich his protest is !ased sha&& render his protest $oid and #ithout force and effect.
Le%a& Princip&e of Buasi'contracts or so&utio inde!iti 0see Art. 16=1 16= of the Ci$i& Code8. The Go$ernent is #ithin the scope of the princip&e of so&utio inde!iti 0CIR $s. 5ireans 5und Insurance Co8
Contents:
Scope of C&ais
a. !.
c. d. e. f.
%. h. i.
Nae of the taxpa"er and address for the iediate past three taxa!&e "ears Nature of reBuest #hether rein$esti%ation or reconsideration specif"in% ne#&" disco$ered e$idence that he intends to present it it is a reBuest for rein$esti%ation Taxa!&e periods co$ered !" the assessent Aounts and (indMs of tax in$o&$ed, and Assessent Notice Nu!er Date of receipt of assessent notice or &etter of deand Itei+ed stateent of the findin%s to #hich the taxpa"er a%rees, if an", as a !asis for coputin% the tax due, #hich aount shou&d !e paid iediate&" upon the fi&in% of the protest. 5or this purpose, the protest sha&& not !e deeed $a&id&" fi&ed un&ess pa"ent of the a%reed portion of the tax is paid first Itei+ed schedu&e of the ad)ustents #ith #hich the taxpa"er does not a%ree Stateent of facts andMor &a# in support of the protest and Docuentar" e$idence as it a" dee necessar" and re&e$ant to support its protest to !e su!itted #ithin sixt" 048 da"s fro the fi&in% of the protest. If the taxpa"er fai&s to cop&" #ith this reBuireent, the
nder Sec. 1= and 13 of the 6337 NIRC the Coissioner a" credit or refund taxes:
0a8 Erroneous&" or i&&e%a&&" assessed or co&&ected interna& re$enue taxes Taxpa"er pa"s under the ista(e of fact, as for instance in a case #here he is not a#are of the existin% exeption in his fa$or at the tie pa"ents #ere ade A tax is i&&e%a&&" co&&ected if pa"ents are ade under duress. 0!8 Pena&ties iposed #ithout authorit" 0c8 An" su a&&e%ed to ha$e !een excessi$e or in an" anner #ron%fu&&" co&&ected The $a&ue of interna& re$enue staps #hen the" are returned in %ood condition !" the purchaser a" a&so !e redeeed.
Necessit" of Proof for Refund C&ais
29
TAXATION: San Beda College of LAW – ALABANG
Refund c&ai parta(es of the nature of an exeption #hich cannot !e a&&o#ed un&ess %ranted in the ost exp&icit and cate%orica& &an%ua%e. 0CIR $s. ohnson and Sons 5ai&ure to dischar%e !urden of %i$in% proof is fata& to c&ai It ust !e sho#n that pa"ent #as an independent sin%&e act of $o&untar" pa"ent of a tax !e&ie$ed to !e due, co&&ecti!&e and accepted !" the %o$ernent, and #hich therefore, !ecoe part of the state one"s su!)ect to expenditure and perhaps a&read" spent or appropriated 0CIR $s. Li ao, L'6627, Dec. 12, 634@8.
Statutor" ReBuireents for Refund C&ais
This reBuireent is Reasons 0a8 to afford the coissioner an opportunit" to correct the action of su!ordinate officer and 0!8 to notif" the %o$ernent that the taxes sou%ht to !e refunded are under Buestion and that, therefore, such notice shou&d then !e !orne in ind in estiatin% the re$enue a$ai&a!&e for expenditure 0ere)o $s. CIR 27 Phi& 348. Except: Tax credit or tax refund #here on the face of the return upon #hich pa"ent is ade, such pa"ent appears c&ear&" to ha$e !een erroneous. 0Sec. 113, 6337 NIRC8.
co&&ection of taxes re&ati$e thereto 0Pana" E&ectric Co., Inc. $s. Co&&ector of Interna& Re$enue 6@ Phi&. 2638
E$en if the 1'"ear period has &apsed the sae is not )urisdictiona& and a" !e suspended for reasons of eBuit" and other specia& circustances. 0CIR $s. Phi&. Aerican Life Ins. Co., G.R. No. 612, ?a" 13, 6338. 1'"ear prescripti$e period for fi&in% of tax refund or credit c&ai coputed fro date of pa"ent of tax of pena&t" except in the fo&&o#in%:
There is actua&&" a rei!urseent of the tax
The %o$ernent issues a tax credit eo co$erin% the aount deterined to !e rei!ursa!&e #hich can !e app&ied after proper $erification, a%ainst an" su that a" !e due and co&&ecti!&e for the taxpa"er
Corporations 1'"ear prescripti$e period for o$erpaid Buarter&" incoe tax is counted not fro the date the corporation fi&es its Buarter&" incoe tax return, !ut fro the date the fina& ad)usted return is fi&ed after the taxa!&e "ear 0Coissioner of Interna& Re$enue $s. T?O Sa&es, Inc., G.R. No. 2@7@4, an. 6, 63318.
Taxes pa"a!&e in insta&&ent 1'"ear period is counted for the pa"ent of the &ast insta&&ent 0CIR $s Pa&anca, r., supra8 0Sec. 1= 0c8 113 6337 NIRC8 ithho&din% Taxes
ReBuireent a condition precedent and non'cop&iance there#ith !ars reco$er" 0Phi&. Acet"&ene Co. Inc, $s. Coissioner, CTA Case No. 6@16, No$. 7, 63418. Refers not on&" to the *adinistrati$e/ c&ai that the taxpa"er shou&d fi&e #ithin 1 "ears fro date of pa"ents #ith the IR, !ut a&so the )udicia& c&ai or the action for refund the taxpa"er shou&d coence #ith the CTA 0see Gi!!s $s.. Co&&ector of Interna& Re$enue, 67 Phi& 1@18. Taxpa"er a" fi&e an action for refund in the CTA e$en !efore the Coissioner decides his pendin% c&ai in the IR 0Coissioner of Interna& Re$enue $s. Pa&anca r., L' 64414, 9ct. 13, 63448. Suspension of the 1'"aer prescripti$e period a" !e had #hen: 068 there is a pendin% &iti%ation !et#een the t#o parties 0%o$ernent and taxpa"er8 as to the proper tax to !e paid and of the proper interpretation of the taxpa"ers charter in re&ation to the disputed tax and 018 the coissioner in that &iti%ated case a%reed to a!ide !" the decision of the Supree Court as to the
Prescripti$e period counted not fro the date the tax is #ithhe&d and reitted to the IR, !ut fro the end of the taxa!&e "ear 0Gi!!s $s. Coissioner of Interna& Re$enue, supra8
AT Re%istered Person #hose sa&es are +ero'rated or effecti$e&" +ero'rated 1'"ear period coputed fro the end of the taxa!&e Buarter #hen the sa&es transactions #ere ade 0Sec. 661 0A8 6337 NIRC8.
Interest on Tax Refund
The Go$ernent cannot !e reBuired to pa" interest on taxes refunded to the taxpa"er un&ess:
30
TAXATION: San Beda College of LAW – ALABANG Ar!itrariness presupposes inexcusa!&e or o!stinate disre%ard of &e%a& pro$isions 0CIR $s. ictorias ?i&&in% Corp., Inc. L' 6347, No$. 13, 63448.
a. !.
c. An" excess of the taxes #ithhe&d o$er the tax due fro the taxpa"er sha&& !e returned or credited #ithin @ onths fro the fifteenth 06th8 da" of Apri&. Refund or credit after such tie earn interest at the rate of 4Q per annu , startin% after the &apse of the @' onth period to the date the reund or credit is ade 0 Sec 73 0c8 018 6337 NIRC8
Tax has !een paid Taxpa"er has fi&ed #ith the CIR a #ritten c&ai for refund or tax credit #ithin 1 "ears fro pa"ent of the tax or pena&t" and Suit or proceedin% is instituted in the CTA a&so #ithin the sae prescripti$e period of t#o "ears fro the date of pa"ent re%ard&ess of an" super$enin% cause. 0see Secs. 1=, 113 6337 NIRC8.
In case of sei+ure of persona& propert" under c&ai for forfeiture, the o#ner desirin% to contest the $a&idit" of the forfeiture a" !rin% an action: a.
Ad$erse decision or ru&in% rendered !" the Coissioner of Interna& Re$enue in disputed assessent or c&ai for tax refund or credit, taxpa"er a" appea& the sae #ithin thirt" 0@8 da"s after receipt. 0Sec. 66, R.A. No. 6618 Appea& eBui$a&ent to a )udicia& action In the a!sence of appea&, the decision !ecoes fina& and executor". ut #here the taxpa"er ad$erse&" affected has not recei$ed the decision or ru&in%, he cou&d not appea& the sae to the CTA #ithin @ da"s fro notice. -ence, it cou&d not !ecoe fina& and executor". 0Repu!&ic $s. De &a Raa, 62 SCRA 2468 ?otion for reconsideration suspends the runnin% of the @ da" period of perfectin% an appea&. ?ust ad$ance ne# %rounds not pre$ious&" a&&e%ed to to&& the re%&eentar" period other#ise, it #ou&d !e ere&" pro fora. 0Roan Catho&ic Arch!ishop $s. Co&&., L'6442@, an. @6, 63418.
efore sa&e or destruction of the propert" to reco$er the propert" fro the person sei+in% the propert" or in possession thereof upon fi&in% of the proper !ond to en)oin the sa&e. !. After the sa&e and #ithin 4 onths to reco$er the net proceeds rea&i+ed at the sa&e 0see. Sec. 1@6, 6337 NIRC8 Action is parta(es of the nature of an ordinar" ci$i& action for reco$er" of persona& propert" or the net proceeds of its sa&e #hich ust !e !rou%ht in the ordinar" courts and not the CTA.
Taxpa"er a" fi&e an action for daa%es a%ainst an" interna& re$enue officer !" reason of an" act done in the perforance of officia& dut" or ne%&ect of dut". In case of #i&&fu& ne%&ect of dut", taxpa"ers recourse is under Art 17 of the Ci$i& Code.
ReBuireents for Appea& in Disputed Assessent
a. !.
c. d.
Tax assessed has not !een paid Taxpa"er has fi&ed #ith the Coissioner of Interna& Re$enue a petition for the reconsideration or cance&&ation of the assessent 5ina& decision or ru&in% has !een rendered on such petition Suit or proceedin% in the CTA is ade #ithin @ da"s fro receipt of the decision
Effect of 5ai&ure to Appea& Assessent
a.
!.
Taxpa"er !arred, in an action for co&&ection of the tax !" the %o$ernent, fro usin% defense of excessi$e or i&&e%a& assessent. Assessent is considered correct.
ReBuireents for Appea& in Refund and Tax Credit
Re$enue officer actin% ne%&i%ent&" or in !ad faith or #ith #i&&fu& oppression #ou&d !e persona&&" &ia!&e. -e ceases to !e an officer of the &a# and !ecoes a pri$ate #ron%doer.
A taxpa"er a" fi&e a criina& cop&aint a%ainst an" officia&, a%ent or ep&o"ee of the IR or an" other a%enc" char%ed #ith the enforceent of the pro$isions of the Tax Code #ho coits an" of the fo&&o#in% offenses:
68 18
@8 =8
Extortion or #i&&fu& oppression throu%h the use of his office i&&fu& oppression and harassent of a taxpa"er #ho refused, dec&ined, turned do#n or re)ected an" of his offers entioned in no. no#in%&" deandin% or recei$in% sus or copensation not authori+ed or prescri!ed !" &a# i&&fu&&" ne%&ectin% to %i$e receipts as !" &a# reBuired or to perfor an" other duties en)oined !" &a# 31
TAXATION: San Beda College of LAW – ALABANG 8
9fferin% or underta(in% to accop&ish, fi&e or su!it a report or assessent on a txpa"er #ithout the appropriate exaination of the !oo(s of account or tax &ia!i&it", or offerin% or underta(in% to su!it a report or assessent &ess than the aount due the %o$ernent for an" consideration or copensation or conspirin% or co&&udin% #ith another or others to defraud the re$enues or other#ise $io&ate the pro$isions of the tax code 48 Ne%&ectin% or !" desi%n perittin% the $io&ation of the &a# or an" fa&se certificate or return 78 ?a(in% or si%nin% an" fa&se entr" or entries in an" !oo(, or na" fa&se certificate or return 28 a&&o#in% or conspirin% or co&&udin% #ith another to a&&o# the unauthori+ed #ithdra#a& or reca&& of an" return or stateent after the sae has !een officia&&" recei$ed !" the IR 38 -a$in% (no#&ed%e or inforation of an" $io&ation of the Tax Code, fai&ure to report such (no#&ed%e or inforation to their superior officer, or as other#ise reBuired !" &a# ND 68 ithout the authorit" of &a#, deandin% or acceptin% one" or other thin%s of $a&ue fore the coproise or sett&eent of an" char%e or cop&aint for an" $io&ation of the Tax Code. 0see. Sec. 143, 6337 NIRC8
!.
in the hands or under the contro& of the iporter or person #ho is a#are thereof.
Propert" in the custos custod" sha&& !e su!)ect to sa&e under the fo&&o#in% conditions a.
a!andoned artic&es
!.
artic&es entered under #arehousin% entr" not #ithdra#n nor the duties and taxes paid thereon #ithin the period pro$ided under Section 632, TCC
c.
sei+ed propert", other than contra!and, after &ia!i&it" to sa&e sha&& ha$e !een esta!&ished !" proper adinistrati$e or )udicia& proceedin%s in conforit" #ith the pro$ision of this code: and
d.
An" artic&es su!)ect to a $a&id &ien for custos duties, taxes or other char%es co&&ecti!&e !" the ureau of Custos, after the expiration of the period a&&o#ed for the satisfaction of the sae.
Note: Goods in the co&&ectors possession or of Custos authorities pendin% pa"ent of custos duties are !e"ond the reach of attachent. A tax &ien attaches on the %oods, re%ard&ess of the o#nership #hi&e sti&& in the custod" or contro& of the %o$ernent Proceeds of sa&e are app&ied to the tax due. An" deficienc" or excess is for the account or credit, respecti$e&" of the taxpa"er
The tax &ia!i&it" of the iporter constitutes a persona& de!t to the %o$ernent, enforcea!&e !" action 0Sec. 61=, TCC8 This is a$ai&ed of #hen the tax &ien is &ost !" the re&ease of the %oods.
This is a$ai&ed of #hen the iportation is neither nor iproper&" ade
Genera&&" app&ied #hen the pena&t" is fine or forfeiture #hich is iposed #hen the iportation is un&a#fu& and it a" !e exercised e$en #here the artic&es are not or no &on%er in Custos Custod", un&ess the iportation is ere&" attepted.
C&ai for refundVa #ritten c&ai for refund a" !e su!itted !" the iporter:
6.
In a!ateent uses such as: a.
on issin% pac(a%es
In the case of attepted iportation, adinistrati$e fine or forfeiture a" !e affected on&"
!.
deficiencies in the contents of pac(a%es or shorta%e !efore arri$a& of the %oods in the Phi&ippines
a.
c.
artic&es &ost or destro"ed after such arri$a&,
#hi&e the %oods are sti&& #ithin the custos )urisdiction, or
32
TAXATION: San Beda College of LAW – ALABANG
1.
d.
artic&es &ost or destro"ed
e.
dead or in)ured ania&s and
f.
for anifest c&assica& errors 0see section 676' 672, TCC8
.
5orfeiture
4.
9ther Adinistrati$e Reedies
udicia&
udicia& re&ief
7.
Ci$i& Action
In dra#!ac( cases #here the %oods are re'exported
2.
Criina& Action
a.
Protest see the ear&ier discussions on *Custos Protest Cases/
!.
' Sei+ure !" the %o$ernent of persona& propert", tan%i!&e or intan%i!&e, to enforce the pa"ent of faces, to !e fo&&o#ed !" its pu!&ic sa&e, if the taxes are not $o&untari&" paid.
In sei+ure cases c.
Actua& There is ta(in% of possession of persona& propert" out of the taxpa"er into that of the %o$ernent. In case of intan%i!&e propert". Taxpa"er is a&so di$erted of the po#er of contro& o$er the propert"
d.
Constructi$e The o#ner is ere&" prohi!ited fro disposin% of his persona& propert".
see ear&ier discussion on the su!)ect c.
Sett&eent of case !" the pa"ent of fine or redeption of forfeited propert" see ear&ier discussions on the su!)ect
Note: The o#ner or iporter a" a!andon either express&" or " iportation in fa$or of the Go$ernent thus re&ie$in% hise&f of the tax &ia!i&it" !ut not fro the possi!&e criina& &ia!i&it". The taxpa"er a" appea& to the Court of Appea&s #hich has exc&usi$e )urisdiction to re$ie# decisions of the Coissioner of Custo in cases in$o&$in%: a8 !8
&ia!i&it" for custos duties, fees or other one" char%es sei+ures, detention or re&ease of propert" affected
c8
fines forfeitures or other pena&ties iposed in re&ation thereto and
d8
other atters arisin% under the custos La# or other &a#s adinistered !" the Re$enue of Custos.
Enueration of the Reedies Adinistrati$e 6.
Distraint of Persona& Propert"
1.
Le$" of Rea& Propert"
@.
Tax Lien
=.
Coproise
Actua& Distraint. ?ade on the propert" on&" of a de&inBuent taxpa"er. There is actua& ta(in% or possession of the propert". Effected !" ha$in% a &ist of the distraint propert" or !" ser$ice or #arrant of distraint or %arnishent. An iediate step for co&&ection of taxes #here aount due is definite.
Constructi$e Distraint ?a" !e ade on the propert" of an" taxpa"er #hether de&inBuent or not Taxpa"er is ere&" prohi!ited fro disposin% of his propert". Effected !" reBuirin% the taxpa"er to si%n a receipt of the propert" or !" &ea$in% a &ist of sae Such iediate step is not necessar" tax due a" not !e definite or it is !ein% Buestioned.
.
Taxpa"er is de&inBuent in the pa"ent of tax.
4.
Su!seBuent deand for its pa"ent.
7.
Taxpa"er ust fai& to pa" de&inBuent tax at tie reBuired.
2.
Period #ith in to assess or co&&ect has not "et prescri!ed. In case of constructi$e distraint, reBuisite no. 6 is not essentia& 0see Sec. 14 TC8
here aount in$o&$ed does not exceed P6 0Sec. 1 TC8. In (eepin% #ith the pro$ision on the a!ateent of the co&&ection of tax as the cost of sae i%ht e$en !e ore than P6. 33
TAXATION: San Beda College of LAW – ALABANG
.
Postin% of notice is not &ess than t#o p&aces in the unicipa&it" or cit" and notice to the taxpa"er specif"in% tie and p&ace of sa&e and the artic&es distrained.
7.
Sa&e at pu!&ic auction to hi%hest !idder
2.
Disposition of proceeds of the sa&e.
=.
@.
ho a" effect distraint coissioner or his authori+ed representati$e
=.
an( sha&& turn o$er to CIR so uch of the !an( accounts as a" !e sufficient.
due
Aount In$o&$ed In excess of P6,,. P6,,. or &ess
@.
=.
ReBuire taxpa"er or person in possession to a.
Si%n a receipt co$erin% propert" distrained
!.
9!&i%ate hi to preser$e the sae properties.
c.
Prohi!it hi fro disposin% the propert" fro disposin% the propert" in an" anner, #ith out the authorit" of the CIR.
here Taxpa"er or person in possession refuses to si%n:
RD9
In case of Tan%i!&e Propert": a.
=.
Ser$e #arrant upon taxpa"er and president, ana%er, treasurer or responsi!&e officer of the !an(.
Ser$ice of #arrant of distraint upon taxpa"er or upon person in possession of taxpa"ers persona& propert".
4.
@.
@.
a.
9fficer sha&& prepare &ist of the propert" distrained.
!.
In the presence of t#o #itnesses of sufficient a%e and discretion, &ea$e a cop" in the preises #here propert" is &ocated.
Cop" of an account of the propert" distrained, si%ned !" the officer, &eft either #ith the o#ner or person fro #ho propert" #as ta(en, at the d#e&&in% or p&ace of !usiness and #ith soeone of suita!&e a%e and discretion
4.
Taxpa"er is retirin% fro an" !usiness su!)ect to tax.
7.
Taxpa"er is intendin% to &ea$e the Phi&ippines or
!.
Stateent of the su deanded.
2.
To reo$e his propert" there fro.
c.
Tie and p&ace of sa&e.
3.
Taxpa"er hides or concea&s his propert".
In case of intan%i!&e propert": a.
Stoc(s and other securities Ser$in% a cop" of the #arrant upon taxpa"er and upon president, ana%er, treasurer or other responsi!&e officer of the issuin% corporation, copan" or association.
!.
Note: =.
an( accounts a" !e distrained #ith out $io&atin% the confidentia& nature of !an( accounts for no inBuir" is ade. IR sip&" sei+es so uch of the deposit #ith out ha$in% to (no# ho# uch the deposits are or #here the one" or an" part of it cae fro.
.
If at an" tie prior to the consuation of the sa&e, a&& proper char%es are paid to the officer conductin% the sae, the %oods distrained sha&& !e restored to the o#ner.
4.
hen the aount of the !id for the propert" under distraint is not eBua& to the aount of the tax or is $er" uch &ess than the actua& ar(et $a&ue of artic&es, the CIR or his deput" a" purchase the distrained propert" on !eha&f of the nationa& %o$ernent.
De!ts and credits @.
=.
c.
6. Taxpa"er acts tendin% to o!struct co&&ection proceedin%s.
Lea$in% a cop" of the #arrant #ith the person o#in% the de!ts or ha$in% in his possession such credits or his a%ent. arrant sha&& !e sufficient authorit" for such person to pa" CIR his credits or de!ts.
an( Accounts %arnishent
34
TAXATION: San Beda College of LAW – ALABANG Le$" Act of sei+ure of rea& propert" in order to enforce the pa"ent of taxes. The propert" a" !e so&d at pu!&ic sa&e, if after sei+ure the taxes are not $o&untari&" paid. The reBuisites are the sae as that of distraint.
7.
oth cannot !e a$ai&ed of #here aount in$o&$ed is not ore than P6.
2.
Distraint persona& propert" Le$" rea& propert"
7.
Internationa& Re$enue officer sha&& prepare a du&" authenticated certificate sho#in%
-
2.
a.
Nae of taxpa"er
!.
Aount of tax and
c.
Pena&t" due.
3.
Le$" forfeiture !" %o$ernent authori+ed #here there is no !idder or the hi%hest !id is not sufficient to pa" the taxes, pena&ties and costs. 6. Distraint Taxpa"er no %i$en the ri%ht of redeption Le$" Taxpa"er can redee properties &e$ied upon and so&dMforfeited to the %o$ernent.
enforcea!&e throu%h out the Phi&ippines
9fficer sha&& #rite upon the certificate a description of the propert" upon #hich &e$" is ade.
Note: .
3.
Ser$ice of #ritten notice to: c.
The taxpa"er, and 4.
d.
Distraint forfeiture !" %o$ernent, not pro$ided
RD #here propert" is &ocated.
It is the dut" of the Re%ister of Deeds concerned upon re%istration of the dec&aration of forfeiture, to transfer the tit&e to the propert" #ith out of an order fro a copetent court The reed" of distraint or &e$" a" !e repeated if necessar" unti& the fu&& aount, inc&udin% a&& expenses, is co&&ected.
6. Ad$ertiseent of the tie and p&ace of sa&e. 66. Sa&e at pu!&ic auction to hi%hest !idder. 61. Disposition of proceeds of sa&e.
a &e%a& c&ai or char%e on propert", either rea& or persona&, esta!&ished !" &a# as a securit" in defau&t of the pa"ent of taxes.
The excess sha&& !e turned o$er to o#ner.
e.
Person entit&ed: Taxpa"er or an"one for hi
f.
Tie to redee: one "ear fro date of sa&e or forfeiture -
-
%.
h.
4.
A &ien in fa$or of the %o$ernent of the Phi&ippines #hen a person &ia!&e to pa" a tax ne%&ects or fai&s to do so upon deand.W
e%ins fro re%istration of the deed of sa&e or dec&aration of forfeiture.
Exists fro tie assessent is ade !" the CIR unti& paid, #ith interests, pena&ties and costs.
Cannot !e extended !" the courts.
Possession pendin% redeption o#ner not depri$ed of possession
pon a&& propert" and ri%hts to propert" !e&on%in% to the taxpa"er.
Price: Aount of taxes, pena&ties and interest thereon fro date of de&inBuenc" to the date of sa&e to%ether #ith interest on said purchase price at 6Q per annu fro date of purchase to date of redeption.
oth are suar" reedies for co&&ection of taxes.
9n&" #hen notice of such &ien is fi&ed !" the CIR in the Re%ister of Deeds concerned.
.
Pa"ent or reission of the tax 35
TAXATION: San Beda College of LAW – ALABANG @. 4. 7.
2.
Prescription of the ri%ht of the %o$ernent to assess or co&&ect. 5ai&ure to fi&e notice of such &ien in the office of re%ister of Deeds, purchases or )ud%ent creditor.
?iniu coproise rate: a.
6Q of the !asic tax assessed in case of financia& incapacit".
!.
=Q of !asic tax assessed other cases.
Destruction of the propert" su!)ect to the &ien. =. In case Nos. 6 and 1, there is no ore tax &ia!i&it". nder nos. @ and =, the taxpa"er is sti&& &ia!&e.
Su!)ect to appro$a& of E$a&uation oard c.
hen !asic tax in$o&$ed exceeds P6,,. or
d.
here sett&eent offered is &ess than the prescri!ed iniu rates.
A tax &ien is distin%uished fro disttraint in that, in distraint the propert" sei+ed ust !e that of the taxpa"er, a&thou%h it need not !e the propert" in respect to the tax is assessed. Tax &ien is directed to the propert" su!)ect to the tax, re%ard&ess of its o#ner.
Genera& Ru&e : The po#er to coproise or a!ate sha&& not !e de&e%ated !" the coissioner.
Note: @.
This is superior to )ud%ent c&ai of pri$ate indi$idua&s or parties
=.
Attaches not on&" fro tie the #arrant #as ser$ed !ut fro the tie the tax #as due and deanda!&e.
Exception : The Re%iona& E$a&uation oard a" coproise the assessent issued !" the re%iona& offices in$o&$in% !asic taxes of P or &ess.
The CIR a" either: CoproiseVa contract #here!" the parties, !" reciproca& concessions, a$oid &iti%ation or put an end to one a&read" coenced.
=.
enforce the coproise, or
=.
Re%ard it as rescinded and insists upon the ori%ina& deand.
=.
It is a certain aount of one" #hich the taxpa"er pa"s to coproise a tax $io&ation.
.
It is pain in &ieu of a criina& prosecution.
4.
Since it is $o&untar" in character, the sae a" !e co&&ected on&" if the taxpa"er is #i&&in% to pa" the.
Taxpa"er ust ha$e a tax &ia!i&it".
.
There ust !e an offer !" taxpa"er or CIR, of an aount to !e paid !" taxpa"er.
4.
There ust !e acceptance of the offer in sett&eent of the ori%ina& c&ai.
=.
@.
A reasona!&e dou!t as to the $a&idit" if the c&ai a%ainst the taxpa"er exists
.
The financia& position of the taxpa"er deonstrates a c&ear ina!i&it" to pa" the assessed tax.
4.
Criina& $io&ations, except: a.
Those a&read" fi&ed in court
!.
Those in$o&$in% fraud.
5orfeitureVip&ies a di$estiture of propert" #ith out copensation, in conseBuence of a defau&t or offense. It inc&udes the idea of not on&" &osin% !ut a&so ha$in% the propert" transferred to another #ith out the consent of the o#ner and #ron%doer. 2.
Effect: Transfer the tit&e to the specific thin% fro the o#ner to the %o$ernent.
3.
hen a$ai&a!&e: a. No !idder for the rea& propert" exposed for sa&e. !.
If hi%hest !id is for an aount insufficient to pa" the taxes, pena&ties and costs. 36
TAXATION: San Beda College of LAW – ALABANG -
ith in t#o da"s thereafter, a return of the proceedin% is du&" ade.
6@. Ri%ht of Redeption:
6. -o# enforced: c.
d.
In case of persona& propert" !" sei+ure and sa&e or destruction of the specific forfeited propert". In case of rea& propert" !" a )ud%ent of condenation and sa&e in a &e%a& action or proceedin%, ci$i& or criina&, as the case a" reBuire.
66. hen forfeited propert" to !e destro"ed or so&d: c.
To !e destro"ed !" order of the CIR #hen the sa&e for consuption or use of the fo&&o#in% #ou&d !e in)urious to the pu!&ic hea&th or pre)udicia& to the enforceent of the &a#: 0at &east 1 da"s after sei+ure8 6.
disti&&ed spirits
1.
&iBuors
@.
ci%ars
=.
ci%arettes, and other anufactured products of to!acco
.
p&a"in% cards
4.
A&& apparatus used in or a!out the i&&icit production of such artic&es.
f.
Persona& entit&ed taxpa"er or an"one for hi
%.
Tie to redee #ith in one 068 "ear fro forfeiture
h.
Aount to !e paid fu&& aount of the taxes and pena&ties, p&us interest and cost of the sa&e
i.
To #ho paid Coissioner or the Re$enue Co&&ection 9fficer
).
Effect of fai&ure to redee forfeiture sha&& !ecoe a!so&ute.
Note: The Re%ister of Deeds is dut" !ound to transfer the tit&e of propert" forfeited to the %o$ernent #ith our necessit" of an order fro a copetent court.
=.
.
ReBuirin% fi&in% of !onds in the fo&&o#in% instances: a.
Estate and donors tax
!.
Excise taxes
c.
Exporters !ond
d.
?anufacturers and iporters !ond
ReBuirin% proof of fi&in% incoe tax returns efore a &icense to en%a%e in trade, !usiness or occupation or to practice a profession can !e issued.
d.
To !e so&d or destro"ed depends upon the discretion of CIR @.
=.
A&& other artic&es su!)ect to exercise tax, 0#ine, autoo!i&e, inera& products, anufactured oi&s, isce&&aneous products, non'essentia& ites a petro&eu products8 anufactured or reo$ed in $io&ation of the Tax Code. Dies for printin% or a(in% IR staps, &a!e&s and ta%s, in iitation of or purport to !e &a#fu& staps, &a!e&s or ta%s.
61. here to !e so&d: c.
Pu!&ic sa&e: pro$ided, there is notice of not &ess than 1 da"s.
d.
Pri$ate sa&e: pro$ided, it is #ith the appro$a& of the Secretar" of 5inance.
4.
Gi$in% re#ard to inforers Su eBui$a&ent to 6Q of re$enues, surchar%es or fees reco$ered andMor fine or pena&t" iposed and co&&ected or P6, ,. per case, #hiche$er is &o#er.
7.
Iposition of surchar%e and interest.
2.
?a(in% arrest, search and sei+ure Liited to $io&ations of an" pena& &a# or re%u&ation adinistered !" the IR, coitted #ith in the $ie# of the Interna& Re$enue 9fficer or EE.
3.
Deportation in case of a&iens on the fo&&o#in% %rounds c.
no#in%&" and fraudu&ent&" e$ades pa"ent of IR taxes.
37
TAXATION: San Beda College of LAW – ALABANG d.
i&&fu&&" refuses to pa" such tax and its accessor" pena&ties, after decision on his tax &ia!i&it" sha&& ha$e !ecoe fina& and executor".
c.
Dispute sae !" fi&in% protest #ith CIR
d.
Appea& ad$erse decision of CIR to CTA
6. Inspection of !oo(s oo(s of accounts and other accountin% records of taxpa"er ust !e preser$ed, %enera&&" #ithin three "ears after date the tax return #as due or #as fi&ed #hiche$er is &ater.
A direct ode of co&&ection of taxes, the )ud%ent of #hich sha&& not on&" ipose the pena&t" !ut a&so order pa"ent of taxes.
66. se of Nationa& Tax Re%ister
An assessent of a tax deficienc" is not necessar" to a criina& prosecution for tax e$asion, pro$ided there is a pria facie sho#in% of #i&&fu& attept to e$ade.
61. 9!tainin% inforation on tax &ia!i&it" of an" person
6@. In$entor" Ta(in% of stoc('in'trade and a(in% sur$ei&&ance. 6=. Prescri!in% presupti$e %ross sa&es or receipt:
c.
Person fai&ed to issue receipts and in$oices
d.
Reason to !e&ie$e that records do not correct&" ref&ect dec&aration in return.W
Does not exonerate taxpa"er his ci$i& &ia!i&it" to pa" the tax due. Thus, the %o$ernent a" sti&& co&&ect the tax in the sae action. Reason: Tax is an o!&i%ation, does not arise fro a criina& act.
i&& not operate to extin%uish taxpa"ers criina& &ia!i&it" since the dut" to pa" the tax is iposed !" statute, independent of an" attept on past of taxpa"ers to e$ade pa"ent.
6. Prescri!in% rea& propert" $a&ues 64. InBuirin% into !an( deposit accounts of c.
A deceased person to deterine %ross estate
d.
An" taxpa"er #ho fi&ed app&ication for coproise !" reasons of financia& incapacit" his tax &ia!i&it".
This is true in case the criina& action is !ased on the act to taxpa"er of fi&in% a fa&se and fraudu&ent tax return and fai&ure to pa" the tax. Note: The satisfaction of ci$i& &ia!i&it" is not one of the %rounds for the extinction of criina& action.
67. Re%istration of Taxpa"ers.
Ci$i& and Criina& Actions: 6.
rou%ht in the nae of the Go$ernent of the Phi&ippines.
1.
Conducted !" Le%a& 9fficer of IR
@.
?ust !e #ith the appro$a& of the CIR, in case of action, for reco$er" of taxes, or enforceent of a fine, pena&t" or forfeiture.
Actions instituted !" the %o$ernent to co&&ect interna& re$enue taxes in re%u&ar courts 0RTC or ?TCs, dependin% on the aount in$o&$ed8 hen assessent ade has !ecoe fina& and executor" for fai&ure or taxpa"er to:
5or purposes of Taxation, statue of &iitation is priari&" desi%ned to protect the ri%hts of the taxpa"ers a%ainst unreasona!&e in$esti%ation of the taxin% authorit" #ith respect to assessent and co&&ection of Interna& Re$enue Taxes.
Genera& Ru&e: Interna& Re$enue Taxes sha&& !e assessed #ithin three 0@8 "ears after the &ast da" prescri!ed !" &a# for the fi&in% of the return or fro the da" the return #as fi&ed, in case it is fi&ed !e"ond the period prescri!ed thereof. 0Section 1@ of the Tax Code8 Note:
38
TAXATION: San Beda College of LAW – ALABANG 6.
1.
@.
=.
.
A return fi&ed !efore the &ast da" prescri!ed !" &a# for the fi&in% thereof sha&& !e considered as fi&ed on such &ast da". In case a return is su!stantia&&" aended, the %o$ernent ri%ht to assess the tax sha&& coence fro the fi&in% of the aended return 0CIR $s. Phoenix, ?a" 1, 634 ei Co. $s. Co&&ector, = SCRA 2718 In coputin% the prescripti$e period for assessent, the &atter is deeed ade #hen notice to this effect is re&eased, ai&ed or sent !" the Coissioner to the correct address of the taxpa"er. -o#e$er, the &a# does not reBuire that the deandMnotice !e recei$ed #ithin the prescripti$e period. 0asi&an Estates, Inc. $s. Coissioner 16, SCRA 67 Repu!&ic $s. CA Apri& @, 63278 An affida$it executed !" a re$enue office indicatin% the tax &ia!i&ities of a taxpa"er and attached to a criina& cop&aint for tax e$asion, cannot !e deeed an assessent. 0 CIR $s. Pascoi Rea&t" Corp. une 13, 63338 A transcript sheets are not returns, !ecause the" do not contain inforation necessar" and reBuired to perit the coputation and assessent of taxes 0Sinforo A&ca $s. Coissioner, Dec. 13, 634=8
7. .
here no return #as fi&ed ' #ithin ten 068 "ears after the date of disco$er" of the oission.
4.
here a return #as fi&ed !ut the sae #as fa&se or fraudu&ent #ithin ten 068 "ears fro the disco$er" of fa&sit" or fraud.
a.
!.
c.
5raud is ne$er presued and the circustances consistin% it ust !e a&&e%ed and pro$ed to exist !" c&ear con$incin% e$idence 0Repu!&ic $s. eir, Sept. @, 63448 The fraud contep&ated !" &a# is actua& and not constructi$e. It ust aount to intentiona& #ron%doin% #ith the so&e o!)ect of a$oidin% the tax. A ere ista(e is not a fraudu&ent intent. 0A+nar case, Au%. 1@, 637=8 A fraud assessent #hich has !ecoe fina& and executor", the fact of fraud sha&& !e )udicia&&" ta(en co%ni+ance of in the ci$i& or criina& action for the co&&ection thereof. 0Sec. 111 para%raph 0a88
2.
d.
Intentiona& and su!stantia& understateent of tax &ia!i&it" of the taxpa"er.
e.
Intentiona& and su!stantia& deductions of exeption
f.
Recurrence of the fore%oin% circustances.
a.
hen the Coissioner fai&s ipute fraud in the assessent noticeMdeand for pa"ent.
!.
hen the Coissioner fai&ed to a&&e%e in his ans#er to the taxpa"ers petition for re$ie# #hen the case is appea&ed to the CTA.
c.
hen the Coissioner raised the Buestion of fraud on&" for the first tie in his eorandu #hich #as fi&ed the CTA after he had rested his case.
d.
here the IR itse&f appeared, *not sure/ as to the rea& aount of the taxpa"ers net incoe.
e.
A ere understateent of incoe does not pro$e fraud, un&ess there is a sufficient e$idence sha$in% fraudu&ent intent.
o$erstateent
of
here the coissioner and the taxpa"er, !efore the expiration of the three 0@8 "ear period of &iitation ha$e a%reed in #ritin% to the extension of said period.
c.
The a%reeent extendin% the period of prescription shou&d !e in #ritin% and du&" si%ned !" the taxpa"er and the coissioner.
d.
The a%reeent to extend the sae shou&d !e ode !efore the expiration of the period pre$ious&" a%reed upon.
here there is a #ritten #ai$er or renunciation of the ori%ina& @'"ear &iitation si%ned !" the taxpa"er.
d.
The #ai$er to !e $a&id ust !e executed !" the parties !efore the &apse of the prescripti$e period.
e.
A #ai$er is inefficient I it is executed !e"ond the ori%ina& three "ear.
f.
The coissioner can not $a&id a%ree to reduce the prescripti$e period to &ess than that %ranted !" &a#.
39
TAXATION: San Beda College of LAW – ALABANG
6.
a proceedin% in court #ithin the period a%reed upon in #ritin% !efore the expiration of '"ear period.
here the &a# does not pro$ide for an" particu&ar period of assessent, the tax sou%ht to !e assessed !ecoes iprescripti!&e.
1.
here no return is reBuired !" &a#, the tax is iprescripti!&e.
@.
Assessent of unpaid taxes, #here the !ases of #hich is not reBuired !" &a# to !e reported in a return such as excise taxes. 0Caren $s. A"a&a Securities Corp., No$. 16, 6328
=.
Assessent of copensatin% and docuentar" stap tax.
66. here the %o$ernent a(es another assessent on the !asis of rein$esti%ation reBuested !" the taxpa"er the prescripti$e period for co&&ection shou&d !e counted fro the &ast assessent. 0Rep. $s. Lope+, ?arch @, 634@8 61. here the assessent is re$ised !ecause of an aended return the period for co&&ection is counted fro the &ast re$ised assessent. 6@. here a tax o!&i%ation is secured !" a suret" !ond the %o$ernent a" proceed thru a court action to forfeit a !ond and enforce such contractua& o!&i%ation #ithin a period of ten "ears. 6=. here the action is !rou%ht to enforce a coproise entered into !et#een the coission and the taxpa"er the prescripti$e period is ten "ears. 5.
D. Genera& Ru&e : 6.
1.
E.
here an assessent #as ade An" interna& re$enue tax #hich has !een assessed #ithin the period of &iitation a" !e co&&ected !" distraint or &e$" or !" proceedin% in court #ithin "ears fo&&o#in% the date of assessent. here no assessent #as ade and a return #as fi&ed and the sae is not fraudu&ent or fa&se' the tax shou&d !e co&&ected #ithin @ "ears after the return #as due or #as fi&ed, #hiche$er is &ater.
hen tax is deeed co&&ected for purposes of the prescripti$e period. =.
Co&&ection !" suar" reedies It is effected !" suar" ethods #hen the %o$ernent a$ai& of distraint and &e$" procedure.
.
Co&&ection !" )udicia& action The co&&ection !e%ins !" fi&in% the cop&aint #ith the proper court. 0RTC8
4.
here assessent of the coissioner is protected appea&ed to the CTA the co&&ection !e%in #hen the %o$ernent fi&e its ans#er to taxpa"ers petition for re$ie#.
Exceptions: 2.
here a fraudu&entMfa&se return #ith intent to e$ade taxes #as fi&ed a proceedin% in court for the co&&ection of the tax a" !e fi&ed #ithout assessent, at an"tie #ithin ten "ears after the disco$er" of the fa&sit" or fraud. Note: The 6'"ear prescripti$e period for co&&ector thru action does not app&" if it appears that there #as an assessent. In such case, the ordinar" '"ear period 0no# @ "ears8 #ou&d app&" 0Rep. $s. Ret., ?arch @6, 63418
3.
hen the taxpa"er oits to fi&e a return a court proceedin% for the co&&ection of such tax a" !e fi&ed #ithout assessent, at an"tie #ithin 6 "ears after the disco$er" of the oission.
Ru&e: A&& $io&ations of an" pro$ision of the tax code sha&& prescri!e after fi$e 08 "ears. Note:
The fi$e 08 "ear prescripti$e period sha&& !e%in to run fro the: c.
Da" of the coission of the $io&ation, if (no#.
d.
If not (no#n, fro the tie of disco$er" and the institution of )udicia& proceedin% for its in$esti%ation and punishent.
c.
hen a proceedin% is instituted a%ainst the %ui&t" person
6. ai$er of statute of &iitations an" interna& re$enue tax, #hich has !een assessed #ithin the period a%reed upon, a" !e co&&ected !e distinct or &e$" of !" 40
TAXATION: San Beda College of LAW – ALABANG
d.
Note: If the taxpa"er infors the Coissioner of an" chan%e in address the statute #i&& not !e suspended.
hen the offender is a!sent fro the Phi&ippines.
e. hen the proceedin% is disissed for reason not Constitutin% )eopard".
c.
In ci$i& case If not raised in the &o#er court, it is !ai&ed peranent&" if can not !e raised for the first tie on appea&.
d.
In criina& case It can !e raised e$en if the case has !een decided !" the &o#er court !ut pendin% decision on appea&.
=.
.
hen CTA suspends the co&&ection of tax &ia!i&it" of the taxpa"er pursuant to Section 66 of RA 661 upon proof that its co&&ection a" )eopardi+es the %o$ernent and Mor the taxpa"er. c.
hen the taxpa"er reBuests for rein$esti%ation #hich is %ranted !" coissioner. Note: A ere reBuest for rein$esti%ation #ithout an" action or the part of the Coissioner does not interrupt the runnin% of the prescripti$e period. The reBuest ust not !e a ere pro' forer. Su!stantia& issues ust !e raised.
d.
hen the taxpa"er cannot !e &ocated in the address %i$en !" hi in the return.
his authori+ed representati$e
4.
?e!er of his househo&d #ith sufficient discretion and no propert" cou&d !e &ocated.
f.
hen the taxpa"er is out of the Phi&ippines.
%.
In criina& cases for $io&ation of tax code the period sha&& not run #hen the offender is a!sent fro the Phi&ippines.
The &a# on prescription reedia& easure shou&d !e interpreted &i!era&&" in order to protect the taxpa"er.
7.
The defense of prescription ust !e raised !" the taxpa"er on tie, other#ise it is deeed #ai$ed. The Buestion of prescription is not )urisdictiona&, and as defense it ust !e raised reasona!&" other#ise it is deeed #ai$ed.
3.
!.
.
4.
Durin% #hich the Coissioner is prohi!ited fro a(in% the assessent or !e%innin% distraintM&e$" or a proceedin% in court and for 4 da"s thereafter e.%. 5i&in% a petition for re$ie# in the CTA fro the decision of the Coissioner. The coissioner is pre$ented fro fi&in% an ordinar" action to co&&ect the tax.
taxpa"er
Nota ene:
2.
a.
=.
Note: A petition for reconsideration of a tax assessent does not suspend the criina& action. Reason: No reBuireent for assessent of the tax !efore the criina& action a" !e instituted.
here !efore the expiration of the tie prescri!ed for the assessent of the tax, !oth the coissioner and the taxpa"er ha$e consented in #ritin% to its assessent after such tie, the tax a" !e assessed prior to the expiration of the period a%reed upon. The runnin% of statute of &iitations on a(in% an assessent and the !e%innin% of distraintM&e$" or a proceedin% in court for co&&ection sha&& !e suspended for the period.
hen the #arrant of distraint or &e$" is du&" ser$ed upon an" of the fo&&o#in% person:
The prescripti$e pro$ided in the tax code o$er ride the statute of non'c&ais in the sett&eent of the deceaseds estate.
6. In the e$ent that the co&&ection of the tax has a&read" prescri!ed, the %o$ernent cannot in$o(e the princip&e of EBuita!&e recu!ent !" settin%' off the prescri!ed tax a%ainst a tax refused to #hich the taxpa"er is entit&ed. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX S9?E I?P9RTANT PR9ISI9NS 9N T-E TAO RE59R? ACT 95 6337
. ' The ureau of Interna& Re$enue sha&& !e under the super$ision and contro& of the Departent of 5inance and its po#ers and duties sha&& coprehend the assessent and co&&ection of a&& nationa& interna& re$enue taxes, fees, and char%es, and the enforceent of a&& forfeitures, pena&ties, and fines connected there#ith, inc&udin% the execution of )ud%ents in a&& cases decided in its fa$or !" the Court of Tax Appea&s and the ordinar" 41
TAXATION: San Beda College of LAW – ALABANG courts. The ureau sha&& %i$e effect to and adinister the super$isor" and po&ice po#ers conferred to it !" this Code or other &a#s. . ' The ureau of Interna& Re$enue sha&& ha$e a chief to !e (no#n as Coissioner of Interna& Re$enue, hereinafter referred to as the Coissioner and four 0=8 assistant chiefs to !e (no#n as Deput" Coissioners. . ' The po#er to interpret the pro$isions of this Code and other tax &a#s sha&& !e under the exc&usi$e and ori%ina& )urisdiction of the Coissioner, su!)ect to re$ie# !" the Secretar" of 5inance. The po#er to decide disputed assessents, refunds of interna& re$enue taxes, fees or other char%es, pena&ties iposed in re&ation thereto, or other atters arisin% under this Code or other &a#s or portions thereof adinistered !" the ureau of Interna& Re$enue is $ested in the Coissioner, su!)ect to the exc&usi$e appe&&ate )urisdiction of the Court of Tax Appea&s.
. ' In ascertainin% the correctness of an" return, or in a(in% a return #hen none has !een ade, or in deterinin% the &ia!i&it" of an" person for an" interna& re$enue tax, or in co&&ectin% an" such &ia!i&it", or in e$a&uatin% tax cop&iance, the Coissioner is authori+ed: 0A8 To exaine an" !oo(, paper, record, or other data #hich a" !e re&e$ant or ateria& to such inBuir" 08 To o!tain on a re%u&ar !asis fro an" person other than the person #hose interna& re$enue tax &ia!i&it" is su!)ect to audit or in$esti%ation, or fro an" office or officer of the nationa& and &oca& %o$ernents, %o$ernent a%encies and instruenta&ities, inc&udin% the an%(o Sentra& n% Pi&ipinas and %o$ernent'o#ned or 'contro&&ed corporations, an" inforation such as, !ut not &iited to, costs and $o&ue of production, receipts or sa&es and %ross incoes of taxpa"ers, and the naes, addresses, and financia& stateents of corporations, utua& fund copanies, insurance copanies, re%iona& operatin% headBuarters of u&tinationa& copanies, )oint accounts, associations, )oint $entures of consortia and re%istered partnerships, and their e!ers 0C8 To suon the person &ia!&e for tax or reBuired to fi&e a return, or an" officer or ep&o"ee of such person, or an" person ha$in% possession, custod", or care of the !oo(s of accounts and other accountin% records
containin% entries re&atin% to the !usiness of the person &ia!&e for tax, or an" other person, to appear !efore the Coissioner or his du&" authori+ed representati$e at a tie and p&ace specified in the suons and to produce such !oo(s, papers, records, or other data, and to %i$e testion" 0D8 To ta(e such testion" of the person concerned, under oath, as a" !e re&e$ant or ateria& to such inBuir" and 0E8 To cause re$enue officers and ep&o"ees to a(e a can$ass fro tie to tie of an" re$enue district or re%ion and inBuire after and concernin% a&& persons therein #ho a" !e &ia!&e to pa" an" interna& re$enue tax, and a&& persons o#nin% or ha$in% the care, ana%eent or possession of an" o!)ect #ith respect to #hich a tax is iposed.
The pro$isions of the fore%oin% para%raphs not#ithstandin%, nothin% in this Section sha&& !e construed as %rantin% the Coissioner the authorit" to inBuire into !an( deposits other than as pro$ided for in Section 4058 of this Code.
. ' 0A8 Exaination of Returns and Deterination of Tax Due. ' After a return has !een fi&ed as reBuired under the pro$isions of this Code, the Coissioner or his du&" authori+ed representati$e a" authori+e the exaination of an" taxpa"er and the assessent of the correct aount of tax: Pro$ided, ho#e$er That fai&ure to fi&e a return sha&& not pre$ent the Coissioner fro authori+in% the exaination of an" taxpa"er. An" return, stateent of dec&aration fi&ed in an" office authori+ed to recei$e the sae sha&& not !e #ithdra#n: Pro$ided, That #ithin three 0@8 "ears fro the date of such fi&in%, the sae a" !e odified, chan%ed, or aended: Pro$ided, further, That no notice for audit or in$esti%ation of such return, stateent or dec&aration has in the eantie !een actua&&" ser$ed upon the taxpa"er. 08 5ai&ure to Su!it ReBuired Returns, Stateents, Reports and other Docuents. ' hen a report reBuired !" &a# as a !asis for the assessent of an" nationa& interna& re$enue tax sha&& not !e forthcoin% #ithin the tie fixed !" &a#s or ru&es and re%u&ations or #hen there is reason to !e&ie$e that an" such report is fa&se, incop&ete or erroneous, the Coissioner sha&& assess the proper tax on the !est e$idence o!taina!&e. 42
TAXATION: San Beda College of LAW – ALABANG In case a person fai&s to fi&e a reBuired return or other docuent at the tie prescri!ed !" &a#, or #i&&fu&&" or other#ise fi&es a fa&se or fraudu&ent return or other docuent, the Coissioner sha&& a(e or aend the return fro his o#n (no#&ed%e and fro such inforation as he can o!tain throu%h testion" or other#ise, #hich sha&& !e pria facie correct and sufficient for a&& &e%a& purposes. 0C8 Authorit" to Conduct In$entor"'ta(in%, sur$ei&&ance and to Prescri!e Presupti$e Gross Sa&es and Receipts. ' The Coissioner a", at an" tie durin% the taxa!&e "ear, order in$entor"' ta(in% of %oods of an" taxpa"er as a !asis for deterinin% his interna& re$enue tax &ia!i&ities, or a" p&ace the !usiness operations of an" person, natura& or )uridica&, under o!ser$ation or sur$ei&&ance if there is reason to !e&ie$e that such person is not dec&arin% his correct incoe, sa&es or receipts for interna& re$enue tax purposes. The findin%s a" !e used as the !asis for assessin% the taxes for the other onths or Buarters of the sae or different taxa!&e "ears and such assessent sha&& !e deeed pria facie correct. hen it is found that a person has fai&ed to issue receipts and in$oices in $io&ation of the reBuireents of Sections 66@ and 1@7 of this Code, or #hen there is reason to !e&ie$e that the !oo(s of accounts or other records do not correct&" ref&ect the dec&arations ade or to !e ade in a return reBuired to !e fi&ed under the pro$isions of this Code, the Coissioner, after ta(in% into account the sa&es, receipts, incoe or other taxa!&e !ase of other persons en%a%ed in sii&ar !usinesses under sii&ar situations or circustances or after considerin% other re&e$ant inforation a" prescri!e a iniu aount of such %ross receipts, sa&es and taxa!&e !ase, and such aount so prescri!ed sha&& !e pria facie correct for purposes of deterinin% the interna& re$enue tax &ia!i&ities of such person. 0D8 Authorit" to Terinate Taxa!&e Period. ' hen it sha&& coe to the (no#&ed%e of the Coissioner that a taxpa"er is retirin% fro !usiness su!)ect to tax, or is intendin% to &ea$e the Phi&ippines or to reo$e his propert" therefro or to hide or concea& his propert", or is perforin% an" act tendin% to o!struct the proceedin%s for the co&&ection of the tax for the past or current Buarter or "ear or to render the sae tota&&" or part&" ineffecti$e un&ess such proceedin%s are !e%un iediate&", the Coissioner sha&& dec&are the tax period of such taxpa"er terinated at an" tie and sha&& send the taxpa"er a notice of such decision, to%ether #ith a reBuest for the iediate pa"ent of the tax for the period so dec&ared terinated and the tax for the precedin% "ear or
Buarter, or such portion thereof as a" !e unpaid, and said taxes sha&& !e due and pa"a!&e iediate&" and sha&& !e su!)ect to a&& the pena&ties hereafter prescri!ed, un&ess paid #ithin the tie fixed in the deand ade !" the Coissioner. 0E8 Authorit" of the Coissioner to Prescri!e Rea& Propert" a&ues. ' The Coissioner is here!" authori+ed to di$ide the Phi&ippines into different +ones or areas and sha&&, upon consu&tation #ith copetent appraisers !oth fro the pri$ate and pu!&ic sectors, deterine the fair ar(et $a&ue of rea& properties &ocated in each +one or area. 5or purposes of coputin% an" interna& re$enue tax, the $a&ue of the propert" sha&& !e, #hiche$er is the hi%her of: 068 the fair ar(et $a&ue as deterined !" the Coissioner, or 018 the fair ar(et $a&ue as sho#n in the schedu&e of $a&ues of the Pro$incia& and Cit" Assessors. 058 Authorit" of the Coissioner to inBuire into an( Deposit Accounts. ' Not#ithstandin% an" contrar" pro$ision of Repu!&ic Act No. 6= and other %enera& or specia& &a#s, the Coissioner is here!" authori+ed to inBuire into the !an( deposits of: 068 a decedent to deterine his %ross estate and 018 an" taxpa"er #ho has fi&ed an app&ication for coproise of his tax &ia!i&it" under Sec. 1= 0A8 018 of this Code !" reason of financia& incapacit" to pa" his tax &ia!i&it". In case a taxpa"er fi&es an app&ication to coproise the pa"ent of his tax &ia!i&ities on his c&ai that his financia& position deonstrates a c&ear ina!i&it" to pa" the tax assessed, his app&ication sha&& not !e considered un&ess and unti& he #ai$es in #ritin% his pri$i&e%e under Repu!&ic Act No. 6= or under other %enera& or specia& &a#s, and such #ai$er sha&& constitute the authorit" of the Coissioner to inBuire into the !an( deposits of the taxpa"er. 0G8 Authorit" to Accredit and Re%ister Tax A%ents. ' The Coissioner sha&& accredit and re%ister, !ased on their professiona& copetence, inte%rit" and ora& fitness, indi$idua&s and %enera& professiona& partnerships and their representati$es #ho prepare and fi&e tax returns, stateents, reports, protests, and other papers #ith or #ho appear !efore, the ureau for taxpa"ers. ithin one hundred t#ent" 0618 da"s fro anuar" 6, 6332, the Coissioner sha&& create nationa& and re%iona& accreditation !oards, the e!ers of #hich sha&& ser$e for three 0@8 "ears, and sha&& desi%nate fro aon% the senior officia&s of the ureau, one 068 chairan and t#o 43
TAXATION: San Beda College of LAW – ALABANG 018 e!ers for each !oard, su!)ect to such ru&es and re%u&ations as the Secretar" of 5inance sha&& prou&%ate upon the recoendation of the Coissioner. Indi$idua&s and %enera& professiona& partnerships and their representati$es #ho are denied accreditation !" the Coissioner andMor the nationa& and re%iona& accreditation !oards a" appea& such denia& to the Secretar" of 5inance, #ho sha&& ru&e on the appea& #ithin sixt" 048 da"s fro receipt of such appea&. 5ai&ure of the Secretar" of 5inance to ru&e on the Appea& #ithin the prescri!ed period sha&& !e deeed as appro$a& of the app&ication for accreditation of the appe&&ant. 0-8 Authorit" of the Coissioner to Prescri!e Additiona& Procedura& or Docuentar" ReBuireents. ' The Coissioner a" prescri!e the anner of cop&iance #ith an" docuentar" or procedura& reBuireent in connection #ith the su!ission or preparation of financia& stateents accopan"in% the tax returns. . ' The Coissioner a" de&e%ate the po#ers $ested in hi under the pertinent pro$isions of this Code to an" or such su!ordinate officia&s #ith the ran( eBui$a&ent to a di$ision chief or hi%her, su!)ect to such &iitations and restrictions as a" !e iposed under ru&es and re%u&ations to !e prou&%ated !" the Secretar" of finance, upon recoendation of the Coissioner: Pro$ided, ho#e$er , That the fo&&o#in% po#ers of the Coissioner sha&& not !e de&e%ated: 0a8 The po#er to recoend the prou&%ation of ru&es and re%u&ations !" the Secretar" of 5inance 0!8 The po#er to issue ru&in%s of first ipression or to re$erse, re$o(e or odif" an" existin% ru&in% of the ureau 0c8 The po#er to coproise or a!ate, under Sec. 1= 0A8 and 08 of this Code, an" tax &ia!i&it": Pro$ided, ho#e$er, That assessents issued !" the re%iona& offices in$o&$in% !asic deficienc" taxes of 5i$e hundred thousand pesos 0P,8 or &ess, and inor criina& $io&ations, as a" !e deterined !" ru&es and re%u&ations to !e prou&%ated !" the Secretar" of finance, upon recoendation of the Coissioner, disco$ered !" re%iona& and district officia&s, a" !e coproised !" a re%iona& e$a&uation !oard #hich sha&& !e coposed of the Re%iona& Director as Chairan, the Assistant Re%iona& Director, the heads of the Le%a&, Assessent and Co&&ection Di$isions and the Re$enue District 9fficer ha$in% )urisdiction o$er the taxpa"er, as e!ers and 0d8 The po#er to assi%n or reassi%n interna& re$enue officers to esta!&ishents #here artic&es su!)ect to excise tax are produced or (ept.
Except as pro$ided in Section 111, interna& re$enue taxes sha&& !e assessed #ithin three 0@8 "ears after the &ast da" prescri!ed !" &a# for the fi&in% of the return, and no proceedin% in court #ithout assessent for the co&&ection of such taxes sha&& !e !e%un after the expiration of such period: Pro$ided, That in a case #here a return is fi&ed !e"ond the period prescri!ed !" &a#, the three 0@8'"ear period sha&& !e counted fro the da" the return #as fi&ed. 5or purposes of this Section, a return fi&ed !efore the &ast da" prescri!ed !" &a# for the fi&in% thereof sha&& !e considered as fi&ed on such &ast da".
The Coissioner a" '
068 A reasona!&e dou!t as to the $a&idit" of the c&ai a%ainst the taxpa"er exists or 018 The financia& position of the taxpa"er deonstrates a c&ear ina!i&it" to pa" the assessed tax. The coproise sett&eent of an" tax &ia!i&it" sha&& !e su!)ect to the fo&&o#in% iniu aounts: 5or cases of financia& incapacit", a iniu coproise rate eBui$a&ent to ten percent 06Q8 of the !asic assessed tax and 5or other cases, a iniu coproise rate eBui$a&ent to fort" percent 0=Q8 of the !asic assessed tax. here the !asic tax in$o&$ed exceeds 9ne i&&ion pesos 0P6,.8 or #here the sett&eent offered is &ess than the prescri!ed iniu rates, the coproise sha&& !e su!)ect to the appro$a& of the E$a&uation oard #hich sha&& !e coposed of the Coissioner and the four 0=8 Deput" Coissioners.
068 The tax or an" portion thereof appears to !e un)ust&" or excessi$e&" assessed or 018 The adinistration and co&&ection costs in$o&$ed do not )ustif" the co&&ection of the aount due. A&& criina& $io&ations a" !e coproised except: 0a8 those a&read" fi&ed in court, or 0!8 those in$o&$in% fraud. Credit or refund taxes erroneous&" or i&&e%a&&" recei$ed or pena&ties iposed #ithout authorit", refund the $a&ue of interna& re$enue staps #hen the" are returned in %ood condition !" the purchaser, and, in his discretion, redee or chan%e unused staps that ha$e !een rendered unfit for use and refund their $a&ue upon proof of destruction. No credit or refund of taxes or pena&ties sha&& !e a&&o#ed un&ess the taxpa"er fi&es in #ritin% #ith the Coissioner a c&ai for credit or refund #ithin t#o 018 "ears after the pa"ent of the 44
TAXATION: San Beda College of LAW – ALABANG tax or pena&t": Pro$ided, ho#e$er, That a return fi&ed sho#in% an o$erpa"ent sha&& !e considered as a #ritten c&ai for credit or refund. A Tax Credit Certificate $a&id&" issued under the pro$isions of this Code a" !e app&ied a%ainst an" interna& re$enue tax, exc&udin% #ithho&din% taxes, for #hich the taxpa"er is direct&" &ia!&e. An" reBuest for con$ersion into refund of unuti&i+ed tax credits a" !e a&&o#ed, su!)ect to the pro$isions of Section 1@ of this Code: Pro$ided , That the ori%ina& cop" of the Tax Credit Certificate sho#in% a credita!&e !a&ance is surrendered to the appropriate re$enue officer for $erification and cance&&ation: Pro$ided, further, That in no case sha&& a tax refund !e %i$en resu&tin% fro a$ai&ent of incenti$es %ranted pursuant to specia& &a#s for #hich no actua& pa"ent #as ade. The Coissioner sha&& su!it to the Chairen of the Coittee on a"s and ?eans of !oth the Senate and -ouse of Representati$es, e$er" six 048 onths, a report on the exercise of his po#ers under this Section, statin% therein the fo&&o#in% facts and inforation, aon% others: naes and addresses of taxpa"ers #hose cases ha$e !een the su!)ect of a!ateent or coproise aount in$o&$ed aount coproised or a!ated and reasons for the exercise of po#er: Pro$ided , That the said report sha&& !e presented to the 9$ersi%ht Coittee in Con%ress that sha&& !e constituted to deterine that said po#ers are reasona!&" exercised and that the %o$ernent is not undu&" depri$ed of re$enues.
The ci$i& reedies for the co&&ection of interna& re$enue taxes, fees or char%es, and an" increent thereto resu&tin% fro de&inBuenc" sha&& !e: 0a8 " distraint of %oods, chatte&s, or effects, and other persona& propert" of #hate$er character, inc&udin% stoc(s and other securities, de!ts, credits, !an( accounts and interest in and ri%hts to persona& propert", and !" &e$" upon rea& propert" and interest in ri%hts to rea& propert" and 0!8 " ci$i& or criina& action. Either of these reedies or !oth siu&taneous&" a" !e pursued in the discretion of the authorities char%ed #ith the co&&ection of such taxes: Pro$ided, ho#e$er, That the reedies of distraint and &e$" sha&& not !e a$ai&ed of #here the aount of tax in$o&$e is not ore than 9ne hundred pesos 0P68. The )ud%ent in the criina& case sha&& not on&" ipose the pena&t" !ut sha&& a&so order pa"ent of the taxes su!)ect of the criina& case as fina&&" decided !" the Coissioner. The ureau of Interna& Re$enue sha&& ad$ance the aounts needed to defra" costs of co&&ection !" eans of
ci$i& or criina& action, inc&udin% the preser$ation or transportation of persona& propert" distrained and the ad$ertiseent and sa&e thereof, as #e&& as of rea& propert" and ipro$eents thereon.
To safe%uard the interest of the Go$ernent, the Coissioner a" p&ace under constructi$e distraint the propert" of a de&inBuent taxpa"er or an" taxpa"er #ho, in his opinion, is retirin% fro an" !usiness su!)ect to tax, or is intendin% to &ea$e the Phi&ippines or to reo$e his propert" therefro or to hide or concea& his propert" or to perfor an" act tendin% to o!struct the proceedin%s for co&&ectin% the tax due or #hich a" !e due fro hi. The constructi$e distraint of persona& propert" sha&& !e affected !" reBuirin% the taxpa"er or an" person ha$in% possession or contro& of such propert" to si%n a receipt co$erin% the propert" distrained and o!&i%ate hise&f to preser$e the sae intact and una&tered and not to dispose of the sae in an" anner #hate$er, #ithout the express authorit" of the Coissioner. In case the taxpa"er or the person ha$in% the possession and contro& of the propert" sou%ht to !e p&aced under constructi$e distraint refuses or fai&s to si%n the receipt herein referred to, the re$enue officer effectin% the constructi$e distraint sha&& proceed to prepare a &ist of such propert" and, in the presence of t#o 018 #itnessed, &ea$e a cop" thereof in the preises #here the propert" distrained is &ocated, after #hich the said propert" sha&& !e deeed to ha$e !een p&aced under constructi$e distraint.
' pon the fai&ure of the person o#in% an" de&inBuent tax or de&inBuent re$enue to pa" the sae at the tie reBuired, the Coissioner or his du&" authori+ed representati$e, if the aount in$o&$ed is in excess of 9ne i&&ion pesos 0P6,,8, or the Re$enue District 9fficer, if the aount in$o&$ed is 9ne i&&ion pesos 0P6,,8 or &ess, sha&& sei+e and distraint an" %oods, chatte&s or effects, and the persona& propert", inc&udin% stoc(s and other securities, de!ts, credits, !an( accounts, and interests in and ri%hts to persona& propert" of such persons in sufficient Buantit" to satisf" the tax, or char%e, to%ether #ith an" increent thereto incident to de&inBuenc", and the expenses of the distraint and the cost of the su!seBuent sa&e. A report on the distraint sha&&, #ithin ten 068 da"s fro receipt of the #arrant, !e su!itted !" the distrainin% officer to the Re$enue District 9fficer, and to the Re$enue Re%iona& Director: Pro$ided, That the Coissioner or his du&" authori+ed representati$e sha&&, su!)ect to ru&es and re%u&ations prou&%ated !" the Secretar" of 5inance, upon recoendation of the Coissioner, ha$e the po#er to &ift such order of distraint: Pro$ided, further, That a conso&idated report !" the Re$enue Re%iona& Director a" !e reBuired !" the Coissioner as often as necessar". ' After the expiration of the tie reBuired to pa" the de&inBuent tax or de&inBuent re$enue as prescri!ed in this Section, rea& propert" a" !e &e$ied upon, !efore 45
TAXATION: San Beda College of LAW – ALABANG siu&taneous&" or after the distraint of persona& propert" !e&on%in% to the de&inBuent. To this end, an" interna& re$enue officer desi%nated !" the Coissioner or his du&" authori+ed representati$e sha&& prepare a du&" authenticated certificate sho#in% the nae of the taxpa"er and the aounts of the tax and pena&t" due fro hi. Said certificate sha&& operate #ith the force of a &e%a& execution throu%hout the Phi&ippines.
an( accounts sha&& !e %arnished !" ser$in% a #arrant of %arnishent upon the taxpa"er and upon the president, ana%er, treasurer or other responsi!&e officer of the !an(. pon receipt of the #arrant of %arnishent, the !an( sha&& tun o$er to the Coissioner so uch of the !an( accounts as a" !e sufficient to satisf" the c&ai of the Go$ernent.
Le$" sha&& !e affected !" #ritin% upon said certificate a description of the propert" upon #hich &e$" is ade. At the sae tie, #ritten notice of the &e$" sha&& !e ai&ed to or ser$ed upon the Re%ister of Deeds for the pro$ince or cit" #here the propert" is &ocated and upon the de&inBuent taxpa"er, or if he !e a!sent fro the Phi&ippines, to his a%ent or the ana%er of the !usiness in respect to #hich the &ia!i&it" arose, or if there !e none, to the occupant of the propert" in Buestion.
The Re$enue District 9fficer or his du&" authori+ed representati$e, other than the officer referred to in Section 12 of this Code sha&&, accordin% to ru&es and re%u&ations prescri!ed !" the Secretar" of 5inance, upon recoendation of the Coissioner, forth#ith cause a notification to !e exhi!ited in not &ess than t#o 018 pu!&ic p&aces in the unicipa&it" or cit" #here the distraint is ade, specif"in% the tie and p&ace of sa&e and the artic&es distrained. The tie of sa&e sha&& not !e &ess than t#ent" 018 da"s after notice. 9ne p&ace for the postin% of such notice sha&& !e at the 9ffice of the ?a"or of the cit" or unicipa&it" in #hich the propert" is distrained.
In case the #arrant of &e$" on rea& propert" is not issued !efore or siu&taneous&" #ith the #arrant of distraint on persona& propert", and the persona& propert" of the taxpa"er is not sufficient to satisf" his tax de&inBuenc", the Coissioner or his du&" authori+ed representati$e sha&&, #ithin thirt" 0@8 da"s after execution of the distraint, proceed #ith the &e$" on the taxpa"erUs rea& propert". ithin ten 068 da"s after receipt of the #arrant, a report on an" &e$" sha&& !e su!itted !" the &e$"in% officer to the Coissioner or his du&" authori+ed representati$e: Pro$ided, ho#e$er, That a conso&idated report !" the Re$enue Re%iona& Director a" !e reBuired !" the Coissioner as often as necessar": Pro$ided, further, That the Coissioner or his du&" authori+ed representati$e, su!)ect to ru&es and re%u&ations prou&%ated !" the Secretar" of 5inance, upon recoendation of the Coissioner, sha&& ha$e the authorit" to &ift #arrants of &e$" issued in accordance #ith the pro$isions hereof. The officer ser$in% the #arrant of distraint sha&& a(e or cause to !e ade an account of the %oods, chatte&s, effects or other persona& propert" distrained, a cop" of #hich, si%ned !" hise&f, sha&& !e &eft either #ith the o#ner or person fro #hose possession such %oods, chatte&s, or effects or other persona& propert" #ere ta(en, or at the d#e&&in% or p&ace of !usiness of such person and #ith soeone of suita!&e a%e and discretion, to #hich &ist sha&& !e added a stateent of the su deanded and note of the tie and p&ace of sa&e. Stoc(s and other securities sha&& !e distrained !" ser$in% a cop" of the #arrant of distraint upon the taxpa"er and upon the president, ana%er, treasurer or other responsi!&e officer of the corporation, copan" or association, #hich issued the said stoc(s or securities. De!ts and credits sha&& !e distrained !" &ea$in% #ith the person o#in% the de!ts or ha$in% in his possession or under his contro& such credits, or #ith his a%ent, a cop" of the #arrant of distraint. The #arrant of distraint sha&& !e sufficient authorit" to the person o#nin% the de!ts or ha$in% in his possession or under his contro& an" credits !e&on%in% to the taxpa"er to pa" to the Coissioner the aount of such de!ts or credits.
At the tie and p&ace fixed in such notice, the said re$enue officer sha&& se&& the %oods, chatte&s, or effects, or other persona& propert", inc&udin% stoc(s and other securities so distrained, at pu!&ic auction, to the hi%hest !idder for cash, or #ith the appro$a& of the Coissioner, throu%h du&" &icensed coodit" or stoc( exchan%es. In the case of Stoc(s and other securities, the officer a(in% the sa&e sha&& execute a !i&& of sa&e #hich he sha&& de&i$er to the !u"er, and a cop" thereof furnished the corporation, copan" or association #hich issued the stoc(s or other securities. pon receipt of the cop" of the !i&& of sa&e, the corporation, copan" or association sha&& a(e the correspondin% entr" in its !oo(s, transfer the stoc(s or other securities so&d in the nae of the !u"er, and issue, if reBuired to do so, the correspondin% certificates of stoc( or other securities. An" residue o$er and a!o$e #hat is reBuired to pa" the entire c&ai, inc&udin% expenses, sha&& !e returned to the o#ner of the propert" so&d. The expenses char%ea!&e upon each sei+ure and sa&e sha&& e!race on&" the actua& expenses of sei+ure and preser$ation of the propert" pendin% the sa&e, and no char%e sha&& !e iposed for the ser$ices of the &oca& interna& re$enue officer or his deput".
If at an" tie prior to the consuation of the sa&e a&& proper char%es are paid to the officer conductin% the sa&e, the %oods or effects distrained sha&& !e restored to the o#ner.
ithin t#o 018 da"s after the sa&e, the officer a(in% the sae sha&& a(e a report of his proceedin%s in #ritin% to the Coissioner and sha&& hise&f preser$e a cop" of such report as an officia& record.
hen the aount !id for the propert" under distraint is not eBua& to the aount of the tax or is $er" uch &ess than the actua& ar(et $a&ue of the artic&es offered for sa&e, the Coissioner or his deput" a" purchase the sae in !eha&f of the nationa& Go$ernent for the aount of taxes, pena&ties and costs due thereon.
46
TAXATION: San Beda College of LAW – ALABANG Propert" so purchased a" !e reso&d !" the Coissioner or his deput", su!)ect to the ru&es and re%u&ations prescri!ed !" the Secretar" of 5inance, the net proceeds therefro sha&& !e reitted to the Nationa& Treasur" and accounted for as interna& re$enue. ithin t#ent" 018 da"s after &e$", the officer conductin% the proceedin%s sha&& proceed to ad$ertise the propert" or a usa!&e portion thereof as a" !e necessar" to satisf" the c&ai and cost of sa&e and such ad$ertiseent sha&& co$er a period of a &east thirt" 0@8 da"s. It sha&& !e effectuated !" postin% a notice at the ain entrance of the unicipa& !ui&din% or cit" ha&& and in pu!&ic and conspicuous p&ace in the !arrio or district in #hich the rea& estate &ies and !" pu!&ication once a #ee( for three 0@8 #ee(s in a ne#spaper of %enera& circu&ation in the unicipa&it" or cit" #here the propert" is &ocated. The ad$ertiseent sha&& contain a stateent of the aount of taxes and pena&ties so due and the tie and p&ace of sa&e, the nae of the taxpa"er a%ainst #ho taxes are &e$ied, and a short description of the propert" to !e so&d. At an" tie !efore the da" fixed for the sa&e, the taxpa"er a" discontinue a&& proceedin%s !" pa"in% the taxes, pena&ties and interest. If he does not do so, the sa&e sha&& proceed and sha&& !e he&d either at the ain entrance of the unicipa& !ui&din% or cit" ha&&, or on the preises to !e so&d, as the officer conductin% the proceedin%s sha&& deterine and as the notice of sa&e sha&& specif". ithin fi$e 08 da"s after the sa&e, a return !" the distrainin% or &e$"in% officer of the proceedin%s sha&& !e entered upon the records of the Re$enue Co&&ection 9fficer, the Re$enue District officer and the Re$enue Re%iona& Director. The Re$enue Co&&ection 9fficer, in consu&tation #ith the Re$enue district 9fficer, sha&& then a(e out and de&i$er to the purchaser a certificate fro his records, sho#in% the proceedin%s of the sa&e, descri!in% the propert" so&d statin% the nae of the purchaser and settin% out the exact aount of a&& taxes, pena&ties and interest: Pro$ided, ho#e$er, That in case the proceeds of the sa&e exceeds the c&ai and cost of sa&e, the excess sha&& !e turned o$er to the o#ner of the propert". The Re$enue Co&&ection 9fficer, upon appro$a& !" the Re$enue District 9fficer a", out of his co&&ection, ad$ance an aount sufficient to defra" the costs of co&&ection !" eans of the suar" reedies pro$ided for in this Code, inc&udin% the preser$ation or transportation in case of persona& propert", and the ad$ertiseent and su!seBuent sa&e, !oth in cases of persona& and rea& propert" inc&udin% ipro$eents found on the &atter. In his onth&" co&&ection reports, such ad$ances sha&& !e ref&ected and supported !" receipts. ithin one 068 "ear fro the date of sa&e, the de&inBuent taxpa"er, or an" one for hi, sha&& ha$e the ri%ht of pa"in% to the Re$enue District 9fficer the aount of the pu!&ic taxes, pena&ties, and interest thereon fro the date of de&inBuenc" to the date of sa&e, to%ether #ith interest on said purchase price at the rate of fifteen percent 06Q8 per annu fro the date of purchase to the date of redeption, and such pa"ent sha&& entit&e the person pa"in% to the de&i$er" of the certificate issued to the purchaser and a certificate fro the said Re$enue District 9fficer that he has thus redeeed the propert", and the Re$enue District 9fficer sha&& forth#ith pa" o$er to the purchaser the aount
!" #hich such propert" has thus !een redeeed, and said propert" thereafter sha&& !e free for the &ien of such taxes and pena&ties. The o#ner sha&& not, ho#e$er, !e depri$ed of the possession of the said propert" and sha&& !e entit&ed to the rents and other incoe thereof unti& the expiration of the tie a&&o#ed for its redeption. In case there is no !idder for rea& propert" exposed for sa&e as herein a!o$e pro$ided or if the hi%hest !id is for an aount insufficient to pa" the taxes, pena&ties and costs, the Interna& Re$enue 9fficer conductin% the sa&e sha&& dec&are the propert" forfeited to the Go$ernent in satisfaction of the c&ai in Buestion and #ithin t#o 018 da"s thereafter, sha&& a(e a return of his proceedin%s and the forfeiture #hich sha&& !e spread upon the records of his office. It sha&& !e the dut" of the Re%ister of Deeds concerned, upon re%istration #ith his office of an" such dec&aration of forfeiture, to transfer the tit&e of the propert" forfeited to the Go$ernent #ithout the necessit" of an order fro a copetent court. ithin one 068 "ear fro the date of such forfeiture, the taxpa"er, or an" one for hi a" redee said propert" !" pa"in% to the Coissioner or the &atterUs Re$enue Co&&ection 9fficer the fu&& aount of the taxes and pena&ties, to%ether #ith interest thereon and the costs of sa&e, !ut if the propert" !e not thus redeeed, the forfeiture sha&& !ecoe a!so&ute. The Coissioner sha&& ha$e char%e of an" rea& estate o!tained !" the Go$ernent of the Phi&ippines in pa"ent or satisfaction of taxes, pena&ties or costs arisin% under this Code or in coproise or ad)ustent of an" c&ai therefore, and said Coissioner a", upon the %i$in% of not &ess than t#ent" 018 da"s notice, se&& and dispose of the sae of pu!&ic auction or #ith prior appro$a& of the Secretar" of 5inance, dispose of the sae at pri$ate sa&e. In either case, the proceeds of the sa&e sha&& !e deposited #ith the Nationa& Treasur", and an accountin% of the sae sha&& rendered to the Chairan of the Coission on Audit. The reed" !" distraint of persona& propert" and &e$" on rea&t" a" !e repeated if necessar" unti& the fu&& aount due, inc&udin% a&& expenses, is co&&ected.
No court sha&& ha$e the authorit" to %rant an in)unction to restrain the co&&ection of an" nationa& interna& re$enue tax, fee or char%e iposed !" this Code. If an" person, corporation, partnership, )oint'account 0cuentas en participacion 8, association or insurance copan" &ia!&e to pa" an interna& re$enue tax, ne%&ects or refuses to pa" the sae after deand, the aount sha&& !e a &ien in fa$or of the Go$ernent of the Phi&ippines fro the tie #hen the assessent #as ade !" the Coissioner unti& paid, #ith interests, pena&ties, and costs that a" accrue in addition thereto upon a&& propert" and ri%hts to propert" !e&on%in% to the taxpa"er: Pro$ided, That this &ien sha&& not !e $a&id a%ainst an" ort%a%ee purchaser or )ud%ent creditor unti& notice of such &ien sha&& !e fi&ed !" the Coissioner in the office of the Re%ister of 47
TAXATION: San Beda College of LAW – ALABANG Deeds of the pro$ince or cit" #here the propert" of the taxpa"er is situated or &ocated.
Ci$i& and criina& actions and proceedin%s instituted in !eha&f of the Go$ernent under the authorit" of this Code or other &a# enforced !" the ureau of Interna& Re$enue sha&& !e !rou%ht in the nae of the Go$ernent of the Phi&ippines and sha&& !e conducted !" &e%a& officers of the ureau of Interna& Re$enue !ut no ci$i& or criina& action for the reco$er" of taxes or the enforceent of an" fine, pena&t" or forfeiture under this Code sha&& !e fi&ed in court #ithout the appro$a& of the Coissioner.
deficienc", sha&& !e suspended for the period durin% #hich the Coissioner is prohi!ited fro a(in% the assessent or !e%innin% distraint or &e$" or a proceedin% in court and for sixt" 048 da"s thereafter #hen the taxpa"er reBuests for a rein$esti%ation #hich is %ranted !" the Coissioner #hen the taxpa"er cannot !e &ocated in the address %i$en !" hi in the return fi&ed upon #hich a tax is !ein% assessed or co&&ected: Pro$ided, that, if the taxpa"er infors the Coissioner of an" chan%e in address, the runnin% of the Statute of Liitations #i&& not !e suspended #hen the #arrant of distraint or &e$" is du&" ser$ed upon the taxpa"er, his authori+ed representati$e, or a e!er of his househo&d #ith sufficient discretion, and no propert" cou&d !e &ocated and #hen the taxpa"er is out of the Phi&ippines.
The reed" for enforceent of statutor" pena&ties of a&& sorts sha&& !e !" criina& or ci$i& action, as the particu&ar situation a" reBuire, su!)ect to the appro$a& of the Coissioner.
The forfeiture of chatte&s and reo$a!&e fixtures of an" sort sha&& !e enforced !" the sei+ure and sa&e, or destruction, of the specific forfeited propert". The forfeiture of rea& propert" sha&& !e enforced !" a )ud%ent of condenation and sa&e in a &e%a& action or proceedin%, ci$i& or criina&, as the case a" reBuire.
0a8 In the case of a fa&se or fraudu&ent return #ith intent to e$ade tax or of fai&ure to fi&e a return, the tax a" !e assessed, or a proceedin% in court for the co&&ection of such tax a" !e fi&ed #ithout assessent, at an" tie #ithin ten 068 "ears after the disco$er" of the fa&sit", fraud or oission: Pro$ided, That in a fraud assessent #hich has !ecoe fina& and executor", the fact of fraud sha&& !e )udicia&&" ta(en co%ni+ance of in the ci$i& or criina& action for the co&&ection thereof. 0!8 If !efore the expiration of the tie prescri!ed in Section 1@ for the assessent of the tax, !oth the Coissioner and the taxpa"er ha$e a%reed in #ritin% to its assessent after such tie, the tax a" !e assessed #ithin the period a%reed upon. The period so a%reed upon a" !e extended !" su!seBuent #ritten a%reeent ade !efore the expiration of the period pre$ious&" a%reed upon. 0c8 An" interna& re$enue tax #hich has !een assessed #ithin the period of &iitation as prescri!ed in para%raph 0a8 hereof a" !e co&&ected !" distraint or &e$" or !" a proceedin% in court #ithin fi$e 08 "ears fo&&o#in% the assessent of the tax. 0d8 An" interna& re$enue tax, #hich has !een assessed #ithin the period a%reed upon as pro$ided in para%raph 0!8 hereina!o$e, a" !e co&&ected !" distraint or &e$" or !" a proceedin% in court #ithin the period a%reed upon in #ritin% !efore the expiration of the fi$e 08 '"ear period. The period so a%reed upon a" !e extended !" su!seBuent #ritten a%reeents ade !efore the expiration of the period pre$ious&" a%reed upon. 0e8 Pro$ided, ho#e$er, That nothin% in the iediate&" precedin% and para%raph 0a8 hereof sha&& !e construed to authori+e the exaination and in$esti%ation or inBuir" into an" tax return fi&ed in accordance #ith the pro$isions of an" tax anest" &a# or decree.
Sa&es of forfeited chatte&s and reo$a!&e fixtures sha&& !e effected, so far as practica!&e, in the sae anner and under the sae conditions as the pu!&ic notice and the tie and anner of sa&e as are prescri!ed for sa&es of persona& propert" distrained for the non'pa"ent of taxes.
The runnin% of the Statute of Liitations pro$ided in Sections 1@ and 111 on the a(in% of assessent and the !e%innin% of distraint or &e$" a proceedin% in court for co&&ection, in respect of an"
Disti&&ed spirits, &iBuors, ci%ars, ci%arettes, other anufactured products of to!acco, and a&& apparatus used I or a!out the i&&icit production of such artic&es a", upon forfeiture, !e destro"ed !" order of the Coissioner, #hen the sa&e of the sae for consuption or use #ou&d !e in)urious to pu!&ic hea&th or pre)udicia& to the enforceent of the &a#. A&& other artic&es su!)ect to excise tax, #hich ha$e !een anufactured or reo$ed in $io&ation of this Code, as #e&& as dies for the printin% or a(in% of interna& re$enue staps and &a!e&s #hich are in iitation of or purport to !e &a#fu& staps, or &a!e&s a", upon forfeiture, !e so&d or destro"ed in the discretion of the Coissioner. 5orfeited propert" sha&& not !e destro"ed unti& at &east t#ent" 018 da"s after sei+ure.
a&& )ud%ents and onies reco$ered and recei$ed for taxes, costs, forfeitures, fines and pena&ties sha&& !e paid to the Coissioner or his authori+ed deputies as the taxes these&$es are reBuired to !e paid, and except as specia&&" pro$ided, sha&& !e accounted for and dea&t #ith the sae #a".
hen an action is !rou%ht a%ainst an" Interna& Re$enue officer to reco$er daa%es !" reason of an" act done in the perforance of officia& dut", and the Coissioner is notified of such action in tie to a(e defense a%ainst the sae, throu%h the So&icitor Genera&, an" )ud%ent, daa%es or costs 48
TAXATION: San Beda College of LAW – ALABANG reco$ered in such action sha&& !e satisfied !" the Coissioner, upon appro$a& of the Secretar" of 5inance, or if the sae !e paid !" the person used sha&& !e repaid or rei!ursed to hi. No such )ud%ent, daa%es, or costs sha&& !e paid or rei!ursed in !eha&f of a person #ho has acted ne%&i%ent&" or in !ad faith, or #ith #i&&fu& oppression.
0a8 The additions to the tax or deficienc" tax prescri!ed in this Chapter sha&& app&" to a&& taxes, fees and char%es iposed in this Code. The Aount so added to the tax sha&& !e co&&ected at the sae tie, in the sae anner and as part of the tax. 0!8 If the #ithho&din% a%ent is the Go$ernent or an" of its a%encies, po&itica& su!di$isions or instruenta&ities, or a %o$ernent'o#ned or contro&&ed corporation, the ep&o"ee thereof responsi!&e for the #ithho&din% and reittance of the tax sha&& !e persona&&" &ia!&e for the additions to the tax prescri!ed herein. 0c8 the ter YpersonY , as used in this Chapter, inc&udes an officer or ep&o"ee of a corporation #ho as such officer, ep&o"ee or e!er is under a dut" to perfor the act in respect of #hich the $io&ation occurs. 0A8 There sha&& !e iposed, in addition to the tax reBuired to !e paid, a pena&t" eBui$a&ent to t#ent"'fi$e percent 01Q8 of the aount due, in the fo&&o#in% cases: 068 5ai&ure to fi&e an" return and pa" the tax due thereon as reBuired under the pro$isions of this Code or ru&es and re%u&ations on the date prescri!ed or 018 n&ess other#ise authori+ed !" the Coissioner, fi&in% a return #ith an interna& re$enue officer other than those #ith #ho the return is reBuired to !e fi&ed or 0@8 5ai&ure to pa" the deficienc" tax #ithin the tie prescri!ed for its pa"ent in the notice of assessent or 0=8 5ai&ure to pa" the fu&& or part of the aount of tax sho#n on an" return reBuired to !e fi&ed under the pro$isions of this Code or ru&es and re%u&ations, or the fu&& aount of tax due for #hich no return is reBuired to !e fi&ed, on or !efore the date prescri!ed for its pa"ent. 08 In case of #i&&fu& ne%&ect to fi&e the return #ithin the period prescri!ed !" this Code or !" ru&es and re%u&ations, or in case a fa&se or fraudu&ent return is #i&&fu&&" ade, the pena&t" to !e iposed sha&& !e fift" percent 0Q8 of the tax
or of the deficienc" tax, in case, an" pa"ent has !een ade on the !asis of such return !efore the disco$er" of the fa&sit" or fraud: Pro$ided, That a su!stantia& underdec&aration of taxa!&e sa&es, receipts or incoe, or a su!stantia& o$erstateent of deductions, as deterined !" the Coissioner pursuant to the ru&es and re%u&ations to !e prou&%ated !" the Secretar" of 5inance, sha&& constitute pria facie e$idence of a fa&se or fraudu&ent return: Pro$ided, further, That fai&ure to report sa&es, receipts or incoe in an aount exceedin% thirt" percent 0@Q8 of that dec&ared per return, and a c&ai of deductions in an aount exceedin% 0@Q8 of actua& deductions, sha&& render the taxpa"er &ia!&e for su!stantia& underdec&aration of sa&es, receipts or incoe or for o$erstateent of deductions, as entioned herein.
There sha&& !e assessed and co&&ected on an" unpaid aount of tax, interest at the rate of t#ent" percent 01Q8 per annu, or such hi%her rate as a" !e prescri!ed !" ru&es and re%u&ations, fro the date prescri!ed for pa"ent unti& the aount is fu&&" paid. An" deficienc" in the tax due, as the ter is defined in this Code, sha&& !e su!)ect to the interest prescri!ed in Su!section 0A8 hereof, #hich interest sha&& !e assessed and co&&ected fro the date prescri!ed for its pa"ent unti& the fu&& pa"ent thereof. In case of fai&ure to pa": 068 The aount of the tax due on an" return to !e fi&ed, or 018 The aount of the tax due for #hich no return is reBuired, or 0@8 A deficienc" tax, or an" surchar%e or interest thereon on the due date appearin% in the notice and deand of the Coissioner, there sha&& !e assessed and co&&ected on the unpaid aount, interest at the rate prescri!ed in Su!section 0A8 hereof unti& the aount is fu&&" paid, #hich interest sha&& for part of the tax. If an" person reBuired to pa" the tax is Bua&ified and e&ects to pa" the tax on insta&&ent under the pro$isions of this Code, !ut fai&s to pa" the tax or an" insta&&ent hereof, or an" part of such aount or insta&&ent on or !efore the date prescri!ed for its pa"ent, or #here the Coissioner has authori+ed an extension of tie #ithin #hich to pa" a tax or a deficienc" tax or an" part thereof, there sha&& !e assessed and co&&ected interest at the rate hereina!o$e prescri!ed on the tax or deficienc" tax or an" part thereof unpaid fro the date of notice and deand unti& it is paid. In the case of each fai&ure to fi&e an inforation return, stateent or &ist, or (eep an" record, or supp&" an" inforation reBuired !" this Code or !" the Coissioner on the date prescri!ed therefor, un&ess it is sho#n that such fai&ure is due to reasona!&e cause and not to #i&&fu& ne%&ect, there sha&&, upon notice and deand !" the Coissioner, !e paid !" the person fai&in% to fi&e, (eep or supp&" the sae, 9ne 49
TAXATION: San Beda College of LAW – ALABANG thousand pesos 06,8 for each fai&ure: Pro$ided, ho#e$er , That the a%%re%ate aount to !e iposed for a&& such fai&ures durin% a ca&endar "ear sha&& not exceed T#ent"'fi$e thousand pesos 0P1,8.
An" person reBuired to #ithho&d, account for, and reit an" tax iposed !" this Code or #ho #i&&fu&&" fai&s to #ithho&d such tax, or account for and reit such tax, or aids or a!ets in an" anner to e$ade an" such tax or the pa"ent thereof, sha&&, in addition to other pena&ties pro$ided for under this Chapter, !e &ia!&e upon con$iction to a pena&t" eBua& to the tota& aount of the tax not #ithhe&d, or not accounted for and reitted.
An" ep&o"erM#ithho&din% a%ent #ho fai&s or refuses to refund excess #ithho&din% tax sha&&, in addition to the pena&ties pro$ided in this Tit&e, !e &ia!&e to a pena&t" to the tota& aount of refunds #hich #as not refunded to the ep&o"ee resu&tin% fro an" excess of the aount #ithhe&d o$er the tax actua&&" due on their return
If o!)ecti$e and ethods are a&i(e constitutiona&&" $a&id, no reason is seen #h" the state a" not &e$" taxes to raise funds for their prosecution and attainent. Taxation a" !e ade the ip&eent of the stateUs po&ice po#er . It is inherent in the po#er to tax that a State !e free to se&ect the su!)ects of taxation and it has !een repeated&" he&d that *irre%u&arities #hich resu&t fro a sin%&in% out of one particu&ar c&ass for taxation or exeption infrin%e no Constitutiona& &iitation./ The su%ar industr"s prootion, protection and ad$anceent therefore redound %reat&" to the %enera& #e&fare. Thus, the contention of p&aintiff that the Act #as prou&%ated not for pu!&ic purpose cannot !e uphe&d.
It is said that taxes are #hat #e pa" for ci$i&i+ed societ". ithout taxes, the %o$ernent #ou&d !e para&"+ed for &ac( of the oti$e po#er to acti$ate and operate it . -ence, despite the natura& re&uctance to surrender part of oneUs hard earned incoe to the taxin% authorities, e$er" person #ho is a!&e to ust contri!ute his share in the runnin% of the %o$ernent. The %o$ernent for its part, is expected to respond in the for of tan%i!&e and intan%i!&e !enefits intended to ipro$e the &i$es of the peop&e and enhance their ora& and ateria& $a&ues. This s"!iotic re&ationship is the rationa&e of taxation and shou&d dispe& the erroneous notion that it is an ar!itrar" ethod of exaction !" those in the seat of po#er .
It #as contended that said ordinances iposin% &icense fee on the distri!ution and sa&e of !i!&es and other re&i%ious &iterature, ipair the free exercise of re&i%ion, specifica&&" the ri%ht to disseinate re&i%ious inforation. As !et#een taxation and re&i%ion, the &atter pre$ai&s .
The exeption under Sec. 110@8 Art. I of the Constitution on&" co$ers taxes assessed on ceeteries, churches, and parsona%es or con$ents, appurtenant thereto and a&& &ands, !ui&din%s and ipro$eents used exc&usi$e&" for re&i%ious purposes. These taxes are propert" taxes as contra'distin%uished fro excise taxes. In the case at !ar, #hats !ein% assessed #as a donees %ift tax not on the properties these&$es. The %ift tax #as an excise tax upon the use ade of the properties, upon the exercise of the pri$i&e%e of recei$in% the properties. This (ind of tax is not #ithin the exeptin% pro$ision of the constitution. Therefore, the petitioner as su!stituted !" the -ead of the Diocese, is &ia!&e to pa" the said %ift tax. The exeption under Sec. 110@8 Art. I of the Constitution on&" co$ers propert" taxes assessed on ceeteries, churches, and parsona%es or con$ents, appurtenant thereto and a&& &ands, !ui&din%s and ipro$eents used exc&usi$e&" for re&i%ious purposes.
The phrase *used exc&usi$e&" for educationa& purposes/ is not &iited to propert" actua&&" indispensa!&e therefor !ut extends to faci&ities, #hich are incidenta& to and reasona!&" necessar" to the accop&ishent of said purposes
Exeption fro pa"ent of &and tax, #hich refers to &ots used as hoe of the priest #ho preside o$er the church ust inc&ude not on&" the &ot actua&&" occupied !" the church !ut a&so the ad)acent %round destined to eet the ordinar" incidenta& uses of an.
This is !ecause dou!&e taxation is not prohi!ited !" the Constitution . 5urtherore, there is dou!&e taxation on&" #hen the sae person is taxed !" the sae )urisdiction for the sae purpose. In the first case, the annua& !usiness tax is a &icense tax to en%a%e in the !usiness of #ho&esa&e &iBuor in Ce!u Cit". Such &icense tax constitutes a re%u&ator" easure in the exercise of po&ice po#er, #hereas that #hich is iposed !" the ordinance is a t"pica& tax or re$enue easure.
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TAXATION: San Beda College of LAW – ALABANG
Criina& Action Tax Assessent
An assessent is not necessar" !efore criina& char%es can !e fi&ed. A criina& char%e need not on&" !e supported !" a pria facie sho#in% of fai&ure to fi&e a reBuired return. The CIR had, in such tax e$asion cases, discretion on #hether to issue an assessent, or to fi&e a criina& case a%ainst the taxpa"er, or to do !oth. Criina& Action
The CIR authori+ed certain IR officers to exaine the !oo(s of accounts and other accountin% records of Pascor Rea&t" and De$e&opent Corp. 0PRDC8 for 6324, 6327 and 6322. The exaination resu&ted in recoendation for the issuance of an assessent of P7,=32,=@=.4 and P@,6,1@4.@ for 6324 and 6327, respecti$e&". 9n ?arch 6, 633, Coissioner fi&ed a criina& cop&aint for tax e$asion a%ainst PRDC, its president and treasurer !efore the D9. Pri$ate respondents fi&ed iediate&" an ur%ent reBuest for reconsideration on rein$esti%ation disputin% the tax assessent and tax &ia!i&it". 9n ?arch 1@, 633, pri$ate respondents recei$ed a su!poena fro the D9 in connection #ith the criina& cop&aint. In a &etter dated, ?a" 67, 633, the Coissioner denied pri$ate respondents reBuest for reconsideration 0rein$esti%ation on the %round that no fora& assessent has !een issued #hich the &atter e&e$ated to the CTA on a petition for re$ie#. The Coissioners otion to disiss on the %round of the CTAs &ac( of )urisdiction inasuch as no fora& assessent #as issued a%ainst pri$ate respondent #as denied !" CTA and ordered the Coissioner to fi&e an ans#er !ut did not instead fi&ed a petition #ith the CA a&&e%in% %ra$e a!use of discretion and &ac( of )urisdiction on the part of CTA for considerin% the affida$itMreport of the re$enue officers and the endorseent of said report as assessent #hich a" !e appea&ed to he CTA. The CA sustained the CTA decision and disissed the petition.
6. 1.
hether or not the criina& cop&aint for tax e$asion can !e construed as an assessent. hether or not an assessent is necessar" !efore criina& char%es for tax e$asion a" !e instituted.
The fi&in% of the criina& cop&aint #ith the D9 cannot !e construed as a fora& assessent. Neither the Tax Code nor the re$enue re%u&ations %o$ernin% the protest assessents pro$ide a specific definition or for of an assessent. An assessent ust !e sent to and recei$ed !" the taxpa"er, and ust deand pa"ent of the taxes descri!ed therein #ithin a specific period. The re$enue officers affida$it ere&" contained a coputation of respondents tax &ia!i&it". It did not state a deand or period for pa"ent. It #as addressed to the Secretar" of ustice not to the taxpa"er. The" )oint affida$it #as eant to support the criina& cop&aint for tax e$asion it #as not eant to !e a notice of tax due and a deand to pri$ate respondents for the pa"ent thereof. The fact that the cop&aint #as sent to the D9, and not to pri$ate respondent, sho#s that coissioner intended to fi&e a criina& cop&aint for tax e$asion, not to issue an assessent.
A tas( force #as created on une 6, 633@ to in$esti%ate tax &ia!i&ities of anufacturers en%a%ed in tax e$asion schees. 9n u&" 6, 633@, the CIR issued Re$. ?eo Circ. No. @7'3@ #hich rec&assified certain ci%arette !rands anufactured !" pri$ate respondent 5ortune To!acco Corp. 05ortune8 as forei%n !rands su!)ect to a hi%her tax rate. 9n Au%ust @, 633@, 5ortune Buestioned the $a&idit" of said rec&assification as !ein% $io&ati$e of the ri%ht to due process and eBua& protection of &a#s. The CTA, on Septe!er 2, 633@ reso&$ed that said rec&assification #as of dou!tfu& &e%a&it" and en)oined its enforceent. In the eantie, on Au%ust @, 633@, 5ortune #as assessed deficienc" incoe, ad $a&ore and AT for 6331 #ith pa"ent due #ithin @ da"s fro receipt. 9n Septe!er 61, 633@, pri$ate respondent o$ed for reconsideration of said assessent. ?ean#hi&e on Septe!er 7, 633@, the Coissioner fi&ed a cop&aint #ith the D9 a%ainst pri$ate respondent 5ortune, its corporate officers and 3 other corporations and their respecti$e corporate officers for a&&e%ed fraudu&ent tax e$asion for non'pa"ent of the correct incoe, ad $a&ore and AT for 6331. The cop&aint #as referred to the D9 Tas( 5orce on re$enue cases #hich found sufficient !asis to further in$esti%ate the char%es a%ainst 5ortune. A su!poena #as issued on Septe!er 2, 633@ directin% pri$ate respondent to su!it their counter'affida$its. ut it fi&ed a $erified otion to disiss or a&ternati$e&", a otion to suspend !ut #as denied and thus treated as their counter'affida$it. A&& otions fi&ed thereafter #ere denied. anuar" =, 633=, pri$ate respondents fi&ed a petition for certiorari and prohi!ition #ith pra"er for pre&iinar" in)unction pra"in% the CIRs cop&aint and prosecutors orders !e disissedMset aside or a&ternati$e&", that the pre&iinar" in$esti%ation !e suspended pendin% deterination !" CIR of 5ortunes otion for reconsiderationMrein$esti%ation of the Au%ust 6@, 633@ assessent of taxes due. The tria& court %ranted the petition for a #rit of pre&iinar" in)unction to en)oin the pre&iinar" in$esti%ation on the cop&aint for tax e$asion pendin% !efore the D9, ru&in% that the tax &ia!i&it" of pri$ate respondents first !e sett&ed !efore an" cop&aint for fraudu&ent tax e$asion can !e initiated.
hether the !asis of pri$ate respondents tax &ia!i&it" first !e sett&ed !efore an" cop&aint for fraudu&ent tax e$asion can !e initiated.
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