TAX REMEDIES FOR BIR

CASES AND
COMPLIANCE TRAINING
“PROPER TAX FILLING WILL NEED A
GOOD INTERNAL AND ACCOUNTING
CONTROLS”
DUTIES OF TAXPAYERS
1. To get Taxpayer Identification Number (TIN)
2. To Register as a Taxpayer (Income Tax, Withholding Agent,
VAT, Non-Vat and to Update BIR COR)
3. To Register Books of Accounts and to Keep Books and
Records for 10 Years from Date of Last Entry
4. To Secure Authority to Print and to Register and Issue Sales
Invoices, incl. Delivery Receipts, Official Receipts,
Provisional Receipts and Acknowledgement Receipts
DUTIES OF TAXPAYERS
5. To Register Cash Register Machines and POS Machines
6. To File Tax Returns and Pay Taxes Within the Dates
Prescribed by Law; Otherwise Penalties will be Imposed
7. To Withhold and Remit Taxes Required by Law or
Regulations and to Issue Certificate of Tax Withheld
8. To Submit Reports and Other Information Required by Law
or Regulations
TAX EVASION AND TAX AVOIDANCE
“Tax evasion connotes fraud through the use of pretenses
and forbidden devices to lessen or defeat taxes. On the other
hand, tax avoidance is a legal means used by the taxpayer to
reduce taxes.”
1. The end to be achieved
2. An accompanying state of mind which is described as evil,
in bad faith, willful or deliberate and not accidental
3. A course of action or failure of action which is unlawful
ASSESSMENT PROCEDURE
 ASSESSMENT CYCLE
Activity Number of Days
Filling of Tax Return law prescribes due date
Tax Audit by BIR 180 days + 180 days (upon waiver)
Informal Conference 30 days from receipt of notice
PAN
Reply to PAN 15 days from receipt of PAN
FAN 3 years or 10 years from filling
 ASSESSMENT CYCLE
Activity Number of Days
Adm. Protest to FAN 30 days from receipt of FAN
Supplemental Protest 60 days from filing of protest
BIR Action 180 days from protest
Appeal to CTA 30 days from denial of protest or lapse
of 180 days
Motion for Recon – CTA 15 days from date or receipt
 ASSESSMENT CYCLE
Activity Number of Days
Appeal to CTA en banc 15 days from date of receipt
Appeal to Supreme 15 days from date of receipt
Court
Appeal to Supreme 15 days from date of receipt, Only for
Court en Banc extraordinary cases
CONTENTS OF LOA
1. Name, address and TIN of Taxpayer
2. Name and designation of revenue officer(s) authorized to
conduct tax audit. (Audit perform other than them will
invalidate the tax audit)
3. Scope of Examination (Kinds of Taxes and Period) (Should
only be for a year and you cannot be audited twice for the
same kind of tax)
4. Telephone number(s) of BIR office.
REQUIREMENTS OF LOA AND AUDIT
1. The Revenue Regional Director shall approve and sign
LOAs for all audit cases within his regional jurisdiction,
except:
1. Cases involving civil or criminal tax fraud which fall under
the Tax Fraud Division of the Enforcement Service
2. Cases under Large Taxpayers Division
3. LOAs will be issued only for tax returns which correspond
with the existing
REQUIREMENTS OF LOA AND AUDIT
2. The same Revenue Officer/Group Supervisor shall not be
allowed to audit the same taxpayer for two consecutive
years.
3. Checklist of Presentation of the Requirements for the
Audit Attached to LOA
4. No erasures on LOA
5. LOA shall only cover one year and unverified prior years it
not allowed
REQUIREMENTS OF LOA AND AUDIT
6. Audit must be completed within 180 days, unless
revalidated for another 180 days.
7. Only revenue officers named in LA are authorized to look
at books and records.
8. Audit must be done generally in taxpayer’s place of
business.
9. For access to records, Revenue Officer concerned shall
send a First Notice, signed by himself and/or his group
supervisor, to the taxpayer after 10 calendar days.
REMEDIES DURING AUDIT
1. Submit copy of returns, worksheets, and other reportorial
requirements to revenue officers with covering transmittal
letter.
2. Present only books, records, and other documents
covered by the period under audit.
3. Bank deposits and related records are covered by RA 1405
(Bank Secrecy Law), which cannot be examined by
revenue officers
REMEDIES DURING AUDIT
4. Make analyses of accounts and comparison of figures
shown in ITR, VAT returns, audited FS, SLS and SLP, alpha
list of compensation income and fringe benefits,
inventory, etc. Many findings of revenue officers relate to
discrepancies between or among above documents.
INFORMAL CONFERENCE
Purpose: Presentation of Audit Findings and Give Taxpayer
the Opportunity to Present His Side
Revenue Officers:
1. Will present in an informal manner their findings to the
taxpayer or his representative
2. Will verbally explain the source of information and the bases
of their findings
3. May sign their findings.
INFORMAL CONFERENCE
Taxpayer may:
1. Listen passively to the revenue officers
2. Explain his position or comment on the revenue officer’s findings
and submit documentary evidence
3. Ask for another informal conference to give a more detailed
explanation to their findings
4. Request for breakdown of findings or source of the information
from revenue officers as well as the factual or legal bases
PRE-ASSESSMENT NOTICE
Contents:
1. Computation of Proposed Deficiency Tax
2. Details of Facts & Law, Rules and Regulations, or
Jurisprudence on Which the Assessment is Based
PURPOSE:
1. Presentation of Audit Proposal
2. Give Taxpayer the Opportunity to Present His Side
PRE-ASSESSMENT NOTICE
General Rule: PAN must be issued by BIR before issuing FAN
and demand letter
Exceptions:
1. Deficiency tax is the result of mathematical error
2. Discrepancy between amount withheld and tax remitted
3. Taxpayer who opted to claim refund/tax credit but also
carried over and applied the same on the next filing
4. Excise tax due has not been paid
5. Violation of condition of tax-free importation
REPLY TO PAN
•Within 15 days from date of receipt of PAN
•Explanation of every item of income or deduction or other
matter questioned by revenue officer
•Factual and/or legal bases, including applicable
jurisprudence
•Prays for total or partial cancellation of PAN
•Issuance of FAN and Demand Letter is tantamount to denial
of Reply to PAN.
FINAL ASSESSMENT NOTICE
•Written notice of tax liability of a taxpayer, contains
computation of tax liability and a demand for the payment of
tax.
•Creates legal obligation on the part of taxpayer to pay tax to
government. If taxpayer files timely protest, assessment
does not become final and executory.
•Must issued within 3 years from date of filing of return, 10
years from date of discovery for false/fraudulent return.
PROTEST LETTER
•Must be filed within 30 days from date of receipt of
assessment
•Nature of Protest
1. Request for Reconsideration
2. Request for Reinvestigation (60 days to extension)
•Contents of Protest Letter
1. Findings to which taxpayer agrees
2. Findings to which taxpayer does not agree and statement of
facts and or/law
Consequences of Absence of Valid and
Timely Protest
1. Make assessment final and executory
2. Appeal to CTA by taxpayer is no longer available or
ineffective
3. Motion to dismiss may be filed by BIR
4. BIR may pursue collection of taxes and penalties,
administratively and/or judicially;
5. Compromise settlement of assessment is still possible.
ADMINISTRATIVE APPEAL
Decision of Regional Director on the Protest is Not Final and
May be Appealed to the Commissioner
◦ Remedy of taxpayer to the denial of protest is appeal to the
CTA
◦ Decision of CIR on disputed assessment is appealable to CTA
but CIR’s power can be delegated to subordinate officials
◦ Appeal to CTA necessitates payment of expensive filling fee and
lawyer’s professional fee
Prima Facie Evidence of Fraud
Failure to report sales, receipts or income in an amount
exceeding thirty percent (30%) of that declared per return,
and a claim of deductions in an amount exceeding (30%) of
actual deductions, shall render the taxpayer liable for
substantial under declaration of sales, receipts or income or
for overstatement of deductions, as mentioned herein.
REMEDIES OF TAXPAYERS
•Substantive Remedies
• To question legality of law, rules or regulations
• To question validity of assessment
•Procedural Remedies
• To raise non-compliance with administrative procedures
• To raise lack of notice or receipt of notice
REMEDIES OF TAXPAYERS
•Administrative Remedies
• To protest deficiency tax assessment
• Offer compromise or abatement
• To file claim for refund or tax credit
• Carry over of excess payment to next quarter/year
•Judicial Remedies
• Appeal to Court of Tax Appeals
Other Things Worth Mentioning
1. There is no compromise for Withholding Taxes. You will
pay it 100% of what is assessed of you plus surcharges
and interests.
2. You can still be audited on three consecutive years if your
first two years audit resulted to deficiency taxes.
Thank you!