ADMINISTRATIVE

PROVISIONS OF
INCOME TAXATION
Chapter 2
Chapter Objectives
 Discuss the 2 aspects of tax administration
 Identify the situation where assessment is
required.
 Identify the prescribed assessment procedures
 Described the remedies of government to enforce
collection of taxes
 Explain the concept of levy and distraint
TAX ASSESSMENT
When applied to internal revenue taxes, refers to the valuation and
appraisal of the subject of taxation.
It is an official action of an officer, authorized by law, to determine
the amount of tax due, including surcharges, penalties, and
interests.

Tax Assessment involves the following basic procedures:

1. Determination of the amount due
2. Issuance of proper notice to the taxpayer regarding the amount
of his/her tax liability
3. Enforcement or demand for payment simultaneous with the
giving of notice.
 Tax deficiency
- Means the amount of tax levied is more than what the taxpayer
paid as shown on his/her return

Deficiency Assessment
- Refers to an assessment made after the examination, inspection
or independent investigation by the revenue officer of the
taxpayer’s records where deficiency had been found.

Fraud Assessment
- Refers to an assessment arising from false or fraudulent filing
determined by a revenue officer during the conduct of tax
examination and evaluation of the taxpayer’s records.
Prescribed Period of Assessment
 -the time allowed by the law to appraise and determine the total
value or amount of the subject of taxation.
 - Assessment made outside the allowed period is not valid, and
the results or findings of the examination cannot be
implemented.
 - In the event assessment is made outside the allowable period,
the taxpayer can raise a defense that the right of the government
to assess has already lapsed or prescribed.
Assessment Period Allowed by NIRC are as
follows:
 1. 3 year from date of filling the return
- The 3 year period applies when a correct tax return has been
filed.

a. If the return was filed before the last day of filing, the 3-year
period will start after the last day of filing the return.

b. If the return was filed after the mandated period of filing, the 3
year period of assessment will start from the date of filing the
return.
Assessment Period Allowed by NIRC
are as follows:
 2. 10 year from the date of discovery or
omission.
- This period applies under the following
instances:
A. Failure to file a return
B. Return filed was false or fraudulent with the
intention to evade the tax.
Illustration 2.1
 Ms. Charmaine, sales manager of Townsville Company, filed his
income tax return for 2023 on March 10, 2024. The tax due and
payable on his taxable compensation income was P20, 000.00. The
tax audit of the BIR revealed that the tax due amounted to P55,
000.00.

 Required: Determine whether the following assessment conducted

were valid or not.
 Case 1- The BIR made the assessment for deficiency tax on
November 15, 2026.
 Case 2- Assume that the income tax return filed was fraudulent and
such was discovered by the BIR on July 10, 2024. The assessment
was made on February 10, 2027.
Requisites of Valid Tax Assessment
1. The assessment is made within the
prescribed period.
2. The assessment are conducted in
accordance with the standards procedures.
Tax Collection

Collectionof taxes is an administrative

aspect of taxation. This refers to a
process wherein the government
devises effective and efficient ways
and means to collect taxes.
Remedies of the Government to
enforce Tax Collection
 Sometimes, taxpayers are not able to pay the
taxes due and payable on the prescribed time. In
such case, the government is equipped with
various remedies to effect collection.
Collection Remedies of the
Government

Collection Remedies of the

Government

Administrative Judicial
1. Distraint of 1. Civil Action
Personal Property 2. Criminal
2. Levy of Real Action
Property
Administrative Remedies
 1. Distraint of Personal Property
- Refers to the seizure of Personal, Tangible or Intangible, by the
government to effect collection of taxes including penalties.

- In the event there is no voluntary payment of taxes, the distraint

property will be offered for public auction.

 2. Levy of Real Property

 Refers to the seizure of real property of the taxpayer by the
government to enforce payment of taxes.
Distinction Between Distraint and
Levy
Basis Distraint Levy

As to Subject matter Personal Property Real Property

As to disposition in Purchased by the Forfeited by the

case there is no bidder government then government then
or bids are insufficient resold to satisfy tax resold to satisfy tax
to cover tax liability liability liability
As to necessity of Advertisement is not Advertisement is
advertisement required required once a
week for three
weeks.
Giving Rewards to Qualified Tax
Informers
 Any person, except an internal revenue officer or employee, or other
public official or his/her relative within the sixth degree of
consanguinity, who voluntarily gives definite and sworn information
not yet in the possession of the BIR leading to the discovery of frauds
upon the internal revenue laws or violations of the discovery of frauds
upon the internal revenue laws or violations of any of the provisions
thereof, shall be rewarded.

 The cash reward of informers shall be subject to income tax, collected

as a final withholding tax, at a rate of 10%.

 10% based on revenues, surcharge imposed or collected or P1, 000,

000.00
Continuation...
 In giving the rewards to tax informers, the following amounts or rates
are followed:
 1. 10% based on revenue, surcharge imposed or P1 ,000,000.00,
whichever is lower for giving of voluntary sworn information to the
BIR or for the Violations of the tax code.
 2. 10% based on the FAIR MARKET VALUE, or P1, 000, 000.00
whichever is lower, discovery and seizure of smuggled goods.
Illustration 2.2
 During the taxable year, Mr. Wilmard Taeyoung informed the BIR about the plan of
some businessmen to import smuggled goods from South Korea. The entrapment
resulted in the seizure of smuggled goods with a fair market value of P30, 000,
000.00.
 Required: Compute the amount of reward that Mr. Wilmard Taeyoung will receive
from the government.
Ans. The amount of reward is computed as follows:
Fair market Value of the Smuggled Goods P30, 000,
000.00
Multiply: Percentage of reward 10%
Total P3, 000, 000.00
Limit (Maximum allowable reward) P1,
000, 000.00
Less: Final Tax ( P1, 000, 000.00 x 10% ) P100,
000.00
Amount of Reward P900, 000.00
Imposition of Surcharge and
Penalties
 Surcharge arises because of late filing of the return and delinquency in
payment of tax liabilities.
 1. 25% surcharge is imposed on the following cases:
A. For late filing of the tax return
B. For late payment of tax due
C. For failure to pay deficiency tax assessment on the prescribed time

 2. 50% surcharge on the following cases:

A. For willful neglect to file the return
B. For false or Fraudulent return filed

 3. 12% interest per annum from the date of payment is due up to date of full
payment.
Illustration 2.3
 During the 2023 taxable year, Ms. Lyka, a self employed
individual with registered address at Kidapawan City, has tax due
and payable of P250, 000.00 based on the income tax return.
 Required: Compute the total tax liabilities, including surcharge
and penalties, under the following cases:
 1. Ms. Lyka filed her income tax return (ITR) on July 1, 2024

 2. Assume that Ms. Lyka deliberately did not file her income tax
return on april 15, 2024. Her intention was called by the BIR
through the formal notice and demands to file her return(ITR).
She filed her return on January 31, 2025.
Solution 1: late filing and payment of ITR
 Amount of tax liability is computed as follows:

Income tax due per return filed

P250, 000.00
Add: Surcharge and Interest
Surcharge (P250, 000.00 x 25%) P62,
500.00
Interest (P250, 000.00 x 12% x 77/365) P6, 328.77 P68,
828.77
Total amount due
P318, 828.77
 Solution 2: Willful Neglect and late filing
 Willful Neglect of filing is imposed a 50% surcharge and 12% interest
The tax due and payable will be:
Income tax due per return filed
P250, 000.00
Add: Surcharge and interest
Surcharge (P250, 000.00 x 50% ) P125, 000.00
Interest (P250, 000.00 x 12% x 291/365) P23, 917.81 P148,
917.81
Total amount due
P398, 917.81
Tax Administration
- Refers to the management of the tax
system.
- National tax systems in the Philippines is
entrusted to the BIR which in under the
supervision and administration of DOF.
- Chief officials of BIR:
a. 1 Commissioner
b. 4 Deputy Commissioners
- Operations group
- Legal enforcement group
- Information systems group
- Resource management group