PRINCIPLES OF TAXATION

WEEK 1 DAY 2
WHAT ARE THE INHERENT POWERS OF THE STATE?

 Police power
 Eminent domain
 Taxation
WHAT IS POLICE POWER?

The power of promoting public welfare by restraining and regulating the

use of liberty and property. It enables it to prohibit all that is hurtful to
the comfort, safety, and welfare of society.
GIVE AN EXAMPLE OF CIRCUMSTANCE WHERE THE STATE
EXERCISED ITS POLICE POWER.

A perfect example of this is the community quarantine imposed by the

national government to prevent the spread of COVID-19. The liberty
regulated and limited is the freedom of movement while the purpose is
to protect public health.
WHAT IS THE BASIS OF POLICE POWER?

The Police Power of the State is based on the law of overruling necessity,
which means that the State has the power to restrain and regulate the
use of liberty and property for the promotion of public welfare. It is only
logical that the State has the power to do what is necessary in each
scenario. Absent such powers, public welfare will suffer.
WHAT ARE THE LIMITATIONS ON THE EXERCISE OF THE POLICE
POWER?

1. Due Process Clause – Provides that no person shall be deprived of

life, liberty, or property without due process of law.
2. Equal Protection Clause – Provides that no person shall be denied
the equal protection of the laws.
WHAT ARE THE REQUISITES FOR A VALID EXERCISE OF POLICE
POWER?

1. Lawful subject - The subject of the measure is within the scope of the
police power, i.e., that the activity or property sought to be regulated
affects the public welfare. The interest of the public, generally, as
compared to a particular class requires interference by the State; and
2. Lawful means - The means employed are reasonably necessary for the
accomplishment of the purpose, and not unduly oppressive upon
individuals. Both the end and the means must be legitimate
WHAT IS EMINENT DOMAIN?

The power to forcibly take private property for public purpose upon
payment of just compensation.
GIVE AN EXAMPLE OF THE EXERCISE OF THE EMINENT DOMAIN
POWER

The road widening project currently in development throughout

the country. Said project consist of the taking of private
property, the land near every major highway, and using it to
expand said highways.
WHAT IS THE POWER OF TAXATION?

The power by which the sovereign, through its law-making body,

raises revenue to defray the necessary expenses of
government. It is a way of apportioning the costs of government
amount those who in some measure are privileged to enjoy its
benefits and must bear its burdens.
WHAT IS THE SCOPE OF TAXATION?

Taxation covers persons, property, or occupation to be taxed

within the taxing jurisdiction. It is inherent in the power to tax
that a State be free to select the subjects of taxation.
DISTINGUISH THE THREE INHERENT POWERS

Police Power Eminent Domain Taxation

As to purpose Public necessity and the Necessity of the public for Public necessity; lifeblood
right of the State and of the use of private property theory
the public to self-
preservation and self-
protection
DISTINGUISH THE THREE INHERENT POWERS

Police Power Eminent Domain Taxation

As to nature of the Property is noxious or Property is wholesome and is devoted to public use or
property involved intended for a noxious purpose
purpose and as such
taken and destroyed
DISTINGUISH THE THREE INHERENT POWERS

Police Power Eminent Domain Taxation

As to purpose Public necessity and the Compensation is the full Compensation is the
right of the State and of and fair equivalent of the protection and public
the public to self- property taken improvements instituted
preservation and self- by the government for the
protection taxes paid
DISTINGUISH THE THREE INHERENT POWERS

Police Power Eminent Domain Taxation

As to the scope Regulates both liberty and Affects only property rights
property
DISTINGUISH THE THREE INHERENT POWERS

Police Power Eminent Domain Taxation

As to exercising authority Exercised only by the May be delegated to Exercised only by the
Government private entities (Meralco is Government
able to buy land for their
electric posts as it is use
for public utility, despite
being a private entity)
WHAT IS THE NATURE OF TAXATION?

1. Inherent in sovereignty
2. Essentially a legislative function
3. Subject to constitutional and inherent limitations
WHAT DOES ‘INHERENT IN SOVEREIGNTY’ IMPLY?

The power to tax is an attribute of sovereignty. It is a power emanating from

necessity. It is a necessary burden to preserve the State's sovereignty and a means
to give the citizenry an army to resist an aggression, a navy to defend its shores from
invasion, a corps of civil servants to serve, public improvement designed for the
enjoyment of the citizenry and those which come within the State's territory, and
facilities and protection which a government is supposed to provide
WHAT DOES ‘ESSENTIALLY A LEGISLATIVE FUNCTION’ IMPLY?

The power to tax is peculiarly and exclusively legislative and cannot be exercised by
the executive or judicial branch of the government. Hence, only Congress, our
national legislative body, can impose taxes
WHAT DOES ‘SUBJECT TO CONSTITUTIONAL AND INHERENT
LIMITATIONS’ IMPLY?

The power to tax is said to be the strongest of all the powers of government. It is
unlimited, plenary, comprehensive and supreme, in the absence of constitutional
restrictions, the principal check on its abuse resting in the responsibility of members
of Congress to their constituents. However, the power of taxation is subject to
constitutional and inherent limitations. These limitations are those provided in the
fundamental law or implied therefrom, while the rest spring from the nature of the
taxing power itself although they may or may not be provided in the Constitution.
WHAT ARE THE CHARACTERISTICS OF TAXES?
1. It is an enforced contribution for its imposition is in no way dependent upon the will or assent of the person taxed. It is not
contractual, either express or implied, but positive acts of government.
2. It is generally payable in the form of money, although the law may provide payment in kind
3. It is proportionate in character or is laid by some rule of apportionment which is usually based on ability to pay. ―The rule of
taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.
4. It is levied on persons, property, rights, acts, privileges, or transactions.
5. It is levied by the State which has jurisdiction or control over the subject to be taxed.
6. It is personal to the taxpayer.
7. It is levied by the law-making body of the State. The power to tax is a legislative power but is also granted to local governments,
subject to such guidelines and limitations as law may be provided by law. ―Each local government unit shall have the power to
create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress
may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
governments.
8. It is levied for public purpose. Revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit
of private persons. A tax levied for a private purpose constitutes a taking of property without due process of law; and
9. It is also an important characteristic of most taxes that they are commonly required to be paid at regular periods or intervals every
year.
WHAT IS THE PRIMARY PURPOSE OF TAXATION?

Primary purpose of taxation is to provide funds or property with which to promote

the general welfare and protection of its citizens.
ARE THERE SECONDARY PURPOSES?

Yes. Taxation is often employed as a device for regulation by means of which certain
effects or conditions envisioned by governments may be achieved. Taxes may be
levied with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public interest as to be
within the police power of the state. These regulatory purposes are also known as
Sumptuary.
WHAT ARE THEORIES AND BASES OF TAXATION?

1. Lifeblood Theory

2. Necessity theory.

3. Benefits-protection Theory (Symbiotic Relationship).

WHAT IS THE ‘LIFEBLOOD THEORY’?

Taxes are the lifeblood of the government and so should be collected

without unnecessary hindrance. It is said that taxes are what we pay for
civilized society. Without taxes, the government would be paralyzed for
lack of the motive power to activate and operate it.
WHAT IS THE ‘NECESSITY THEORY’?

The power of taxation proceeds upon theory that the existence of

government is a necessity; that is cannot continue without means to pay
its expenses; and that for those means it has the right to compel all
citizens and property within its limits to contribute.
WHAT IS THE ‘NECESSITY THEORY’?

The power of taxation proceeds upon theory that the existence of

government is a necessity; that is cannot continue without means to pay
its expenses; and that for those means it has the right to compel all
citizens and property within its limits to contribute.
WHAT IS THE ‘BENEFITS-PROTECTION THEORY’?

This principle serves as the basis of taxation and is founded on the reciprocal duties
of protection and support between the State and its inhabitants.
Despite the natural reluctance to surrender part of one's hard earned income to the
taxing authorities, every person who is able to must contribute his share in the
running of the government. The government for its part is expected to respond in the
form of tangible and intangible benefits intended to improve the lives of the people
and enhance their moral and material values. This symbiotic relationship is the
rationale of taxation and should dispel the erroneous notion that it is an arbitrary
method of exaction by those in the seat of power.
WHAT ARE THE PRINCIPLES OF A SOUND TAX SYSTEM?

1. Fiscal adequacy
2. Administrative feasibility.
3. Theoretical justice or equality
WHAT IS FISCAL ADEQUACY?

The sources of tax revenue should coincide with, and approximate the
needs of, government expenditures. The revenue should be elastic or
capable of expanding or contracting annually in response to variations in
public expenditures.
WHAT IS ADMINISTRATIVE FEASIBILITY?

Tax laws should be capable of convenient, just, and effective

administration. Each tax should be capable of uniform enforcement by
government officials, convenient as to the time, place, and manner of
payment, and not unduly burdensome upon, or discouraging to business
activity
WHAT IS THEORETICAL JUSTICE OR EQUITY?

The tax burden should be in proportion to the taxpayer‘s ability to pay.

This is the so-called ability to pay principle. Taxation should be uniform
as well as equitable
 KINDS AND
CLASSIFICATION
OF TAXES
Week 2 Day 1
What are the elements of taxation?

◦ Enforced proportional contribution from persons and properties - Its imposition is in no way
dependent upon the will or assent of the person taxed. It is not contractual, either express or implied, but
positive acts of government;
◦ Imposed by the State by virtue of its sovereignty; and
◦ It is levied for the support of government
What are the four characteristics of taxation?

◦ Comprehensive
◦ Unlimited
◦ Plenary
◦ Supreme
What does “comprehensive” imply?

Taxation covers persons, businesses, activities, professions, rights and privileges.

Is a tax invalid if it deters the activities taxed?

No. A tax does not cease to be valid merely because it regulates, discourages, or even definitely
deters the activities taxed. The power to impose taxes is one so unlimited in force and so searching
in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever,
except such as rest in the discretion of the authority which exercises it
What does “plenary” imply?

It implies that the power of taxation is complete in all its aspects and that the
collection of taxes, being the lifeblood of the government, should be collected
without unnecessary hindrance, every precaution must be taken not to unduly
suppress it.
What does “supreme” imply?

It is supreme insofar as the selection of the subject of taxation is

concerned, but it does not mean that it is superior to the other inherent
powers of the State
What are the kinds of taxes, as to object?

1. Personal, Poll or Capitation Tax

2. Property Tax
3. Privilege/Excise Tax
What is a “Personal, Poll or Capitation Tax”?

This is a tax of a fixed amount imposed on persons residing within a

specified territory, whether citizens or not, without regard to their
property or the occupation or business in which they may be engaged
(cedula).
Is a tax on a person engaged in a particular business or
performing a certain activity “personal, poll, or capitation
tax”?
No. Taxes of a specified amount imposed upon each person
performing a certain act or engaging in a certain business or profession
are not poll taxes
What is a “property tax”?

This is a tax imposed on property, real or personal, in proportion to its value or in

accordance with some other reasonable method of apportionment (e.g., real estate
tax).
Is property tax based upon the voluntary acts of the
person assessed?
No. The obligation to pay the tax is absolute and unavoidable and is
not based upon the voluntary action of the person assessed
What is a “privilege or excise tax”?

This is any tax which does not fall within the classification of a poll tax or a
property tax. Thus, it is said that an excise tax is a charge imposed upon the
performance of an act, the enjoyment of a privilege, or the engaging in an
occupation, profession, or business.
May a person avoid the payment of excise tax?

Yes. The obligation to pay the tax is based on the voluntary action of the person
taxed in performing the act or engaging in the activity which is subject to the
excise.
What are the kinds of taxes, as to burden or incidence?

◦ Direct taxes
◦ Indirect taxes
What are “direct taxes”?

Taxes which are demanded from persons who also shoulder them;
taxes for which the taxpayer is directly or primarily liable, or which he
cannot shift to another (e.g., income tax, estate tax, donor‘s tax,
community tax)
What are “indirect taxes”?

Taxes which are demanded from one person in the expectation and intention that he
shall indemnify himself at the expense of another, falling finally upon the ultimate
purchaser or consumer; taxes levied upon transactions or activities before the articles
subject matter thereof, reach the consumers who ultimately pay for them not as taxes
but as part of the purchase price. Thus, the person who absorbs or bears the burden
of the tax is other than the one on whom it is imposed and required by law to pay the
tax. Practically all business taxes are indirect (e.g., VAT, percentage tax, excise taxes on
specified goods, customs duties).
What are the kinds of taxes, as to tax rates?

◦ Specific
◦ Ad valorem
◦ Mixed
What is a “specific tax”?

This is a tax of a fixed amount imposed by the head or number or by some other
standard of weight or measurement. It requires no assessment (valuation) other
than the listing or classification of the objects to be taxed (e.g., taxes on distilled
spirits, wines, and fermented liquors; cigars and cigarettes)
What is an “ad valorem tax”?

This is a tax of a fixed proportion of the value of the property with respect to which the tax is
assessed. It requires the intervention of assessors or appraisers to estimate the value of such
property before the amount due from each taxpayer can be determined. The phrase ”ad valorem”
means literally, “according to value.”
What are the kinds of taxes, as to purpose?

◦ General or Fiscal Tax

◦ Special/Regulatory/Sumptuary Tax
What is a “General Tax”?

This is a tax levied for the general or ordinary purposes of the Government, i.e., to
raise revenue for governmental needs (e.g., income tax, VAT, and almost all taxes)
What is a “Special/Regulatory/Sumptuary Tax Tax”?

This is a tax levied for special purposes, i.e., to achieve some social or economic
ends irrespective of whether revenue is actually raised or not (e.g., protective tariffs
or customs duties on imported goods to enable similar products manufactured
locally to compete with such imports in the domestic market). Tariff duties
intended mainly as a source of revenue are relatively low so as not to discourage
imports
What are the kinds of taxes, as to scope?

◦ National
◦ Municipal or Local
What are the kinds of taxes, as to graduation?

◦ Progressive
◦ Regressive
◦ Proportionate
◦ Digressive
What is a “progressive tax”?

The rate of tax increases as the tax base or bracket increases, such as those of the
Individual Income Tax.
What is a “regressive tax”?

The rate of tax decreases as the tax base or bracket increases.

There is no regressive tax in the Philippines
What is a “proportionate tax”?

The rate of tax is based on a fixed percentage of

the amount of the property, receipts or other
basis to be taxed, e.g., real estate tax, VAT, and
other percentage taxes.
What is a “digressive tax”?

A fixed rate is imposed on a certain amount and

diminishes gradually on sums below it. The tax
rate in this case is arbitrary because the increase
in tax rate is not proportionate to the increase of
tax base
What is a “tariff ”?

A kind of tax imposed on articles which are traded internationally

What is a “toll”?

A toll is a sum of money for the use of something, generally applied to the
consideration which is paid for the use of a road, bridge or the like, of a public
nature.
Which has a limit on the amount collected, taxes or
tolls?
Tolls. Amount paid depends upon the cost of construction or maintenance of the
public improvement used
Which may be imposed by private persons, taxes or
tolls?
Tolls. May be imposed by the government or by private individuals or entities.
What is a “License fee”?

This is a charge imposed under the police power for purposes of regulation
May license fees be imposed upon persons, property
and the right to exercise a privilege?
No. It may only be imposed upon the right to exercise a privilege.
Differentiate between the consequences of non-
payment of taxes and license fees.
Failure to pay taxes does not necessarily make the act or business illegal,
however, surcharges or imprisonment may apply. On the other hand,
failure to pay license fees makes the act or business illegal
Why is it necessary to differentiate between taxes and
license fees?
It is necessary to determine whether a particular imposition is a tax or a license fee
because some limitations apply only to one and not to the other, and for the reason
that exemption from taxes may not include exemption from license fee.
May an exaction be considered both a tax and a license
fee?
Yes. An exaction may be considered both a tax and a license fee. This is true in the
case of car registration fees which may be regarded as taxes even as they also serve
as an instrument of regulation. If the purpose is primarily revenue, or if revenue,
is, at least, one of the real and substantial purposes, then the exaction is properly
called a tax.
If primary purpose of taxes is to generate revenue, and license
fees generate revenue, may it also be considered a tax?

No. The general rule is that the imposition is a tax if its primary purpose is to
generate revenue, and regulation is merely incidental; but if regulation is the
primary purpose, the fact that incidentally revenue is also obtained does not make
the imposition a tax.
What is a “special assessment”?

This is a charge imposed only on property owners benefited is a special assessment

rather than a tax notwithstanding that the statute calls it a tax. The rule is that an
exemption from taxation does not include exemption from special assessment. But
the power to tax carries with it the power to levy a special assessment.
May a “special assessment” be levied upon persons and
privileges?
No. A special assessment is levied only on land.
May taxes be the subject of “off-set” or
“compensation”?
No. Taxes cannot be the subject of off-set or compensation.
THE BUREAU OF INTERNAL
REVENUE

PRITAX W2D3
 WHAT ARE THE POWERS AND DUTIES
OF THE BIR?

The Bureau of Internal Revenue shall have the powers and

duties that comprehend the assessment and collection of all
national internal revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties, and fines connected
therewith, including the execution of judgments in all cases
decided in its favor by the Court of Tax Appeals and the
ordinary courts. The Bureau shall give effect to and
administer the supervisory and police powers conferred to it
by this Code or other laws.
 WHO ARE THE CHIEF OFFICIALS OF THE
BIR?

The Bureau of Internal Revenue shall have a chief to

be known as Commissioner of Internal Revenue and
four (4) assistant chiefs to be known as Deputy
Commissioners.
 WHO SHALL HAVE THE EXCLUSIVE AND
ORIGINAL JURISDICTION TO INTERPRET THE
PROVISION OF THE NIRC?

The power to interpret the provisions of this Code

and other tax laws shall be under the exclusive and
original jurisdiction of the Commissioner, subject to
review by the Secretary of Finance.
DOES THE COMMISSIONER HAVE POWER
TO DECIDE TAX CASES?

Yes. The power to decide disputed assessments, refunds of

internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under
this Code or other laws or portions thereof administered by
the Bureau of Internal Revenue is vested in the
Commissioner.
 WHO SHALL HAVE EXCLUSIVE APPELLATE
JURISDICTION OVER THE C ASES DECIDED
BY THE CIR?

The Court of Tax Appeals shall have the exclusive

appellate jurisdiction over the cases decided by the
CIR
 DOES THE CIR HAVE THE POWER TO TO
EXAMINE ANY BOOK, PAPER, RECORD, OR
OTHER DATA?

Yes, if such book, paper, record, or other data is

relevant or material to ascertaining the correctness
of any return, or in making a return when none has
been made, or in determining the liability of any
person for any internal revenue tax, or in collecting
any such liability, or in evaluating tax compliance
 WHAT ARE THE C ASES WHERE THE CIR MAY
EXERCISE ITS POWER TO OBTAIN
INFORMATION, AND TO SUMMON, EXAMINE,
AND TAKE TESTIMONY OF PERSONS
1. In ascertaining the correctness of any return, or
2. In making a return when none has been made, or
3. In determining the liability of any person for any internal revenue tax, or
4. In collecting any such liability, or
5. In evaluating tax compliance
 MAY THE CIR AUTHORIZE THE
EXAMINATION OF A TAX RETURN?

Yes. After a return has been filed, the Commissioner or his

duly authorized representative may authorize the
examination of any taxpayer and the assessment of the
correct amount of tax.
 IF NO RETURN IS FILED, IS THE CIR STILL
AUTHORIZED TO EXAMINE THE TAXPAYER?

Yes. The failure to file a return shall not prevent the

Commissioner from authorizing the examination of any
taxpayer.
 MAY A TAX RETURN BE MODIFIED,
CHANGED, OR AMENDED?

Yes, provided that:

1. It is done within 3 years of filing; and
2. Before any notice for audit or investigation has been
served upon the taxpayer.
 WHEN MAY THE CIR CONDUCT AND
INVENTORY-TAKING?

At any time during the taxable year.

 WHEN MAY THE CIR PLACE PERSON
UNDER SURVEILLANCE?

When there is reason to believe that such person is not

declaring his correct income, sales or receipts for internal
revenue tax purposes.
 WHEN MAY THE CIR PRESCRIBE
PRESUMPTIVE GROSS SALES AND RECEIPTS?

1. When it is found that a person has failed to issue receipts

and invoices in violation of the requirements of Sections
113 and 237 of the NIRC; or
2. When there is reason to believe that the books of
accounts or other records do not correctly reflect the
declarations made or to be made in a return
 WHEN MAY THE CIR TERMINATE A
TAXABLE PERIOD?

1. When a taxpayer is retiring from business subject to tax;

2. When a taxpayer is intending to leave the Philippines or
to remove his property therefrom or to hide or conceal
his property
3. When a taxpayer is performing any act tending to
obstruct the proceedings for the collection of the tax for
the past or current quarter or year or to render the same
totally or partly ineffective
 IF A TAX PERIOD IS TERMINATED, WHEN
WILL THE TAX BE PAID?

Said taxes shall be due and payable immediately and shall be

subject to all the penalties, unless paid within the time fixed.
 WHAT SHALL BE THE VALUE OF PROPERTY
FOR THE PURPOSES OF ANY INTERNAL
REVENUE TAX?

Whichever is higher:
1. The fair market value as determined by the
Commissioner; or
2. The fair market value as shown in the schedule of values
of the Provincial and City Assessors.
 HOW MAY THE ZONAL VALUATION AS
DETERMINED BY THE CIR BE VALID?

It shall be valid if:

1. Published in a newspaper of general circulation in the province,
city or municipality concerned, or in the absence thereof,
2. Posted in the provincial capitol, city or municipal hall and in
two (2) other conspicuous public places therein
And the basis of any valuation, including the records of
consultations done, shall be public records open to the inquiry of
any taxpayer.
 IS THE CIR AUTHORIZED TO INQUIRE INTO
THE BANK DEPOSITS AND OTHER RELATED
INFORMATION HELD BY FINANCIAL
INSTITUTION?
Generally, no. Under R.A. 1405, as amended, all deposits of whatever
nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby considered as
of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
 WHEN MAY THE CIR INQUIRE INTO THE
BANK DEPOSITS AND OTHER RELATED
INFORMATION HELD BY FINANCIAL
INSTITUTIONS
In case of:
1. A decedent to determine his gross estate; and
2. Any taxpayer who has filed an application for compromise of
his tax liability by reason of financial incapacity to pay his tax
liability.
3. A specific taxpayer or taxpayers subject of a request for the
supply of tax information from a foreign tax authority pursuant
to an international convention or agreement on tax matters to
which the Philippines is a signatory or a party of
 MAY THE CIR ACCREDIT AND REGISTER
TAX AGENTS?

Yes. The Commissioner shall accredit and register, based on

their professional competence, integrity and moral fitness,
individuals and general professional partnerships and their
representatives who prepare and file tax returns, statements,
reports, protests, and other papers with or who appear
before, the Bureau for taxpayers.
 MAY THE CIR PRESCRIBE ADDITIONAL
PROCEDURAL OR DOCUMENTARY
REQUIREMENTS IN THE PREPARATION AND
SUBMISSION OF FINANCIAL STATEMENTS
ACCOMPANYING THE TAX RETURNS?

Yes. The Commissioner may prescribe the manner of

compliance with any documentary or procedural
requirement in connection with the submission or
preparation of financial statements accompanying the tax
returns.
 MAY THE CIR DELEGATE ITS POWERS?

Yes. The Commissioner may delegate the powers vested in

him to any or such subordinate officials with the rank
equivalent to a division chief or higher, subject to such
limitations and restrictions as may be imposed under rules
and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner
 WHICH POWERS MAY NOT BE
DELEGATED?

1. The power to recommend the promulgation of rules and regulations by the Secretary of
Finance;
2. The power to issue rulings of first impression or to reverse, revoke or modify any existing
ruling of the Bureau;
3. The power to compromise or abate. However, assessments issued by the regional offices
involving basic deficiency taxes of Five hundred thousand pesos (P500,000) or less, and minor
criminal violations discovered by regional and district officials, may be compromised by a
regional evaluation board which shall be composed of the Regional Director as Chairman, the
Assistant Regional Director, the heads of the Legal, Assessment and Collection Divisions and
the Revenue District Officer having jurisdiction over the taxpayer, as members; and
4. The power to assign or reassign internal revenue officers to establishments where articles
subject to excise tax are produced or kept.
 IS IT THE DUTY OF THE CIR TO ENSURE THE
PROVISION AND DISTRIBUTION OF FORMS,
RECEIPTS, CERTIFIC ATES, AND APPLIANCES,
AND THE ACKNOWLEDGMENT OF PAYMENT
OF TAXES.
Yes. It shall be the duty of the Commissioner to prescribe, provide,
and distribute to the proper officials the requisite licenses; internal
revenue stamps; unique, secure and non-removable identification
markings (hereafter called unique identification markings), such as
codes or stamps, be affixed to or form part of all unit packets and
packages and any outside packaging of cigarettes and bottles of
distilled spirits; labels and other forms; certificates; bonds; records;
invoices; books; receipts; instruments; appliances and apparatus
used in administering the laws falling within the jurisdiction of the
Bureau.
 WHO SHALL DIVIDE THE PHILIPPINES
INTO INTERNAL REVENUE DISTRICTS?

With the approval of the Secretary of Finance, the

Commissioner shall divide the Philippines into such number
of revenue districts as may from time to time be required for
administrative purposes. Each of these districts shall be
under the supervision of a Revenue District Officer.
 WHAT ARE THE POWERS AND DUTIES
OF A REVENUE REGIONAL DIRECTOR?

1. Implement laws, policies, plans, programs, rules and regulations of the department or agencies
in the regional area;
2. Administer and enforce internal revenue laws, and rules and regulations, including the
assessment and collection of all internal revenue taxes, charges and fees;
3. Issue Letters of authority for the examination of taxpayers within the region;
4. Provide economical, efficient and effective service to the people in the area;
5. Coordinate with regional offices or other departments, bureaus and agencies in the area;
6. Coordinate with local government units in the area;
7. Exercise control and supervision over the officers and employees within the region; and
8. Perform such other functions as may be provided by law and as may be delegated by the
Commissioner.
 WHAT ARE THE DUTIES OF REVENUE
DISTRICT OFFICERS AND OTHER INTERNAL
REVENUE OFFICERS?

1. To ensure that all laws, and rules and regulations affecting national internal
revenue are faithfully executed and complied with, and to aid in the
prevention, detection and punishment of frauds of delinquencies in
connection therewith.
 WHAT IS A UNIQUE DUTY OF EVERY
REVENUE DISTRICT OFFICER?

1. To examine the efficiency of all officers and employees of

the Bureau of Internal Revenue under his supervision,
and
2. To report in writing to the Commissioner, through the
Regional Director, any neglect of duty, incompetency,
delinquency, or malfeasance in office of any internal
revenue officer of which he may obtain knowledge
 WHO ARE AGENTS AND DEPUTIES FOR
COLLECTION OF NATIONAL INTERNAL
REVENUE TAXES

1. The Commissioner of Customs and his subordinates with

respect to the collection of national internal revenue taxes on
imported goods;
2. The head of the appropriate government office and his
subordinates with respect to the collection of energy tax; and
3. Banks duly accredited by the Commissioner with respect to
receipt of payments internal revenue taxes authorized to be
made thru banks.
 WHAT IS THE AUTHORITY OF A
REVENUE OFFICER?

1. Pursuant to a Letter of Authority issued by the Revenue

Regional Director, examine taxpayers within the
jurisdiction of the district in order to collect the correct
amount of tax,
2. To recommend the assessment of any deficiency tax due
in the same manner that the said acts could have been
performed by the Revenue Regional Director himself.
 WHO SHALL HAVE THE AUTHORITY TO
ADMINISTER OATHS AND TAKE TESTIMONY
IN ANY OFFICIAL MATTER OR
INVESTIGATION CONDUCTED WITHIN THE
JURISDICTION OF THE BUREAU?
1. The Commissioner,
2. Deputy Commissioners,
3. Service Chiefs,
4. Assistant Service Chiefs,
5. Revenue Regional Directors,
6. Assistant Revenue Regional Directors,
7. Chiefs and Assistant Chiefs of Divisions,
8. Revenue District Officers,
9. special deputies of the Commissioner,
10. internal revenue officers and any other employee of the Bureau thereunto especially
deputized by the Commissioner
 WHO SHALL HAVE THE AUTHORITY TO
MAKE ARRESTS AND SEIZURES FOR THE
VIOLATION OF ANY PENAL LAW, RULE OR
REGULATION ADMINISTERED BY THE BIR?
1. The Commissioner,
2. the Deputy Commissioners,
3. the Revenue Regional Directors,
4. the Revenue District Officers and other internal revenue officers
 HOW LONG MAY AN INTERNAL REVENUE
OFFICER ASSIGNED TO AN ESTABLISHMENT
THAT PRODUCES OR KEEPS ARTICLES
SUBJECT TO EXCISE TAX STAY?
2 years.
 HOW LONG MAY AN INTERNAL REVENUE
OFFICER REMAIN IN AN ASSESSMENT OR
COLLECTION FUNCTION?

3 years
 HOW LONG MAY AN INTERNAL REVENUE
OFFICER REMAIN IN A SPECIAL FUNCTION?

1 year
 WHAT IS CONTAINED IN THE ANNUAL
REPORT OF THE COMMISSIONER?

Detailed statements of the collections of the Bureau with

specifications of the sources of revenue by type of tax, by
manner of payment, by revenue region and by industry group
and its disbursements by classes of expenditures.
In case the actual collection exceeds or falls short of target
as set in the annual national budget by fifteen percent (15%)
or more, the Commissioner shall explain the reason for such
excess or shortfall.
 WHAT ARE THE NATIONAL REVENUE
TAXES?

(a) Income tax;

(b) Estate and donor's taxes;
(c) Value-added tax;
(d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stamp taxes; and
(g) Such other taxes as may be imposed and collected by the Bureau of Internal
Revenue.
CTA & OTHER
MATTERS
How many Justices are in the CTA and
how may they sit?
The Court of Tax Appeals is composed of nine (9)
Justices: one (1) Presiding Justice and (8) Associate
Justices. The CTA may sit en banc or in three (3) divisions
with each division consisting of three (3) Justices. A
decision of a division of the CTA may be appealed to
the CTA En Banc, and the latter's decision may further be
appealed by verified petition for certiorari to the
Supreme Court.
Who shall exercise exclusive original
jurisdiction in tax collection cases involving
final and executory assessments for taxes,
fees, charges and penalties, where the
principal amount of taxes and fees,
exclusive of charges and penalties, claimed
is one million pesos or more?
The CTA in Division
Who shall exercise exclusive appellate
jurisdiction over appeals from the
judgments, resolutions or orders of the RTCs
in tax collection cases originally decided by
them within their respective territorial
jurisdiction?

The CTA in Division

Who shall exercise exclusive appellate
jurisdiction over local tax cases decided by
the RTC in the exercise of their original
jurisdiction?
The CTA in Division
Who shall exercise exclusive appellate
jurisdiction over local tax cases decided by
the RTC in the exercise of their appellate
jurisdiction?
The CTA en banc
Who shall exercise exclusive appellate to
review by appeal the decisions or
resolutions the Court in Divisions?
The CTA en banc
Who shall exercise exclusive original
jurisdiction over all criminal offenses arising
from violations of the NIRC or Tariff and
Customs Code and other laws administered
by the BIR or the Bureau of Customs, where
the principal amount of taxes and fees,
exclusive of charges and penalties, claimed
is one million pesos or more.
The CTA in Division.
What if it is less than P1,000,000 or there
is no amount specified?
It depends:
◦ If the case was decided by the RTC in the exercise of their original jurisdiction,
the CTA in Division has jurisdiction.
◦ If the case was decided by the RTC in the exercise of their appellate
jurisdiction, the CTA en banc has jurisdiction.
When may the appeal be made?
In civil cases, a party aggrieved or adversely affected
May appeal within 30 days from the receipt of the copy
of the decision or ruling, or the expiration of the period
fixed by law for the Commissioner to decide, to the Court
of Tax Appeals Division
In criminal cases, the accused may appeal within 15
days from the receipt of the decision.
What is “double taxation”?

Double taxation means taxing the same property

twice when it should be taxed only once; that is,
“taxing the same person twice by the same
jurisdiction for the same thing.”
What are the requisites of double
taxation?
1. Both taxes must be imposed on the same property or subject
matter;
2. For the same purpose;
3. By the same State, Government, or taxing authority;
4. Within the same territory, jurisdiction or taxing district;
5. During the same taxing period; and
6. Of the same kind or character of tax
Is there a constitutional prohibition
against double taxation?
There is no constitutional prohibition against
double taxation in the Philippines. It is something
not favored, but is permissible, provided some
other constitutional requirement is not thereby
violated.
Is double taxation allowed?
Double taxation in its narrow sense is undoubtedly unconstitutional
but in the broader sense is not necessarily so. Where double
taxation (in its narrow sense) occurs, the taxpayer may seek relief
under the uniformity rule or the equal protection guarantee.
What is the “impact of taxation”?
Impact of taxation is the point where the tax is originally
imposed or the one on whom the tax is formally
assessed. In so far as the law is concerned, the taxpayer,
the subject of tax, is the person who must pay the tax to
the government
What is “incidence of taxation”?

Incidence of taxation is the point on whom the

tax burden finally rests. It takes place when
shifting has been effected from the statutory
taxpayer to another.
What is tax avoidance?
Tax avoidance or tax minimization is the exploitation by
the taxpayer of legally permissible alternative tax rates or
methods of assessing taxable property or income in order
to avoid or reduce tax liability.
What is tax evasion?

The use by the taxpayer of illegal or fraudulent

means to defeat or lessen the payment of a tax. It
is also known as “tax dodging.”
Which is illegal?
Tax evasion
Situs of taxation means?
The place of taxation.
What is the situs of income tax?
Citizenship, residency, and source of income.
Summary of Situs of Income Tax:
Citizenship Residency Income within Phil. Income outside Phil.
Filipino Resident Taxable Taxable
Filipino Non-resident Taxable Non-taxable
Alien Resident Taxable Non-taxable
Alien Non-resident Taxable Non-taxable
Summary of Situs of Property Tax
Kind of property Situs
Real property Where it is located
Tangible personal property Where property is physically located
although the owner resides in another
jurisdiction; or place of sale or transaction
Intangible personal property General Rule: Domicile of the owner
Exception: When property has acquired a
business situs in another jurisdiction:
1. Franchise, patents, copyrights,
trademarks – situs is the place of the
country where such intangibles are
exercised
2. Receivables – Domicile or residence of
the debtor
3. Bank deposits – Location of the
depository bank
Summary of Situs of Excise Tax:
Kind of Excise Tax Situs
Income Tax Occupation – where the occupation is
engaged in
Transaction – where the transaction took
place
Donor’s Tax Location of property; nationality or
residence of donor
Estate Tax Location of property; nationality or
residence of deceased
Summary of Situs of Business Tax:
Kind of Business Tax Situs
VAT Where transaction is made (i.e. where the
good/service is sold/perform and
consumed)
Sale of Real Property Where the real property is located
Sale of Personal Property Where the personal property was sold
Tax Remedies
General Concepts
Taxpayer Remedies
1. Administrative Remedies (BIR)
1. Before payment
1. Filing a protest with request for reconsideration or reinvestigation; and
2. Entering into a compromise
2. b. After payment
1. Filing a claim for refund; and
2. Filing a claim for tax credit
General Concepts
Taxpayer Remedies
2. Judicial Remedies (CTA/RTC)
2. Civil Action
1. Appeal to the CTA
2. Action to contest forfeiture of chattel; and
3. Action for damages
3. Criminal Action
1. Filing a criminal complaint against erring BIR officials and employees
General Concepts
Government Remedies
1. Administrative Remedies
1. Enforcement of tax lien
2. Distraint of personal property, and garnishment of bank deposits
3. Levy of real property
4. Forfeiture of property
5. Compromise and abatement
6. Penalties and fines
7. Suspension of business operations
2. Judicial Remedies
1. Ordinary civil action
2. Criminal action
Tax Delinquency v. Tax Deficiency
Tax Delinquency Tax Deficiency
1. The self-assessed tax per return was not paid or 1. The amount by which the tax imposed by law
only partially paid; or exceeds the amount shown in the tax return; or
2. The deficiency tax assessed by the BIR became 2. If no amount is shown in the return, or if there is
final and executory. no return, then the amount by which the tax as
determined by the CIR exceeds the amount
previously assessed as a deficiency
Delinquency tax can be collected administratively by Deficiency tax must be assessed and must go through
distraint or levy or by judicial action the process of filing the protest by the taxpayer and
denial of such protest by the BIR.
The filing of a civil action for the collection of the The filing of a civil action at the ordinary court for
delinquent tax in the ordinary court is a proper collection during the pendency of protest may be the
remedy subject of a motion to dismiss. In addition, the
taxpayer must file a petition for review with the CTA
to toll the running of the prescriptive period.
Subject to administrative penalties, such as 25% Subject to administrative penalties of interest and
surcharge, interest, and compromise penalty compromise penalty, but NOT to the 25% surcharge
Prescriptive Period for Assessment
General Rule: Within 3 years after the last day prescribed by law for the filing of the
return or from the date of actual filing, whichever comes later; provided, that a return
filed before the last day prescribed by law for filing shall be considered as filed on such
last day
Exception: Within 10 years after the discovery of the falsity, fraud or omission.
Procedural due process in tax
assessments
1. Letter of Authority (LOA) and Tax Audit - A Revenue Officer is allowed only 120 days
from the date of receipt of an LOA by the taxpayer to conduct the audit and
submit the required report of investigation.
2. Notice of Discrepancy (NOD) – If the taxpayer is not amenable, they are afforded
the opportunity to present his side of the case in Discussion of Discrepancy within
30 days from receipt of NOD.
3. Issuance of Preliminary Assessment Notice (PAN) - If it is found that the taxpayer is
still liable for deficiency tax or taxes after presenting his side, and the taxpayer is
not amenable, the case shall be endorsed within 10 days from the conclusion of
the Discussion for the issuance of a deficiency tax assessment.
Exceptions to the issuance of a PAN
1. The finding for any deficiency tax is the result of mathematical error in the computation of
the tax as appearing on the face of the return; or
2. A discrepancy has been determined between the tax withheld and the amount actual
remitted by the withholding agent; or
3. A taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax
for a taxable period was determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
4. The excise tax due on excisable articles has not been paid; or
5. An article locally purchased or imported by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare parts, has been sold, traded or
transferred to a non-exempt person.
Reply to the PAN
The taxpayer is given 15 days from the date of receipt of the PAN to respond.
1. If the taxpayer fails to respond, he is considered in default and a Formal Letter Of
Demand And Final Assessment Notice (FLD/FAN) shall be issued to the taxpayer.
2. If he responds that he disagrees with the findings of deficiency taxes, an FLD/FAN
shall be issued within 15 days from filing/submission of the taxpayer’s response
Formal Letter of Demand and Final
Assessment Notice (FLD/FAN)
An assessment contains not only a computation of tax liabilities, but also a demand for
payment within a certain period.
1. If the FLD/FAN is issued beyond the 15-day period, it shall still be valid, provided
that it is issued within the period of limitation to assess internal revenue taxes
2. If the FLD/FAN is issued before the lapse of the 15-day period, it shall be void.
Disputed FLD/FAN
The taxpayer or his duly authorized representative may protest administratively
against the FLD/FAN within 30 days from date of receipt thereof. The taxpayer may file
a written request for:
1. Reconsideration – The CIR or his duly authorized representative is given 180 days
to decide
2. Reinvestigation – The taxpayer is given 60 days to submit documents, after which
the 180 days of CIR begins.
Effect of Failure to File Protest
The assessment shall become final, executory and demandable. No request for
reconsideration or reinvestigation shall be granted on such tax assessments.
Action after the Decision on the Protest
If the Authorized Representative denies:
1. Appeal to the CIR within 30 days
2. Appeal to the CTA Division within 30 days
If the CIR denies:
1. Appeal to the CTA Division within 30 days
Inaction on the Protest
In case of inaction by the CIR or his duly authorized representative within the 180-day
period:
1. Appeal to the CTA within 30 days from the lapse of the 180-day period, OR
2. Await the final decision of the CIR or his duly authorized representative on the
disputed assessment and appeal such final decision to the CTA within 30 days after
receipt of such decision.
Recovery of Tax Erroneously or Illegally
Collected
Tax Refund as distinguished from Tax Credit
1. Tax refund takes place when there is actual reimbursement
2. Tax credit takes place upon the issuance of a tax certificate or tax credit memo,
which can be applied against any sum that may be due and collected from the
taxpayer.
Grounds for filing a claim for tax refund
or credit
1. Tax is erroneously or illegally assessed or collected
1. Taxes are erroneously paid when a taxpayer pays under a mistake of fact,
2. Taxes are illegally collected when payments are made under duress.
2. Penalty is collected without authority
3. Sum collected is excessive or in any manner wrongfully collected
Requisites for tax refund or tax credit
1. There is a tax collected erroneously or illegally, or a penalty collected without authority, or
a sum excessively or wrongfully collected.
2. There must be a written claim for refund filed by the taxpayer to the CIR
1. Exceptions (No written claim necessary):
1. When on the face of the return upon which payment was made, such payment appears clearly to
have been erroneously paid; or
2. A return filed showing an overpayment shall be considered as a written claim for credit or refund
3. The claim must be a categorical claim for reimbursement
4. The claim for refund must be filed within 2 years from the date of the payment of the tax
regardless of any supervening cause
5. Taxpayer must show proof of the payment of tax
Two-year period when counted
General Rule: From the date the tax was paid
Exceptions:
1. If the tax is withheld at source – from the date it falls due at the end of the taxable
year
2. If the income is paid on a quarterly basis – from the time of filing the final
adjustment return
3. When the tax is paid in installments – from the date of final payment or the last
installment
Remedy upon Denial or Inaction by the
CIR
1. If the CIR denies claim – appeal to the CTA within 30 days from receipt of the CIR’s
decision and within 2 years from the date of payment
2. If the CIR does not act on the claim and the 2-year period is about to lapse – file a
claim before the CTA prior to the lapse of the 2- year period; otherwise, the claim
shall be barred
Period for claiming refund once granted
The refund check or warrant must be claimed or cashed within 5 years from the date
such warrant or check was mailed or delivered; otherwise it shall be forfeited in favor
of the government and the amount thereof shall revert to the general fund.
Period for using the TCC
TCCs may be applied against all internal revenue taxes, excluding withholding tax. TCCs
which remain unutilized after 5 years from the date of issue shall, unless revalidated,
be considered as invalid, and shall revert to the general fund.
Compromise and Abatement
Compromise - to reduce the amount of tax payable
Abatement - to cancel the entire amount of tax payable.
Cases which may be compromised
1. Delinquent accounts
2. Cases under administrative protest after issuance of the Final Assessment Notice
to the taxpayer which are still pending in the Regional Offices, Revenue District
Offices, Legal Service, Large Taxpayer Service (LTS), Collection Service,
Enforcement Service and other offices in the National Office
3. Civil tax cases being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations, other than those already filed in court or those involving
criminal tax fraud
Cases which cannot be compromised:
1. Withholding tax cases, unless the applicant taxpayer invokes provisions of law that cast doubt on
the taxpayer's obligation to withhold
2. Criminal tax fraud cases confirmed as such by the CIR or his duly authorized representative
3. Criminal violations already filed in court
4. Delinquent accounts with duly approved schedule of installment payments
5. Cases where final reports of reinvestigation or reconsideration have been issued resulting to
reduction in the original assessment and the taxpayer is agreeable to such decision by signing the
required agreement form for the purpose. On the other hand, other protested cases shall be
handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to
case basis
6. Cases which become final and executory after final judgment of a court, where compromise is
requested on the ground of doubtful validity of the assessment; and
7. Estate tax cases where compromise is requested on the ground of financial incapacity of the
taxpayer
Grounds for Compromise
1. A reasonable doubt as to the validity of the claim against the taxpayer exists; or
2. The financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax (financial incapacity)
Limits to Compromise
1. For cases of financial incapacity: a minimum compromise rate equivalent to ten percent
(10%) of the basic assessed tax.
2. For other cases: a minimum compromise rate equivalent to forty percent (40%) of the
basic assessed tax
3. When the basic tax involved exceeds One Million Pesos (P1,000,000), or where the
settlement offered is less than the prescribed minimum rates, the compromise must be
approved by the National Evaluation Board
4. The compromise offer shall be paid by the taxpayer upon filing of the application for
compromise settlement. No application for compromise settlement shall be processed
without the full settlement of the offered amount. In case of disapproval of the
application for compromise settlement, the amount paid upon filing of the aforesaid
application shall be deducted from the total outstanding tax liabilities
When the CIR may abate or cancel a tax
liability
1. The tax or any portion thereof appears to be unjustly or excessively assessed; or
2. The administration and collection costs do not justify the collection of the amount
due. (e.g., when the costs of collection are greater than the amount of tax due)
Government Remedies for Collection of
Delinquent Taxes
Requisites
1. The government can initiate collection administratively or judicially once the
assessment becomes final and executory
2. Collection must be made within 5 years following the assessment of the tax.
Two ways to collect
1. Summary or administrative remedies
1. Distraint on personal property
2. Levy on real property
2. Judicial remedies (civil or criminal)
Administrative Remedies
Tax Lien
1. When a taxpayer neglects or refuses to pay his internal revenue tax liability after
demand, the amount so demanded shall be a lien in favor of the government
from the time the assessment was made by the CIR until paid with interests,
penalties, and costs that may accrue in addition thereto upon all property and
rights to property belonging to the taxpayer.
2. The lien shall NOT be valid against any mortgagee, purchaser or judgment
creditor until notice of such lien shall be filed by the CIR in the office of the
Register of Deeds of the province or city where the property of the taxpayer is
situated or located.
Administrative Remedies
Distraint and Levy
1. Distraint is a remedy in which the collection of tax is enforced on the goods,
chattels, or effects, and other personal property of whatever character, including
stocks and other securities, debts, credits, bank accounts, and interest in and
rights to personal property.
2. Garnishment refers to the taking of personal properties, usually cash or sums of
money, owned by a delinquent taxpayer which is in the possession of a third party
3. Levy refers to the seizure of real properties and interest in or rights to such
properties for the satisfaction of taxes due from the delinquent taxpayer
Judicial Remedies
Civil and criminal action and proceedings instituted in behalf of the Government
under the authority of NIRC or other law enforced by the BIR:
1. shall be brought in the name of the Government of the Philippines;
2. shall be conducted by legal officers of the BIR; and
3. shall be filed in court only with the approval of the CIR.
Civil Penalties
Interest
In general, interest is assessed and collected on any unpaid amount of tax at the rate
of 12% or double the legal interest rate for loans or forbearance of any money as set
by the BSP from the date prescribed for payment until the amount is fully paid
Delinquency Interest and Deficiency
Interest
Deficiency Interest Delinquency Interest
Base Basic tax Basic tax + deficiency interest +
surcharge
Reckoning date From the date prescribed for its From the due date appearing in the
payment until the full payment notice and demand of the CIR until
thereof the amount is fully paid
The deficiency and the delinquency interest SHALL NOT be imposed simultaneously
Illustration
Deficiency tax assessed, P1,000,000
Prescribed date, April 15, 2020
Notice and demand due date, April 15, 2021
Date fully paid: July 15, 2021
Total tax paid, including interest: ?
Illustration
Deficiency interest:
P1,000,000 x 12% = 120,000
Delinquency interest:
P1,120,000 x 12% x 3/12 = 33,600
Total tax paid:
P1,000,000 + 120,000 + 33,600 = 1,153,600.00
Surcharge
This is a civil penalty imposed in addition to the tax required to be paid
Rates of Surcharge (25% or 50%)
25% of the amount due for:
1. Failure to file any return and pay the tax due on the prescribed date;
2. Filing a return with an internal revenue officer other than those with whom the return is
required to be filed, unless the CIR authorizes otherwise;
3. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment;
4. Failure to pay the full or part of the amount of tax due on or before the date prescribed
for its payment
Surcharge
50% of the tax or of the deficiency tax for:
1. Willful neglect to file the return within the prescribed period;
2. A false or fraudulent return is willfully made
Prima facie evidence of a false or fraudulent return:
1. Substantial under-declaration of sales, receipts or income – failure to report
sales, receipts or income in an amount exceeding 30% of that declared per
return
2. Substantial overstatement of deductions – a claim of deductions in an amount
exceeding 30% of actual deductions
Compromise Penalty
A compromise penalty is an amount of money paid by a taxpayer to compromise a tax
violation that he has committed, instead of the BIR instituting a criminal action
against the taxpayer. A compromise is consensual in character, hence, may not be
imposed on the taxpayer without his consent.
All criminal violations may be compromised except:
(a) those already filed in court, or
(b) those involving fraud