remedies - tax administration

7/25/2019 Remedies - Tax Administration

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Taxation Law Case Digests Atty. Michael Montero

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REMEDIES

1. Tax Administration

Sections 2-3, 9-20, 244-246, and 290, Tax Code

SEC. 2. Powers and duties of the Bureau of Internal Revenue . - The Bureau ofInternal Revenue shall be under the supervision and control of the Department ofFinance and its powers and duties shall comprehend the assessment andcollection of all national internal revenue taxes, fees, and charges, and the

enforcement of all forfeitures, penalties, and fines connected therewith, includingthe execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. The Bureau shall give ef fect to and administer thesupervisory and police powers conferred to it by this Code or other laws.

SEC. 3. Chief Officials of the Bureau of Internal Revenue . - The Bureau of

Internal Revenue shall have a chief to be known as Commissioner of Internal

Revenue, hereinafter referred to as the Commissioner and four (4) assistant chiefs

to be known as Deputy Commissioners.

SEC. 9. - Internal Revenue Districts . - With the approval of the Secretary ofFinance, the Commissioner shall divide the Philippines into such number ofrevenue districts as may form time to time be required for administrative purposes.

Each of these districts shall be under the supervision of a Revenue District Officer.

SEC. 10. - Revenue Regional Director . - Under rules and regulations, policiesand standards formulated by the Commissioner, with the approval of the Secretaryof Finance, the Revenue Regional director shall, within the region and district

offices under his jurisdiction, among others:(a) Implement laws, policies, plans, programs, rules and regulations of thedepartment or agencies in the regional area;(b) Administer and enforce internal revenue laws, and rules and regulations,including the assessment and collection of all internal revenue taxes, charges andfees.(c) Issue Letters of authority for the examination of taxpayers within the region;(d) Provide economical, efficient and effective service to the people in the area;

(e) Coordinate with regional offices or other departments, bureaus and agencies inthe area;(f) Coordinate with local government units in the area;(g) Exercise control and supervision over the officers and employees within theregion; and(h) Perform such other functions as may be provided by law and as may bedelegated by the Commissioner.

SEC. 11. Duties of Revenue District Officers and Other Internal Revenue

Officers. - It shall be the duty of every Revenue District Officer or other internalrevenue officers and employees to ensure that all laws, and rules and regulationsaffecting national internal revenue are faithfully executed and complied with, and toaid in the prevention, detection and punishment of frauds of delinquencies in

connection therewith.It shall be the duty of every Revenue District Officer to examine the efficiency of allofficers and employees of the Bureau of Internal Revenue under his supervision,and to report in writing to the Commissioner, through the Regional Director, anyneglect of duty, incompetency, delinquency, or malfeasance in office of any internalrevenue officer of which he may obtain knowledge, with a statement of all the factsand any evidence sustaining each case.

SEC. 12. Agents and Deputies for Collection of National Internal Revenue

Taxes. - The following are hereby constituted agents of the Commissioner:(a) The Commissioner of Customs and his subordinates with respect to thecollection of national internal revenue taxes on imported goods;(b) The head of the appropriate government office and his subordinates withrespect to the collection of energy tax; and(c) Banks duly accredited by the Commissioner with respect to receipt of paymentsinternal revenue taxes authorized to be made thru bank.

Any officer or employee of an authorized agent bank assigned to receive internalrevenue tax payments and transmit tax returns or documents to the Bureau ofInternal Revenue shall be subject to the same sanctions and penalties prescribedin Sections 269 and 270 of this Code.

SEC. 13. - Authority of a Revenue Offices. - subject to the rules and regulations

to be prescribed by the Secretary of Finance, upon recommendation of theCommissioner, a Revenue Officer assigned to perform assessment functions in

any district may, pursuant to a Letter of Authority issued by the Revenue RegionalDirector, examine taxpayers within the jurisdiction of the district in order to collectthe correct amount of tax, or to recommend the assessment of any deficiency taxdue in the same manner that the said acts could have been performed by theRevenue Regional Director himself.

SEC. 14. Authority of Officers to Administer Oaths and Take Testimony . - TheCommissioner, Deputy Commissioners, Service Chiefs, Assistant Service Chiefs,

Revenue Regional Directors, Assistant Revenue Regional Directors, Chiefs and Assistant Chiefs of Divisions, Revenue District Officers, special deputies of theCommissioner, internal revenue officers and any other employee of the Bureauthereunto especially deputized by the Commissioner shall have the power to

administer oaths and to take testimony in any official matter or investigationconducted by them regarding matters within the jurisdiction of the Bureau.

SEC. 15. Authority of Internal Revenue Officers to Make Arrests and Seizures .

- The Commissioner, the Deputy Commissioners, the Revenue Regional Directors,the Revenue District Officers and other internal revenue officers shall haveauthority to make arrests and seizures for the violation of any penal law, rule orregulation administered by the Bureau of Internal Revenue. Any person so arrestedshall be forthwith brought before a court, there to be dealt with according to law.

SEC. 16. Assignment of Internal Revenue Officers Involved in Excise TaxFunctions to Establishments Where Articles subject to Excise Tax areProduced or Kept. - The Commissioner shall employ, assign, or reassign internal




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revenue officers involved in excise tax functions, as often as the exigencies of therevenue service may require, to establishments or places where articles subject toexcise tax are produced or kept: Provided, That an internal revenue officerassigned to any such establishment shall in no case stay in his assignment formore than two (2) years, subject to rules and regulations to be prescribed by theSecretary of Finance, upon recommendation of the Commissioner.

SEC. 17. Assignment of Internal Revenue Officers and Other Employees toOther Duties. - The Commissioner may, subject to the provisions of Section 16

and the laws on civil service, as well as the rules and regulations to be prescribedby the Secretary of Finance upon the recommendation of the Commissioner,assign or reassign internal revenue officers and employees of the Bureau ofInternal Revenue, without change in their official rank and salary, to other or specialduties connected with the enforcement or administration of the revenue laws as theexigencies of the service may require: Provided, That internal revenue officersassigned to perform assessment or collection function shall not remain in the same

assignment for more than three (3) years; Provided, further, That assignment ofinternal revenue officers and employees of the Bureau to special duties shall notexceed one (1) year.

SEC. 18. Reports of violation of Laws. - When an internal revenue officerdiscovers evidence of a violation of this Code or of any law, rule or regulations

administered by the Bureau of Internal Revenue of such character as to warrantthe institution of criminal proceedings, he shall immediately report the facts to the

Commissioner through his immediate superior, giving the name and address of theoffender and the names of the witnesses if possible: Provided, That in urgentcases, the Revenue Regional director or Revenue District Officer, as the case maybe, may send the report to the corresponding prosecuting officer in the latter case,a copy of his report shall be sent to the Commissioner.

SEC. 19. Contents of Commissioner's Annual Report. - The annual Report ofthe Commissioner shall contain 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 ofexpenditures.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 explainthe reason for such excess or shortfall.

SEC. 20. Submission of Report and Pertinent Information by the

Commissioner .(A) Submission of Pertinent Information to Congress. - The provision of Section270 of this Code to the contrary notwithstanding, the Commissioner shall, uponrequest of Congress and in aid of legislation, furnish its appropriate Committeepertinent information including but not limited to: industry audits, collectionperformance data, status reports in criminal actions initiated against persons andtaxpayer's returns: Provided, however, That any return or return information whichcan be associated with, or otherwise identify, directly or indirectly, a particulartaxpayer shall be furnished the appropriate Committee of Congress only when

sitting in Executive Session Unless such taxpayer otherwise consents in writing tosuch disclosure.(B) Report to Oversight Committee. - The Commissioner shall, with reference to

Section 204 of this Code, submit to the Oversight Committee referred to in Section

290 hereof, through the Chairmen of the Committee on Ways and Means of the

Senate and House of Representatives, a report on the exercise of his powers

pursuant to the said section, every six (6) months of each calendar year.

SEC. 244. Authority of Secretary of Finance to Promulgate Rules andRegulations. - The Secretary of Finance, upon recommendation of theCommissioner, shall promulgate all needful rules and regulations for the effectiveenforcement of the provisions of this Code.

SEC. 245. Specific Provisions to be Contained in Rules and Regulations. -The rules and regulations of the Bureau of Internal Revenue shall, among otherthins, contain provisions specifying, prescribing or defining:• (a) The time and manner in which Revenue Regional Director shall canvass their

respective Revenue Regions for the purpose of discovering persons andproperty liable to national internal revenue taxes, and the manner in whichtheir lists and records of taxable persons and taxable objects shall bemade and kept; (b) The forms of labels, brands or marks to be required on

goods subject to an excise tax, and the manner in which the labelling,branding or marking shall be effected; (c) The conditions under which andthe manner in which goods intended for export, which if not exportedwould be subject to an excise tax, shall be labelled, branded or marked;

(d) The conditions to be observed by revenue officers respecting theinstitutions and conduct of legal actions and proceedings; (e) Theconditions under which goods intended for storage in bonded warehousesshall be conveyed thither, their manner of storage and the method ofkeeping the entries and records in connection therewith, also the books tobe kept by Revenue Inspectors and the reports to be made by them inconnection with their supervision of such houses; (f) The conditions underwhich denatured alcohol may be removed and dealt in, the character andquantity of the denaturing material to be used, the manner in which the

process of denaturing shall be effected, so as to render the alcohol

suitably denatured and unfit for oral intake, the bonds to be given, thebooks and records to be kept, the entries to be made therein, the reportsto be made to the Commissioner, and the signs to be displayed in thebusiness ort by the person for whom such denaturing is done or by whom,such alcohol is dealt in; (g) The manner in which revenue shall becollected and paid, the instrument, document or object to which revenuestamps shall be affixed, the mode of cancellation of the same, the manner

in which the proper books, records, invoices and other papers shall bekept and entries therein made by the person subject to the tax, as well asthe manner in which licenses and stamps shall be gathered up andreturned after serving their purposes; (h) The conditions to be observedby revenue officers respecting the enforcement of Title III imposing a taxon estate of a decedent, and other transfers mortis causa, as well as on




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gifts and such other rules and regulations which the Commissioner mayconsider suitable for the enforcement of the said Title III; (i) The mannerin which tax returns, information and reports shall be prepared andreported and the tax collected and paid, as well as the conditions underwhich evidence of payment shall be furnished the taxpayer, and thepreparation and publication of tax statistics; (j) The manner in whichinternal revenue taxes, such as income tax, including withholding tax,

estate and donor's taxes, value-added tax, other percentage taxes, excisetaxes and documentary stamp taxes shall be paid through the collection

officers of the Bureau of Internal Revenue or through duly authorizedagent banks which are hereby deputized to receive payments of suchtaxes and the returns, papers and statements that may be filed by thetaxpayers in connection with the payment of the tax: Provided, however,That notwithstanding the other provisions of this Code prescribing theplace of filing of returns and payment of taxes, the Commissioner may, byrules and regulations, require that the tax returns, papers and statements

that may be filed by the taxpayers in connection with the payment of thetax. Provided, however, That notwithstanding the other provisions of thisCode prescribing the place of filing of returns and payment of taxes, theCommissioner may, by rules and regulations require that the tax returns,papers and statements and taxes of large taxpayers be filed and paid,respectively, through collection officers or through duly authorized agent

banks: Provided, further, That the Commissioner can exercise this powerwithin six (6) years from the approval of Republic Act No. 7646 or the

completion of its comprehensive computerization program, whichevercomes earlier: Provided, finally, That separate venues for the Luzon,Visayas and Mindanao areas may be designated for the filing of taxreturns and payment of taxes by said large taxpayers.

For the purpose of this Section, 'large taxpayer' means a taxpayer who satisfiesany of the following criteria;(1) Value-Added Tax (VAT) - Business establishment with VAT paid or payable ofat least One hundred thousand pesos (P100,000) for any quarter of the preceding

taxable year;(2) Excise tax - Business establishment with excise tax paid or payable of at leastOne million pesos (P1,000,000) for the preceding taxable year;(3) Corporate Income Tax - Business establishment with annual income tax paid

or payable of at least One million pesos (P1,000,000) for the preceding taxableyear; and(4) Withholding tax - Business establishment with withholding tax payment orremittance of at least One million pesos (P1,000,000) for the preceding taxable

year.Provided, however, That the Secretary of Finance, upon recommendation of theCommissioner, may modify or add to the above criteria for determining a largetaxpayer after considering such factors as inflation, volume of business, wage andemployment levels, and similar economic factors.The penalties prescribed under Section 248 of this Code shall be imposed on anyviolation of the rules and regulations issued by the Secretary of Finance, uponrecommendation of the Commissioner, prescribing the place of filing of returns andpayments of taxes by large taxpayers.

SEC. 246. Non- Retroactivity of Rulings. - Any revocation, modification orreversal of any of the rules and regulations promulgated in accordance with thepreceding Sections or any of the rulings or circulars promulgated by theCommissioner shall not be given retroactive application if the revocation,modification or reversal will be prejudicial to the taxpayers, except in the followingcases:

• (a) Where the taxpayer deliberately misstates or omits material facts from hisreturn or any document required of him by the Bureau of Internal

Revenue; (b) Where the facts subsequently gathered by the Bureau ofInternal Revenue are materially different from the facts on which the rulingis based; or (c) Where the taxpayer acted in bad faith.

SEC. 290. Congressional Oversight Committee. - A Congressional Oversight Committee, hereinafter referred to as the Committee, ishereby constituted in accordance with the provisions of this Code. The Committeeshall be composed of the Chairmen of the Committee on Ways and Means of theSenate and House Representatives and four (4) additional members from eachhouse, to be designated by the Speaker of the House of Representatives and theSenate President, respectively.

The Committee shall, among others, in aid of legislation:• (1) Monitor and ensure the proper implementation of Republic Act No. 8240; (2)

Determine that the power of the Commissioner to compromise and abateis reasonably exercised; (3) Review the collection performance of theBureau of Internal Revenue; and (4) Review the implementation of theprograms of the Bureau of Internal Revenue.

In furtherance of the hereinabove cited objectives, the Committee is empowered to

require of the Bureau of Internal Revenue, submission of all pertinent information,

including but not limited to: industry audits; collection performance data; status

report on criminal actions initiated against persons; and submission of taxpayer

returns: Provided, however, That any return or return information which can be

associated with, or otherwise identify, directly or indirectly, a particular taxpayer

shall be furnished the Committee only when sitting in Executive Session unless

such taxpayer otherwise consents in writing to such disclosure.

DOF Order No. 007-02 (May 7, 2002)

Providing for the Implementing Rules of the First Paragraph of Section 4 of the

1997 NIRC, repealing for this purpose DO No. 005-99 amd Revenue Admin Order

No. 1-99

SUMMARY (This is all you need to know right here!): A ruling by the CIR shall be

presumed valid until overturned or modified by the Finance Secretary. The decision

of the CIR may be reviewed by the Finance Sec in 2 ways!

1. Through a REQUEST FOR REVIEW submitted by the taxpayer within 30days from the receipt of such ruling, accompanied with a duplicate copy ofthe BIR records, authenticated and certified by the BIR. The Request for




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Review must conform to certain requisites (see Section 3) and failure tofollow the requisites may lead to the dismissal of the Finance Sec todismiss the requisite with prejudish.

2. Through a MOTU PROPRIO REVIEW by the Finance Sec, in which case,he shall order the BIR to transmit the records within 15 days.

Finance Sec may affirm, reverse or modify the CIR ruling. In case of affirmation,

Finance Sec may rely wholly on the reasons of CIR. In case of reversal or

modification, the CIR ruling shall be deemed ineffective as of the date of receipt of

written notice of such reversal or modification (a) by the taxpayer; or (b) by the BIR,WHICHEVER IS EARLIER.

Certification fees only apply to REQUESTS FOR REVIEW, not to motu proprio

review by the Finance Sec.

Facts: joke lang, walang facts

WHEREAS, Section 4 of the National Internal Revenue Code of 1997 vests with

the Commissioner of Internal Revenue exclusive and original jurisdiction to

interpret its provisions and other tax laws, subject to review by the Secretary of

Finance;

WHEREAS, DO 005-99, dated January 26, 1999 and Revenue Administrative

Order No. 1-99, dated February 5, 1999, implements the power of the Secretary of

Finance to review rulings of the Commissioner of Internal Revenue;

WHEREAS, there is need to further provide for the implementing rules of the first

paragraph of Section 4 of the NIRC.

NOW THEREFORE, I, JOSE ISIDRO N. CAMACHO, Secretary of Finance, by

virtue of the powers of supervision and control over the BIR granted to me by

Section 2 of the NIRC and Book IV, Title II, Chapter 4, Section 18 of the

Administrative Code of 1987, do hereby order:

SECTION 1. Scope of This Order. — This Department Order shall apply to allrulings of the BIR that implement the provisions of the NIRC and other tax laws.

SECTION 2. Validity of Rulings. — A ruling by the CIR shall be presumed valid until

overturned or modified by the Secretary of Finance.

SECTION 3. Rulings Adverse to the Taxpayer. — A taxpayer who receives an

adverse ruling from the CIR may, within 30 days from the date of receipt of such

ruling, seek its review by the Secretary of Finance. The request for review shall be

in writing and under oath, and must:

a) be addressed to the Secretary of Finance and be filed with the LegalOffice, Department of Finance, DOF Building, BSP Complex, RoxasBoulevard corner Pablo Ocampo St., City of Manila;

b) contain the heading "Request for review of BIR Ruling No.______c) allege and show that the request was filed within the reglementary period;d) indicate the Tax Identification Number of the taxpayer;e) allege the material facts upon which the ruling was requested;

f) state that exactly the same facts were presented to the BIR;g) g) define the issues sought to be resolved; TCADEc

h) contain the facts and the law relied upon to dispute the ruling of theCommissioner;

i) be signed by or on behalf of the taxpayer filing the appeal; provided that,only lawyers engaged by the taxpayer and/or tax agents accredited by theBIR may sign on behalf of the taxpayer;

j) be accompanied by a copy of the Commissioner's challenged ruling; andk) contain a stamp of the Office of the Commissioner of Internal Revenue,

indicating that a copy of the request to review the ruling was received bythe Commissioner; and

l) specifically state that the taxpayer does not have a pending assessmentor case in an court of justice where the same issues are being considered.

Furthermore, the taxpayer must, at the time of filing of the request for review,

submit a duplicate copy of the records on file with the BIR pertaining to his request,

which set of records must be authenticated and certified by the BIR.

The Secretary of Finance may dismiss with prejudice a request for review that

fails to comply with these requirements.

SECTION 4. Motu proprio review by the Secretary of Finance. — The Secretary of

Finance may, of his own accord, review a ruling issued by the CIR. In such a case,

the Secretary of Finance shall order the CIR to transmit a duplicate copy of the BIR

records. The CIR shall transmit such records within 15 days from receipt of notice

of the request for transmittal.

SECTION 5. Affirmation, reversal or modification by the Secretary of Finance. —

The Secretary of Finance may affirm, reverse or modify a ruling of theCommissioner of Internal Revenue. In the case of an affirmation, the Secretary of

Finance may rely wholly on the reasons stated in the ruling of the Commissioner of

Internal Revenue.

Subject to Section 246 of the Republic Act No. 8424, a reversal or

modification of the ruling shall terminate its effectivity upon the earlier date of the

receipt of written notice of such reversal or modification by the taxpayer or by the

BIR.




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SECTION 6. Certification Fee to be Imposed by the BIR. — Except for review of

rulings under Section 4 the BIR may impose appropriate certification fees to carry

out the provisions of this Order.

SECTION 7. Repealing Clause. — .Department Order No. 005-99 and Revenue

Administrative Order No. 1-99, as well as all o ther existing Department Orders and

issuances of the Commissioner of Internal Revenue that are inconsistent with this

Order are hereby repealed.

SECTION 8. Effectivity. — This Department Order shall take effect immediately.

Done in the City of Manila this 7th of May 2002.

(SGD.) JOSE ISIDRO N. CAMACHO

Secretary of Finance

Revenue Regulations 5-2012 (April 2, 2012)

Subject: Binding effect of rulings issued prior to Tax Reform Act of 1997

Date: April 2, 2012Sec. of Finance: Cesar Purisima

CIR: Kim Jacinto-Henares

Summary: This RR establishes the policy on the binding effect of rulings issued

prior to the effectivity of the Tax Reform Act of 1997. All ruling issued prior to Jan.

1, 1998 shall no longer have any binding effect. Consequently, these rulings cannot

be invoked as basis for any current transaction/s. Neither can these ruling be used

as basis for securing legal tax opinions/rulings.

Section 1. Background - Republic Act No. 8424, or The Tax Reform Act of 1997(hereinafter referred to as the Tax Code of 1997), which was approved on

December 11, 1997 has put in place the last phase of the comprehensive reformpackage on tax laws which took effect on January 1, 1998. Pursuant to Section244, in relation to Section 4 of the Tax Code of 1997, these Regulations are beingpromulgated to establish the policy on the binding effect of rulings issued prior tothe effectivity of the Tax Code of 1997 on January 1, 1998.

Section 2. Coverage. – All rulings issued prior to January 1, 1998 will no longerhave any binding effect. Consequently, these rulings cannot be invoked as basis

for any current business transaction/s. Neither can these rulings be used as basisfor securing legal tax opinions/rulings.

Section 3. Repealing Clause. – All existing rules and regulations or parts thereofwhich are inconsistent with the provisions of these Regulations are herebyamended, repealed or revoked accordingly.

Section 4. Effectivity Clause. – These Regulat ions shall take effect immediately.

Revenue Regulations 14-2008 (November 26, 2008)

Summary: increased the coverage of withholding tax agents who are required towithhold 1% from regular suppliers of goods and 2% from regular supplier of

services from the top 10,000 private corporations to the top 20,000 private

corporations.

Income payments made by the top 20,000 to local/resident suppliers and non-

resident aliens engaged in trade or business in the Philippines, shall be withheld a

creditable income tax as follows:

Supplier of goods= 1%

Supplier of services= 2%

SECTION 1. Scope. — Pursuant to the provisions of Section 244 of the Tax Code

of 1997, as amended, in relation to Section 57 (B) thereof, these Regulations are

hereby promulgated to further amend Section 2.57.2 (M) of Revenue Regulations

No. 2-98, as amended, increasing the coverage of withholding tax agents who are

required to withhold 1% from the regular suppliers of goods and 2% from the

regular suppliers of services from the top ten thousand (10,000) private

corporations to top twenty (20,000) private corporations.

SECTION 2. Amendment. — Section 2.57.2 (M) of Revenue Regulations 2-98, as

amended, is hereby further amended to read as follows:

"Sec. 2.57. Withholding of Tax at Source. —

"Sec. 2.57.2. Income payment subject to creditable withholding tax

and rates prescribed thereon. — Except as herein otherwise provided, there shall

be withheld a creditable income tax at the rates herein specified for each class of

payee from the following items of income payments to persons residing in the

Philippines.

"xxx xxx xxx

"(M) Income payments made by the top twenty thousand (20,000) private

corporations to their local/resident supplier of goods and local/resident supplier of

services other than those covered by other rates of withholding tax. — Income

payments made by any of the top twenty thousand (20,000) private corporations,

as determined by the Commissioner, to their local/resident supplier of goods and

local/resident supplier of services, including non-resident alien engaged in trade or

business in the Philippines




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Supplier of goods — One percent (1%)

Supplier of services — Two percent (2%)

"Top twenty thousand (20,000) private corporations shall include a

corporate taxpayer who has been determined and notified by the Bureau of Internal

Revenue (BIR) as having satisfied any of the following criteria:

(a) Classified and duly notified by the Commissioner as a large taxpayer

under Revenue Regulations No. 1-98, as amended, or belonging to the

top five thousand (5,000) private corporations under RR 12-94, or to the

top ten thousand (10,000) private corporations under RR 17-2003, unless

previously de-classified as such or had already ceased business

operations (automatic inclusion);

(b) Any taxpayer with net VAT paid or payable for the preceding year of at

least P100,000;

(c) Any taxpayer with annual income tax paid or payable for the preceding

year of at least P200,000;

(d) Any taxpayer with percentage taxes for the preceding year of at least

P100,000;

(e) Any taxpayer whose gross sales for the preceding year is over

P10,000,000;

(f)Any taxpayer whose gross purchases for the preceding year is over

P5,000,000.

"The term "goods" pertains to tangible personal property. It does not

include intangible personal property, as well as real property.

"The term "local/resident suppliers of goods" pertains to a supplier from

whom any of the top twenty thousand (20,000) private corporations, as determined

by the Commissioner, regularly makes its purchases of goods. As a general rule,

this term does not include a casual purchase of goods, that is, purchase made from

a non-regular supplier and oftentimes involving a single purchase. However, a

single purchase which involves Ten thousand pesos (P10,000.00) or more shall be

subject to a withholding tax. The term "regular suppliers" refers to suppliers who

are engaged in business or exercise of profession/calling with whom the taxpayer-buyer has transacted at least six (6) transactions, regardless of amount per

transaction, either in the previous year or current year. The same rules apply to

local/resident supplier of services other than those covered by separate rates of

withholding tax. ECTAHc

"A corporation shall not be considered a withholding agent for purposes of

this Section, unless such corporation has been determined and duly notified in

writing by the Commissioner that it has been selected as one of the top twenty

thousand (20,000) private corporations.

"Any corporation which has been duly classified and notified as large

taxpayer by the Commissioner pursuant to RR 1-98, as amended, shall be

automatically considered one of the top twenty thousand (20,000) private

corporations, provided, however, that its authority as a withholding agent shall be

effective only upon receipt of written notice from the Commissioner that it has been

classified as a large taxpayer, as well as one of the top twenty thousand (20,000)

private corporations, for purposes of these regulations.

"Any corporation shall remain a withholding agent for purposes of these

regulations, unless the Commissioner notifies it in writing that it shall cease to be

one. The following, however, are some of the reasons that a taxpayer shall

automatically cease to be a withholding agent, and therefore no prior written notice,

for purposes of these regulations, is required, to wit:

(a) closure/cessation of business/dissolution (for taxpayer with notice of

dissolution given to the BIR);

(b) merger/consolidation (for dissolved or absorbed corporation);

(c) any other form of business combination wherein by operation of law a

corporate taxpayer loses its juridical personality.

"The withholding agent shall submit on a semestral basis a list of its

regular suppliers of goods and/or services to the Large Taxpayers Assistance

Division/Large Taxpayers District Office in the case of large taxpayers duly notified

as such pursuant to RR 1-98, as amended, or Revenue District Office (RDO)

having jurisdiction over the withholding agent's principal place of business on or

before July 31 and January 31 of each year.

"A government-owned or -controlled corporation previously classified as

one of the top five thousand (5,000) corporations under RR 12-94, as amended,

shall cease to be a withholding agent or included in the top twenty thousand

(20,000) private corporations for purposes of these regulations but rather shall be

treated as one under the succeeding sub-section (N) since it is already withholding

1% or 2% of the amount paid for the purchase of goods/services from local/resident

suppliers.

"The Commissioner of Internal Revenue may recommend to the Secretary

of Finance the amendment/modification to any or all of the criteria in the

determination and selection of taxpayers forming part of the top twenty thousand

(20,000) private corporations after considering such factors as inflation, volume ofbusiness, and similar factors. Provided, however, that the Commissioner is

empowered to conduct periodic review as to the number of taxpayers who ceased

to qualify under the category of top twenty thousand (20,000) private corporations

for purposes of delisting them or excluding them from the list and to identify

taxpayers to be added to the list of top twenty (20,000) private corporations.

"All taxpayers previously included in the list of top 5,000 private

corporations under RR 12-94, as amended, and those who qualified as top ten

thousand (10,000) private corporations under RR 17-2003 shall continue to

withhold one percent (1%) for supplier of goods and 2% for supplier of services

upon the effectivity of these Regulations, unless any of the following situations




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occur: (a) the Commissioner communicates in writing that they have ceased to

qualify as taxpayers includible in the list of top twenty thousand (20,000) private

corporations, or (b) those officially identified to have ceased business operations,

or undergone any of the business combinations wherein by operation of law the

juridical personality of said taxpayers ceased."

SECTION 3. Repealing Clause. — All existing rules and regulations or parts

thereof which are inconsistent with the provisions of these regulations are hereby

modified, amended, revoked or repealed accordingly.

SECTION 4. Effectivity. — These regulations shall take effect fifteen (15) days

following publication in a newspaper of general circulation.

Revenue Regulations 16-2002 (October 11, 2002)

SUMMARY

• All internal revenue taxes collected through AABs shall be credited to thedemand deposit accounts opened and maintained by the Bureau of Treasury

(BTr) for BIR in the head offices of AABs.

• In filing a tax declaration and making payment to an AAB, the taxpayer mustaccomplish and submit a BIR-prescribed deposit slip, which the bank teller

shall machine validate as evidence that the BIR tax payment has beenreceived and deposited to the account of the BTr.

• Aside from the electronic payment system currently being used by sometaxpayers in paying their internal revenue taxes, the rest shall pay their taxliabilities through any of the following modes:1) over-the-counter cash payments (for each tax payment not exceeding P

10,000.00); 2) bank debit system; and

3) check payment system.

• The following checks, however, are not acceptable as check payments forinternal revenue taxes: 1) accommodation checks; 2) second endorsed

checks; 3) stale checks; 4) postdated checks; 5) unsigned checks; and 6)checks with alterations/erasures. Second indorsement of checks which arepayable to the Bureau of Internal Revenue or Commissioner of Internal

Revenue is absolutely prohibited. Each check should cover one tax type forone return period only.

• AABs are mandated to accept tax returns/payment forms partly paid through

any of the aforementioned modes of payment and partly through Tax DebitMemos (TDM) duly and validly issued by the BIR. TDMs, however, are notacceptable as payments for Withholding Taxes, Fringe Benefit Tax, and taxes,fees and charges collected under special schemes/procedures/ programs ofthe government/BIR.

• Taxpayers are not required to enroll with any AAB where they intend to file

tax returns/payment forms and/or pay internal revenue taxes.

• Any diversion, non-remittance or under-remittance of the taxes collected by AABs through fault or negligence of the bank accepting such payment as well

as the diversion of any payment for BIR taxes using the facilities of the bankthrough fault or negligence of any of the banks personnel shall subject thebank to civil and criminal liabilities.

SUBJECT : Modes of and Procedure for the Payment of Internal Revenue Taxes

Through Authorized Agent Banks Amending Revenue Regulations No. 4-97, as

amended by Revenue Regulations No. 6-98

SECTION 1. Scope. — Pursuant to Section 244 of the National Internal

Revenue Code of 1997 (CODE) in relation to Sections 8, 12, 56, 58, 81, 103, 114,

128, 130, 200 and 245, all of the same Code, these Regulations are hereby

promulgated to amend Revenue Regulations No. 4-97, as amended by Revenue

Regulations No. 6-98, on the provisions relative to acceptable modes of

payment of internal revenue taxes coursed through authorized agent banks

(AABs), the recording of such payments and issuance of validated BIR-

prescribed deposit slips which likewise serve as acknowledgment receipts

for payments of taxes deposited by taxpayers for BTR-BIR account , and the

control mechanisms to deter and detect the diversion of tax payments.

SECTION 2. Recording of BIR Tax Payments by the AABs. —

A) All internal revenue taxes collected through authorized agent banks

(AABs) shall be credited to the demand deposit accounts opened andmaintained by the Bureau of Treasury (BIR) for BIR in the head offices of AABs;

B) Head offices of AABs shall assign and maintain a separate general ledgeraccount for said BTr demand deposit accounts;

C) Using the online tellering system, the bank tellers shall immediately postthe BIR tax payments they collect by crediting the BTr demand depositaccounts in the head offices of the AABs, instead of recording them as

mere payables to BTr at the end of each banking day in the AABs’backrooms.

D) In filing a tax declaration and making payment to an AAB, a taxpayer mustaccomplish and submit a BIR–prescribed deposit slip which AAB’s must

design, print and make available in all participating branches. The depositslip must in addition to those needed by the bank, provide for the followinginformation:

• Transaction Date

• Name of Taxpayer

• TIN

• BTR-BIR Account Number

• Account Name which must be BTR–BIR

• Name of Drawee Bank

• Check Number

• Bank Debit Advice Number (for debit system payments)

• Amount




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E) The bank teller shall machine validate the BIR–prescribed deposit slipaccomplished by the taxpayer as evidence that the BIR tax payment wasdeposited to the account of the BTr. Said deposit slip shall beaccomplished and issued in triplicate copies, distributed as follows:original (taxpayer’s copy), duplicate (AAB’s copy) and triplicate (to beattached to the tax return. Additionally, the AAB receiving the taxreturn/payment form shall also machine validate and stamp mark the word

"Received" on the return/payment form as proof of filing thereturn/payment form and payment of the tax by the taxpayer. The

machine validation on the return/payment form shall reflect the date ofpayment, amount paid and transaction code, the name of the bank,branch code, teller’s code and teller’s initials.

F) Before 12:00 NN of the following banking day, the head offices of the AABs shall provide to BTR/BIR the daily total amount of BIR taxes theycollected.

G) After receipt of payment but not later than 24 hours thereafter, the AAB

branch shall encode into the LBDE System and transmit to the concernedBIR Data Center, the below data and copy furnish the AAB head office.1. Date of the transaction;2. Name of the taxpayer;3. Taxpayer Identification Number (TIN) of the taxpayer;4. Tax type which is being paid for;

5. Return period for the tax type being paid for;6. Amount of tax paid;

7. Name of the drawee bank and check number, for tax paymentsthrough checks;

SECTION 3. Modes of Payment to AABs. — Aside from the electronic

payment system currently used by some taxpayers in paying their BIR taxes, the

rest shall pay their tax liabilities through any of the following modes: a) over–

the–counter cash payments; b) bank debit system; or c) check payment system.

a) "Over–the–counter cash payment" - payment of tax liabilities to authorizedagent bank in the currencies (paper bills or coins) that are legal tender in the

Philippines. The maximum amount allowed per tax payment shall not exceedten thousand pesos (P10,000.00)

b) "Bank debit system" - system whereby a taxpayer, through a bank debitmemo/advice, authorizes withdrawals from his/its existing bank accounts forpayment of tax liabilities.The bank debit system mode is allowed only if the taxpayer has a bank

account with the AAB branch where he/it intends to file and pay his/its tax

return/form/declaration, provided said AAB branch is within the jurisdiction of

the BIR Revenue District Office (RDO)/Large Taxpayers District Office (LTDO)

where the tax payment is due and payable.

c) "Checks" - bill of exchange or Order Instrument drawn on a bank payable ondemand.

In the issuance and accomplishment of checks for the payment of internal

revenue taxes, as illustrated below, the taxpayer shall indicate in the space

provided for "PAY TO THE ORDER OF" the following data:

(1) presenting/collecting bank or the bank where the payment is to be coursed

and

(2) FAO (For the Account Of) Bureau of Internal Revenue as payee; and under

the "ACCOUNT NAME" the taxpayer identification number (TIN).

(Below is a sample of a tax check payment where the drawee bank and presentingbank are different from each other.)

(Below is sample of a check tax payment drawn from and presented to the same

bank.)




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The following checks are not acceptable as check payments for internal revenue

taxes:

1. Accommodation checks — checks issued or drawn by a party other thanthe taxpayer making the payment;

2. Second endorsed checks — checks issued to the taxpayer as payee whoindorses the same as payment for taxes;

3. Stale checks — checks dated more than six (6) months prior topresentation to the authorized agent bank;

4. Postdated checks — checks dated a day or several days after the date ofpresentation to the authorized agent bank;

5. Unsigned checks — checks with no signature of the drawer;

6. Checks with alterations/erasures.

AABs accepting checks for the payment of BIR taxes and other charges must

see to it that the check covers one tax type for one return period only.

Moreover, AABs must strictly comply with the systems and procedures for the

reception, processing, clearing and accounting of the checks to be prescribed

under a separate regulation.

Second indorsement of checks which are payable to the Bureau of InternalRevenue or Commissioner of Internal Revenue is absolutely prohibited.

SECTION 4. Tax Returns Partly Paid Thru Tax Debit Memos (TDMs). —

AABs are mandated to accept tax returns/payment forms partly paid thru any

of the modes of payment mentioned in Section 3 hereof and partly thru TDMs

duly and validly issued by the BIR. Before accepting the BIR tax return/payment

form partly paid thru tax debit memo, the AAB shall insure that the number of the

TDM is indicated in the BIR tax return/payment form in the same manner that the

check number/drawee bank and bank debit advice number are indicated in the tax

return/payment form paid thru check or bank debit system, respectively. A

photocopy of the tax credit certificate (TCC), front and back page, which was the

source of the TDM, together with a copy of the TDM, must be required from thetaxpayer and attached to the BIR tax return/payment form.

TDMs are, however, not acceptable as payments for withholding taxes, including

Fringe Benefit Tax (clarified and implemented under RR No. 2-98, as amended,

and RR No. 3-98), and for taxes, fees and charges collected under special

schemes/procedures/programs of the Government / BIR as discussed and

elucidated in a separate revenue regulation. AABs shall see to it that this restriction

is strictly observed in the BIR tax returns/payment forms they receive.

SECTION 5. Enrollment of Taxpayers with Authorized Agent Bank Not

Required. — Taxpayers are not required to enroll with any AAB where they

intend to file tax returns/payment forms and/or pay internal revenue taxes.

Taxpayers may file tax returns/payment forms and pay internal revenue taxes with

any AAB of the appropriate BIR office (Revenue District Office (RDO), Large

Taxpayers District Office (LTDO), or Large Taxpayers Service, etc., whichever is

applicable) where they are required to file the particular return/payment form.

SECTION 6. Responsibility and Privilege of Taxpayers. — Taxpayers shall

see to it that their tax returns/payment forms with payment are filed with and

internal revenue taxes paid to legitimate AABs of the BIR. Nonetheless, theymay confirm their tax payments with their home RDO/LTDO or LTDO/RDO where

they are required to file tax returns/payment form and pay internal revenue taxes.

SECTION 7. Additional Liabilities/Responsibilities of Authorized Agent

Banks (AABs). —

(a) Any diversion, non-remittance or under-remittance of the taxes collectedby AABs through fault or negligence of the bank accepting such payment aswell as the diversion of any payment for BIR taxes using the facilities ofthe bank through fault or negligence of any of the bank’s personnel shallsubject the bank to civil and criminal liabilities provided for underSections 248 and 275 of the Tax Code, as amended, and other existing

laws, rules and regulations. AABs shall be liable to the BIR for double theamount of taxes diverted and unremitted, plus the increments andpenalties prescribed by the Tax Code, as amended, but the total penaltiesimposed may be reduced on meritorious grounds subject to the approval of themajority of the members of the Management Committee (MANCOM) of theBIR, composed of the Commissioner of Internal Revenue and the four (4)Deputy Commissioners, where the Commissioner of Internal Revenue votesfor such reduction.

(b) The reports of AABs to be submitted to BTr/BIR (under Sec. 2) of all the tax

payments collected shall be in accordance with the forms prescribed by BIR.(c) The requirements prescribed in these regulations shall be included in the

accreditation criteria to be mentioned in the Memorandum of Agreement to besigned by and among the BTR, BIR and the AAB for compliance by all AABs.

Revenue Memorandum Circular 22-2012 (May 7, 2012)

Subject: Clarification on the implementation of Revenue Regulations No. 5 – 2012

Summary: BIR Rulings issued prior to Jan 1, 1998 remains valid only to the

taxpayer who was issued the ruling and covering the transactions subject of the

same ruling. These cannot be used as precedents by other taxpayers and lawyers.

This Circular is issued to clarify the implementation and proper interpretation of

Revenue Regulations No. 5 – 2012, to wit:




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1. All BIR Rulings issued prior to Jan 1, 1998 are not to be used asprecedent by any taxpayer as a basis to secure rulings for themselves forcurrent business transaction/s or in support of their position against anyassessment.

2. All BIR Rulings issued prior to Jan 1, 1998 are not to be used by any BIRaction lawyer in issuing new rulings for request for rulings involving currentbusiness transaction/s.

3. However, BIR Rulings issued prior to Jan 1, 1998 remains to be validbut only:

a. To the taxpayer who was issued the ruling; andb. Covering the specific transaction/s which is the subject of

the same ruling4. BIR Rulings issued prior to Jan 1, 1998, shall remain valid as mentioned

above, unless expressly notified of its revocation or unless the legal basisin law for such issuance has already been repealed/amended in thecurrent Tax Code.

5. All concerned revenue officials and employees are hereby enjoined to give this

Circular as wide a publicity as possible.

Kim S. Jacinto-Henares

BIR Ruling No. 370-2011 (October 7, 2011)

(Just lifted this off from last sem. Don’t worry I checked if mei kulang.)Summary:The case is about the PEACe bonds, and the tax to be imposed on the interestincome. In the 2001 BIR Rulings, they said that the bonds were exempt from the20% Final tax. The 2001 Rulings interpreted the law incorrectly by saying thatsince it was sold to any one entity it is not to be considered as depositedsubstitutes and thus not to be charged a 20% Final Tax. This however was foundto be inaccurate as the law was found out to provide that these bonds are covered.The interpretation of the phrase “at ANY one time” means the entire term of the

bond not just the original issuance. The 2001 Rulings were declared null and voidfor adding an exemption that is not found in the law hence this ruling was given

retroactive effect. As a result, CODE-NGO must pay the present value of thediscount – P4.86 B, because it did not pay upfront when it should have beenwithheld upfront and paid at the time of issuance, they would have paid only P1.4B. They cannot rely on the 2001 Rulings because they were in excess of what theTAX CODE provides.

FACTS:

• Hon. Cesar v. Purisima, Secretary of Finance, sent a letter dated September2011 requesting for the proper tax treatment of the discount or interest income

arising from the P34 billion worth of 10-year zero coupon treasury bonds1

issued by the Bureau of Treasury (BTr) on October 18, 2001 – PovertyEradication and Alleviation Certificates (PEACe Bonds)

Why the PEACe Bonds were issued

• Stemmed from the proposal of the Caucus of Development NGO Networks

(CODE-NGO) sometime in March 2001 for the Dep’t of Finance (DOF) to issueP15 billion worth of 10-year zero coupon treasury notes.

• CODE-NGO will purchase the notes and sell them to investors.

• The net proceeds from the sale estimated to be at P1.45 billion will be used byCODE-NGO to establish a fund that will finance anti-poverty projects of NGOs

nationwide.

• The original plan did not happen because BTr questioned the propriety ofissuing the bonds directly to CODE-NGO, not being a Government SecuritiesEligible Dealer (GSED). They wanted an auction and they wanted that CODE-

NGO get a GSED to join.

• BTr sold the PEACe Bonds via auction to eligible GSEDs.

Taxation of the Interest Income

• BTr provided in the Public Offering of Treasury Bonds the tax treatment of thePEACe Bonds– WILL NOT BE SUBJECT TO 20% FINAL WITHHOLDINGTAX.

• The tax treatment was based on 3 BIR rulings (2001 Rulings) issued beforethe auction.o May 31 – supposedly the Bonds were to be issued to a single entity,

CODE-NGO, the Bonds were NOT considered to be “public” borrowing,

they were NOT considered “deposit subsitutes2” as defined by the Tax

Code so not subject to the 20% final withholding tax.o August 16 – They are not deposit substitutes because of the fact of their

original issuance to a single entity. Construction of the phrase, “at any onetime” to mean the original issuance.

o September 29 – confirmed the 2 above

Auction

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• RCBC was declared as the winning bidder – lowest bid interest rate of 12.75%for a total face value of P35 billion.

• RCBC paid BTr P10.7 Billion for P 35 billion worth of treasury bonds, discount

of P24.3 billion.

• RCBC sold the PEACe bonds to CODE-NGO. CODE-NGO sold it to RCBC

Capital for P12.1 billion = gain of P1.4 billion

2004 BIR Ruling no. 007-2004

• Issued in response to request for confirmation of the BTr on the tax

consequences of its regular and special issuance of treasury bills and bonds –REVERSING THE 2001 Rulings.

• “The mere issuance of government debt instruments and securities is deemed

as falling within the coverage of ‘deposit substitutes’ irrespective of thenumber of lenders at the time of origination. Accordingly, since governmentdebt instrument and securities are not exempt from taxes, interest incomederived therefrom shall be subject to the following:

(c) 20% final tax imposed under sections 27 (D) (1) and 28 (A) (7) (a),of the Tax Code, for domestic and resident foreign corporationsrespectively ;

• The phrase at “any one time” is deemed to refer to the floatation of the debtinstrument or security.

• In other words, since the actual number of bond holders or investors maybe at

maturity date of the financial instrument, more than 20 individuals orcorporation, the said direct lenders and indirect investors are deemed to bewhat constitute “public.”

• In light of such ruling, BIR issued Revenue Regulations No. 17-84:

o Deposit substitutes shall mean –" In the case of other non-financial companies, including the national

or local government and its instrumentalities, all borrowings through the issuance of debt instruments denoted as treasury

bonds, treasury bills, treasury notes, and similar instruments.

• BIR also declared in another BIR Ruling that the tax due should be withheldupfront.

ISSUES: Purisima raises the ff issues

1. W/N the interest income arising from PEACe Bonds shall be subject to the20% Final Tax or, in the alternative, to Ordinary Income Tax – 20% FinalTax

2. How much is the tax due – P4.86 billion (MAIN) 3. Who shall be liable to pay the tax due – CODE-NGO 4. How will the tax be collected – Withhold upfront

RATIO:ISSUE 1: Subject to 20% Final Tax

• The P24.3 billion discount on the issuance of the PEACe Bonds should besubject to the 20% Final Tax on interest income from deposit substitutes.

• It is now settled that all treasury bond regardless of the number ofpurchasers/lenders at the time of origination/issuance are considered depositsubstitutes.

• In the case of zero coupon bonds, the discount (face value – purchase price) istreated as interest income of the purchaser

• Section 27 (D) (1) of the 1997 Tax Code:

o Interest from Deposits and Yield or any other Monetary Benefit fromDeposit Substitutes and from Trust Funds and Similar Arrangements,and Royalties. - A final tax at the rate of twenty percent (20%) is hereby

imposed upon the amount of interest on currency bank deposit and yieldor any other monetary benefit from deposit substitutes and from trust

funds and similar arrangements received by domestic corporations, androyalties, derived from sources within the Philippines: Provided, however,That interest income derived by a domestic corporation from a depositorybank under the expanded foreign currency deposit system shall be subjectto a final income tax at the rate of seven and one-half percent (7 1/2%) ofsuch interest income.

ISSUE 2: Amount of Tax Due

• Manner of payment – DOF Department Order No. 141-95 – this should havebeen followed.o “Treasury Bonds, the 20% final income tax shall be withheld on

discounts valued at present value on every original sale. Periodiccoupon payments on Treasury Bonds shall be subject to the 20% finalincome tax to be withheld at the time the coupon payments are made.”

o PRESENT VALUED BY THE NET YIELD ON THE SECURITY TOENSURE THE INTEREST TAXED AT 20% TO BE PAID UPFRONT

• However, at the time of the issuance of the PEACe Bonds in 2001, the BTr

was not able to collect the final tax on the discount realized by RCBC as aresult of the 2001 Rulings.

• Subsequently, the issuance of the 2004 Ruling modified and superseded the

2001 Rulings by stating that the TAX CODE is clear that the term ”public”means borrowing from 20 or more lenders “at ANY one time”.o The word “ANY” indicates that the period contemplated is the entire term

of the bond and not merely the point of origination issuance.o The Tax Code provision is clear and there is no need for statutory

construction.

• Thus, by taking the PEACe Bonds out of the ambit of deposits substitutes and

exempting it from the 20% Final Tax, an exemption in favour of the PEACeBonds was created when no such exemption is found in the law.

• THE 2001 rulings are null and void and cannot be given any legal effect

for being contrary to law.o It is basic principle of administrative law that the interpretation given

by an administrative agency cannot run contrary to the law which itseeks to implement.

o Administrative rules and regulations are intended to carry out,neither to supplant nor to modify, the law.




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• RCBC should have paid upon issuance and it would have paid only P1.4B,20% of the value as of October 18, 2001. o Since they did not pay they will have to pay now the present value of the

original discount – P4.86B. (So basically, this ruling was givenretroactive effect)

ISSUE 3: Who shall be liable

• RCBC merely acted as an agent or conduit of CODE-NGO by virtue of the

requirement by BTr that it is not a GSED.

• CODE-NGO should pay because it is the beneficial owner of the PEACeBonds.

ISSUE 4: How will the tax be collected

• BTr shall withhold the FINAL TAX due on the interest income derived from thePEACe Bonds prior to its payment on the date of maturity.

remedies - tax administration

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