Tax 2 Selected Topics
Tax 2 Selected Topics
Tax 2 Selected Topics
Decedent’s interest
• Refers to all interest of the decedent over all property, real
or personal, tangible or intangible
• Only properties within the CONTROL of the decedent
• Residents and Citizens – All properties wherever situated
• Non-resident Aliens – Only properties situated in the Philippines,
provided that, with respect to intangible personal properties
B
Decedent
merger
D Naked Title
Transmission of full ownership to from C to
D is tax-exempt
19
C
Minor
son of A
A
Decedent
B
Brother of A
D
Another
Heir
Administrative Provisions
Administrative Provisions
Filing of the estate tax return
• Attachment to the return – Statement of Assets and Liability
certified by a CPA if gross estate exceeds P5.0M
• Who will file – executor, administrator or heirs
• Time for filing & payment – within 1 yr from death; Pay-as-
you-file procedure; extension of time to file return in
meritorious cases for a period not exceeding 30 days
• Extension of time to pay due to financial difficulties – 5 years
if settled judicially and 2 years if settled extra-judicially
• Installment payment – within 2 years without civil penalty and
interest
Withdrawals from Cash Account
• 6% Final Tax
• On any withdrawals from bank deposits of decedent who
died starting January 1, 2018
Decedent / Administrator / Heir
Decedent Decedent thru Administrator or
Executor Heir
(during his lifetime)
(during settlement of estate)
• A Corporation (undivided /
unregistered partnership)
• Income Tax:
• Tax Rate: Sec 27
• Gross Income: Sec 32
• Deduction: Sec 34
DONOR’S TAX
SECTIONS 98 TO 104
Title III – Estate and Donor’s Tax
39
Meaning of Consideration
• The word “consideration” means that, when the
transferor gives something away and does not at the
same time replace it with money of equal value or
some goods or services capable of being valuated in
money, he is deemed to have made a gift within the
taxing law (Commissioner v. Bristol, 121 F(2d) 129)
• Consideration must be measurable in money or
money’s worth. Mere legal consideration is not
sufficient.
• The consideration must flow to the donor; mere
detriment to the donee does not satisfy the purpose of
the statute
41
Rules of Valuation
Trust Arrangements
X C
Minor
Daughter of A & S son of X
A
Decedent
Y D
Son of A & S Another
Minor
Z
son of X
S
Spouse of Right to Inherit:
Illegitimate son of A
Renunciation/Repudiation of Right:
When subject to Estate Tax Only? When subject to Estate Tax and Donors Tax?
54
BUSINESS TAXES:
(1) VALUE ADDED TAX
Part I
Title IV – Value Added Tax
55
Business Taxes
• Valued Added Tax
• Other Percentage Tax
• Excise Taxes
56
References
• Tax Code – Title IV
• Recently amended by RA 10963
• Chapter I : Imposition of Tax
• Sections 105 to 112
• Chapter II: Compliance Requirements
• Sections 113 to 115
• BIR Revenue Regulations
• RR 16-2005 Consolidated VAT Regulations
• RR 2-2007
• RR 4-2007
• RR 6-2007
• RR 13-2008
• RR 10-2011
• RR 16-2011
• RR 15-2013
57
What is VAT?
• A Form of Sales Tax
• Tax on consumption levied on
-sale of goods, properties and services
-importation of goods
• An indirect tax imposed on sellers but actually borne by the
buyers.
• Sellers act merely as tax collectors
58
• Importers
59
• 12%
• 0%
60
Comparison:
Rates in Other Countries
• El Salvador 13% • Nepal 10%
• India 10-40% • Peru 18%
• Indonesia 10% • Tajikistan 20%
• Japan 5% • Tanzania 20%
• Jordan 13% • Thailand 7%
• Kazakhstan 16% • Vietnam 0%/5%/10%/
• Kyrgyztan 20% 20%
61
“goods or properties”
• The term “goods or properties” refer to all tangible and
intangible objects which are capable of pecuniary estimation
and shall include
• (1) Real properties held primarily for sale to customers or held for
lease in the ordinary course of trade or business;
• (2)The right or the privilege to use patent, copyright, design or model,
plan, secret formula or process, goodwill, trademark, trade brand or
other like property or right;
• (3) The right or the privilege to use any industrial commercial or
scientific equipment;
• (4) The right or the privilege to use motion picture films, films, tapes
and discs; and
• (5) Radio, television, satellite transmission and cable television time.
64
“initial payment”
• “Initial payments” means payment or payments which
the seller receives before or upon execution of the
instrument of sale and payments which he expects or is
scheduled to receive in cash or property (other than
evidence of indebtedness of the purchaser) during the
year when the sale or disposition of the real property was
made.
• It covers any down payment made and includes all
payments actually or constructively received during the
year of sale, the aggregate of which determines the limit
set by law.
68
Additional Provision
• Items 3, 4, and 5 shall be subject to the 12% VAT and no
longer be considered export sales subject to 0% VAT
upon satisfaction of the following conditions:
ü There is a successful establishment and implementation
of an enhanced VAT refund system that grants refunds of
creditable input tax within 90 days from the filing of the
VAT refund application with the Bureau.
Additional Provision
• The Department of Finance shall establish a VAT Refund
Center in the BIR and BOC that will handle the processing and
granting of cash refunds of creditable input tax.
Deleted provision
The following shall no longer be subject to 0% VAT:
Effectively zero-rated
• The term “effectively zero-rated sales of goods and
properties” shall refer to the sale by a VAT-registered
person to a person or entity who was granted indirect tax
exemption under special laws, e.g. RA 7227 or
international agreements, e.g. ADB, IRRI, EO 226.
• Effectively zero-rated transactions shall cover local sale of
goods and properties to persons or entities enjoying
exemptions from indirect taxes.
88
Additional Provision
• Items 1 and 5 shall be subject to the 12% VAT and no
longer be considered export sales subject to 0% VAT
upon satisfaction of the following conditions:
ü There is a successful establishment and implementation
of an enhanced VAT refund system that grants refunds of
creditable input tax within 90 days from the filing of the
VAT refund application with the Bureau.
Additional Provision
• The Department of Finance shall establish a VAT Refund
Center in the BIR and BOC that will handle the processing and
granting of cash refunds of creditable input tax.
• (4) ‘cont
• i. Change of ownership of the business;
• Except: (Not subject to VAT)
• Change in trade name
• Mergers
• Consolidation
• ii. Dissolution of a partnership other than a general professional
99
TAX BASE
• Sale of goods - Gross Selling Price
VAT Liability
Sales > Output Tax
Less:
Cost/Expenses (VATable) > Input Tax
Effect of Zero-rating
• A zero-rated sale of goods or properties (by a VAT-
registered person) is a taxable transaction for VAT
purposes, but shall not result in any output tax. However,
the input tax on purchases of goods, properties or
services, related to such zero-rated sale, shall be
available as tax credit or refund in accordance with these
regulations
112
Mixed Transactions
• Claim only input tax directly attributable to vatable activity
• Can’t claim input tax directly attributable to exempt activity
• Can claim ratable portion attributable to vatable activity for
input tax that cannot be directly identified to either activity
(subject to apportionment/attribution allocation)
• Input tax attributable to exempt transaction are not
creditable
124
VAT Refund
• Zero-rated and effectively zero-rated sales of goods,
properties or services
• On related input tax, within 2 yrs after close of taxable quarter
when sales where made
• Mandatory 90 day-rule
• Cancellation of VAT registration
• On unused input tax, within two years from cancellation of
registration
125
BUSINESS TAXES:
(2) OTHER PERCENTAGE
TAX
Title V – Percentage Tax
128
• Reference:
• Revenue Regulations (RR) 16-2005 as amended
• RR 15-2013 (on international carriers)
• Either VAT or Percentage Tax and never both
• Also a business tax
• An excise tax
• An indirect tax
129
BUSINESS TAXES:
(3) EXCISE TAX
Title VI – Excise Tax
141
[Sec 129]
Goods and Services subject to excise
• Goods manufactured or produced in the Philippines for
domestic sale or consumption or any other disposition
• Things imported
• Services performed in the Philippines
143
• Determination of base
• Specific tax: based on volume, weight, quantity
• Ad valorem tax: based on gross selling price net of the VAT
• Manufacturer’s or Producer’s Sworn Statement
• Filed by every producer showing all the products and their
corresponding gross selling price and cost of production
147
DOCUMENTARY STAMP
TAX
Title VII –
152
References
• Tax Code:
• Secs. 173 to 201
• Revenue Regulations No. 4-2018
153
Nature
• Tax on documents, instruments, paper evidencing the
acceptance, assignment, sale or transfer of an
obligations, right or property
• An excise tax
• Paid for the privilege to enter into the transaction
• Various DST rates depending on the document and the
face value of the document/instrument
154
When to file
• On or before the 5th day following the close of the month
of transaction
157
Bureau of
Local DEPARTMENT Bureau of
Government OF FINANCE Customs
Finance
Bureau of
Treasury
Finance Agencies & GOCCs
Insurance
Commission
Privatization
and National Tax
Research
Management
Center
Office
DEPARTMENT
OF FINANCE
Central Board
Cooperative of
Development
Assessment
Authority
Appeal
Philippine
Philippine Deposit
Export-Import
Insurance
Credit Agency
Corporation
Chiefs Officials of the BIR [Sec 2]
Deputy Commissioner –
Operations Group
Deputy Commissioner –
Legal &
Commissioner
of Internal Inspection Group
Deputy Commissioner –
Revenue
Resource
Management Group
Deputy Commissioner –
Information
Systems Group
Regional & District Offices
[Sec 9 & 10]
DCIR - OG 1
Regions 19 + 2
District
Offices 119 + 8
Powers & Duties of the BIR [Sec 2]
• Assess and collect of all internal revenue taxes, fees, and
charges, and
• Enforce all forfeitures, penalties, and fines connected with
the assessment & collection function
• Execute favorable judgments of the Court of Tax Appeals
and the ordinary courts.
Powers of the Commissioner [Sec 4]
• Interpret:
• exclusive and original jurisdiction to interpret the provisions tax
laws (subject to review by the Secretary of Finance)
• Decide:
• To decide on, (subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals)
• disputed assessments
• refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto,
Powers of the Commissioner [Sec 5]
• Purpose:
• Ascertain correctness of any return
• Making a return when none was prepared
• Determining tax liability
• Collection of tax liability
• Evaluating tax compliance
Power of Commissioner [Sec 5]
• Examination
• Notice of Audit, Letters of Authority, Tax Verification Notice, Letter
Notice
• Obtain information
• Request for Third Party Information, Data-Linkage
• Summon any person
• Subpoena Duces Tecum
• Take testimony
• Subpoena Ad Testificandum
• To order canvass [survey or surveillance]
• Mission Orders
Power of the Commissioner [Sec 6]
• (A) Examination of Returns
• Absence of a return does not prelude examination [Sec 222]
• Filed return cannot be withdrawn [Sec 255]
• May be modified, changed or amended within the period of 3 years
from filing, provided no notice of audit or investigation has been
actually served upon the taxpayer
Power of the Commissioner [Sec 6]
• (B) Assess based on Best Evidence Obtainable
• When taxpayer fails to file a return or document required
• When there is reason to believe that the return filed is false,
incomplete or erroneous
• RMC 23-2000
• Rationale: unhampered assessment and collection function
• Burden of proof is upon the taxpayer to show clearly that
the assessment is wrong and without basis or is
erroneous.
• Failure to do so on the part of the taxpayer justify the
judicial affirmation of the assessment.
• (C) Inventory Taking, Surveillance, Prescribe Presumptive
Gross Sales & Receipts
• Inventory Stock-Taking
• All taxpayer, excise
• Surveillance
• Spot-checking, open surveillance (covert or overt operations)
• Presumptive Sales/Receipts
• Sec 113 & 237
• Benchmarking
• Prima facie correct as basis to compute tax liability
• (D) Terminate Taxable Period
• Retirement of business
• Intending to leave the country
• Remove, hide or conceal property
• Obstruction in collection activity
REMEDIES
Title VIII –
181
References
• Tax Code:
• Title VIII, Secs. 202 to 231
182
Compromise Penalty
incremental penalty impose in lieu of criminal prosecution
subject to consent by a taxpayer
186
2. The tax administration and collection cost involved do not justify
the collection of the amount due.
187
Injunction
• General Rule
• (Sec 218) No court shall have authority to grant an injunction to restrain
the collection of any NIRC imposed taxes, fees or charges
• Exception
• (Se 11, RA 1125 as amended) Injunction may be issued by the CTA
when in it opinion collection of taxes may jeopardize the interest of the
Government and/or the taxpayer, where the court may require the
taxpayer to deposit the amount or post a surety bond not more than
double the amount being collected with the CTA
199
What is an assessment?
• It is a formal notice to the taxpayer stating that the amount
thereon is due as a tax and containing a demand for the
payment thereof. An assessment contains not only a
computation of tax liabilities but also a demand for
payment within a prescribed period (Alhambra Cigar v.
Collector, 1959).
• Civil Action –
• Appeal to CTA
• Contest a forfeiture before sale of forfeited property or
after the its sale (within 6 months) to recover net
proceeds realized
• Claim damages against BIR officials for acts beyond
official function/grave abuse of authority
• Criminal Action –
• Against erring BIR officials and employees
208
Protesting an Assessment
• A Protest must be filed within thirty (30) days from
receipt of the Final Assessment Notice
• A Protest may come in two (2) forms:
a) Request for Reinvestigation – where the taxpayer would
introduce newly discovered evidence;
b) Request for Reconsideration – where the taxpayer
would invoke misappreciation of facts, misapplication of
law , or both.
• A protest filed out of time will make the assessment
final, executory and demandable.
• A late protest will not suspend the prescriptive period to
collect (CIR v. Atlas Con. Mining & Dev. Corp., 2000)
209
For Final
End Decisio
Execution n End
222
Process Flow for the
Assessment and Collection of Taxes ( as amended by
RR 18-2013) Within three (3) years
Filing of FAN
Returns Issuance PAN
of LA 15 days
Not paid/
Protested Not protested
Served Audit Paid w/in
w/in 30 w/in 30 days
w/in 30
Terminate 30 days
d in 120 days
days days
Assessmen
t Final
Claim for
refund A
Admin & Judicial
2 years after payment Remedies
(w/in 5 yrs)
No Yes
SC CTA Granted TCC /
Gov’t check
For Final
End Decisio
Execution n End
223
Reconsideration Reinvestigation
- Not suspend -Suspends collection
collection - 60 days to submit
docs
Yes Favorabl
End Favorabl No e
e
Yes
No
Final End
Decisio SC CTA Adverse
End
n
224
COMPLIANCE
REQUIREMENTS
Title IX –
225
Chapter I
• Sec 232 – Keeping of Books of Accounts
• Relevant and appropriate set of bookkeeping records
• CPA certificate needed is gross annual sales/receipts exceed
P3.0million
• Sec 233 – Subsidiary Books
• Keep as the business requires
• Will form part of accounting system
226
Chapter II
• Sec 236 – Registration Requirements
• Simple registration requirements for SEPs
• No option to be VAT registered for entities who opted to be under the
8% income tax rate
• Sec 237 – Issuance of Receipts or Sales or Commercial
Invoices
• P100.00
• Mandatory shift to e-receipts within 5 years
• Sec
237 (A) – Electronic Sales Reporting System
• Sec
238 – Printing of Receipts or Sales or Commercial Invoices
• Sec
239 & 240 – Exhibit signs for excisable entities
• Sec
241 – Exhibition of Certificate of Payment at Place of
Business
228
Chapter III
• Sec 244: Authority to promulgate rules and regulations
vest upon the Secretary of Finance upon recommendation
of the Commissioner
• Sec 245: Specific Provisions in a Rules and Regulations
• Sec 246: Non-retroactivity of Rulings
230
STATUTORY OFFENSES
AND PENALTIES
Title X –
231
• Chapter I
• Additions to Tax: Secs 247 - 252
• Chapter II
• Crimes, Other Offenses and Forfeitures: Secs 253 - 268
• Chapter III
• Penalties Imposed on Public Officers: Secs 269 - 273
• Chapter IV
• Other Penal Provisions: Secs 274 - 282
232
Civil Penalties
• Interest
• Double the legal interest rate set by BSP
• Deficiency interest vs. delinquency interest – one time computation
of interest
• From due date until paid
• Compromise Penalty
• In lieu of criminal prosecution
• Voluntary only on the part of the taxpayer
234
• Penalty:
• equivalent to amount of withholding taxes
• In relation with Sec 34 (K): disallowance of deduction for income tax
purposes
236
• Elements:
• Any person
• willfully attempts in any manner
• to evade or defeat any tax
MOC: 2010 Workshop on RATE 239
• Penalties
• Penalties
• Elements:
• Any person
• Carries on any business for which an annual registration fee is
imposed
• Without paying the tax as required by law shall upon conviction.
MOC: 2010 Workshop on RATE 254
• Penalties
• For each act or omission, a fine of not less than P5,000.00 but
not more than P20,000.00
• Suffer imprisonment of not less than six (6) months but not
more than two (2) years
• That in the case of a person engaged in the business of
distilling, rectifying, repacking, compounding or manufacturing
any article subject to excise tax, for each act or omission, be
punished by a fine of not less than P30,000.00 but not more
than P50,000.00 and suffer imprisonment of not less than two
(2) year but not more than four (4) years.
MOC: 2010 Workshop on RATE 255
• Elements:
• Any person
• Who ships, transports or removes spirituous,
compounded or fermented liquors, wines or any
manufactured products of tobacco under any other
than the proper name or brand known to the trade
as designating the kind and quality of the contents
of the cask, bottle or package containing the same
or as an imitation of any existing or otherwise
known product name or brand or causes such act
to be done.
MOC: 2010 Workshop on RATE 264
Section 262. Shipment or Removal of Liquor or Tobacco Products under
False Name or Brand or as an imitation of any existing or otherwise known
product name or brand
• Penalties
• Any person
• Who owns and/or is found in possession of imported
articles subject to excise tax, the tax on which has not
been paid in accordance with law, or any person who
owns and/or is found in possession of imported tax-
exempt articles other than those to whom they are legally
issued.
MOC: 2010 Workshop on RATE 266
• Penalties
• Fine of not less than P1,000.00 nor more than P2,000.00 and
suffer imprisonment of not less than 60 days but not more than
100 days if the appraised value , to be determined in the
manner prescribed in the Tariff and Customs Code (TCC),
including duties and taxes of the articles exceeds P1,000.00
but does not exceed P50,000.00.
• Fine of not less than P10,000.00 but not more than P20,000.00
and imprisonment of not less than 2 years but not more than 4
years , if the appraised value , to be determined in the manner
prescribed in the TCC, including duties and taxes of the articles
exceeds P50,000.00.
MOC: 2010 Workshop on RATE 267
• Fine of not less than P30,000.00 but not more than P60,000.00
and imprisonment of not less than four years but not more than
six years, if the appraised value , to be determined in the same
manner prescribed in the TCC, including duties and taxes of
the articles is more than P50,000.00 but does not exceed
P150,000.00;
• Fine of not less than P50,000.00 but not more than P100,000
and suffer imprisonment of not less than 10 years but not more
than 12 years, if the appraised value, to be determined in the
manner prescribed in the TCC, including duties and taxes of
the articles exceeds P150,000.00
MOC: 2010 Workshop on RATE 268
• Penalties
• For the first offense, a fine of not less than 10 times the
amount of excise tax due on the articles but not less than
P1,000.00 and suffer imprisonment of not less than one
(1) year but not more than two (2) years.
271
• Penalties
• Elements
• Any person
• Who commits any of the following acts:
• Making, importing, selling, using or possessing without express
authority from the CIR, any die, for printing or making stamps, labels,
tags or playing cards;
• Erasing the cancellation marks of any stamp previously used, or
altering the written figures or letters or cancellation marks on internal
revenue stamps;
• Possessing false, counterfeit, restored or altered stamps, labels or tags
or causing the commision of any such offense by another;
MOC: 2010 Workshop on RATE 278
• Elements
• Any person
• Who commits any of the following acts:
• Selling or offering for sale any box or package containing articles
subject to excise tax with false, spurious or counterfeit stamps or labels
or selling from any such fraudulent box, package or container as
aforementioned; or
• Giving away or accepting from another, or selling, buying or using
containers on which the stamps are not completely destroyed.
MOC: 2010 Workshop on RATE 279
• Penalties
• Yutivo Sons Hardware Co. vs. CTA,CIR [G.R. No. L-13203, Jan.
28, 1961]
• The Coll. Of Internal Revenue vs. Benipayo [G.R. No. L-13656,
Jan. 31, 1962]
• Elevator Service Co., Inc. vs CIR [G.R. No. 61509, April 19, 1988]
MOC: 2010 Workshop on RATE 293
Informer’s Reward
• Sec 282
• 10% of amount collected but not more than Php1,000,000
• Subject to 10% final withholding taxes
298
Appellate Jurisdiction
• Decisions of the CIR
• Inaction of the CIR
• Decision of RTC on local tax cases
• Decision of Commissioner of Customs
• Decisions of Central Board Assessment Appeal (CBAA)
• Decisions of DOF on customs cases elevated on
automatic review
• Decisions of DTI (on non-agri products) and DA (on agri
products) involving dumping and countervailing duties
301
Criminal case
• Original jurisdiction
• Offenses arising out of violations of NIRC, TCC and other laws
administered by BIR and BOC where principal amount (excluding
penalties) is at least Php1,000,000
• Appellate jurisdiction
• On appeals on judgments by RTC on cases less than
Php1,000,000
• On Petition for Review on decisions of RTC in their appellate
jurisdiction over MTC cases
302
Civil Case
• Original jurisdiction
• Tax collection cases where the principal amount is Php1,000,000 or
more
• Appellate jurisdiction
• Appeals over decision of RTC in tax collection cases
• Petition for review over decisions of RTC on appeal over MTC
decisions
303
Tax Review on
Case Certiorari
LBA CBAA
Motion for
Review
BIR BOC CBAA DTI DA
Petition for Review
(en banc)