The Bureau of Internal Revenue (BIR) has the authority to audit all taxpayers and render assessments for deficiency taxes.
During audits, the BIR effectively uses a fraction of the
government’s resources against a single taxpayer. Meanwhile, the
taxpayer still has to carry on his or her business operations while the
audit is taking place. The balancing factor, according to the Supreme
Court, is ensuring that all audits are properly authorized.
In G.R. Case No. 222743, Medicard Philippines, Inc. was issued
assessments without being issued a Letter of Authority (LOA) from the
BIR. This lack of adherence to due process effectively voided the
assessments.
The ruling was later reiterated by BIR Revenue Memorandum Circular No. 75-2018.
To avoid being taken advantage of by corrupt revenue officers,
taxpayers need to learn the process of a BIR audit or investigation, and
what validates or invalidates such audit.
The BIR audit begins with the issuance of a LOA.
Prior to that, the taxpayer can be issued a letter notice to notify
the taxpayer of any discrepancy in the reports. Letter notices cannot
replace LOAs, and as such do not authorize further examinations or
assessments.
This applies even if the letter notice already contains the exact
deficiency determined via the BIR’s database. In such cases, letter
notices will need to be converted into letters of authority before
assessments can be issued.
LOAs need to be specific, containing which types of taxes will be
audited and for what taxable year. While sanctioning the audit of all
types of taxes is allowed, LOAs can only cover one taxable year. For
audits of multiple years, separate LOAs need to be issued.
The LOA needs to be served to the taxpayer within 30 calendar days of
its issuance, otherwise it is voided and will need to be revalidated.
Once the LOA has been issued, the actual audit can begin. The LOA
will contain which documents need to be submitted to the BIR. Failure to
provide the requested documents will subject the taxpayer to the
issuance of Subpoena Duces Tecum.
After the audit is finished, the BIR will issue a Notice for Informal
Conference (NIC), containing the taxpayer’s liabilities. The taxpayer
can then contest the assessment through an informal conference within 30
days from the issuance of the notice. If the BIR is not convinced by
the taxpayer’s argument, it will proceed with the issuance of a
Preliminary Assessment Notice (PAN).
The taxpayer will have 15 days to respond to the PAN, and only after
the said period prescribes can the BIR issue the Formal Letter of Demand
(FLD) and the Final Assessment Notice (FAN).
These documents (NIC, FLD, PAN, and FAN) need to be received by an authorized representative of the taxpayer.
In the case of Mannasoft Technology Corp. vs Commissioner of Internal
Revenue (CTA Case No. 8745), the foregoing documents were received by
persons not authorized by the taxpayer. The Court of Tax Appeals (CTA)
ruled that such receipt does not count. As such, the CTA ruled that
since the documents were not received by the proper authorized
representatives, the assessments issued for that audit are deemed void
as well.
Further, the burden of proving that the assessments were in fact
received by the taxpayer lies with the BIR. In the case of Commissioner
of Internal Revenue vs Bank of the Philippine Islands (G.R. Case No.
224327), the BIR failed to prove the receipt of the final assessment.
The SC ruled that, essentially, “no assessment was issued.”
There is also a 120-day period prescribed for the duration of audit,
but this is apparently not part of the due process. Even if the audit
were to exceed the prescribed period, it will not be invalidated.
The government needs to implement this period strictly, and limit the
types of investigation based on the size of the taxpayer’s business.
Microbusinesses, which will not be able to provide much in the way of
assessments anyway, should only be subjected to a tax mapping—with a
one-week prescribed period. Small, medium, and large enterprises will
then be liable to tax mapping, regular audits, and Run Against Tax
Evaders (RATE) cases.
The audit should only last three months for small enterprises, six
months for medium enterprises, and nine months for large enterprises.
RATE cases could be recommended longer periods—six months for small
enterprises, one year for medium enterprises, and one to two years for
large enterprises.
Conducting long audits that continually drain the taxpayer’s finances
hurts only the taxpayers and often used by corrupt revenue examiners.
As such, violation of this period should be grounds for the invalidation
of the audit.
Currently, there are still procedures that are open to exploitation.
There are currently no limits to being audited, and it usually means
businesses are audited yearly. If done correctly, the audit should
already address all violations. The taxpayer should then have ample time
to comply with regulations.
The BIR should only audit a particular business once every three
years. Currently, the BIR throws around guesswork assessments, accusing
the same companies over and over again.
Examiners need to be made accountable for the assessments they make.
If they are not able to collect a certain portion of their imposed
assessment, then they should face strict administrative measures. This
would act as a safeguard against corrupt officers.
Once an audit is finished, even if it was rendered void, the BIR
cannot examine those same parameters (i.e. same tax types and taxable
year). In other words, the BIR has every reason to follow the due
process to ensure that it will be able to collect from its
investigations.
However, this does not mean that taxpayers should rely on such
invalidations all the time. It should only be a last resort against
harassing audits.
In the long run, it is better to learn how to avoid the discrepancies
that warrant an audit in the first place. Creating a comprehensive tax
plan and ensuring tax compliance are key to saving more on taxes.
Without fines and penalties, businesses will be able to earn more.
(This article reflects the personal opinion of the author and
does not reflect the official stand of the Management Association of the
Philippines or MAP. The author is one of the 2017 Outstanding Young
Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015
The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young
Leader of the Year, and Founding President of the Asian Consulting Group
(ACG) and the Center for Strategic Reforms of the Philippines (CSR
Philippines). Feedback at <map@map.org.ph> and
<consult@acg.ph>. For previous articles, please visit )
source: Philippine Daily Inquirer By: Mon Abrea
Tuesday, October 16, 2018
Sunday, September 9, 2018
When the BIR validates sales activities
As the hackneyed saying goes: “Taxes are the lifeblood of the
nation”. Simply put, without the needed funds it gets from taxes,
government will be paralyzed to perform its basic functions. And to
ensure that taxes constantly run though those government “veins”, so to
speak, the Bureau of Internal Revenue (BIR) has to make sure that the
“supply” of taxes do not run dry.
One of the activities that the BIR undertakes to achieve this purpose is to check and validate that taxpayers engaged in the sale of goods/services declare the proper sales income from their business activities. Just recently, the BIR, through Revenue Memorandum Circular (RMC) No. 72-2018, has provided policies and guidelines for the effective monitoring and validation of taxpayers’ sales declarations generated from the following sources:
Point of Sale (POS)/Cash Register Machines (CRM);
Special Purpose Machines (SPM);
Other Sales Receipting System Software;
Receipting/Invoicing of Computerized Accounting System (CAS), including online sales transactions; and Manual invoices/receipts/supplemental commercial documents.
The following are the salient points of RMC No. 72-2018:
The monitoring and validation of accuracy of sales (also called “Post Evaluation”) by the BIR, may be conducted simultaneously with other BIR enforcement activities, such as the “Tax Compliance Verification Drive” (TCVD), Surveillance, Inventory Stocktaking, and Tax Audit/Investigation.
An inventory of all POS/CRM/SPM and other receipting machines/software shall be taken, matched, and reconciled with the list from the BIR database. Particularly, the BIR will provide a listing of matched and unmatched machines per the BIR’s database as against the machines that are physically in the taxpayer’s place of business. In case of a discrepancy, the BIR shall issue a Letter Notice (LN), requiring the taxpayer to explain and reconcile in writing, within 5 days from receipt of the LN, why such discrepancy exists.
If needed, the service provider of the machines shall assist the taxpayer in extracting the sales data during the scheduled Post Evaluation of the BIR. The taxpayer shall submit to the BIR the extracted sales data not later than the second day of the Post Evaluation.
The BIR shall ensure that sales data is extracted and validated from all available sources, such as:
CRM/POS/Other Sales Receipting System Software/CAS;
Sales book/accounting records and manual invoices/receipts, including unregistered/expired receipts/invoices/records, if any;
All SPMs used for supplementary invoicing/receipting such as collection/acknowledgement receipt or bills
payment without corresponding principal invoice/receipt.
If the taxpayer is unable to provide the sales information/machines during the period required by the BIR to do so, the BIR will issue a Subpoena Duces Tecum (SDT) to compel the submission/presentation of such documents/machines. Note that the failure to abide by the SDT will subject the erring taxpayer to possible criminal charges.
The sales data from all sources as discussed above shall be reconciled and compared by the BIR with the taxpayer’s returns filed with the BIR, such as value-added tax (VAT) returns, income tax returns, eSales reports, and summary list of sales (SLS).
Note that under the “Tax Reform for Acceleration and Inclusion” (TRAIN) Law, any taxpayer required to transmit sales data to the BIR’s electronic sales reporting system, but fails to do so, shall pay for each day of violation, a penalty amounting to 1/10th of 1 percent of the annual net income as reflected in the taxpayer’s audited financial statements, or P10,000, whichever is higher. Should the total number of days in violation exceed 180 days within a taxable year, the BIR shall impose an additional penalty of permanent closure of the taxpayer’s business.
source: Manila Times Column By ATTY. PEACHES ARANAS
One of the activities that the BIR undertakes to achieve this purpose is to check and validate that taxpayers engaged in the sale of goods/services declare the proper sales income from their business activities. Just recently, the BIR, through Revenue Memorandum Circular (RMC) No. 72-2018, has provided policies and guidelines for the effective monitoring and validation of taxpayers’ sales declarations generated from the following sources:
Point of Sale (POS)/Cash Register Machines (CRM);
Special Purpose Machines (SPM);
Other Sales Receipting System Software;
Receipting/Invoicing of Computerized Accounting System (CAS), including online sales transactions; and Manual invoices/receipts/supplemental commercial documents.
The following are the salient points of RMC No. 72-2018:
The monitoring and validation of accuracy of sales (also called “Post Evaluation”) by the BIR, may be conducted simultaneously with other BIR enforcement activities, such as the “Tax Compliance Verification Drive” (TCVD), Surveillance, Inventory Stocktaking, and Tax Audit/Investigation.
An inventory of all POS/CRM/SPM and other receipting machines/software shall be taken, matched, and reconciled with the list from the BIR database. Particularly, the BIR will provide a listing of matched and unmatched machines per the BIR’s database as against the machines that are physically in the taxpayer’s place of business. In case of a discrepancy, the BIR shall issue a Letter Notice (LN), requiring the taxpayer to explain and reconcile in writing, within 5 days from receipt of the LN, why such discrepancy exists.
If needed, the service provider of the machines shall assist the taxpayer in extracting the sales data during the scheduled Post Evaluation of the BIR. The taxpayer shall submit to the BIR the extracted sales data not later than the second day of the Post Evaluation.
The BIR shall ensure that sales data is extracted and validated from all available sources, such as:
CRM/POS/Other Sales Receipting System Software/CAS;
Sales book/accounting records and manual invoices/receipts, including unregistered/expired receipts/invoices/records, if any;
All SPMs used for supplementary invoicing/receipting such as collection/acknowledgement receipt or bills
payment without corresponding principal invoice/receipt.
If the taxpayer is unable to provide the sales information/machines during the period required by the BIR to do so, the BIR will issue a Subpoena Duces Tecum (SDT) to compel the submission/presentation of such documents/machines. Note that the failure to abide by the SDT will subject the erring taxpayer to possible criminal charges.
The sales data from all sources as discussed above shall be reconciled and compared by the BIR with the taxpayer’s returns filed with the BIR, such as value-added tax (VAT) returns, income tax returns, eSales reports, and summary list of sales (SLS).
Note that under the “Tax Reform for Acceleration and Inclusion” (TRAIN) Law, any taxpayer required to transmit sales data to the BIR’s electronic sales reporting system, but fails to do so, shall pay for each day of violation, a penalty amounting to 1/10th of 1 percent of the annual net income as reflected in the taxpayer’s audited financial statements, or P10,000, whichever is higher. Should the total number of days in violation exceed 180 days within a taxable year, the BIR shall impose an additional penalty of permanent closure of the taxpayer’s business.
source: Manila Times Column By ATTY. PEACHES ARANAS
Saturday, August 25, 2018
Casualty loss
JUST recently, we saw a lot of business establishments being flooded
due to intense rains brought about by tropical storm Karding and the
habagat (south-west monsoon). As a result, some taxpayers may have
sustained losses in the form of damage to their equipment, machinery or
merchandise.
Fortunately, our tax laws take cognizance of this predicament by allowing casualty losses to be claimed as deduction for income tax purposes. However, there are specific guidelines on the time and manner by which the taxpayers should claim casualty losses. Non-compliance with these guidelines may result in the disallowance of deduction during BIR’s audit examination.
To avoid the disallowance, it is important to know and comply with the deadline for reporting, the facts to be established and the documentary requirements for claiming casualty losses.
DEFINITION
Casualty loss refers to the complete or partial destruction of property resulting from an identifiable event of sudden, unexpected, or unusual nature, such as those arising from storm, fire, shipwreck, or other casualty, or from theft or robbery (Revenue Regulation 12-77).
REQUISITES FOR DEDUCTIBILITY
Under BIR Revenue Memorandum Order No. 31-2009, the taxpayer claiming casualty losses must comply with the following requisites:
DOCUMENTARY REQUIREMENTS
To establish the requisites, the following documents must be submitted to the BIR:
All documents and other evidence submitted to prove the losses shall be subject to verification by the concerned BIR office, and should be kept by the taxpayer as part of his tax records, and be made available to the duly-authorized Revenue Officer/s, upon audit of his Income Tax Return and the declaration of loss.
Weather advisories, like rainfall alert from NDRRMC, are effective tools to save lives and avoid damage to properties. Yet, loss is sometimes inevitable. For this reason, deduction for casualty loss is allowed in the computation of income tax provided that the taxpayer claiming it strictly complies with the requirements set by law and the BIR.
source: Daily Guardian Column By: Atty. Edward G. Gialogo
Fortunately, our tax laws take cognizance of this predicament by allowing casualty losses to be claimed as deduction for income tax purposes. However, there are specific guidelines on the time and manner by which the taxpayers should claim casualty losses. Non-compliance with these guidelines may result in the disallowance of deduction during BIR’s audit examination.
To avoid the disallowance, it is important to know and comply with the deadline for reporting, the facts to be established and the documentary requirements for claiming casualty losses.
DEFINITION
Casualty loss refers to the complete or partial destruction of property resulting from an identifiable event of sudden, unexpected, or unusual nature, such as those arising from storm, fire, shipwreck, or other casualty, or from theft or robbery (Revenue Regulation 12-77).
REQUISITES FOR DEDUCTIBILITY
Under BIR Revenue Memorandum Order No. 31-2009, the taxpayer claiming casualty losses must comply with the following requisites:
- The losses were incurred for properties actually used in the business of the taxpayer. The loss of assets not used in business and/or are personal in nature shall not be allowed;
- The concerned properties must have been reported as part of the taxpayer’s assets based on accounting records and financial statements in the preceding year;
- The amount of loss compensated by insurance cannot not be claimed as deductible loss; and
- The deduction of assets as capital losses must be properly recorded in the accounting reports (with the adjustment of the applicable accounts).
DOCUMENTARY REQUIREMENTS
To establish the requisites, the following documents must be submitted to the BIR:
- Sworn declaration of loss filed within45 days after the date of the event causing the loss, stating the following:
- Nature of the event that gave rise to such loss and the time of its occurrence;
- Description and location of the damaged properties;
- Items needed to compute the losses (cost or other basis of the properties; depreciation allowed, if any; value of the property before and after the event; and cost of repair);
- Amount of insurance or other compensation received;
- The Financial Statement for the year immediately preceding the event; and
- Proof of the elements of the losses claimed:
- Photographs of the properties before and after the typhoon to show the extent of the damage.
- Documentary evidence for determining the cost or valuation of the damaged properties (cancelled checks, vouchers, receipts, and other evidence of costs);
- Insurance policy, in the event that there is an insurance coverage for the properties; and
- Police report, in cases of robbery/theft during the typhoon and/or as a consequence of looting.
All documents and other evidence submitted to prove the losses shall be subject to verification by the concerned BIR office, and should be kept by the taxpayer as part of his tax records, and be made available to the duly-authorized Revenue Officer/s, upon audit of his Income Tax Return and the declaration of loss.
Weather advisories, like rainfall alert from NDRRMC, are effective tools to save lives and avoid damage to properties. Yet, loss is sometimes inevitable. For this reason, deduction for casualty loss is allowed in the computation of income tax provided that the taxpayer claiming it strictly complies with the requirements set by law and the BIR.
source: Daily Guardian Column By: Atty. Edward G. Gialogo
Thursday, August 2, 2018
Court stops BIR seizure of Pacquiao assets
The Court of Tax Appeals (CTA) has lifted the Bureau of Internal
Revenue seizure orders on the assets of boxing great, Sen. Manny
Pacquiao, as it directed the BIR to stop its efforts to collect P3.29
billion in taxes while the case remains pending.
Pacquiao’s legal battle, however, is not yet over as it is set to proceed to the trial stage. Pretrial conference of the case is scheduled for Aug. 30.
Citing the BIR’s “violations of rules and irregularities,” the CTA First Division ordered the bureau to “cease and desist” from implementing its final decision on disputed assessment (FDDA) dated May 14, 2013.
The FDDA set at P3.29 billion the final amount of the deficiency tax liabilities imposed on Pacquiao and his wife Jinkee for 2008 and 2009.
In a resolution dated July 27, the CTA also withdrew the tax lien annotated on the titles of the Pacquiaos’ General Santos City properties.
A tax lien prevents the couple from disposing of the property and secures it to satisfy the government’s claim for taxes.
No more bond
Moreover, the CTA spared the billionaire from the requirement of posting a bond first as a condition for stopping the BIR’s tax collection efforts.
The BIR “utterly failed to comply with necessary requirements under pertinent laws and issuances” in assessing the couple’s liabilities, read the decision signed by Presiding Justice Roman G. del Rosario and Associate Justices Erlinda P. Uy and Cielito N. Mindaro-Grulla.
Because of the irregularities, the CTA would be “dispensing the required cash deposit or bond provided under Section 11 of the [Republic Act] No. 1125.”
The CTA found “no prima facie evidence of fraud or tax evasion” established by the BIR during its preliminary investigation.
The BIR failed to show that it conducted procedures to verify and determine “the schemes employed and the extent of the fraud” on the Pacquiaos’ part, the court said.
The BIR did not even specify in its May 2, 2012, formal letter of demand (FLD) the “best possible sources” of information it used in computing their tax underpayments.
Newspaper articles
Documentary evidence presented to the CTA showed that the BIR used newspaper and magazine articles to establish that Pacquiao earned income in the United States in the form of guaranteed payouts and his cut of pay-per-view revenues and ticket sales.
The reports were not “corroborated by other more sufficient evidence” and the BIR did not at least confirm the veracity of the articles with the authors, the court said.
The BIR notices were hounded by procedural flaws, too. For one, the FLD was not even addressed to Jinkee despite being held jointly liable with her husband.
The warrants of distraint and/or levy and garnishment—which paved the way for the seizure of the Pacquiaos’ bank accounts—were found to be prematurely issued. These were dated July 1, 2013, though the couple received the FDDA only on July 2, 2013.
On giving the couple due process, the BIR failed to prove that a notice of formal conference was issued or even any record to show that the conference actually took place.
Jayson Fernandez, the Pacquiaos’ lawyer, told the BIR in a Jan. 31, 2012, letter that he only learned of the proceedings by chance and asked for it to be rescheduled, but the BIR did not reply.
It failed to show the court the protest letter where the Pacquiaos supposedly admitted that they attended the conference.
The agency also failed to justify why it included the years 1995 to 2006 in the scope of its electronic letter of authority that authorized the tax audit.
The CTA had to evaluate the validity of the BIR notices after the Supreme Court ruled on April 19, 2016, that when imposing the bond requirement, it should make a preliminary determination of whether the BIR violated the law in its tax collection efforts.
The case reached the Supreme Court because the Pacquiaos questioned the CTA requirement for them to first deposit P3.29 billion in cash or post a P4.948-billion surety bond before the stay order against the garnishment on April 22, 2014, can take effect.
In its April 2016 decision, the high tribunal said the CTA should have conducted a preliminary hearing first before imposing the bond requirement.
The Supreme Court reminded the CTA that in case of doubt, the scale should tip in favor of the taxpayer’s right to due process and equal protection.
source: Philippine Daily Inquirer
Pacquiao’s legal battle, however, is not yet over as it is set to proceed to the trial stage. Pretrial conference of the case is scheduled for Aug. 30.
Citing the BIR’s “violations of rules and irregularities,” the CTA First Division ordered the bureau to “cease and desist” from implementing its final decision on disputed assessment (FDDA) dated May 14, 2013.
The FDDA set at P3.29 billion the final amount of the deficiency tax liabilities imposed on Pacquiao and his wife Jinkee for 2008 and 2009.
In a resolution dated July 27, the CTA also withdrew the tax lien annotated on the titles of the Pacquiaos’ General Santos City properties.
A tax lien prevents the couple from disposing of the property and secures it to satisfy the government’s claim for taxes.
No more bond
Moreover, the CTA spared the billionaire from the requirement of posting a bond first as a condition for stopping the BIR’s tax collection efforts.
The BIR “utterly failed to comply with necessary requirements under pertinent laws and issuances” in assessing the couple’s liabilities, read the decision signed by Presiding Justice Roman G. del Rosario and Associate Justices Erlinda P. Uy and Cielito N. Mindaro-Grulla.
Because of the irregularities, the CTA would be “dispensing the required cash deposit or bond provided under Section 11 of the [Republic Act] No. 1125.”
The CTA found “no prima facie evidence of fraud or tax evasion” established by the BIR during its preliminary investigation.
The BIR failed to show that it conducted procedures to verify and determine “the schemes employed and the extent of the fraud” on the Pacquiaos’ part, the court said.
The BIR did not even specify in its May 2, 2012, formal letter of demand (FLD) the “best possible sources” of information it used in computing their tax underpayments.
Newspaper articles
Documentary evidence presented to the CTA showed that the BIR used newspaper and magazine articles to establish that Pacquiao earned income in the United States in the form of guaranteed payouts and his cut of pay-per-view revenues and ticket sales.
The reports were not “corroborated by other more sufficient evidence” and the BIR did not at least confirm the veracity of the articles with the authors, the court said.
The BIR notices were hounded by procedural flaws, too. For one, the FLD was not even addressed to Jinkee despite being held jointly liable with her husband.
The warrants of distraint and/or levy and garnishment—which paved the way for the seizure of the Pacquiaos’ bank accounts—were found to be prematurely issued. These were dated July 1, 2013, though the couple received the FDDA only on July 2, 2013.
On giving the couple due process, the BIR failed to prove that a notice of formal conference was issued or even any record to show that the conference actually took place.
Jayson Fernandez, the Pacquiaos’ lawyer, told the BIR in a Jan. 31, 2012, letter that he only learned of the proceedings by chance and asked for it to be rescheduled, but the BIR did not reply.
It failed to show the court the protest letter where the Pacquiaos supposedly admitted that they attended the conference.
The agency also failed to justify why it included the years 1995 to 2006 in the scope of its electronic letter of authority that authorized the tax audit.
The CTA had to evaluate the validity of the BIR notices after the Supreme Court ruled on April 19, 2016, that when imposing the bond requirement, it should make a preliminary determination of whether the BIR violated the law in its tax collection efforts.
The case reached the Supreme Court because the Pacquiaos questioned the CTA requirement for them to first deposit P3.29 billion in cash or post a P4.948-billion surety bond before the stay order against the garnishment on April 22, 2014, can take effect.
In its April 2016 decision, the high tribunal said the CTA should have conducted a preliminary hearing first before imposing the bond requirement.
The Supreme Court reminded the CTA that in case of doubt, the scale should tip in favor of the taxpayer’s right to due process and equal protection.
source: Philippine Daily Inquirer
Monday, July 23, 2018
BIR says bank deposits not included in listing of taxpayers’ assets
The Bureau of Internal Revenue (BIR) said today the instruction to
revenue regional directors and other tax enforcement officials to list
down all assets of individuals and businesses did not include bank
deposits
The Bureau of Internal Revenue (BIR) said today the instruction to revenue regional directors and other tax enforcement officials to list down all assets of individuals and businesses did not include bank deposits.
BIR Deputy Commissioner for Operations Arnel Guballa issued the clarification as the agency finally implemented the old Revenue Memorandum Order (RMO) 26-2010 which was questioned by lawyers and accountants as violation of the bank secrecy law.
The RMO signed by then BIR Commissioner Joel Tan-Torres included the listing of the name of the taxpayer’s depository bank, the amount and account number including foreign currency.
Guballa explained the RMO has been modified to exclude bank deposits, stressing the secrecy of bank deposits which was even affirmed when Congress approved the Tax Reform for Acceleration and Inclusion Law.
However, Guballa said they will continue to issue warrant of garnishment on the bank accounts of delinquent taxpayer when the assessment becomes final and executory.
He explained the listing of assets is necessary to speed up the collection of back accounts in instances that a business collapses, or the taxpayer had gone abroad or died.
This way, Guballa said tax collection officers can easily collect tax debts when such information is readily available.
Records showed delinquent accounts have been piling up through the years involving tens of billions of pesos as many delinquent taxpayers can no longer be located.
source: Manila Bulletin By Jun Ramirez
The Bureau of Internal Revenue (BIR) said today the instruction to revenue regional directors and other tax enforcement officials to list down all assets of individuals and businesses did not include bank deposits.
BIR Deputy Commissioner for Operations Arnel Guballa issued the clarification as the agency finally implemented the old Revenue Memorandum Order (RMO) 26-2010 which was questioned by lawyers and accountants as violation of the bank secrecy law.
The RMO signed by then BIR Commissioner Joel Tan-Torres included the listing of the name of the taxpayer’s depository bank, the amount and account number including foreign currency.
Guballa explained the RMO has been modified to exclude bank deposits, stressing the secrecy of bank deposits which was even affirmed when Congress approved the Tax Reform for Acceleration and Inclusion Law.
However, Guballa said they will continue to issue warrant of garnishment on the bank accounts of delinquent taxpayer when the assessment becomes final and executory.
He explained the listing of assets is necessary to speed up the collection of back accounts in instances that a business collapses, or the taxpayer had gone abroad or died.
This way, Guballa said tax collection officers can easily collect tax debts when such information is readily available.
Records showed delinquent accounts have been piling up through the years involving tens of billions of pesos as many delinquent taxpayers can no longer be located.
source: Manila Bulletin By Jun Ramirez
Sunday, July 22, 2018
For BIR's benefit
Every taxpayer wants to have peace of mind, free from unreasonable
examination, investigation, or assessment. As such, we commonly
encounter queries from taxpayers seeking assurance that a particular tax
assessment has been settled, and that local tax authorities will no
longer run after them.
Some mention the Bureau of Internal Revenue’s (BIR) practice of issuing Authority to Cancel Assessment (ATCA) for tax deficiency and/or tax delinquency assessment that are paid. As a result, the question of whether a taxpayer is entitled to the issuance of an ATCA persists.
With its renewed efforts to account for clean, and determine collectivity of its Accounts Receivables/Delinquent Accounts (ARs/DAs) as part of its concerted tax collection activities, the BIR recently issued Revenue Memorandum Order (RMO) No. 33-2018. The RMO aims to implement an improved system for managing BIR’s ARs/Das while simultaneously setting an objective write-off mechanism to purge its database of tax arrears longer collectible.
Under RMO No. 33-2018, the issuance of ATCA as proof of cancellation of the applicable tax assessments pursuant to a Final Assessment Notice/Formal Letter of Demands (FAN/FLD) is mandatory. Accordingly, issuance of ATCA shall be made on the following:
The difference between the amounts of the original tax assessment and the reduced tax assessment after the originally issued FAN/FLD has been modified, amended, or declared null and void pursuant to final administrative decision by the BIR commissioner or his duly authorized representative.
A final approval of the applications for compromise settlement and abatement or cancellation of penalties has been secured.
A court of competent authority has decided to modify, amend, or declare with finality the nullity of a tax assessment, as shown in the entry of judgement.
A court of competent authority has declared that the AR/DA is uncollectible due to the insolvency of the taxpayer.
The taxpayer availed of tax amnesty as indicated by the taxpayer’s inclusion in the List of Tax Amnesty Availers provided by the Office of the BIR commissioner or the BIR deputy commissioner for Operations.
Condonation of the assessment by virtue of law as duly approved by the BIR commissioner or his authorized representative.
When the right of the government to assess/collect the deficiency/delinquent taxes has prescribed and such cancellation due to the aforesaid reason has been approved by the commissioner based on the recommendation of the National Committee on Prescribed Cases.
ARs/DAs recommended for write-off and approved by the BIR Commissioner or his authorized representative on grounds such as but not limited to the following:
• Individual taxpayer is deceased and no distrainable or leviable asset can be found
• Permanent cessation of business
• Dissolution
• Taxpayer is a general partnership and the individual partners are already deceased
• AR/DA cases with a total amount due of P20,000 and below, provided that all collection enforcement summary remedies have been fully exhausted.
Other meritorious cases deemed necessary by the BIR commissioner to be covered by ATCA.
The issuance of an ATCA is not mandatory after the payment of tax deficiency and tax discrepancy assessments. The non-inclusion of payment of tax assessments in the above list bolsters the claim of tax officers that the best evidence for the conclusion of a particular assessment are the payment forms used in the settlement of assessed amounts.
While it may be argued that tax assessment cases can be included in the category “Other meritorious cases”, it seems otherwise. If there was actual intent on the part of the BIR to include paid tax assessments on the list, then it would have specifically provided for it in RMO No. 33-2018, in the same vein that the difference between the original assessment indicated in the FAN/FLD and the assessment indicated in the FDDA is provided in the aforementioned list.
Further, there was no discussion of any participation from the taxpayer in the procedure for issuing an ATCA. While RMO 33-2018 provides that the ATCA shall be prepared in quadruplicates, the taxpayer is not entitled to receive a copy of such since each copy of the ATCA is allotted to the docket of the case and the relevant divisions of the BIR.
Obviously, the ATCA is an internal document of the BIR and serves the purpose of tracking and accounting receivables, collections, delinquent, and uncollectible BIR accounts. In other words, the ATCA is a tool by the BIR to manage its accounts and is not meant to be issued for the convenience or security of taxpayers.
The author is a Senior Manager with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
source: Manila Times
Some mention the Bureau of Internal Revenue’s (BIR) practice of issuing Authority to Cancel Assessment (ATCA) for tax deficiency and/or tax delinquency assessment that are paid. As a result, the question of whether a taxpayer is entitled to the issuance of an ATCA persists.
With its renewed efforts to account for clean, and determine collectivity of its Accounts Receivables/Delinquent Accounts (ARs/DAs) as part of its concerted tax collection activities, the BIR recently issued Revenue Memorandum Order (RMO) No. 33-2018. The RMO aims to implement an improved system for managing BIR’s ARs/Das while simultaneously setting an objective write-off mechanism to purge its database of tax arrears longer collectible.
Under RMO No. 33-2018, the issuance of ATCA as proof of cancellation of the applicable tax assessments pursuant to a Final Assessment Notice/Formal Letter of Demands (FAN/FLD) is mandatory. Accordingly, issuance of ATCA shall be made on the following:
The difference between the amounts of the original tax assessment and the reduced tax assessment after the originally issued FAN/FLD has been modified, amended, or declared null and void pursuant to final administrative decision by the BIR commissioner or his duly authorized representative.
A final approval of the applications for compromise settlement and abatement or cancellation of penalties has been secured.
A court of competent authority has decided to modify, amend, or declare with finality the nullity of a tax assessment, as shown in the entry of judgement.
A court of competent authority has declared that the AR/DA is uncollectible due to the insolvency of the taxpayer.
The taxpayer availed of tax amnesty as indicated by the taxpayer’s inclusion in the List of Tax Amnesty Availers provided by the Office of the BIR commissioner or the BIR deputy commissioner for Operations.
Condonation of the assessment by virtue of law as duly approved by the BIR commissioner or his authorized representative.
When the right of the government to assess/collect the deficiency/delinquent taxes has prescribed and such cancellation due to the aforesaid reason has been approved by the commissioner based on the recommendation of the National Committee on Prescribed Cases.
ARs/DAs recommended for write-off and approved by the BIR Commissioner or his authorized representative on grounds such as but not limited to the following:
• Individual taxpayer is deceased and no distrainable or leviable asset can be found
• Permanent cessation of business
• Dissolution
• Taxpayer is a general partnership and the individual partners are already deceased
• AR/DA cases with a total amount due of P20,000 and below, provided that all collection enforcement summary remedies have been fully exhausted.
Other meritorious cases deemed necessary by the BIR commissioner to be covered by ATCA.
The issuance of an ATCA is not mandatory after the payment of tax deficiency and tax discrepancy assessments. The non-inclusion of payment of tax assessments in the above list bolsters the claim of tax officers that the best evidence for the conclusion of a particular assessment are the payment forms used in the settlement of assessed amounts.
While it may be argued that tax assessment cases can be included in the category “Other meritorious cases”, it seems otherwise. If there was actual intent on the part of the BIR to include paid tax assessments on the list, then it would have specifically provided for it in RMO No. 33-2018, in the same vein that the difference between the original assessment indicated in the FAN/FLD and the assessment indicated in the FDDA is provided in the aforementioned list.
Further, there was no discussion of any participation from the taxpayer in the procedure for issuing an ATCA. While RMO 33-2018 provides that the ATCA shall be prepared in quadruplicates, the taxpayer is not entitled to receive a copy of such since each copy of the ATCA is allotted to the docket of the case and the relevant divisions of the BIR.
Obviously, the ATCA is an internal document of the BIR and serves the purpose of tracking and accounting receivables, collections, delinquent, and uncollectible BIR accounts. In other words, the ATCA is a tool by the BIR to manage its accounts and is not meant to be issued for the convenience or security of taxpayers.
The author is a Senior Manager with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
source: Manila Times
A look at the BIR’s audit of ‘small’ taxpayers
Small taxpayers, beware; the Bureau of Internal Revenue (BIR) has you
in its sights. The BIR has issued Revenue Memorandum Order (RMO) No.
32-2018, dated July 6, 2018, prescribing the audit/investigation of
individual and non-individual taxpayers by the Assessment Divisions of
the BIR Regional Offices.
But what exactly is a “small” taxpayer? Under RMO No. 32-2018, to be considered a “small” taxpayer would depend largely on a person’s gross sales/receipts, which amount varies depending on the particular BIR Revenue Region a taxpayer belongs to:
–For those belonging to Regions5, 6, 7 and 8 and with gross sales/receipts amounting to P10,000,000 and below;
–For those belonging to Regions 1, 4, 9A, 9B, 11, 12, 13,16 and 19 and with gross sales/receipts amounting to P5,000,000 and below; and
–For those belonging to Regions 2, 3, 10, 14, 15, 17 and 18 and with gross sales/receipts amounting to P2,000,000 and below.
With the identification of small taxpayers, the BIR shall issue electronic Letters of Authority (eLA) to cover the audit/investigation of taxpayers for tax returns for taxable year 2017, which shall include all internal revenue tax liabilities, except when a specific tax type has been previously examined. Note that a Letter of Authority is an official document that contains the mandate of a BIR revenue officer (ROs) to examine a taxpayer’s books of accounts and other accounting records for a particular taxable year.
The audit of cases issued under the RMO shall be conducted by the ROs of the Office Audit Section (OAS) of the Assessment Divisions in the Regional Offices, and shall be performed without the benefit of a “field audit”. Generally, a “field audit” will entail scheduled visits by ROs to a taxpayer’s business address, where the examination of the taxpayer’s books of accounts and other accounting records will be made. By dispensing with the field audit, the BIR will instead retrieve copies of manually filed and electronically submitted tax returns for taxable year 2017from the BIR Document Processing Division and BIR Revenue Data Center. From these tax returns, the BIR shall select the “small” taxpayers who fall under the prescribed thresholds as explained above.
The eLA, together with the “Notice for the Presentation/Submission of Documents/Records” (Notice) may be delivered personally to the taxpayer by:
–The RO assigned to the case.
–Any other BIR employee with a written authorization to deliver the eLA.
–A courier company.
The concerned taxpayer shall be given 10 days from receipt of the Notice to submit to the ROs the required documents and records. If the taxpayer does not comply with the Notice, a reminder letter shall be sent immediately after the lapse of the 10-day period. If the requested documents are not submitted within 5 days from receipt of the reminder letter, a memorandum report shall be prepared recommending the issuance of a Subpoena Duces Tecum (SDT). For this purpose, an SDT is a process directed to a taxpayer requiring him to bring before a competent authority the books, documents, and other records required under the Notice. Failure to abide by the SDT may result in the imposition of stiff penalties and/or possible imprisonment.
With the issuance of the RMO, the BIR hopes for an increase in the voluntary compliance with the timely payment of taxes, as well as to generate additional tax revenues from small taxpayers.
source: Manila Times Column By ATTY. PEACHES ARANAS
But what exactly is a “small” taxpayer? Under RMO No. 32-2018, to be considered a “small” taxpayer would depend largely on a person’s gross sales/receipts, which amount varies depending on the particular BIR Revenue Region a taxpayer belongs to:
–For those belonging to Regions5, 6, 7 and 8 and with gross sales/receipts amounting to P10,000,000 and below;
–For those belonging to Regions 1, 4, 9A, 9B, 11, 12, 13,16 and 19 and with gross sales/receipts amounting to P5,000,000 and below; and
–For those belonging to Regions 2, 3, 10, 14, 15, 17 and 18 and with gross sales/receipts amounting to P2,000,000 and below.
With the identification of small taxpayers, the BIR shall issue electronic Letters of Authority (eLA) to cover the audit/investigation of taxpayers for tax returns for taxable year 2017, which shall include all internal revenue tax liabilities, except when a specific tax type has been previously examined. Note that a Letter of Authority is an official document that contains the mandate of a BIR revenue officer (ROs) to examine a taxpayer’s books of accounts and other accounting records for a particular taxable year.
The audit of cases issued under the RMO shall be conducted by the ROs of the Office Audit Section (OAS) of the Assessment Divisions in the Regional Offices, and shall be performed without the benefit of a “field audit”. Generally, a “field audit” will entail scheduled visits by ROs to a taxpayer’s business address, where the examination of the taxpayer’s books of accounts and other accounting records will be made. By dispensing with the field audit, the BIR will instead retrieve copies of manually filed and electronically submitted tax returns for taxable year 2017from the BIR Document Processing Division and BIR Revenue Data Center. From these tax returns, the BIR shall select the “small” taxpayers who fall under the prescribed thresholds as explained above.
The eLA, together with the “Notice for the Presentation/Submission of Documents/Records” (Notice) may be delivered personally to the taxpayer by:
–The RO assigned to the case.
–Any other BIR employee with a written authorization to deliver the eLA.
–A courier company.
The concerned taxpayer shall be given 10 days from receipt of the Notice to submit to the ROs the required documents and records. If the taxpayer does not comply with the Notice, a reminder letter shall be sent immediately after the lapse of the 10-day period. If the requested documents are not submitted within 5 days from receipt of the reminder letter, a memorandum report shall be prepared recommending the issuance of a Subpoena Duces Tecum (SDT). For this purpose, an SDT is a process directed to a taxpayer requiring him to bring before a competent authority the books, documents, and other records required under the Notice. Failure to abide by the SDT may result in the imposition of stiff penalties and/or possible imprisonment.
With the issuance of the RMO, the BIR hopes for an increase in the voluntary compliance with the timely payment of taxes, as well as to generate additional tax revenues from small taxpayers.
source: Manila Times Column By ATTY. PEACHES ARANAS
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