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1
The Philippines: Tax Assessment, Appeal and Dispute Resolution
Presentation made for
The ASEAN Tax System Seminar September 15 to 17, 2010 Bangkok, Thailand
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
The Philippine Tax Office: BIR
DEPARTMENT OF FINANCE
Bureau of Internal
Revenue
Bureau of Customs
Bureau of Treasury
Bureau of Local
Government Finance
2 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Chiefs Officials of the BIR
Commissioner of Internal Revenue
Deputy Commissioner – Operations Group
Deputy Commissioner – Legal & Inspection Group
Deputy Commissioner – Resource
Management Group Deputy Commissioner –
Information Systems Group
3 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Large Taxpayers Offices
LT Audit Offices
Group (Assistant Commissioners
Regular & Excise)
CIR 1
2
8
4 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Regional & District Offices
District Offices
Regions
DCIR - OG 1
19
119
5 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Powers & Duties of the BIR
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 the Court of Tax Appeals and the ordinary courts.
6 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Powers of the Commissioner of BIR
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,
7 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Power of Commissioner of the BIR
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
8 Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Audit Notice
Issuance of Audit Notice Letter of Authority Letter Notice of Discrepancy
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
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Audit and Investigation
Audit and Investigation Proper Actual audit of taxpayer’s books of account Use of third party information to check on
accuracy of reporting Revenue Officers who audit the taxpayer shall
prepare a report of discrepancies noted with a report of possible tax deficiency assessment
Average: 120 days to conduct audit & investigation
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Informal Conference
Notice of Informal Conference A Notice of Informal Conference is an invitation by
the Revenue District Office (RDO) to a taxpayer under audit to visit the tax office to hear all the discrepancies noted by the Revenue Officer who audited their books of accounts with a computation of possible tax deficiency assessment
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Informal Conference
Notice of Informal Conference An Informal Conference affords the taxpayer with
an opportunity to present his side of the case After service of a Notice of Informal Conference,
taxpayer is given fifteen (15) days from date of receipt to appear before the tax agency, otherwise he shall be considered in default.
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Preliminary Assessment Notice (PAN)
Preliminary Assessment Notice (PAN) After an Informal Conference, taxpayer is given
reasonable time to present documentary evidence or explanation on the discrepancies noted and to rebut the deficiency tax assessment against them
If still there exist a sufficient basis to assess or after the taxpayer has been declared in default in an informal conference a PAN shall be issued against a taxpayer
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Preliminary Assessment Notice (PAN)
Preliminary Assessment Notice (PAN) A PAN is issued and served either personally or
by registered mail to the taxpayer It contains a explanation of the deficiency tax
assessment, showing in details the facts and the laws and rules and regulations or jurisprudence on which the proposed assessment is based
Taxpayer is given fifteen (15) days to respond to said PAN otherwise they are considered in default
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Final Assessment Notice (FAN) and Formal Letter of Demand Final Assessment Notice (FAN) and Formal
Letter of Demand After giving opportunity to the taxpayer to rebut
the PAN and still there are basis to assess deficiency taxes or there are still unexplained issues or after they have been in default, a Final Assessment Notice shall be issued against them with a Formal Letter of Demand calling for the payment of the computed deficiency tax assessment
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Exceptions to Prior Notice of Assessment
When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return by the taxpayer; or
When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Exceptions to Prior Notice of Assessment
When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter/s of the succeeding taxable year; or
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Exceptions to Prior Notice of Assessment
When the excise tax due on excisable articles has not been paid; or
When an article locally purchased or imported by an exempt person, such asm but not limited to vehicles, capital equipment, machineries, and spare parts, has been sold, traded or transferred to non-exempt persons
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Final Assessment Notice (FAN) and Formal Letter of Demand Final Assessment Notice (FAN) and Formal
Letter of Demand Issued by the Commissioner or his authorized
representative It must state the facts, the laws, rules and
regulations, or jurisprudence on which the assessment is made, otherwise the letter of demand and assessment notice shall be void
Sent to taxpayer by mail or by personal service
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Disputed Tax Assessment
A taxpayer may protest administratively within thirty (30) days from receipt of the formal letter of demand and assessment notice
If there are several issues involved in the formal letter of demand and assessment notice but the taxpayer only disputes or protests validity of some issues raised, the taxpayer shall be required to pay the deficiency tax on undisputed tax assessments
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Disputed Tax Assessment
Taxpayer’s failure to present facts, laws, rules and jurisprudence to support his protest on an issue will likewise make such issue undisputed thus collectible
A collection letter shall be issued to the taxpayer calling for the payment of the said deficiency tax, inclusive of the applicable penalties on the undisputed assessment
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Disputed Tax Assessment
Taxpayer who administratively protest an assessment is required to submit required documents within sixty (60) days from filing of letter of protest, otherwise, the assessment becomes final, executory and demandable
Also, if the taxpayer fails to file a timely protest, the assessment becomes final, executory and demandable
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Final Decision on Disputed Assessment (FDDA) Within 180 days, the protest may be denied
in whole or in part by the Commissioner of his authorized representative through the issuance of a Final Decision on Disputed Assessment (FDDA), where taxpayer is given thirty (30) days to administratively appeal or judicially make an appeal
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Administrative Appeal
Within thirty (30) days from receipt of FDDA taxpayer may file an appeal before the Commissioner on matters involving question of law or before the assessing office on matters involving question of facts, otherwise, the assessment becames final, executory and demandable
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Judicial Appeal
In alternative, within thirty (30) days from receipt of FDDA taxpayer may opt to file an appeal before the Court of Tax Appeals (CTA)
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Administrative Decision on Appeal
The CIR is expected to render a decision which shall state the facts, the applicable law, rules and regulations or jurisprudence on which the decision is made, otherwise such a decision shall be considered void
Likewise it should state that such is a final decision
Thereafter, taxpayer may make a judicial appeal before the Court of Tax Appeals (CTA)
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
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Judicial Decision on Appeal
Decision rendered by the Court of Tax Appeals (CTA) may be appealed before CTA on motion for reconsideration, then it can still be further appealed before the CTA En Banc, then finally before Supreme Court
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand]
Court of Tax Appeals
Composed of nine (9) justices Divided into three (3) branches Makes a decision either
En Banc Branch (consisting of 3 justices each)
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand] 28
Appellate Jurisdiction of CTA By law has exclusive appellate jurisdiction to
review by appeal Decision of the CIR Inaction of the CIR Decisions of lower court on local tax cases Decision of Commissioner of Customs Decisions of real property taxes Decisions of Finance on cases elevated to them
by automatic review Decisions of Department of Trade & Agriculture
involving dumping and countervailing duties
Philippine Presentation for The ASEAN Tax System Seminar [Sept 15 to 17, 2010 Bangkok, Thailand] 29