The Philippines: Tax Assessment, Appeal and Dispute Resolution

Transcription

1 The Philippines: Tax Assessment, Appeal and Dispute Resolution Presentation made for The ASEAN Tax System Seminar September 15 to 17, 2010 Bangkok, Thailand 1

2 The Philippine Tax Office: BIR Bureau of Internal Revenue Bureau of Local Government Finance DEPARTMENT OF FINANCE Bureau of Customs Bureau of Treasury 2

3 Chiefs Officials of the BIR Deputy Commissioner Operations Group Commissioner of Internal Revenue Deputy Commissioner Legal & Inspection Group Deputy Commissioner Resource Management Group Deputy Commissioner Information Systems Group 3

4 Large Taxpayers Offices CIR 1 Group (Assistant Commissioners Regular & Excise) 2 LT Audit Offices 8 4

5 Regional & District Offices DCIR - OG 1 Regions 19 District Offices 119 5

6 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

7 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

8 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

9 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 9

10 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 10

11 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 11

12 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. 12

13 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 13

14 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 14

15 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 15

16 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 16

17 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 17

18 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 18

19 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 19

20 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 20

21 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 21

22 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 22

23 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 23

24 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 24

25 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) 25

26 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) 26

27 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 27

28 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) 28

29 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 29