Taxation 101: General Principles PDF

TAXATION 101 by: Atty. Rachelle Ann C. Baod, CPA GENERAL PRINCIPLES  Tax Type Basis Prescriptive Period Prescriptive Period Agencies and Agent To Assess/ To Collect for...

TAXATION 101 by: Atty. Rachelle Ann C. Baod, CPA GENERAL PRINCIPLES  Tax Type Basis Prescriptive Period Prescriptive Period Agencies and Agent To Assess/ To Collect for Tax Administration National Internal National General Rule: Bureau of Internal Revenue Taxes Internal Within 3 years from the Within 3 years Revenue 1. Income Revenue Code last day prescribed by law from date of a. BIR tax / Tax Code, as for the filling of the return assessment Commissioner 2. Estate amended by or if filed after the last [Chief Executive and donor's taxes TRAIN law day, within three years Officer of the BIR 3. Value- from date of actual filling. appointed by the added tax President upon 4. Other Exception: the percentage taxes Within 10 years from recommendation 5. Excise discovery of the omission, Within 10 years DOF Secretary] taxes fraud or falsity – if no from discovery and his/her 6. Documentary return is filed or the without need of an Deputies stamp taxes (DST) return filed is false or assessment b. Regional 7. Such fraudulent Director other taxes as are c. Revenue District or hereafter may Officer be imposed and d. Revenue collected by the Collection Bureau of Internal Officer / Revenue. Deputized Treasurer of the concerned BIR Office e. Authorized Agent Banks (AAB) – for collection Tariff and customs Tariff and 1 year from the date of Bureau of Customs duties customs code the final payment of (BOC) of the duties, unless the a. BOC Phils.(TCCP)/ liquidation of import entry Commissioner Customs was merely tentative. b. District Modernization (Sec 1603,TCC) Collectors and and Tariff Act their deputies (CMTA) c. Other customs officers especially deputized by the District Collector Local Taxes, fees, Local Within 5 years from the Within five (5) Provincial, city, and or charges: Government date they became due years from date of municipal assessors 1. Local Business Code (LGC) assessment – and treasurers of the Tax (LBT) Within 10 years from collected either by Local Government 2. Real Property discovery of the fraud or administrative or Units (LGUs) Tax (RPT) intent to evade payment – judicial action (Sec. Cities and in case of fraud or intent 194. LGC) municipalities to evade the payment of Metro Manila - taxes 2% Provinces - 1%. 3. P300 Occupational / Professional Tax 4. 5% Ad Valorem Tax on Idle Lands 5. 1% SEF Tax  ENFORCEMENT AND ADMINISTRATION SOURCES OF TAX LAWS 1. Statutes – e.g. Train Law 2. Presidential Decrees – e.g. RPT Code; Travel Tax; Energy Tax 3. Executive Orders – E.O. 273 VAT imposition under Pres. Corazon Aquino 5. Court Decisions 6. Tax Codes – National Internal Revenue Code/ NIRC / Tax Code 7. Revenue Regulations 8. Administrative Issuances These must always be in harmony with the provisions of the law. In case of discrepancy, Basic law v implementing rules and regulations (IRR), the former prevails.  ENFORCEMENT AND ADMINISTRATION 9. BIR Rulings 10. Local Tax Ordinance 11. Tax Treaties and Conventions RULE OF NO ESTOPPEL AGAINST THE GOVERNMENT General Rule: The Government is not estopped by the mistakes or errors of its agents; erroneous application and enforcement of law by public officers do not bar the subsequent correct application of statutes. (E. Rodriguez, Inc. vs. Collector, L-23041, July 31, 1969) Exception: In the interest of justice and fair play, as where injustice will result to the taxpayer. (see CIR vs. CA, GR No. 117982, Feb. 6, 1997; CIR vs. CA, GR No. 107135, Feb. 3, 1999)  NATURE OF INTERNAL REVENUE LAWS 1. Not political in character 2. Civil in nature (Not penal in character) – penalties to compel the timely payment or to punish evasion or neglect of duty 3. Not subject to ex post facto law prohibitions (since retroactivity allowed in certain circumstances)  CONSTRUCTION OF TAX LAWS 1. Public purpose is always presumed. 2. A statute will not be construed as imposing a tax unless it does so clearly, expressly and unambiguously. 3. In case of doubt, it is construed most strongly against the Government, and liberally in favor of the taxpayer. (a) where the language of the statute is plain and there is no doubt as to the legislative intent. (b) where the taxpayer claims exemption from the tax. 4. Provisions of a taxing act are not to be extended by implication. 5. Tax laws operate prospectively Exception: when is expressly declared or clearly the legislative intent Exception to exception: Collection of interest in tax cases is not penal in nature; it is but a just compensation to the State.  CONSTRUCTION OF TAX LAWS 6. Tax laws are special laws and prevail over a general law. 7. Tax statutes are to receive a reasonable construction or interpretation with a view to carrying out their purpose and intent. Thus, the good faith of the taxpayer is not a sufficient justification for exemption from the payment of surcharges imposed by the law for failing to pay tax within the period required by law. 8. Philippines tax laws may be subject to “tax treaty” provisions entered into by the Phils. with other countries. Such may provide for: a) Tax exemption; b) Tax credits; or c) Preferential / lower tax treaty rates.  PROVISIONS OF TAX LAWS Mandatory Directory 1. For security of citizens –e.g. notice 1.For information / direction of tax officers before sale 2. For equality or certainty of nature and 2. For methodical / systematic methods amount of taxes – e.g. prescribed rates Omission of this provision makes the act Omission of this provision does not affect the invalid. validity of the act. (Administrative liability of the BIR officer only)  POWER OF THE SECRETARY OF FINANCE  The Secretary of Finance, upon the recommendation of the Commissioner [of Internal Revenue], promulgates needful rules and regulations for the effective enforcement of the provisions of the Tax Code (Section 244, Tax Code of 1997).  Can revoke rulings of predecessors  NOTE: The power to promulgate regulations is not the power to legislate in the guise of regulation. DOF Secretary Issuances / Regulations  Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes.  These are formal interpretations of the Tax Code and other Tax Laws  COMMISSIONER OF INTERNAL REVENUE  has the exclusive and original power to interpret the provisions of the Tax Code, but subject to review by the Secretary of Finance  He cannot delegate to his subordinates the recommendation of internal revenue rules and regulations  COMMISSIONER OF INTERNAL REVENUE CIR Issuances / Regulations 1. Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications / clarifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices. 2. Revenue Memorandum Orders (RMOs) are issuances to all Internal Revenue Officers and Employees that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.  COMMISSIONER OF INTERNAL REVENUE CIR Issuances / Regulations 3. BIR Rulings  are the official position of the Bureau to queries raised by taxpayers and other stakeholders on “specific” issues of laws or administration relative to clarification and interpretation of tax laws General: CIR has the sole authority to issue rulings but can delegate to subordinates Except: Cannot delegate issuance of 1. Rulings of first impression (new and important) 2. Reversal, revocation or modification of previous rulings  TAX REGULATIONS NECESSITY OF REGULATIONS 1. For enforcement and execution of laws 2. For implementation of broad policies laid down in a statute, by “filling in” the details, which the Legislature may neither have the time nor the expertise to provide REQUISITES FOR VALIDITY OF REGULATIONS 1. Necessary for proper enforcement of law; 2. Not contrary to Constitution or law; and 3. Published in the official gazette. EFFECTIVITY OF REGULATIONS All administrative rules and regulations shall be filed with the University of the Philippines Law Center (UPLC) and they shall become effective 15 days from the date of filing. (Sections 3 & 4, Chapter 2, Book IV of the Administrative Code of 1987) Exceptions: 1. Effectivity date fixed by law; or 2. Imminent danger to public health, safety or welfare.  TAX REGULATIONS FORCE AND EFFECT OF REGULATIONS  Have the force and effect of laws  Except: Null and void if contrary to the law or Constitution WEIGHT OF REGULATIONS  Executive officers’ duty to enforce is entitled to great respect by courts but not conclusive  Except: Ignored if judicially found to be erroneous  COURT DECISIONS Supreme Court  tribunal of last resort or final appeal Court of Tax Appeals (CTA)  has jurisdictions over the decisions of the Commissioner of the Internal Revenue and the Commissioner of Customs  CTA decisions are appealable to the SC by filing a “Petition for Review on Certiorari”  COURT DECISIONS Supreme Court  tribunal of last resort or final appeal Court of Tax Appeals (CTA)  has jurisdictions over the decisions of the Commissioner of the Internal Revenue and the Commissioner of Customs  CTA decisions are appealable to the SC by filing a “Petition for Review on Certiorari”