Learning Material - Tax Administration.pptx

Learning Material - Tax Administration.pptx

1. TAX ADMINISTRATION

2. Tax Administration Tax administration refers to the management of the tax system. Tax administration of the national tax system in the Philippines is entrusted to the Bureau of Internal Revenue which is under the supervision and administration of the Department of Finance.

3. Who are the BIR Officials? Commissioner of Internal Revenue (CIR) - This is the head of the whole bureau. Deputy Commissioners - Four Deputy Commissioners are assigned to the following: (1) Operations Group, (2) Legal Enforcement Group, (3) Information Systems Group and (4) Resource Management Group. Assistant Commissioners - Thirteen assistant commissioners are designated to each of the service divisions. Head Revenue Executive Assistants - Thirteen head revenue executive assistants are designated to each of the service divisions.

4. Who are the BIR Officials? Regional Directors - They are the heads of each revenue region which administers and enforces internal revenue laws including the assessment and collection of all internal revenue taxes, charges and fees from taxpayers within the region's jurisdiction, as well as ensures proper and effective implementation of National Office's policies and programs within the Regional Office. Revenue District Officers - They are the heads of the 123 revenue district offices which mainly provide frontline assistance and service to taxpayers.

5. Powers of the BIR The following are the powers of the Bureau of Internal Revenue as vested by law. 1. Assessment and collection of taxes 2. Enforcement of all forfeitures, penalties and fines and judgments in all cases decided in its favor by the courts 3. Giving effect to, and administering the supervisory and police powers conferred to it by the NIRC and other laws 4. Assignment of internal revenue officers and other employees to other duties

6. Powers of the BIR 5. Provision and distribution of forms, receipts, certificates, stamps, etc. to proper officials 6. Issuance of receipts and clearances 7. Submission of annual report, pertinent information to Congress and reports to the Congressional Oversight Committee in matters of taxation

7. Powers of the CIR The Commissioner of Internal Revenue is given the following powers to fulfill the duties and responsibilities of its office. 1. To interpret the provisions of the NIRC, subject to review by the Secretary of Finance 2. To decide tax cases, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals 3. To obtain information and to summon, examine, and take testimony of persons to effect tax collection 4. To make assessment and prescribe additional requirement for tax administration and enforcement 5. To examine tax returns and determine tax due thereon 6. To conduct inventory taking or surveillance

8. Powers of the CIR 7. To prescribe presumptive gross sales and receipts for a taxpayer when: a. The taxpayer failed to issue receipts; or b. The CIR believes that the books or other records of the taxpayer do not correctly reflect the declaration in the return. 8. To terminate tax period when the taxpayer is: a. Retiring from business b. Intending to leave the Philippines c. Intending to remove, hide, or conceal his property d. Intending to perform any act tending to obstruct the proceedings for the collection of the tax or render the same ineffective

9. Powers of the CIR 9. To prescribe real property values 10. To compromise tax liabilities of taxpayers 11. To inquire into bank deposits, only under the following instances: a. Determination of the gross estate of a decedent b. To substantiate the taxpayer's claim of financial incapacity to pay tax in an application for tax compromise 12. To accredit and register tax agents 13. To refund or credit internal revenue taxes 14. To abate or cancel tax liabilities in certain cases 15. To prescribe additional procedures or documentary requirements 16. To delegate his powers to any subordinate officer with a rank equivalent to a division chief of an office

10. Non-Delegated Power of the CIR The following powers of the Commissioner shall not be delegated: 1. The power to recommend the promulgation of rules and regulations to the Secretary of Finance. 2. The power to issue rulings of first impression or to reverse, revoke or modify any existing rulings of the Bureau. 3. The power to compromise or abate any tax liability 4. The power to assign and reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept.

11. Rules in Assignments of Revenue Officers to Other Duties 1. Revenue officers assigned to an establishment where excisable articles are kept shall in no case stay there for more than 2 years. 2. Revenue officers assigned to perform assessment and collection function shall not remain in the same assignment for more than 3 years. 3. Assignment of internal revenue officers and employees of the Bureau to special duties shall not exceed 1 year.

12. Agents and Deputies for Collection of National Internal Revenue Taxes The following are constituted agents for the collection of internal revenue taxes: 1. The Commissioner of Customs and his subordinates with respect to collection of national internal revenue taxes on imported goods. 2. The head of appropriate government offices and his subordinates with respect to the collection of energy tax. 3. Banks duly accredited by the Commissioner with respect to receipts of payments of internal revenue taxes authorized to be made thru banks. These are referred to as authorized government depositary banks (AGDB).

13. Other Revenue-Related Government Bodies Bureau of Customs (BOC) Board of Investments (BOI) Philippine Economic Zone Authority (PEZA) Local Government Tax Collecting Units

14. Taxpayer Classification Large taxpayers are under the supervision of the Large Taxpayer Service (LTS) of the BIR. Non-large taxpayers are under the supervision of the respective Revenue District Offices (RDOs) where the business, trade or profession of the taxpayer is situated. As to payment Value-Added Tax At least P200,000 per quarter for the preceding year Excise Tax At least P1,000,000 tax paid for the preceding year Income Tax At least P1,000,000 annual income tax paid for the preceding year Withholding Tax At least P1,000,000 annual withholding tax payments or remittances from all types of withholding taxes Percentage Tax At least P200,000 percentage tax paid or payable per quarter for the preceding year Documentary Tax At least P1,000,000 aggregate amount per year

15. Taxpayer Classification As to financial conditions and results of operations Gross receipts or sales P1,000,000,000 total annual gross sales or receipts Net worth P300,000,000 total net worth at the close of each calendar or fiscal year Gross purchases P800,000,000 total annual purchases for the preceding year

16. Taxpayer Classification Automatic Classification 1. All branches of taxpayers under the Large Taxpayer's Service 2. Subsidiaries, affiliates, and entities of conglomerates or group of companies of a large taxpayer 3. Surviving company in case of merger or consolidation of a large taxpayer 4. A corporation that absorbs the operation or business in case of spin-off of any large taxpayer 5. Corporation with an authorized capitalization of at least P300,000,000 registered with the SEC 6. Multinational enterprises with an authorized capitalization or assigned capital of at least P300,000,000

17. Taxpayer Classification Automatic Classification 7. Publicly listed corporations 8. Universal, commercial, and foreign banks (the regular business unit and foreign currency deposit unit shall be considered one taxpayer for purposes of classifying them as large taxpayer) 9. Corporate taxpayers with at least P100,000,000 authorized capital in banking, insurance, telecommunication, utilities, petroleum, tobacco, and alcohol industries 10. Corporate taxpayers engaged in the production of metallic minerals

18. Taxpayer Classification GROUP GROSS SALES Micro Less than Three Million Pesos Small Three Million Pesos to less that Twenty Million Pesos Medium Twenty Million Pesos to less than One Billion Pesos Large One Billion Pesos and above Sec. 3, RA No. 11976 dated July 24, 2023

19. Types of Tax Laws Tax Laws These are laws that provide for the assessment and collection of taxes. Examples: 1. The National Internal Revenue Code (NIRC) 2. The Tariff and Customs Code 3. The Local Tax Code 4. The Real Property Tax Code Tax Exemption Laws These are laws that grant immunity from taxation. Examples: 1. The Minimum Wage Law 2. The Omnibus Investment Code of 1987 (E.O. 226) 3. Barangay Micro-Business Enterprise (BMBE) Law 4. Cooperative Development Act

20. Interpretation of Tax Laws The maxim, strictissimi juris , indicates that he, who a tax statute is construed against, bears the burden of proving relation to said statute. Taxation is the rule, exemption is the exception.

21. Interpretation of Tax Laws Vague Tax Laws Ambiguous Tax Laws are construed against the government and in favor of the taxpayer. This is so because the state is the one imposing a burden to its subjects, thus, it is the taxpayer who has the right to question the applicability of said tax law to himself. Moreover, a vague tax law means no tax law. Obligation arising from law is not presumed. This is also in conjunction with the uniformity and equal protection clause granted by the Constitution. Considering also that it is the State that drafts tax laws, it should be drafted properly that the approved law should be clear and concise.

22. Interpretation of Tax Laws Vague Tax Exemptions In the construction of tax statutes, exemptions are construed against the taxpayer and in favor of the government. The fundamental theory is that all taxable property should bear its share in the cost and expense of the government. A vague exemption law means no exemption law. The claim for exemption is construed against the taxpayer in accordance with the lifeblood doctrine. It is, therefore, the responsibility of the taxpayer that he/she is within the context of said tax exemption.

23. Administrative Issuances Revenue Regulations (RRs) These 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. Revenue Memorandum Orders (RMOs) These are issuances 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.

24. Administrative Issuances Revenue Memorandum Rulings (RMRs) These are ruling, opinions and interpretations of the CIR with respect to the provisions of the Tax Code and other tax laws as applied to specific sets of facts, with or without established precedents, and which the CIR may issue from time to time for the purpose of providing taxpayers guidance on the consequences in specific situations. Revenue Memorandum Circulars (RMCs) These are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

25. Administrative Issuances Revenue Administrative Orders (RAOs) These are issuances that cover subject matters dealing strictly with the permanent administrative set-up of the Bureau, more specifically, the organizational structure, statements of functions and/or responsibilities of BIR offices, definitions and delegations of authority, staffing and personnel requirements and standards of performance. Revenue Delegation of Authority Orders (RDAOs) These refer to functions delegated by the Commissioner to revenue officials in accordance with law.

26. Administrative Issuances Revenue Bulletins (RB) These refer to the period issuance, notices and official announcement of the CIR that consolidate the BIR’s position on certain specific issues of law or administration on relation to the provisions of the tax code, relevant tax laws, and other issuances for the guidance of the public. BIR Rulings These are official positions of the BIR to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.