Junior Philippine Institute of Accountants and Auditors – United

Strategic Tax Management with Tax Planning

OVERVIEW Powers off CIR Relative to the Determination
of Correct Tax
1. Tax Filing and Payment Deadlines
a) Obtain data and information from third
2. Government Remedies
parties
a. Assessment
b) Conduct inventory surveillance
i. Selection of Taxpayer to be
c) Examine and inspect the books of
audited
accounts of a taxpayer
ii. Audit of the taxpayer
d) Prescribe presumptive gross sales and
iii. Assessment of taxpayers
receipts
with unpaid or deficiency
tax
Prescriptive period of assessment
b. Collection
- General Rule: within 3 years from the
i. Government Remedies to
actual filing of the return or the deadline
Enforce Collections
required by law whichever is later
ii. Stages of Collection
- Exception to the 3-year Prescription
3. Taxpayer’s Remedies
Rule:
a. Disputing an assessment
1. Fraudulent Returns
b. Recovery of erroneously paid taxes
a. Gross Income is understated more
than 30%
Tax Filing and Deadlines
b. Deductions are overstated by more
than 30%
2. Willful neglect to file
- 3 years of non-filing
3. Waiver of the statutes of limitation by
the taxpayer.
- When the taxpayer requests for a
reinvestigation of his assessment
which is granted by the CIR, the
CIR and the taxpayer usually agree
for the temporary suspension of
the prescriptive period for not less
than 6 months (180 days) to give
way to the reinvestigation.

Stages of Assessment
(Source: https://www.bir.gov.ph/images/bir_files/tax_calendar/2024-bir-tax-calendar.pdf)
1. Selection of Taxpayer to be audited
Government Remedies 2. Audit of the taxpayer
1. Assessment 3. Assessment of taxpayers with unpaid or
2. Collection deficiency tax

ASSESSMENT Selection of Taxpayer to be audited

- is the act or process of determining the tax - Based on criteria of BIR’s Annual Audit
liability in accordance with tax laws Program
- it also pertains to the notice sent by the - The BIR may also identify taxpayers to be
government to the taxpayers informing subjected to regular audit from the
them of their unpaid or still unpaid tax following:
obligations coupled with a demand to pay a) Tax compliance verification drive
the same. b) Information furnished by tax
informers
c) Pre-audit tax returns

Page 1 of 5
 Junior Philippine Institute of Accountants and Auditors – United
Strategic Tax Management with Tax Planning
d) Direct field observation by revenue
officers b. Conduct of the Audit Examination
Audit of the Taxpayer ⮚ Period of investigation
a. Release of Letter of Authority (LA) - Revenue officers have up to 120 days
b. Conduct of the Audit examination ⮚ Frequency of revalidation of LAs
c. Reporting on the results of examination - Only once every taxable year
⮚ Frequency of taxpayer examination
a. Release of Letter of Authority (LA) The taxpayer shall be subject to
⮚ Letter of Authority (LA) - an official examination only once in every taxable
document that authorizes a BIR Revenue year, except when:
Officer to examine a taxpayer’s books of a) The CIR determined that fraud,
accounts and other accounting records irregularities, or mistakes were
⮚ Requisites for the validity of an LA: committed by the taxpayer.
a) must be served within 30 days from b) The taxpayer requested for
the date of issuance re-investigation or
b) must be an electronic LA (eLA) re-examination.
printed under BIR Form 1966 c) There is a need to verify the
c) issued under the BIR Letter of taxpayer’s compliance with
Authority Monitoring System withholding tax and other
(LAMS) internal revenue taxes.
⮚ Other BIR notices d) The taxpayer’s capital gains tax
1. Tax verification notice (TVN) - liabilities must be verified.
evaluation or verification of tax on e) The CIR exercises power to obtain
one-time transaction (ONETT) information relative to the
2. Letter notice (LN) examination of other taxpayers.
- communication from the BIR ⮚ Power of the CIR to obtain information
national office informing the and to summon, examine, and take
taxpayer of a finding of significant testimony of persons
discrepancy between 1. Subpoena duces tecum
sales/purchases reported in his - Compel the taxpayer to produce,
tax return under penalty of neglect, certain
- information obtained by the BIR documents sought therein
from third parties. 2. Subpoena ad testificandum
⮚ Reconciliation of Discrepancies - A summon upon a person to appear
- Taxpayers have 5 days from receipt of and to give oral testimony.
LN to reconcile
- If agrees to finding discrepancies: 30 c. Reporting on the results of examination
days from the receipt of LN must settle - the revenue officer shall recommend the
tax liability issuance of an assessment to the taxpayer
⮚ Consolidation of LN and eLA in his report.
- The LN in such case shall be Aside from demanding the unpaid delinquency
consolidated with the eLA issued for or deficiency tax, the BIR will also impose
such examination. increments in the assessment as required by law,
⮚ LN payments may be claimed as tax such as:
credit
a. Surcharge – at the following rate on the
- The amount paid under the LN may be
basic tax:
considered as a tax credit against
- simple neglect to file – 25%
any findings of deficiency under the
- willful neglect to file – 50%
eLA (regular audit) to the extent that
they pertain to the same issues.

Page 2 of 5
 Junior Philippine Institute of Accountants and Auditors – United
Strategic Tax Management with Tax Planning
b. Interest – double of the rate prescribed c) The assessment must be served through
for forbearance of money, this is currently registered mail or by personal delivery
12% per annum and acknowledged by the taxpayer or his
c. Compromise penalty – a settlement for duly authorized representative.
the government not to enforce criminal d) The assessment must be preceded by a
prosecution. pre-assessment notice.
Instances where no PAN is required
Assessment of taxpayers with unpaid or
a) Result of mathematical error
deficiency tax
b) Discrepancies between tax withheld
⮚ The assessment stage involves the
and amount actually remitted
following:
c) Twice deduction of tax credit/refund
a. Pre-Assessment Notice (PAN)
d) Excise tax due is not paid
- taxpayer has up to 15 days from the
e) article locally purchased or imported
receipt of the PAN to reply to the
by an exempt person, such as, but not
proposed assessment.
limited to, vehicles, capital equipment,
- is a written communication issued by
machineries and spare parts, has been
the Regional Assessment Division or
sold, traded or transferred to
any other concerned BIR office
non-exempt persons.
informing the taxpayer of his
obligation for deficiency of tax based
● Jeopardy Assessment
on the audit findings of a revenue
- one made by an authorized revenue
officer.
officer without the benefit of a
complete or partial audit in light of the
b. Formal Letter of Demand and Final
officer’s belief that the assessment and
Assessment Notice (FLD/FAN)
collection of a deficiency tax will be
An FLD/FAN is a final declaration of
jeopardized by the delays caused by
deficiency tax issued by a taxpayer:
the taxpayer to comply with audit and
a. Who defaulted by failing to respond
investigation requirements to present
to the PAN within 15 days of its
his book of accounts and pertinent
receipt.
records or substantiate all of the
b. Whose reply to the PAN is
deductions, exemptions, or credit
unmeritorious.
claimed in his return.
The FLD/FAN shall be issued 15
● Types of Taxpayer’s Protest:
days from the filing or submission
of the taxpayer’s response or within a. Request for reconsideration is a plea for
15 days from the issuance of the a reevaluation of an assessment on the
PAN in case the taxpayer failed to basis of existing records without need of
respond. additional evidence which may involve a
question of facts or of law or both.
The assessment must be served within the
prescriptive period. b. Request for re-investigation is a plea of
reevaluation of an assessment on the
a) The assessment must inform the taxpayer
basis of newly discovered or additional
of the discovery of unpaid or still unpaid
evidence that the taxpayer intends to
tax coupled with a demand of the same
present in the reinvestigation which may
including penalties.
also involve a question of fact or of law or
b) The assessment must show in detail the
both.
facts and the law, rules and regulations, or
jurisprudence on which the assessment is
based.
c. Final Decision on a Disputed Assessment
(FDDA)

Page 3 of 5
 Junior Philippine Institute of Accountants and Auditors – United
Strategic Tax Management with Tax Planning
- The FDDA of the CIR mat be 6. Seizure of properties
communicated to the taxpayer within 7. Auction sale and/or forfeiture of
180 days from the filing of his protest. properties
- Resolution of the Protested 8. Filing of civil or criminal action
Assessment:
a. Resolved in favor of the taxpayer – ⮚ Prescriptive Period of Collection
CANCELLED - 5 years from the date of release of the
b. Resolved with reduction of Final Assessment
Liability – REVISED
c. Sustained – ENFORCED ⮚ Suspension of the Statutes of
Limitation
COLLECTION
The prescriptive period for assessment
- Collection will be enforced by the
and collection may be suspended under
government once the assessment achieves
the following circumstances:
finality under any of the following
instances: a. Request for reinvestigation of the
a. When the taxpayer defaulted in his taxpayer which is granted by the
administrative remedies CIR
b. Failure of the taxpayer to seasonably b. When the Commissioner is
respond to the PAN prohibited from making an
c. Failure of the taxpayer to seasonably assessment or from beginning
protest the FLD/FAN distraint or levy or a proceeding
d. Denial of the taxpayer’s protest by the CIR in court
or his authorized representative c. When the taxpayer cannot be
e. Whether or not on appeal, when the located in the address given by
assessment is upheld by the court him
d. When the warrant of distraint or
⮚ Government Remedies to Enforce levy is served and no properties
Collections can be located
1. Imposition of tax lien e. When the taxpayer is out of the
2. Seizure of the taxpayer’s properties Philippines
(distraint or levy)
3. Auction sale and forfeiture of Taxpayer’s Remedies
taxpayer’s properties 1. Disputing an assessment – if the tax has
4. Filing of civil or criminal action against not yet paid the assessment
the taxpayer 2. Recovery of erroneously paid taxes – if the
5. Imposition of administrative penalties tax has already paid
and fines
6. Suspension of business operation ⮚ Disputing an assessment
7. Entering into a tax compromise with
1. Upon receipt of the Pre-Assessment
the taxpayer
Notice, the taxpayer must explain his
position within 15 days.
⮚ Stages of Collection
2. Upon receipt of the Formal Assessment
1. Preliminary Collection Letter
Notice/Formal Letter of Demand, the
2. Final Notice before Seizure Letter
taxpayer must file a formal protest in 30
3. Warrant of Distraint/Levy or
days.
Garnishment
4. Research of taxpayer properties
Types of protest:
5. Notice of Tax Lien and or Notice of Tax
Levy

Page 4 of 5
 Junior Philippine Institute of Accountants and Auditors – United
Strategic Tax Management with Tax Planning
a. Request for reconsideration – no new
issues or evidence to be raised
b. Request for re-investigation – new issues
or evidence will be raised
- In the case of request for
re-investigation, the taxpayer must
submit the necessary documents
in support of his position within
60 days from the date of filing of
the protest.
3. The taxpayer shall wait for BIR action
within 180 days which shall be counted
from:
a. The submission of documents – for
request for re-investigation
b. The receipt of the FAN/FLD – for
request for reconsideration

⮚ Recovery of erroneously paid taxes

1. File a Claim for a refund or credit
within 2 years from the date of
payment of the tax.
2. When the claim for refund or credit is
denied by an authorized representative
of the CIR, the taxpayer may file a
petition for reconsideration within 30
days from receipt of the denial and
within the two-year prescriptive period
from the date of payment of the tax.
3. An adverse final decision of the CIR
within 30 days shall be appealed by
filing a petition for review before the
CTA within 30 days from receipt of the
final decision and within the two-year
prescriptive period.
4. If the BIR did not act on the claim for
refund or credit, the taxpayer must file
a petition for review before the CTA
before the expiration of the two-year
prescriptive period.
5. An adverse decision of the CTA shall be
appealed within 15 days to the
Supreme Court.
References: Business and Transfer Taxation 2019
edition by Rex Banggawan

Page 5 of 5