Week 2 TAX ADMINISTRATION

1.1 Tax Administration

It is the enforcement of taxes through assessment and collection in accordance with

the country’s tax policies.

1.2 Tax Administration Agencies

The DEPARTMENT OF FINANCE (DOF) is the principal fiscal and financial

administrative arm of the Philippine Government. It has executive supervision and
control over other government agencies, such as:

1. BUREAU OF INTERNAL REVENUE (BIR) – is tasked to assess and collect all taxes
and charges imposed by the NIRC, other tax laws and regulations.

2. BUREAU OF CUSTOMS (BOC) – is tasked to enforce the Tariff and Customs Code,
and to collect taxes on imports imposed in the NIRC.

3. LAND TRANSPORTATION OFFICE (LTO) – is tasked to collect registration fees and

motor vehicle tax.

4. DULY AND LAWFULLY AUTHORIZED COLLECTORS – refer to persons, agencies or

duly accredited banks authorized by the BIR, BOC, and LTO to collect taxes.

5. LOCAL GOVERNMENT OFFICES:

a. Provincial, City, Municipal and Barangay Treasurers
b. Provincial and City Assessors
c. Provincial and City Board of Assessment Appeals
d. Central Board of Assessment Appeals

1.3 Other Tax Enforcers

1. Secretary of Justice – ascertain the validity of laws subject to review by the Courts
of Justice.
2. Head of appropriate government office and his subordinates, with respect to the
collection of energy tax
 3. Banks duly accredited by the BIR Commissioner with respect to receipt of
payments of internal revenue taxes.
4. Various offices providing indirect assistance in collection of taxes:
a. The Courts
b. Register of Deeds
c. Secretary of Public Works and Highways Offices
d. Philippine Economic Zone Authority
e. Board of Investments
f. City Fiscals
g. Notaries Public

1.4 Bureau of Internal Revenue

The BUREAU OF INTERNAL REVENUE (BIR) is tasked to assess and collect all taxes
and charges imposed by the NIRC, other tax laws and regulations. The following are
the BIR officers listed in the NIRC:

1. The Commissioner of Internal Revenue

2. Deputy Commissioners of Internal Revenue
3. Revenue Regional Director
4. Revenue District Officer
5. Revenue Examiners and Officers
6. BIR Division Chiefs
7. BIR Collection Agents

Powers and Duties of the BIR –

1. Assess and collect all internal revenue taxes, fees and charges
2. Enforce all forfeitures, penalties and fines
3. Execute judgment in all cases decided in its favor by the Court of Tax Appeals
(CTA) and other regular courts
4. Administer, supervise and effect police powers authorized by the NIRC and other
laws

Powers of the BIR Commissioner –

1. Interpret tax laws
2. Decide disputed tax assessments
3. Summon and obtain information or testimony of persons
4. Make assessments and prescribe additional tax requirements
5. Compromise, abate and refund or credit taxes
6. Suspend the business operations of a taxpayer
7. Delegate powers

Power to Interpret Tax Laws –

It is vested only to the BIR Commissioner to interpret the provisions of the NIRC and
other special laws, subject to review by the Secretary of Finance.
Power to Decide Tax Cases –
It is the BIR Commissioner who has the power to decide disputed assessments, tax
refunds, fees or other charges, and penalties, subject to exclusive appellate
jurisdiction of the CTA within 30 days. Any tax assessments may be appealed
administratively by the taxpayer to the BIR Commissioner. Any adverse decision of
the BIR Commissioner may be appealed to the Court of Tax Appeals. Final decisions
by CTA shall be taken for review to higher courts within 15 days from notice of ruling,
decision or judgement of the CTA.

Power to Obtain Information –

1. Examine taxpayer’s records
2. Obtain taxpayer’s financial information
3. Summon the person liable for tax
4. Take testimony of the person concerned under oath
5. Conduct regular canvas concerning all persons liable to pay any internal revenue
tax

Power to Make Assessment –

1. Examination of:
a. tax returns and determination of tax due, and
b. unsubmitted statements, reports and other documents.
The assessment shall be based on “best evidence obtainable” in case of
non-presentation of accounting records or other documents by the
taxpayer.
2. Authority to:
a. conduct inventory and surveillance, and prescribe presumptive gross sales
and receipts
 b. terminate taxable period and demand for immediate payment of tax due
from the taxpayer who:
- retires from business subject to tax
- intends to leave the Philippines
- removes his property from the Philippines
- hides or conceals his property
- performs any acts tending to obstruct the proceedings of the collection
of tax
c. Prescribe real property values
d. Inquire into bank deposit accounts, in case of:
- Validating the declared gross estate of the decedent
- Granting compromise of the taxpayer’s liability by reason of financial
incapability to pay
A waiver in writing shall be executed by the taxpayer.
e. Accredit and register tax agents
f. Prescribe additional procedural or documentary requirements

Authority to Compromise, Abate and Refund or Credit Taxes –

1. Existence of a reasonable doubt as to the validity of the claim by the BIR against
the taxpayer
2. Unjust or excessive tax assessment
3. Inability of the taxpayer to pay the tax assessment
4. Administration and collection costs are greater than the collection of tax due

Power to Suspend and Temporarily Close Business Operations –

1. In case of VAT-registered person:
a. Failure to issue receipts or invoices
b. Failure to file a VAT return
c. Understatement of taxable sale or receipts by more than 30% of the correct
taxable sales or receipts for the taxable quarter
2. Failure by any person to register

The temporary closure of the business establishment shall be for the duration of not
less than 5 days and shall be lifted only upon compliance with whatever
requirements prescribed in the BIR closure order.

An initiation, known as “Oplan Kandado”, is recommended if after the conclusion of

the surveillance, there is a sufficient ground for closure of the business
establishment. The closure and temporary suspension of business under the BIR
closure order shall not preclude the BIR from filing the appropriate charges under the
Run After Tax Evader (RATE) program of the BIR.
 BIR in action:

Authority to Delegate Power –

The BIR Commissioner may delegate its power to any subordinate official with a rank
equivalent to a division chief or higher, subject to limitations and restrictions, except
the following powers:
1. To recommend the promulgation of rules and regulations by the Secretary of
Finance
2. To issue first interpretation regarding rulings, or to reverse, revoke or modify any
existing ruling of the Bureau
3. To assign or re-assign internal revenue officers to establishments where articles
subject to excise tax are produced or kept
4. To compromise or abate

1.5 Administrative Provisions

BIR enhances its frontline services by imposing a ‘Single Window Policy’ to cater new
business registrants thru a simplified business registration procedures and guidelines.
1. REGISTRATION REQUIREMENTS
a. Prepare all documentary requirements in the BIR’s checklist
b. Register by using the appropriate BIR Forms:
- BIR Form 1901 (for self-employed, mixed income individuals,
estates and trusts)
- BIR Form 1902 (for individuals earning purely compensation
income)
- BIR Form 1903 (for registration of corporations and
partnerships)
- BIR Form 1904 (for registration of one-time taxpayer and
persons registering under E.O. No. 98)
- BIR Form 1905 (for updating/ cancellation of registration) –
Changes in Registration Information:
1. Change in registered address
2. Change in business trade name
3. Change in tax type
4. Additional line of activity
5. Cancellation of registration/ retirement of business/
transfer of registration
Taxpayers who are temporarily suspending their business
operations are still required to file tax returns on time. They
may indicate the phrase “No transaction".

c. Secure only one Taxpayer Identification Number (TIN). A taxpayer with

multiple TINs shall be criminally liable, except for the decedent person
wherein the estate of the decedent shall obtain a new TIN.

d. Every person subject to any internal revenue tax shall register with the
appropriate RDO:
- Within 10 days from date of employment
- On or before the commencement of business (within 30 days)
- Before payment of any tax due
- Upon filing a return, statement or declaration

e. Pay annual registration fee of P500 using BIR Form 0605 upon registration
and every thereafter on or before January 31, except:
- Cooperatives
- Individuals earning purely compensation income
- Overseas contract workers
f. Register the business as either VAT or Non-VAT. Gross Sales/Receipts
exceeding P3,000,000 in any 12-month period effective January 01, 2018
are subject to VAT

g. Claim the Certificate of Registration, and “Ask for Receipt” notice

h. Attend the scheduled taxpayer’s initial briefing or orientation seminar
2. INVOICING REQUIREMENTS
a. Submit a final and clear sample layout of principal receipts/ invoices (or
choose from the sample layouts below) upon submission of application
for registration
 Kinds of receipts/ invoices:
1. Principal
2. Supplementary (also known as commercial invoice)

All receipts/ invoices will have a validity of 5 years only. A taxpayer

with expiring ATP for its invoices/ receipts shall apply for a new ATP
not later than 60 days prior to actual expiry date.

b. Secure the BIR’s Authority to Print

c. Provide relevant information in the printed receipts or invoices as to:
- Serial number
- Name, business style, TIN and business address of the taxpayer
- Other information as prescribed by rules and regulations by
the BIR
 d. Issue receipts or invoices at the time when the transaction is effected,
except:
- when the value of merchandise sold or service rendered is less
than P100 for non-VAT taxpayers
e. Issue original receipt to the purchaser, while keeping the duplicate in the
place of business for 10 years
f. Issue sales invoice and/ or collection receipt for sale of goods while official
receipts and/ or statement of account for sale of services

3. BOOKKEEPING REQUIREMENTS
a. Register the Books of Accounts within 30 calendar days from the date of
business registration with BIR before its actual use
b. Keeping of books (journal, ledger, others) are required for recording of
daily transactions
c. Preserve the books for a period of 10 years

1.6 Tax Returns

They refer to a formal report prepared by the taxpayer in a prescribed form showing
an enumeration of taxable amounts and description of taxable transactions,
allowable deductions, amount of tax and tax payable to the government.

1. BIR Form 1700 and 1701 – Annual income tax return for individual
2. BIR Form 1702 – Annual income tax return for corporations and partnerships
3. BIR Form 1800 – Donor’s tax return
4. BIR Form 1801 – Estate tax return
5. BIR Form 2551Q – Quarterly percentage tax return
6. BIR Form 2550M – Monthly VAT return
7. BIR Form 2550Q – Quarterly VAT return
8. BIR Form 2000 – Documentary stamp tax return
9. BIR Form 2200-P – Excise tax return

1.7 Tax Remedies

They refer to procedures or actions available both to the government to collect taxes
and to the taxpayer to avoid abuses in payment of taxes.

1. Disputing an assessment
2. Compromise
3. Tax refund
4. Amendment of tax returns
1.8 Tax Assessment

It is a formal letter notice made by the BIR demanding the taxpayer to settle his tax
liability within the indicated period. It is relevant in the imposition of surcharges and
interest. It is the beginning and the necessary step to the issuance of a warrant of
distraint or levy, and to establish a case for judicial action.

Presumption of Correctness –
The tax assessment is presumed correct and made in good faith in the performance
of official duties and failure to present proof of error will prosper such assessment.

Authority to Assess –
The BIR Commissioner or his duly representative has the authority to examine any
taxpayer and assess the correct amount of tax after the latter has filed the tax
return(s). Failure to file the return(s) does not preclude the examination of the
taxpayer.

Tax Assessment Period –

The prescriptive period in assessing the national internal revenue taxes shall be:
a. For regular return due to simple neglect (without fraud) – within 3 years from
the filing of the tax return, or its amendment.
If the BIR has issued a notice of investigation (Letter of Authority), the
taxpayer cannot anymore modify, change or amend the tax return.
b. For fraudulent return due to willful neglect (with fraud, falsity failure to file
return or substantial omission) – within 10 years from the discovery of fraud or
omission, or after a court proceeding for the collection of tax (if no prior
assessment was made).
Tax assessment is not necessary before filing criminal charges complaint for
tax evasion.

Failure of the government to assess or collect within the prescribed period shall be
presumed that the taxpayer has paid the correct amount of tax. For those taxpayers
subject to jeopardy assessment (such as those who are retiring from business,
leaving the country, hiding their properties or performing any acts that tend to
obstruct the proceeding in the collection of tax) shall be assessed anytime by
terminating the taxable period.

Time to Effect Tax Assessment –

a. Before a tax return is filed:
- After the prescription period expired
- If the taxpayer intends to leave the country or close business (Jeopardy
Assessment)
b. After a fraudulent tax return is uncovered:

Kinds of Tax Assessment –

a. Self-assessment – is made by the taxpayer upon filing the tax return and paying
the amount of tax due.
b. Notice of Informal Conference – is made by the BIR prior to the issuance of a
preliminary assessment in order to afford the taxpayer with an opportunity to
present his side of the case within 30 days.
c. Preliminary assessment – is made by the BIR that shows in detail the facts and
the law, rules and regulations, or jurisprudence on which the proposed
assessment is based.
d. Disputed assessment – is made by the BIR thru a Formal Letter of Demand (FLD)
and Final Assessment Notice (FAN) that is being protested administratively by the
taxpayer as to its validity or legality and being asked to be canceled within 30
days from the date of receipt. A Request for Reconsideration or Reinvestigation
may be made.
e. Final assessment – is made by the BIR but was not disputed nor properly
appealed by the taxpayer within the prescribed period and has been final and
executory.
f. Deficiency assessment – is made by the BIR showing the difference between the
correct amount of tax after audit and amount of tax paid by the taxpayer.
g. Jeopardy assessment – is made by the BIR without the benefit of a tax audit
which is intended to prevent the delay of assessment and collection of taxes
caused by the taxpayer’s failure to comply with tax investigation requirements
and substantiation of proper documents.
h. Illegal or void assessment - is made by the BIR without authority or in violation
of the provisions of the Tax Code.
Contesting the Validity of an Assessment –

a. Motion for Reconsideration – is a request by the taxpayer that the BIR reviews
the existing records without the need of additional evidence.
b. Motion for Reinvestigation – is a request by the taxpayer that the BIR considers
the newly discovered or additional evidence which must be submitted within 60
days from the date of filing of the protest.
c. Motion for Withdrawal – is a request to the BIR or Court to remove a tax plea
bargain the taxpayer entered into because it will not serve his best interest.
d. Motion for Cancellation – is a request to the BIR or Court to stop the tax
assessment due to prescription and violation of due process of law.

Tax Assessment Procedure –

1.9 Tax Collection

Taxes are mandatory enforceable contributions being the lifeblood of the

government. The power to assess taxes carry with it the power to collect them.
However, the Philippine Constitution protects the taxpayer against abuses of tax
collection by requiring tax collectors to exercise due process of law.

Collection Remedies of Government –

a. Administrative remedies –
- Distraint of personal property – is the seizure by the government of
personal property (tangible or intangible) to enforce the payment of taxes.
- Levy of real property – is the seizure by the government of immovable
property to enforce the payment of taxes.
- Other administrative collection remedies –
1. Imposition of junction – is a restraining order issued by the court
having jurisdiction over the filed suit intended to forbid the
continuance of the action of law for purposes of due process.
2. Tax lien – is a legal claim granted to the government to secure the
payment of taxes by ensuring that it gets first the right to the property
over other creditors.
3. Forfeiture – implies confiscation of property without compensation if
injurious to the public health.
4. Compromise – is a contract whereby the parties, by reciprocal
concessions, avoid litigation or put an end to one already commenced.
All criminal violations may be compromised except those already filed
in court, or involving fraud.
- 10% for cases of financial incapability
- 40% for cases of doubtful validity
5. Bonds – are used in contracts (exports or imports) to secure the
payments, mostly, of customs duties and excise taxes.
6. Proof of Income Tax Return filed – is required before a renewal of
license to engage in trade, business or occupation or practice a
profession can be issued.
7. Informer’s Reward – is granted to taxpayer who acted as informer for
violations of the provisions of Tax Code or discovery of frauds.
- 10% of revenue, surcharges or fees recovered and/ or fine or
penalty imposed and collected, or P1,000,000 per case,
whichever is lower (for violations of Tax Code)
- 10% of fair market value of smuggled and confiscated goods, or
P1,000,000 per case, whichever is lower (for discovery and
seizure of smuggled goods)
8. Making Arrest, Search and Seizure – is a grant of authority to an
internal revenue officer for violation of internal revenue code being
committed by the taxpayer.
9. Deportation in Case of Aliens – is possible when there are tax evasion
cases filed against them, or willful refusal to pay taxes and penalties
after the BIR or the court has made them final and executory.
 10. Inspection of Books – is made by examining the books of accounts and
other accounting records of the taxpayer but a Letter of Authority
must be issued. All that are required by law to pay internal revenue
taxes shall keep and use relevant and appropriate set of bookkeeping
records. Books of accounts with gross annual sales, earnings, receipts
or output exceeding P3,000,000 must be audited by a CPA.
11. Use of National Tax Register – aids in the collection of taxes as
records of names of persons residing in each city or municipality are
kept and maintained by every regional or revenue district offices.

b. Judicial remedies –
- Civil action – is one that is instituted by the government to collect
national internal revenue taxes in the ordinary courts.
- Criminal action – is an action instituted to punish an infraction of criminal
laws. Assessment is not necessary before filing criminal complaint for tax
evasion but the burden of proof is on the BIR for fraud is never presumed.

1.10 BIR Electronic Services

It is a web application of various taxpayer registration

services including TIN Issuance, Payment of Registration Fee
and Generation of Certificate of Registration.

It is the electronic processing and transmission of tax return

information including attachments, and taxes due thereon
to the government made over to the internet through the
BIR website.

It was developed primarily to provide taxpayers with an

alternative mode of preparing and filing tax returns that is
easier and more convenient.

It provides the link for ePayment Channels of AABs that

taxpayers can access for the electronic payment of their tax
dues and liabilities. It also accepts tax payments through the
use of either online, credit / debit / prepaid cards, and
mobile payments.

1.11 Tax Penalties

 a. Surcharge – is a civil penalty imposed by law due to delinquency or
misrepresentation of taxes.
- For simple neglect, 25% is imposed on:
- Failure to file return and pay the tax due on time prescribed
- Failure to pay the deficiency tax within the time prescribed for its
payment in the notice of assessment
- Filing at the wrong revenue district office
- For willful neglect, 50% is imposed on:
- Filing a false or fraudulent tax return to the BIR
(under-declaration of more than 30% of sales or revenues, and/ or
over-declaration of more than 30% of allowable deductions)
- Intentional negligence to file tax return with the period prescribed
by the tax law or BIR rules and regulations
b. Interest – is equal to 20% per annum based on the date prescribed for payment
until the unpaid tax amount is fully paid.
c. Compromise – is made in lieu of the criminal penalty imposed on violations of
provisions of the Tax Code. For willful negligence of the taxpayer, there is no
compromise penalty in order for the BIR to file a criminal case.

Any person convicted of criminal offenses of the Tax Code shall be:
a. Deported immediately (in case of alien or foreigner)
b. Dismissed in addition to paying the maximum penalty prescribed by law (in case
of public officer or employee)
c. Debarred from using his PRC license (in case of CPA)
d. Liable on behalf of the association, partnership or corporation (in case of partner,
president, manager, treasurer, and other responsible party)

Sample Schedule of Compromise Penalty:

1.12 Taxpayer Remedies

 a. Administrative Remedies –
- Tax avoidance
- Amendment of tax returns
- Refusal to accept Letter of Authority
- Protesting an assessment
- Applying for tax amnesty program
- Enter into a compromise settlement
- Filing a claim for tax credit/ tax refund

b. Judicial Remedies –
- Civil action
- Criminal action

Exercises

1. True or False
1. Tax administration involves legislation and collection of taxes.
2. The EFPS is a manual mode of filing tax returns and payment of taxes. False -
electronic
3. Among the executive officials of the government, only the BIR Commissioner has the
power to interpret the provisions of NIRC and other tax laws.
4. If the taxpayer has no accounting records or other documents, the tax assessment is
based on the best evidence obtainable.
5. Tax assessment must be in writing containing the law and facts as the basis of
assessment.
6. The estate of the decedent person shall continue to use the TIN of the decedent.
False
7. All taxpayers should acquire one TIN and pay a registration fee of P500. False -
employee
8. The transfer of registration requires no additional fee to be paid by the taxpayer.
9. A peddler should register his business and keep the certificate of payment to be
presented upon demand by any internal revenue officer.
10. Tax assessment is an action of actual tax collection. False – introduction of taxes
11. The BIR can appeal to the CTA. False – only taxpayer
12. The BIR has the burden to prove that the taxpayer concerned has received the tax
assessment.
13. The final decision made by the CTA can be appealed to the Supreme Court within 30
days. False – 15 days from receipt of decision of CTA
14. A tax assessment must be in writing containing the factual findings and the law
violated by the taxpayer.
15. A fraudulent return with 30% understatement of income reported is subject to a
penalty of 25% based on the basic tax unpaid.
16. By forfeiture, the proceeds of the property sold are applied to satisfy the tax liability
and the excess thereof shall be returned to the taxpayer. False - seizure
17. By seizure, no part of proceeds goes to the taxpayer because the property is
confiscated in favor of the government. False - forfeiture
18. A second cousin of an internal revenue officer is allowed to receive an informer’s
reward. False – 6th degree of consanguinity
19. Cases regarding collection of taxes already filed in the court are not subject to
compromise. False – tax evasion is an exception
20. Delinquent accounts with duly approved schedule of installment payments are not
subject to compromise.
21. The BIR can assess the taxpayer’s record regarding sales or purchases even without a
Letter of Authority. False - mandatory
22. In a written protest to BIR Commissioner, all relevant supporting documents must be
submitted to the Court of Tax Appeals within 60 days from date of assessment;
otherwise, the assessment shall be come final. False – from the date a protest is
filed
23. The power to assess the proper tax based on the best evidence obtainable is
applicable only when the relevant reports are not available.
24. For tax violation committed, the BIR has the power to suspend and temporarily close
business establishment within 5 days subject to taxpayer’s compliance with the
requirement as indicated in the closure order.
25. The object of distraint may either be personal and/ or real properties of delinquent
taxpayer. False – distraint is for personal properties
26. Criminal tax violations filed in courts may be compromised. False – no compromise
27. Any internal revenue tax, which has been assessed within the prescribed limitation
period, may be collected by distraint or levy, or by a proceeding in court within 5
years following the assessment of tax.
28. The prescriptive period for collection of tax shall be made within 3 years from the
time the final assessment was released. False – 5 years
29. The National Government is allowed to purchase property under distraint if the
amount of bid is substantially lower than the actual cost of the said property.
30. After one year from the date of sale of real property under levy, the delinquent
taxpayer may redeem the property sold. False – within 1 year
31. The levy may be repeated until the full amount due, including all expenses, is
collected.
32. Delinquent accounts may be compromised, however withholding tax cases, in
general, are not subject to compromise.
33. The transfer of business place during the year will require registration and additional
registration fee. False – no additional registration fee
34. The estate must secure its own TIN, as a taxpayer separate from its owner.
35. The informer’s reward is subject to a 10% creditable withholding tax. False – final tax
36. Jeopardy assessment requires no tax audit and shortens the taxpayer’s period.
37. Tax assessment cannot be enforced when there are no available accounting records
maintained by the taxpayer. False – it can enforce on jeopardy assessment
38. Jeopardy assessment can be enforced when the taxpayer obstructs the proceedings
to collect taxes.
39. When a taxpayer applies for tax compromise, the BIR Commissioner can
automatically inquire into his bank deposits. False – a waiver is needed
40. An invalid assessment cannot be used as a basis for a tax compromise.
41. The heart of tax administration is the enforcement of tax policy.
 42. The BIR is principally responsible for the fiscal policies and general management of
the government’s financial resources. False – DOF
43. The BIR is primarily in charge to assess and collect taxes imposed both by the
national and local government units. False – BIR collects national taxes only
44. The Secretary of Justice has the authority to interpret and ascertain the validity of tax
laws, subject to the review by the Court of Tax Appeals. False – Court of Appeals
review
45. The power to interpret the provisions of the Tax Code, to be able to decide on tax
cases under its office, is granted by law to the BIR Commissioner. False – Secretary of
Justice and Courts also interprets tax laws
2. Multiple Choice
1. Tax administration is a system involving enforcement of taxes through the use of:
a. Tax legislation
b. Tax legislation and assessment
c. Tax imposition and collection
d. Tax assessment and collection

2. Which is not within the scope of authority of the BIR Commissioner?

a. To exercise the levying function of taxation
b. To interpret tax laws
c. To assess and collect BIR taxes
d. To decide cases involving national internal revenue taxes

3. The BIR is under the supervision of the:

a. Department of Budget
b. Bureau of Customs
c. Department of Finance
d. Department of Trade and Industry

4. This tax assessment is being asked to be canceled because there is a question as to its
validity or legality.
a. Jeopardy assessment
b. Disputed assessment
c. Illegal assessment
d. Deficiency assessment

5. Which of the following amount of annual gross sales or receipts requires CPA’s audit
certification?
a. P100,000
b. P500,000
c. P1,919,500
d. P3,000,000

6. Statement 1: An individual taxpayer earning purely compensation income is exempt

from P500 registration fee, but required to renew his registration every year.
Statement 2: Cooperatives are exempt from annual registration with the BIR.
 a. Only statement 1 is correct.
b. Both statements are correct.
c. Only statement 2 is correct.
d. Both statements are not correct.

7. The seized property of a delinquent taxpayer becomes the property of the

government. This refers to:
a. Distraint
b. Levy
c. Forfeiture
d. Compromise

8. Which of the following surcharges is not correct?

a. 25% of basic amount of tax due for simple neglect
b. 25% of basic amount of tax due for unintentional failure to file and pay tax return
on prescribed date
c. 50% of the basic amount of tax due for filing of return wrong RDO
d. 50% of the basic amount of tax due for false or fraudulent tax return

9. The BIR may issue TIN to the following, except:

a. A taxpayer who changed his name
b. Minors opening a bank account
c. The estate of a dead person
d. Self-employed individuals

10. What is the expiration of a Letter of Authority?

a. 30 days from its date of issue
b. 120 days from its date of issue
c. 3 years from its date of issue
d. 10 days from its date of issue

11. In installment tax payments, the unpaid balance of the tax is subject to a surcharge
of:
a. 0%
b. 10%
c. 20%
d. 25%

12. Which is not an administrative remedy available to the government?

a. Assessment
b. Distraint
c. Tax avoidance
d. Tax lien

13. A formal letter from the BIR requiring the taxpayer to pay his tax liability within a
specific period.
a. Tax remedies
 b. Tax assessment
c. Tax collection
d. Letter of Authority

14. Which of the following tax remedies is both beneficial to the government and the
taxpayer?
a. Tax lien
b. Compromise
c. Injunction
d. Forfeiture

15. After the final assessment is made, the government should enforce collection within:
a. 2 years
b. 3 years
c. 5 years
d. 10 years

3. Fill in the Blanks

1. Date of tax return filed April 15, 2011
Date of material non-inclusion of income discovered June 20, 2012
Required:
When is the last day to amend the tax return?

Answer: April 15, 2014 (3 years)

2. Date of tax return filed April 15, 2011

Date of tax return amended October 20, 2012
Required:
When is the deadline to assess tax return?

Answer: October 20, 2015 (3 years)

3. Date of tax return was not filed April 15, 2011

Date when omission was discovered by BIR April 15, 2012
Required:
When is the deadline to assess tax return?

Answer: April 15, 2022 (10 years)

4. ABC is a food chain corporation with a principal office in Davao City. It has 2 factories
located in Tagum City and 12 warehouses in Digos City; and 45 branches throughout
the Philippines.
Required
How much is the total annual registration fees of ABC?
 Answer: P30,000 (500 x 60)

5. A criminal case was filed in court against Mr. X for obtaining 3 different TIN resulting
to an estimated tax fraud of P50 million.
Required:
If Mr. X proposed for a compromise to the BIR Commissioner, how much is the
minimum compromise that is allowed to Mr. X?

Answer: None

6. X, a first cousin of B (a tax examiner), provided an information to the BIR leading to a

discovery of a tax fraud amounting to P9,000,000.
Required
How much is the amount of net cash informer’s reward that can be received by X
from the government?

Answer: None

7. Ms. A reported her income tax return for 2017 only on June 30, 2018 voluntarily
without any notice from the BIR. The tax due per return amounts to P10,000.
Required:
What would be the total surcharge to be added to the basic tax?

Answer: P2,500 (10,000 x 25%)

8. If the basic tax is P10,000 and the surcharge is P2,500, how much is the interest
charge if the 2017 income tax return is only filed on June 30, 2018?

Answer: P416.67 (10,000 x 20% x 2.5/12)

9. A certain taxpayer has a basic tax due amounting to P10,000 pertaining to his 2017
income tax return but was filed only on June 30, 2018 to wrong Revenue District
Office.
Required:
How much would be the total amount due by the taxpayer inclusive of penalties?

Answer: P20,417

Basic tax 10,000

Surcharges:
Late filing and payment (25%) 2,500
Filing in wrong RDO (2%) 2,500
Interest (10,000 x 20% x 2.5/12) 417
 Compromise 5,000
Total amount due 20,417

10. The taxpayer’s income tax return for the calendar year 2017 was due for filing on
April 15, 2018 but the taxpayer voluntarily filed his return, without assessment notice
from the BIR only on June 30, 2018. The tax due per return amounts to P100,000.
Required:
How much would be the total amount due inclusive of penalties?

Answer: P20,417

Basic tax 100,000

Surcharges:
Late filing and payment (25%) 25,000
Interest from April 15, 2018 to
June 30, 2018 (100,000 x 20%
x 2.5/12) 4,167
Compromise 20,000
Total amount due 149,167