3J TAX Q and A REVIEWER MIDTERMS

“Fight for the things that you care about. But do it in a way that will lead others to join you.”
– Ruth Bader Ginsburg

Made by: ARCILLA, Stevie R. | ABELLA, Jomaica C. | AL-MIJHEM, Jeremy Ahmed T. | AVENDAÑO,
Roy Daniel N. | BAUTISTA, Reynald L. | CAGARA, Garilissa Erin S. | CARIÑO, John Mark D. | CELZO,
Camille C. | CONSTANTINO, Jon Arvin G.| CRUZ, John Paul Alfred R. | DELOS REYES, Jhomel B. |
DEMAISIP, Kin Andrea D. | EBREO, Maria Rosario C.| JACABA, Joyce B. | LAZARO, Nery Royce T. |
MARASIGAN, Marc Andrew M. | Masilungan, King Laurenz S.| MELGAR, Jonathan Karl P. | MILO, Jose
Francisco B. | MONTESA, Romar B. | NAVARRO, Mia P. | Palorma, Larizza | SEBOLLENA, Bianca Joy S.
| TAN,Tim R. | VALLE, Jose Jun M.| VILLANUEVA, John Fiel D.

TRUE OR FALSE and state your reasons

1. MR suspends prescriptive period

Suggested Answer: FALSE. Revenue Regulations No. 18-2013 provides that a motion for
reconsideration (MR) of the Commissioner's denial of the protest or administrative appeal does
not suspend the running of the 30-day prescriptive period within which an appeal shall be made
to the CTA. As such, the taxpayer should institute an appeal with the CTA within the said
period; otherwise, the assessment will become final, executory, and demandable.
2. Period to assess under CMTA is imprescriptible

Suggested Answer: TRUE. The law states that all goods imported into the Philippines shall be
subject to duties, taxes and other charges upon importation, including goods previously exported
from the Philippines. It is the duty of customs officer to classify, value, and determine the duties
and taxes to be paid. Thereafter, they shall prepare and submit a tentative assessment which may
be disputed by the importer. The law further provides a time limit for appeal for readjustment of
appraisal. However, the law did not state a prescription period for assessment. Applying
expressio unius est exclusio alterius, it may be inferred that the legislators intended for it to be
imprescriptible.

Outright vs technical smuggling

3. COC is empowered to compromise involving forfeiture proceedings under cmta

Suggested Answer: FALSE. SECTION 1131. Authority of the Commissioner to Make

Compromise.—Subject to the approval of the Secretary of Finance, the Commissioner may
compromise any administrative case arising under this Act involving the imposition of fines and
surcharges, including those arising from the conduct of a post clearance audit, unless otherwise
specified by law.
Cases involving forfeiture proceedings shall however not be subject to any compromise.
4. President under flexible tariff clause grant exempt customs if EO and published
Suggested Answer: FALSE. Under Sec. 1608 of the CMTA, It is not required that the grant of
exemption to custom duties by virtue of the flexible clause of the President be contained in an
Executive Order nor that it be published for it to be valid. The exercise of the Flexible clause by
the President is deemed proper when it was made in consultation with the Tariff Commission
and the National Economic Development Authority.
5. Regular courts has jurisdiction to issue a TRO and/or preliminary injunction against the
commissioner of customs for collection under tax code - De Los Reyes
Suggested Answer: FALSE. No court shall have the authority to grant an injunction to restrain
the collection of any national internal revenue tax, fee or charge imposed by this Code. (Sec.
218, NIRC). Only the CTA can issue an injunction provided, that: There is an appeal to the
CTA; in the opinion of the court, the collection by the government agencies may jeopardize the
interest of the Government and/ or the taxpayer; and taxpayer either to deposit the amount
claimed or to file a surety bond for not more than the double the amount with the Court. (R.A.
1125, Sec. 11, as amended by R.A. 9282). However, CTA is not a regular court so the answer
would be false.
6. Filed return April 2013 comptroller waiver August 1 2017 no board resolution extend to
November 2017. October 14 2017 PAN. Prescribed? - Cagara (See Next Mobile v CIR)
Suggested Answer: NO. On April 4, 2016, the BIR issued RMO 14-2016, providing a new set
of rules on executing waivers. Under the new relaxed rules, the waiver may be, but not
necessarily in the form prescribed by RMO 20-90 or the related Revenue Delegation Authority
Order No. 05-01. The taxpayer’s failure to follow the prescribed forms will not invalidate the
executed waiver, as long as the following minimum conditions are complied with:
a. The waiver of the Statute of Limitations under Section 222 (b) and (d) shall be executed before
the expiration of the period to assess or to collect taxes. The date of execution shall specifically
be indicated in the waiver.

b. The waiver shall be signed by the taxpayer himself or his duly authorized representative. ln the
case of a corporation, the waiver must be signed by any of its responsible officials;

c. The expiry date of the period agreed upon to assess/collect the tax after the regular three-year
period of prescription should be indicated;

MULTIPLE CHOICE -Choose the letter and state the reasons or legal basis
7. Alvarez given notice of assessment containing only the amount of delinquency taxes without
stating factual and legal bases - Constantino
a. valid, Alvarez need only know the amount
b. invalid, failure to state factual and legal bases
c. valid, but may contest/protest
d. invalid, Alvarez would have no means of determining if the computation was correct
Suggested Answer: B. invalid, failure to state factual and legal bases. However, we must
determine whether the assessment is final or preliminary as there must be first a PAN before
FAN. Nevertheless, the law provides that a notice of assessment shall be issued within the scope
of authority, that it must be in writing, and issued by CIR or other duly authorized
representative, must be served before prescriptive period and lastly it must contain the facts and
the law on which the assessment is based.
Moreover, stated in the case of cir vs enron subic power corp. A taxpayer must be
informed in writing of the legal and factual bases of the tax assessment made against him. The
use of the word shall in the legal provisions indicates the mandatory nature of the requirement. In
this case, when Alvarez was given notice with any factual bases, it is said that such notice is not
consistent with the requirement of law as such the notice must be considered invalid.

8. Teddy was given PAN, therein stated he is given 15 days within which to comment or protest.
8 days after, FAN. -Cruz
a. invalid, because teddy was deprived of opportunity to comment, in violation of his due process
rights
b. invalid, because premature
c. valid, because given within the prescriptive period to assess
d. valid, because need not wait for period to lapse because filing of comment to PAN not
mandatory
Suggested Answer: D. In the case of Medtex Corporation v. CIR, issuance of FAN before lapse
of the 15 day period for the taxpayer to file its reply to the PAN inflicts no prejudice in the
taxpayer as long as the taxpayer is properly served the FAN and it is able to intelligently contest
the FAN by filing a protest within the period allowable by law. REASON: PAN is not an
assessment even if it contains a computation of the tax liabilities of a taxpayer and a demand of
payment for the computed tax liabilities was made.
ADDITIONAL: FAN issued without PAN is denial of due process on the part of the taxpayer.

9. Belinda filed return April 12, 2017, ahead of April 15, 2017 deadline for filing. Yesterday, it
was discovered that she actually has income of 10M, but in her return, she stated only 5M.
Prescriptive period? Bautista
a. Within 3 years from Apr 12
b. Within 10 years from Apr 12
c. Within 3 years from Apr 15
d. Within 10 years from Apr 15
e. None of the above
Suggested Answer:
E. None of the above.
As part of the exceptions as to the period of limitations regarding assessment and collection of
taxes, Sec. 222 of the NIRC, specifically under sub-section (a), states that the government's right
to assess may be exercised within 10 years upon discovery of the falsity or fraud in cases of
false or fraudulent returns.

Berlinda's case herein falls under such category, being that there is deficiency between the return
and the actual tax paid. Such fact, however, was only discovered yesterday. Thus, the 10 year
prescriptive period starts today and shall end 10 years thereafter, following the provisions of
Article 13 of the civil code regarding counting of periods, excluding the first day and including
the last day.

Dela Cruz
10. Roma Corporation has unpaid taxes. Can the stockholders of Roma corporation be
held liable for the unpaid taxes of Roma Corp? -Villanueva
Suggested Answer:
Yes, stockholders of Roma Corporation may be held liable for unpaid taxes.
As a rule, a corporation has a juridical personality distinct and separate from the persons owning
or composing it. Thus, the owner or stockholders of a corporation may not generally be made to
answer for the liabilities of a corporation and vice versa.

The veil of corporate fiction, however, may sometimes be abused to avoid liability for taxes. As
a result, tax authorities have in several occasions pierced the veil of corporate fiction in order to
hold directors, officers, and employees personally liable.

In taxation, piercing the veil of corporate fiction means that stockholders or officers of a
corporation can be held directly liable for corporate tax liabilities and vice versa when the
corporation is formed or used for illegitimate purposes, particularly, as a shield to perpetuate
fraud, defeat public convenience, justify wrong, evade a just and valid obligation or defend a
crime.

11. State if the following are taxable within the Philippine Jurisdiction:
a) Pogi Corporation’s resident manager received a car. Car is located in Cebu.
b) 200 shares of stocks of Pogi Corporation given to resident manager Ivan -
Ebreo
Suggested Answer:
a. The car, located in Cebu is taxable within the Philippines. The situs of personal property,
wherever it was actually kept or located, was held to be at the domicile of its owner,
following the doctrine of mobilia sequuntur personam (movables follow the person).
b. The 200 shares of stock are taxable within the Philippines. It was settled in a
jurisprudence that in cases of shares of stock, its situs for the purposes of taxation is the
 state in which they are permanently kept regardless of the domicile of the owner of the
State in which the corporation was organized. Moreover, the Tax Code enumerates
properties which have acquired actual situs in the Philippines, regardless of the residence
of their owners, one of which is the shares of stock, obligations, bonds issued by
domestic corporations organized and constituted in accordance with Philippine laws.

In this case, assuming that the 200 shares of stock of Pogi Corporation, issued by
a domestic corporation and constituted in accordance with Philippine laws, regardless of
the residency of resident manager Ivan, is subject to tax.

Cabaneiro

12. Describe the power of taxation having in mind the board spectrum of taxation. Are the
provisions of the 1987 Constitution relevant to taxation considered as basis for the grants
of the power to tax. Discuss fully. -Montesa
Suggested Answer:
Yes. It is relevant. The power of taxation is inherent to the State (along with the power of
eminent domain and police power); hence, the right of the state to impose taxes exist
apart from the Constitution. The State is free to select the subject of taxation, and the
Court has repeatedly held that inequalities which result from a singling out of one
particular class for taxation or exemption, infringe no constitutional limitation (Lutz vs.
Araneta, G.R. No. L-7859). As the State has the power to determine the subject of
taxation, it is also free to select those who will be exempt from taxation (Gomez vs.
Palomar, G.R. No. L-23645. Lifeblood theory: Taxes are the lifeblood of the State,
through which the Government and its agencies continue to operate and with which the
state effects its functions for the welfare of its constituents (Commissioner of Internal
Revenue vs. Court of Tax Appeals, G.R. No. 106611). However, even with the lifeblood
theory, the power of taxation must still be exercised with reasonably and in accordance
with the law and prescribed procedure (CIR vs. Algue, G.R. No. L-28896). As the power
of taxation is inherent to the state, the provisions of 1987 Constitution does not grant the
power to tax. Rather, the provision of the Constitution provides for the limitations for the
power to tax.
13.In the case of Tolentino vs. Secretary of Finance, the Philippine Press Institute Inc. (PPI)
contended that by withdrawing the exemption previously granted to print media
transactions involving printing, publication, importation or sale of newspapers, RA 7716
has singled out the press for discriminatory treatment and that within the class of media
the law discriminates against print media by giving broadcast media favored treatment. Is
the contention of PPI correct? Explain fully
Valle
There is no discrimination in this case.
 1. The imposition of VAT on print media is not because it was being singled
out, but because of the withdrawal of its previous exemption. The tax is not
imposed on print media specifically, but to a wide range of goods and
services
2. The withdrawal of the exemption is not discriminatory because the
exemption granted to the press was not the only exemption withdrawn in RA
7716
3. The tax imposed on print media relates to transactions involving printing
and publication, which are different from the transactions of broadcast
media. There is a reasonable basis for the classification
Suggested Answer:
14. In 2011, Mrs. Marvel gave her parents a bday gift of Php 200, 000 and a donation of
Php. 100,000 to her parish church St. Jerome in Alabang. She also donated a land a parcel
of land located at Taal, Batangas, for the construction of a building for Batangas West
High School Alumni Association,-a non stock non profit organization. Western portion
shall be leased to a bookstore to generate income for the association. Is the donation to St.
Jerome church subject to tax? Explain. -Carino
Suggested Answer:
No. SEC. 101. Exemption of Certain Gifts. — The following gifts or donations shall be exempt
from the tax provided for in this Chapter:
(A) In the Case of Gifts Made by a Resident -
xxx
(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited nongovernment organization, trust or philantropic
organization or research institution or organization: Provided, however, That not more than
thirty percent (30%) of said gifts shall be used by such donee for administration purposes. For
the purpose of this exemption, a ‘non-profit educational and/or charitable corporation, institution,
accredited nongovernment organization, trust or philanthropic organization and/or research
institution or organization’ is a school, college or university and/or charitable corporation,
accredited nongovernment organization, trust or philanthropic organization and/or research
institution or organization, incorporated as a nonstock entity, paying no dividends, governed by
trustees who receive no compensation, and devoting all its income, whether students’ fees or
gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion
of the purposes enumerated in its Articles of Incorporation

Additional: M City approved ordinance levying customs duties on articles entering the
jurisdiction of the city. Published February 1, 2017 effective November 11 2017
Suggested Answer:
No. SECTION 133 of the LGC. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and Barangays shall not extend to the levy of the following:
xxx
(35) Customs duties, registration fees vessels and wharfage on wharves, tonnage dues, and all
other kinds of customs fees, charges and dues except wharfage on wharves constructed and
maintained by the local government unit concerned;

15. Mr. Will A. Revillame, a BIR examiner, requested the Commissioner of Internal
Revenue for authority to inquire into the bank deposits of Versoza, a taxpayer whom he
suspects that he did not declare the correct gross income in his 2011 income tax return. He
justified his authority to request to the CIR for such authority in order that he can initiate
the net worth method of investigation to establish the suspected fraudulent act of taxpayer.
May the CIR give such authority to Mr. San Pedro. Explain fully your answer- Celzo
Suggested Answer:
No, the CIR cannot give such authority to Mr. San Pedro since this will be violative of RA 1405,
the Bank Deposits Secrecy Law. The Commissioner or his duly authorized representative may be
allowed to inquire into the bank deposits of of a taxpayer in the following grounds:
1. For the purpose of determining the gross estate of a decedent;
2. Pursuant to Sec 6F of NIRC, where the taxpayer has filed an application for compromise
of hix tax liability by reason of financial incapacity to pay such tax liability and signed a
waiver authorizing the Commissioner or his duly authorized representatives into the bank
deposits.
Hence, in this case the mere suspicion on the correctness of the declaration of the gross income
of Versoza is not one of the grounds mentioned so as to give the CIR the authority to inquire
into the bank deposits of a taxpayer.

16. Batangas Electric Co. was given a franchise by the government to provide electricity to
various towns and barangays in Batangas. Under the franchise BATELEC will only pay a 2
percent franchise tax from January 1, 2017 to May 1, 2022. On May 2020, a law was passed
requiring all franchise holders to pay income tax. BATELEC contended that it is not liable
to pay income tax because that will constitute a violation of non-impairment clause. Is
BATELEC correct? Marasigan
Suggested Answer:
No, BATELEC is incorrect in contending that it is not liable to pay income tax because that will
constitute a violation of non-impairment clause.
The tax exemptions protected by the non-impairment clause are contractual tax exemptions, not
those granted by franchises and licenses. A franchise is subject to amendment, alteration, or
repeal by Congress when the public interest so requires; hence, any exemption based on a
franchise is not protected by the non-impairment clause. - Ingles, I. (2018). Tax Made Less
Taxing: A Reviewer with Codals and Cases, p. 13 citing Cagayan Electric Power and Light Co.,
Inc. v. CIR, G.R. No. L-60126, September 25, 1985.
In this case, BATELEC’s exemption is based on a franchise. It is not protected by the non-
impairment clause. Therefore, the imposition of income tax against BATELEC will not
constitute a violation of the non-impairment clause.

17. Aling D. Yonesa who was the recipient of various notices from the BIR for the
examination of her 2016 income tax return opted to ignore said notices prompting the BIR
to rule that the tax assessment is final and unappealable. Subsequently, the BIR filed a civil
action against Yonesa to collect deficiency tax due. After many years, a decision was
promulgated by the Court ordering Yonesa to pay the tax due together with the
incremental penalties and surcharges. The judgement become final and executory but
various attempts to the BIR to collect the tax liability yielded negative results. Bothered by
her conscience, Yonesa invoked the power to compromise the ase under Section 204, NIRC
for which she offered 50 percent of the court’s award stating to the court that that is the
only amount she could really afford. May the Commissioner accept the offer? Is there
something illegal or unethical if the same is accepted? -Navarro

May the Commissioner accept the offer?

No.

Although Sec. 204 of the NIRC authorizes the Commissioner to enter into a compromise
agreement where the settlement offered is less than the prescribed minimum rates-40% in
doubtful validity and 10% for financial incapacity, provided that is shall be subject to the
approval of the Evaluation Board, he can only do so when civil tax cases are being disputed
before the courts not when there has already been a final and executory judgement by the court
as provided in Rev Regs. 7-2001 (as amended by Rev. Regs. No. 30-2002).

In the case of Revero v. Amparo the Supreme Court held that a compromise can never be
entered into after the final judgement of the court for the Government had already acquired a
vested right. The remaining function of the officials is to carry out the terms of the said final
court decision and in so doing,naturally guarding and protecting the interests of the Government
they represent.

Hence, The Commissioner cannot accept Yonesa's offer to compromise.

Is there something illegal or unethical if the same is accepted?

Yes. The Commissioner may be held administratively liable if he/she accepted Yonesa’s
offer to compromise. Since there has already been a proceeding wherein the government funds
had already been exhausted, it is unenthical for him/her to disregard the court’s ruling and
instead entered into a compromise. (if may showing na (hindi ako super sure dito huhu)
18. Mr. Manny Pinakyaw was assessed for deficiency excise taxes for which he filed an
administrative protest to the BIR. May the government during the pendency of that protest
file a criminal action against the taxpayer for filing a false fraudulent return? Explain your
answer. -Palorma
YES, the government can file a criminal action for filing a false fraudulent return against Mr.
Manny Pinakyaw pending the administrative protest before the BIR at any time within 10 years
after the discovery of the falsity, fraud, or omission, PROVIDED that there is a prima facie
showing of a willful attempt to evade taxes or failure to file the required return. Jurisprudence
provides that what is involved in a criminal action is not the collection of taxes but the criminal
prosecution for violations of the NIRC. It is not a requirement for the filing of a criminal protest
that there is a precise computation and assessment of the tax (BASIS: CIR vs. Pascor Realty
Devt. Corp; Sec. 222(a) of NIRC).

[Another reason provided by the SC in CIR vs. Pascor Realty Devt Corp: administrative protests
could not stop or suspend the criminal action which was independent of the resolution of the
protest in the CTA. This was because the CIR had, in tax evasion cases, discretion whether to (1)
issue an assessment, or (2) file a criminal case against taxpayer, or (3) both.]

NOTES:
1. First basis nya is under Sec 222(a) of NIRC: In the case of false or fraudulent return with
intent to evade tax or of failure to file a return, (1) the tax may be assessed, or (2) a
proceeding in court for the collection of such tax may be filed without an assessment, at
any time within 10 years after the discovery of the falsity, fraud, or omission xxx
2. Sabi sa jurisprudence: magkaiba yung matters involved in administrative protests and
criminal actions. Sa admin protests, what is involved is the collection of taxes. In
criminal action, what is involved is the prosecution for the violation of the NIRC.
A final computation and assessment of tax liabilities is not a condition precedent to file
criminal actions under NIRC, kasi even the Code itself gives the CIR the discretion to
either issue assessment, or file a criminal case, or both, in case of tax evasion cases.
Pero may other condition necessary: kelangan may PRIMA FACIE showing of intent to
evade tax or failure to file a return. So qualify natin yung sagot sa tanong with this
condition. =)
PS: kung tingin ninyo mali, please correct me huhu and sorry in advance kung mali =(

Not from samplex but related:

19. The Commissioner of Internal Revenue issued a BIR ruling to the effect that the
transaction is liable to income tax and value added tax. Upon receipt of the ruling, a
taxpayer does not agree thereto. What is his proper remedy? -Jacaba
The taxpayer may file a motion for reconsideration with the CIR (RR No. 18-2013, Sec. 3.1.4) or
file an appeal to the CTA within 30 days from receipt of the decision (RR No. 12-99, Sec. 3.1.4,
as amended by RR No. 18-2013). However, filing of the motion for reconsideration will not toll
the 30-day period to appeal to the CTA (RR No. 12-99, Sec. 3.1.4, as amended by RR No. 18-
2013).

On the other hand, pursuant to the tenor of finality rule, if the tenor of the letter shows the firm
stand of the BIR against the reconsideration of the disputed assessment, the letter should be
considered the final decision of the BIR on the taxpayer’s protest. (The letter of denial shall be
considered as the final decision wherein the CIR not only demanded payment of the amount
assessed but he also gave a warning that in the event the taxpayer failed to pay the same, he
would be constrained to enforce the collection thereof by means of the remedies prescribed by
law.) Hence, the only remedy of the taxpayer is to file an appeal to the CTA within 30 days from
receipt of the decision.

20. In 2009, Caruso, a resident Filipino citizen, received dividend income from a U.S.-based
corporation which owns a chain of Filipino restaurants in the West Coast, U.S.A. The
dividend remitted to Caruso is subject to U.S. withholding tax with respect to a non-
resident alien like Caruso. a. What will be your advice to Caruso in order to lessen the
impact of possible double taxation on the same income? b. Would your answer in A. be the
same if Caruso became a U.S. immigrant in 2008 and had become a non-resident Filipino
citizen? Explain the difference in treatment for Philippine income tax purposes. -Demaisip

Suggested answer:
a. Caruso has the option to claim the amount of income tax withheld in the U.S. as deduction
from his gross income in the Philippines or to claim it as a tax credit (Section 34, NIRC).
b. No. The income from abroad of a non-resident citizen is exempt from the Philippine income
tax. Hence, there is no international double taxation on said income (Section 23, NIRC).

21. Congress passed a sin tax law that increased the tax rates on cigarettes by 1,000%. The
law was thought to be sufficient to drive many cigarette companies out of business, and was
questioned in court by a cigarette company that would go out of business because it would
not be able to pay the increased tax. The cigarette company is __________ (A) wrong
because taxes are the lifeblood of the government (B) wrong because the law recognizes
that the power to tax is the power to destroy (C) correct because no government can
deprive a person of his livelihood (D) correct because Congress, in this case, exceeded its
power to tax. -Tan

Answer: B
The law recognizes that the power to tax is the power to destroy.
In McCulloch v. Maryland the Supreme Court declared that the power to tax involves the power
to destroy. This maxim only means that the power to tax includes the power to regulate even to
the extent of prohibition or destruction of businesses. The reason is that the legislature has the
inherent power to determine who to tax, what to tax and how much tax is to be imposed.
Pursuant to the regulatory purpose of taxation, the legislature may impose tax in order to
discourage or prohibit things or enterprises inimical to the public welfare. In the given problem,
the legislature’s imposition of prohibitive sin tax on cigarettes is congruent with its purpose of
discouraging the public form smoking cigarettes which are hazardous to health.

22. XYZ Corporation manufactures glass panels and is almost at the point of insolvency. It
has no more cash and all it has are unsold glass panels. It received an assessment from the
BIR for deficiency income taxes. It wants to pay but due to lack of cash, it seeks permission
to pay in kind with glass panels. Should the BIR grant the requested permission? -Milo

Suggested Answer:
No. XYZ Corp., in this case, seeks to obtain a compromise with the BIR in relation to the
payment of its deficiency income taxes. Sec. 204(A) of the NIRC, as well as Revenue
Regulations No. 30-2002, provide that, in cases of financial incapacity to pay any internal
revenue tax, the taxpayer’s offer for a compromise settlement will not be accepted if there is no
payment of the prescribed minimum rate. This minimum rate should be paid in cash, and not in
kind as with the offer made by XYZ Corp., because neither the text of Sec. 204(A) of the NIRC
nor that of the above regulation state that the compromise rate may be paid in kind. Therefore,
the BIR should refuse the offer of XYZ Corp. to pay through its glass panels.

23. KaTato owns a parcel of land in San Jose, Batangas declared for real property taxation,
as agricultural. In 1999, he used the land for a poultry feed processing plant but continued
to declare the property as agricultural. In March 2020, the local tax assessor discovered
KaTato’s change of use of his land and informed the local treasurer who demanded
payment of deficiency real property taxes from 1999 to 2020. Has the action prescribed?
-Lazaro

“Suggested Answer: No. The deficiency taxes for the period 1999 up to 2020 may still be
collected within 10 years from March 2020.

When what was filed was a false or fraudulent return, the ten 10-year prescriptive period
applies. The ten 10-year period is counted from the discovery of fraud or falsity, not from the
filing of the return. Within this prescriptive period, the Government has two options: either to
assess the correct tax liability, and later on collect the same within the period of five (5) years
by distraint, levy, or by a proceeding in court (Section 222[c]), or to file a proceeding in court
for the collection of such tax without assessment. (Section 222[a).”
24. In 2010, pursuant to a Letter of Authority (LA) issued by the Regional Director, Mr.
Abcede was assessed deficiency income taxes by the BIR for the year 2009. He paid the
deficiency. In 2011, Mr. Abcede received another LA for the same year 2009, this time
from the National Investigation Division, on the ground that Mr. Abcede's 2009 return was
fraudulent. Mr. Abcede contested the LA on the ground that he can only be investigated
once in a taxable year. Decide- Sebollena

Suggested answer:
The contention of Mr. Abcde is untenable. Mr. Abcde may still be assessed for his
deficiency income taxes for the year 2009. Section 235 of the National Internal Revenue Code
provides that for income tax purposes, examination and inspection of the books of accounts and
other accounting records shall be made only once in a taxable year; however, the same section
provides the exceptions which includes fraud, irregularity or mistakes, as determined by the
Commissioner. Since the LA received by Mr. Abcde is based on the ground that the 2009 return
was fraudulent, the LA he received in 2011 is valid and thus, he may be investigated.

25. What is the effect of the execution by a taxpayer of a "waiver of the statute of
limitations" on his defense of prescription?

The 3-year prescriptive period to assess and the 5-year prescriptive period to collect does not
apply, among others, to cases where the taxpayer issues a waiver in favor of the BIR. By signing
a waiver, the taxpayer agrees to extend to a future date the period within which the BIR can issue
a deficiency tax assessment.

26. On October 15, 2015, ABC Corp. imported 1,000 kilos of steel ingots and paid customs
duties and VAT to the Bureau of Customs on the importation. On February 17, 2019, the
Bureau of Customs, citing provisions of the Tariff and Customs Code on post-audit,
investigated and assessed ABC Corp. for deficiency customs duties and VAT.
Is the Bureau of Customs correct?

Suggested answer:
No.
As to the VAT, the Bureau of Customs has no authority to assess ABC Corp. as this falls
under the jurisdiction of the Bureau of Internal Revenue (BIR). Under Sec. 2 of the NIRC, the
BIR’s powers and duties include, among others, the assessment and collection of all national
internal revenue taxes, fees and charges. VAT is a national internal revenue tax under Title IV of
the NIRC. Under Sec. 12 of the NIRC, the Commissioner of Customs and his subordinates are
merely agents and deputies for collection, not assessment of national internal revenue taxes.
 As to the deficiency customs duties found on post-audit, the Bureau of Customs was not
correct in assessing deficiency customs duties. The facts show that the investigation and
assessment on post-audit were made on February 17, 2019, which is more than three (3) years
from October 15, 2015 which is the date of payment by ABC Corp. Sec. 4 of Republic Act 9135
amended Section 1603 of the Tariff and Customs Code of the Philippines. The provision states
that when articles have been entered and passed free of duty or final adjustments of duties made,
with subsequent delivery, such entry and passage free of duty or settlements of duties will, after
the expiration of three (3) years from the date of the final payment of duties, in the absence of
fraud or protest or compliance audit pursuant to the provisions of this Code, be final and
conclusive upon all parties, unless the liquidation of the import entry was merely tentative.