Part 3 - Bus Tax (Banggawan 2019)

- _ oocumentary Stamp Tax
...., ter1 8
,,ir 1ER 18
&APu~ENTARYSTAMPTAX
oC ~ .
~erview and Objectives
11<'~ptC -------- ----------------------- ------------
:-....--------;er provides practical integration ~;--;~-------------------------------
ft1iS chaP and its required compliance requirema the rules on documentary
11
p tax ents.
t~l
. chapter, readers are expected to com pre hend·
1. this
Afte principles of documentary stamp tax ·
1'he ·
1. The rates and basis of documentary stamp tax
2. w to compute documentary stamp tax
\-10
3· The . f
transact10ns exempt rom documentary st
4 amp tax
~
cuMENTARY STAMP TAX
DDOcurnentary stamp tax (DST) is an excise tax on the exerc1·se of c t . . h
o . . d . . er am ng ts
em bo died m certam ocuments. It 1s either imposed as a fi xe d tax or an ad
valorern tax based on the par value or face value of the document.
Nature of documentary stamp tax

Documentar~ stamp tax is in the_ nature ?f an excise tax. It is not imposed
upon the busmess transacted but is an excise upon the privilege, opportunity
or facility offered at exchanges for the transaction of the business. It is an
excise upon the facilities for the transaction of the business separate and
apart from the business itself.
Documentary stamp taxes are levied on the exercise by persons of certain

privileges conferred by law for the creation, revision, or termination of
specific legal relationships through the execution of specific instruments.
(Antam Pawnshop Corp. v. CIR, 2008)
Who is liable?
The person making, signing, issuing, accepting or transferrin~ do~u~ents.
Either of the contracting party is liable. Normally in practice, it is the
benefiting party to the transaction who pays the documentary stamp t~ but
the parties may agree between them who will pay the same. However, if the
agreeing party fail to pay the documentary stamp tax, the govern1?ent ~ay
enforce the tax against the other party. If one of the contrac~ing parties enJhoy~
ex • h rty who 1s not exempt s a
emption to documentary stamp tax, the ot er pa
· ble to the same.
be1ia
653
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Chapter 18 - Documentary Stamp Tax
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Mode of payment b paid by either: !· '
I
The documentary stamp tax may e nd actual affixture on the docurnen

st
1. Purchase of documentary ::~:e taxable document through the Vve~-
2. Imprinting a secured stamp St mp Tax (eDST) System
based Electroni~ Document~ry of: documentary stamp tax return
3. Constructive affixture by filmg ,
Documentary stamp tax return . BIR Form 2000

t declarat10n -
1. Documentary stamp ax f n _ One-time transactions BIR F
2. Documentary stamp tax dee Iara 10 orrn
2000-OT
Deadline of payment . able within 10 days after the

Documentary stamp tax 1s generally pay . . close
of the month when the taxable document was signed, issued, accepted or
transferred.
Wh OS ha II fil e th e documentary stamp tax return?

Mode of payment Person liable who file -
Loose stamps or Revenue collection officer who sold the
actual affixture stamps
Machine imprinted stamps Imprinting machine user* 12.
Constructive affixture The person making, signing, issuing, 13.
accepting or transferring document 14.
15.
Under the old regulations, DST may be paid in loose stamp if the amount of 16.
the documentary stamp tax does not exceed PlS. 17.
18.
Attachment to the documentary stamp tax return 19.
1. Photocopy of the document 20,
2. Proof of payment of the documentary stamp tax 21.
3. A schedule showing the details of the usage or consumption of
documentary stamps Ba
Effects of non-compliance
The failure to pay the documentary stamp tax on documents shall not
invalidate the same. It will not, however, be accepted for recording in the
Registry of Deeds. It will not also be admissible as evidence in court until the
required stamp is affixed thereto and cancelled. Notary or other officers
authorized to administer oaths shall not affix his jurat or acknowledgement
on documents unless the documentary stamp is affixed thereto and cancelled.
654
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_ Documentary Stamp Tax

pter 18
013
cuments/transactions subject to tax
,~ d0 . .
i1s I properties
1. Rea peed of sale
3
· ponation
\ares of stocks
z. 5 Original issue of shares
~: Transfers of shares. . ., , Ql
C rtificate of profits or mterest m property or accumulations
3
4,· B~nds,.debentures, certificate of stocks or indebtedness issued in foreign
countries
Indemnity bonds
!: Bank checks, drafts, certificates of deposits not bearing interest, and other
instrument
7 Bills of exchange or drafts
s: Acceptance of bills of exchange and others
9. Foreign bills of exchange and letters of credits
lO. Debt instruments
11. Insurance
a. Life insurance policies
b. Property insurance
c. Fidelity bonds and other insurance policie
12. Policies of annuities and pre-need pl n
13. Certificates
14. Warehouse receipts
15. Bills oflading or r ceipt
td 16. Proxies
17. Power of attorney
18. Leases and other hiring gr m nt
19. Mortgages, pledges and deeds of tru t
20. Charter parties and imilar arrang ment
21. Assignment, and r n we I of rt in in trum nt
Basic principle in O T imposition:
1. One tran action, one tax.

Documentary ·t1mp L1 is impos don a on -tr n tion, n • b si .
Illustration 1
Pedro dtrrnged to hnrro\\ up to P 1,000,000 from a bank. He made borrowed and
Paid Pl,000,000 thr e tim . Every in tance of borrowing is sep r t
transa •tion "llbjt'rt t DST
lllu trati on 2
Kaling-1 Cn 1fHH\lt.tun is ·ut1d ~hc1rt.!~ with P1,000,000 par value to sub rib r who
Xdic:1nged lus l,111d with zon l aluc ot P 1,500,000.
655
This is taxable as a share issue transaction. The exchange of the property

· not a separate transac t·ion.
payment for the issuance of shares 1s as
Illustration 3
Royal Lending Company loaned Conner Company PZ,OOO,OOO. Royal required
Conner to submit a promissory note to secure the loan.
The loan agreement and the promissory not: used to secure it relates to one and
the same transaction. Only one DST shall be imposed.
2. Scope of taxable transaction

DST applies whenever the right or obligation arises from the Philippines 0
when property or object of contract is in the Philippines regardless of th:
place where the document is executed.
Illustration 1
While abroad, OFWs Juan and Pedro, executed a deed of sale involving Juan's land
in the Philippines to be bought by Pedro.
The transaction evidenced by the deed of sale is subject to DST since the object
of the contract, land, is located in the Philippines.
Illustration 2
Philco Finance accepted a bill of exchange from abroad ordering it to pay
Philippine resident exporter.
The acceptance of the bill of exchange is subject to DST since the obligation to
make payment arises from the Philippines.
Illustration 3
A Philippine bank entered into a loan agreement with a non-resident foreign
company.
The loan agreement shall be subject to DST since the right arises from the
Philippines.
Illustration 4
An OFW in Japan entered into a lease contract to rent his residence from a
Japanese lessor.
This lease agreement shall not be subject to DST since both right and obligation
do not arise from the Philippines.
3. Invalidity of contract does not affect DST imposition the

Documentary stamp taxes are levied independently of the legal status of 0f
transactions giving rise thereto. The DSTs must be paid upon the issuance e
. h. h gav
the said instruments, without regard to whether the contracts w ic_ . ;ne
rise to them are rescissible, void, voidable, or unenforceable. (PhillPP
Home Assurance Corp. v. Court of Appeals, 1999)
656
g - Documentary Stamp Tax
chapter 1
tration 1
1t1us surance issued various policies to several insured and paid documentary
0I
G01Y twere paid on the policies. The insured were not able to pay the premiums
st3rl1 P.ng in the subsequent cancellation of the policies. Is Golya Insurance
su 1ti
re ·tJ d to refund of the DST?
entl e
Documentary stamp tax is a tax on the privilege of conducting a particular
No,. ess or transaction. It is imposable once the right or privilege is exercised
busi:gh the execution of specific instruments independent of the legal status of
thrO . . . h
the transactions g1vmg nse t ereto.
_ only transactions or documents listed by the law is taxable

4
It is a basic rule in taxation that anything not specifically taxed is not taxable.
siamp Taxes on Real Properties
Deed of sale and real properties

The sale of property shall be subject to a documentary stamp tax of PlS for
every Pl,000 or (1.5%) of the selling price or fair value.
arties
The hi
s
tionm
This covers only sales transaction where real property is conveyed to a
purchaser for a consideration. It does not cover all conveyances of property,
except donation.
forei~ Illustration 1
Subic Corporation sold its commercial building for Pl0,000,000 to HB Company.
The land had zonal value of P4,000,000 and fair value per assessor's office of
P3,000,000. The building had a PS,000,000 fair value per assessor's office.
The fair value of the commercial building shall be:

Fair value of land (zonal higher) P 4,000,000
Fair value of building 8.000,000
Fair value of real property P 12.000,000
The basis of the tax is the fair value being higher than the Pl OM selling price. The
documentary stamp tax shall be computed as:
Fair value P 12,000,000

~ultiply by: (PlS / Pl,000) 1.5%
ocumentary stamp tax p 180.000
657
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ctia
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Chapter 18 - Documentary 5tamP Tax cl
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Illustration 2 'th fair value of Pl0,000,000 to the governrn.e fr 0 '

Mr. Thaddeus sold his property Wl
for P8,000,000.
. l1t
ai•'
etl'
l b computed as:
The documentary stamp tax sh al e ,rne
p 8,000,000
Fair value 1.5% fcti 1
Multiply by: (P15 / Pl,000) 120,000 Mtil
Documentary stamp tax voe
t
Assuming Mr. Thaddeus sold his property fordPlZ,OOO,OOO inS ead of PS,000,0oo,
te as· su11
the documentary stamp tax shall be compu ·
p 12,000,000 'f2
Fair value 1.5% 1.
Multiply by: (P15 / Pl,000)
P 180,000
Documentary stamp tax
Note: The basis of the documentary stamp tax on sales of property to the government is 2.
the selling price, not whichever is lower between selling price or fair value.
Donation of real properties

The donation of real property is subject to documentary stamp tax of PlS for
every Pl,000 of the fair value of the property dona ted. Donations to the
t
government or to accredited non -pro fi t o rg nizations sha ll not be subject to
documentary stamp tax. Ori
ThE
Illustration 1
Jose made a deed of donation involving his tricycl w orth P130,000 and a piece th
of land worth P240,000 in favor of his younger broth r Juan. con
V 11
The documentary stamp tax shall be comput d
Ex~
Fair value p 240, 00 1.
Multiply by: (PlS / Pl,000)
Documentary stamp tax 2.
Note: Exemption from donor's tax doe not mean exemption from DST. The donor's tax would 3,
be computed as (P130,000 + P240,000 - P250,000) x 6%.
Illustration 2
Don donated two lots to the governm n t an d to a non -pro fi1t ·mstitution. 4.
h Mariano
fi
T e irst lot worth Pl0,000,00 0 is intended a buildin sit of a government
agency. The secon_d lo_t w~rth P4:000,000 i restricted by Jon Mariano to be used
by the non-profit mst1tut1on for its program me d b enevolent act1v1t1es.
. ..
658
18
chapter
onation i int nd d for public purpose. lt is ex mpt from donor's ta
d
fhe first
ing do umentary stamp tax. 'l'h cond exempt donation is also exemptx
j11clt1~ umentary stamp tax.
froJll o
. w,wt if the second donation is intended for support or administrative
Qtrcf'Y· 0 rthe non-profit institution?
,pen e 'I
. posable documentary tamp tax would be:
r he 1111
P 4,000,000
fair value
Multipl by: (PlS / Pl,000) 1.5%
Documentary stamp tax P 60,000
summary of DST rules on real property

Taxable transactions Tax basis
•-"i. Sale
- - To government Selling price
. Private persons Selling price or fair value, w /e is higher
2. Donation
. To government Exempt
. To accredited non-profit Exempt
- Other donees Fair value
Stamp Taxes on Shares of Stocks
Original issue of stocks

The original issue of stocks is subject to a DST of P2.00 /P200 of par value. If
the stocks issued is a no-par value shares, the DST shall be based on the actual
consideration. In the case of stock dividend, the DST is based on the actual
value represented by each share.
Examples of taxable transactions:

1. Approval of the application for registration of stock corporations with the
Securities and Exchange Commission (SEC)
2. Increase of authorized capitalization with the SEC requiring minimum
subscription of 25% based on authorized capitalization
3. Issuance of unsubscribed authorized capitalization requiring an
application for confirmation of Securities Regulation Code (SRC)
exemption
4· Issuance of shares of stocks through declaration of stock dividends in the
Philippines
On newly incorporating corporations, the documentary stamp tax is imposed
Upon approval of the articles of incorporation and by-laws not upon the
~ctual issue of the certificate of stocks. Subsequent to incorporation, the DST
15
based upon subscription of shares.
659
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Chapter 18 - Documentary st amP Tax 1

IJiustration 1 .
· d with a pro
posed capitalization of PlO,Ooo 00
1 ' 0 r
ABC Corporation was organize shares w1•th a pSO/share par .b va ue. On
. Jun e 1 ~
divided into 200,000 common e subscribed. Subscn ers paid 40o/i0 ' C
2020, 80,000 of the common shares ;er_n 1 month after registration with t~f
their subscription with the bal~n~e ~en\uly 7, 2020, ABC received approval e ti
Securities and Exchange Commisswn. f.10 m the SEC. of
~
its Articles of Incorporation and By-Laws
The corporation begin to exist on Jul 7 p
There is no corporation yet as of June ~ share subscription shall be:
1 0
y ·
7
The documentary stamp tax on the Jun
p 4,000,000.00 f
Total subscriptio n (80,000 x PSO) 1%
Multiply by: P 2.00/ P200.00 p 40,000.00 0
tv1
Illustration 2 D
Assume that on August 7, 2020, ABC received full paym~nt of th e subscription tv1
receivables. ABC issued t~e share certificate at the same time. On September 12, D1
2020, ABC received subscription for 40,000 shares at P60/share from an investor
who paid 50% of his subscription. 01
No more tax shall be imposable upon the full payment of the subscription and th
subsequent issue of certificates. The documentary tax on the new subscription
shall be: Ill
A
Sept. subscription (40,000 x PSO) P 2,000,000
isi
Multiply by: P 2.00/P 200.00 1%
Cc
by
Note: The documentary stamp tax is based on the par value of the share subscription.
Th
Illustration 3
sh
DEF Company issued 100,000 no-par value stocks for a used equi ment with a
as:
value of P800,000. The stocks have a stated value of p 5/sh are m
. thpe b y- laws.
The documentary stamp tax shall be computed as: Or

Value of consideration p
pe
800,000 in1
Multiply by: P2.00/P200.00
1%
p 8,000 Sp
Subsequent sale of stocks
The subsequent sale of stocks is sub. 1.
or fractional thereof. In case of no- J:ct to a DST of Pl.SO /P200 of par value,
th e DST paid on the original issue pf r value st0 cks, the DST shall be 50% of
0 such stocks.
Illustration 1
Mr. M~neyo is a holder of 10 000 PlO
a consideration of Pl,800,000. He so1iJ;r value shares which he purchased for
, 00 shares for P240 /share.
6 60
. _ oocumentary Stamp Tax
P
ter 18
cna
entary stamp tax shall be computed as:
docurn
111e
tocks (4,000 x Pl 00) P 400,000
11.1 e of ·S
pM ~a I bY: Pl.SO / P200.00 0.75%
~11lt1P y tarY stamp tax _p==~ 3~.0~0,g0
cunien -
DO
tratio» 2
1t1u~errno sold 10,000 no par value shares of DEF Company for P200/share. He
Mr- hased the shares for Pl SO/ share from a buyer who bought the shares from
puree rnpany for P120/ share.
oEF o
cumentary stamp tax shall be computed as:
The do
.. al issue price (10,000 x P120) P 1,200,000
origin
Multiply by: P 2.00 / P200.?0 . l%
oocurnentary stamp tax paid on issuance P 12,000
Multiply by: 50%
Documentary stamp tax due ~P==~6~,0~0~0
One transaction means one tax. One deed means one tax. All integral part of
the transaction shall not be separately taxed.
Illustration: Statutory merger

A Company entered into a statutory merger with 8 Company wherein A shall
issue shares in exchange for the shares of 8 Company. Incident thereto, B
Company's assets which include some real estate and liabilities shall be assumed
by A Company.
The issuance of A's shares shall be subject to DST. However, the exchange of B's
shares by its shareholders, the surrender of the real property of 8, and A's
It wiilil assumption of B's liabilities shall not be separately subject to DST.
law~
Only one tax shall be colle cted on each sale or transfer of the stock from one
person to another, r egardless of whether or not a certificate of stock is issued,
indorsed, or delivered in pu rsuance of such sale or transfer.
Special cases:
1. Issue of stocks for property
1arl'l~ Illustration
,e)ij%! Benedict invested his commercial land in the stocks of Belchen corporation.
Belchen issued him 1,000,000 shares with Pl0/share par value. The
commercial land has a zonal value of P12,000,000.
661
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·'·)t ,: . ;;/. cti~f

Chapter 18 Oocum ntllr,' Stamp T ~, ·. , · : · " "'fi~c' •· :l;'Iti:,. ~
td h v b n .sold because this • J~f'~ o,
t
T
•1
O
u of the stocks that should be sub ls an ·
Pl0,000,000 X P2/P20 ~JHOO,oole~tto:
"f:~- ,
; 1/ ,, t
·
'l♦ . :,'-, ..
it~ · •·'\ ""· 1
bl t th v~lue r~~~~ e~ted ~ ..· ~• ;1
ij- ' ,.
~ '1¥1 Qll ~~ tr hfoci t>nM~:) ·flt ,, ;
..,,
Pl0,000,000 stock dividends. Its stock Which has
a current fair value of PlOO/share. Thus, AB
d 100,000 stocks with P200 value as dividends t~
h d cumentary stamp tax shall be computed on the value represented by

h dividends, as follows :
alue of stock dividend P 10,000,000
ultiply by: P2 / P200 1%
Documentary stamp tax p 100,000
s
3. Initial public offering and sale of stocks through the PSE A!
The sale, barter or exchange of shares of stocks listed and traded through the 01
local stock exchange is not subject to documentary stamp tax. in
A ( cc
Illustration ,
Lau con Company had 200,000 PlOO-par value shares authorized out of which bi
100,000 shares are issued. Mr. Wagod and Mr. Taga owns 20,000 and 10,000 tt.
of these issued shares.
Pl
On June 10, 2020, Laucon Company decided to conduct an IPO to sell 25,000 n1
of its unissued shares for P125 per share. Mr. Wagod decided to sell io,ooo of Cl
his share in the IPO. n

g
The issue of 25,000 primary shares shall be subjected to DST at the rate V,
applicable to issue ofstocks. The 20,000 secondary shares shall also be subjected
to DST at the rate applicable to sale of stocks. The exemption pertains only to I
listed shares. These shares are yet to be listed. f
Assume that on June 12, 2020, Mr. Taga decided to sell his 10,000 for
P130/share.
This shall not be subjected to documentary stamp tax since this is a sale
involving listed shares.
Assume further that La uco n conducted a fo llow-th rough offering involving

30,000 more shares at P140/share.
662
I
..i
ter 18 - Documentary Stamp Tax
ct,aP '""1$M&fflLr.Jt.tt~ [i 1i~'1f0'
This shall be subject to documentary stamp ta
oJstockS sine these are Issue ofn w sharesye:t:t::f:!: appli~able f~tt.lssue
4-. oepo It/or tock ub crlptlon •
ntustratlon
Eager to become a shareholder of Axellum Comp~ a·... ~,.,. ,.,,., • ·d . · d
000 th uy, lVll. vvong eposlte
p40,ooo, to e company for future subscription of stocks to be Issued.
Deposits
. forhfuture subscription of stocks ts not sub•'e
'J c
t documentary
t··o · stamp
tax since t e person ~akf n9 the deposit does not have the standing of a
shareholder. (BIR vs. First Express Pawnshop, G.R. Nos. 172045-46 une 16
2009,) I
A u~e Mr. Wong is an exis~~g shareholder of Axellum except that the

deposits are converted to add1t1onal paid up capital without the issuance of
shares.
Shareholder's assessments without the issuance of stocks is not subject to

documentary stamp tax.
fil:aIDP Tax on Certificates of profits or Interest in Property or

Accumulations
On all certificates of profits or any certificate or memorandum showing
interest in the property or accumulations of any association, company or
corporation, and on all transfer of such certificate or memoranda there ,shall
be collected a documentary stamp tax of Pl for every P200, or fractional parts
thereof, of the face value of such certificate or memorandum. ·
)
Profit participation certificate (PPC) entitle holders to dividend distributions but are
not equity interest in a corporation thereby holders are not allowed to vote in the
company. They are also similar to bonds without the fixed interest return and
nominal value. PPC holders benefit from higher dividends when the issuer's business
grows. PPCs are ideal for companies wanting to raise additional capitalization
without causing dilution in ownership structure of its owners.
Interest in property or accumulations includes interests in various funds such as trust

funds, mutual funds and others whether of income or accumulation types.
Illustration 1
Dragon Growth Fund issued 1,000,000 units to investor Glenn for PlO/unit.
The documentary stamp tax shall be P 1,000,000 x P1/f200 = P 500.
Illustration 2
Joy bought 10,000 profit certification certificate from Golden Horse Company at
the issue price of p 10 each. Joy later on transferred the same to John for P13 each.
663
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Chapter 18 - Documentary Stamp Tax '

of the PPCs shall be subject to p5
The issue by Golden Horse Company x Pl0 x P1/P200. Joy shall 0o
00
documentary stamp tax, computed as lO,O its subsequent sale. Pay the
same amount of documentary stamp tax on •
Stamp Tax on Debt Instrume~ts h hall be collect d

On every original issue of debt mstruments, t e:e s . e a stamp
tax of P1.SO/P200, or fractional thereof, of th e issue pnce of any SUch debt
instrument.
For purposes of this DST, debt instrume~ts mean in st.ru?1ents representing
borrowing and lending transactions includmg but not h~ited . to debentures,
certificate of indebtedness, due bills, bonds, loan agreements, mc~udmg those signed
abroad wherein the object of contract is located or used. m_ th e Philippines,
instruments and securities issued by the government or any_of its mS t rumentalities,
deposit substitute, debt instruments, certificates or other evidences of deposits that
are either drawing interest significantly higher than the_ re~lar savings deposit
taking into consideration the size of the deposit and the nsks involved or drawing
interests and having a specific maturity date, orders for payment of any s_um of money
otherwise than at sight on demand, promissory notes, whether negotiable or non-
negotiable, except bank notes issued for circulation.
For debt instrument with terms less than 1 year, the DST to be collected shall
be proportional amount in accordance with the ratio of its term in number of
days to 365 days.
I
· Only one DST shall be imposed on either loan, agreement, promissory notes
issued to secure such loans.
Loan Agreement
A contract in writing where one of the parties delivers to another money or
· other consumable thing, upon the condition that the same amount of the
same kind and quality shall be paid. It includes credit facilities which may be
evidenced by credit memo, drawings or advice, including intercompany
advances.
The documentary stam_;i tax applies on all loan agreements whether made or
signed in the Philippines, or abroad when the obligation or right arises from
Philippine sources or the property or object of the contract is located or used
in the Philippines.
Illustration 1
A and B entered into a loan agreement whereby A lent B PS00,000 at a 10%
interest per annum due in 2 years.Bis required by A to submit a promissory note
to secure the loan agreement.
The documentary stamp tax shall be computed as:
664
e
~~,...,..~ ... , ~· ....~ , / " \
f;'.:i~•:}i~t,~cii~I~~: ..
~- , :.(_
t ~) ~
pocumentary Stamp l7a m t J ~ i -~ -~t/;:?;;;;f.
cn•pt•' 1s-
. al
. CIP . ]1,fl~;';,;."litJijlr,
. ... .
'P 960,000.00 - ~
'::·Jt~r,~
, :~. :' . ; ' :
- ..,. --,:t.,._c,.., 1.,..
. . . · -·"·,,·••"'''.'I~
ao prin . p1.SO/P200 ' .,. fi,' 0.75%' il1,1JftVi~~¥t-;.f ,~~.(;~?ii
0
~vJtiPIY bY~ stamp tax P 3.750,00' :#ti~ »AA,.,,~~--
~t~-t~r~'-J~
ocurnenta y ,•'le'·: ·. ··, n•)1'1811: n£o.f ~ dti;:~.-t:;
D hall separately be imposed' on the ptomisSoiy note' sitf ~ 'it' ff merely .,: ?~
~,0 pS'f sl to the same loan agreement. · B · could have simply executed a .·•.:;:~-J
,,iflc1·d~ nta rynotewithoutnee d o f t h e loanagreement, r..ii, 1 ,•,lt>idL,Ji., .c., t i; t
~· ;'~
1\.1-i!>,'"' ,I'• •
pro ,.. ,,.,,JsSO . I • ,
, , . . . , r: , . ., "
r l'Tfff "• _')
~~· ·.,,,
. g that after the lapse of 2 years, B renewed the loan for another two-year : }!~
AS 5t1 ~~e same amount of DST shall be payable. on s,uch t;tnewal,as. \tri~ -anpther
rerrn,action. · u ~ 11
it1 ! 019Jfl.l . .\.,,
t ran S l ·
aq · tan , 'h"JSZ$'1 . . , nl 'l. •. ,. i;'
tration 2 ,r , · ·r. min ,,fr't .rf '
Jl)uS lo Inc a domestic corporation, issued 20,000.P1,000 face value bondsto
Ma~ous'i·nv;stors. The bonds pay 10% annual interest and mature in 5 vears.
vano · ·Jl
8
The documentary stamp tax on the issue of the bonds shall be co~-p uteq,as:
Bonds face (20,000 x Pl,000) P 20,000,000 ...._.........,._tilll

Ii; a . ,
Multiply by: Pl.SO/ P200 0.75% , oq oJ oiuasS
Documentary stamp tax P 150.000 i2d.u2 _.1..
Shzjj ~1 t ~
er of Illustration 3 . ,r .
Assume Mr. Dico is one of the investors of bond in the previous illustration. Mr.
Dico purchased 200 bonds with Pl,000 face value. He assigned ~ll of his bond
otes holding to XTV Company for P210,000. '
The assignment of domestic bonds is not subject to documentary stamp'truc!'Only

the original issue of the same is subject to tax.
yor
Short-term Borrowing ,
the The DST on short-term borrowing is prorated based on the actual days of
Vbe 1
borrowing over 365 days. ' t
1any
Illustration ,
eor On January 1, 2020, Bell and Beck entered into a loan agreement whereby Bell
·om lent Beck P800,000 at a 12% interest per annum due in October 31, 2020.
sea The documentary stamp tax shall be computed as:
Loan principal P 800,000.00

Multiply by: Pl.SO/ P200 0.75%
Documentary stamp tax for 1 year P 6,000.00
Multiply by: Prorated term 305/365
Documentary stamp tax due P 5,013.70
Note: January 1 to October 31 is 305 days. Note that 2020 is a leap year.
665
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Chapter 18 - Documentary Stamp T~... :!Wtiu~itl

.·\~::.~:-t~!5,;Jr
~,,-i;v.
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Exempti . .1
1 8
°~ to the Documentary tamp tax on loans: .f1 1 ,Y#~,~ r1t1-"t" ,,~- ··
-~~- .
· a o~rowmg and Lend ing of s urities executed under_tpe iSecurjtie~ Bf,m'.QWing

n Lending Program. •,;,.. 1f'"" n, f•vr:1, -.nn
2 · Loan agr ements or promissory notes not exceeding an aggregate amount of
P250,000 cuted by individuals on ru.m~business . purchases or··hfre, pf a
house1 lot motor vehicle, applia,nc.e or furnitt1re on installments . ,Fi •rn
3. Interbranch or interdepartmental advances within the same,legal entity.
4. Forbearances arising from sales or service contracts including credit card and
1
trad r ivable . .,,
5. Bank depo it coun without a fixed term 6r maturity.
6. Interbank call loan with maturity of not more than 7 days to coV'e tlefici'et1cies
in re erve against deposit liabilities, including those between or among
bank or quasi-banks. '
7. Derivatives including repurchase agreements and reverse repurchase
agreements J
8. Fixed income and other securities traded in secondary markets or through an

exchange
Illustration 1 1
• •
1 , •
Baguio Corporation made several advances to its branch m Tarlac City and its
subsidiary, Manila Company:
Tarlac City Branch office P 400,000

Manilla Company 800,000
Total advances P 1.200,000
The documentary stamp tax shall be:

Advances to Manila Company p 800,000
Multiply by: Pl.SO/ P200 0.75%
Documentary stamp tax p 6,000
Note: Inter-company advances is subject to documentary stamp tax but advances between
business divisions, departments or branches of the same taxpayer is exempt.
Illustration 2
Speculating that the shares of listed company Xurfail will fall in the near term,
Abacus borrowed from Wealth, a long-term investor, 20,000,000 shares ofXurfail
with prevailing fair value of P10/share and par value of P 1/share. Abacus .sold
the shares in the market at the current fair value of P10/share and agreed to
return the 20,000,0 00 borrowed shares within 6 months. Abacus bought back the
20,000,000 Xurfail shares from the market when it is trading at P2/share and
returned the same to Wealth.
The share borrowing transaction is not subject to documentary stamp tax.
666
_ oocumentary Stamp Tax
ter 18
cnaP
111srratio~::ed into four loan agreements covering various Items purchased on
I1 ctdiCen
fre 11111 ent: ,
111 ra
principal Supplier Item purchased on installment
ioort p 200,000 BET Co.
Xerox copier, for business use
Loan
1 LAV Co. Car, for personal and fam ily use
800,000
L0an 32 1so,ooo HET Co. Entertainment set, for family use
Loan 450,000 LYK Co. Printer, for business use
Loan 4
b siness loans {Loan 1 and Loan 4) and the personal loan exceeding P250,000
rhe u ,1 shall be subject to the documentary stamp tax imposed on loans.
riaan 2J
11ustration 4 . .
1 ·k Ngina imported vanous $100,000 goods from US Industrials on open
t,,1 ai unt arrangement. To hedge the foreign currency risk, Mark entered into a
acco $
forWard contract to buy 100,000 at a fixed price of PSZ/$1. .
The trade accounts paya?le is not subject to DST. Likewise, the forward contact is a
derivative contract that 1s exempt from DST.
stamp Tax on Bonds, Debentures, Certificates of Stocks or Indebtedness

;ued in Foreien Countries
On bonds, debentures, certificates of stocks or indebtedness issued in any foreign
country, there shall be collected from the person selling or transferring the same
in the Philippines, such tax as is required by law on similar instruments when
issued, sold or transferred in the Philippines.
Note that when these securities are issued or transferred abroad, they are not
subject to documentary stamp tax. When they are sold in the Philippines they are
subject to documentary stamp tax.
Comparison of DST Rules on Shares and Debt Instruments

Domestic Foreign
Shares of stocks
- Issue of stocks Taxable Exempt
- Transfer of stocks Taxable Taxable 2
Debt instruments
~
- Issue of debt instruments Taxable Exempt
- Assignment of debt instruments Taxable 1 Taxable2
Note:
1. Taxable if the assignment or re-assignment of the instruments entails changing the
maturity date or remaining period of coverage from that of the original instrument or
carries with it a renewal or issuance of new instruments in the name of the transferee
2_ ~oa:e~l ace the old ones, otherwise, it is exempt. (RR14-2012; RMC 77-2012)
a 1e if the buyer or assignee is a Philippine resident.
667
..
Chap 18- Documentary Stamp Ts1'
n1......,.,..tton 1
Karl invested tn the bon&J ()f 1,azada eompany1n ~e United States. The ~
were issued at a price of P26,000,000 in Peso eqwvalent. The bonds Pay 9%
nnual b,lterest and matures in 4 years. Karl transferred the bonds at
~nslderatton of P27,000,000 in the Philippines to ABM Investors. a
The issue of the bonds abroad is not subject to documentary stamp tax. Tb
bsequent sale of the bonds in the Philippines is subject to documentary stune
tax at the rate applicable on issue of domestic bonds: p
Issue prlce of bonds P 26,000,000

Multiply by: P1.SO/P200 0.75%
Olustration 2
Mr. King, an OFW, invested in the stocks of Hong Kong Auctioneers while in
abroad. He was issued 100,000 shares at P20/share par value in Peso equivalent
Mr. King later on disposed the shares in the Philippines to his friend, Don Roman
for P22/share.
The issue of the foreign shares abroad shall not be subject to documentary stamp
tax. The sale of such foreign stocks in the Philippines shall be subject to the same
documentary stamp on the sale of domestic stocks as follows:
Par value of stocks (100,000 x P20) P 2,000,000
Multiply by: P1.SO/P200 0.75%
Stamp Tax on Morq:ages, Pledges and Deeds of Trusts

On every mortgage or pledge of lands, estate, or property, real or personal,
heritage or movable, whatsoever, where the same shall be made as a security for
payment of any definite and certain sum of money lent at the time or previously
due and owning or forborne to be paid, being payable, and on any conveyances
of land, estate or property whatsoever, in trust or to be sold, or otherwise
converted into money which shall be and intended only as security, either by
express stipulation or otherwise, there shall be collected a documentary stamp
tax at:
- Amount not exceeding P 5,000 - P40
- On each PS,000, or fractional part thereof in excess of PS,000, P20
a te that the DST covers mortgage, pledge and deed of trust of any property.
Ulustration 1
Gle nn bought John's residential house for P4,000,000. He paid Pl,000,000 down
and mo rtgage back the property as security for the P3,000,000.
668
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s - Documentary Stamp ;rax

cnaPter 1
'
....
documentary stamp tax on the mortgage shaWbe computellia~:t ~
~ ~l
~10rtgage p 3,000,000 DST 1'1 ~m•A-U It
Less: 5,000 P q&Q.qqfl'f hdo"ftt>
s P 2,995,000 i..a •. a..t
E1'ceS . uw~
pivided by, 5,000
'fatal . 599
Multiply by. p 20 • _ 1J1,98Q ,-, HNI~
J
pocumentary stamp tax P . 12._Q30 II 8

Note: .
ohn shall be separate1Y subJect to documentary stamp tax on the deed of sale of the
1. J
property. . . . • ,
The mortgage 1s not an mc1dental part of the sales transaction. Being a separate
2· transaction from the sale, it is subject to separate documentany stamp tax •
111ustration 2 1
CLI Finance lent various clients under a long-tenn collateralized borrowing

scheme:
Client A P 2,000,000 Real estate worth P3,000,000 I

Client B P 1,500,000
Client C P 1,000,000 Pied e of shares of stocks worth Pl,200,000
Each of the loan agreements shall b ubj to the DST imposed on loans. The
real estate mortgage, the chattel mortgage nd the pledge shall be subject to DST
based on the amount of bor row in th y cur .
stamp Tax on Bills of Excham:e, Drafts or Order

A bill of exchange is a w ritte n un conditional orde r made by one party to
another to pay a c rta in s um of money on demand or on pred etermined
date.
Bill of exch ange vs. Promissory note

A bill of exchange i n go ti a ble while prom i ory n o i not A bill of
exchange can be u d to order th ird p rty who not party to the
transaction to mak p ym n t
DST rate: P0.60 for very P200, or fractio n I p rt th reof, of the face v lue
Illustra tion
As ettlement for the goods it received, Vi aroth Company i sued a sight bill in
favor of ·upplier llocandia. The bill is addre s d to ls rog Trade Fin nclng
Corporation to pa p 1,248,910
669
Chapter l8 - Documentary Stamp Tax
The documentary stamp tax shall be: ',

Face amount p 1,248,9 10
Divide by: p 200
6, 245
Total (round-up)
Multiply by: 0.60
Documentary stamp tax 3,747
Scope of the DST on bills of exchange: T . s

1. Bills drawn and payable between points in the Phi 1 ~~m~
2. Bills drawn in foreign country but payable in th e Phihpdpmes ·th· b
3. Foreign bills of exchange and letters of credit (i.e. rawn wi m ut
payable outside the Philippines)
Exempt transactions:
1. Electronic instruction to transfer fund
2. Remittances of overseas Filipino workers (OFWs)
Stamp Tax on Bank Checks, Drafts, Certificate of Deposits, not Beari11&
Interest. and Other Instruments
Check is an instrument containing an unconditional order to a banker
directing him to pay a specified sum .o f money to the person na med therein.
Ch eck vs. B"ll

I S 0 f EXC hange
' Checks Bills of Exchange
Drawee bank Bank or other persons
Expiration 3 months n/a
Acceptance not required Required
Payment On demand upon Grace period is allowed
,· presentation
Protesting on No protest . Can be protested
dishonor
Draft is an instrument created by the bank (drawer) to be given to a payee. It is a

guaranteed payment by a bank on behalf of a payer. The amount on the bank draft
is normally pre-deducted to the source account before release of the draft.
Checks vs. Drafts
Checks Drafts
Parties Drawer, drawee and payee Drawer and payee
Drawer Account holder of a bank One branch of a bank to
another
Clearance and required No need (assured)
approval
Pro testing on No protest Can be protested
dishonor
670
- - ------..
l8 - Documentary Stamp Tax
chapter
Sf itate: .
V ch bank check, draft, or certificate of deposit not drawing interest, or
°
ea for the paymen t f any sum of money drawn upon or issued by any
0!1def
0:nk trust company, or any person or persons, companies or corporations,
~t si~ht or on demand, there shall be collected a stamp tax of P3.
(l}ustration . .
depositor of Busy Commercial Bank requested for a booklet of personal check
~onsisting of 50 copies for drawing against his current account
The bank shall require payment of P 150, computed as P 3 x 50, documentary

starnP tax.
--
stamP Tax on Bills of Ladine or Receipts
Bills of fading is a document signed by a transport carrier of goods to a shipper
of goods that evidences the receipt of goods to be shipped to a particular
destination or person.
Types of bills of lading: . .

1. Straight bill - goods a re consigned to a de 1gnated p rty; hence, non-
transferrable or non -negotiable
z. Order bill - goods a re consign d t th rd r fa n med p rty; henc ,
transferrable or negotia bl
DST rate:
On each set of bills of I din rr ipt r ny g d, m rch nd l , r
shipped:
a. From Philippin port to n th r Philippin p rt
b. From Philippin port t a n f r •i n p rt
Tax rate:
____ v_al~e _9f goods
> PlOO to P1,0Q_O
O:S§"
L__ _:..>~P~l~,0~0~0:,___ _.1.-
....__- _P O
Exception:
1. Charte r party
2. Ferries aero s riv r nger. r land nd wat r carri rs
3. Baggag ac ompanying P
Illustration . d the following good f r htpm nt rom

Victory Cargo Shipping omp n r cetv
various client during the month:
671
1
Nos, of clients per shipment type

~ Qutbound /abound for
Declared amount domestic fer abroad Philippines
Less than PlOO 12
114 26
Pl O1 to Pl,000 314
148 562
More than Pl,000 191
. · ued shall be·
The documentary stamp tax on the bills o fl a d mg iss ·
Inter-dome~ti!;.;:
p 0
Less than PlOO (No tax imposed.)
628 DST
P101 to Pl,000 (314 x P 2/bill of lading) p
3,820 4,448
More than Pl,000 (191 x P20/bill oflading)
Qutbound:
(114 x P 2/bill oflading) p 228
P101 to Pl,000
2,960 3,188
More than Pl,000 (148 x P20/bill of lading)
Total documentary stamp tax e Z,636
Stamp on Warehouse Receipts

Warehouse receipt is a document issued by a warehouseman evidencing receipt
of goods stored or deposited therein. It also serves as a guarantee of the quantity
and quality of goods stored therein and evidence of title to the stored goods.
DST rate: P30 per receipt

Exception:
1. Receipts issued for goods worth P200 or less to any person in any calendar
month
2. Receipts issued by the warehouse owner for his own goods
Illustration
Kaja Safekeepers maintains a warehouse in Pampanga for various commercial
clients. During the month it issued the following receipts:
Nos. of receipts Total declared value
Receipts issued to clients:
:5 P200 in value 2 p 180
> P200 in value 49 378,000
Receipts issued for own goods .3.
Total 42,000
5.5. P 420.180
The documentary stamp tax shall be Pl 470 c d
, , ompute as p 49 x P30.
672
ohsittoff\
l n 1JC}!l}
tttffflftl19((
p · 1,196.00
Multiply by:
Documentary stamp tax p 1.202,00
Lessor regulation
RR12-.2011 set reportorial req~irements for leasing or renting cOipmercial
~stabhshments. Lessors are required to see to it that lessees have:
1. A taxpayer's identification number (TIN)
2. BIR certificate of registration
3. Duly registered receipts or invoices
Illustration 2
Ben and John drafted a contract of lease involving Ben's truck to ·be .rented by
Johan for PB,000 a month for 6 months.
There shall be no imposable documentary stamp tax as the DST applies to leases
of lands or tenements or portion thereof. The DST applies only to rentals of real
properties to the exclusion of movables.
Illustration
Ben and John3drafted a contract oflease involving Ben's ship to be rented by Johan
for P8,000 a month for 6 months.
Th · b . ct to the DST imposed on charter parties to
d' su Je f n Note that ships, vessels or steamers are
ct· e renta1• agr eement 1s
1scussed m t he s u ccee mg sec 10 · b removed from water.
considered immovables to the extent that they cannot e
673
Stamp Tax on Charter Parties and Similar Instruments

On every charter party, contract or agreement for the charter of any Ship, vessel 4
""t/11
to1
or steamer, including renewal or transfer of such charter, contractor agreement, llP
there shall be collected a documentary stamp tax: p.f'i
Oiiiattd\iufcliart'e - ~~
First 6 months Excess over 6 months stJ

51,000 tons P 1,000 PlOO month or fraction
> 1,000 to 10,000 tons P 2,000 P200 month or fraction
> 10,000 tons P 3,000 P300 month or fraction
111
Illustration Ql
Cagayan Seagoers chartered a 5,000-tonner vessel at a contract price of P lM 011
per month over a total of 9.5 months.
'f(
The documentary stamp tax on the charter shall be computed as follows: LE
Total months (round-up) 10 DST
Less: Tax on first 6 months 6 P 2,000.00 rt
Excess months 4
Multiply by: Monthly tax P 200 800,00 Tl
Documentary stamp tax P 2,800.00 M
Note: Fractional months is co un ted as one. D1
Stamp Tax on Indemnity Bonds, Annuities, Pre-Need Plans and

Insurance
TI'
Life insurance policies fl .l ••.11 ~, PP-rnallcv Q
5P 100,000 Exem pt rt
> P 100,000 to P 300,000 p 20
> P 300,000 to P 500,000 so
> P 500,000 to P 750,000 100
> P 750,000 to P 1,000,000 150
> P 1,000,000 200
Other insurance policies, Indemnity, ..... -- Qa 12u.mlu.m ac fradloa '
Annuity or Pre-Need Contracts --
f(
. I
, ,.
I■ ,■ ■
L'
I••
'
Property insurance policies PO.SOL P4 T
Fidelity bonds and other ins urance policies PO.SO/ P4
Indemnity bonds P0.30/P4 F
Annuities or ore-need
Th e tax rates a lso apply on renewal of such contractc;.

Pl.OOLP20j)
- s
1
r
674
.

ter 18
cnaP
. surance contracts
~0o-Ii~e inosed on the policy document, the DST is a tax on the privilege of
wnile ;:g a particular business or transaction. The DST is due and payable
condU cution of the contract. Thus, the subsequent non-payment of the
upon _exe is not a bar to imposition of DST. The liability for documentary-
prerniurnx accrues upon issuance of the insurance policy, even in the event of
starnP taent cancellation of the said policy.
subsequ
nee companies shoulder the payment of DST on the insurance policies.
1nsura
tration 1 - Non-life insurance
n:~ity Assurance Cor poration had the followin g data on its premiums register
Q on-life insurance contracts:
on n
Total premiums charged P

Less: Returned premiums on cancelled contacts
Net premiums received
The documentary stamp tax shall be com put d follow :
Total premiums charged p

Multiply by: P 0.5 0/P4
Note: The DST i b s don m ou nt ch;1r c I.
_fill!!
Illustration 2 - Life insurance

Qualife lnsuranc Corp. h cl th folio in _umm ri
received du ring th mo nth:
Policy name
Full Life A sur P 500,000
St. Peter'- Call -
Die An time
-t-- P 750,000
P 2,000,000 _
-h-
__
__.,
The docum nt r stamp t · h II be computed a :
Full Life As ur (21 P 50/ polic )

St. Peter' all (11 Pl00/ polic )
Die Anytim (1 0 P200/ poli )
Total documentary tamp t
675
Stamp Tax on Proxies
On each proxy for voting at any election for officers or any company or
corporation, . or for any other purposes, there shall be ~ollected a
documentary stamp tax of P30.
Exception: Proxies issued affecting the affai rs of associations or corporations

organized for religious, charitable or literary p urposes
Stamp Tax on Power of Attorneys

On each power of attorney to perform any wh o r, th hall be
collected a documentary stamp tax of PlO.
Exception: Powers of attorn y in h con ct1on

of cla ims due fro m or ac ruin t ubll of th
Philippines, or the gov rnm nt n u
Illustration
And rew issued a p i I p
power to sell Andrew• c r in th
of sale transferring th c r to bu
The special power f attorn y h II b ubj a

However, th de d of s I h II not b
only deed of ale on r I prop r i
1:ames
On each jai-~ l i, h I num r m .
there ~hall b coll
B
etcost D
Pl.00
--
Pl.00_ _ _.,.L-_
P9.20LP l.00
.◄
entarv Stamp Tax
1s-oocum
ter
cna P
ation Id the following tickets during the month:
11111:~f-{ippodrom_e_s_o_------r--::::-:-;------:-::-=--=:-=-::a--1----:::;;-:-~-==~=-7
0311 fri~ Tickets sold T tal r cei ts
p 72.50 1200 P 87,000
strai ht bet p 8 0.00 1500 120,000
p 4 o.00
00uble bet J_~~~~-----==-=--:....:;_ 1100 _ _ 48,000
rrifecta _ _ J ._ _ _ _ _ :...c...:...~
entary stamp tax due shall be:

rnedocum
p 17,520
. bet (73 x P0.20) X 1,200
stra11~tbet (80 x P0.20) x 1,500 24,000
D~~b ta (40 x P0.20) x 1,100 8,800
rruec p 50,320
Total
stamo Tax on Assi2nments and Renewals of Certain Instruments
:;;;;shall be coll~c.ted ~ documentary stamp tax at a rate the same as that
imposed on the ongmal mstrument upon:
1. Every assignment or transfer of any:
31! be a. Mortgage
b. Lease
c. Policy of insurance
Ction 2. Renewal or continuance by a ltering or th rwi of ny:
f the a. Agreement
b. Contract
c. charter or
d. any evidence of inde bt dn
the
leed Documents and Papers Not Subject to Stamp Tax
1. Policies of insura nce ma d o r gra nt d by fr t rn I, o i ty, rd r.
association or coop ra tive comp ny
'1 0. 2. Certificate of oath ad mini t r d t ny gove rnm nt offici I in hi
nee capacity
3. Borrowing or lending of securiti und r th rr in nd
Lending Progra m
4. Loans agree me nt or promis ory not • . th aggr
exceed P250,000 for non-busi n purpo
S. Sale, barter or excha nge of h a r of tocks Ii ted nd tr d d th rough th e
local stock exch nge {RA 9648)
6- Assignment or tra n fe r of a ny mo rtgage, 1 ase or policy of lnsuranc or
renewal or continua n of a ny agreemen t, con tra t, ch rt er or evidenc of
obligation or inde btedne . if there is no chaoi:e in the maturity date QC
rernainin ~ period of cover age from that of the original document
7· Fixed income or o th r docu me nts traded in these ondary mark t
677
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Chapter 18 - Document ry Stamp 1'lll( k~iii' ' i~~
8, 0 rlvatl a, Including r purchase greenients and r~verse rep~r<ihasell; '.: ..
greemen " ., ., ,, ,, ' '''" ..... " ·'' ' ,. ,.,, e"' ',! "' ' r ' • '", u , ..,.,q· . ' '., .,
:\t' ,-·1~'tl\si
~t
, Inter-branch or Interdepartmental advanc~• within the _same l_egal entity
· All forbeanmc arilllng frolll safes or service contracts mcludmg credit
,,,
,
rtvv" II
c J p,sc ,
1
card and trade receivables (limited to those executed by the seller M . 1 . i, lflllo
J · • 3· ptsC
~
rvt provider) , · ' •. ;
6
· Bank deposit wlthou t a ftxed term or maturity ,-:- - , ; •• , • • A,. ,a,I
1
11· All contractS, deeds, documents and transactions related to the conducl:of ·; . O•sc
12
13 . · ·sc
busine s of the BSP 6
· Tax-free transfers of property (corporate re-adjustment) 1· 0~
· lnter-ba~k ~II loans with maturity of more than 7 days to cover. . 6, p~sc
1 :eficlencies mreserve deposit liabilities, including those made between
1 pisc
9,
ank5 and quasi-banks o.6!lu
1r11eo
·
15· Remittances ofall OFWs
1. voe
z. voe
voi
3, If o
par
4. Th
clo
5. As
tax
6. Do
678
a,apte r is- Documentary Stamp Tax
.. o'fER 18: SELF·TEST EXERCISES

Cfl11,1
True or False
I. Documentary stamp tax is a form of business tax.

z. vmdable.
Do_c umentary stamp tax does not apply when the transaction is Void or
· ,, ,
3. If one party is exempt in a transaction subject to DST, the other noii'€xem t
party is taxable. , , , . ,. P
4. The documentary stamp tax return shall be filed withins d_ilyS fro\n l:he
close of the month the transaction is executed. ' · ' "
5, A single transaction may result in payment of several documenlary slamp
taxes.
transaction. ·
~
6. Documents pertaining to the same taxable transactions are taxa61t;" oJ.
.s
1
7. The 'axpayer shall file documentary stamp tax return on loOse siamP.
8. Non-payment of documentary stamp taxes shall invalidate the contract
9. Once
court.DST is unpaid, the document can never be presented as eVidence in
10.The person benefited by the transaction usually pays the DST,-
Multiple Choice: Theory . d cumenta stamp

1. Which
tax? of the following bills of exchange is not subJect to o. .J . '
a. Drawn and payable in the Philippin~s. ·nes

b. Drawn abroad but payable in the Pbhl1hp:1oad
c. Drawn in the Philippines but paya ea r
d. Drawn and payable abroad ,
2. Which of the following inStrumenthis. not

t r subject to DST on a~signment.
c C are ..
a. Mortgage
b. Leas e d·. Traded debt secunt1es
679
3. Statement 1: Loans not exceeding. P250,00O 'made by' ind ividuals idllting a
· t f om documentary stamp tax.
month for personal purposes 1s exemp r .
Statement 1: Loans not exceeding P250,000 made,py, a cori;,o~atiol),.d,µting a
month is subject to documentary stamp tax.
a. True; True c. False; True , •
b. True; False d. F,alse; False C,
d,
4. Which is not subject to DST on bills of lading?
a. Shipment of goods bound for abroad 13,Wbi1
b. Shipment of goods between places in the P a.
c. Import shipment of goods from abroad b,
d. None of these C,
d.
5. Which does not belong to the group for purposes of documentary stamp tax?
a. Mortgages c. Deed of trusts
b. Pledges d. Loans 14.Whi:
a.
6. Statement 1: Stocks issued by foreign corporations in foreign countries are
b.
subject to Philippine documentary stamp tax. c.
Statement 2: Stocks issued by a domestic corporation in foreign countries are d.
subject to Philippine documentary stamp tax.
a. True; True c. False; True 15.Whi<
b. True; False d. False; False a. (
b. 1
7. Which is not subject to documentary stamp tax?
a. Issue of a domestic stocks 16.State
b. Assignment of a domestic stocks docu
c. Issue of a foreign stocks State
d. Assignment of a foreign stocks docu
a. 1
8. Which is subject to documentary stamp tax?
b. 1
a. Savings deposit c. 5-day interbank call loan
b. Time deposit d. Traded bonds securities 17, A cl
9. Which is not subject to documentary stamp tax? a.
a. Bank notes c. Bonds b.
b. Promissory notes d. Mortgage notes
18. Wh
10. Which is subject to documentary stamp tax? a.
a. Accounts payable for services rendered b.
b. Credit card receivables
c. Acco~nts receivables on sales of goods 19. Wh
d. Promissory note for intercompany advances a.
b.
c.
d.
680
rnentary Stamp Tax
is- oocu
ter
chaP e following leases is not subject to DST?
wnich of th e uipment c. Lease of real estate
11· Lease off q sels d. None of these
~: Lease o ves ,
tary stamp taxes are
cumen
12,Do Ad valorem taxes .
a. ecific taxes
b. 5P h d valorem and specific taxes
. h a ad valorem or spec1'f'1c t axes
c. Bot
d. E1t er
. h fthe following advances is not subject to documentary stamp tax?
13 WhlC 0
·a Employee advances . . .
· Advances by a parent company to its subs1d1ary
b. Advances by the home office to its branch
c. . .
d. Advances between sister compames
14 _Which of the following bills of exchange is not taxable?

a. Those made by a Philippine drawer in favor of a Philippine drawee
b. Those made by a Philippine drawer in favor of a foreign drawee
c. Those made by a foreign drawer in favor of a Philippine drawee
d. Those made by a foreign drawer in favor of a foreign drawee
15.Which do not belong to the group?

a. Checks c. Bills of exchange
b. Drafts d. Warehouse receipts
16.Statement 1: Leases not exceeding 1 year in duration is exempt from

Statement 2: Loans not exceeded 1 year in duration is exempt from
a. True; True ·c. False; True
b. True; False d. False; False J
17- A check is subject to a documentary stamp tax of

a. p 1 C. p 5
b. P 3 d. p 8
18
· Which of the following is an ad valorem documentary stamp tax?
~- Stamp tax on proxies c. Stamp tax on checks
· Stamp tax on certificates d. Stamp tax on lease agreements
19. Wh· h
IC documentary stamp tax is a specific tax?
~- Stamp tax on warehouse receipts
· Stamp tax on loan agreements
c. Sramp tax on issue of stocks
d. Stamp tax on deed of conveyance of properties
681
- ,.JI.
·1,1~:
.:f' .
'C', I.
;,t;.
.q.-.•' >
;. <
' i:
' .
.r· t,
• . .! ;)
'
21. A and B, both non-resident citizens entered intp a· lease' contract invoIVin
a land owned by B in the Philippipe~. A sh~l r 7nt the ~arne fQr his pusiness~
Which is correct? -· • ·
a. The lease agreement is notsubje,ct to dooumelltarY stamp ta>c ~ both
parties are non-resident.
b. The lease is supject to documentary ,stamP tax since Uie property is a
real estate. ,
c. The lease agreement is not subject to documentaJy stamp tax since the
lessor is not a resident in the Philippines.
d. The lease is subject to documentary stamp taX since the object of the
contract of lease is a real property located in the Philippines.
Multiple Choice: Computational

1. Teddy sold a piece of lot with zonal value of P4,000,00 u r fir
P4,SOO,OOO. Compute the documentary stamp t
a. P 270,000 c. P 63,750
b. P 67,500 d. P 60,0 0
2. In the immediately pre ding p
assuming the prop rti
a. P 270,000
b. P 67,500
3. Juan donated a pi f Ian t. H w n

Compute the do um nt ry t mp ta
a. P 30,000 c. P 11,
b. P 12,000 d. P 7,5
4. Cas~bl nc Corporation i u J . h ,r ._ l ,O ,O p I ). , II \ l
vanou h r holder for • t t.il cunsi I •r.Hiu11 ot 1 ,000.00
harehod r i J p th ho sub. -rib . 1 t r l O 0
J tp
shar for p 140,000. ·omput th c.l um ·nt 1. H
Pt. on th I u
stock .
P 120,000 . P ll,00ll
b. P 100,000 d. P , O
s. Com put the d umentan· tamp u on J pcch\ l ut h 1
P 10,500 . P l,OSO
b. P >,000 J P llOO
_ Documentary Stamp Tax (
18
chapter
dro contracted Juan to mortgage his land for P3,272,000. His land has a
6, r;nal value of PS,000,000 and an assessor's fair value of P4,500,000.
: p 13,120 c. P14,500
b·. p 12,000 d. PlS,000
Jornar invested P200,000 in the stocks of SMB, a listed corporation. The

7. shares had Pl00,000 par value. Jomar disposed the shares in the open
market for P240,000
a. P 0 c. P 1,000
b. p 750 d. P 1,500
Kulas loaned Tomas Pl,000,000 evidenced by a 12% interest bearing note

8
· due in one-year time. Compute the documentary stamp tax.
a. PO c. P 7,500
b. P 5,000 d. P 8,400
9. Assuming that the loan in the preceding problem is due for 146 days,
compute the documentary stamp tax.
a. PO C. P 3,000
b. P 2,000 d. P 3,360
for
10. German Company issued shares of stocks to Mr. Wong, a n OFW in Germany.
The stocks had P2,000,000 par value in Philippine Pesos. Compute the
a. P 0 c. P 15,000
tax
b. P 7,500 d. P 20,00
11. Compute the documentary tamp t if Mr. Wong i in th

Philippines.
10,
a. P 0 c. P 15,000
b. P 7,500 d. P 20,000
12. Compute the docum entary stamp tax assuming th t bond in t tock
were issue d to Mr. Wong who is a r esident of the Philippin
0 a. PO c. P 15,000
b. P 7,500 d. P 20,000
13. Assume Mr. Wong sold th stock to Wealth Corp rati n in th Philippines
for P2,000,000, what is the d cumcntary tamp ta on the sal .
a. PO C. p 15,000
b. P 7,500 d. P 20,000
14. Ken loaned Mario PS,000,000 under a written loan agreement. The principal
of the loa n will mature in 5 years and pay 10% annual inter t. Ken
requi red Mario to submit a promissory note to secure the loan. After a year,
Mario incurred d el y in interest payment prompting Ken to require Mario
683
Chapter 18 - Documentary Stamp :rax ...
15.
( I • • r
16. Assuming Mario was not able to pay for the mortgage prmcipal and executed
a deed of conveyance of his residence as full payment for the loan, what is
the documentary stamp tax.
a. P O c. P 60,000 ~h
b. P 30,000 d. P 75,000
17. Jem Enterprises of Davao City ordered a custom-built equipment from Tyler
Company in Baguio City for P500,000. Tyler shipped the goods through
Mando Logistics to Kim's Warehousing in Davao. Jem Enterprise issued a
bills of exchange in favor of Jem Enterprise ordering Metro Baguio to pay
P550,000 on sight. After Metro Baguio's payment, Tyler Company ordered
the release of the bills oflading and the warehouse receipt to Jem Enterprise.
Compute the documentary starip tax on the account receivable.
a. p O C. p 4,125
b. P 3,750 d. P 5,500
18. Compute the documentary stamp tax on the bills oflading.

a. p O C. p 30
b. P 20 d. P 50
19. Compute the documentary stamp tax on the warehouse receipts.

a. PO c. P 30
b. P 20 d. P 50
20. Compute the documentary stamp tax on the bills of exchange.

a. p O C. p 1,500
b. P 1,000 d. P 1,650
21. Compute the documentary stamp tax if Jem Enterprise issued a check for the
full payment of Tyler's bill.
a. P 0 C. p 20
b. P 3 d. P 30
22. Oppa Enterprise leased a commercial space owned by Pyto Industries at a

rental of P400,000 a year. The lease covers a n on-cancellable period of 5
year s. Compute the documentary stamp tax.
a. p O C. p 4,002
b. P 3,996 d. P 5,008
684
- ...
,,.
cnaP1.~er 19 - T x R m d
ctfAPTER 1
fJ\XREMEDIE
l'h h p rvt WO :
,. t:a re
h :v rnm nt tn nfurctrtg · ssess ents and
2.
l o th taxpayer tn contesting tax asse~smerrts or
r o rin v
n ila
ously paid taxes
-
T REMEDIE : An Introduction
l t 1'1 J"\
Philippine taxes are self-assessing. Taxpayers compute their taxes, file tax
turns, and then pay to the government The self-assessment method has
an inherent risk: under-compliance or non-compliance.
The government is not totally at the mercy of taxpayers. The government

can resort to its legally mandated procedures to enforce the determination
and collection of the correct amount of tax from the taxpayers. These
procedures are referred to as "government remedies."
On the other hand, taxpayers may be improperly assessed taxes by the

go ernment. At times, the taxpayer may erroneously pay taxes. The law
provides the taxpayer procedures for disputing assessments and in
recovering taxes erroneously paid. These procedures are called "taxpayers'
remedies."
TAX REMEDIES OF THE GOVERNMENT
PRIMARY REMEDIES OF THE GOVERNMENT

1. Assessment
2. Collection
Assessment is the act or process of determining the tax liability of a taxpayer in

accordance with tax laws. Assessment also pertains to the notice sent by the
government to the taxpayers informing them of their unpaid or still unpaid tax
0
bligations cou pied with a demand to pay the same.
Collection perta ins to the procedures of the government to enforce payment of

Unpaid tax.es from delinquent taxpayers.
685
Chapter 19 - Tax Remedies
ASSESSMENT
An assessment calling for the payment of a deficiency tax or unpaid tax can
only be made after the government has established the correct or
reasonably correct amount of tax of the taxpayer.
Powers of the CIR Relative to the Determination of Correct Tax
Relative to the determination of the correct taxes of th e taxpayer, the
Commissioner of Internal Revenue is empowered to:
a. obtain data and information from third parties
b. conduct inventory surveillance
c. examine and inspect the books of accounts of a taxpayer
d. prescribe presumptive gross sales and receipts
PRESCRIPTIVE PERIOD OF ASSESSMENT
The General Rule: 3 years

The law requires that assessment must be made .!..lwL!.i=th=i.....,_X-.,;L.><..>:~ from the
date of the actual filing of the return or the deadlin b I w,
whichever is later.
Illustration 1: Early filing or filing on the dead/in
Horacio filed his 2019 annual incom t r turn hi h w u n pri\ 15,
2020 on March 1, 2020.
A return filed before th e la t da pr by w fi r filing t hall b

considered filed on such la t da O. I · o th
prescriptive period shall b r ko pr 0.
must serve the asse m nt t th £ rb ,I .l
Illustration 2: Late filing

Assume instead th t 1-1 r i Fil hi 1 nnu I in m r tun n Jul
1, 2020.
Wh ere the r turn i fi led b ond th p riorl pr _ T1h, 1 b /a~ , th -ye r
period shall be co unt d from th e day th r Jtllm i. /1/, I (.' o , JR '). Henc ,
the counting of th pr ripti p riod ·h 11/ b r ·k >n d Jro 11 Jul 1, 0 0
The a ses ment mu t b s rv d r1 ur b f r Jul J. v .
DEADLINES OF VARIOUS TAXE
A. In come Tax Return
1. Annual income tax
a. Individual - pril 15 of h
b. orpor tion - n the 15th d
nd of th t , pa r' r~ n j
686
r g _ Tax Remedies
chapte 1
Capital gains tax return

2. 1. Capital gains tax return on sale of domestic stocks
a. Transactional return - 30 days from the date of sale
th
b. Annual return - 15 day of the fourth month following the
end of the taxpayer's year-end
2. Capital gains tax return on sale of real properties - 30 days from

the date of sale
3. Withholding tax returns
1. Withholding of final tax and fringe benefits tax - 10 days
following the month of withholding (manual filing)
2. Withholding tax on compensation income and expanded
withholding tax - 10 days from the end of each calendar month;
for December, January 15 of the succeeding year
B. Transfer Tax Returns
W,
1. Donor's tax - within 30 days from the date of the donation
2. Estate tax- within 1 year from the date of the decedent's death
C. Business Tax Returns
1. Non-VAT Taxpayers - Quarterly Percentage tax (BIR Form 2551Q) -
within 25 days from the end of the quarter
2. VAT Taxpayers - Quarterly Value Added Tax (BIR Form 2550Q) -

within 25 days from the end of the quarter
D. Documentary stamp tax return - within 10 days from end of month
Except in the case of late filing, the prescriptive period for assessment shall
be counted from the aforementioned deadline of filing of the tax type being
assessed. In cases of late filing, the prescriptive period is counted from the
date of filing.
Examples:
1. Any unpaid tax for a donation made on July 1, 2019 must be assessed on or
before July 31, 2022.
2. Any unpaid VAT for the quarter ending August 31, 2020 must be assessed on
or before September 25, 2023.
'faxp , • h d"fy change or amend return

An ayer s rig t to mo I ' t"1on filed within any office authorized to
Y return, statement of declara p 'ded that within 3 years from
rece· h h 11 t b withdrawn. rovi ,
h ive t e same s a no e
t e date of such filing, the same may e
b modified, changed, or amended.
687
Chapter 19 - Tax Remedi s
Provid d, Furth r, tha t no noti for audit or inv st igation of such return
tat m nt or d I~rr tion has in the m an time been actually served upon th~
ta pay r (. c. (A), NIRC).
For purpos of applying prescription rules'. . the date of filing of the
a m nd d r turn hall be considered the actual filing of the return.
EXCEPTIONS TO THE 3-YEAR PRESCTIPTION RULE

1. Fraudulent returns
2. Willful neglect to file
3. Waiver of the statutes of limitation by the taxpayer
Fraudulent return
Fraud involves an intentional and deliberate act on the part of the taxpayer
of deceive the government to avoid a tax. The presence of fraud must be
proven by clear and convincing evidence. It cannot be justified by mere
speculation. In the NIRC however, income tax returns are considered prima
facie fra udulent if the gross income is understated by more than 30% or
when the deductions claimed is overstated by more than 30%.
)
Willful neglect to file

Unless with a reasonable cause, the failure to file is normally considered
willful neglect if the taxpayer incurred multiple instance non-filing. In
practice, 3 years of non-filing of tax return is normally considered willful
neglect
Note the following rules:
I
,,
Deadline of assessment
With a tax return filed
- Return is non-fraudulent 3 years from date of filing or deadline
whichever is late
- Return is fraudulent 10 years from the discovery of fraud
Non-filing of tax return 10 years from the discovery of non-filing
Waiver of the statutes of limitation by the taxpayer

When the taxpayer requests for a reinvestigation of his assessment which is
granted by the C~R, the CIR and the taxpayer usually agree for the
temporary susp~ns10n of the prescriptive period for not less than 6 months
(180 days) ~o gJVe way to the reinvestigation. So, even if the revised final
~s_sessment 1s rendered to the taxpayer more than 3 years from the date of
f1lmg
. of the return so long as it is within the agree d t1me
· · m
extens10n · the
waiver, the assessment remains valid.
688
d
~~-
"'.,.;:
-.~·.: t
chapter 19 - Tax Remedies
Illustration 1 t ~
· In March 3, 2020, the BIR not· ·
BIR
th iced an I
Can the assess e deficiency? error In the 2015 . . .

No. The deadline
. of the return is . tax returrr, < of•M
' •· r, 0ute.
been assessment on or before Ap .1Jrl/ 1S, 2016. The';/',,;-'. , ,, . I '·
Illustration 2 r, S, zo19. '' e,,IC!f!~'il{. tq~es must
. ave i
Supposing the sarne data in illusi: . '
were causedt by a hdeliberate er/ation l eircept th~t the defi ·,-;-, ' . -
governmen , cant e BIR assess th d .
ort on the P art of the taxp . ,
c1en uripaid i;~ '-CUI.es
..
Yes. If fraud can be proven be,,ond e efic1ency? t ay~r
.1 ' to_defraud
J ,,. r the
March 3, 2030 to render the assess-

'J reasonabJe d 0 ubt1 by the BIR the BIR
·1 .
h
Illustration 3 "«ent. . , ru,as up
1 to
In April 7, 2020, the BIR. noticed ·that the ta . , l , ,,

for the last quarter of 2012. Can the BIR Xpahyer fall~d to file his VAT return
assess t e unpaid tax? , -
Yes. Even if the non-fifing is discovered aner mot'h ' · • • •
1
,r R emem b er t h at taxes are imprescriptible
fi/'mBgl.Rh
o1,_non-Th1 ,• re anin7 Years,
the casethis is an '"stance
offraud or non-
ft mg. e as up to Apr,/ 7 2030 to assess the unpa ·d d 1· · ·
Illustration 4
, 1 e mqu,ent ~afes.
On June l, 2018, the BIR. assessed Pl,000,000 deficiency estate tax on the estate
of a decedent who died June l, 2015. On July 15, 2019, the estate administrator
filed for a request for reinvestigation and executed a Waiver of Statutes of
Limitations which was granted. The BIR rendered the taxpayer a revised final
assessment
revised final for P700,000
assessment deficiency estate tax on October 12, 2019. is the
valid?
Yes. The period to make final assessment is extended far at least 6 months
1 by the
I
Waiver of the Statutes of Limitations. •
STAGES OF ASSESSMENT l
1. Selection of taxpayers to be au d"ted
t
1
J
2. Audit of the taxpayers "th unpaid or deficiency tax
3. Assessment of taxpayers WI I
SELECTION OF TAXPAYERS TO
t BE audited based on ; ~Ie~nnual
be AUDITED tion criteria
Audit
The BIR. selects taxpa,Ye:::nn~al
5 1
Audit Program. : ~ taxpayers to be the
established
P in the BIR _ k payers and medmm
. . h.1gh ns tax
rogram ident1f1es
audit priority for each year.
689
Tax Compliance Verification Drive .

T};le Tax: Compliance .Verification Drive also known as Tax Mapping is
intended to locate and identify. taxpayers who do not comply with basic tax
requirements such as registration, bookkeeping or invoicing. ...
' I.
To enforce taxpayer compliance, the BIR instituted a program called "Op/an
Kandado" (OK). Taxpayers' business will be suspended or temporarily
closed for failure to comply with tax regulations.
I f '
The tax compliance verification drive may also discover taxpayers with
possible unpaid taxes wl)ich may qualify for a detailed audit.
Tax lnformatio1,1
Taxpayers which could be subjected to regular detailed audit may be
identified based on information furnished by tax info rmants . Tax informants
are given reward based on the taxes collected from s uch infor mation.
Wl
Pre-audit ofAnnual Income Tax Return Al
A pre-audit is conducted to verify the fo llowing: Off
1. Mathematical computations of income tax due and payment Ur<
2. Correctness and applicability of exemptions claimed by individuals against
the registration records w
3. Correctness and validity of deductions and expenses subject to ceiling
limitations
4. Validity of claims for income tax holiday, tax exemption and other claimed
tax incentives
5. Correctness of the application of the minimum corporate income tax
6. Claimed creditable withholding taxes against tax due and substantiation of
claims through certificates of withholding tax
7. Correct utilization of tax credit certificates which should be duly supported
by an approved Tax Debit Memo issued by the authorized RDO
8. Correctness of deductions claimed by taxpayers who opted OSD
9. Accuracy and applicability of the computation of the NOLCO
10. Completeness of the required attachment to annual ITRs
690
d
_ Tax Remedies
19
chapter
dit of tax returns is not a regular audit. It is conducted entirely
The preh-auBIR office without field investigation.
wirl11n t e
re-audit results in a deficiency tax, the revenue officer prepares a
th
If e P dum report. The taxpayer shall be informed via a letter to be
rnoran .
n~e d by the RDO. The letter shall state the deficiency tax resulting from
signe -audit and shall require payment within 15 days.
the Pre
If the taxpayer agrees to the deficiency tax, he shall pay using the Payment
F rm (BIR Form 0605). If the taxpayer does not pay the deficiency tax, the
r;venue officer will prepare a report recommending the issuance of an
assessment of the taxpayer.
If the revenue officer recommends a thorough audit investigation of the

taxpayer, the taxpayer will be subjected to a regular audit. .
THE BIRTAX AUDIT PROCESS

1. Release of Letter of Authority (LA) to the revenue officer
2. Conduct of the audit examination
3. Reporting on the results of examination
:, .
RELEASE OF LETTER OF AUTHORITY TO THE REVENUE OFFICER
J •
What is a Letter of Authority?

ALetter of Authority (LA) is an official document that authorizes a BIR Revenue
Officer to examine a taxpayer's books of accounts and other accounting records in
order to determine his correct internal revenue tax liabilities.
Who issues and approves the LAs?
Revenue District Office

Lar e Tax a er Service Audit Divisions Assistant Commissioner-LTS
Nati~nal Investigation Divisions and Commissioner of Internal
S ecial lnvesti ation Divisions Revenue
R.equ·1 ·
s1tes for the validity of an LA:
1. :heLA must be served to the taxpayer within 30 days from its date of
Issuance. ;
Z. :he LA must be an electronic LA (eLA) printed under BIR Form 1966
Issued under the BIR Letter of Authority Monitoring System (LAMS).
691
Examiners or revenue officers Wh 0
Manual LAs are no longer allowe_d. n eLA will be subject
conduct audit investigations without a to
administrative sanctions.
. the taxpayer. Taxpayers who Were
Only one LA shall be_ issued. to A hall inform the concerned BIR
inadvertently issued with multiple L s s . of the other LAs.
officer and formalize his request for cance Iatwn
Other BIR notices to taxpayers:

1. Tax verification notice (TVN)
2. Letter notice (LN}
. . luation or verification of tax on
A Tax verification notice authorizes eva d ,
h as estate tax, onor s tax, and
one-time transaction (ONETT) cases sue
capital gains tax.
. . a commumcat10n
A Letter not1ce·1s · · from the BIR national office informing
the taxpayer of a finding of significant discrepan<?' between sales/purcha~es
reported in his tax return and information obtamed by the BIR from third
parties.
Third party information may be taken by the BIR from Reconci!iation of
Listing for Enforcement System (RELIEF) filings of other taxpayers mcluding
data gathered by other government agencies or instrumentalities.
Data Matching Systems

The BIR national office embarked on a program called Data Matching
which is basically a data mining technique intended to match taxpayer's
reported data such as sales against data furnished by third parties such as
purchases of the taxpayer's customers. Significant discrepancies or
variances noted may indicate the presence of unpaid taxes which must be
checked.
Di~crepancies noted by_the_ matching systems are forwarded by the national

office to the revenue d1stnct office having jurisdiction over the concerned
taxpayer. The revenue district office will serve the LN to the taxpayer.
Reconciliation of discrepancies
Taxpayers have 5 days from receipt of the LN to reconci'l th d ' .
· If th
n ot e d th erem. e e 1screpanc1es
e taxpayer agrees to the fl d. f .
must settle any resultant tax liabili . . m mg O discrepancies, he/she
LN. ty wi th m 30 days from the receipt of the
692
Tax Remedies
ter 19 -
cnaP ent of the LN will entitle the taxpayer to abatement of
..,,elY pa~rn surcharge, interest, and compromise penalty.
fiw ponding
,orres
. tion of LN and eLA
c011s011 da
who are selected for regular audit by the RDO may likewise be
faXPayerstly issued an LN by the national office. The LN in such case shall
,oncurri~dated with the eLA issued for such examination.
be cons
ents may be claimed as tax credit
LN par:s who are selected for regular audit may have paid taxes under an
faxr:e amount paid under the LN may be considered as a tax credit against
LN, findings of deficiency under the eLA (regular audit) to the extent that
anY 1 •
theYpertain to the same issues.
CONDUCT OF THE AUDIT EXAMINATION

The examination must be generally conducted in the place of business of the
taxpayer.
Period of investigation
Revenue officers have up to 120 days counted from the date of receipt of the
eLA by the taxpayer within which to conduct the audit and to submit their
reports of investigation. After the lapse of such period, the eLA must be
surrendered and may be revalidated when needed.
Frequency of revalidation of LAs

The eLAs may be revalidated once for those issued by Regional Offices or
Revenue District Offices or twice in the case of LAs issued by the National
Office. Suspended eLAs must be attached to the new eLAs.
Frequency of taxpayer examination

The taxpayer shall be subject to examination only once in every taxable
year, except when:
a. The CIR determined that fraud, irregularities, or mistakes were
committed by the taxpayer.
b. The taxpayer requested for re-investigation or re-examination.
c. There is a need to verify the taxpayer's compliance with withholding tax
and other internal revenue taxes.
d. The taxpayer's capital gains tax liabilities must be verified.
e. The CIR exercises his power to obtain information relative to the
examination of other taxpayers.
693
Chapter 19 - Tax Remedies ""'
Power of the CIR to obtain information and to summon, examine and
take testimony of persons
When after reasonable demands, certain documents, infor~ation or records
are not forthcoming during the examination, the BIR may issue subpoena to
the taxpayer and/ or other person in possession of the same to produce
them.
Types of subpoena:
1. Subpoena duces tecum
A summon upon the taxpayer or other persons compellin,g them to
produce, under penalty of neglect, certain documents sought therein.
This is usually issued to the taxpayer after his failure to comply With
two consecutive requests to produce his books for examination.
2. Subpoena ad testificandum
A summon upon a person to appear and to give oral testimony.
If the requested documents,· records, or information cannot be obtained by
these means, an assessment will be prepared based on the "best evidence
obtainable" rule.
REPORTING ON THE RESULTS OF THE EXAMINATION

After the examination, the revenue officer reports the results of his
investigation.
Finding of Sufficient Basis of Assessment
When the BIR examination or verification determined that there exists a
sufficient basis to assess the taxpayer for any deficiency tax or taxes, the
revenue officer shall recommend the issuance of an assessment to the
taxpayer in his report.
Determining the Amount of Taxes and Increments to Demand

Aside from demanding the unpaid delinquency or deficiency tax, the BIR
will also impose increments in the assessment as required by law, such as:
a. Surcharge - at the following rate on the basic tax:
Simple neglect to file - 25%
Willful neglect to file - 50%
b. Interest - double of the rate prescribed for forbearance of money, this is
currently 12% per annum
c. Compromise penalty - a settlement for the government not to enforce
criminal prosecution
f
l
694 1
. _ Tax Remedies
chapter 19
·on · · · ~.- ·
J11
115trat•
he examination, the
. BIR, determmed
, Lthat the ,taxpayer is. deficient by
After t 00 for his 2018 mcome tax return. T,,, e ijlR .fi.x~d t!l~...4~adljqe (Qr tax,
psoo,o
rnents
by July 30, ~020. - · . ,
, paY ·ncome tax return deadline. is April 15,. 2019'Jwhile" aa't~1•cff ;.cheduled
1
• March 31, 2020 covermg a total penod computed as follows·
Thernent is , . . ,
paY No. of days CJ ·~l
. Gt 30, 2019 (30 - 15) 15 UJ
;\pfll 1 ° 31
r,lay2019 30
June2019 31
July2019 31
August 2019
September 2019 30
October 2019 31
November 2019 30
December2019 31
January 2020 31
February 2020 29
March 2020 31
Total 351
l
The assessment if the taxpayer pays on or before July 30, 2020 shall .b ~:
Basic income tax due P 500,000.00
Surcharge (25% x P500,000) 125,000.00
Deficiency interest (P500,000 x 12% x 351/365) 57,698.63 '
Total
P 682.698.63
Delinquent payment
Assume the taxpayer defaulted on the June 30 scheduled payment of the
deficiency assessment but settles the tax on October 15, 2020.
The delinquency from July 1, 2020 to October 15, 2020 covers a tot~l period
computed as follows :
No. of days
July 2020
31
August 2020 31
September 2020 30
October 2019
Total 15
107
The assessment on October 15, 2020 shall be:
Basic income tax due P 682,698.63
Delinquency interest (?682,698.63 x 12% x 107/365) 24,016.03
Total p 706.714,66
695
. @P
Chapter 19- Tax Remedies ixtrl~\tlitt .; :· ~, 41

'I
r,~;-~•. t1
:J
Assessment Procedure : . tt~ ·1
lfhe assessment stage ihvo'lve th followfngt ~9 w,, · - -.!
1. Pre•Asse ment Notice (PAN) ' fi ~' ,o~ i ~
2. Formal Letter of Demand and Final Asse·~ sment Notite (FLO/FAN)
3. Final DecJsfon on a 1Disputed Assessment (FJ?D4)
ote: The otic bf Inform / Conference stage befote'th~ PAN 'stage is ren'toved from
the procedures of assessme~t una.er RR18 -2013.
What is a Preliminary Assessment Notice (PAN)?

A PAN i a written communication issued by the Regional Assessment
Division or any other concerned BIR office informing the taxpayer of his
obligation for deficiency tax based on the audit findings of a revenu~ officer.
The taxpayer has up to 15 days from the receipt of the PAN to reply to the
for,'
proposed assessment. It must be noted that the PAN is not yet an
assessment and does not establish a legal claim on the r part qf the
government. However, the failure of the taxpayer to reply to the PAN shall
make the impending assessment final, demandable and non-appealable.
J
If the taxpayer's agrees to the findings in the PAN and pays the tax, the BIR
cancels the docket and a termination letter or closure Jetter is sent to the Jost
taxpayer. The
'
to b1
If the taxpayer merely responds that he disagrees with the findings of aPA
defici ency, a Formal Letter of Demand and Final Assessment Notice
(FLD/ FAN) calling for payment of the tax deficiency will be issued to the Ho1A
taxpayer. 1. I
I
What is a Formal Letter of Demand and Final Assessment Notice ,, I
(FLO/FAN)?
2, '
An FLD/ FAN is a final declaration of deficiency tax issued to a taxpayer:
a. who defaulted by failing to respond to the PAN within 15 days of its
receipt 3.
b. whose reply to the FAN is unmeritorious.
The FLD/FAN shall be issued within 15 days from the filing or submission of
the taxpayer's response or within 15 days from the issuance of the PAN in
case the taxpayer failed to respond.
4,
The iss u~nce of an FLD/FAN to the taxpayer is tantamount to a denial of the S.
taxpayers reply to the PAN (Philippine Health Care Pro v1'ders vs. CIR') .
1
696
d
r chapter
19
_ Tax Remedies
. . s of a valid assessment (FLO /FAN)

equ1s1te . .
~ The assessment must ~e served within the prescriptive period.
1, The asses_sment must mf~rm the taxpayer of the di~covery of unpaid or
2- still unpaid tax coupled with a demand of the same including penalties.
The assessmen_t n:ust show in det~il the facts and the law, rules and
3. regulations, or 1unsprudence on which the assessment is based.
4 The assessment must be served through registered mail or by personal
· delivery and acknowledged by the taxpayer or his duly authorized
representative.
5. The assessment must be preceded by a pre-assessment notice.
An assessment which lacks any of these requisites is void. Hence, a "show-

cause letter' or a letter from a revenue officer grantin g the taxpayer an
opportunity to disprove his audit findings does not qualify as, or substitute
for, an assessment.
Moreover, affidavit executed by revenue officers containing computations of

deficiency taxes to support the criminal complaint against a taxpayer is also
not an assessment (See CIR vs. Pastor Realty).
Instances where no PAN is re quired

The PAN is required as a matt r f pr dur I du proc ss for the ta p r
of
to be apprised of his obligation. H n FL /FAN i gen ra lly void ithout
a PAN.
ce
ne
However, a PAN is not r quir din th oil wing ca
l. When the finding of d ficiency taxi the result of math m ti I rr r in
ce
the computation of the tax appearing on the fac of th tax r turn fil d
by the taxpayer;
2. When a discrepancy has been det rmin db twe nth t with h Id nd
the amount actually r mitted by the withholding nt,
3. When a taxpaye r who opt d to cl im a r fund or t r dit of xc
creditable withholding t x for a t x- ble p ri d w d t rmin d to have
carried over and automatic lly ppli d th same mount claimed
against the estimated tax liabilities for th t x ble quarter or quarters of
the succeeding taxable year; or
4
· When the excise tax due on excisable articles has not been paid;
S. When an arti cle locally purchased or imported by an exe~pt ~erson,
such as, but not limited to, vehicle , capital equipment, machineries and
spare parts, has b en old, traded or transferred to non-exempt
Persons.
697
Chapter 19 - T
ceptionat
do ki f n Ued by th BIR and a

1
nt to th wxpay n '
O 1
n J
by n uthoriz d rev nue officer Without
m rd I udit in Jight of•the officer's. belief that
r P f d fl clency tax wm be jeopardized by the
on o r
d' d . .
comply with au 1t an u;ivest1gation
................0 t ~ Yboe1k of accounts and pe~nen~ reco~ds or
th d ductions, exemptions or credit claimed m his
u r.........._. .sment It iS '

Th FLO/FAN may be administratively protested by the taxpayer ?Y filing a assess
.......,rT.,n protest to the BIR within 30 days upon receipt thereof.
goverr
of Taxpayers' Protest:
a. Request for reconsideration is a plea for a reevaluation of an final 1
sessment on the basis of existing records without need of additional fbeFf
evidence which may involve a question of facts or oflaw or both. 'from ti
b. Request for re-investigation is a plea of reevaluation of an assessment
on the basis of newly discovered or additional evidence th~t the Resolll
taxpayer intends to present in the reinvestigation which may also
involve a question of fact or of law or both.
In case of a request fo r re -investigation, taxpayers are mandatorily required Rei

o submit relevant supporting documents within 60 days from the date of
fili ng of the protest The taxpayer will be required to sign a "Waiver of the
Sus
Stntu tes of limitation" fo r a period of not less than 6 months to give way to
the re investigation. Judicia
The FD
The BIR assessment division will settle question of facts. The BIR legal by the 1
divisi on will settle questions of law. after wi
certiora
The fai lure of the taxpayer to seasonably interpose a valid protest shall
make the assessmen t final, executory and demandabl d t for adrnini~
·d · . e an no reques
reco ns1 eration or remvestigation shall be granted.
Finality of assessment on undisputed issues
If th e taxpayer disputes or protes ts l ·
raised in the assessment th on y agamst the validity of some issues
, fi e assessment attributa bl e t o t h e un d'1sp uted
issue or iss ues shall become
ma'I executory an d demanda ble.
698
_ Tax Remedies
19
Chapter
taxpayer failed to st~te the facts, the applicable law, rules and
If th: ,ions or jurisprudence tn support of his protest against certain issues,
regulsarne shall _be conside red undisputed issues, in which case, the
rhe , ent attnbuta ble thereto shall become final executory and
assessn ,
andable.
de1n
nure of the taxpayer to validly protest the FLO /FAN within 30 days
The fa~ thereo f s h a ll resu lt m· the assessment becoming final and
upon
executory.
In such case, the taxpayer shall lose his right to refute the findings, except
when:
The taxpayer did not receive the FAN
~: The taxpayer availed of the amnesty program
It is also noteworthy to mention that the burden of proving that the

assessment was actually received by the taxpayer rests upon the
government.
Final Decision on Disputed Assessment (FDDA)
The FDDA of the CIR may be communicated to the taxpayer within 180 days
from the filing of his protest
,,
Resolution of the Protested Assessment:
If the protested assessment is The assessment is
a. Resolved in favor of the taxpayer Cancelled
b. Resolved with reduction ofliability Revised
C. Sustained Enforced
Judicial Appeal
The FDDA of the CIR on a disputed assessment may be judicially protested
by the taxpayer by filing a petition for review with the Court of Tax Appeals
after which an adverse ruling may be the subject of a petition for review on
certiorari before the Supreme Court. However, assessments that achieved
administrative finality are enforceable by the BIR for collection.
COLLECTION
Collection will be enforced by the government once the assessment achieves
finality under any of the following instances:
A. When the taxpayer defaulted in his administrative remedies
a. Failure of the taxpayer to seasonably respond to the PAN
b. Failure of the taxpayer to seasonably protest the FLO/FAN
699
~ii
Chapter 19 - Tax Remedies f~ ce
~~ t,
B. Deni al of th
th
taxpayer' s protest by the Cl R or his au orizect ~\,
r present tive th
i
I I
C. Wheth r or not on appeal, when the assessment is upheld by e court {~e I
nd ,, \
Collection is enforceable once assessment became final a executory
th
Though valid and seasonably made, an appea l interp?sed_ by e taxpayer
st nd ~·'
before the CTA does not suspend the payment, levy, ~i ~ai~~ a or sale of ~
any property of the taxpayer for the satisfaction of his habihty (Sec. 11, RA ~l
11 25, as amended by RA 9282). \~st
co~
Non-injunction of tax collection \~st
No court shall have the authority to grant an injunction ~o restrain the
collection of any national internal revenue tax, fee or charge imposed by the \~ '
NIRC (See Sec. 218, NIRC). The CTA, however, is authorized to suspend the cot
collection of taxes when it may jeopardize the interest of the taxpayer ~a)
and/or the government (Sec. 11, RA 1125).
th 1
Payment under Protest !ul

To avoid the imposition of interest, penalties or charges on a contested
assessment, a taxpayer may pay the contested assessment under protest. fll
The taxpayer can file a claim for refund later when the disputed assessment w
is partially or wholly decided in his favor. Bl
Government Remedies to Enforce Collections: If
1. Imposition of tax lien al
2. Seiz~re of the taxpayer's properties (distraint or levy)
3. Auct10n sale and or forfeiture of taxpayer's properties
4. Filing?~ civil or criminal action against the taxpayer
5. Imposit10n of administrative penalties and fines
1
6. Suspension of business operations
7. Entering into a tax compromise with the taxpayer
ST AGES OF COLLECTION
1. Preliminary Collection Letter
2. Final Notice before Seizure Letter
3. Warrant of Distraint/Levy or Garnishment
4. Res~arch of taxpayer properties
5. N~tice of Tax Lien and or Notice of Tax Le
6. Seizure of properties vy
7. Auction sale and/or forfeiture f .
8. Filing of civil or criminal actiono properties
700
, th BIR oil tion OlvL Ion wi ll , d
I t r I n d by h RD wh h s
m nt i h r b · :
n
nt and ompromi ttl m nt r ubj ct to pproval by th BIR.
off r th taxpayer a chance to settle the tax

ith ut a u ing him cash flow problems. However,
in Um n r · ubj t to interest. Furthermore, the default of the taxpayer
an m t:al1m nt will ma ke the entire balance due and demandable.
rom1 p ym n offer the taxpayer a chance for a reduced tax
n but are granted only under rigid conditions.
BIR ·11 furnish the taxpayer a termination letter or closure letter upon
pa m nt of the tax.
Fl L OT/CE BEFORE SEIZURE LETTER
1thtn 10 days from the issuance of the Preliminary Collection Letter, the
I nds the taxpayer the Final Notice before Seizure Letter.
e taxpaye r ignores the final notice, the BIR will resort to enforcement of
administrative summary remedies.
Summary Remedies under the NIRC:

t Seizure of taxpayer's property
a. Distraint
b. Levy
2. Civi.l or criminal action
Distraint - the seizure by the government of tangible or intangible personal
lUOperty of the taxpayer to enforce the collection of taxes
Levy - the seizure by the government of real properties of the taxpayer to
enforce the collection of taxes
Garnishment - the seizure or distraint of interests such as bank accounts and
credits owned by the taxpayer
Either or both distraint and levy may be pursued by the authorities charged
With the collection of the tax.
701
WARRANT OF DISTRAINT/LEW ·c · h
The Warrant of Distraint and or Levy (WDL} or a Warran ~of ar~,s ment is
. . d to the Fin a l Notice.
s rv d to the taxpayer after his fa ilure to I espon
Limitation of the Warrant of Distraint and or Levy
1. Di tra int or levy sha ll not be availed of where th e amount of tax is not
more t ha n Pl00. th
2. The WDL s hall not be sent ea rlie r tha n 90 days from e date the
as essment has beco me due a nd demandable.
Exception to the 90-day rule: . . .

Delinquent taxes may be collected immediately by diS t ramt or levy m cases
where:
a. The amount s hown in the return is not paid on time.
b. The individual taxpayer fails to pay the second installment of his income
tax.
RESEARCH OF TAXPAYER PROPERTIES

If the taxpayer fa ils to pay his delinquent accounts after the service of the
WDL, the revenue officer shall look for properties of the taxpayer that can
be attached to his tax liabilities.
Taxpayer properties may be identified from records of the City Assessor's
Office, Registry of Deeds, Land Transportation Office, Securities and
Exchange Commission, business bureaus, and local banks.
NOTICE OF TAX LIEN (NTL) OR NOTICE OF LEVY

The Notice of Tax lien or Notice of Levy is used to validate the legal claims or
charge of the government on identified property of the taxpayer either
personal or real, as security for the payment of his tax liability.
The Tax liens are annotated at the back of the title document of the property
in the case of real property.
Tax lie~s will make the government a priority claimant on the identified
properties of the delinquent taxpayer.
Distraint of Personal Property

Who shall conduct the distraint?
a. The CIR or his duly authorized representative - I'f h . .
in excess of PlM t e amount mvolved 1s
b. The revenue district officer_ if the amou t . .
n mvo 1ved 1s PlM or less
702
t r 1 - Tax Remedies
nrttofproperties
. to behdistrained
, n \ propert1es sue as goods chatt l
· · ' d eb ts, ere ct·lts, b ank accounts
'-ur,t\ ' ande s,
. effects ' stocks and oth
h ll b
rtie s a e seize · dm • sufficient quantity1nterest or rig
. h ts to Persona\
er
I a. due to cover the following:
Penalties and interests
~xpenses of distraint
sts of selling the properties
n tructi.ve Distraint
, onstructive distraint, the government freezes the tax ,
. umng
. . the taxpayer or the person having possession payers
or property
t f byh
. . . con ro
roperty to sign a rec_e1pt obligating him to preserve the same intact o t
1 and e
na\tered and not to dispose 1t Without the express authority of the C\R.
In case the taxpayer or the person having the possession and control of the
roperty sought to be placed under constructive distraint refuses or fails to
ign the receipt herein referred to, the revenue officer effecting the
onstructive distraint shall proceed to prepare a list of such property and, in
the presence of two witnessed, leave a copy thereof in the premises where
the property distrained is located, after which the said property shall be
deemed to have been placed under constructive distraint.
When a constructive distraint may be made? .
The purpose of constructive distraint is to protect t~e mterest of the
government when, in the opinio1:1 of the C\R, the taxpayer is:
a. retiring from a business sub1ect to tax
b intending to leave the Philippines h
c.. intending to remove his . prope rty or. conceal
t t e same
bstruct .
the proceedings for
d. intending to perform an ac: tendmg o o
collecting the tax due from him d'
. t raint or
To whom is the warrant of dis garnishment
ther serve : - to the
personal properties
l F d hattels effects, or 0
. or goo s, c , d' t ained the president,
possessor of the goods is -~ies - to the taxpayer and up:::.tion, company
2. For stocks and other secun .ble officer of the corp
r responsi . .
manager, treasurer o_ d the said stocks . h debts or havmg m
. . hich issue owmng t e
or association w . to the person . with his agent . or
3. For debts and credits. - ontrol such credit, or ger treasurer, cashier
possession or un d e r his c the president • mana ,
4. For bank accounts f-fi t_oals
other responsible o ici
703
Levy on Real Property .

The revenue officer shall prepare a duly authenticated certificate shoWing
th e name of the taxpayer and the amount of taX and penalty ?ue from hirn
and indicate therein the description of the property upon which th e levy is
made. Said certificate shall operate with the force of a legal execution
throughout the Philippines (See Sec. 207 (BJ, NIRC).
Levy on real property may be done before, simultaneous with, or after the
distraint of personal property.
AUCTION SALE OF SEIZED PROPERTY

Seized properties will be sold at auction sales if the taxpayer did not settle
the delinquent tax. Within 20 days from levy, the revenue officer conducting
the proceeding shall advertise the property for auction sale for at lea t 30
days. The property shall be awarded to the high st bidde r.
The proceeds of the sale shall be used to satisfy th ta P unp id t

liabilities. The excess proceeds of the sale will b r turn to th p r.
FORFEITURE OF TAXPAYER'S PROPERTY

When the amounts offered by bidd r in n utiv II
to raise a sufficient amount to ov r rh t r' Ii bili
will forfeit the property. Titl to f rt it d pr i II in
the name of the Republic of th Philtppln
Taxpayer's right of redemption
The taxpayer has up to n ar fr m lU 1 n r ttur
within whi h tor deem th pr p r
Further distraint or Levy

Further di traint or I vy m· b m h nth pr re • u 1 n
fail to ti fy th unpaid t .
CIVIL OR CRIMINAL ACTION

Th gov rnm nt m y alternatlv ly or ·tmultar, ou. / pu u rtlrn vii r
criminal a tion again r the t. rny r 1th th ·urru ,1 t I tr mt
r I vy (. ee . 205, NIRC).
The RA TE Program
To pro ut -r1mtn I viol ti n th IR . h Bl tntudh Run
After Ta Evad r. (RA TE) pro r m. Th T int n
id ntify and pro ut high-protil Jm • ·u h
c I briti r u u ll t rg t ct , n ft tt mmonly
70
~ chapter
19
_ Tax Remedies
. d as a deliberate display of the BIR's serious resolve f .

perceive_ or erring
ta)(payer s.
,nent is not necessary for criminal prosecution
AS5essssinent 1.s not a reqmrement
. . the prosecution of criminal
m f
A55Jeati·on of internal revenue laws. (CIR vs. Pascor Realty & Deve
viO ca,ses
opment or
corp., et. al. (G.R. No. 128315 ~ated June 29, 1999) The judgment in the
criminal case shall not ?nly impose the penalty, but shall also order
payment of the taxes sub1ect of the criminal case as finally decided by the
commissioner. (Ibid.] .
Hence, collection of tax may be made without a prior assessment if there is a
criminal intent to evade payment of taxes such as in the case of:
a. Filing of a fraudulent return
b. Willful neglect to file a return
Areturn is generally deemed fraudulent when there is:
X
a. Failure to report an income exceeding 30% of that declared per return
b. Overstatement of deductions exceeding 30% of the actual allowable
deductions
ii
Civil and criminal actions and proceedings instituted in behalf of the
lt
Government under the authority of the NIRC and other laws enforced by the
n
BIR shall be brought in the name of the Government of the Philippines and
shall be conducted by legal officers of the BIR. No civil or criminal action for
the recovery of taxes or enforcement of any fine, penalty or forfeiture under
the Code shall be filed in court without the authority of the CIR.
PRESCRIPTIVE PERIOD OF COLLECTION

The government has 5 years from the date of release _of. the final nd
Je assessment to the taxpayer to make collection (Bank of the Phil,ppme Isla s
vs. CIR, G.R No. 139736). · f period is
When the demand letters is undate.d, the 5-year prescnpolV~- p cific
or counted from the date of receipt of the assessment notice ar me a
nt
Finance vs. CIR, CTA Case No. 6195).
Illustration 1 . return which should have been
~n July 15 2015, Mr. A filed his 2014 income ta~st 15 2015. The BIR issued a
~led _April 15, 2015. He paid the tax on Aug '
2017
eficiency assessment on August 2, ·
Th . be on or before August 2, 2022.
e deadline to enforce collectwn shall
705
Chapter 19 - Tax Rem di s
mu tr tion 2 rn ent letter. The assessment

On Mar h , . 015, th FHR . nt .tn u nd at d ~ . h should have been paid March
c v r d th unpr1ld t t t, x of t de d n t w ~ssessment on March 18, 201s.
5, 2014 . Th t t dmini trato r Iv d th
. h 11 b on or before March 18, 2020 since th
Th d ad/in t en/i. oil t10n a e
undat d.
mu t ti n
Th ta pa r did 11 t 11n, 1 11 mco
• me tax return for the year 2006. The BIR
R • d d 1·
di o red th non - tli11g on May 4, 2013. The Bl issue a e mquency
m n on Jul 15, 20 15.
Th d ad/in to nforce collection is on or before July 15, 202 0, .

3.
u p n ion of the Statutes of Limitation
Th pr criptive period for assessment and coJiection may be suspended
und r the following circumstances:
a. Request for reinvestigation of the taxpayer which is granted by the CIR
b. hen the Commissioner is prohibited from making an assessment or
from beginning distraint or levy or a proceeding in court 1
c. When the taxpayer cannot be located in the address given by him2
d. When the warrant of distraint or levy is served and no properties can be
located
e. When the taxpayer is out of the Philippines
Note:
1. The suspension shall run for the period during which the CIR is so prohibited plus
60 days thereafter.
2. If the taxpayer informed the CIR of any change in address the running of the
statutes of limitation will not be suspended. '
Summary of Prescription Rules: Collection

Deadline of collection Mode of coUection
With a prior 5 years from assessment
assessment Summary proceedings or
Without a prior bv judicial action
10 years from discovery
assessment By judicial action only
of fraud or falsity
. .
TAX REMEDIES OF THE TAXPAYER
1. Disputing an assessment 1'f th
-
2 · Recovery of erroneously paid e tax has t •
taxes . no yet paid the assessment
- if the tax has already paid
4.
706
_ Tax Remedies
19
( flapter
..n1rrtNG AN ASSESSMENT
oJ)rv on r c ipt of th Pre-Asse ment Notice, th
1, ~!sit1on wi hln 15 day • taxpaye 'inust explain his
..
. '
opon re Ip h Formal Assessmeht Notice/Po tii I L · : 4,.

~
2. t)le taxpayer mu fl\ formal protes In 30 days,' a, etter of Demand, .,

""
'fYPe of protest:
a. Reque t for
fi reconsideration
. . . - no new issues O cv -·"''
1uence to be raised
b· Request or re-mvest1gatwn - new issues 0,.~ evi'denee w1'llb e raised
. .. · . (
ln the cas of request ~or re-investigation, the taxpayer muk submit the
"' \
'
necessa~ docuf mhents m support of his position witt\in ,601 c4ly.s fi;om the
date of filmg o t e protest. ••
. The taxpayer shall wait for BIR action within 180 days which shall be
3
counted from: , :
a. the submission of documents - for request for re-investigation "'~ i
b. the receipt of the FAN/FLD - for request for reconsideration ' ~·
u
BIR denial or adverse decision
If a duly authorized representative of the CIR -denies the· protest or
1i m- issues an adverse decision, the taxpayer may interpose either a/an:
ties can a. judicial appeal - file a petition for review with the Court of Tax
Appeals (CT A) within 30 days from the receipt of adverse decision
b. Administrative appeal - file a motion for reconsideration with the
CIR within 30 days from the receipt of the adverse decision
I ._ 1[ \
b1brt:erl 1..5 The final decision (FDDA) of the CIR may be appealed t9,the CTA within
30 days from receipt of the adverse decision.
J \-
BIR inaction within the 180-day period . . th 180 d :nod The

The BIR may not act on the proteSt wit bm e i ,ay p ·
taxpayer may either: . . ft the lapse of the 180-day peno· d' or
a. Wait for the BIR dec1si~n a e~ h CTA within 30-days from the
th
b. File a petition for review Wl . t_ e eal .
la se of the 180-day period LJudicial app J.
p exclusive. Hence, if the taxpayer opted
These two options are mutually •t for BIR action and cannot
er must wa1 l
Y
for the first option, the taxpa d . s his administrative appea ·
tl the BIR enie
proceed t o the CTA un 1 h CTA the taxpayer may,
dverse ruling from t , e '
4 · Upon receipt of an a
within 15 days:
707
Chapter 19 - Tax Remedie
a. Fil moti on fo r r consid ration or new trial under the sarne

divi ion, or
An adve rse d i ·io n of th e CTA in divi sion m ay be appealed to the CTA e
ban w ith in 15 days. Th e CTA may g rant a n additional 15 day leeway afte:
payment of th e d o ket fee. An adve rse decision of the CTA en bane may be
app aled within 15 days to the Supreme Court.
b. File a p tition for review on certiorari to the Supreme Court.

An a d v r e r ulin g from th e Supreme Court may be subject to a motion for
reconsideratio n afte r which th e final decision can no longer be appealed.
Content of Reply to PAN

The taxpayer's reply to the PAN shall include:
a. Ex pla nation on matters questioned by the examiner
b. Factual and legal bases supporting the taxpayer's position
,
c. Prayer for full or partial cancellation of the PAN
30 days
Requirements for the validity of a protest: personal
1. The taxpayer must indicate the nature of protest (i.e. request for appearanc
reconsideration or request for reinvestigation) (See CIR vs. Philippine
Global Communications, GR. No. 167146, October 31, 2006).
2. The taxpayer must state the date of the assessment notice. '
3. The taxpayer should state the facts, the applicable law. rules and
submit
required
documents
I
regulations or jurisprudence on which the protest is based.
4. The protest must be filed by the taxpayer or his/her duly authorized
representatives, in person or through registered mail with return card
with the concerned Regional Director, Assistant Commissioner-LTS or
Assistant Commissioner-Enforcement Service, as the case may be (RMC
39-2013).
5. All relevant documents must be submitted within 60 days from the L
fi li ng of the request for reinvestigation.
Suspension of the prescriptive period *Mutually exc/1

It is settled under jurisprudence that the 60-day period applies only to a receipt
request for re-investigation but not to a request for reconsideration.
The suspension of the prescriptive period applies only upon approval of the
request for r~-investigation. The act of requesting for re-investigation does
not, by itself, suspends the running of the prescriptive period of collection.
The prescriptive period of collection will be suspended only when the BIR
grants the request for re-investigation (CIR vs. United Salvage and Towage
(Phils.}, Inc., GR No. 197515).
708
_ Tax Remedies
ter 19
ci,aP •
d to be categorical
rotest nee s shall categorically raise all issues in the FAN /FLO that he
~ne ta,cpayerd backs each objection individually by stating the facts, law,
objects ~ r:;ulations, and jurisprudence supporting his position. It must be
rules an that assessments on uncontested issues will become final,
recalled and demandable by the government.
executor}', .
sununa ry of Rule: Disputing an assessment

------------ Government side ------------
~
\ FAN \
.' BIR denial or lapse of 180- CTA
day whichever comes first Adverse
NFIC I\ PAN \ decision
-
---► L---)-1 .. --- ➔ ----~ --- -➔ ---➔ -- + - -- ~
30 days 15 days 30 days 60 days 80 day~ 30 days 15 days
Personal Petition for

Motion Submlt Petition re ·ew on
appearance supporting
for for review certiorari
Reinvesti- documents (CTA) (SC)
Submit gation
required A\ I
documents 1\ Reply I
\ OR I Judicial remedies*
I
Motion I
for
Reconsi-
-------->
180 days
-7 Wait for BIR action*
deration
Administrative remedies
*Mu~a/ly exclusive remedy, adverse decision may be appealed to th CTA within Oda from
receipt
---------- Taxpayer's side------------
!he
w
remedy of last resort: Compromise
taxpayer who has exhausted all the remedies may settle hi t , H bHit by
ui~ ng1dof _c~mpromise payment. Compromise, h owever, is p rmi ibl only
er will be
conditions which discussed later.
709
RECOVERY OF ERRONEOUSLY PAID TAXES
Procedures: . . . ears from the date nr

1.Fi l a Claim fo r refund or credit _w1thm -2 Y ---=a~~
payment of th tax (Sec. 229, NIRC).

. , c. d or credit is denied by an authorized
2. WI1en t he Iaim 1or r ,un fi1 a etif fi
repre en tati ve of the CIR, the taxpayer may ~ P _w? or
'd · ·th ' 30 d ys from receipt of the denial and w1thm the
reco11s1 era ti on w, · m a f th ta
two-y ar prescriptive period from the date of payment O e x.
3. An adverse fi nal decision of the CIR shall be appealed by_filingfa hpetition
for review befo re the CTA within 30 days from receipt O t e final
decision (Sec. 11 RA 1125} 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 peti tion for review before the CTA before the expiration of the
two-year prescriptive period.
An adverse decision of the CTA may be appealed in the same division within
15 days. An adverse decision of the concerned CTA division may be
appealed to the CTA, en bane within 15 days.
5. An adverse decision of the CTA shall be appealed within 15 days to the
Supreme Court.
These procedural requirements apply not only to taxes paid in error but
also those paid under protest or duress (Sec. 229, NIRC).
Sum
Note on administrative procedures
It must be noted that aside from complying with the rules on deadlines, all
required taxpayer procedures for his administrative remedies must be
executed within the two-year prescriptive period and, in case of adverse
decision, the taxpayer must have interposed a case for the recovery of the
tax with the CTA on or before the expiration of such period. The failure to do
so shall result in the forfeiture of the tax subject of the claim.
When the taxpayer discovered the erroneous payment when the 2-year
--
p_eriod was abo~t to lapse, he may file a claim for refund or credit
s1~ultanheoCuTsAJy with the mstitution of a case for the recovery of the same
be1ore t e .
Claim for refund or credit
Tax refunds or credit are in the nature of a tax exe . · : hi
construed against the taxpayer. The tax a er mptwn and are ~1g_ y
evidence to substantiate his t'tl P Y must present convmcmg
en J ement to refund or credit.
710
a:zaf
ter 19 - Tax Remedies
chaP
When ;5 an application for a claim for refund or credit not necessary?
tax return filed showing an overpayment is by itself considered a claim for
:efund. Hence, the taxpayer need not file an application for claim for refund
or credit.
When is a claim for refund or credit not allowed?

a. Documentary stamp tax
b. Payment on tax assessments that became final and executory*
~ his is not payment under protest
counting of the 2-year Prescriptive Period

1. The 2-year period is counted from the date of filing of the Final Adjusted
Return, not from the date of the quarterly income tax payments.
2. For VAT payments, the 2-year period is counted from the date of filing
of the quarterly VAT return, not from the monthly payments
3. If tax is paid in installment, the 2-year period is counted from the last
installment
4. For withholding taxes
a. Final withholding tax - the 2-year period is counted from the 25 th
day after the close of each calendar quarter
b. Creditable withholding tax - the 2-year period is counted from the
last day of the month following the close of the quarter during
which withholding was made
Summary of Rules: Recovery of Erroneously Paid Taxes
---------- Government side ------------
CTA
BIR denial
I Adverse decision
---> -----➔ ------;>

30 days 15 days
Payment of Claim for
tax refund
Petition for
review (CTA)*
,- --> Petition for
review on
certiorari
2years (SC)
I I
*Must be executed even without a BIR decision on the claim for refund
---------- Taxpayer' s s1"d e ------------
711
~ .,, f
~
~
~
.-e. 1" ,·
• . ., ,!''-' ti'
Chapter 19 - Tax Remedies •m~ •f •et~~· -~-1: :·

• l • '"' : '\~\ l"'i· '
Forfefture·of refund ......... -

h• · - -~~·-- • ' > {: :~
Refund check or warrant issued by the BIR most be otaimed or ~ J. ;I l
Within five years from the date said warrant or check was mailed or I I
delivered; otherwise, the same wiH be forfeited in favor of the ~
and the amount thereof shall revert to the general fund. (Sec. 230 (At NIRCJ
Forfeiture of tax credit

A tax credit certificate issued in accordance with the provision of the fRC
m ust be utilized within s years from the date of issue. Unless revalidat.ed.
tax credit which remains unutilized after such period shaJJ be considered
invalid and shall not be allowed payment for int maJ ea ,
liabilities of the taxpayer.
It is also noteworthy to ment1on th

assignable under current regulation .
Action to Contest Forfeiture of Cb ttel
In case of the eizure of personaJ property und r I
owner desiring to conte t th lidi th rfi i
before the sale or de truction of th prope •, brin n
person seizing th prop rty or n uu~•-:-c:.;i. h
same, and upon giving pr p r b n •
and within (6) months, h • m b n
realized from th s.11• {St· . l J. J
AUTHORITY OF Tt-lE
CREDIT TAX
AUTHORI TY TO CO WR fl'il
Condition f r ·omprontht•:
The CIR may c mpmnw,t• tht· p 1
a A r •,1'>trn,1bl doubt t· h[ .ts
t.1xp.1 1 e1 c 1,h.
J The lin,11H ,.ti pu,111011
p :lV tilt' .I. st' l'd l.1
llllllllllll ul tOlllpl 0111

Io 0u ot tht· b.i-.1t ., It
. w u 1)1 thl' b,ISll I
n
( HllJJI UllllSt' I'> gl'IH.'I
1• •,()J t \)( tht• l,,._t-dlll l l lllt l
,.in ,11h1r1011 l II l> th th
d
19 _ Tax Remedies
chapter
will approve the offer of compromise by taxpayers?
Wlt~ffice of the Commissioner of Internal Revenue
a. N tional Evaluation Board (NEB)
~- R:gional Evaluation Board (REB)
e compromise of taxes is within the judgment and discretion of the

~~rnmissioner of Internal Revenue, except in the following cases:
compromise by the NEB

The NEB shall approve the compromise offer when:
1. the basic tax involved exceeds Pl,000,000 or
z. the settlement offered is less than the prescribed minimum rates
composition of the NEB:
a. The Commissioner of Internal Revenue
b. The four Deputy Commissioners
I tne
tirne All the decisions of the NEB, favorable or unf; vor bl , h ii h v th
t tne concurrence of the Commissioner .
. tne
sale Compromise by the REB:
eeai The REB shall approv the ff r mi r:
a. Assessments i sued by R i m lvin · " b
of PS00,000 or le
iOR · b. Minor criminal viol ati n di r~r.. ,~
Composition of the REB:

a. Regional Director - h irm n
b. Assistant R gio nal Dir
c. Chief, Legal Division
d. Chief, Asse m nt Divi · I n
e. Chief, Coll ction Divi i n
f. Revenue Di tri t m r h vln rth p r· pl nt
If the off r of ompromi I I th n th pr ib r t ,th m hll

always be subje t to th ppro 1of th EB.
The CIR alon c n nt r into h nth ta inv lv d
not exce d PlM, nd th i n t th pr rtb d
Percentage .
713
Chapter 19 - T Remedies
mp mi
un
2 r dmlnf tfV p
gdts for t
din i• I
tw tr1tr.t ~ 'V
ng
1
J fr ud
~mnw
,.
)•
p ...-n..-3..-,.,..m nt notlc sted by the taxpay r 5.

6,
ed?' 7.
ithh lding B,
rimin J fraud cases 9.
riminaJ violations already filed in courts 10,
D linquent accounts with duJy approved schedule of installment
men 11.
of reduced assessment agreed upon by the taxpayer 12.
e which have become final and executory after final judgment of a 13,
court 14.
15.
AUTHORITY OF THE CIR TO ABATE TAXES 16.
Under Section 204(B) of the NIRC, the CIR is authorized to abate or cancel a 17.
tax liability under the following conditions: 18.
1. The tax or any portion of it which appears to be unjustly or excessively 19.
assessed. 20.
2. The administrative or collection costs involved do not justify the
collection of the amount due. Trm
3. The taxpayer is dead, leaving no distrainable or Ieviable property. 1.
4. The taxpayer is abroad leaving no forwarding address with no
distrainable or Ieviable property. 2.
5, The taxpayer is a corporation who has already dissolved and all 3.
subscribed shares of stock have been fully paid.
6. The tax case has already prescribed. 4.
5. '
6. '
7.
8.
9.
714
___,,,,,,,,,
V 19 _ Tax Remedies
chapter
pT,...E~R=1=9=:S=E....
L.....
F-=T=E=ST=E..,..XE~R_c_,_sE...:;s_ _ _ _ _ _ _ _ _ _ __
~
ssion Questions
enumerate an exp am t h e two remedies of the government and the two
oisCll d I .
1, remedies of the taxpayer.
What are the powers of the CfR relative to the determination of the correct
2, taX of the taxpayer?
Discuss the prescriptive period of assessment.
3· Enumerate the stages of assessment.
4
· Discuss the BIR a udit process.
5
· Discuss the stages of assessment of a taxpayer.
6. h
7. Enumerate t e requisites of a valid assessment.
B. Discuss the notices issued to a taxpayer who will be assessed.
9. What is a jeopardy assessment?
10. Distinguish a request for reconsideration from a request for re-
investigation.
11. Enumerate the instances when collection is enforced by the BIR.
12. Enumerate the government remedies to enforce collections.
13. Illustrate the stages of collection.
14. Compare distraint to levy.
15. Explain the RA TE program of the government.
16. Discuss the prescriptive period of collection.
17. Discuss the procedures for disputing an assessment.
18. Discuss the procedures for recovering erroneously paid taxes.
J' 19. Enumerate the conditions for compromise of tax liabilities.
20. Enumerate the conditions for abatement of tax liabilities.
True or False 1
1. Philippine taxes are assessed by the government subject to the concurrence
0 of the taxpayers.
2. An assessment will not push through without the approval of the taxpayer.
3. Government assessment is prima facie presumed correct and done in good
faith.
4. Recovering erroneously paid tax is a government remedy.
5. The government remedies are assessment and collections.
6. The taxpayers' remedies include payment of tax or delaying government
collections until the tax prescribes.
7. An assessment is a notice of tax deficiency or delinquency coupled with a
demand for its payment.
8. To determine the correct tax, the Commissioner of Internal Revenue can
inquire into the balances of bank accounts of the taxpayers.
9. The assessment must be made within 3 years from the filing of the return.
715
4. J
s. '
True or False 2
1. · The BIR must restrict its examination to those taxpayer groups listed in the 8.
BIR Annual Audit Program. Any assessment issued in violation of this r~le is
void. 9.
2. The pre-audit of tax returns may lead to an additional tax liability of the
taxpayer. . 10.
1
3. A revenue officer can issue his own letter of authority to any taxpayer he 11.
suspects of fraudulent tax reporting.
4. The business operations of taxpayers who are non -compliant with basic tax
rules and regulations may be permanently suspended a nd dosed. 12.
5. The business operations of taxpayers may resume after their compliance 13.
with requirements and payment of the penalties due.
6. The "letter of authority" is required to be an electronic copy printout 14.
7. The taxpayer can object to an investigation if he is given a manual LA. 15.
8. A tax verification notice is also an authority for an examination.
9. A letter notice is an authority for the examination of a particular taxpayer.
10. A taxpayer who is issued a letter notice may also be issued a letter of
authority. Tru1
11. A letter notice which is issued to a taxpayer who is imult neously issued a 1.
letter of authority is void.
12. The examination of the taxpayer shall be generally onducted in the BIR 2.
office so that the taxpayer cannot interfere with th ind p ndence of the
revenue officer.
3.
13. Ta~payers may be subject to audit examination mor than once in a year.
14. A Jeopardy assessment may be issued ba ed on the "best evidence 4, I
obtainable" rule.
15. A revenue officer who finds reasonable basis for the issuance of an
5. '
assessment must recommend the issuance of a warrant of distraint or levy.
716
Tax Remedies
ter 19 -
/1 JP
• e or
f atseessment
3 . 1s
notice . a lways reqmre
. d to b e given
. to a taxpayer w h o
1r11 re-ass
A P assessed.
1· \.viii be ents must always be coupled by a demand for the payment of the
j\ssessm
z,
taX~ failure of the taxpayer to respond within 15 days shall result to the
3. fh ce of a final assessment that can no longer be questioned in court.
·ssuan
1 fi al assessment notice from the BIR can no longer be questioned.
1
4, A :aiver of statutes of limitation is required for a request for
5, ~econsideration.
fhe failure to file a protest shall make the assessment final and executory
6· d unappealable to the CTA
~e assessment will become automatically final and executory on both
7· contested and uncontested issues if the taxpayer fails to submit the
required supporting documents.
If the BIR finds merits in the taxpayer's responses to the preliminary
8
· assessment letter, the impending assessment may be cancelled.
9. Assessment that reached the stage of finality shall be enforced for
collection.
lO. An assessment is always necessary for the collection of unpaid taxes.
ll. Once the assessment becomes final and executory, the government cannot
be enjoined from collecting the same. No court i authoriz d to u pend the
collection of taxes for whatever reason .
12. Payment under protest may be r cov r d by th t xp y r.
13. The Commissioner of Internal R v nu m y n t t on th prot t within
180 days.
14. A judicial appeal to the CTA i c II d p titi n fi r r vi won c rtior ri.
15. The failure of the taxpayer to st t th f nd th I gal b i in upp rt
his protest on a tax is ue shall make th s es ment on su h cont t d i u
final, executor, and demandable.
True or False 4
1. The collectio n of tax i nforc abl one n hi V
administrativ finality.
2. The remedies of distraint or I vy m y b v ii d by th nt v n
in default of n asse m nt.
3. The gov rnment m y r ort to u p n ion of bu in s op r tions to
enforce the ollection of tax .
4. The final noti e b fore izure letter must b i ued before thew rr nt of
di traint or I vy.
5. An in tallm nt payment nd a compromis ettlem nt ar ubject to th
approval of th BIR.
717
~-~~~~{~~- ~-ti ~,}rts-~~-;~~~~~;-' ,-; ~~,~' ~~- ~~r,: :~~.:?,./\~~?
·t · ~--i,, %~r. ;-~,~~·.,1'/'' "k.•~ 1<~ <L,·. ?1,~>t:,?,J'.: i ··; ~:->?,:z?:ri-~,)t
, , • -' ..,. •• .JJ , •......, • . .• l ,.,,-,;,,;,./4ii.U. ~J.'.•i,,,..,,,c,1-t, - ::.·
~ ,-\: ; -
·~ ~"f!u'
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" • ,.,,.
,__..1~ f'Jvpl'q,u'f.:P'
~ ~¼!, ~ '
ilti, ,;,..~-r;·"•~,-
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.
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Chapter 19 - Tax Remedies ,;·--: ,-,: * /,: • •• ·, ' ,,_'~, :· ·_ :_,:•l,r?:ftrf

f aJ action sim~Iht~~rlusl .~tl\ th· r -
6. The government may pursue Ju dle -. 1t ·, ' · · · · ,. , ,, •I ,\ . 1 ,
distratnt and/or levy ofa taxpayer's pro!:~;nd co11edf611' df ta,c~s shall
7. The statutes of 11mltatfon for the asse}sthe Philippines. · ,i. •'••- · \. • . 0e
~spended when the taxpayer Is outjod!cial appeal or administrative aph
8. The remedies of the taxpayer for ~ u . i , .: , i • 1' .t'ea1
. tu lly exc1us1ve. .
after the 180•day period a~e mu a aid taxes'must'be 'filed Within 2 ye
The claim for refund for errone9usrt.y P. , ,:., . H 1 , ; , , -.,,. 1 i,. , , , • ; ats
J I Pi
from the filing of the return. ·, . \.-t, •• ~he · re'tur I is 'flrnd sh'owin
10. A claim for refund ls not e es J vv 1
1.. u , 1 g an 1 •
overpayment of tax. ust'pay,at least 10% of the·b .

L'
5
11. In a compromise settl ment, taxp ye 1, HJ · 1 1, m as1c
assessed tax in cases of financial incapacity~st ' .. a at least half of the .
12. In a compromise settlement, raxpayets mfi ~ iiincapacity 1 ,, basic
a essed tax in ,ill other cases other than' mancia a· h
13. A compromise may be benefic1a to · l b Oth the
_ •
government
, ,
an t. e, taxpay ; er.
1
14. Minor criminal violations may·be cotnpromi~~d. .
15. Taxes may be abated by the gover~ment when th e tax case -~~amst the
taxpayer has already prescribed.
Multiple Choice - Theory 1

1. The 3-year prescriptive period will' be extended by 1any 0 f 1tije following
instances except one. Choose the exception,
a. Failure of the taxpayer to file a return
b. Waiver by the taxpayer of the statutes of limitation
c. Filing by the taxpayer of a fraudulent return
d. Fortuitous events
2. In the case of late filing of return, the prescriptive period for assessment
shall be counted as
a. 3 years from the filing of the return.
b. 3 years from the payment of the tax.
c. 5 years from the deadline of the return.
d. 5 years from the filing of the return.
3. Which is correct regarding the pre-audit of a tax return?

a. Pre-audit is part of a regular audit.
b. Pre-audit requires the issuance of an LA.
c. Pre-audit is done to check mathematical computations or ascertain
correctness and validity of deductions claimed by the taxpayer
d. Pre-audit is a substitute for a regular audit.
718
med' s
• r 19 - Ta
C ll e
um n
m r mi
,m n n n I ng r b di pu d.
m nt n no long r be enforced.
c. Both statements
d. Neither statement
ill not be involved during the assessment stage?

ssme nt notice
r o demand and final assessment notice
io n on disput d assessment
collection letter
is no a remedy of the government to enforce collection of unpaid
payer properties
administrative penalties
business operations
d. the tax liability of the taxpayer
lO. T ailure o the taxpayer to make the installment payment of the tax shall
r suit in
a.. or itur o h tax balance.
b. he entir tax b lane b coming due and demandable immediately.
c. the issuance o an w ssessment
719
d. the criminal prosecution of the taxpayer.

A
11. Which is not required in an assessment notice? 3· fc
a. A declaration of tax deficiency from the taxpayer a.
b. A demand for the payment of tax deficiency of the ~axpayer
C. A statement to the effect that the taxpayer muS t dispute the findings of b
the examiner C
d. The details of the supporting facts and the legal basis of the assessment C
12. Exceptionally, an FLD/FAN may be issued outright except when

a. The taxpayer interposed valid defenses 4.
b. The deficiency tax results from mathematical errors
C. The deficiency tax pertains to unremitted withholding taxes
d. The deficiency tax pertains to excise tax on excisable articles
13. To freeze bank accounts and interests, the government shall issue a 5.
a. Notice of levy
b. Warrant of distraint
c. Warrant of garnishment
d. Preliminary collection letter
14. The issuance of an FLD /FAN after protest has been made by the taxpayer is
a. a denial of the protest. -
b. an illegal procedure which deprives the taxpayer of due process. 6.
c. called jeopardy assessment.
d. intended to expedite the collection of taxes.
15. An assessment made without the benefit of a complete or partial audit

a. Jeopardy assessment
b. Illegal assessment 7.
c. Disputed assessment
d. Finalassessment
Multiple Choice - Theory 2

1. In general, the conduct of the audit investigation of the taxpayer shall not
run over 8.
a. 60 days. c. 180 days.
b. 120 days. d. One year.
2. As a rule, taxpayers shall be subject to audit

a. annually.
b. at least once a year.
c. only once a year.
720
cnaP r1 - Tax m Ji
d. ( r i, I n . th mn d I
m ·I t on 'iderlng th taxpayer's audit
ri~~ .
subj • t mult·lpl
a udits during the year in the
3. A t, r>• r
f 11owh t on . hoo th x ptlon.
d r tion by h " xpayer which was granted by the
b. Wh n ne d t v rlfy pltal gains tax liabili ties

IR f fr ud or mistakes committed by the taxpayer
d. on
4. p n r c lpt of preliminary assessment notice, the taxpayer must

r pond within
10 day . c. 30 days.
b. 15 d y . d. 60 days.
s. The final decision of the CIR may be administratively disputed by the

taxpaye r within
a. 15 days from receipt thereof.
b. 15 days from issuance thereof.
c. 30 days from receipt thereof.
d. 30 days from issuance thereof.
6. A taxpayer who concedes to a BIR assessment must

a. pay the tax.
b. file a motion for re-investigation.
c. pay the tax and file a claim for refund.
d. file a petition for review with the CTA.
7. Documents are required to support a

a. Request for reconsideration
b. Request for re-investigation
c. Both A and 8
d. Neither A nor B
8. The document must be submitted within

a. 60 days from the receipt of the FLO/FAN.
b. 60 days from the submission of the protest.
c. 30 days from the receipt of the pre-assessment notice.
d. 30 days from the issuance of the FLO/FAN.
721
9. A taxpayer's motion for reconsideration may be acted upon by the BIR

within
a. 180 days from the submission of documents. 'J,.
b. 180 days from the filing of the protest.
c. 60 days from the filing of the filing of the proteSt .
d. 60 days from the receipt of the final assessment notice.
10. A taxpayer's motion for re-investigation may be acted upon by the BIR
within
a. 180 days from the submission of documents.
3.
b. 180 days from the filing of the protest.
c. 60 days from the filing of the filing of the protest. .
d. 60 days from the receipt of the final assessment notice.
11. The seizure of personal property is

a. Distraint c. Levy
b. Garnishment d. Forfeiture
4.
12. The seizure ofreal property is
a. Distraint c. Levy
b. Garnishment d. Forfeiture
13. The seizure of interests such as bank acco unts and cred its of th e ta payer is
called
a. Distraint. c. L vy. 5.
b. Garnishment. d. For~ itur .
14. The remedies of distraint levy can b u d only wh n the amount f tax
a. do not exceed Pl 00.
b. do not exceed Pl,000.
c. exceeds Pl00.
d. exceeds Pl,000.
15. Used to validate the legal claims of the gov rnm nt t t xp y r's property
a. Notice of tax lien
b. Notice of seizu re
c. Warrant of distraint or levy
d. Final notice
Multiple Choice: Theory 3

1. Seized properties shall not be sold at public auction
a. after the property has been adverti ed for at J a t 30 d
b. if the taxpayer settled the assessment. y·
722
d
chaPter 19 - Tax Remedies
c. if the taxpayer did not pay the assessment

d. if the amount of tax does not exceed Pl00.
2
Who shall
' exceed conduct the distraint of property when the amount of tax do no t
Pl,000,000?
a. Revenue director
b. Revenue district officer .
c.
Commissioner of Internal Revenue
d. Deputy Commissioner
3. Properties of the taxpayer shall be seized in sufficient quantity to cover the

following costs except one. Choose the exception.
a. Tax due including penalties and interest
b. Expenses of the distraint
c. Selling expense of the property
d. Service fee of the BIR
4. who
Constructive
is distraint is least likely to be made on a property of a taxpayer
a. intending to remove or conceal hi property.
b. retiring from a business subj ct t t
c. intending to leave th e Phi lippin .
d. changing business addres with du n ti iv n to th BIR.
5. Statement 1: Levy and distraint may b don simultan ously.

Statement 2: Levy may be done after the di traint of p r on I pr p rty.
Which is correct?
a. Statement 1
b. Statement 2 c. Both statement
d. Neither statem nt
6. Statement 1: The gover nment may forfeit prop rty In it -!

vor after the
failure of three auction sales to raise th amount f th e un P t .x. b h
I
Statement 2: The taxpayer may redeem th prop rty forfeited y t e
government within two years.
Wh ich statem ent is false?

a. Statem ent 1
c. Both statements
b. Statement 2
d. Neither statement
723
7. Sta.tement 1: RATE~ atefl'.,._,.19

has attained the state of finality. ·,·• '· L' • ·
Sta.tement 2: Returns are considered (raudulm

underdectared or ttemsof deductioo&are
Which statement ls correct?

a. Statement 1
b. Statement 2
8. Collection mu be by
a, 3 y from th aDl!SIIMl'lL
b. Sy from
c. 10 y
d. l y
l J.
I •
C
0
• r.: · _ Tax Remedies
. :" cnapter 19 .
' t 1: Refund checks or warr nts wh1tn emai -un'elaihf a or
. stateme~ed within 5 years will be forfeited unless revalidated: · , · 1
:• 12.unencas r ' ' ' ~ • } • I' I ..
tatement2. . Tax credit certificates which rema . in

, .. ,unuse,d "Zithin
. ' ,•; .~. 5 years will
!e forfeited unless revalidated. , .8 . .
Which is true? ' ' , hO ,t !
Statement 1 c. Both statements 0
~: Statement 2 d. Neither statement
. .£
Which is true regarding a compromlse? _. ·J • ,
13·
a. Taxpayers requesting for a compromise must , settle
, . at;:) least
, 40%
, of the
tax. , •1 , .n
b. It is entered into when a reasonable doubt as tq the_validity of the claim
against the taxpayer exists. ~ ;,
c. Compromise is a coercive way to enforce collection oft~.
d. All of these
elitninary
l
14. Who is not authorized to approve a taxpayer's offer for compromise?

a. The Revenue District Officer who has jurisdiction over the taxpayer j
b. The Commissioner of Internal Revenue

c. The National Evaluation Board
d. The Regional Evaluation Board
uspended
15. Which can be compromised?
a. Withholding tax cases
b. Criminal tax fraud cases
c. Protested assessment cases
d. Cases of reduced assessment which were agreed by the taxpayer
taXes? 16. Which cannot be compromised?

from the a. Collection cases filed in courts
b. Civil tax cases contested by the taxpayer before the courts
supreme
c. Delinquent accounts with approved scheduled installment payments
:nust be d. Minor criminal violations
Mc1aim
l 7. The CIR may not abate taxes in which of the following conditions?
a. The tax or any portion of which appears to be excessively assessed.
b. The taxpayer offered for a compromise settlement
c. The taxpayer is dead with no property left.
d. The tax case already prescribed.
I 725
Chapter 19 - T R m i s
4. A y r ubmltted motion for r -fnvestfgatlbn ffi response to the BIR's
formal letter of demand and final assessment notice. He must
. Walt for a period of 180 days for BIR action. 14...
ubmft documents within the 180-day period. "'
c. ubmtt documen within 60 days.
d. aft for the BfR to Issue a subpoena duees teeum.
5. A taxpay r recelv d an adverse tlnal decision on a disputed assessment

which was fgned by an authorized representative of the Commissioner. He
must
a. RI a petition for review on certiorari with the Supreme Court within
15 days.
b. file a petition for review with the Court of Tax Appeals within 30 days.
c. elevate the case before the Commissioner of Internal Revenue.
d. B or C
6. An adverse final decision on disputed assessment issued by the

Commissioner must be disputed by filing a
a. petition for review with the National Evaluation Board.
b. motion for reconsideration with the Commissioner.
c. petition for review with the Court of Tax Appeals.
d. petition for review on certiorari with the Supreme Court.
7. The following data relates to a disputed assessment of a taxpayer:
Deadline of the return : June 30, 2017

Filing of the return : June 30, 2017
Date PAN was received : July 15, 2020
No reply was made to the PAN
Date FLD /FAN was received : August 5, 2020
What is the taxpayer's next procedure?

a. He must file a motion for reconsideration on or before September 4
2020. '
st
b. He mu reque_st for a re-investigation on or before September 4, 2020.
c. He must submit documents on or before October 4, 2020.
d. No more because the taxpayer defaulted.
8. The following data relate to the disputed assessment of a taxpayer:
Date FLD/FAN was received

: August 5, 2020
Filing date of a motion for reconsider t·
CIR,s d ema
. I a 10n : August 29, 2020
of the request
: December 4, 2021
728
er 19 - Tax Remedies
chaPt
a. petition for review before the CTA on or before January 3, 2021.
b. Petition for review before the CTA on or before January 31, 2021.
c. Petition for review on certiorari before the Supreme Court on or before
January 3, 2021.
d. Petition for review on certiorari before the Supreme Court on or before
January 31, 2021.
9. The following data relates to the disputed assessment of a taxpayer:

Date of denial of protest : March 5, 2016
Date petition for review was filed with CTA : March 29, 2016
Date of release of an adverse CTA en bane decision : December 4, 2019

a. File a motion for reconsideration with the BIR on or before January 3,
2020
b. Petition for review on certiorari with the Supreme Court on or before
January 3, 2020
c. Petition for review on certiorari with the Supreme Court on or before
December 19, 2020
d. No more. The taxpayer has slept on his right.
10. A taxpayer defaulted for failing to seasonably interpose a valid protest on

an assessment issued January 5, 2014. On December 31, 2020, the BIR sent
a preliminary collection letter.
What is the best defense of the taxpayer?

a. Raise the issue of prescription.
b. Apply for a compromise settlement.
c. Apply for an extended payment term.
d. Raise the issue of failure of jurisdiction.
729
_,

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- _ oocumentary Stamp Tax

Nature of documentary stamp tax

Documentary stamp taxes are levied on the exercise by persons of certain

The documentary stamp tax may e nd actual affixture on the docurnen

Documentary stamp tax return . BIR Form 2000

Deadline of payment . able within 10 days after the

Wh OS ha II fil e th e documentary stamp tax return?

_ Documentary Stamp Tax

Basic principle in O T imposition:

1. One tran action, one tax.

This is taxable as a share issue transaction. The exchange of the property

2. Scope of taxable transaction

3. Invalidity of contract does not affect DST imposition the

_ only transactions or documents listed by the law is taxable

siamp Taxes on Real Properties

Deed of sale and real properties

The fair value of the commercial building shall be:

Fair value P 12,000,000

Illustration 2 'th fair value of Pl0,000,000 to the governrn.e fr 0 '

Donation of real properties

summary of DST rules on real property

Stamp Taxes on Shares of Stocks

Original issue of stocks

Examples of taxable transactions:

Chapter 18 - Documentary st amP Tax 1

The documentary stamp tax shall be computed as: Or

Illustration: Statutory merger

·'·)t ,: . ;;/. cti~f

h d cumentary stamp tax shall be computed on the value represented by

his share in the IPO. n

Assume further that La uco n conducted a fo llow-th rough offering involving

A u~e Mr. Wong is an exis~~g shareholder of Axellum except that the

Shareholder's assessments without the issuance of stocks is not subject to

fil:aIDP Tax on Certificates of profits or Interest in Property or

Interest in property or accumulations includes interests in various funds such as trust

The documentary stamp tax shall be P 1,000,000 x P1/f200 = P 500.

Chapter 18 - Documentary Stamp Tax '

Stamp Tax on Debt Instrume~ts h hall be collect d

The documentary stamp tax shall be computed as:

Bonds face (20,000 x Pl,000) P 20,000,000 ...._.........,._tilll

The assignment of domestic bonds is not subject to documentary stamp'truc!'Only

Loan principal P 800,000.00

Chapter 18 - Documentary Stamp T~... :!Wtiu~itl

· a o~rowmg and Lend ing of s urities executed under_tpe iSecurjtie~ Bf,m'.QWing

8. Fixed income and other securities traded in secondary markets or through an

Tarlac City Branch office P 400,000

The documentary stamp tax shall be:

The share borrowing transaction is not subject to documentary stamp tax.

stamp Tax on Bonds, Debentures, Certificates of Stocks or Indebtedness

Comparison of DST Rules on Shares and Debt Instruments

Issue prlce of bonds P 26,000,000

Stamp Tax on Morq:ages, Pledges and Deeds of Trusts

s - Documentary Stamp ;rax

pocumentary stamp tax P . 12._Q30 II 8

CLI Finance lent various clients under a long-tenn collateralized borrowing

Client A P 2,000,000 Real estate worth P3,000,000 I

stamp Tax on Bills of Excham:e, Drafts or Order

Bill of exch ange vs. Promissory note

The documentary stamp tax shall be: ',

Scope of the DST on bills of exchange: T . s

Ch eck vs. B"ll

Draft is an instrument created by the bank (drawer) to be given to a payee. It is a

The bank shall require payment of P 150, computed as P 3 x 50, documentary