DEPARTMENT OF FINANCE

Bureaus
Bureau of Internal Revenue (BIR)
Bureau of Customs (BOC)
Bureau of Local Government Finance (BLGF)
Bureau of the Treasury (BTr)

UNITS/CORPORATIONS
Philippine Tax Academy (PTA)
National Tax Research Center (NTRC)
Central Board of Assessment Appeal (CBAA)
Insurance Commission (IC)
Securities and Exchange Commission (SEC)
Philippine Crop Insurance Corporation (PCIC)
Philippine Guarantee Corporation (PHILGUARANTEE)
Land Bank of the Philippines
 BUREAU OF INTERNAL REVENUE

BIR COMMISSIONER

DEPUTY COMMISSIONERS

(a) Legal, (b) Operation, ( c) Information System, (d) Resource Management

ASSISTANT COMMISSIONERS

REGIONAL DIRECTORS

DISTRICT OFFICERS
BUSINESS

The phrase “doing business” means some “trade or commercial activity + regularly engaged in as a
means of livelihood or with a view of profit.

“Commencement of Business” – in the case of pursuit of business or practice of profession, it shall be reckoned
from the day when the first sale transaction occurred or within thirty (30) calendar days from the issuance of
Mayor’s Permit/Professional Tax Receipt (PTR) by LGU, or Certificate of Registration issued by the Securities and
Exchange Commission (SEC), whichever comes earlier.

Businesses in the Philippines may be able to register for VAT or Percentage Tax.
Both are types of business-related taxes incurred on the sale of services or sale of goods.

Gross Receipts Gross Sales

SEE NEW RULES PER RA 11976

Both are Reportable under Accrual Basis
Commercial of Sales invoice is issued .
TAX ADMINISTRATION
BIR COMPLIANCE REQUIREMENTS

Tax mapping is a regular inspection of business establishments to determine their compliance

with registration, bookkeeping, and invoicing regulations of the Bureau of Internal Revenue (BIR).

TAX REGISTRATION
COMPLIANCE as to INVOICING
VEFIFICATION BOOKKEEPING
D RIVE

Business owners who are violating or not complying with the BIR rules will be penalized from P1,000 to
P50,000, depending on the nature of the violation.
RA 11976, LOWERED to P500 for
small and micro businesses,

Some violations may lead to business closure (OPLAN CANDADO), criminal charges, and imprisonment.
 AVOID PENALTIES To be Displayed
Observable in Conspicuous Area

• Display the following in your Business place:

1. 2303, Certificate of Registration
Repealed Under RA 11976 2. Form 605, Proof of Payment of Annual Business Registration
3. Notice to Issue Receipts/Invoice (ASK FOR RECEIPT BIR plate)

RA 11976, Only Commercial Sales Invoice is to be issued

for both Goods Sold and Services Rendered , All are
accrual reporting

Failure to display, penalty =P1,000/violation (P500 per RA 11976 applicable to Small

and Micro taxpayers)
A 11976
 RA 11976, Special Concession to Micro and Small Taxpayers;

Micro, Less than P3,000,000 Sales

Small, Less than P20,000,000 Sales

 Income Tax Return, Maximum of two pages.

 Reduced Rate of 10% for Civil penalties under Section 248 of NIRC 25%

 50% Reduction on Interest Rate under Section 249 of NIRC (RR 20-2018, 12%)

 Reduced fine of P500/failure under Section 250 of NIRC P1,000/failure

 Reduced Compromise Penalty of at least 50% under Section 113,237 and 238 of NIRC
CERTIFICATE OF REGISTRATION
The Certificate of Registration (BIR Form 2303) will be
issued not later than five (5) working days from filing of application and submission of all
documentary requirements, and upon presentation of duly validated BIR Form 0605 as proof of
payment of Annual Registration Fee or Official Receipt.
Repealed by
RA 11976
ANNUAL REGISTRATION FEE, P500/business establishment
Repealed, RA 11976, January 22, 2024

1901 Application for Registration for Self-Employed and Mixed

Income Individuals, estate and trust doing business.

1903 Application for Registration for Corporations/ Partnerships

(Taxable/Non-Taxable)

1902 Registration to secure TIN for employee within 10 days from first day of employment.v

1904 one time Registration like application for TIN of the Estate of the decedent.
Secondary Registration

• 1905, Registration of Book of Accounts

• 1906, Application for Authority to Print Receipts & Invoices
• 1900, Application for Authority to Use Computerized Accounting Systems and/or
Components thereof/Loose-leaf Book of Accounts
• 1907, Application for Permit to Use Cash Register Machine (CRM) and/or Point of Sales Machine (POS)

RMC 117-2019 BIR PRINTED INVOICE(BPI) and BIR PRINTED RECEIPT (BPR)

Available at BIR RDO at minimum cost of P100 or Lower per 50 pcs/booklet

Good for one year temporary use until The printed Invoice/Receipts covered with ATP is available

Allowed to be used temporarily by:

1. New business registrant
2. Business with low volume of turn over which 50 pcs/booklet will be enough for one year use
3. Political parties, and candidates
COMMERCIAL or SALES INVOICE

VAT registered person shall issue Sales or Commercial invoice for every goods sold or services
rendered.
In case of VAT sales of P1,000 or more , information to be indicated;
 Name
 Address of the purchaser
 TIN

Non VAT registered person shall issue Sales or Commercial Invoice for goods sold or services
rendered valued P500 or more.

Non VAT registered erroneously issued VAT invoice is liable to:

 Its OPT,
 12% VAT + 50% Surcharge
RA 11976 POWER of BIR COMMISSIONER to suspend/close business operation temporarily for the
following violations:
 Failure to issue invoice
 Failure to file VAT Return
 Understatement of taxable sale by 30% or more of factual sales.
BOOKS OF ACCOUNTS

Manual Books of Accounts: The company uses BIR-approved/stamped hard-copy ledgers and journals.
This requires accounting transactions to be encoded entirely by hand by the company’s bookkeeper.
Loose-Leaf Books of Accounts must be maintained via a process that combines digital systems and manual
submissions
 Must be always available in the business place.

 Entries must be handwritten in ink, in native language or English

 Must be preserved for 5 years from the date of last entry (RA 11976)

Loose-Leaf Books of Accounts must be maintained via a process that combines digital systems and
manual submissions

Computerized Accounting System (CAS): This is where the books/accounts are generated by a computer
system. Transactions are recorded, reports are generated and receipts/invoices are issued using a digital or
computerized accounting system.
BIR CASE MONITORING SYSTEM

STOP FILERS are taxpayers who were identified to have failed to file their returns as indicated in the Revenue Data
Center’s Returns Compliance System.

Open cases are BIR returns or tax forms a COR holder failed or forgot to file thru the online eBIR app. They could be
monthly, quarterly, or annually depending on the taxes indicated on the COR (Certificate of Registration) issued by
BIR during application for registration.

RESOLVING OPEN CASES

1. If the taxpayer has proof that those returns tagged as “not file”, he must present those actually filed returns if
any to the Revenue District office to clear and close his “open case”.

2. If the returns were actually not filed, the taxpayer will be required to pay the corresponding penalty to close the
“open case”.

NIRC SEC. 250. Failure to File Certain Information Returns. - In the case of each failure to file an
information return, statement or list, or keep any record, or supply any information required by this
Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due
to reasonable cause and not to willful neglect, there shall, upon notice and demand by the
Commissioner, be paid by the person failing to file, keep or supply the same, One Thousand Pesos (P
1,000) for each failure: Provided, however, That the aggregate amount to be imposed for all such
failures during a calendar year shall not exceed Twenty-Five Thousand Pesos (P 25,000).
 BUSINESS CLOSURE, Required documentation

In the system of BIR, unless a business closure has been filed, COR remains registered even if the
business or practice of profession stopped.

One common mistake of some taxpayers is thinking that when their businesses stop operating, they are
automatically relieved from the obligation to file tax returns. Some taxpayers are unaware that there is a need to
formally close their business with the BIR. Until the taxpayer files its business closure with the BIR, even with zero
transactions, the taxpayer is still required to file regular tax returns indicated in the Certificate of Registration.
Failure to file the tax returns will result in “Open Cases,” which pertain to the list of tax returns in the BIR’s system
that are tagged as not filed or not submitted.

Resolving these open cases, which would entail payment of penalties, is required before the old business can be formally cleared
and closed with the BIR. It is worth noting that these open cases do not prescribe and will continue to accumulate regardless of
the years of non-operation, unless the taxpayer properly applies for business closure with the BIR. Under the current rules, the
penalty is P1,000 for every unfiled NIL tax return or attachment, provided that the aggregate amount of penalty does not exceed
P25,000 during a calendar year. So, if the business stops operating and is not properly closed for a decade or more, the penalty
could reach up to P250,000 and more if the taxpayer has tax deficiencies.
DEREGISTERING OF BUSINESS
Initial clearance is to be secured from local treasurer’s office from where the mayor’s permit to operate
your business was issued.

Deregistering a business with the BIR requires the filing of a notice of closure or cessation of business to the
RDO where it is registered, by accomplishing the prescribed registration updates form and submitting the
required documents. Pursuant to Revenue Memorandum Circular No. 57-2020, the streamlined documentary
requirements are as follows:

1. BIR Form 1905 (2 originals);

2. Death certificate, in case of death of an individual (1 photocopy);

3. List of ending inventory of goods, supplies, including capital good (1 original);

4. Inventory of unused sales invoices/official receipts (1 original); and

5. Unused sales invoices/official receipts and all other unutilized accounting forms (e.g., vouchers,
debit/credit memos, delivery receipts, purchases orders, etc.) including business notices and permits as
well as the Certificate of Registration (BIR Form 2303) subject for destruction to be witnessed by BIR
personnel and officials (1 original).
ASPECTS OF TAXATION

LEGISLATIVE ASPECT= Levy and imposition

TAX ADMINISTRATION
The Bureau of Internal Revenue is an agency of Department of Finance.
BIR collects more than half of the total revenues of the government.

Assessment
BIR the principal agency for Internal Revenue TAX ADMINISTRATION
Collection

Chief Officials of the Bureau of Internal Revenue. –

The Bureau of Internal Revenue shall have a chief to be known as Commissioner of Internal Revenue, hereinafter
referred to as the Commissioner and four (4) assistant chiefs to be known as Deputy Commissioners.

DEPUTY Commissioners: Legal, Operation, Information System, Resource Management

POWERS and DUTIES of BUREAU OF INTERNAL REVENUE As Mandated:

 Assessment and collection of all national internal revenue taxes, fees and charges.

 Enforcement of all forfeitures, penalties, fines and execution of judgments in all cases

decided in its favor by the Court of Tax Appeals and the ordinary courts

 Administer supervisory and police powers conferred by National Internal Revenue Code as

amended by R.A. 8424 or other laws.

POWERS of the BIR Commissioner

Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases

Section 5. Power of the Commissioner to Obtain Information, and to Summon, Examine,

and Take Testimony of Persons

Section 6. Power of the Commissioner to Make assessments and Prescribe additional

Requirements for Tax Administration and Enforcement

Section 7. Authority of the Commissioner to Delegate Power.

Section 8. Duty of the Commissioner to Ensure the Provision and Distribution of forms,
Receipts, Certificates, and Appliances, and the Acknowledgment of Payment of Taxes
That the following powers of the Commissioner shall not be delegated:
(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;

(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau;

(c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any tax liability: Provided, however,
That assessments issued by the regional offices involving basic deficiency taxes of Five hundred thousand pesos
(P500,000) or less, and minor criminal violations, as may be determined by rules and regulations to be promulgated
by the Secretary of finance, upon recommendation of the Commissioner, discovered by regional and district
officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as
Chairman, the Assistant Regional Director, the heads of the Legal, Assessment and Collection Divisions and the
Revenue District Officer having jurisdiction over the taxpayer, as members; and

(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax
are produced or kept.
 Authorities of the Commissioner
In Deciding Tax Cases

Unjustly/Excessively Assessed
a. To abate or cancel tax liability
Cost does not warrant the amount being collected

Other Instances when ABATEMENT could be exercised:

i. Taxpayer is dead, leaving no distrainable/leviable property.
ii. Collection of the delinquent account has been prescribed.

b. To enter into tax compromise

10% of Basic Tax, Due to financial incapacity of taxpayer

40% of basic tax, Due to doubtful assessment

Where the basic tax involved exceeds One million pesos

(P1,000.000) or where the settlement offered is less than the
prescribed minimum rates, the compromise shall be subject to the
approval of the Evaluation Board which shall be composed of the
Commissioner and the four (4) Deputy Commissioners.

c. To refund taxes ( erroneously or illegally collected)

TAX COMPROMISE , An agreement to settle the tax liability at lower amount than what is actual amount being assessed.

What are tax cases that may be compromised?

• a. delinquent payments
• b. cases under administrative protest after issuance of final notice of assessment.
• c. criminal violations involving tax fraud, other than those already filed in court
• d. Civil tax cases being disputed before the courts
• e. collection cases filed before the court

What tax cases may not be compromised?

• a. withholding taxes
• b. criminal violations involving tax fraud, already filed in court
• c. tax cases with final judgment already rendered by court
 Refund or Credit Taxes

No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing
with the Commissioner a claim for credit or refund within two (2) years after the

payment of the tax or penalty: Provided, however,

That a return filed showing an overpayment shall be considered as a written claim

for credit or refund.

A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any
internal revenue tax, excluding withholding taxes, for which the taxpayer is directly liable.
 TAX ASSESSMENT = Determination of Tax Liability

TAXPAYER GOVERNMENT

1701/1702 LOA`, Letter of Authority

Gross Taxable Income xxx
Waiver of the statute of limitation
Standard deduction
Itemized Deductions SDT, Subpoena Duces Tecum

Net Taxable Income xxx ND, Notice of Discrepancy

X %
PAN, Preliminary assessment notice
Income Tax due xxx
Less: FAN, Final assessment notice
Tax Credits xxx

Net Tax Payable xxxx

GOVERNMENT TAX ASSESSMENT

Requisite of Valid Assessment

·Assessment must be made within the prescriptive period
·Pre-assessment notice must be sent to the taxpayer
·The taxpayer must be informed in writing of the law and the facts upon which the assessment was made.

SEC. 203. Period of Limitation Upon Assessment and Collection. –

Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last
day prescribed by law for the filing of the return, and no proceeding in court without assessment for the
collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the
return was filed.
For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day.
BIR’s tax assessment process • This must be served to concerned
taxpayer w/ in 30 days from date
LOA, The BIR’s tax assessment process starts with the issuance of a Letter of Authority of issuance, otherwise it shall
become null and void.
(LOA)
Any tax assessment issued without an LOA is a violation of the taxpayer’s right to due • It can be revalidated only once, if
process, and is therefore, “inescapably void”. issued by the Regional offices.
Included in the LOA is a Checklist of Required Documents to be audited.
* It can be revalidated twice, if
issued by the National office.

Taxpayers must always ensure that a valid LOA has been duly issued and
received before the BIR can proceed with its tax assessment. If only a
Letter Notice (LN) was received, the revenue officer cannot proceed with
further examination and assessment of taxpayer unless an LOA is also
secured.
SDT, subpoena duces tecum, will be issued that the taxpayer will comply with the notices on the submission of
required documents.
If the taxpayer still fails to submit or submits incomplete requirements,
then the issuing office of the BIR may forward the case to the Prosecution
Division at the National Office or the Legal Division at the Regional Office,
as the case may be.
 A Waiver of the Statute of Limitation is a written agreement between the taxpayer and the BIR to
extend the three-year period for assessment pursuant to Section 222 of the NIRC RA8424
No longer available when Subpoena Duces Tecum is already issued.
In case the BIR requests for a waiver, the taxpayer should always assess
whether a waiver is advantageous to him or if it will just unnecessarily
lengthen the assessment process.

Notice of Discrepancy (ND). Under RR No. 22-2020, a Notice of Discrepancy (ND) must be issued to the
taxpayer if he is found liable for deficiency taxes during an investigation conducted by a revenue office.

The taxpayer must be able to present and explain his side on the
discrepancies noted by the BIR within five days from receipt of the ND. In
case the taxpayer needs more time to present documents, he may submit
such documents and explanations after the discussion but within 30 days
from receipt of the ND.
The PAN Preliminary Assessment Notice, is a written communication issued by the Commissioner of Internal
Revenue or his duly authorized representative informing a taxpayer who has been audited of the findings of his
deficiency taxes, showing in details the facts and the law, rules and regulations, and/or jurisprudence on which the
assessment is based.
If the taxpayer disagrees with the findings stated in the PAN, he shall then have fifteen
(15) days from his receipt of the PAN to file a written reply contesting the proposed
assessment. (RR12-1999, as amended by RR 18-2013 dated November 28, 2013)
FLD/FAN Final Assessment Notice, is a written demand to pay deficiency taxes (RR 18-2013 dated November 28,
2013 and RMC 11-2014 dated February 18, 2014) issued to a taxpayer who fails to respond to a PAN within the
prescriptive period of time, or whose reply to the PAN was found to be without merit, whether in full or in part

Taxpayer may Protest to the FLD/FAN within 30 days from date of receipt of the
FLD/FAN either through a Request for Reconsideration or a Request for
Reinvestigation.
Request for Reconsideration – refers to a plea for Request for Reinvestigation – refers to a plea for
re-evaluation of an assessment on the basis of re-evaluation of an assessment on the basis of
existing records without need of additional evidence. newly discovered or additional evidence that a
It may involved a question of fact or of law or both. taxpayer intends to present in the reinvestigation.
* Submit all relevant supporting documents in
support of his protest within sixty (60) days from
date of filing of his letter of protest, otherwise, the
assessment shall become final.
A PAN shall not be required in any of the following cases, in which case, issuance of the Final Assessment
Notice for the payment of the taxpayer’s deficiency tax liability shall be sufficient:
(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax
appearing on the face of the tax return filed by the taxpayer; or

(b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the
withholding agent; or

(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable
period was determined to have
carried over and automatically applied the same amount claimed against the estimated tax liabilities for the
taxable quarter or quarters of the
succeeding taxable year; or

(d) When the excise tax due on excisable articles has not been paid; or

(e) When an article locally purchased or imported by an exempt person, such as, but not limited to vehicles,
capital equipment, machineries and
spare parts, has been sold, traded or transferred to non-exempt persons (Section 228, NIRC).
COURT PROCEEDINGS to protest Assessment

If the protest is denied, in whole or in part, by the Commissioner or his duly authorized
representative, the taxpayer may

Appeal to the Court of Tax Appeals, through a Petition for Review, within thirty (30) days from
receipt of the said decision

In the event that the Taxpayer is likewise unsatisfied with the decision of the Court of Tax
Appeals (en banc), he may appeal this decision with the Supreme Court, within fifteen (15)
days from receipt of the Decision/Resolution. (Rules of Court)
COLLECTION OF TAXES
· Pay as you file
· within five (5) years following the government assessment of tax
· a proceeding in court for collection, without assessment, may be instituted within ten (10) years after the
discovery of falsity, fraud or omission in the case of a false or fraudulent return with intent to evade tax or
failure to file return.

No court shall have the authority to grant an injunction to restrain the collection of any internal revenue tax,
Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent
(25%) of the amount due, in the following cases: (Repealed by RA11976, reduced to 10% for Micro and Small
Businesses)
(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules
and regulations on the date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other
than those with whom the return is required to be filed; or (Repealed under RA11976M Jan. 22, 20224)

(B) In case of willful neglect to file the return within the period prescribed by this Code or by rules and regulations,
or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (50%) of the
tax or of the deficiency tax.

Rev. Reg 21.2018, The deficiency interest shall be 12% per year which is double the 6% legal interest on loans
pursuant to BSP Memorandum No. 799, s. 2013. Repealed under RA 11976, reduced to 6% for Micro and Small
Businesses.
TAX COLLECTION REMEDIES
SEC. 205. Remedies for the Collection of Delinquent Taxes
1. Civil Remedies:
Accept a Tax Compromise, the Lower amount offered by the taxpayer to settle the tax deficiency assessed.
Tax Lien, Priority of govt claim over all property and rights to property belonging to the taxpayer.
This lien shall not be valid until notice of such lien shall be filed by the Commissioner in the office of
the
Register of Deeds of the province or city where the property of the taxpayer is situated or located.
Distraint proceedings on Movable Properties of the Delinquent Taxpayer
Purchase of movable properties not sold thru distraint proceedings.

Levy proceedings on Real Properties of the Delinquent Taxpayer

Forfeiture of Real properties not sold thru levy procedings in behalf of the
government

Redemption of Property Sold under levy proceeding. - Within one (1) year from the date of sale,
the delinquent taxpayer, or any one for him, shall have the right of paying to the Revenue District Officer
the amount of the public taxes, penalties, and interest thereon from the date of delinquency to the date of
sale, together with interest on said purchase price at the rate of fifteen percent (15%) per annum from the
date of purchase to the date of redemption.
The owner shall not, however, be deprived of the possession of the said property and shall be entitled to
the rents and other income thereof until the expiration of the time allowed for its redemption.
What remedies are available to the taxpayer in the settlement of his tax liabilities?

a) Payment in full including delinquency penalties;

b) Payment in installment including delinquency penalties;

c) Payment through compromise settlement (Revenue Regulations No. 30-2002); and

d) Payment through abatement of penalties (Revenue Regulations No. 13-2001)

An amended return is filed to make corrections, additions or omissions to returns already declared, provided they have not yet
been issued letters of authority from the BIR.

(RMC) No. 21-2018 indicates that ONLY the amendment of returns with additional tax being due shall warrant the
imposition of surcharges and penalties.

RMC No. 54-2018 an amendment of return where an additional tax shall be due , 25% penalty and 12% interest shall be
imposed on the additional tax to be paid. (RA11976, 10% and 6% )

Distinction between Tax Amnesty and Tax Condonation

Tax Amnesty – a general pardon or intentional overlooking by the state of its authority to impose penalties on
persons otherwise guilty of tax evasion or violation of tax laws.
Amnesty covers both civil and criminal liabilities are forgiven, but condonation covers only civil liabilities of the
taxpayer.
Tax Condonation – means to remit or to desist or refrain from exacting or imposing a tax.
Tax Condonation is when tax payer’s tax liability is pardoned/forgiven.

Tax exemption is grant of immunity from tax which others are obliged to pay.