Tax 2

Taxation 2
Course Outline
ATTY. XANDRIX J. PERALTA, CPA
Part 1
A) Authority and Function of Secretary of Finance – Sec. 2, 4
(NIRC)
B) Powers and Duties of Bureau of Internal Revenue(BIR) – Sec. 2
i. Assessment and Collection
ii. Enforcement of forfeitures, penalties, and fines
iii. Execution of judgments
C) Bureau of Internal Revenue(BIR) Officers in General
i. Chief officials – Sec. 3, NIRC
ii. Other officers – Sec. 10, Sec. 11
D) Powers of the Commissioner of Internal Revenue(CIR)
i. Interpret and Decide Tax Case – Sec. 4
Know the Terms of the following:
• Revenue Regulations - Revenue Regulations (RR) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner
of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal
Revenue Code (NIRC) and related statutes.
• BIR Rulings - are the official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation
of tax laws. A BIR ruling of first impression to be valid must not be against the law and it must be issued only by Commissioner of Internal
Revenue.
• Revenue Memorandum Circulars - contain pertinent and applicable portions, as well as amplification of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.
• Revenue Memorandum Orders - provide directives or instructions, prescribe guidelines and outline processes, operations, activities, workflows,
methods and procedures necessary in the implementation of stated policies, objectives, plans and programs of the BIR in all areas of operations,
except audit.
• Revenue Audit Memorandum Orders - provide standardized audit procedures and techniques in the conduct of audit of taxpayers
• Revenue Memorandum Rulings - are rulings, opinions and interpretations of the Commissioner with respect to the provisions of the Tax Code
and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to
time to inform taxpayers of the tax consequences on specific situations.
• Revenue Bulletins – Announcement and information released from time to time by the BIR.
I. Interpret and Decide Tax Case
1. Power Sector Assets v. CIR, GR 198146, 8 Aug 2017

2. CIR v. Fortune Tobacco, GR 167274, 21 July 2008
3. Misamis Oriental Association v. Dept. of Finance, 238
SCRA 632
4. Non-retroactivity of Rulings – Sec. 246
II. Obtain Information, to Summon, Take
Testimony, etc. – Sec. 5, Section 3, TRAIN.
• CIR v. Gonzales, GR 177279, 13 Oct 2010

• Fitness by Design, Inc. v. CIR, GR 177982, 17 Oct
2008
• Section 3. Section 5 of the National Internal Revenue Code of 1997 (NIRC), as amended, is hereby further amended to read as follows :
• "Sec. 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take Testimony of Persons. - In ascertaining the
correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or
in collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized:
• "(A) x x x
• "(B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from
any office or officer of the national and local governments, government agencies and instrumentalities, including the Bangko Sentral ng Pilipinas and
government-owned or -controlled corporations, any information such as, but not limited to, costs and volume of production, receipts or sales and
gross incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual fund companies, insurance companies,
regional operating headquarters of multinational companies, joint accounts, associations, joint ventures or consortia and registered partnerships, and
their members: Provided, That the Cooperative Development Authority shall submit to the Bureau a tax incentive report, which shall include
information on the income tax, value-added tax, and other tax incentives availed of by cooperatives registered and enjoying incentives under Republic
Act No. 6938, as amended: Provided, further, That the information submitted by the Cooperative Development Authority to the Bureau shall be
submitted to the Department of Finance and shall be included in the database created under Republic Act No. 10708, otherwise known as ‘The Tax
Incentives Management and Transparency Act (TIMTA)’.
III. Power to make Assessments, Etc. – Sec. 6; Section 4, TRAIN.
1. Examination of Returns and Determination of the Tax

Due
2. Best Evidence Obtainable
– CIR v. Hantex Trading, GR 136975, 31 Mar 2005
3. Authority to Terminate Taxable Period
4. Prescribed Real Property Values
5. Inquire Bank Deposits
SPOUSES EMMANUEL D. PACQUIAO AND JINKEE J. PACQUIAO, PETITIONERS, VS. THE COURT
OF TAX APPEALS - FIRST DIVISION AND THE COMMISSION OF INTERNAL REVENUE,
RESPONDENTS . G.R. No. 213394, April 06, 2016

Whether the FLD issued against the petitioners was irregular. - The FLD issued against the
petitioners allegedly stated that the amounts therein were "estimates based on best
possible sources." A taxpayer should be informed in writing of the law and the facts on
which the assessment is made, otherwise, the assessment is void. An assessment, in order
to stand judicial scrutiny, must be based on facts. The presumption of the correctness of an
assessment, being a mere presumption, cannot be made to rest on another presumption.
To stress, the petitioners had asserted that the assessment of the CIR was not based on
actual transactions but on "estimates based on best possible sources." This assertion
has not been satisfactorily addressed by the CIR in detail. Thus, there is a need for the CTA
to conduct a preliminary hearing.
MAY THE BIR INQUIRE BANK DEPOSIT?
Republic Act 1405, Section 2
All deposits of whatever nature with banks or banking institutions in the

Philippines including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office,
except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of
public officials, or in cases where the money deposited or invested is the
subject matter of the litigation.
People vs. Sps. Ligot (CTA Crim Case O-241)
2019 Court of Tax of Appeals case in People v. Spouses Jacinto and
Erlinda Ligot (Sps. Ligot) where the BIR thru the Anti – Money Laundering
Council (AMLC) was able to look into the deposits of Sps Ligot. They saw
that the Sps. Ligot had 12M deposits and was able to make amortizations to
properties however have not reported the same amount or any amount
income in the income tax return.
Banking on the evidence gathered from the AMLC, the BIR filed a criminal
case against the Sps. Ligot. However, the CTA Third Division decided in
favor and ACQUITED the Spouses Ligot since the court did not admit the
evidence gathered especially from the bank deposits as it was not within
the exception given by the Bank Secrecy Law and not within the Powers of
the Commissioner (enumerated above).
Hence, the BIR:
• Cannot inquire or look into your bank accounts unless
and until you fall into these exceptions:
• You waived or permitted the BIR to look into your account
• You are already dead
• You are asking for a compromise on your the tax liabilities
because financial incapability
• A foreign tax authority is asking for it.
IV. Delegation of Power; exception – Section 7
V. Other Powers
1. Power to Assign Internal Revenue Officers and
Employees – Sec. 16, Sec. 17
2. Power to Suspend Business

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Taxation 2

1. Power Sector Assets v. CIR, GR 198146, 8 Aug 2017

• CIR v. Gonzales, GR 177279, 13 Oct 2010

1. Examination of Returns and Determination of the Tax

RESPONDENTS . G.R. No. 213394, April 06, 2016

All deposits of whatever nature with banks or banking institutions in the

2. Power to Suspend Business

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