ACYTAXN: Powers and Authority of the Commissioner of Internal Revenue

Power to Interpret Tax Laws and to Decide Tax Cases

The power to interpret the provisions of the Tax Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance;

The power to decide disputed assessments, refunds of internal revenue taxes, fees and other charges, penalties imposed in relation thereto, or other matters arising under the Tax Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.

Power 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. To examine any book, paper, record, or data which may be relevant or material to such inquiry;

B. To obtain on a regular basis any information such as, but not limited to, costs and volume of production, receipts or sales and gross income of taxpayers, and the names, addresses, and financial statements of corporations and other companies and their members;

C. To summon persons to appear before the Commissioner or his duly authorized representative at a time and place specified in the summons and to produce books, papers, records or other data and to give testimony;

D. To take such testimony of the persons concerned, under oath, as may be relevant or material to such inquiry;

E. To cause revenue officers and employees to make a canvass from time to time of any revenue district or region and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons owning or having the care, management or possession of any object with respect to which a tax is imposed.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Examination of Returns and Determination of Tax Due

1) After a return has been filed or when there is failure to file a return, the Commissioner or his duly authorized representative may authorize the examination of any taxpayer and the assessment of the correct amount of tax;

2) The tax or any deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or from his duly authorized representative;

3) Any return, statement or declaration filed in any office authorized to receive the same shall not be withdrawn; Provided, That within three (3) years from the date of such filing, the same may be modified /changed or amended: Provided, further, That no notice for audit or investigation of such return, statement or declaration has, in the meantime, been actually served upon the taxpayer.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Failure to Submit Required Returns, Statements, Reports and Other Documents

1) When a report required by law as a basis for assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations or when there is reason to believe that any such report is false, incomplete, or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable;

2) In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise files a false or fraudulent return or other document, the Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purposes.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Authority to Conduct Inventory-Taking, Surveillance and to Prescribe Presumptive Gross Sales and Receipts

1) The Commissioner may, at any time during the taxable year, order inventory-taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities, or may place the business operations of any person, natural or juridical, under observation or surveillance if there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes;

2) The findings may be used as a basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct;

3) When it is found that a person has failed to issue receipts and invoices in violation of the requirements of the Tax Code, or when there is reason to believe that the books of accounts and other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of the Tax Code, the Commissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar businesses under similar situations or circumstances or after considering other relevant information, may prescribe a minimum amount of such gross receipts, sales and taxable base, and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such persons.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Authority to Terminate Taxable Period

1) The Commissioner shall declare the period of a taxpayer terminated at any time when it shall come to his knowledge:

a. that a person is retiring from business subject to tax, or

b. is intending to leave the Philippines or remove his property therefrom or to hide or conceal his property, or

c. is performing any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or year or to render the same totally or partly ineffective unless such proceedings are begun immediately.

2) The Commissioner shall send the taxpayer a notice of his decision to terminate together with a request for immediate payment of the tax for the period so declared terminated and the tax for the preceding year or quarter, or such portion thereof as may be unpaid, and said taxes shall be due and payable immediately and shall be subject to all penalties prescribed, unless paid within the time fixed in the demand made by the Commissioner.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Authority to Prescribe Additional Procedural or Documentary Requirements

1) The Commissioner is hereby authorized to divide the Philippines into different zones or areas and shall, upon mandatory consultation with competent appraisers both from the private and public sectors, and with prior notice to affected taxpayers, determine the fair market value of real properties located in each zone or area, subject to automatic adjustment once every three (3) years through rules and regulations issued by the Secretary of Finance based on the current Philippine valuation standards:

2) No adjustment in zonal valuation shall be valid unless published in a newspaper of general circulation in the province, city or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in two (2) other conspicuous public places therein.

3) The basis of any valuation, including the records of consultations done, shall be public records open to the inquiry of any taxpayer.

4) For purposes of computing any internal revenue tax, the value of the property shall be, whichever is the higher of:

a. the fair market value as determined by the Commissioner; or

b. the fair market value as shown in the schedule of values of the Provincial and City Assessors.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Authority to Inquire into Bank Deposit Accounts

1) Notwithstanding any contrary provision of R.A. No. 1405 and other general or special laws, the Commissioner is hereby authorized to inquire into bank deposits of:

a. Decedent to determine his gross estate; and

b. Any taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability.

2) In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in writing his privilege under R.A. No. 1405 or under other general or special laws, and such waiver shall constitute and authority of the Commissioner to inquire into the bank deposits of the taxpayer.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Authority to Accredit and Register Tax Agents

1) The Commissioner shall accredit and register, based on their professional competence, integrity and moral fitness, individuals and general professional partnerships and their representatives who prepare and file tax returns, statements, reports, protests, and other papers with, or who appear before the Bureau for taxpayers;

2) Individuals and general professional partnerships and their representatives who are denied accreditation by the Commissioner and/or the national and regional accreditation boards may appeal such denial to the Secretary of Finance, who shall rule on the appeal within sixty (60) days from receipt of such appeal;

3)Failure of the Secretary of Finance to rule on the appeal within the prescribed period shall be deemed as approval of the application for accreditation of the appellant.

Power to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement - Authority to Prescribe Additional Procedural or Documentary Requirements

1) The Commissioner may prescribe the manner of compliance with any documentary or procedural requirement in connection with the submission or preparation of financial statements accompanying the tax returns.

Authority of the Commissioner to Delegate Power

The Commissioner may delegate the powers vested in him under the pertinent provisions of the Tax Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner;

Powers of the Commissioner that Cannot be Delegated

The following powers of the Commissioner shall not be delegated:

1) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;

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

3) The power to compromise or abate any tax liability;

4) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept.

Powers and Duties of the Bureau of Internal Revenue

The Bureau of Internal Revenue shall be under the supervision and control of the Department of Finance and its powers and duties shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code or other laws.

Chief Officials of the Bureau of Internal Revenue

The Bureau of Internal Revenue shall have a chief to be known as:

a. Commissioner of Internal Revenue, hereinafter referred to as the Commissioner; and

b. Four assistant chiefs to be known as Deputy Commissioners who shall each be the head of the following:

1) Legal and Enforcement Group (now Legal Group);

2) Operation Group;

3) Information System Group; and

4) Resource Management Group

Scope of Local Taxes

The provision under Local Government Taxation shall govern the exercise by provinces, cities, municipalities, and Barangays of their taxing and other revenue-raising powers.

Local Taxing Authority

The power to impose a tax, fee, or charge or to generate revenue under this Code shall be exercised by the Sanggunian of the local government unit concerned through an appropriate ordinance.

Venue of Filing of Return

All local taxes, fees, and charges shall be collected by the provincial, city, municipal, or Barangay treasurer, or their duly authorized deputies.

Time of Filing of Tax Return

Unless otherwise provided in this Code, all local taxes, fees, and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be. The Sanggunian concerned may, for a justifiable reason or cause, extend the time of payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding six (6) months.

Board of Investments

Shall be composed of seven (7) governors:

a. The Secretary of Trade and Industry,

b. Three (3) Undersecretaries of Trade and Industry to be chosen by the President; and

a. Three (3) representatives from other government agencies and the private sector.

The Secretary of Trade and Industry shall be concurrently Chairman of the Board and the Undersecretary of the Department of Trade and Industry for Industry and Investments shall be concurrently the Vice-Chairman of the Board and its Managing Head.

The three (3) representatives from the other government agencies and the private sector shall be appointed by the President for a term of four (4) years. Upon the expiration of his term, a governor shall serve as such until his successor shall have been appointed and qualified. No vacancy shall be filled except for the unexpired portion of any term, and that no one may be designated to be governor of the Board in an acting capacity but all appointments shall be ad interim or permanent.

Philippine Economic Zone Authority

Is a government agency in the Philippines attached to the Department of Trade and Industry created to help promote investments in the export-oriented manufacturing industry into the country by assisting investors in registering and facilitating their business operations and providing tax incentives.

PEZA also assists investors who locate in service facilities inside selected areas in the country (areas are called PEZA Special Economic Zones) which are usually business process outsourcing and knowledge process outsourcing firms.

Other activities also eligible for PEZA registration and incentives include establishment and operation within special economic zones for tourism, medical tourism, logistics and warehousing services, economic zone development and operation and facilities providers.

Composition of PEZA Board

PEZA was enacted under Republic Act 7916 and was passed by the House of Representatives and the Senate and approved by former Philippine President Fidel V. Ramos on the 21st of February, 1995.

As provided in the Special Economic Zone Act, the PEZA Board is:

a. Chaired by the Secretary of the Department of Trade and Industry.

b. Vice-Chair is the Director General (Chief Executive Officer) of PEZA.

c. Members of the Board are Undersecretaries representing nine (9) key government Departments, to ensure efficient coordination between PEZA and their respective Departments on matters pertaining to investors' operations inside the Special Economic Zones.

Incentives Offered by PEZA

PEZA offers both fiscal and non-fiscal incentives as well as ready-to-occupy business locations in world-class economic zones and IT parks or buildings.

Fiscal incentives include:

a. income tax holiday for a certain number of years, which translates to 100% exemption from corporate income tax;

b. tax and duty-free importation of raw materials, capital equipment, machineries and spare parts;

c. exemption from wharfage dues and export tax, impost or fees;

d. VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements;

e. exemption from payment of any and all local government imposts, fees, licenses or taxes; and

f. exemption from expanded withholding tax.

Non-fiscal incentives, on the other hand include:

a. simplified import-export procedures, extended visa facilitation assistance to foreign nationals and

b. spouses and dependents; special visa multiple entry privileges;