REPUBLIC OF THE
PHILIPPINES
DEPARTMENT OF FINANCE
BUREAU OF INTERNAL
REVENUE
Date: November 28,
2013
REVENUE REGULATIONS
NO. 18-2013
SUBJECT : Amending Certain Sections of Revenue
Regulations No. 12-99
Relative to the Due
Process Requirement in the Issuance of a
Deficiency Tax
Assessment
TO : All Internal Revenue Officers and Others
Concerned
___________________________________________________________________
SECTION 1. Scope. —
Pursuant to the provisions of
Section 244, in
relation to
Section 245
of the National
Internal Revenue Code
of 1997 (Tax
Code), as
amended, these
Regulations are hereby
promulgated to amend
provisions of
Revenue Regulations
(RR) No. 12-99.
SECTION 2. Amendment. —
Section 3 of RR 12-99 is hereby amended by deleting
Section 3.1.1
thereof which provides
for the preparation
of a Notice
of Informal
Conference, thereby
renumbering other provisions
thereof, and prescribing
other
provisions for the
assessment of tax liabilities. Section 3 of RR 12-99 shall now read
as follows:
“SECTION 3. Due
Process Requirement in
the Issuance of a
Deficiency Tax Assessment. —
3.1 Mode of procedure
in the issuance of a deficiency tax assessment:
3.1.1 Preliminary
Assessment Notice (PAN).
— If after
review and
evaluation by the
Commissioner or his duly authorized representative, as the
case may be, it
is determined that there exists
sufficient basis to assess the
taxpayer for
any deficiency tax
or taxes, the
said Office shall
issue to the
taxpayer a
Preliminary Assessment Notice
(PAN) for the
proposed
assessment. It
shall show in
detail the facts
and the law,
rules and
regulations, or jurisprudence on
which the proposed
assessment is based
(see illustration in
ANNEX “A” hereof).
If the
taxpayer fails to
respond within fifteen
(15) days from
date of
receipt of the PAN,
he shall be considered in default, in
which case, a Formal
Letter of
Demand and Final
Assessment Notice (FLD/FAN)
shall be issued
calling for
payment of the
taxpayer's deficiency tax
liability, inclusive of the
applicable penalties.
If the taxpayer,
within fifteen (15) days from date of
receipt of the PAN,
responds that
he/it disagrees with the findings of deficiency tax or taxes,
an
FLD/FAN shall be
issued within fifteen (15) days from
filing/submission of the
taxpayer’s response,
calling for payment
of the taxpayer's
deficiency tax
liability, inclusive
of the applicable penalties.
3.1.2 Exceptions to Prior Notice
of the Assessment. — Pursuant to
Section 228 of the
Tax Code, as amended, a PAN shall not be required in any
of the following
cases:
(i) 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
(ii) When a discrepancy has been determined
between the tax withheld
and the amount
actually remitted by the withholding agent; or
(iii) 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
(iv) When the excise tax due on excisable articles
has not been paid; or
(v) 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.
In the above-cited
cases, a FLD/FAN shall be issued outright.
3.1.3 Formal Letter
of Demand and
Final Assessment Notice
(FLD/FAN). — The
Formal Letter of
Demand and Final
Assessment Notice
(FLD/FAN) shall
be issued by the Commissioner
or his duly
authorized
representative.
The FLD/FAN calling for payment of the taxpayer's
deficiency
tax or taxes shall
state the facts, the law, rules and regulations, or jurisprudence
on which the
assessment is based; otherwise, the
assessment shall be void
(see illustration in
ANNEX “B” hereof).
3.1.4 Disputed Assessment. —
The taxpayer or
its authorized
representative or tax
agent may protest administratively against the aforesaid
FLD/FAN within
thirty (30) days
from date of
receipt thereof. The
taxpayer
protesting an
assessment may file a written
request for reconsideration or
reinvestigation
defined as follows:
(i) Request for reconsideration — refers to a plea of re-evaluation of
an assessment
on the basis
of existing records
without need of
additional evidence.
It may involve both a question of fact or of law or both.
(ii) Request for reinvestigation —
refers to a plea of re-evaluation of
an assessment
on the basis
of newly discovered
or additional
evidence that a
taxpayer intends to present in the reinvestigation. It
may also involve a
question of fact or of law or both.
The taxpayer shall
state in his protest (i) the nature of protest whether
reconsideration or
reinvestigation, specifying newly
discovered or additional
evidence he intends
to present if it is a request for reinvestigation, (ii) date of
the assessment
notice, and (iii) the applicable law, rules and regulations, or
jurisprudence on
which his protest
is based, otherwise,
his protest shall
be
considered void and
without force and effect.
If there are several
issues involved in the FLD/FAN but the taxpayer only
disputes or
protests against the
validity of some
of the issues
raised, the
assessment
attributable to the undisputed issue or issues shall become final,
executory and
demandable; and the
taxpayer shall be
required to pay
the
deficiency tax or
taxes attributable thereto, in which case, a collection letter
shall be issued to
the taxpayer calling for payment of the said deficiency tax or
taxes, inclusive of
the applicable surcharge and/or interest.
If there are several
issues involved in the disputed assessment and the
taxpayer fails to
state the facts, the applicable law, rules an d regulations, or
jurisprudence in
support of his protest against some of the several issues on
which the assessment
is based, the same shall be considered undisputed issue
or issues, in which
case, the assessment attributable thereto shall become final,
executory and
demandable; and the
taxpayer shall be
required to pay
the
deficiency tax or
taxes attributable thereto and a collection letter shall be issued
to the taxpayer
calling for payment of the said deficiency tax, inclusive of the
applicable surcharge
and/or interest.
For requests for
reinvestigation, the taxpayer shall 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.
The term “relevant
supporting documents” refer to those documents necessary
to support
the legal and
factual bases in
disputing a tax
assessment as
determined by the
taxpayer. The sixty (60)-day period for the submission of all
relevant supporting
documents shall not apply to requests
for reconsideration.
Furthermore, the
term “the assessment
shall become final” shall
mean the
taxpayer is barred
from disputing the correctness of the
issued assessment by
introduction of newly
discovered or additional evidence, and
the FDDA shall
consequently be
denied.
If the taxpayer fails
to file a valid protest against the
FLD/FAN within
thirty (30) days from
date of receipt thereof, the assessment shall become final,
executory and
demandable. No request for reconsideration
or reinvestigation
shall be granted on
tax assessments that have already become final, executor and demandable.
If the protest is
denied, in whole or in part, by the Commissioner’s duly
authorized
representative, the taxpayer may either: (i) appeal to the Court of
Tax Appeals
(CTA) within thirty
(30) days from
date of receipt
of the said
decision; or (ii)
elevate his protest through request for
reconsideration to the
Commissioner within
thirty (30) days from date of receipt of the said decision.
No request for
reinvestigation shall be allowed in administrative appeal and only
issues raised
in the decision
of the Commissioner’s duly
authorized
representative shall
be entertained by the Commissioner.
If the protest is not
acted upon by the Commissioner’s duly
authorized
representative within
one hundred eighty (180) days counted from the date of
filing of
the protest in
case of a
request reconsideration; or
from date of
submission by the
taxpayer of the required documents within sixty (60) days
from the date of
filing of the protest in case of a request for reinvestigation , the
taxpayer may
either: (i) appeal
to the CTA
within thirty (30)
days after the
expiration of
the one hundred
eighty (180)-day period;
or (ii) await
the final
decision of the
Commissioner’s duly authorized representative on the disputed assessment.
If the protest or
administrative appeal, as the case may be, is denied, in
whole or in part, by
the Commissioner, the taxpayer may appeal to the CTA
within thirty (30)
days from date of receipt of the said decision. Otherwise, the
assessment shall
become final, executory
and demandable. A
motion for
reconsideration of
the Commissioner’s denial of the protest or administrative
appeal, as the case
may be, shall not toll the thirty (30)-day period to appeal to
the CTA.
If the
protest or administrative appeal
is not acted
upon by the
Commissioner within
one hundred eighty (180) days counted from the date of
filing of the
protest, the taxpayer may either: (i) appeal to the CTA within thirty
(30) days from after
the expiration of the one hundred eighty (180)-day period;
or (ii) await the
final decision of the Commissioner on the disputed assessment
and appeal such final
decision to the CTA within thirty (30) days after the receipt
of a copy of such
decision.
It must be
emphasized, however, that in case of inaction on p rotested
assessment within the
180-day period, the option of the taxpayer to either: (1)
file a petition for
review with the CTA within 30 days after the expiration of the
180-day period; or
(2) await the final decision of the Commissioner or his duly
authorized
representative on the disputed assessment and appeal such final
decision to the CTA
within 30 days after the receipt of a copy of such decision,
are mutually
exclusive and the resort to one bars the application of the other.
3.1.5 Final Decision
on a Disputed
Assessment (FDDA). — The
decision of the
Commissioner or his duly authorized representative shall state
the (i)
facts, the applicable law, rules and regulations, or jurisprudence on
which
such decision is
based, otherwise, the decision shall be void (see illustration in
ANNEX “C” hereof),
and (ii) that the same is his final decision.
3.1.6 Modes of Service. — The
notice (PAN/FLD/FAN/FDDA) to the
taxpayer herein
required may be
served by the
Commissioner or his
duly
authorized
representative through the following modes:
(i) The
notice shall be
served through personal
service by delivering
personally a
copy thereof to the party
at his registered
or known
address or wherever
he may be found. A known address shall
mean
a place other than
the registered address where business activities
of the party are
conducted or his place of residence.
In case personal
service is not practicable, the notice shall be served by substituted service
or by mail.
(ii) Substituted service can be resorted to when
the party is not present
at the
registered or known
address under the
following circumstances:
The notice may be
left at the party’s registered address, with his clerk
or with a person
having charge thereof.
If the known address
is a place where business activities of the party
are conducted, the
notice may be left with his clerk or with a person having charge thereof.
If the known address
is the place of residence, substituted service
can be made by
leaving the copy with a person of legal age residing therein.
If no person is found
in the party’s registered or known address, the
revenue officers
concerned shall bring a barangay official and two (2)
disinterested
witnesses to the address so that they may personally
observe and attest to
such absence. The notice shall then be given
to said barangay
official. Such facts shall be contained in the bottom
portion of
the notice, as
well as the
names, official position
and signatures of the witnesses.
Should the party be
found at his registered or known address or any
other place
but refuse to
receive the notice,
the revenue officers
concerned shall bring
a barangay official and two (2) disinterested
witnesses in the
presence of the party so that they may personally
observe and attest to
such act of refusal. The notice shall then be
given to said
barangay official. Such facts shall be contained in the
bottom portion of the
notice, as well as the names, official position and signatures of the
witnesses.
“Disinterested
witnesses” refers to persons of legal age other than
employees of the
Bureau of Internal Revenue.
(iii) Service by mail is done by sending a copy of
the notice by registered
mail to the
registered or known address of the party with instruction
to the Postmaster to
return the mail to the sender after ten (10)
days,
if undelivered.
A copy of the notice
may also be
sent through
reputable professional
courier service. If no registry
or reputable
professional courier
service is available
in the locality
of the
addressee, service
may be done by ordinary mail.
The server shall accomplish the bottom portion of
the notice. He shall
also make a written
report under oath before a Notary Public or any
person authorized to
administer oath under Section 14 of the NIRC,
as amended, setting
forth the manner, place and date of service, the
name of
the person/barangay official/professional courier
service
company who
received the same
and such other
relevant
information. The
registry receipt issued
by the post
office or the
official receipt
issued by the professional courier company containing
sufficiently identifiable
details of the
transaction shall constitute
sufficient proof of
mailing and shall be attached to the case docket.
Service to the tax
agent/practitioner, who is appointed by the taxpayer under
circumstances prescribed
in the pertinent
regulations on accreditation
of tax
agents, shall be
deemed service to the taxpayer.”
SECTION 3. Amendment. —
Section 5 of RR 12-99 is hereby amended by modifying
Section 5.5 thereof
which provides for modes of procedures in computing for the tax
and/or applicable
surcharge. In cases of late payment of a deficiency tax assessed,
the taxpayer shall be
liable for the delinquency interest provided under Section 249
(C)(3) of the 1997
National Internal Revenue Code, as amended. Sec tion 5.5 of RR
12-99 shall now read
as follows:
“5.5 Late
payment of a
deficiency tax assessed.
– In general,
the
deficiency tax
assessed shall be
paid by the
taxpayer within the
time
prescribed in the
notice and demand, otherwise, such taxpayer shall be liable
for the delinquency
interest incident to late payment.
Illustration 1:
Based on the
above Illustration No.
3, Scenario 4,
assuming that
the calendar year
1997 deficiency income
tax assessment
against XYZ
CORPORATION, in the amount of P304,771.67, is not paid by
June 30, 1999, the
deadline for payment of the assessment, and assuming
further that this
assessment has already become final and collectible. In this
case, such
corporation shall be
considered late in
payment of the
said
assessment. Assuming,
further, that the corporation pays its tax assessment
only by
July 31, 1999,
the delinquency interest
for late payment
shall be
computed as follows:
Calendar Year 1997
Income tax due per
investigation P350,000.00
Less: Income tax paid
per return P175,000.00
——————
Deficiency income
tax P175,000.00
Add: 50% surcharge for filing a
fraudulent or false
return
(P175,000.00 times
50%) P 87,500.00
20% int. p.a. fr.
4-15-98 to 7-31-99
(P175,000.00 times
.258630) P 45,260.27
——————
Total amount due P307,760.27
Add: 20% delinquency interest p.a. from 7-1-99 to
7-31-99
Basic Tax 175,000.00
Surcharge 87,500.00
20% int. p.a. fr.
4-15-98
to 6-30-99 42,271.67
——————
Total 304,771.67
(P304,771.67 times
.0166667) P5,079.54
___________
Total amount due
(excluding suggested compromise
penalty for late
payment) P312,839.81
===========
Illustration 2:
Based on the immediately preceding Illustration, assuming
that the calendar
year 1997 deficiency income tax assessment against XYZ
CORPORATION, in the
amount of P304,771.67, is not paid by June 30, 1999,
the deadline for
payment of the assessment but is instead timely protested.
Assuming further
that after exhaustion of
all administrative remedies,
the
assessment was upheld
and became final, executory and demandable on July
1, 2000. However,
payment was made by the taxpayer only on June 30, 2002.
In this case, such
corporation shall be considered late in payment of the said
assessment. The civil
penalties for late payment shall be computed as follows:
Calendar Year 1997
Income tax due per
investigation P350,000.00
Less: Income tax paid
per return P175,000.00
——————
Deficiency income
tax P175,000.00
Add: 50% surcharge for filing a
fraudulent or false
return
(P175,000.00 times
50%) P 87,500.00
20% int. p.a. fr.
4-15-98 to 6-30-2002
(P175,000.00 times
.841644) P147,287.70
——————
Total amount due P409,787.70
Add: 20% delinquency interest p.a. from 7-2-2000
to
6-30-2002
Basic Tax 175,000.00
Surcharge 87,500.00
20% int. p.a. fr.
4-15-98
to 7-1-00
(.4427397) 77,479.45
——————
Total 339,979.45
(P339,979.45 times
.3989041) P135,619.20
___________
Total amount due
(excluding suggested compromise
penalty for late
payment) P545,406.90
===========
Illustration 3:
Assuming that in
calendar year 1997,
XYZ
CORPORATION filed
a false or
fraudulent return and
was assessed of
deficiency basic
income tax amounting to Php100,000.
Assuming further that
XYZ CORPORATION timely protested the said assessment. After exhaustion
of all administrative
remedies, the assessment was upheld and became final,
executory and demandable
on April 15, 2001. However, payment was made
by the taxpayer only
on April 15, 2003.
In this case, such
corporation shall be considered late in payment of the
said assessment. The
civil penalties for late payment shall be computed as
follows:
Calendar Year 1997
Total deficiency
income tax assessment
P100,000.00
Add: 50% surcharge for filing a
fraudulent or false
return P 50,000.00
20% interest p.a.
from 4-15-1998 to
4-15-2003 (P100,000 x
20% x 5) P100,000.00
Delinquency Interest
20% interest p.a.
from 4-15-2001 to
4-15-2003
Basic Tax 100,000.00
Surcharge 50,000.00
20% int. p.a. fr.
4-15-98
to 4-15-01 60,000.00
——————
Total 210,000.00
(P210,000.00 x 20% x
2) P84,000.00
__________
Total Amount Due As
of April 15, 2003
(excluding suggested
compromise penalty for late payment)
P334,000.00
===========”
SECTION 4. Repealing
Clause. — Any
rules and regulations
or parts thereof
inconsistent with the
provisions of these Regulations are hereby repealed, amended,
or modified
accordingly.
SECTION 5. Effectivity. —The provisions of these
Regulations shall take effect after
fifteen (15) days
following publication in any newspaper of general circulation.
(Original Signed)
CESAR V. PURISIMA
Secretary of Finance
Recommending
Approval:
(Original Signed)
KIM S.
JACINTO-HENARES
Commissioner of
Internal Revenue
Source
ftp://ftp.bir.gov.ph/webadmin1/pdf/79052RR%2018-13%20final.pdf. [Accessed 1 September 2016].
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