PRELEC QUIZ
1. Simply put, the self-assessing nature of Philippine taxes requires taxpayers to determine and
declare their own taxable income, compute the corresponding tax due, and file the necessary
tax returns with the Bureau of Internal Revenue (BIR). With the help of the tax laws,
regulations, and guidelines set forth by the BIR, taxpayers are expected to assess their own tax
liabilities accurately and honestly based on their income, deductions, exemptions, and other
relevant factors.
2. In reference to Section 203 of the Tax Code which governs the period of limitation for
assessment of tax, the BIR has three years from the last day for filing the tax return or from the
actual filing date, whichever is later, to assess any internal revenue tax. However, this period is
extended to ten years in the following cases:
a. When the taxpayer fails to file a tax return
b. When the taxpayer files a fraudulent return to evade taxes.
c. When the taxpayer willfully attempts to evade taxes.
d. When there is a substantial under-declaration of income exceeding 30% of the amount
declared in the return.
More importantly, the taxpayer may also agree in writing to an extension of the assessment
period beyond the original three-year limit
On the other hand, for the period of limitation on collection of tax under Section 222 of the Tax
Code, the BIR has five years from the assessment date to collect the tax. The assessment date is
defined as the date when the taxpayer receives a notice and demand for payment, whether it is
through a formal assessment or an formal letter of demand. Similar to the assessment period,
the five-year limitation is extended to ten years in cases where there is a fraudulent return,
willful attempt to evade taxes, or substantial under-declaration of income exceeding 30%.
3. A jeopardy assessment is an action taken by the tax authorities when there is a pressing need
to protect the government's interest in collecting taxes. It allows the immediate assessment
and collection of taxes, even without giving the taxpayer the opportunity to contest or dispute
the assessment beforehand. It is typically employed in situations where the government
believes there is a substantial risk of loss or non-payment of taxes if regular assessment and
collection procedures are followed.
However, in order to prevent the abuse of power, the jeopardy assessment is subject to certain
safeguard and requirements. The Commissioner must issue a written explanation stating the
factual basis for the assessment and the jeopardy involved. The taxpayer has the right to
protest the assessment within a specified period, usually within 30 days from receipt of the
assessment. If the taxpayer protests, the BIR should hold a hearing to allow the taxpayer to
present their case and evidence. If the taxpayer's protest is denied, they have the option to
appeal the decision to the Court of Tax Appeals (CTA) within 30 days from receipt of the denial.
The CTA will then review the case based on its merits.
4. The instances when a prior notice of assessment is not required are the following:
a. mathematical error of computing the tax that results to a deficiency of tax
b. discrepancy is between the tax withheld and the amount actually remitted
c. taxpayer chose to claim a refund or tax credit of excess creditable withholding tax but is
found out to have carried over the same amount against the estimated tax liabilities
d. no payment of excise tax due
e. sale, trade, or transfer of a locally purchased or imported article from an exempt person to a
non-exempt person
5. If you request for reconsideration, you do not need any additional evidences for the reevaluation of assessment. The assessment is will based on the existing records you already
submitted. On the other hand, if you request for a reinvestigation, you should present a newly
discovered or additional evidences for the re=evaluation of assessment.
6. After filing a protest before the Commissioner of Internal Revenue, the taxpayer can appeal
the decision of the Commissioner of Internal Revenue to the Court of Tax Appeals (CTA). The
appeal must be filed within 30 days from the receipt of the denial or the lapse of the 180-day
period without any action by the BIR. The CTA is an independent judicial body that specializes in
resolving tax disputes.
7. Tax delinquency refers to the failure of a taxpayer to pay their taxes on time. It occurs when
a taxpayer does not remit the required tax payments by the due date specified by the tax
authorities. It may arise from non-payment, underpayment, or late payment of taxes.
Moreover, it is a violation of tax laws and can result in penalties, interest charges, or other legal
consequences imposed by the tax authorities.
On the other hand, Tax deficiency, refers to the difference between the amount of tax reported
or assessed by the taxpayer and the correct or accurate amount of tax determined by the tax
authorities. It occurs when the Bureau of Internal Revenue (BIR), determine that the taxpayer
has underreported their taxable income, claimed improper deductions, or made errors in
calculating their tax liability. Tax deficiencies can result from errors, omissions, or intentional
tax evasion.
8. Distraint is the legal process by which the tax authorities seize the assets or properties of a
delinquent taxpayer to satisfy the unpaid tax liability. It involves the physical seizure of tangible
assets, such as vehicles, machinery, inventory, or other property of value.
Levy, similar to distraint, is a legal action taken by tax authorities to collect unpaid taxes.
However, the key difference is that levy primarily refers to the act of seizing or attaching funds
from a taxpayer's bank accounts, wages, or other financial assets. The tax authorities issue an
order to freeze or seize the funds directly from the bank or the employer, diverting them to
satisfy the outstanding tax debt.
Garnishment is a broader term that encompasses both distraint and levy. It refers to the legal
procedure by which the tax authorities can seize a delinquent taxpayer's assets or property,
including tangible assets and financial assets, to satisfy the unpaid tax liability. It includes both
the physical seizure of assets (distraint) and the attachment of funds (levy) from bank accounts
or wages.
9. Under the Tax Code, the running of the prescriptive period for assessment and collection of taxes is
suspended when the taxpayer file a request for reinvestigation and is granted by the Commissioner.
10. A tax refund is an amount of money that is returned to a taxpayer when they have overpaid
their taxes. It occurs when the taxpayer's total tax payments, including tax withholding or
estimated tax payments, exceed their actual tax liability.
A tax credit, on the other hand, is a direct reduction in the amount of tax owed by a taxpayer. It
is a specific amount or a percentage of expenses or certain tax-related activities that can be
subtracted from the taxpayer's total tax liability.
11.
Jurisdiction
The NIRC is the primary law governing national taxes imposed by the national government, such
as income tax, value-added tax (VAT), excise tax, and documentary stamp tax. The LGC, on the
other hand, governs local taxes imposed by local government units (LGUs), such as real
property tax, business tax, and franchise tax.
Administrative Remedies
Under the NIRC, taxpayers have administrative remedies available to them, including the right
to protest, appeal, and seek reconsideration of tax assessments within the Bureau of Internal
Revenue (BIR). The administrative remedies aim to resolve tax disputes without resorting to
judicial proceedings. In contrast, under the LGC, taxpayers generally follow the administrative
remedies provided by the specific LGU, such as filing an administrative protest with the local
assessor or treasurer, before pursuing judicial remedies.
Court of Tax Appeals
The Court of Tax Appeals (CTA) has exclusive jurisdiction over tax disputes involving national
taxes under the NIRC. Taxpayers can directly appeal decisions of the BIR to the CTA. On the
other hand, for local taxes under the LGC, tax disputes are generally resolved through regular
trial courts, with the decisions of trial courts appealable to higher courts.
Tax Collection
The remedies for tax collection also differ between national taxes and local taxes. The NIRC
provides for remedies such as distraint and levy (seizure of assets), garnishment (attachment of
funds), and civil and criminal actions to collect unpaid national taxes. For local taxes, the
remedies for collection are typically provided by the specific LGU, which may include
administrative remedies, collection suits, or other legal actions within the local jurisdiction.
12. The Court of Tax Appeals (CTA) is a specialized judicial body in the Philippines that has
exclusive jurisdiction over cases involving tax disputes and controversies. It is an independent
and autonomous court established to provide taxpayers with an impartial venue to resolve
disputes with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), among
other government agencies involved in tax matters.
13.
Tax due per return
2,500,000
Surcharge (50%*2.5M)
1,250,000
Interest (12%*2.5M*16/12)
400,000
Total Liability
4,150,000
14.