Failure to Fill Up the 'Creditable Tax Withheld' Portion of BIR Form 1701 and 1702

Schedule 1, Page 2, Annual Income Tax Return
Failure to Fill Up the 'Creditable Tax Withheld' Portion of BIR Form 1701 and 1702
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For the untrained minds, these two Court of Tax Appeals' resolutions contradicted each other. However, in essence, the placing of the GROSS INCOME and its corresponding TAX WITHHELD IS OPTIONAL. Provided, that the gross income which was subjected to expanded withholding tax by a supplier or vendor should be declared in the TOTAL GROSS INCOME FOR THE TAXABLE YEAR CONCERNED. Provided, further that the TAX WITHHELD THEREFROM should be indicated on the front page of 1701 or 1702. Provided, furthermore that the Certificate of Tax Withheld (BIR Form No. 2307) was attached to the said 1701 or 1702 and duly received by the BIR. Provided, finally that a note to financial statements stating among others that ALL THE GROSS INCOME SUBJECT TO WITHHOLDING OF A TAX ARE TRUTHFULLY AND CORRECTLY DECLARED.

In order to remove and completely avoid the stress and harassment being incorporated by many untrained and undereducated revenue officers, it is RECOMMENDED that you fill up the said portion. 

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Orix Auto Leasing Corporation vs. CIR, CTA EB Case No. 1016, December 9, 2013

The fact that the “Creditable Tax Withheld” portion of the Annual Income Tax Return of the taxpayer which was left blank should not be taken lightly. It is well settled that much credence is imbued in the Annual Income Tax Return. The taxpayer asserts the truth and correctness in the declarations made therein, explicitly stating that the same are made under the penalties of perjury. Such declaration is made pursuant to the provisions of Section 267 of the NIRC.

Applying this provision to the instant case, taxpayer’s failure to fill up the “Creditable Tax Withheld” portion, coupled by the inability of the pieces of evidence submitted to prove that the income subjected to the claimed unutilized creditable withholding tax was declared as part of its gross income, is fatal to a claim for issuance of TCC on the unutilized creditable withholding tax. 
 

There is neither law nor jurisprudence that states that the taxpayer’s failure to fill up the entry in the “Creditable Tax Withheld” column in Schedule 1 of the Annual Income Tax Return would be fatal to a claim for refund.

In this claim for refund of unutilized creditable withholding taxes, the BIR questioned, among others, the taxpayer’s compliance of the requirement that the income upon which the taxes were withheld were included in the return of the recipient, on the ground that the creditable tax withheld column in schedule 1 of the annual ITR was not filled-up.

CIR vs. Sonoma Services Inc., CTA EB No. 931, December 11, 2013

The CTA en banc ruled that there is neither law nor jurisprudence that states that the taxpayer’s failure to fill up the entry in the “Creditable Tax Withheld” column in Schedule 1 of the Annual ITR would be fatal to a claim for refund. What Section 2.58.3 of RR No. 2-98 and the applicable jurisprudence require is that the taxpayer be able to declare as part of its gross income in the Annual Income Tax Return the income payment from which the withholding was made. Further, failure on the part of a taxpayer to make an entry in the “Creditable Tax Withheld” column found in page 2 of the Annual Income Tax Return, specifically Schedule 1 or the “Schedule of Sales/Revenues/Receipts/Fess” is not a sufficient basis to conclude that the taxpayer failed to comply with the requirement that “income upon which the taxes were withheld were included in the return of the recipient” when the taxpayer has offered other evidence to establish its compliance with this requirement. The claim for refund was granted. 

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WHEN A TAX ASSESSMENT NOTICE BECOMES INVALID? - facebook.com/Kataxpayer

WHEN A TAX ASSESSMENT NOTICE BECOMES INVALID?
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In the case of CIR versus Fitness by Design, Inc. CTA EB-970, July 14, 2014, it was ruled that all Deficiency Tax Assessment Notices must clearly show a due date. Else, for lack of a definite and unequivocal demand for payment of a certain date and for want of due process, the assessment is void.

MORAL LESSON: Accept all Formal Letters of Demand or Final Assessment Notices having no due dates and then use the prescription period to your advantage. At any rate, the succeeding notice emanating therefrom is also considered void.

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When is the best time to issue a Warrant of Garnishment and/or Distraint and Levy - facebook.com/Kataxpayer

Warrant of Garnishment and/or Distraint and Levy
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In the case of Solid-One Mills, Phils., Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8507, May 29, 2014, it was ruled that
the taxpayer received both the FLD and the FAN on June 8, 2007. As it was not established when the FLD and FAN were released, mailed or sent by the BIR to the taxpayer, the date of receipt by the taxpayer should be regarded as the date when the FLD and the FAN were released, mailed or sent to the taxpayer. Since the taxpayer received the FLD and the FAN on June 8, 2007, the BIR had until June 8, 2012 within which to collect he deficiency taxes.

Although the Notice of Tax Lien, Warrant of Distraint and/or Levy and Warrants of Garnishment were issued by the BIR on June 7, 2012, or one day before the expiration of the period for collection on June 8, 2012, the Notice of Tax Lien was served on the Register of Deeds on June 14, 2012 and the Warrants of Garnishment were received by the banks on June 15, 2012 and June 18, 2012. Distraint and levy proceedings did not validly begin or commence with the mere
issuance of the Warrant of Distraint and/or Levy. The Warrant of Distraint and/or Levy must be served upon the taxpayer within the prescriptive period to collect, in order to suspend the running of the prescriptive period for collection of deficiency taxes. Since the Warrant of Distraint and/or Levy was served on taxpayer only on June 14, 2012 or six days beyond the expiration of the five-year period, the government lost its right o collect he assessed deficiency taxes and penalties.

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BIR Investigation, Suspension Starts on December 16 - Facebook.com/EmelinoTMaestro

WAIVER OF STATUTE OF LIMITATION (BEYOND 3 YEARS) by Facebook.com/EmelinoTMaestro

WAIVER OF STATUTE OF LIMITATION (BEYOND 3 YEARS)
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To extend the prescriptive period for the BIR to assess taxpayer’s tax liabilities, the BIR requested the taxpayer to execute a series of waivers of the statute of limitations. But the Court declared the waivers executed by the taxpayer as defective for the following reasons, among others: (1) the signatory signed the waivers without any notarized written authority from the taxpayer’s Board of Directors; (2) the respective dates of their acceptance by the BIR were not indicated in the waivers. The waivers, being defective, have no binding effect on the taxpayer. (Next Mobile, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 7965, December 11, 2012)

K Corp, through its accountant, executed two Waivers of Defense of Prescription. The Bureau of Internal Revenue (“BIR”) issued an assessment, which K Corp duly protested. The BIR denied the protest and required K Corp to pay deficiency tax liabilities. In its petition for review before the Court of Tax Appeals (“CTA”), K Corp raised the defense of prescription on the ground that the waivers executed by its accountant were invalid and thus did not extend the BIR’s period to assess. The Court held that the waivers were defective for the following reasons: (a) the waivers were executed without the notarized written authority of the accountant to sign on behalf of K Corp; (b) the waivers failed to indicate the BIR’s date of acceptance of the same; and (c) the fact of receipt by K Corp of its file copy was not indicated in the original copies of the waivers. A valid waiver should strictly comply with the requirements set forth in RMO 20-90 and RDAO 05-01, otherwise the period to assess will not be tolled and prescription will set in. (Commissioner of Internal Revenue v. Kudos Metal Corporation, G.R. No. 178087 dated May 5, 2010)

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Books of Accounts, When to Register/Renew? Facebook.com/EmelinoTMaestro

REVENUE MEMORANDUM CIRCULAR NO. 82-2008 (RMC 82-2008)
SUBJECT : REGISTRATION OF MANUAL BOOKS OF ACCOUNTS
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It has been observed that the different Revenue District Offices (RDOs) of the Bureau adopt differing rules and procedures with respect to the registration of the manual books of accounts. In some RDOs, before a new set of books of accounts is registered, taxpayers are still required to first present the previously registered books of accounts regardless of whether or not the pages thereof have all been filled up. On the other hand, in other districts, a photocopy of the stamped front page of these previously registered books of accounts is the document being required in order to approve the registration of the new set of books. Apparently, these differing rules observed by the RDOs have caused frustration and exasperation to the taxpayers which eventually resulted to an indifferent attitude towards compliance.

In view of the foregoing misinterpretations on registration procedures, this Circular is hereby issued to elucidate the proper registration procedures for manual books of accounts based on the existing provisions in the Bookkeeping Regulations.

The following are the existing rules with respect to the registration of manual books of accounts:

(1) Manual books of accounts previously registered but whose pages are not yet fully exhausted can still be used in the succeeding years without the need of re-registering or re-stamping the same, provided, that the portions pertaining to a particular year should be properly labeled or marked by taxpayer;

(2) The registration of a new set of manual books of accounts shall only be at the time when the pages of the previously registered books have all been already exhausted. This means that it is not necessary for a taxpayer to register a new set of manual books of accounts each and every year.

(3) The registration deadline of “January 30 of the following year” as enunciated in RMO 29-2002 applies only to computerized books of accounts and not to manual books accounts. The “15 days after the end of the calendar year” deadline under RMC 13-82 refers to loose-leaf bound books of accounts and not to manual books of accounts;

(4) Newly Registered taxpayers shall present the Manual Books of Accounts before use to the RDOs where the place of business is located or concerned office under the Large Taxpayer Service for approval and registration;

(5) Subsidiary manual books of accounts to be used by taxpayers, in addition to the manual books of accounts, required by the National Internal Revenue Code of 1997 and existing rules, shall likewise be registered before use, following the same rules abovementioned;

(6) It is to be emphasized that the Taxpayer Service Section (TSS) of the RDOs or concerned office under Large Taxpayer Service has no authority to examine whether the previously registered books are complete and/or updated prior to the approval of the registration.

The aforementioned rules are to be uniformly observed by revenue officers in charge of registration of manual books of accounts.

All internal revenue officers are hereby enjoined to give this Circular as wide a publicity as possible. 

To avoid a tax mapping penalty for failure to update your books of accounts, the best is to register loose-leaf books of accounts. So you deprive revenue officers in mapping the same. 

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PEZA-reg Entity sold its Building to Another PEZA-reg Entity, Is the sale subject to VAT, withholding tax and regular income tax?

PEZA-reg Entity sold its Building to Another PEZA-reg Entity, Is the sale subject to VAT, withholding tax and regular income tax?

The BIR Chief, Ms. Kim Henares ruled, in the case of STMI, that the sale of unregistered goods or properties is subject to withholding tax and thus, to regular income tax because only those goods and properties explicitly stated to be subject to preferential rate or income tax holiday (ITH) are exempt from withholding tax and regular income tax. For VAT purposes, the sale is also subject to VAT at 0% percent.

Moral lesson is this 'Before selling any good or property inside the PEZA area, have it first registered.'

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Tip to reduce mistakes - Facebook.com/Kataxpayer

Tip to reduce mistakes in handling tax opportunities
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Katax ETM is tipping you that before you act, you must look for a similar act in which a judicial interpretation of the law has been applied. Likewise, before you answer any request of any revenue officer, check if there is a court decision that is applicable thereto.

In the case of CIR vs. Michel J Lhuillier, GR#150947, July 15, 2003, the Philippine Supreme Court says that The Supreme Court by tradition and in our system of judicial administration, has the las word on what the law is; it is the final arbiter of any justifiable controversy. There is only one Supreme Court from whose decisions all other courts should take their bearings.

Even the BIR Chief's interpretation of the law is not final and executory.

If you've been harassing by any revenue officer, please call Divine or Dhen who may help assisting you against such oppression (0922 8010922). Thanks

Kim Henares said, Tax Code shall prevail over PFRS and GAAP... by facebook.com/Kataxpayer

The rule of taxation must be uniform and equitable - 1987 Philippine Constitution

Read the herein shown letter of Ms. Kim Henares to facebook.com/EmelinoTMaestro, then picture that you're being investigated because you miserably failed to recognise that your independent Certified Public Accountant's audited financial statements have no disclosures on the issues affecting national taxation. Then, you felt that you're betrayed for your intention is to comply with the Tax Code and not with the PFRS/GAAP.

As a parent, will you offer a solution to your kids that they didn't need, neither understand? Yes, you will feel so guilt, so ashamed because you're just wasting your kids' time and polluting their minds if you do so. As also a kid, this is what your mind is whispering to you. You're becoming so  frustrated. Without a solution in sight, you tell yourself that you will evade taxes, even if a part of you are screaming not to do so, so that you can have something to give to those harassing, bothering and oppressing you. 

The rule of taxation must be uniform. Inside the taxation-rule is the tax accounting rule. If the preparation of your income tax return which is based on tax accounting rules is supported by audited financial statements which must also be based on tax accounting rules, you will encounter no tax troubles and miseries. Else, gross misconduct had been exercised consciously. Thus, the receipt of huge deficiency tax assessments is imminent. 

EmelinoTMaestro believes that to reconcile PFRS/GAAP to Tax Code is just a waste of time and in the dialect of the National Society of Accountants of the United States of America, too costly and expensive. PFRS/GAAP is copied from abroad and to use it is only an option. The Tax Code, on the other hand, is the law that is created for the Filipinos, by Filipinos, and of Filipinos and to use it is not option or in other words, mandatory and obligatory. This is the reason for which Ms. Kim Henares is ordering you to reconcile your PFRS/GAAP basis financial statements with the Tax Code.

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ETM IS ALSO INTERESTED TO CONDUCT THE 'INTRO TO TAX ACCOUNTING' SEMINAR AT YOUR PRINCIPAL PLACE OF BUSINESS OR OTHER EVENT PLACE LOCATED IN METRO MANILA. IT IS ALSO FREE OF CHARGE, PROVIDED THAT THE REFERENCE MATERIALS AND BOOKS TO BE USED DURING THE SEMINAR SHALL BE PAID TO EMELINOTMAESTRO; MINIMUM PARTICIPANTS, 10 PAX.

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