Publishing the amendments effected by Presidential Decree No. 69 to Title IX of the National Internal Revenue Code

January 9, 1973 REVENUE MEMORANDUM CIRCULAR NO. 09-73 SUBJECT : Publishing the amendments effected by Presidential Decree No. 69 to Title IX of the National Internal Revenue Code TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there is published below certain sections of Title IX of the National Internal Revenue Code, as amended by Presidential Decree No. 69, viz.: Title IX General Administrative Provisions SEC. 306. Recovery of tax erroneously or illegally collected . No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or if any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, that the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. SEC. 308. Form and mode of proceeding in action arising under this Code . Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and shall be conducted by the provincial or city fiscal, or the Solicitor-General, or by the legal officers of the Bureau of Internal Revenue deputized by the Secretary of Justice, but no civil and criminal actions for the recovery of taxes or the enforcement of any fine, penalty, or forfeiture under this Code shall be begun without the approval of the Commissioner of Internal Revenue. SEC. 309. Authority of Commissioner to make compromises and to refund taxes . The Commissioner may: "(1) Compromise any civil case arising under this code or other laws or part of laws administered by the Bureau of Internal Revenue when there is reasonable doubt as to the validity of the claim against the taxpayer or where the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax; or any criminal case other than one involving the commission of fraud by the taxpayer before that case is filed in court. (2) Abate the payment of any tax that appears to be unjustly or excessively assessed or the unpaid portion of the assessed tax or any liability in respect thereof, if under the rules and regulations to be recommended by the Commissioner with the approval of the Secretary of Finance, the administration and collection costs involved do not warrant the collection of the amount due. (3) Credit or refund taxes erroneously or illegally received, or penalties imposed without authority; refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two years after the payment of the tax or penalty. SEC. 311. Remedy for enforcement of statutory penal provisions . The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the particular situation may require, subject to approval of the Commissioner of Internal Revenue. SEC. 315. Nature and extent of tax lien . If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance company liable to pay an internal revenue tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner of Internal Revenue until paid, with interest, penalties, and costs what may accrue in addition thereto upon all property and rights to property belonging to the taxpayer. Provided , That this lien shall not be valid against any mortgagee, purchaser, or judgment creditor until notice of such lien shall be filed by the Commissioner in the office of the register of deeds of the province or city where the property of the taxpayers is situated or located. SEC. 316. Remedies for the collection of delinquent taxes. The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be (a) by distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and (b) by civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes; Provided, however, That the remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than one hundred pesos. The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner of Internal Revenue. The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof as well as of real property and improvements thereon. SEC. 328. Forfeiture to Government for want of bidder . In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the taxes, penalties, and costs, the Internal Revenue Officer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two days thereafter shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. It shall be the duty of the Register of Deeds concerned upon registration with his office of any such declaration of forfeiture to transfer the title of the property forfeited to the government without the necessity of an order from a competent Court. Within one year from the date of such forfeiture the taxpayer, or any one for him, may redeem said property by paying to the Commissioner or the latter's Collection Agent the full amount of the taxes and penalties, together with interest thereon and the costs of sale; but if the property be not thus redeemed, the forfeiture shall become absolute. SEC. 332. Exceptions as to period of limitation of assessment and collection of taxes . (a) In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the falsity, fraud, or omissional; Provided That, in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. (b) Where before the expiration of the time prescribed in the preceding section for the assessment of the tax, both the Commissioner of Internal Revenue and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. (c) Where the assessment of any internal revenue tax has been made within the period of limitation above-prescribed, such tax may be collected by distraint or levy or by a proceeding in court, but only if begun (1) within five years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner of Internal Revenue and the taxpayer before the expiration of such five-year period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. SEC. 333. Suspension of running of statute . The running of the statute of limitations provided in section 331 or 332 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner of Internal Revenue is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided , That, if the taxpayer informs the Commissioner of Internal Revenue of any change in address, the statute will not be suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located, and when the taxpayer is out of the Philippines. SEC. 337. Preservation of books of accounts, and other accounting records . All the books of accounts, including the subsidiary books, and other accounting records, of corporations, partnerships, or person shall be preserved by them for a period of at least five years from the last entry in each book and shall be subject to examination and inspection only once in a taxable year during that five-year period by internal revenue officers, except in cases of fraud, irregularity or mistake as determined by the Commissioner, or unless the taxpayer requests otherwise, in which case, another examination and inspection may be made. Examination and inspection of books of accounts and other accounting records shall be done only in the taxpayer's office or place of business or in the office of the Bureau of Internal Revenue. All corporations, partnerships, or persons, that retire from business shall, within ten days from the date of retirement or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases, submit their books of accounts, including the subsidiary books and other accounting records, to the Commissioner or any of his deputies for examination, after which they shall be returned. Corporations and partnerships contemplating dissolution must notify the Commissioner of Internal Revenue and shall not he dissolved until cleared of any tax liability. SEC. 337-A Supplying of taxpayer account number . Any person required under the authority of this Code to make, render, or file a return, statement, or other document shall be supplied with or assigned a taxpayer account number which he shall include in such return, statement or document filed with the Commissioner for his proper identification for tax purposes. Only one account number shall be given a person required to have one, and any person who shall secure more than one account number shall be criminally liable under the provisions of Section 352 of this Code. FEATURES OF THE AMENDMENTS Amendment to Section 306 : Recovery of tax erroneously or illegally collected . There are two important amendments to this section, the first consisting of a clear mandate establishing as sole criterion in computing the two-year period within which to claim refund of tax or penalty erroneously or illegally collected or assessed, that is from the date of payment of the tax or penalty, even if the taxpayer had no cause for refund as the tax or penalty was legally collected, and even if after the lapse of the two-year period, a supervening cause should arise which would entitle the taxpayer to refund. By this amendment, the doctrine enunciated by the Supreme Court in the case entitled "Com. V. Insular Lumber Co. and CTA, L-24221, Dec. 11, 1967" finds no more application. In this case the Supreme Court held that "Where the tax sought to be refunded is illegally or erroneously collected, the period of prescription starts from the date the tax was paid; but when the tax is legally collected, the prescriptive period commences to run from the date of occurrence of the supervening cause which gave rise to the right of refund." The other amendment to this section consists of the new proviso thereof which authorizes the Commissioner to effect refund or credit, even without a written claim therefor, where on the face of the return the payment appears clearly to have been erroneously paid. Amendment to Section 308 : Form and mode of proceeding on actions arising under this Code The amendment to this section authorizes the legal officers of the Bureau who are deputized by the Secretary of Justice to directly institute both civil and criminal actions and personally conduct the proceedings thereon. Furthermore, under the amendment, criminal actions can now be instituted only with the approval of the Commissioner. By virtue of this amendment, other law enforcement agencies of the government cannot now on their own institute criminal actions for violations of the internal revenue laws without the approval of the Commissioner. Amendments to Section 309 : Authority of the Commissioner to make compromises and to refund taxes . The framework of this section was restructured and the amendments correspondingly inserted. The amendment, among others, indicates the instances where civil cases may be compromised, and these instances are: 1. When there is reasonable doubt as to the validity of the claim against the taxpayer; or 2. Where the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The amendment also authorizes the compromise of a criminal case only before the case is filed in court, and ordains that a case involving fraud cannot be compromised. The amendment furthermore expressly grants the Commissioner the discretion to abate, regardless of the merit of the case, the collection of the unpaid portion of a tax or any assessed tax where the administration and collection costs involved do not warrant the collection of the amount due. This contemplates cases where the amount to be expended in pursuing collection of the tax may even be more or only equal the amount being collected. Nevertheless, in the exercise of this power, the merits of each case must be appreciated. Amendment to Section 311 : Remedy for enforcement or statutory penal provisions . In line with the amendment to Section 308, the amendment to this section now also requires the approval of the Commissioner respecting the enforcement of statutory penal provisions of the Tax Code by criminal or civil action. Amendment to Section 315 : Nature and extent of tax lien . The first three paragraphs of this section were repealed and the fourth and last paragraph amended by integrating therein all taxes in addition to the income tax which was the sole coverage before of this paragraph. By virtue of this amendment, the different treatment of the nature and extent of the liens for taxes on property, or on any business or occupation, and taxes on resources and receipts covered by former paragraph 1 from the liens on the estate tax covered by former paragraph 2 and the tax on gifts formerly covered by paragraph 3 was removed and they are now all equally treated under former paragraph 4 which now constitutes the sole paragraph of the section. Amendment to Section 316 : Remedies for the collection of delinquent taxes . The word "civil" describing "remedies" in the title of this section was removed in view of the amendment expanding the scope of the remedy by judicial action to include criminal action. As a result of this amendment, a new paragraph was also inserted, now consisting of the second paragraph providing that the judgment in a criminal case shall also include an order for the payment of the taxes subject of the criminal case. The amendment furthermore inhibits the availment of the remedies of distraint and levy if the amount of the tax involved is less than P100. This amendment is in keeping with the amendment to Section 309 relative to the abatement of the collection of a tax if the costs of collection do not warrant the collection of the amount due inasmuch as the costs incident to the availment of the remedies of distraint and levy might even be more than P100. Finally, the amendment consisting of the last paragraph of this section authorizes the Bureau to advance the expenses incident to the availment of both the civil and criminal actions in the collection of taxes. Amendment to Section 328 : Forfeiture to Government for want of bidder . The amendment to this section directs the registers of deeds upon any registration of any declaration of forfeiture of property for want of bidders to transfer the title to the property forfeited to the Government without the necessity of an order from a competent court. The other amendments merely changed any reference to the provincial or city treasurer to the proper internal revenue official or officer. Amendment to Section 332 : Exceptions as to period of limitation of assessment and collection of taxes . The amendment to this section consists solely of the proviso added to the first paragraph to the effect that in a collection case instituted by the Bureau involving fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of by the court. By this amendment, the taxpayer is now prevented in invoking prescription as a defense by assailing the findings of fraud by the Bureau. Amendment to Section 333 : Suspension of running of statute . The amendment to this section expanded the instances and situations where the running of the statute of limitations is suspended which consist of the enumeration added to this section as follows: 1. When the taxpayer requests for a reinvestigation which is granted; 2. When the taxpayer cannot be located in the address given in the return upon which the tax was assessed; but if the taxpayer gave notice of change of address, the running of the period shall not be suspended; 3. When the warrant of distraint and levy is duly served on the taxpayer, or his authorized representative, or on any member of his household with sufficient discretion, and no property could be located; and 4. When the taxpayer is out of the Philippines. Amendment to Section 337 : Preservation of books of accounts and other accounting records . The amendment to this section now reposed with the Commissioner the determination of the fact of fraud, irregularity and mistake in the keeping of books of accounts of the taxpayer or on the latter's operations which before was reposed with the regional director. The amendment now also requires corporations and partnerships contemplating dissolution to notify the Commissioner thereof, and they shall not be dissolved until cleared of their tax liabilities. Amendment to Section 337-A : Supplying of taxpayer account number . The amendment, which consist of the last paragraph, now subjects persons securing more than one account number to the penal provisions of Section 352. EFFECTIVITY All of the amendments to Title IX of the National Internal Revenue Code take effect on January 1, 1973. ENFORCEMENT All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this circular as wide a publicity as possible. aisa dc MISAEL P. VERA Commissioner of Internal Revenue APPROVED: CESAR VIRATA Secretary of Finance