Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 1705)
The Commissioner of Internal Revenue can request valuable information from certain government offices such as the Register of Deeds, SEC, and others for the discovery of potential taxpayers. These offices are required to furnish the information within 30 days from receipt of the request.
The Commissioner is authorized to examine relevant books, summons persons to produce records and testify under oath, and take testimonies relevant to tax inquiries. Failure to comply with summons may result in penalties under Section 337.
If there is a reason to believe that a person is not declaring their correct income or receipts for tax purposes, the Commissioner may observe the business operations for up to two months, with findings used as a basis for future assessments.
The Commissioner shall assess the proper tax based on the best evidence obtainable and notify the taxpayer of findings. The taxpayer must respond within a prescribed period; if no response, an assessment is issued, which can be protested administratively and appealed to the Court of Tax Appeals.
Resident corporations are taxed on total net income derived from sources within the Philippines. International carriers pay 2.5% on gross Philippine billings. Branch profit remittances to the mother company are taxed at 15%, except for petroleum operations which are taxed at 7.5%.
Partners in general professional partnerships are liable for income tax only in their individual capacity, and their distributive share of the partnership’s net profits is taxable accordingly.
Persons who neglect or refuse to comply with summons, produce documents, or testify as required face penalties prescribed by Section 337 of the National Internal Revenue Code, which may include fines and imprisonment.
Residents with income solely from salaries, wages, dividends, etc., must file on or before March 18 each year. All other individuals, including non-resident citizens, must file on or before April 15 each year.
Penalties include a 25% surcharge for failure to file returns or pay taxes on time and a 50% surcharge if a false or fraudulent return is made. Interest is also charged at 20% per annum on unpaid taxes, and surcharges may apply for nonpayment of assessments.
Self-employed individuals receiving income from trade or profession must file a declaration of estimated income by April 15 and pay estimated taxes in four installments as prescribed, with provisions to amend declarations if income estimates change.