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no permit and tax evasion

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1 no permit and tax evasion on Sun Sep 07, 2014 10:34 am


Arresto Menor
my company is operating in ortigas and their permit is addressed in is illegal right?and they are using transmittal receipt instead of official receipt in their transactions.that is tax evasion right?

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2 Re: no permit and tax evasion on Sat Nov 01, 2014 7:22 pm


Reclusion Perpetua
hindi ho automatic me tax evasion.

ang labas ho is unregistered ang branch nila sa ortigas. kasi lahat ng branches at ang mismong head office should be registered sa BIR. me permit sa ortigas , me permit sa malabon, at kung ang permit na ginamit sa ortigas is ang permit sa malabon, hindi naman ibig sabihin illegal ang negosyo nila . lalong hindi tama sabihin na if me utang ang isang tao sa branch nila sa ortigas, makaka wala or mapawalang bisa ang utang niya sa ortigas branch. iyong wala syang permit sa ortigas, ibang violation iyan. puwede ho iyan bayaran ng company sa bir ng compromise penalty dahil unregistered sya sa ortigas.

bawal po iyang transmittal receipt in place of official receipt kasi me regulation po tayo na lahat ng receipts, including trust receipts, etc etc, dapat registered sa bir at me karamptang authority to print. at kung sakaling nag gamit sya ng receipt na hindi registered sa bir, me violation at penalty iyan. pero hindi ibig sabihin na tax evasion iyan. kasi hindi natin alam na iyong covered na amount na nilagay sa transmittal receipt, nilista nila as sales sa head office nila. me violation but definitely not tax evasion muna kasi dapat me proof dapat ang fraud or dapat me findings of  fact . so as of now, hindi pa natin alam if me tax evasion or not.  normally po, sa mga negosyo na on processs pa ang bir registration, ginagamit nila ang transmittal receipt at iyong sales na covered noong transmittal receipt, ililista nila as sales sa head office. so hindi pa natin alam.

Tax evasion connotes the integration of three factors:
(1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due;
(2) an accompanying state of mind which is described as being “evil,” in “bad faith,” “willfull,”or “deliberate and not accidental”; and
(3) a course of action or failure of action which is unlawful.[24]

as of now, hindi natin malalaman if me evil state of mind sila or bad faith unless di natin makita ang libro nila. pero one thing is for sure, the mere fact na unregistered ang receipt niya is hindi ibig sabihin 100% me tax evasion na. ang bir ang makaka alam niyan. kasi ipa audit iyan.

paki basa po nitong post na ito. me discussion about tax evasion.

([G.R. No. 147188. September 14, 2004]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE ESTATE OF BENIGNO P. TODA, JR., Represented by Special Co-administrators Lorna Kapunan and Mario Luza Bautista, respondents.

Is this a case of tax evasion

or tax avoidance?

Tax avoidance and tax evasion are the two most common ways used by taxpayers in escaping from taxation.

**Tax avoidance is the tax saving device within the means sanctioned by law.
This method should be used by the taxpayer in good faith and at arms length.

**Tax evasion, on the other hand, is a scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities.[23]

Tax evasion connotes the integration of three factors:
(1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due;
(2) an accompanying state of mind which is described as being “evil,” in “bad faith,” “willfull,”or “deliberate and not accidental”; and
(3) a course of action or failure of action which is unlawful.[24]

All these factors are present in the instant case.

It is significant to note that as early as 4 May 1989, prior to the purported sale of the Cibeles property by CIC to Altonaga on 30 August 1989, CIC received P40 million from RMI,[25] and not from Altonaga. That P40 million was debited by RMI and reflected in its trial balance[26] as “other inv. – Cibeles Bldg.” Also, as of 31 July 1989, another P40 million was debited and reflected in RMI’s trial balance as “other inv. – Cibeles Bldg.” This would show that the real buyer of the properties was RMI, and not the intermediary Altonaga.

The investigation conducted by the BIR disclosed that Altonaga was a close business associate and one of the many trusted corporate executives of Toda. This information was revealed by Mr. Boy Prieto, the assistant accountant of CIC and an old timer in the company. [27] But Mr. Prieto did not testify on this matter, hence, that information remains to be hearsay and is thus inadmissible in evidence. It was not verified either, since the letter-request for investigation of Altonaga was unserved,[28] Altonaga having left for the United States of America in January 1990. Nevertheless, that Altonaga was a mere conduit finds support in the admission of respondent Estate that the sale to him was part of the tax planning scheme of CIC. That admission is borne by the records. In its Memorandum, respondent Estate declared:

Petitioner, however, claims there was a “change of structure” of the proceeds of sale. Admitted one hundred percent. But isn’t this precisely the definition of tax planning? Change the structure of the funds and pay a lower tax. Precisely, Sec. 40 (2) of the Tax Code exists, allowing tax free transfers of property for stock, changing the structure of the property and the tax to be paid. As long as it is done legally, changing the structure of a transaction to achieve a lower tax is not against the law. It is absolutely allowed.

Tax planning is by definition to reduce, if not eliminate altogether, a tax. Surely petitioner [sic] cannot be faulted for wanting to reduce the tax from 35% to 5%.[29] [Underscoring supplied].

The scheme resorted to by CIC in making it appear that there were two sales of the subject properties, i.e., from CIC to Altonaga, and then from Altonaga to RMI cannot be considered a legitimate tax planning. Such scheme is tainted with fraud.

Fraud in its general sense, “is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another.”[30]

Here, it is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid especially that the transfer from him to RMI would then subject the income to only 5% individual capital gains tax, and not the 35% corporate income tax. Altonaga’s sole purpose of acquiring and transferring title of the subject properties on the same day was to create a tax shelter. Altonaga never controlled the property and did not enjoy the normal benefits and burdens of ownership. The sale to him was merely a tax ploy, a sham, and without business purpose and economic substance. Doubtless, the execution of the two sales was calculated to mislead the BIR with the end in view of reducing the consequent income tax liability.

In a nutshell, the intermediary transaction, i.e., the sale of Altonaga, which was prompted more on the mitigation of tax liabilities than for legitimate business purposes constitutes one of tax evasion.[31]

Generally, a sale or exchange of assets will have an income tax incidence only when it is consummated.[32] The incidence of taxation depends upon the substance of a transaction. The tax consequences arising from gains from a sale of property are not finally to be determined solely by the means employed to transfer legal title. Rather, the transaction must be viewed as a whole, and each step from the commencement of negotiations to the consummation of the sale is relevant. A sale by one person cannot be transformed for tax purposes into a sale by another by using the latter as a conduit through which to pass title. To permit the true nature of the transaction to be disguised by mere formalisms, which exist solely to alter tax liabilities, would seriously impair the effective administration of the tax policies of Congress.[33]

To allow a taxpayer to deny tax liability on the ground that the sale was made through another and distinct entity when it is proved that the latter was merely a conduit is to sanction a circumvention of our tax laws. Hence, the sale to Altonaga should be disregarded for income tax purposes.[34] The two sale transactions should be treated as a single direct sale by CIC to RMI.

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