The ability of criminals to evade persecution by traveling to a different country has resulted to the formation of a network of police forces, the more famous of which is the “Interpol”, a network of police forces from 190 countries all over the world. The Philippines is a member country, and has “Interpol Manila” housed under the Philippine Center on Transnational Crime.

Now that we’re discussing Interpol and the cooperation of police forces, you might wonder if there is a similar network of tax authorities around the world? With the globalization of finance and trade, we are witnessing the proliferation of “international taxpayers” so to speak; people and entities who are taxpayers of multiple tax jurisdictions. And with the presence of international taxpayers, there is a need for a framework within which information concerning a particular taxpayer may be accessed and shared by tax authorities around the world.

The process by which a tax authority requests information on a particular taxpayer from another tax authority is properly called “Exchange of Information”. Particularly, a mechanism to enable an exchange of information

between 2 tax authorities is usually found in tax treaties signed by the countries concerned. In 2010, Republic Act (RA) No. 10021 was passed, allowing the exchange of information by the Philippine Bureau of Internal Revenue (BIR) on tax matters, according to internationally-agreed tax standards. To further implement the provisions of RA No. 10021, the Department of Finance (DoF) in 2010 issued Revenue Regulations (RR) No. 10-10, the “Exchange of Information Regulations”.

As a result, the Commissioner of Internal Revenue (CIR) is authorized to obtain any information, including bank deposits and other related information held by financial institutions, to respond to a request pursuant to a tax treaty to which the Philippines is a signatory to. Any information received by a foreign tax authority from the BIR shall be treated as absolutely confidential in nature, and shall be disclosed only to persons or authorities involved in the assessment or collection of the taxes covered by the particular tax treaty. It is worthwhile to note that income tax returns of specific taxpayers shall be open to inspection only upon the order of the President of the Philippines, under rules and regulations prescribed by the Secretary of Finance.

Upon receipt of a request for tax information, the CIR shall inform in writing the financial institution concerned of the specific documents/information requested by the foreign tax authority. The financial institution is given 15 days within which to provide the specific documents/information, or to provide an explanation why it is unable to do so. Any officer of a financial institution who willfully refuses to supply the required information runs the risk of being charged with a fine or imprisonment, or both.

So, where does the taxpayer concerned feature in the above transactions? Should he be, at the very least, informed of the proceedings? Quite recently, the DOF issued RR No. 22-2018, amending the process by which a taxpayer is informed that exchange of information proceedings have been instituted against him. Specifically, the CIR must inform the concerned taxpayer in writing within 60 days following the transmittal of the tax information to the requesting foreign tax authority. In addition, if the requesting foreign tax authority requests for a deferment of the notification on grounds that it may undermine the chance of success of the investigation, notice to the taxpayer must only be given after receipt of communication from the requesting tax authority that the investigation has already attained finality.

Manila Times Source

ATTY. PEACHES ARANAS

Managing Partner LMA LAW