Notes in Remedies
INTRODUCTION
1. Stages in the imposition of tax
a. Levy – It is a legislative act which determines that a tax of a certain
amount or of a certain percentage shall be imposed on the persons,
properties or acts.
b. Assessment – It is the official action of an officer authorized by law in
ascertaining the amount of tax due under the law from a taxpayer.
c. Collection – IT is the getting by the proper government agency of the
taxes imposed.
Assessment should be made within 3 years from the date of filing of return, or
from the last day required by law for filing, if the return was filed before such last
day.
Collection should be made within 5 years from the date of assessment, either by
summary proceedings or judicial proceedings.
2. Remedies available to the government
a. Administrative Remedies
i. Distraint of personal property
ii. Levy of real property
iii. Enforcement of forfeiture
iv. Enforcement of tax lien
v. Entering into compromise of tax cases
vi. Constructive distraint
b. Judicial Remedies
i. Civil actions
ii. Criminal actions
3. Remedies available to the taxpayer
a. Administrative Remedies
i. Reinvestigation or reconsideration
ii. Compromise
iii. Claim for refund
b. Judicial Remedies
i. Appeal to Court of Tax Appeals
ii. Criminal actions
iii. Civil actions
REMEDIES IN GENERAL
1. Period of limitation (Statute of Limitation)
Assessment
Assessment should be made within 3 years from the date of filing of return, or
from the last day required by law for filing, if the return was filed before such last
day.
No proceeding in court without assessment for the collection of such taxes shall
be begun after the expiration of such period.
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Exceptions to 3-year prescriptive period for assessment
1. In case of false or fraudulent return or of failure to file a return, the tax may be
assessed at any time within 10 years after the discovery of the falsity, fraud or
omission. (False or fraudulent return; and Failure to file return)
2. If before the expiration of the 3-year period for the assessment of the tax,
both the Commissioner and the taxpayer have agreed in writing to its
assessment after such time, the tax may be assessed within the period
agreed upon. The period so agreed upon may be extended by subsequent
written agreement made before the expiration of the period previously agreed
upon. (Extension)
Suspension of the running of the Statute of Limitations (Prescriptive Period) on
the making of assessment:
1. When the Commissioner is prohibited from making the assessment, or
beginning distraint, or levy or a proceeding in court;
2. When the taxpayer requests for and is granted a reinvestigation by the
Commissioner’
3. When the taxpayer could not be located in the address given by him in the
return filed upon which the tax is being assessed or collected;
4. When the warrant or distraint and levy is duly served upon the taxpayer or his
authorized representative, and no property could be located;
5. When the taxpayer is out of the Philippines.
Collection
Collection should be made within 5 years from the date of assessment, either by
summary proceedings or judicial proceedings.
Any internal revenue tax which has been assessed within the extended period
agreed upon may be collected by distraint or levy or by a proceeding in court
within the period agreed upon in writing before the expiration of the 5 year period.
The period so agreed upon may be extended by subsequent written agreements
made before the expiration of the period previously agreed upon.
Collection without assessment
Collection should be made within 3 years from the date of filing of return, or from
the last day required by law for filing, if the return was filed before such last day,
by judicial proceedings only.
In case of a false or fraudulent return or of failure to file a return, collection should
be made within 10 years from discovery of fraud, falsity or failure to file a return,
by judicial proceedings only.
2. Authority of the Commissioner to compromise, abate and refund or credit taxes
The Commissioner may
a. Compromise the payment of any internal revenue tax, when :
1. A reasonable doubt as to the validity of the claim against the taxpayer
exists; or
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2. The financial position of the taxpayer demonstrates a clear inability to pay
the assessed tax.
The compromise settlement of any tax liability shall be subject to the following
minimum amounts:
a. For cases of financial incapacity, a minimum compromise rate equivalent
to ten percent (10%) of the basic assessed tax; and
b. For other cases, a minimum compromise rate equivalent to forty percent
(40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos (P1,000,000) or where
the settlement offered is less than the prescribed minimum rates, the
compromise, shall be subject to the approval of the Evaluation Board which shall
be composed of the Commissioner and the four (4) Deputy Commissioners.
Cases which may be compromised:
1. Delinquent accounts;
2. Cases under administrative protest pending in the regional offices, revenue
district offices, legal service, large taxpayer service (LTS), collection service,
enforcement service and other offices in the national office;
3. Civil tax cases being disputed before the courts;
4. Collection cases filed in courts;
5. Criminal violations, other than those already filed in court or those involving
criminal tax fraud; and
6. Cases covered by pre-assessment notices but taxpayer is not agreeable to
the findings of the audit office as confirmed by the review office.
Cases which cannot be compromised:
1.
2.
3.
4.
5.
Withholding tax cases;
Criminal tax fraud cases;
Criminal violations already filed in court;
Delinquent accounts with duly approved schedule of installment payments;
Cases where final reports of reinvestigation or reconsideration have been
issued resulting to reduction in the original assessment and the taxpayer is
agreeable to such decision.
6. Cases which become final and executory after final judgment of a court.
The prescribed minimum rates for the compromise settlement of tax liabilities,
reckoned on a per tax type assessment basis, are
1. 40% in cases of doubtful validity;
2. 10% in cases of financial incapacity;
3. 50% in cases of delinquent accounts and disputed assessments of taxpayer
registered under the LTS and ETS.
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Applications for the compromise settlement of tax liabilities will be evaluated and
approved/disapproved by the:
1. National Evaluation Board (for basic assessed tax exceeding P1 million and
for offers less than the prescribed minimum rates);
2. Regional Evaluations Board (for basic assessed tax of P500,000.00 or less);
3. Commissioner of Internal Revenue (for basic assessed tax exceeding
P500,00.00 but not over P1 million).
b. Abate or cancel a tax liability, when:
a. The tax or any portion thereof appears to be unjustly or excessively assessed;
b. The administration and collection costs involved do not justify the collection of
the amount due.
All criminal violations may be compromised except:
a. Those already filed in court, or
b. Those involving fraud.
c. Credit or refund taxes erroneously or illegally received or penalties imposed without
authority
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 (2)
years after the payment of the tax or penalty.
A returned filed showing an overpayment shall be considered as a written claim
for credit and refund.
CIVIL REMEDIES FOR COLLECTION OF TAXES
1. Civil remedies for collection of taxes
1. By distraint of personal property or levy on real property
2. By civil or criminal action
2. By distraint of personal property or levy on real property
Distraint is the seizure by the government of personal property, tangible or
intangible, to enforce the payment of taxes, to be followed by its public sale, if the
taxes are not voluntarily paid.
Kinds of distraint:
a. Actual Distraint – taking of possession of the personal property out of the
taxpayer.
b. Constructive Distraint – the owner is merely prohibited from disposing of his
property.
Actual Distraint vs. Constructive Distraint
1. Both are summary remedies for the collection of taxes;
2. Both refer only to personal property;
3. Both cannot be availed of where the amount of the tax involved is not more
than P100;
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4. Actual Distraint is made on the property only of delinquent taxpayer while
Constructive Distraint may be made on the property of any taxpayer, whether
delinquent or not;
5. In actual distraint there is a taking of possession or transfer of control over the
property distrained while in constructive distraint, the taxpayer is merely
prohibited from disposing of his property;
6. Actual distraint is effected by leaving a list of the property distrained or by
service of a warrant of distraint or garnishment while constructive distraint, by
requiring the taxpayer to sign a receipt of the property or by the revenue
officer preparing and leaving a list of such property; and
7. Actual distraint is an immediate step for collection of delinquent taxes while
constructive distraint is not necessarily so, its purpose being to prevent the
taxpayer from disposing of his property pending final determination of his tax
liability.
When and by whom distraint may be made:
1. It shall be made not earlier than 3 months nor later than 6 months from
receipt of demand by the taxpayer;
2. The distraint of personal property shall be made by the Commissioner of
Internal Revenue of his duly authorized representative if the amount involved
is more than P1,000,000 or the Revenue District Officer, if the amount
involved is P1,000,000 or less.
Levy refers to act or seizure of real property in order to enforce the payment of
taxes and the property may be sold at public sale, if after seizure, the taxes are
not voluntarily paid.
Distraint vs. Levy
1. Both are summary remedies for the collection of taxes;
2. Both cannot be availed of where the amount of the tax involved is not more
than P100;
3. Distraint refers to personal property while levy to real property;
4. In distraint of personal property, forfeiture by the government is not provided,
while in the case of levy upon real estate, forfeiture by the government is
authorized where there is no bidder or the highest bid is not sufficient to pay
the taxes, penalties; and
5. The taxpayer is not given the right of redemption with respect to distrained
personal sold, while such right is given in case of real estate levied upon and
sold or forfeited to the gorvenment.
Requisites for exercise of remedy of distraint or levy
a.
b.
c.
d.
The taxpayer must be delinquent in the payment of tax;
There must be subsequent demands for its payments;
The taxpayer must fail to pay the delinquent tax at the time required; and
The period within which to assess or collect the tax has not yet prescribed.
Where constructive distraint is availed of, tax delinquency is not essential.
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3. By civil or criminal action
The Bureau of Internal Revenue (BIR) files civil or criminal action before the
Municipal Trial Court, Regional Trial Court or the Court of Tax Appeals with
appropriate jurisdiction.
PROTEST OF ASSESSMENT
1. Protest of assessment
Assessment is the official action of the Bureau of Internal Revenue in
ascertaining the amount of tax due under the law from a taxpayer.
Assessment should be made within 3 years from the date of filing of return, or
from the last day required by law for filing, if the return was filed before such last
day.
Jeopardy Assessment
Jeopardy assessment is a tax assessment which was made without the benefit of
complete or partial audit by an authorized revenue officer who has reason to
believe that the assessment and collection of a delinquency tax will be
jeopardized by delay because of taxpayer’s failure to comply with audit and
investigation requirements to present his books of accounts or to substantiate all
or any of the deductions, exemptions or credits claimed.
2. Procedure prescribed law
In case of disputed assessment:
1. The BIR notifies the taxpayer through a Pre-Assessment Notice of findings
that proper taxes should be assessed. (Sex. 228)
2. a. The taxpayer responds 15 days from receipt of the Pre-Assessment
Notice why no taxes should be assessed against him.
i.
ii.
If the BIR accepts the taxpayer’s explanations, then the proceedings
are ended.
If the BIR rejects the taxpayer explanations, the proceedings are
ended or an assessment issued based on the findings. (Sec. 228)
b. If the taxpayer fails to respond within 15 days from receipt of the PreAssessment Notice, the BIR ends the proceedings, or an assessment issued
based on the findings. (Sec. 228)
3. The BIR issues the assessment.
4. If the taxpayer does not do anything within 30 days from receipt of the notice of
assessment, the assessment becomes that, executor, demandable and not
appealable to the Court of Tax Appeals, and the BIR could avail of its remedies to
collect the tax.
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If the taxpayer administratively protests or disputes the assessment by filing a
request for reconsideration or reinvestigation within 30 days from receipt of the
notice of assessment, within 60 from filing of the protests, all relevant supporting
documents shall be submitted. IF the documents are not seasonably submitted, the
assessment shall become final, executor, demandable and not appealable to the
Court of Tax Appeals.
5. The BIR denies the administrative protest or dispute within 180 days from receipt of
the relevant supporting documents.
The BIR either denies the administrative protest or dispute, or does not act on the
administrative protest or dispute.
6. If the taxpayer receives the BIR’s denial of his administrative protest or dispute,
within 30 days from receipt of the denial appeals the decision of the BIR to the Court
of Tax Appeals – Division.
If the taxpayer does not seasonably interpose an appeal, the decision of the BIR
denying his administrative protest or dispute becomes final and executor. The
disputed assessment becomes final, executor, demandable and not anymore
appealable to the Court of Tax Appeals – Division.
If the taxpayer learns of the inaction by the BIR on his administrative protest or
dispute, within 30 days from the lapse of 180 days from the taxpayer’s submission of
all the relevant supporting documents, must interpose an appeal to the Court of Tax
Appeals – Division.
If a protest filed by a taxpayer be denied by the BIR, the taxpayer may request the
BIR for a reconsideration of such denial and that his case be referred to the BIR’s
Appellate Division. The Appellate Division serves as a “Court” where both parties,
i.e. the Revenue Officer on one hand, and the Taxpayer on the other, can present
testimony and evidence before a Hearing Officer, to support their respective claims.
(Alternative course of action of the taxpayer)
7. The Court of Tax Appeals (CTA) - Division
The decision of the CTA – Division may be appealed to the CTA – en banc within 15
days.
8. The Court of Tax Appeals (CTA) – en banc
The decision of the CTA – en banc may be appealed to the Supreme Court within 15
days.
In case of undisputed assessment:
1. The BIR may file an action with the CTA – Division where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is P1,000,000.00 or
more.
The BIR may file an action with the Regional Trial Court or the Municipal Trial
Court as the case my be, where the principal amount of taxes and fees, exclusive
of charges and penalties, claimed is less than P1,000,000.00
2. The decision of the Regional Trial Court in the exercise of its original jurisdiction
or appellate jurisdiction is appealable to the CTA – Division.
3. The decision of the CTA division is appealable to the CTA en banc. The decision
of CTA en banc is appealable to the Supreme Court.
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JURISDICTION OF THE COURT OF TAX APPEALS (RA 9282)
a. Exclusive appellate jurisdiction to review by appeal:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties
in relation hereto, or other matters arising under the National Internal Revenue
Code or other laws administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties
in relation thereto, or other matters arising under the National Internal Revenue
Code or other laws administered by the Bureau of Internal Revenue.
3. Criminal cases decided by the Regional Trial Court in the exercise of original
jurisdiction or appellate jurisdiction.
4. Tax collection cases decided by the Regional Trial Court in the exercise oforiginal
jurisdiction or appellate jurisdiction.
b. Jurisdiction over cases involving criminal offenses and collection cases
1. Criminal offenses arising from violations of the National Internal Revenue Code
or Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or the Bureau of Customs where the taxes and fees, exclusive
of charges and penalties, claimed is P1,000,000 or more.
2.
Collection cases where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is P1,000,000.00 or more.
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