NIRC: REMEDIES IN GENERAL therefore necessary to reconcile the

OUTLINE OF REMEDIES apparently conflicting interests of the

REMEDIES OF THE GOVERNMENT authorities and the taxpayers so that
Basic remedies: the real purpose of taxations, which is
• Assessment; and the promotion of the common good,
• Collection. may be achieved. (Reyes v.
Other classifications: Almanzor)
I. As to procedure ASSESSMENT
A. Collection with assessment; or Assess means to impose a tax; to
B. Collection without assessment. charge with a tax; to declare a tax to
II. As to the nature of be payable; to apportion a tax to be
proceeding paid or contributed, to fix a rate; to fix
A. Administrative remedies or settle a sum to be paid by way of
1. Distraint of personal property tax; to set, fix or charge a certain sum
including garnishment and to each taxpayer; to settle determine
deposit; or fix the amount of tax to be paid (84
2. Summary remedy of levy on C.J.S 74-750)
real property; An assessment is the notice to the
3. Forfeiture to the government; effect that the amount therein stated is
4. Tax lien; due from a taxpayer as a tax with a
5. Compromise and abatement; demand for payment of the same
and within a stated period of time.
6. Penalties and fines. (Commissioner v. CTA, 27 SCRA
B. Judicial remedies 1159)
1. Civil; and An assessment contains not only a
2. Criminal. computation of tax liabilities, but also a
REMEDIES OF THE TAXPAYER demand for payment within a
I. Before payment of tax prescribed period. It also signals the
A. Administrative remedies time when penalties and interests
1. Protest; begin to accrue against the
2. Compromise; and 188
3. Abatement. taxpayer. To enable the taxpayer to
B. Judicial remedies determine his remedies thereon, due
II. After payment of tax process requires that it must be served
A. Administrative remedy on and received by the taxpayer. (CIR
1. Tax refund; and v. PASCOR Realty and Development
2. Tax credit. Corporation)
B. Judicial remedies When Assessment is Made
REMEDIES OF THE GOVERNMENT Prescriptive Period for Assessment
Importance of Tax Remedies (Sec. 203, NIRC)
While taxes are the lifeblood of the If the taxpayer filed a return: Internal
government and so should be revenue taxes shall be assessed
collected without unnecessary within three years after the last day
hindrance. However, such collection prescribed by law for the filing of the
should be made in accordance with return.
law as any arbitrariness will negate the If a return is filed beyond the period
very reason for government itself It is prescribed by law: The three-year
period shall be counted from the day FIRST STEP: Issuance of Letter of
the return was filed. Authority
• Exceptions: Revenue officers examine the books of
o False return; account and other accounting records
o Fraudulent return with of taxpayers to determine the correct
intent to evade tax; tax liability. This is through the
o Failure to file a return. issuance of a Letter of Authority.
(Sec. 222, NIRC) Letter of Authority (LA) – The Letter
Waiver of Period for Assessment of Authority refers to the letter
The taxpayer and the Commissioner informing a taxpayer that a certain
may agree in writing, before the revenue officer is authorized to
expiration of the time prescribed in examine the books of accounts and
Sec. 203, to extend the period of other accounting record of said
assessment. The period so agreed taxpayer for the purpose of verifying
upon may be extended by subsequent his tax liabilities during a taxable year.
written agreement made before the (ABAN, Law of Basic Taxation in the
expiration of the period previously Philippines, p. 196)
agreed upon. (Sec. 222(b), NIRC) SECOND STEP: Service of LA; Tax
Suspension of Running of Statute Audit
of Limitations (Sec. 223, NIRC) The LA must be served to the taxpayer
1. Period during which the within thirty (30) days from its issue;
Commissioner is prohibited from otherwise, it becomes null and void
making the assessment or and the taxpayer has all the right to
beginning distraint or levy or a refuse its service. (ABAN, supra at
proceeding in court, and for sixty 196)
(60) days thereafter ; 189
2. When the taxpayer requests for a A Revenue Officer shall, within 120
reinvestigation which is granted by days from the date of issuance and
the Commissioner; service of the LA, conduct his audit
3. When the taxpayer cannot be and submit his report of investigation
located in the address given by him (ibid).
in the return filed upon which a tax Effect of failure to complete the 120-
is being assessed or collected, day period
BUT if the taxpayer informs the 1. Audit will continue without the need
Commissioner of any change in to revalidate the LA; but
address, the running of the statute 2. The officer concerned shall be
of limitations shall not be subjected to administrative
suspended; sanctions (RMC No. 23-2009;
4. When the warrant of distraint or RMO No. 44-2010).
levy is duly served upon the THIRD STEP: Issuance of
taxpayer, his authorized Preliminary Assessment Notice
representative, or a member of his (PAN)
household with sufficient discretion, A PAN is issued to the taxpayer
and no property is located; and informing him of the findings of the
5. When the taxpayer is out of the Revenue Officer if after review and
Philippines. evaluation of taxpayer’s records, there
Assessment Procedure found a sufficient basis to assess the
taxpayer for any deficiency taxes (RR the findings in PA, or if he is in default,
No. 18-2013, Sec. 3.1.1). FLD/FAN shall be issued.
Prior to issuance of PAN, the taxpayer FLD/FAN
may be allowed to make voluntary A notice of assessment constituting a
payments of probable deficiency taxes computation of deficiency taxes and a
and penalties (RMC No. 11-2014). demand issued to the taxpayer. This is
Rationale: the notice of assessment and not the
To give the taxpayer the opportunity to PAN that must be made within the
refute the findings of the examiner and prescriptive period of assessment and
give a more accurate and detailed which MUST be protested by the
explanation regarding the taxpayer, otherwise, the assessment
assessment(s) (Sony Philippines v. shall become final, executory and
CIR, CTA Case No. 6185). demandable.
Note: The issuance of a Notice of 190
Informal Conference under RR No. 12- Requisites of a valid FLD/FAN:
99 before issuing PAN is already 1. Must be issued by the CIR or
dispensed with pursuant to RR No. 18- his duly authorized representative.
2013 issued on November 28, 2013. The duly authorized
FOURTH STEP: Reply to PAN representatives refer to the same
The taxpayer has 15 days from the persons who are authorized to
date of receipt of PAN to reply (RR No. issue PAN (RR No. 18-2013, Sec.
18-2013, Sec. 3.1.1). 3.1.3; RMC No. 11-2014);
Requisites of a valid reply: 2. Must be issued after issuance
1. Must be made within the said 15- of a valid PAN, except for the
day period (RR No. 18-2013, Sec. instances where a PAN is not
3.1.1); and required (Sec. 228, par. 1 & 2,
2. Must be filed by the taxpayer or his NIRC; RR No. 18-2013, Sec.
duly authorized representative, in 3.1.2);
person or through registered mail 3. Must be served to the taxpayer
with return card, with the Office of personally and if not practicable, by
the duly authorized representative substituted service or by mail (RR
of the CIR (Regional Director, No. 18-2013, Sec. 3.1.6);
ACIR-LTS, ACIR-Enforcement 4. Must be served to the taxpayer
Service) who signed the PAN before the lapse of the prescriptive
(RMC No. 11-2014, RMC No. 39- period of making assessment (Sec.
2013). 203, NIRC);
Effect of failure to submit valid 5. Must be in writing and contain
reply to PAN the facts and the law on which the
1. Taxpayer shall be considered in assessment is made (RR No. 18-
default and a FLD/FAN will be 2013, Sec. 3.1.3)
issued (Sec. 228, par. 3, NIRC). Period to Issue FLD/FAN
2. Taxpayer can still file a protest to Rule: FAN can be issued only after a
FLD/FAN (Sec. 228, par. 4, NIRC). PAN was issued. The taxpayer must
FIFTH STEP: Issuance of a Formal first be informed that he is liable for
Letter of Demand and Final deficiency taxes through the sending
Assessment Notice (FLD/FAN) of PAN. Absence of PAN renders
If the taxpayer was not able to refute nugatory any assessment made by
the tax authorities (CIR v. Metro claim a refund or tax credit of
Superama, Inc,; SVI Information v. excess creditable withholding tax
CIR). for a taxable period was
After the issuance of the PAN, the determined to have carried over
FAN may be issued in any of the and automatically applied the
following cases/periods: same amount claimed against the
1. After the lapse of the 15-day estimated tax liabilities for the
period to respond to PAN without taxable quarter or quarters of the
the taxpayer submitting a reply (RR succeeding taxable year
No. 18-2013, Sec. 3.1.1); When Assessment is Deemed
2. Before the lapse of the 15-day Made
period to respond to PAN and the The assessment is deemed to
taxpayer has not yet submitted a have been made on the date when
reply to PAN (Oakwood 191
Management Services v. CIR); the demand letter or notice of
3. Within 15 days after assessment is released, mailed or
filing/submission of the response to sent, even though the same is
PAN (RR No. 18-2013, Sec. 3.1.1); actually received by the taxpayer
4. After 15 days after after the expiration of the
filing/submission of the response to prescriptive period (Basilan
PAN (RMC No. 11-2014). Estates v. CIR).
Exceptions: In the following Rule: When a mail matter is sent
instances where PAN is not required, by registered mail, there exists a
a FLD/FAN shall be issued outright: presumption that it was received in
(RR No. 18-2013) the regular course of mail
1. When the finding for any (Republic v. CA).
deficiency tax is the result of Sixth Step: Protesting the
mathematical error in the Assessment; Questioning the
computation of the tax as Validity of FLD/FAN
appearing on the face of the After the FLD/FAN was made, the
return; taxpayer may question the validity of
2. When the excise tax due on the imposition of the deficiency taxes
excisable articles has not been as shown in the notice of assessment
paid; within 30 days from receipt thereof.
3. When a discrepancy has been (Sec. 228, NIRC)
determined between the tax Failure to File a Valid Protest
withheld and the amount actually If the taxpayer fails to file a valid
remitted by the withholding agent; protest against the FLD/FAN within 30
4. When an article locally days from the date of receipt thereof,
purchased or imported by an the assessment shall become final,
exempt person, such as, but not executory and demandable. No
limited to, vehicles, capital request for reconsideration or
equipment, machineries and reinvestigation shall be granted on tax
spare parts, has been sold, assessments that have already
traded or transferred to nonexempt become final, executory and
persons; and demandable.
5. When a taxpayer who opted to Seventh Step: Administrative Action
on Protested Assessment When the Government May Avail of
The power to decide disputed the Remedies of Collection
assessments, refunds of internal Generally: When the assessment
revenue taxes, fees or other charges, shall have become final, executory and
penalties imposed in relation thereto, demandable. No proceeding in court
or other matters is vested in the 192
Commissioner, subject to the exclusive without the assessment for the
appellate jurisdiction of the Court of collection of such taxes shall be
Tax Appeals. commenced.
(See discussions on Remedies of the When Assessed Taxes Become
Taxpayer for a more detailed Collectible
explanation) 1. Failure to protest FLD/FAN within
COLLECTION the prescribed period;
It is the actual effort exerted by the 2. Failure to appeal FDDA within the
government to effect the exaction of prescribed period;
what is due from the taxpayer. 3. Failure to appeal an adverse
Rule on “No Injunction to Restrain decision of the court within the
Tax Collection” prescribed period.
Generally: No court shall have the Exception: In case of false or
authority to grant an injunction to fraudulent return with intent to evade
restrain the collection of any internal tax or of failure to file a return, a
revenue tax, fee, or charge imposed proceeding in court for collection may
by this Code. (Sec. 218, NIRC) be filed without assessment within 10
Exceptions: years from discovery of falsity, fraud or
When the all of the following conditions omission. (Sec. 222(a), NIRC)
concur: ADMINISTRATIVE REMEDIES
1. It is an appeal to the CTA from a Administrative Remedies of the
decision of the CIR, or Government in Collection
Commissioner of Customs or the A. Distraint of personal property
RTC, provincial, city or municipal including garnishment and deposit;
treasurer or the Secretary of B. Summary remedy of levy on real
Finance, the case may be; and property;
2. In the opinion of the Court of Tax C. Forfeiture to the government;
Appeals, the collection may D. Tax lien;
jeopardize the interest of the E. Compromise and abatement; and
Government and/or the taxpayer. F. Penalties and fines.
(Sec. 11, R.A. 1125 as amended Distraint and Levy Distinguished
by R.A. 9282) Distraint is a remedy whereby the
No Injunction Rule Applicable Only collection of taxes is enforced on the
to National Taxes; No Express goods, chattels or effects and other
Prohibition in LGC personal property of whatever
The prohibition on the issuance of a character of a taxpayer.
writ of injunction to enjoin the Levy, on the other hand, means the
collection of taxes applies only to collection enforcement is effected on
national internal revenue taxes, and the real property and interests in or
not to local taxes. (Angeles City v. rights to real property of the delinquent
Angeles Electric Corporation) taxpayer. (ABAN supra at 238; Sec.
205 (a), NIRC;) demanded and not of the time and
A. DISTRAINT OF PERSONAL place of sale. (Sec. 208, NIRC)
PROPERTY 3. Notice of Sale of Distrained
Remedy enforced on the goods, Property
chattels, or effects, and other personal The RO or his duly authorized
property of whatever character representative, other than the
including stocks and other securities, officer referred to in Sec. 208 of
debts, credits, bank accounts, and NIRC, shall, according to rules and
interest in and rights to personal regulations prescribed by the
property. (Sec. 205 (a), NIRC) Secretary of Finance, upon
Kinds of Distraint recommendation of the
1. Actual Distraint Commissioner, forthwith cause a
2. Constructive Distraint notification to be exhibited in not
Actual Distraint less than two (2) public places in
A collection remedy resorted to when the municipality or city where the
delinquency in the payment sets in, distraint is made, specifying the
i.e., when at the time required for time and place of sale and the
payment, a person fails to pay his tax articles distrained. The time of sale
obligation. It consists of the actual shall not be less than twenty (20)
seizure and distraint of personal days after notice to the owner or
property of taxpayer in sufficient possessor of the property as above
quantity to satisfy the tax or charge. specified and the publication or
(ABAN supra at 238) posting of such notice. One place
Procedure for Actual Distraint for the posting of such notice shall
1. Commencement of Distraint be at the Office of the Mayor of the
Proceedings city or municipality in which the
• More than P1M – by the property is distrained. (Sec. 209,
Commissioner or his duly NIRC)
authorized representative; 4. Sale of Distrained Property
• P1M or less – by the Revenue At the time and place fixed in such
Officer (RO) notice, the said revenue officer
(Sec. 207 (A), NIRC) shall sell the goods, chattels, or
2. Service of Warrant of Distraint effects, or other personal property,
The officer serving the warrant of including stocks and other
distraint shall make or cause to be securities so distrained, at public
made an account of the goods, auction, to the highest bidder for
chattels, effects, or other personal cash, or with the approval of the
property distrained, a copy of Commissioner, through duly
which, signed by himself, shall be licensed commodity or stock
left either with the owner or person exchanges. (Sec. 209, NIRC)
from whose possession such Right of Pre-emption: If at any time
goods, chattels, or effects, or other prior to the consummation of the sale,
place of business of such person ALL proper charges are paid to the
and with someone of suitable age officer conducting the sale, all the
and discretion, to which list shall be distrained properties shall be restored
193 to the owner. (Sec. 210, NIRC)
added a statement of the sum Right of Redemption: There is NO
right of redemption in sale of personal to sign a receipt covering the property
property distrained. (SABABAN, distrained and obligate himself to
Taxation Law Review, 2008) preserve the same intact and
Purchase by the government at sale unaltered and not dispose of the same
upon distraint (Sec. 212, NIRC) in any manner whatsoever without the
When the amount bid for the distrained express authority of the
property is: Commissioner.
1. NOT equal to the amount of tax; or In case the taxpayer or the person
2. Very much LESS than the actual having possession and control of the
market value of the property property sought to be placed under
offered for sale. constructive distraint refuses or fails to
The CIR or his deputies may purchase sign the receipt, the revenue officer
in behalf of the National Government effecting the constructive distraint shall
for the amount of taxes, penalties and proceed to prepare a list of such
cost due thereon. property and in the presence of two
Property so purchased may be resold witnesses leave a copy thereof in the
by the CIR or his deputy; the net premises where the property distrained
proceeds shall be remitted to the is located after which said property
National Treasury and accounted as shall be deemed to have been placed
internal revenue. under constructive distraint. (Sec. 206,
Constructive Distraint NIRC)
A remedy where no actual delinquency Distraint of Intangible Properties
is necessary before the same is Intangible properties which can be the
resorted to. It is a preventive remedy subject of distraint are:
the aim of which is to forestall a 1. Stocks and other securities –
possible dissipation of the taxpayer’s shall be distrained by serving a
assets when delinquency takes place. copy of the warrant of distraint
(ABAN supra at 238) upon the taxpayer and upon the
Grounds for Constructive Distraint president, manager, treasurer, or
When in the opinion of the other responsible officer of the
Commissioner: corporation, company or
1. The taxpayer is retiring from any association, which issued the said
business subject to tax; or stocks or securities
2. He intends to leave the Philippines; 2. Debts and credits – shall be
or distrained by leaving with the
3. He intends to remove his property person owning the debts or having
or to hide his property therefrom; or in his possession or under his
4. He performs any act tending to control such credits, or his agent, a
obstruct the proceedings for copy of the warrant of distraint
194 3. Bank accounts – shall be
collecting the tax due or which may garnished by serving a warrant of
be due from him (Sec. 206, NIRC) garnishment upon the taxpayer and
Procedure for Constructive Distraint upon the president, manager,
The constructive distraint of personal treasurer, or other responsible
property shall be effected requiring the officer of the bank
taxpayer or any person having Garnishment
possession or control of such property The taking of personal properties,
usually cash or sums of money, owned NIRC)
by a delinquent taxpayer which is in 2. Service of Warrant
the possession of a third party. Levy shall be effected by writing
B. SUMMARY REMEDY OF LEVY upon said certificate a description
ON REAL PROPERTY LEVY of the property upon which levy is
When levy may be effected made.
After the expiration of the time required At the same time, written notice of
to pay the delinquent tax, real property the levy shall be mailed to or
may be levied upon before, served upon the Register of Deeds
simultaneously, or after the distraint of of the province or city where the
personal property belonging to the property is located and upon the
delinquent taxpayer (Sec. 207(B), taxpayer (If he is absent from the
NIRC); Philippines: to his agent or
Further distraint or levy manager of business in respect to
The remedy by distraint and levy may which the liability arose or to the
be repeated if necessary until the full occupant of the property in
amount, including all expenses, is question). (Sec. 207(B), NIRC)
collected (Sec. 217, NIRC). 3. Advertisement of Sale
Levy after distraint Within twenty (20) days after the
In case the warrant of levy is not levy, the officer conducting the
issued before or simultaneously with proceedings shall proceed to
the warrant of distraint and the advertise for SALE the property or
personal property of the taxpayer is a portion as may be necessary to
not sufficient to satisfy his tax satisfy the claim and costs of sale.
delinquency, the Commissioner or his Such advertisement shall cover a
duly authorized representative shall, period of at least thirty (30) days.
within thirty (30) days after the The notice shall be posted at the
execution of the distraint, proceed with main entrance of the city or
the levy on taxpayer’s real property municipal all AND in a public and
(Sec. 207(B), NIRC). conspicuous place in the barrio or
Procedure for Levy district where the real property lies.
1. Issuance of Warrant of Levy The notice must also be published
The IR officer designated by the in a newspaper of general
Commissioner or his duly circulation in the place where the
195 property is located, once a week for
authorized representative shall three (3) weeks.
prepare a: CONTENTS of notice: statement of
i. DULY AUTHENTICATED amount of taxes, and penalties due,
CERTIFICATE showing the name time and place of sale, name of
of the taxpayer and the amounts taxpayer, short description of
of tax and penalty due from him. property. (Sec. 213, NIRC)
ii. This certificate shall operate with 4. Sale
the force of LEGAL EXECUTION Right of pre-emption: The
throughout the Philippines. taxpayer may discontinue all the
iii. The certificate shall contain a proceedings by paying the taxes,
description of the property upon penalties and interest at any time
which levy is made. (Sec. 207(B), before the day fixed for the sale.
The sale shall be held either at the Officer conducting the sale shall
main entrance of the municipal or declare the property forfeited to the
city hall or on the premises to be Government in satisfaction of the
sold. Property will be awarded to claim. (Sec. 215, NIRC)
the highest bidder. In case the Resale of real estate taken for taxes
proceeds of the sale exceed the The Commissioner shall have charge
claim and costs of sale, the excess of any real estate obtained by the
shall be turned over to the owner of Government in payment of taxes,
the property. (Sec. 213, NIRC) penalties or costs arising under this
A Certificate of Sale shall be Code or in compromise or adjustment
delivered to the purchaser. of any claim.
If the proceeds of the sale exceed The Commissioner may:
the claim and cost of sale, the 1. Sell and dispose of the same at a
excess shall be turned over to the public auction upon giving of not
owner of the property. less than 20 days notice; or
5. Redemption of property (Sec. 2. Dispose of the same at a private
214, NIRC) sale with the approval of the
Period: Within 1 year from the date Secretary of Finance (Sec. 216,
of sale. The one-year period for NIRC).
redemption begins from the Specific Instances Where Forfeiture
registration of the deed of sale is Imposed
(Santos v. RFC). 1. Liquor or tobacco shipped under a
Who may redeem: The delinquent false name or brand (Sec. 262,
taxpayer or any one for him NIRC);
To whom made: To the Revenue 2. All chattels, machinery, and
District Officer removable fixtures of any sort used
How made: Upon payment of the in the unlicensed production of
taxes, penalties and interest articles (Sec. 268, NIRC);
thereon from the date of 3. Dies and other equipment used for
delinquency to the date of sale, the printing or making of any
196 internal revenue stamp, label or tag
together with interest on purchase which is in imitation of or purports
price at 15% per annum from the to be a lawful stamp, label or tag.
date of sale to the date of (Sec. 268, NIRC)
redemption. 4. All tax-paid articles which are
The owner shall not, however, be allowed to remain in a distillery,
deprived of the possession of said distillery warehouse, bonded
property and shall be entitled to the warehouse or other place where
rents and other income thereof until made unless specially authorized
the expiration of the time allowed (Sec. 268, NIRC);
for its redemption. 5. Articles withdrawn from said place
C. FORFEITURE IN FAVOR OF THE or from Customs custody or
GOVERNMENT imported into the country without
If there is no bidder for the real payment of the requisite tax (Sec.
property or if the highest bid is not 268, NIRC).
sufficient to pay the taxes, penalties Enforcement of the remedy of
and costs, the Internal Revenue forfeitures
1. Forfeiture of personal property, forfeitures, fines and penalties shall be
chattels and removable fixtures: paid to the Commissioner or his
Enforced by the seizure, sale or authorized deputies as the taxes
destruction of the specific forfeited themselves are required to be paid,
property. and except as specially provided, shall
2. Forfeiture of real property: be accounted for and dealt within the
Enforced by a judgment of same way. (Sec. 226, NIRC)
condemnation and sale in a legal D. TAX LIEN
action or proceeding civil or A lien is understood to denote a legal
criminal as the case may require claim or charge on property, either real
(Sec. 224, NIRC) or personal, as security for the
When property to be sold or payment of some debt or obligation. Its
destroyed meaning is more extensive than the
1. Forfeited chattels and removable jus retentionis of the civil law.
fixtures – sold in the same manner (Hongkong & Shanghai Banking
and under the same conditions as Corporation v. Rafferty)
the public notice and the time and Nature and Extent of Tax Lien
manner of sale as are prescribed When a taxpayer neglects or refuses
for sales of personal property to pay his internal revenue tax liability
distrained for the non-payment of after demand (issuance of FAN), the
taxes; amount so demanded shall be a lien in
2. Distilled spirits, liquors, cigars, favor of the government from the time
cigarettes, other manufactured the assessment was made by the
products of tobacco and all Commissioner until paid with interest,
apparatus used in or about the illicit penalties and costs that may accrue in
production of such articles – addition thereto upon all property and
destroyed by the order of the rights to property belonging to the
Commissioner when the sale or taxpayer (Sec. 219, NIRC).
197 Paramount Lien or Superior Claim
use would be injurious to public The claim of the government
health or prejudicial to the predicated on a tax lien is superior to
enforcement of the law; the claim of a private litigant
3. All other articles subject to excise predicated on a judgment
tax manufactured or removed in (Commissioner of Internal Revenue
violation of the Code, dies for the v. NLRC)
printing or making of internal Civil Law Concept of Lien and Tax
revenue stamps and labels – sold Lien; Distinguished
or destroyed in the discretion of the The general rule of the Civil Law:
Commissioner; Possession of movables is not
4. Forfeited property shall not be necessary to the validity of a lien,
destroyed until at least 20 days whether created by contract or by act
after seizure. (Sec. 225, NIRC) of law. Such lien will attach upon
Disposition of funds recovered in movable property, even in the hands of
legal proceedings or obtained from a bona fide purchaser without notice.
forfeiture Law of Taxation: The tax lien does
All judgments and monies recovered not establish itself upon property which
and received for taxes, costs, has been transferred to an innocent
purchaser prior to demand. A demand taxpayer demonstrates a clear
is necessary to create and bring the inability to pay the assessed tax.
lien into operation. In order that the Limits of the Commissioner’s power
lien may follow the property into the to compromise
hands of a third party, it is further 1. For cases of financial incapacity: a
essential that the latter should have minimum compromise rate
notice, either actual or constructive. equivalent to ten percent (10%) of
(Hongkong & Shanghai Banking the basic assessed tax;
Corporation v. Rafferty) 2. For other cases: a minimum
When does the lien in favor of the compromise rate equivalent to forty
Government arise: percent (40%) of the basic
1. With respect to personal property – assessed tax
from the time the tax became due Note: When the basic tax involved
and payable (Commissioner of exceeds One Million Pesos
Internal Revenue v. NLRC); and (P1,000,000), or where the settlement
2. With respect to real property – from offered is less than the prescribed
the time of registration with the minimum rates, the compromise must
Register of Deeds. (Sec. 219, be approved by the Evaluation Board
NIRC) which shall be composed of the
Validity of a tax lien Commissioner and four (4) Deputy
The lien shall be valid against any Commissioners.
mortgagee purchaser or judgment Authority of the Commissioner to
creditor only when notice of such lien Abate Taxes (Sec. 204 (B), NIRC)
198 Grounds
shall be filed by the CIR in the office of 1. When the tax or any portion thereof
the Register of Deeds of the province appears to be unjustly or
or city where the property of the excessively assessed; or
taxpayer is situated or located (Sec. 2. When the administration and
219, NIRC). collection costs involved do not
E. COMPROMISE AND justify the collection of the amount
ABATEMENT; DISTINGUISHED due.
Compromise involves a reduction of F. PENALTIES AND FINES
the taxpayer’s liability, while General Considerations
abatement of tax means that the entire 1. Incidents to the commission of a
tax liability of the taxpayer is cancelled. tax offense – Any person convicted
(ABAN, at 235) of a crime penalized under the Tax
Authority of the Commissioner to Code shall, in addition to being
Compromise the Payment of liable for the payment of the tax, be
Taxes (Sec. 204 (A), NIRC) subject to the penalties imposed
Grounds thereunder. Payment of the tax due
The Commissioner may compromise after apprehension shall not
the payment of any internal revenue constitute a valid defense in any
tax in the following cases: prosecution for violation of any
1. A reasonable doubt as to the provision of the Tax Code, or in
validity of the claim against the any action for the forfeiture of
taxpayer exists; or untaxed articles (Sec. 253(a),
2. The financial position of the NIRC)
2. Criminal liability of accomplices – responsible corporation officers,
Any person who willfully aids or partners or employees shall, upon
abets in the commission of a crime conviction for each act or omission,
penalized under the Tax Code or be fined for not less than Fifty
who causes the commission of any thousand pesos (P50,000) but not
such offense by another shall be more than One hundred thousand
liable I the same manner as the pesos (P100,000).
principal. (Sec. 253(b), NIRC) JUDICIAL REMEDIES
3. Other incidents in the case of I. CIVIL ACTION
offenders who are aliens, public For tax remedy purposes, these are
officers or employees, or CPAs - If actions instituted by the government
the offender is not a citizen of the to COLLECT internal revenue taxes
Philippines, he shall be deported including the filing by the government
immediately after serving the of claims against the deceased
199 taxpayer with the probate court.
sentence without further Two ways to enforce civil liability
proceedings for deportation. If he is through civil action:
a public officer or employee, the 1. By filing a civil case for
maximum penalty prescribed for collection of a sum of money with
the offense shall be imposed and , proper regular court (NIRC, Secs.
in addition, he shall be dismissed 203 & 222); or
from the public service and 2. By filing an answer to the
perpetually disqualified from petition for review filed by taxpayer
holding any public office, to vote with CTA (Fernandez Hermanos
and to participate in any election. If Inc. v. CIR).
the offender is a CPA, his Form and mode of proceeding:
certificate as a CPA shall, upon 1. Civil actions shall be brought in
conviction, be automatically the name of the Government of the
revoked or cancelled. (Sec. 253(c), Philippines;
NIRC) 2. It shall be conducted by legal
4. Offenses committed by officers of the BIR;
associations, partnerships or 3. No civil or criminal action for the
corporations – In the case of recovery of taxes shall be filed in
associations, partnerships or court without the approval of the
corporations, the penalty shall be CIR. However, under Sec. 7 of the
imposed on the partner, president, NIRC, the Commissioner may
general manager, branch manager, delegate such power to a Regional
treasurer, officer-in-charge and Director (Sec. 220, NIRC)
employees responsible for the Jurisdiction:
violation. (Sec. 253(d), NIRC) 1. Court of Tax Appeals – where
5. Penal liability of corporations and the principal amount of taxes and
other entities – Any corporation, fees, exclusive of charges and
association or general copartnership penalties claimed is P1,000,000
liable for any of the and above.
acts or omissions penalized under 2. Regional Trial Court,
the Tax Code, in addition to the Municipal Trial Court,
penalties imposed therein upon the Metropolitan Trial Court – where
the principal amount of taxes and actions
fees, exclusive of charges and 1. Effect of acquittal of the
penalties claimed is less than taxpayer in a criminal action
P1,000,000.00 (Sec. 7, R.A. No. It does NOT necessarily result in
9282). the exoneration of said taxpayer
II. CRIMINAL ACTION from his civil liability to pay taxes.
Criminal action in violation of the Rationale: The duty to pay tax is
NIRC also constitutes a collection imposed by statute prior to and
method because the judgment in the independent of any attempt on the
criminal case shall not only impose part of the tax payer to evade
200 payment. It is neither a mere
the penalty but shall also order the consequence of the felonious acts
payment of the taxes subject of the charged nor is it a mere civil liability
criminal case as finally decided by derived from a crime (Republic v.
the CIR (Sec. 205, NIRC). Patanao).
Any person convicted of a crime The civil liability to pay taxes arises
penalized by the NIRC shall, in not because of felony but upon
addition to being liable for the taxpayer’s failure to pay taxes.
payment of the tax, be subject to the Criminal liability in taxation arises
penalties imposed herein (Sec. as a result of one’s liability to pay
253(a), NIRC). taxes.
Form and mode of proceeding 2. Effect of subsequent
Same with civil action (Sec. 220, satisfaction of civil liability
NIRC) The subsequent satisfaction of civil
Jurisdiction: liability by payment or prescription
1. Court of Tax Appeals – on DOES NOT extinguish the
criminal offenses arising from taxpayer’s criminal liability (People
violations of the NIRC or TCC and v. Tierra).
other laws administered by the BIR 3. No subsidiary imprisonment
and the BOC where the principal In case of insolvency on the part of
amount of taxes and fees exclusive the taxpayer, subsidiary
of charges and penalties claimed imprisonment CANNOT be
isP1,000,000 and above. imposed as regards the tax which
2. Regional Trial Court, he is sentenced to pay.
Municipal Trial Court, However, it may be imposed in
Metropolitan Trial Court – on cases of failure to pay the fine
criminal offenses arising from imposed (Sec. 280, NIRC).
violations of the NIRC or TCC and 4. Criminal action may be filed
other laws administered by the BIR despite the lapse of the period to
and the BOC, where the principal file a civil action for collection of
amount of taxes and fees, taxes.
exclusive of charges and penalties When the civil action arising from
claimed is less than P1,000,000 tax delinquency has prescribed, the
OR where there is no specified BIR has only 5 years from
amount claimed (Sec. 7, R.A. No. assessment within which to collect
9282). the tax through criminal action in
Important principles on criminal which case, would prescribe after
lapse of 5 years from discovery of assessment
crime AND institution of 1. Within 3 years after the last day
proceedings (Sec. 281, NIRC). prescribed by law for the filing of
201 the return; or
5. Assessment is not a 2. From the date of actual filing of the
prerequisite in the filing of a return, whichever comes later.
criminal action. (Sec. 203, NIRC)
Rule: What is involved here is not Note: The period applicable when the
the collection of taxes where the law does not require the filing of any
assessment of the CIR may be return, and the tax is such that its
reviewed by the CTA, but a criminal amount cannot be ascertained without
prosecution for violations of the the data is pertinent thereto, the
NIRC which is within the Commissioner may, by appropriate
cognizance of the MTC/RTC. While regulations, require the filing of the
there can be no civil action to necessary returns. (Bisaya Land
enforce collection before the Transportation Co. Inc. v. CIR)
assessment procedures provided in Exceptions:
the Code have been followed, there 1. Extraordinary or abnormal
is no requirement for the precise assessment
computation and assessment of the In case of false or fraudulent return
tax before there can be a criminal with intent to evade tax or failure to
prosecution under the Code file a return – within 10 years after
(Ungab v. Cusi). the discovery of the falsity, fraud or
6. Filing of a criminal action is omission (Sec. 222(a), NIRC);
not an implied assessment by False Return and Fraudulent
the CIR Return
An affidavit, which was executed by The difference between a “false”
revenue officers stating the tax return and a “fraudulent” return is
liabilities of a taxpayer and that a false return merely implies a
attached to a criminal complaint for deviation from the truth or fact
tax evasion, cannot be deemed an whether intentional or not, whereas
assessment. (CIR v. PASCOR a fraudulent return is intentional
Realty and Development and deceitful with the aim of
Corporation) evading the correct tax due (Aznar
The recommendation letter of the v. Commissioner).
Commissioner (addressed to the Note: It is to the interest of the
DOJ for the filing of a criminal taxpayer to file said returns even
complaint against the taxpayer) without [the appropriate
cannot be considered a formal regulations] if he wishes to avail
assessment. It merely as the prima himself of the benefits of the threeyear
facie basis for filing criminal prescriptive period. If this
information that the taxpayers had notwithstanding, he does not file a
violated (penal provisions) of the return at all, then an assessment
Tax Code (Adamson, v. CA). may be made within the ten-year
STATUTE OF LIMITATIONS prescriptive period. (Bisaya Land
ASSESSMENT Transportation Co. Inc. v. CIR)
Generally: Ordinary or normal 202
2. Waiver of the Statute of Rule: The following shall govern in
Limitations case there is an amendment of the
In case of a valid waiver – up to the return:
extended period agreed upon (Sec. 1. If the amendment is substantial, the
222(b), NIRC). counting of the prescriptive period
Note: The prescriptive period for shall be reckoned on the date the
making assessment shall also apply substantial amendment was made.
when the Government makes an 2. If the amendment was superficial, the
erroneous refund of internal revenue counting of the prescriptive period is
taxes. (ABAN, supra at 286) still the original period (CIR v.
Construction of statutory provision Phoenix Assurance).
on prescription Rationale: To prevent taxpayers from
The law of prescription being a evading the payment of taxes by
remedial measure should be simply reporting in their original return
interpreted in a way conducive to heavy losses and amending the same
bringing about the beneficient purpose more years later when the CIR has lost
of affording protection to the taxpayer his authority to assess the proper tax
within the contemplation of the thereunder. The object of the NIRC is
Commission which recommend the to impose taxes for the needs of the
approval of the law (Republic v. Government and not to enhance tax
Ablaza). avoidance to its prejudice (CIR v.
Burden of proof that a return was Phoenix Assurance, supra).
filed to apply the 3-year period Exception: If the return is sufficiently
It is incumbent on the taxpayer to complete to enable the CIR to
prove that a return had been filed by intelligently determine the proper
him in order that the 3-year amount of tax to be assessed, then the
prescriptive period may apply prescriptive period for assessment
(Republic v. Marsman Dev’t.) starts from the filing of the original
because the prescription of the return (A.L. Ammen Trasnportation
Government’s right to assess taxes is v. Collector).
an affirmative defense (Taligaman Tax Returns Warranting Application
Lumber v. CIR). of Ten-Year Prescriptive Period
Requisites in order that a return A. False Return
may be considered filed for Example of a falsity warranting the 10-
purposes of starting the running of year prescriptive period to apply is a
the prescriptive period: substantial under-remittance of
1. The return must be valid – it withholding tax on compensation
must comply substantially with the (Samar-I Electric Cooperative, Inc. v.
requirements of the law; and CIR)
2. The return must be appropriate 203
– it is a return for the particular tax B. Fraudulent return
required by law. Thus, an income tax For the 10-year prescriptive period to
return cannot be considered as the apply based on fraud, such must first
equivalent of the VAT or percentage be proved as a fact by the BIR.
tax return (Butuan Sawmill, Inc. v. Such fact in a fraud assessment which
CTA). has already become final and
Effect of amendment of tax return executory shall be judicially taken
cognizance of in a civil or criminal prescriptive period for collection
action for the collection thereof (Sec. under abnormal assessment is 5
222(a), NIRC). years, hence it can be concluded
The following instances negate the that the prescriptive period under
existence of fraud and preclude the normal assessment is also 5 years.
application of the 10-year prescriptive (SABABAN, Taxation Law Review
period: (2008), p.182)
1. The CIR failed to impute fraud Second view: 3 years from the time
in the assessment notice or demand the assessment was made. The 5-
for payment; year period refers to an instance
2. The CIR failed to allege fraud in where there is an assessment issued
his answer to the taxpayer’s petition on the basis of false or fraudulent
for review when the case is appealed return or the absence of a return
to the CTA (ABAN, supra at pp. (Sec. 222(c), NIRC in relation to
274-275); Sec. 222(a), NIRC) or in the instance
3. Mere understatement of gross of an extended assessment under
earnings does not of itself prove Sec. 222(d) of the NIRC. The
fraud (Yutivo Sons v. CTA). interpretation should be in favor of
C. Failure to file a return the taxpayer, providing for a shorter
The following constitutes failure to file period of 3 years from the issuance
to warrant the 10-year prescriptive of an assessment, because the 5-
period: year period places a “law-abiding”
1. A deficient return which prevented taxpayer in the same category as
the CIR from computing taxes dues. one who is not “law-abiding,” i.e.,
Such defective return is the same as who files a false or fraudulent return,
if no return is filed at all (CIR v. or one who does not file a tax return,
Gonzales); and etc. (DOMONDON, Bar Reviewer in
2. Failure to report income in the Taxation, Vol. I (2008), pp.414-415).
returns which were clearly not 204
exempted from tax. The Court did not 2. Collection under an abnormal
treat this as a simple omission as the or extraordinary assessment (one
same involved substantial sums with the 10-year period to assess)
(Standard Chartered Bank v. CIR). – 5 years from the time the
COLLECTION assessment was made (Sec. 222(c),
The following rules shall govern for the NIRC)
prescriptive period of collection of 3. Collection without
taxes: assessment through judicial
1. Collection under a normal or action – 10 years after discovery of
ordinary assessment (one with the the falsity, fraud or omission to file a
3-year period to assess) – return
Two (2) views: Note: The aforementioned rules shall
First view: 5 years from the time the likewise be applied for filing claims
assessment was made. Under the against the estate for the unpaid taxes
old Tax Code, the prescriptive period (Vera v. Fernandez) BUT shall not be
for collection under both normal and applicable on the following:
abnormal assessment is 3 years. 1. Where the Government’s action
Under the new Tax Code, the is on a bond which the taxpayer
executes in order to secure the suspended but if the collection is
payment of his obligation, the made by levy or distraint, then it is
applicable period is 10 years under not suspended, hence the
Art. 1144(1) of the Civil Code Government can run after the
(ABAN, supra at 282). taxpayer’s property even if the case
2. When the Government is appealed to the CTA.
proceeds by court action to forfeit a 2. When the taxpayer requests for
bond, the action for the enforcement a reinvestigation which is granted by
of a contractual obligation shall the CIR;
prescribe in 10 years (Republic v. Requisites:
Arcache). 1. There must be request for
Grounds for suspension of the reinvestigation and not a request
running of the Statute of for reconsideration (see discussion
Limitations: (Sec. 223, NIRC) of forms of protest under Remedies
1. When the CIR is Prohibited of the Taxpayer) (CIR v. Philippine
from making the assessment or Global Communications); and
beginning the distraint or levy or a 2. The request for reinvestigation
proceeding in court, AND for sixty 60 must be granted or acted upon by
days thereafter; the CIR (BPI v. CIR, citing CIR v.
Illustration: When a case is on Suyoc Consolidated Mining
appeal to the CTA, the CIR is Company, 104 Phil. 819, 1958;
prevented from filing an ordinary Bravo Alabang, Inc. v. CIR).
action to collect the tax in the regular 205
courts; for if this were not so, Note: The burden of proof that the
collection in the regular courts would request for reinvestigation had
run counter to the judicial policy of been actually granted shall be on
avoiding multiplicity of suits and the the CIR. Such grant may be
rule of lis pendens (Republic v. Ker expressed in its communications
& Co.). with the taxpayer or implied from
This may happen when there is a the action of the CIR or his
pending petition for review in the authorized representative in
CTA from the decision on the response to the request for
protested assessment, the filing of reinvestigation (BPI v. CIR, supra).
such petition interrupts the running of 3. When the taxpayer cannot be
the prescriptive period for collection. located in the address given by him
The interruption is from the time the in the return, UNLESS he informs the
appeal is filed in the CTA until its CIR of any change in his address;
termination in the Supreme Court 4. When the warrant of distraint or
should there be an appeal to a levy is duly served, AND NO property
higher court (Republic v. Ker & Co., is located; and
Ltd., supra). 5. When the taxpayer is out of the
This also happens when the CTA Philippines.
suspends the collection of the tax CRIMINAL CASES
liability of the taxpayer (ABAN, All violations of any provision of this
supra at 288). Code shall prescribe after 5 years
If the collection is made judicially, (Sec. 281, NIRC).
then the prescription period is When does it begin to run
1. From the day of the commission After the FLD/FAN was made, the
of the violation of the law (Sec. 281, taxpayer may question the validity of
NIRC); or The 5-year prescriptive the imposition of the deficiency taxes
period for violation of any provision of as shown in the notice of
the Tax Code should be reckoned assessment within 30 days from
from the date of the final notice and receipt thereof.
demand for payment of the Forms of protest
deficiency taxes that the cause of 1. Request for reconsideration –
action on the part of the BIR accrued. a plea for a reevaluation of an
This is because prior to the receipt of assessment on the basis of existing
the letter-assessment, no violation records without need of additional
has yet been committed by the evidence which may involve a
taxpayers (DIZON, Q&A in Taxation question of fact or law or both
citing Lim, Sr. v. Court of 2. Request for reinvestigation –
Appeals). a plea for the re-evaluation of an
2. If the same be not known at the 206
time, from the discovery thereof AND assessment on the basis of the
the institution of judicial proceedings newly-discovered or additional
for its investigation and punishment evidence that a taxpayer intends to
(Sec. 281, NIRC). present in the reinvestigation which
Necessity of judicial proceeding may also involve a question of law
The Supreme Court held that in case or fact or both (RR No. 18-2013,
of falsity or fraud with intent to evade Sec. 3.1.4)
the tax, the right of the government Requisites of a valid protest:
to collect through criminal action is 1. Must be in writing (RR No. 18-
imprescriptible because the said 2013, Sec. 3.1.4);
remedy of collection through criminal 2. Must be addressed to the CIR
action is only deemed instituted from or his duly authorized
discovery thereof and the institution representative (RR No. 18-2013,
of judicial proceedings for its Sec. 3.1.4);
investigation and punishment (Lim v. 3. Must be submitted within thirty
CA) (30) days from receipt of FLD/FAN
Interruption of prescriptive period (RR No. 18-2013, Sec. 3.1.4);
The period shall be interrupted: 4. Must be filed by the taxpayer or
1. When proceedings are his duly authorized representative,
instituted against the guilty persons; in person or through registered mail
or with return card, with the Office of
2. When the offender is absent the duly authorized representative
from the Philippines (Sec. 281, of the CIR (Regional Director,
NIRC) ACIR-LTS, ACIR-Enforcement
Note: In No. 1, the period shall begin Service) who signed the FLD/FAN
to run again if the proceedings are (RMC No. 11-2014, RMC No. 39-
dismissed for reasons not constituting 2013);
jeopardy (Sec. 281, NIRC). Note: The revenue officials who
REMEDIES OF THE TAXPAYER received the protests shall submit a
PROTEST report on all protests filed to the
I. Protesting the Assessment CIR. The Office of the CIR shall
then create a database of these. If executory and demandable and no
the protest filed is not included in request for reconsideration or
the database, the same shall be reinvestigation shall be granted (RR
considered as NOT officially filed, No. 18-2013, Sec. 3.1.4).
hence, without force and effect Payment in protest
(RMC No. 39-2013). 1. If there are several issues
5. Must Contain the following: involved in the FLD/FAN but the
a. Name of the taxpayer and taxpayer only protests against the
address for the immediate past 3 validity of some of the issues
taxable years; raised, the assessment attributable
b. Nature of request whether to the undisputed issues shall
reinvestigation or reconsideration become final, executory and
specifying newly discovered demandable. The taxpayer shall be
evidence he intends to present if required to pay the deficiency taxes
it is a request for reinvestigation; 207
c. Taxable periods covered; attributable thereto (RR No. 18-
d. Assessment number; 2013, Sec. 3.1.4).
e. Date of receipt of assessment Note: Previously under RR No. 12-
notice or letter of demand; 99, no action shall be taken on the
f. Itemized statement of the findings disputed issues unless there is a
to which the taxpayer agrees as a payment of deficiency taxes
basis for computing the tax due, attributable to the undisputed ones.
which amount should be paid However, this has already been
immediately upon the filing of the deleted under the current rules and
protest; regulations for protesting
g. Itemized schedule of the assessment under RR No. 18-
adjustments with which the 2013.
taxpayer does not agree; and 2. If there are several issues
h. Statement of the facts and law involved in the disputed
in support of the protest assessment and the taxpayer fails
Pro-forma protest to state the facts and the law in
A pro-forma protest is not valid. The support of the protest against some
alleged “protest letter” basically of the several issues on which the
informing CIR that it had already assessment is based, the same
written or answered the PAN and shall be considered undisputed
that it explained its position to the tax issues, in which case the
assessment is neither a request for assessment shall become final,
reinvestigation nor a request for executory and demandable. The
reconsideration. It must be taxpayer shall be required to pay
emphasized that a protest to the the deficiency taxes attributable
PAN is not the same as the protest thereto (RR No. 18-2013, Sec.
required in reply to the FAN 3.1.4).
(Security Bank Corporation v. II. Submission of documents after
CIR). protest
Effect of failure to file a valid Within 60 days from date of filing of
protest request for reinvestigation only, the
The assessment shall become final, taxpayer shall submit all relevant
supporting documents. This does not CIR or his duly authorized
apply to request for reconsideration representative may exercise the
(RR N. 18-2013, Sec. 3.1.4). following:
Relevant supporting documents 1. Direct grant or denial of protest
Those documents necessary to – render a decision through FDDA
support the legal and factual bases granting or denying the protest
in disputing a tax assessment as within the prescribed period to act
determined by the taxpayer (RR No. 208
18-2013, Sec. 3.1.4) upon it (RR No. 18-2013, Sec.
Rationale: Taxpayer would be 3.1.5);
placed at the mercy of the BIR which 2. Indirect denial of protest – deny
may require production of documents the protest in another way without
which taxpayer could not produce rendering a decision through
(Standard Chartered Bank v. CIR). FDDA; or
Effect of failure to submit 3. Inaction – not act upon it within
documents the prescribed period (RR No. 18-
Non-submission of the documents 2013, Sec. 3.1.4).
renders the assessment final (RR Period to act upon the protest
No. 18-2013, Sec. 3.1.4). The CIR or his duly authorized
The phrase “the assessment shall representative has the following
become final” means the FLD/FAN periods to act upon the protest or
shall become “final” by operation of administrative appeal, as the case
law. The taxpayer shall be barred may be:
from disputing the correctness of the 1. By CIR – in case of protest,
issued assessment by introduction of within 180 days from filing of
newly discovered or protest (regardless of the form of
additional evidence because it is protest); in case of administrative
deemed to have lost its jurisdiction to appeal, within 180 days from filing
present these evidence. The BIR of the administrative appeal
shall then deny the request for Administrative appeal – request
reinvestigation through the issuance for reconsideration filed with the
of an FDDA (RMC No. 11-2014). CIR to elevate the denial of protest
Note: It will not render the made by his duly authorized
assessment executory and representative
demandable because the taxpayer 2. By duly authorized
can still avail of his remedies after representative
the issuance of the FDDA (Please a. Request for reinvestigation –
see later discussion below regarding within 180 days from submission
FDDA and remedies of the taxpayer). of the relevant documents
III. Administrative action on the b. Request for reconsideration –
disputed assessment within 180 days from filing of
Disputed assessment – happens protest (RR No. 18-2013, Sec.
when a valid protest against 3.1.4)
FLD/FAN was submitted Failure to act upon the protest or
After the taxpayer submitted a administrative appeal within the
protest and the relevant supporting abovementioned 180-day period
documents, as the case may be, the constitutes inaction. However, the
CIR or his duly authorized That final decision is the letter of
representative may render at a later denial where the CIR not only
period a decision through FDDA, demanded payment of the amount
subject to the Statute of Limitations 209
on collection (RR No. 18-2013, Sec. assessed but wherein he also gave
3.1.4). the warning that in the event the
Direct grant or denial of protest taxpayer failed to pay the same, he
Final Decision on Disputed would be constrained to enforce
Assessment (FDDA) the collection thereof by means of
It is the administrative decision on the remedies prescribed by law
the disputed assessment. (Reyes v. CIR).
Requisites of a valid FDDA: Example: “Final Notice Before
1. Must be issued by the CIR or Seizure”. The very title expressly
his duly authorized representative. indicated that it was final notice
The duly authorized prior to seizure of property. The
representatives refer to the same letter itself clearly stated that the
persons who are authorized to taxpayer was being given “this
issue PAN and FLD/FAN (RR No. LAST OPPORTUNITY” to pay;
18-2013, Sec. 3.1.5; RMC No. 11- otherwise, its properties would be
2014); subjected to distraint and levy (CIR
2. Must be served to the taxpayer v. Isabela Cultural Corp.).
personally and if not practicable, by Indirect denial of protest (without
substituted service or by mail (RR FDDA)
No. 18-2013, Sec. 3.1.6); Without rendering an FDDA on the
3. Must be in writing and contain merits of the protest, the CIR or his
the facts and the law on which the duly authorized representative
assessment is made (RR No. 18- nevertheless executed administrative
2013, Sec. 3.1.5); and actions which the Court considered
4. Must state that the same is his as denial thereof
final decision (RR No. 18-2013, IV. Remedies of the taxpayer in case
Sec. 3.1.5). of denial of protest or
Rationale: To avoid any confusion administrative appeal or in case of
that could adversely affect the inaction
rights and interest of the taxpayer Direct denial of protest through
(Allied Banking Corp. v. CIR). FDDA
What constitutes final decision 1. FDDA by CIR – either:
denying the protest (Tenor of a. File a motion for reconsideration
Finality Rule) with the CIR (RR No. 18-2013,
If the tenor of the letter shows the Sec. 3.1.4, Fishweath Canning
firm stand of the BIR against the Corp. v. CIR, G.R. No. 179343,
reconsideration of the disputed January 21, 2010); or
assessment, the letter should be b. Appeal to the CTA within 30
considered the final decision of the days from receipt of FDDA (RR
BIR on the taxpayer’s No. 18-2013, Sec. 3.1.4).
administrative protest or the FDDA BUT: The motion for
(Cagayan Corn Products reconsideration of the decision with
Corporation v. CIR). the CIR will NOT toll the 30-day
period to appeal to the CTA (RR the CIR; or
No. 18-2013, Sec. 3.1.4). 2. Appeal to the CTA within 30
Effect of failure to appeal to the days from receipt of the decision
CTA within the 30-day period: (RR No. 18-2013, Sec. 3.1.4)
The assessment shall become BUT: The motion for reconsideration
final, executory and demandable of the decision with the CIR will NOT
(RR No. 18-2013, Sec. 3.1.4). toll the 30-day period to appeal to the
2. FDDA by duly authorized CTA (RR No. 18-2013, Sec. 3.1.4).
representative – either: Effect of failure to appeal to the
a. File administrative appeal to the CTA within the 30-day period: The
CIR within 30 days from receipt of assessment shall become final,
the FDDA through request for executory and demandable (RR No.
reconsideration (RR No. 18-2013 18-2013, Sec. 3.1.4).
Sec. 3.1.4); or Indirect forms of denial of protest
Note: No request for or administrative appeal (without
reinvestigations shall be allowed FDDA)
in administrative appeal and only The remedies available to the
issues raised in the decision of taxpayer in case of direct denial of
the CIR’s duly authorized protest or administrative appeal by
representative shall be the CIR or his duly authorized
entertained by the CIR (RR No. representative through FDDA are
18-2013 Sec. 3.1.4). applicable to indirect forms of denial.
b. Appeal to the CTA within 30 Inaction by CIR or duly authorized
days from receipt of FDDA (RR representative
No. 18-2013 Sec. 3.1.4). 1. Inaction by the CIR – either
Effect of filing the administrative a. Appeal to the CTA within 30
appeal: The administrative appeal days from the expiration of the
filed with the CIR will toll the 30-day 180-day period; or
period and the denial of the b. Await the final decision of the
administrative appeal or the CIR on the disputed assessment,
inaction of the CIR is the one and then appeal such final
appealable to the CTA (CIR v. decision to the CTA within 30
International Pharmaceuticals, days after the receipt of a copy of
Inc.). such decision (RR 18-2013, Sec.
Effect of failure to file the 3.1.4).
administrative appeal or appeal 2. Inaction by duly authorized
to the CTA within the 30-day representative – either:
period: The assessment shall a. Appeal to the CTA within 30
become final, executory and days after the expiration of the
demandable. 180-day period; or
Direct denial of administrative b. Await the final decision of the
appeal through FDDA duly authorized representative on
210 the disputed assessment (RR 18-
In case the administrative appeal is 2013, Sec. 3.1.4). .
denied, the taxpayer may either: The options are mutually exclusive
1. File a motion for reconsideration and resort to one bars the
of the administrative appeal with application of the other (RR No. 18-
2013, Sec. 3.1.4; Rizal Commercial to said Court. This is in
Banking Corp. v. CIR, G.R. No. consonance with the rule on
168498, April 24, 2007; Lascona exhaustion of administrative
Land Co. v. CIR, G.R. No. 171251, remedies.
March 5, 2012). Exception:
Effect of failure to appeal the When the government is
inaction to the CTA within 30-day estopped, by issuing a FLD/FAN,
period: It will not result in the finality partly read as follows:
of the FLD/FAN, as the taxpayer can “It is requested that the above
wait for the decision (Rizal deficiency tax be paid immediately
Commercial Banking Corp., supra). . . . This is our final decision based
JUDICIAL REMEDIES on investigation. If you disagree,
A. Judicial appeal you may appeal the final decision
B. By way of special civil action within thirty (30) days from receipt
C. Action to contest forfeiture of hereof, otherwise said deficiency
chattel tax assessment shall become
D. Action for damages final, executory and demandable.”
E. Injunction The taxpayer, taking a cue from
A. Judicial appeal the tenor of the letter, filed a
1. Appeal to the CTA (Division) petition for review with the CTA
– within 30 days from receipt of instead of filing a protest against
decision on the denial of protest or FLD/FAN.
administrative appeal or from the The SC held, however, that the
lapse of 180 days due to inaction petition was not premature and
of the CIR or his duly authorized held the jurisdiction of the CTA
representative, as discussed in the over the matter. It appeared from
immediately preceding topic the demand letter that the CIR has
(Procedure No. IV under Protest) already made a final decision on
Administrative decisions of the the matter and the remedy of the
CIR or his duly authorized taxpayer is to appeal the final
representative in tax decision.
assessment cases appealable Moreover, the SC cannot ignore
to CTA (Division) the fact that in the FLD/FAN, the
Rule: Such Court can take BIR used the word “appeal”
cognizance of decisions in cases instead of “protest”,
involving only disputed “reinvestigation” or
assessments (FDDA) (R.A. No. “reconsideration”. Although there
211 was no direct reference for the
1125, Sec. 7) and which are taxpayer to bring the matter
prejudicial to the taxpayer (Sec. directly to the CTA, it cannot be
228, NIRC). denied that the word “appeal”
To reiterate, there is disputed under prevailing tax laws refers to
assessment when there is a valid the filing of a petition for review
protest against with the CTA and the terms
FLD/FAN. Hence, unless there is “protest”, “reinvestigation” and
a valid protest to FLD/FAN, the “reconsideration” refer to the
taxpayer cannot elevate the case administrative remedies of the
taxpayer (Allied Banking Corp. v. C. Action to contest forfeiture of
CIR, supra). chattel, at any time before the sale
Administrative actions of the or destruction thereof, to recover
CIR or his duly authorized the same, and upon giving proper
representative in tax bond, enjoin the sale; or after the
assessment cases appealable sale and within 6 months, an action
to CTA (Division) to recover the net proceeds
In sum, they are the following: realized at the sale (Sec. 231,
1. Direct denial of protest or NIRC)
administrative appeal through D. Action for damages against a
FDDA; revenue officer by reason of any
2. Indirect denial of protest or act done in the performance of
administrative appeal; official duty (Sec. 227, NIRC)
3. Inaction by the CIR or his duly E. Injunction – to be issued by the
authorized representative; and CTA if collection may jeopardize
4. Decision on undisputed the interest of the government
assessment, as previously and/or the taxpayer (R.A. No. 1125
discussed. as amended by R.A. No. 9282).
To emphasize, indirect denial of COMPROMISE
protest or administrative appeal is A contract whereby the parties, by
different from a decision on making reciprocal concessions, avoid
undisputed assessment in that the litigation or put an end to one already
former, there was a valid protest commenced. (CIVIL CODE, Art. 2028)
filed, while the in the latter, there In case of tax assessment, it is a
was no such protest, hence, contract between the government and
undisputed. the taxpayer to settle the liability.
2. Appeal to the CTA en banc – Note: Compromise discussed herein is
the party adversely affected by the different from compromise penalty.
CTA Division’s decision may file Compromise Compromise
one motion for penalty
reconsideration/new trial within 15 Nature
days from receipt of the decision Amount of
with the CTA Division. If the MR is money paid by
212 the taxpayer to
denied, file a petition for review settle his
with the CTA en banc. deficiency taxes
3. Appeal to the Supreme Court Amount paid by
– within 15 days from the receipt the taxpayer to
of the decision of the CTA en banc compromise a
(Please refer to CTA jurisdiction tax violation and
for further discussion) paid in lieu of
B. By way of special civil action – criminal
Petition for certiorari, prohibition prosecution
and mandamus to the Supreme Amount
Court in cases of grave abuse of Fixed
discretion, lack of jurisdiction or percentage rate
excess of jurisdiction. depending on
the ground for issued by the Regional Offices
compromise involving basic deficiency taxes of
which is P500,000 or less or minor criminal
computed violations discovered by the Regional
based on the and District Offices (Sec. 204(A) &
basic assessed 7(c), NIRC)
tax Grounds
Fixed amount or 1. Doubtful validity – reasonable
based on a doubt as to the validity of claim
graduated table against the taxpayer exists; and
depending 2. Financial incapacity – when
usually on the the financial position of the taxpayer
gross annual demonstrates a clear inability to pay
sales, earnings the assessed tax (Sec. 204(A),
or receipts of NIRC).
the taxpayer Cases that may be compromised
(RMO No. 19- 1. Delinquent accounts;
2007) 2. Cases under administrative
Remedy in case of non-payment protest after issuance of the FAN;
by the taxpayer 3. Civil tax cases being disputed
1. Enforce the before the courts;
compromise; 4. Collection cases filed in courts;
or and
2. Treat it as 5. Criminal violations except those
rescinded already filed in court or those
and insist involving criminal tax fraud (RR No.
upon the 30-2002, Sec. 2)
original Cases that are not subject to
demand compromise
(CIVIL 1. Withholding tax cases, unless
CODE, Art. the applicant taxpayer invokes
2041). provisions of law that cast doubt on
Institute a the taxpayer’s obligation to withhold;
criminal action 2. Criminal tax fraud cases
(RMO No. 19- confirmed as such by the CIR or his
2007, III(5)) duly authorized representative;
Approving authority in compromise 3. Criminal violations already filed
of taxes: in court;
1. Commissioner – general power of 4. Delinquent accounts with duly
compromise of tax liability approved schedule of installment
2. National Evaluation Board (NEB) – payments;
the basic tax involved exceeds P1M 5. Cases where final reports of
or the settlement offered is less than reinvestigation or reconsideration
the prescribed minimum rates have been issued resulting to
213 reduction in the original assessment
3. Regional Evaluation Board (REB) – and the taxpayer is agreeable by
offers of compromise of assessments signing the agreement form;
6. Cases which become final and validity of
executory after final judgment of a assessment;
court, where compromise is or
requested on the ground of doubtful 2. Financial
validity of the assessment; and incapacity of
7. Estate tax cases where taxpayer
compromise is requested on the any portion
ground of financial incapacity of the thereof appears
taxpayer (RR No. 30-2002, Sec. 2). to be unjustly or
ABATEMENT excessively
Cancellation of the entire tax liability of assessed; or
the taxpayer (NIRC, Sec. 204(B)) 2. The
Who has the authority to abate administration
The CIR has the sole authority to and collection
abate or cancel: costs involved
1. Surcharge; do not justify the
2. Interest; and collection of the
3. Compromise penalties (RR No. amount due
13-2001, Sec. 4) REMEDIES AFTER PAYMENT
Grounds: 1. Tax refund – actual
1. The tax or any portion thereof reimbursement of the tax. A “refund”
appears to be unjustly or excessively is a written claim for the payment of
assessed; or cash for taxes erroneously or illegally
2. The administration and paid by the taxpayer to the
collection costs involved do not government.
justify the collection of the amount 2. Tax credit – the government
due. issues a tax credit certificate (TCC)
Compromise Abatement or a tax credit memo covering the
Nature amount determined to be
Involves a reimbursable after proper verification
reduction of the and the same may be applied
taxpayer’s against any sum that may be due
liability. and collectible from the taxpayer
Involves the All TCCs issued by the BIR shall not
cancellation of be allowed to be transferred or
the entire tax assigned to any person (RR No. 14-
liability of a 2011, Sec. 2)
taxpayer. Tax Refund Tax Credit
Officer/s authorized to Formality
compromise/abate The taxpayer
CIR, NEB and asks for
REB CIR restitution of the
Grounds money paid as
1. Reasonable 1. The tax or tax.
214 The taxpayer
Compromise Abatement asks that the
doubt as to money so paid
be applied to his for refund or credit filed by the
existing tax taxpayer with CIR (Sec. 229, NIRC;
liability. Vda. de Aguinaldo v. CIR).
Practical consideration Exceptions:
The taxpayer to a. A return filed showing an
whom the tax is overpayment shall be considered
refunded would as a written claim for credit or
have the option, refund (Sec.204(C), NIRC);
among others, to b. The CIR may, even without the
invest for profit written claim therefor, refund or
the returned credit any tax where on the face of
sum. the return upon which the payment
An option not was made, such payment appears
proximately clearly to have been erroneously
available if the paid (Sec.229, NIRC).
taxpayer 215
chooses instead 3. The claim for refund must be a
to receive a tax categorical demand for
credit. reimbursement (Bermejo v.
Period of collectability Collector of Internal Revenue).
2-year period to 4. The claim for refund with the
file claim with CIR and the 30-day period to appeal
the CIR starts to the CTA (R.A. No. 1125, Sec. 2)
after the must be filed within 2 years from the
payment of the date of payment of the tax or penalty.
tax or penalty. Rule: The administrative claim must
2-year period be filed within the said 2-year period,
starts from the regardless of any supervening cause
date such credit (Sec. 229, NIRC).
was allowed (in If the CIR takes time in deciding the
case credit is claim, and the period of 2 years is
wrongfully about to end, the suit or proceeding
made). for a refund must be started in the
Grounds for filing a claim for tax CTA before the end of the 2-year
refund or tax credit: (EPS) period even without the decision of
1. Tax is erroneously or illegally the CIR (Gibbs v. CIR).
assessed or collected; Exception:
2. Penalty is collected without The 2-year prescriptive period may
authority; be suspended when:
3. Sum collected is excessive or in a. There is a pending litigation
any manner wrongfully collected between the Government and the
(Sec. 229, NIRC) taxpayer; and
Requisites of tax refund or credit: b. The CIR in that litigated case
1. There must be a legal ground or agreed to abide by the decision of
basis for tax refund or tax credit the SC as to the collection of taxes
(Sec. 229, NIRC). relative thereto (Panay Electric
2. There must be a written claim Co. v. Collector).
Note: A claim for refund or credit for 2. Refunds and credits of income
excess input VAT is governed by taxes withheld on the wages of the
another provision wherein the appeal employees (Sec. 72(C), NIRC).
to the CTA need not be made within Forfeiture of tax refund/tax credit
the 2-year prescriptive period (Sec. 1. Forfeiture of refund – a refund
112(C), NIRC). check or warrant which remains
5. Prior payment of the tax must unclaimed or uncashed within 5
be proven. There must be actual years from date of mailing or delivery
collection and receipt by the shall be forfeited in favor of the
government of the tax sought to be government and the amount thereof
recovered and this requires factual shall revert to the general fund.
proof (Collector of Internal 216
Revenue v. Li Yao). 2. Forfeiture of tax credit – a TCC
Submission of documents in which remains unutilized after 5
support for the tax refund or credit years from date of issue, shall unless
The submission of complete revalidated, be invalid and shall not
supporting documents is necessary to be allowed as payment for internal
support a claim for refund or for revenue taxes and the amount
issuance of tax credit. However, failure covered by the certificate shall revert
to submit documents in support of a to the general fund (Sec. 230, NIRC).
taxpayer’s claim for refund at the Note: Unutilized TCCs may be
administrative level DOES NOT converted into cash refund during the
prevent the CTA from entertaining the validity period of the TCC (RR No. 05-
appeal. Non-submission of documents 2000).
in the administrative level is NOT Other considerations
FATAL to a judicial claim for refund. 1. Payment under protest not
The cases filed before the CTA are required – any suit or proceeding for
litigated de novo and party litigants refund or credit may be maintained
should prove every minute aspect of whether or not such tax, penalty, or
their cases (CIR v. Philippine Bank of sum has been paid under protest or
Communications, CTA EB No. 933 duress (Sec. 229, NIRC).
re: CTA Case No. 7915, October 7, 2. The remedy of tax refund
2013). cannot be availed of to revive the
Interest on tax refunds right to contest the validity of an
Rule: Government cannot be required assessment once the same has been
to pay interest on taxes refunded to lost not only by failure to appeal but
the taxpayer in the absence of a by the lapse of the reglementary
statutory provision clearly or expressly period within which appeal could
directing or authorizing such payment have been taken (CIR v.
(CIR v. Sweeney). Concepcion).
Exceptions: 3. A withholding agent has a legal
1. When the CIR acted with patent right to file a claim for refund for the
arbitrariness. Arbitrariness following reasons:
presupposes inexcusable or • He is considered a “taxpayer”
obstinate disregard of legal as he is personally liable for the
provisions (Commissioner v. withholding tax as well as for
Victorias Milling). deficiency assessments,
surcharges, and penalties, option, by referring to the taxable
should the amount of the tax period when it was acquired by the
withheld be finally found to be taxpayer (United International
less than the amount that Pictures AB v. CIR).
should have been withheld
under law; and
• As an agent of the taxpayer, his
authority to file the necessary
income tax return and to remit
the tax withheld to the
government impliedly includes
the authority to file a claim for
refund and to bring an action for
recovery of such claim (CIR v.
Smart Communication, Inc.).
Note: While the withholding agent
has the right to recover the taxes
erroneously or illegally collected, he
nevertheless has the obligation to
remit the same to the principal
taxpayer.
Tax refund or tax credit or carryover
of excess income tax
payments
In case of excess income tax
payments, the corporation is given
another option aside from tax credit or
refund. Such excess payments may be
carried-over and credited against the
estimated quarterly income tax
liabilities for the taxable quarters of the
succeeding taxable years (Sec.76,
NIRC).
The options are mutually exclusive.
Once the option to carry-over the
excess payments was made, such
shall be considered irrevocable for that
taxable period and no application for
refund or issuance of a tax credit
certificate shall be allowed (Sec. 76,
NIRC).
It should be emphasized that the
irrevocability rule applies only to the
option of carry-over (Stablewoods
Philippines, Inc. v. CIR).
“For that taxable period” refers to the
excess income tax, subject of the