Government’s Remedies - To be valid, the assessment must be:

a. In writing
REMEDIES
b. Must inform in taxpayer of the law and the
- These pertain to the means and facts on which the assessment is made
mechanisms by which the violation of a right - The power to issue an assessment is with
or provisions of law is prevented, redressed the CIR
or compensated. - However, this power is delegable.
- Government remedies are the means - Before the delegated revenue officer can be
which can be used by the government to conduct an examination or assessment,
ensure that it gets sufficient money into its there must be a clear grant of authority,
coffers to keep the government machinery embodied in a Letter of Authority (LOA)
moving. - The LOA cannot be for “unverified prior
- Taxpayer’s remedies, on the other hand, years”.
are those which are available to the - The other period or years should be
taxpayer to ensure that his rights are specifically indicated in the LOA, otherwise,
protected while the government exercises the LOA is void insofar as the unverified
its power to tax. prior years is concerned.
- After the examination and the BIR finds
GOVERNMENT’S REMEDIES
sufficient basis for an assessment, the BIR
1. Assessment – an action either by the will issue a preliminary assessment notice
taxpayer or an administrative officer to (PAN) stating the facts, laws, rules,
determine the taxpayer’s tax due. regulations, and assessment is based.
- The taxpayer has 15 days from receipt of
Two kinds:
the PAN to respond.
a. Self-assessment – the taxpayer computes a. If he doesn’t, he is in default, and a
his own liability, files his return, and pays Formal Letter of Demand and Final

the tax based on his computation. Assessment Notice (FLD/FAN) shall be

Generally, taxes are self-assessing. issued

b. Deficiency assessment – this occurs upon b. If he does, FLD/FAN will be issued

discovery of the BIR that the self- within 15 days from the filing/submission
assessment was either deficient or when no of taxpayer’s response
return was made by the taxpayers c. If no PAN is given (and the case is no
part of the exceptions), then the FAN
DEFICIENCY ASSESSMENT:
which follows therefrom is void

- Consists of a computation of the amount of - A PAN is not needed and can be issued

tax that must be paid by the taxpayers, and outright in the following cases:

- Coupled with a demand to pay the tax within

a specified period of time.
1. Any deficiency tax is the result of - waivers of the statute of limitation, requisites
mathematical error in the computation of the for validity:
tax evident on the face of the return 1. must be in writing (need not be notarized)
2. Discrepancy between the tax withheld and 2. date of execution and acceptance of the
the amount actually remitted by the waiver by the BIR shall be before the
withholding agent expiration of the period to assess or collect
3. Taxpayer who opted to claim a refund or tax taxes;
credit for excess creditable withholding tax 3. date of execution shall be specifically
carried it over and automatically applied the indicated in the waiver
amount claimed against the estimated tax 4. signed by the taxpayer or his duly
liabilities for the succeeding taxable year authorized representative. For corporation,
4. Excise tax due on excisable articles has not the waiver must be signed by any of its
been paid responsible officials; and
5. When article locally purchased or imported 5. expiry date of the period agreed upon
by an exempted person has been sold, should be indicated
traded or transferred to non-exempt person
2. Imposition of Penalties and Interest
PRESCRIPTIVE PERIOD FOR DEFICIENCY
- Apply to all cases, fees and charges
ASSESSMENT
imposed by NIRC
- Assessments made beyond the prescriptive - The purpose of this is to discourage delay in
period are not binding on the taxpayer. the payment of the taxes due to the
- General Rule: the right to assess must be government
exercised within 3 years from: - Penalties can be either 25% or 50%
a. The day return was actually filed: or surcharge
b. from the last day prescribed by law for filing - Interest can be either (1) general interest;
the return (2) deficiency interest; (3) delinquency
interest; and (4) extended payment interest.
General Rule: 3 years
CIVIL PENALTIES
Exceptions:
25% surcharge is imposable on the amount due in
a. false or fraudulent return with intent to
the following cases:
evade taxes: within 10 years from discovery
of the falsify or fraud a. Failure to file a return AND pay tax due
b. failure or omission to file a return: within 10 b. Filing a return with n internal revenue officer
years after discovery of the failure or other than those with whom the return is
omission required to be filed
c. waiver of the statute of limitations in writing, c. Failure to pay deficiency ax within the time
period agreed upon prescribed in the notice to assessment; and
 d. Failure to pay the full or part of the amount INTEREST
of tax stated in the return ( or full amount
- For general interest, the interest on unpaid
when no return is filed) on or before the
taxes is 20% per annum on any amount of
date prescribed for its payment
tax from the date prescribed for payment
NOTE: there is NO 25% surcharge when you until the amount is fully paid.
file on the time, pay the full amount stated in the - For deficiency interest, the rate is 20% per
return, but subsequently find out that the return annum on any deficiency in the tax due from
filed and the amount paid was erroneous. the date prescribed for its payment until full
payment
50% surcharge is imposable on the amount due in
- For delinquency interest, 20% per annum
the following cases:
on the unpaid amount in case of failure to
a. Willful neglect to file a return within the pay:
period prescribed by law  Amount of tax due on any return
b. False or fraudulent return is willfully made required to be filed; or
 Amount of tax due for which no return is
required; or
50% surcharge is imposable on the amount due in  Deficiency tax, or any surcharge or
the following cases: interest thereon on the due date
appearing in notice and demand of CIR
1. Willful neglect to file a return within the
- For interest on extended payment, the rate
period prescribed by law
is 20% per annum
Note: if the taxpayer voluntarily files the return,
This is imposed when a taxpayer is qualified
without notice from the BIR, only 25% surcharge
and elects to pay the tax on installment, but
shall be imposed for late filing and late payment of
fails to pay the tax or any installment thereof or
the tax
pays it beyond the period of payment; or
But if the taxpayer files the return only after prior
The CIR has authorized an extension of time
notice in writing from the BIR, then the 50%
within which to pay a tax or deficiency tax or
surcharge will be imposed
any part thereof.
2. False or fraudulent return is willfully made
3. Criminal Actions and other Penalties
Note: there is a prima facie evidence of a false and - No criminal action for the recovery of taxes
fraudulent return when there is substantial under shall be filed without the approval of the CIR
declaration of taxable income or substantial - However, this required approval can be
overstatement of deductions (failure to declare an delegated to and issued by subordinate
amount exceeding 30% for taxable income or - Officials because the approval of filing of a
actual deductions) criminal action is not one of the non-
delegable functions of the CIR.
 - A criminal complaint is instituted not to discovery of frauds upon the NIRC, resulting
demand payment, but to penalize the to the recovery of revenues and fees and/or
taxpayer for violation of the Tax Code. imposition of any fine or penalty.
- Acquittal of taxpayer in a criminal case does
Who are DISQUALIFIED to avail of the Informer’s
not exonerate him from tax liability.
Reward:
- Computation and assessment of deficiency
taxes is not a prerequisite for criminal - A BIR official or any other incumbent public
prosecution under the NIRC. Hence, official or employee;
protesting an assessment cannot stop - Relative within the 6th degree of
criminal prosecution under the NIRC. consanguinity of BIR official or employee, or
- When fraudulent tax returns are involved, a other public official or employee;
proceeding in court after the collection of - Though already retired or separated from
such tax may be begun even without service, BIR officials or employees or other
assessment. public officers who acquired the information
- Intent to defraud need not be shown for a in the course of their duties during their
conviction of tax evasion. incumbency.
- The only thing that needs to be proven is
that the taxpayer was aware of his 4. Collection
obligation to file the tax return but he - When there is no valid protest made by the
nevertheless voluntarily, knowingly, and taxpayer, the assessment shall become
intentionally failed to file the required final and unappealable, and thus the tax
returns. shall be collectible.
- GR: the government can file a proceeding in
PRESCRIPTION: 5 years, counted from:
court to collect once the assessment has
- Service of the final notice and demand for become final and unappealable.
payment of the deficiency taxes upon the - XP: in the case of a false or fraudulent
taxpayer, if the violation is for failure or return with intent to evade tax or of failure to
refusal to pay the tax due. file a return, a proceeding for collection may
- Discovery and institution of judicial be filed without assessment at any time
proceedings for its investigation and within 10 years after the discovery of the
punishment, if the violation is for filing of falsify, fraud, or omission.
false or fraudulent returns.
MODES:
INFORMERS ‘S REWARDS:
1. Summary/Extrajudicial/Administrative
- An informer is any qualified person who a. Distraint – enforced on personal property
voluntarily provides definite and sworn b. Levy – enforced on real property
information not yet in the possession of the c. Tax Lien – (security)
BIR nor of public knowledge, leading to the
 - Amount of tax, penalties and interest can’t - The taxpayer will be required to sign a
be imposed against mortgage if lien is not receipt covering the property distrained and
registered obligate himself to:
- The counterpart valid any lien even if it is a. Preserve it intact and unaltered, and
registered from the time become due b. Not dispose it of in any manner, without
2. Judicial (whether civil or criminal) express authority of the CIR
- These modes may be pursued singly or
LEVY
independently of each other or all of the
simultaneously Procedures:
1. Commencement of levy proceedings
DISTRAINT
2. Service of warrant of levy
Two Kinds: 3. Advertisement for sale
a. Actual – personal property is actually seized 4. Public sale of the property under levy
by the BIR; actual delinquency in tax 5. Redemption of property sold
payment is necessary 6. Forfeiture to the government for want of
b. Constructive – no actual delinquency is bidder
necessary 7. Resale of real estate taken for taxes
8. Further distraint and levy
ACTUAL DISTRAINT
TAX LIEN
Procedures:
- A lien is a legal claim or charge on property,
1. Commencement of distraint proceedings
either real or personal, established by law
2. Service of warrant of distraint
as a security in default of the payment of
3. Notice of sale of distrained property
taxes.
4. Release of distrained property, prior to sale
- The tax, together with interest, penalties,
5. Sale of property distrained
and cost that may accure in addition
6. Purchase by government at sale upon
thereto, is a lien upon all all
distraint
propertybelonging to the taxpayer.
CONSTRUCTIVE DISTRAINT is resorted to when - The lien SHALL NOT be valid against any
the CIR believes that the taxpayer: mortgage, purchaser, or judgment creditor
until notice of such lien shall be filed by the
- Is retiring from any business subject to tax
CIR in the Office of the Register of Deeds of
- Intends to leave the Philippines
the province of city where the property of
- Intends to remove his property from the
the taxpayer is situated or located.
Philippines
- Lien attaches from the time tax became due
- Performing any act tending to obstruct the
and payable.
proceeding for collecting the tax due

CONSTRUCTIVE DISTRAINT is effected by:

SUSPENSION OF COLLECTION 3. Taxpayer cannot be located in the address
given by him in the return filed, unless he
GR: No court can issue an injunction to restraint the
informs the Cir of the change of address.
collection of internal revenue taxes, fees, or
4. When the warrant of distraint and levy is
charges imposed by the NICR.
duty served upon the taxpayer or authorized
XP: Only the CTA can issue an injuction and it is representative and no property could be
only allowed when the following conditions occur: located.
5. When the taxpayer is out of the Philippines.
1. There is an appeal to the CTA;
2. In the opinion of the court, the collection Taxpayer’s Remedies
may jeopardize the interest of the
a) Protest or dispute of assessment
Government and/or the taxpayer; and
b) Refund or recovery of erroneously or
3. Taxpayer either to deposit the amount
illegally collected tax.
claimed or to file a surety bond for not more
than double the amount with the court.
1. PROTEST OR DISPUTE OF
PRECRIPTIVE PERIOD: 5 years from date of ASSESSMENT
assessment. - Filled within 30 days from date of receipt of
the FLD/FAN
Exceptions:
- Can be in the form of either a written
1. False or fraudulent return with intent to request for
evade taxes: within 10 years from discovery a. Reinvestigation; or
without need of assessment. The b. Reconsideration
government may file a proceeding in court. - For request for reinvestigation, the taxpayer
2. Failure or omission to file a return: within 10 shall submit all relevant supporting
years from discovery without need for documents within 60 days from the date of
assessment. the filing of his letter of protest.
3. Waiver in writing executed before the 5-year - The CIR or his representative must act on
period expires: period agreed upon. the protest with 180 days counted from:
a. date of filing of the protest (in case of a
PRESCRIPTIVE PERIOD for both the power to
request for reconsideration); or
assess and power to collect can be suspended in
b. date of submission of the required
the following situations:
relevant supporting documents (in case
1. When the CIR is prohibited from making an of reinvestigation)
assessment or beginning distraint and levy - If the CIR does not act within the 180 day
or a proceeding in court and for 60 days period, the taxpayer may either:

thereafter a. Appeal to the CTA within 30 days from

2. Taxpayers request for reinvestigation which the expiration of the 180-day period; or
is granted by the CIR.
 b. Wait for the final decision of the CIR’s b. Avail of a tax credit; or
representative. c. Carry over the excess credit against the
estimated income tax liabilities of the
Quick rundown of the protest procedure
succeeding quarter.
- LOA
REMEDIES COMMON TO GOVERNMENT AND
- BIR finds deficiency and issues PAN (15
THE TAXPAYER
days to respond)
- FLD/FAN (30 days to protest) Common Remedies
- Taxpayer files protest letter a. Compromise
- Submit supporting documents if request for b. Abatement
reinvestigation (60 days from time to protest
letter) 1. COMPROMISE
a. BIR denial > Appeal to CTA(within 30 days Grounds:
from receipt of decision) a. Doubtful validity of the claim against the
b. BIR inaction for 180 days > Appeal to the taxpayer; or
CTA (within 30 days from lapse of 180 b. Financial incapacity of the taxpayer
days) or Wait for decision of the CIR.
Cases which may be compromised:
a. Delinquents accounts;
2. CLAIM FOR REFUND/CREDIT b. Pending administrative cases under
administrative protest after issuance of
Instances when a claim for refund may be availed
FAN;
of:
c. Civil tax cases disputed before the courts;
- Erroneously or illegally assessed or
d. Collection cases filed in courts;
collected internal revenue taxes
e. Criminal violations (XP- (1) already filed in
- Penalties imposed without authority; or
courts; (2) involving criminal tax fraud)
- Any sum alleged to have been excessive or
in any manner wrongfully collected Cases which MAY NOT be compromised:
a. Withholding tax cases, unless the applicant
Requirements
taxpayer invokes provisions of law that cast
a. Written with claim for credit or refund filed
doubt on the taxpayer’s obligation to
with the CIR
withhold;
b. Within the 2 years after the actual payment
b. Criminal tax fraud cases confirmed as such
of the tax or penalty
by the CIR or his duly authorized
A taxable corporation whose total quarterly income
representative;
tax payments in a given taxable year, exceeds its
c. Criminal violations already filed in court;
total income due is given 3 options:
d. Delinquent accounts with duly approved
a. Filing for a tax refund ; or schedule of installment payments;
 e. Cases where final reports of reinvestigation
or reconsideration fave been issued
resulting to reduction in the original
assessment and the taxpayer is agreeable
to such decision by signing the required
assessment form for the purpose;
f. Cases which become final and executory
after final judgment of a court, where
compromise is requested on the ground of
doubtful validity of the assessment;
g. Estate tax cases where compromise is
requested on the ground of the financial
incapacity of the taxpayer.

Minimum Compromise Rates

a. Based on financial incapacity – 10% of the
basic assessed tax
b. Based on doubtful validity – 40% of the
basic assessed tax

2. ABATEMENT OR CANCELLATION OF
TAX LIABILITY
When allowed:
a. The taxes or any portion thereof appears to
be unjustly or excessively assessed; or
b. The administration and collection costs do
not justify the collection of the amount due.