TAX REMEDIES

LECTURE NOTES

TAXATION (Tax Remedies)

1. Period of Limitation upon Assessment and Collection.
Internal revenue taxes shall be assessed within 3 years
1) After the due date, or
2) From the day the return was filed, where a return is filed beyond the due date.

Note: A return files before the due date shall be considered as filed on such due date.

Exercise: Determine the last day to make valid assessment.

a. Individual income tax return on compensation income earned in 2015 was filed on April 15, 2016.
b. Decedent died January 1, 2015. Estate tax return was filed on September 1, 2015.
c. Donation was given on March 14, 2017. Donor’s tax was filed on March 31, 2017.

2. Authority of the Commissioner of Internal Revenue.

a. The Commissioner may:
1) Compromise the payment of any internal revenue tax.
2) Abate or cancel tax liability
3) Credit or refund;
a) taxes erroneously or illegally received or penalties imposed without authority,
b) the value of internal revenue stamps when returned in good condition by the purchaser,
c) the value, upon proof of destruction, of unused stamps that are unfit for use.

b. Payment of tax may be compromised when:

1) A reasonable doubts as to validity of the claim against the taxpayer exists; or
2) The financial position of the taxpayer demonstrates a clear in ability to pay the assessed tax.
Notes: (new provisions)
a) Prescribed minimum compromise rates
1) Financial incapacity - 10% of the basic assessed tax.
2) Other cases - 40% of the basic assessed tax.
b) Compromise settlement subject to approval of the Evaluation Board composed of the Commissioner and the
four (4) Deputy Commissioners:
1) Where the basic tax exceeds P1,000,000 or
2) Where the settlement offered is less than the prescribed minimum rates.
c) Tax Liability may be abated or cancelled when:
1) The tax or any portion thereof appears to be unjustly or excessively assessed; or
2) The administration and collection costs involved do not justify the collection of the amount due
Note: All criminal violations may be compromised except:
a. Those already in court, or
b. Those involving fraud
d. Tax credit or refund
1) No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within 2 years after the payment of the tax or penalty.
2) A return filed showing an overpayment shall be considered as a written claim for credit or refund. (new
provision)
3) A Tax Credit Certification validly issued under the provision of the Tax Code may applied against any internal
revenue tax, excluding withholding taxes, for which the taxpayer is directly liable, (new provision)

A. REMEDIES OF THE GOVERNMENT

3. Remedies for the collection of Delinquent Taxes

a. The civil remedies for the collection of internal revenue taxes, fees or charges, and any increment thereto resulting
from delinquency shall be by:
1) Summary proceedings:
a. Distraint of personal property and
b. Levy upon real property and interest in or rights to real property.

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 2) Judicial proceedings:
c. Civil action or
d. Criminal action
b. Either of the summary or judicial or both simultaneously may be pursuant in the discretion of the authorities
charged with the collection of such taxes.
c. The remedies of distraint and levy shall not availed of where the amount of tax involved is not more than P100.
d. The judgement in the criminal case:
1) shall not only impose the penalty but
2) shall also order payment of the taxes

4. Actual and Constructive Distraint.

a. Actual distraint - The physical taking of the taxpayer’s personal property to answer for his tax deficiency.
b. Constructive distraint - The service of a notice upon the taxpayer that he could not dispose of his personal property
unit he has paid his tax deficiency.

Notes: 1. Persons who shall seize and distraint personal property (actual distraint):

a. Amount of delinquent tax is more than P1,000,000 - Commissioner or his duly authorized representative.

b. Amount of delinquent tax is P1,000,000 or less - Revenue District Officer

2. The commissioner or his duly authorized representative shall have the power to lift order of distraint.

5. Distinction Between Actual and Constructive Distraint

Actual Distraint Constructive Distraint
a. Personal property is physically taken a. Personal property is not physically taken

b. The taxpayer is already delinquent b. There is no findings yet of a discrepancy, only that the
taxpayer is leaving the country of disposing of his
properly the fraud of creditors or is in the process of
liquidation.
6. Levy on Real Property
a. After the expiration of the time required to pay the delinquent tax or delinquent revenue, real property may be
levied upon before, simultaneously or after the distraint of personal property belonging to the delinquent.
b. Levy shall be effected by writing upon a duly authenticated certificate showing the name of the taxpayer and
the amount to the tax and penalty due from him a description of the property of the upon which levy is made.
c. Written notice of the levy shall be mailed to or served upon the:
a. After the expiration of the time required to pay the delinquent tax or delinquent revenue, real property may be
levied upon before, simultaneously or after the distraint of personal property belonging to the delinquent.
b. Levy shall be affected by writing upon a duly authenticated certificate showing the name of the taxpayer and
the amount to the tax and penalty due from him a description of the property upon which levy is made.
c. Written notice of the levy shall be mailed to or served upon the:
1. Register of Deeds of the province or city where the property is located and
2. upon the delinquent taxpayer,
3. or if he is absent form the Philippines, to his agent of the manager of the business in respect to which the
liability arose
4. or if there is none, to the occupant of the property in question.

7. Distinctions: Among Warrant of Distraint, Warrant of Levy and Warrant of Garnishment.

Distraint Levy Garnishment
a. As to subject matter Personal property owned Real property owned Personal property
by and in possession of the by and in possession of owned by the
Taxpayer. the Taxpayer taxpayer but in the
possession of a third
party.

b. As to disposition for Purchased by the Forfeited to the Purchased by

want of bidders or Government then resold to Government then sold Government then
bids inadequate to meet deficiency. to meet the deficiency. resold to meet
satisfy tax deficiency. deficiency.

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 c. As to advertisement for No advertisement is Advertisement once a No advertisement is
sale required. week for three required.
weeks.
8. Released of Distrained Property Upon Payment Prior to Sale
If any time prior to the consummation of the sale all proper charges are paid to the officer conducting the sale, the
goods of effect distrained shall be restores to the owner.

9. Redemption of Property Sold

a. The property sold may be redeemed by the delinquent taxpayer within one year from the due date of sale by
paying:
1) the amount of public taxes,
2) penalties and
3) interest thereon from the date of delinquency to the date of sale together with
4) 15% interest per annum of the purchase price from the date of purchase to the date of redemption.
b. The owner shall not be deprived of the possession of the property sold and shall be entitled to the rents and other
income thereof until the expiration of the time allowed for redemption.

10. Further Distraint or Levy

The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due,
including all expenses, is collected.

11. Injunction not Available to Retrain Collection of Tax

a. No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue
tax, fee or charge imposed by the Tax Code.
b. The Court of Tax Appeals can issue injunctions while in the exercise of its appellate jurisdiction in cases pending
before it. This is an exception to injunction rule.
c. The CTA may enjoin collection of taxes if in its opinion the same may jeopardize the interest of the government
and/or the taxpayer.

12. Tax Lien

a. A legal claim or charge on property, either real or personal, as security from the payment of a tax obligation.

13. Remedy for Enforcement of Statutory Penal Provisions

The remedy of enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the particular
situation may require, subject to the approval of the Commissioner.

14. Period for Assessment and Collection (Summarized).

a. Return filed was not false or fraudulent
1) Collection with prior assessment
a) Assessment shall be made within 3 years from the date of Filing of return or from the last day required by
law for filing, if the return was filed before such last day.
b) Collection shall be made within 5 years (new provision) from the date of assessment, either by:
(1) Summary proceedings, or
(2) Judicial proceedings
2) Collection without prior assessment.
a) No proceeding in court without assessment for the collection shall be begun after expiration of the 3-year
period.
b. Return filed was false or fraudulent with intent to evade tax or no return was filed.
3) Collection with prior assessment
a) Assessment shall be made at any time within 10 years after discovery of the falsity, fraud or omission.
b) Collection shall be made within 5 years (new provision) from the date of assessment, either by:
(1) Summary proceedings or
(2) Judicial proceedings.
4) Collection without prior assessment.
a) A proceeding in court for the collection of tax my be filed without assessment, at any time within 10 years
after the discovery of the falsity, fraud or omission.

c. If before the expiration of the 3-year period, both the Commissioner and the taxpayer have agreed in writing to its
assessment after such time

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 1. Assessment may be made within the period agreed.
2. The period so agreed upon may be extended by subsequent written agreement before the expiration of the period
previously agreed upon.
3. Collection shall be made within the period agreed upon in writing before the expiration of the 5 year period
following the assessment by:
a) Summary proceedings, or
b) Judicial proceedings

15. Suspension of Running of Statute of Limitation

a. The running of the 3-year period or the 10-year period on the making of assessment and the beginning of distraint
or levy or a proceeding in court for collection, in respect to any deficiency, shall be suspended:
1) For the period during which the Commissioner is prohibited from making the assessment or beginning distraint
or levy or a proceeding in court and for 60 days thereafter.
2) When the taxpayer requests for reinvestigation which is granted by the Commissioner.
3) When the taxpayer cannot be located in the address given by him in the return filed upon which, tax is being
assessed or collected (except if the taxpayer informs the Commissioner of any change in address).

B. REMEDIES OF THE TAXPAYER

16. Assessment defined.
Assessment is a notice to the taxpayer requiring payment within a specified time of the tax due from him including
interest and civil penalties.
17. Protesting of Assessment.
a. When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall
notify the taxpayer of his findings.
b. A preassessment notice shall not be required in the following cases: (new provision):
1) When finding for any deficiency tax is the result of mathematical error in the computation of the tax as
appearing on the face of the return or
2) When a discrepancy has been determined between that tax withheld and the amount actually remitted by the
withholding agent; or
3) When the taxpayer who opted to claim a refund or tax credit of excess creditable tax for a taxable period was
determined to have carried over and automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the succeeding taxable year; or
4) When the excise tax due on excisable articles has not been paid; or
5) When an article locally purchased or imported by an exempt person, such as but not limited to, vehicles, capital
equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons.
c. The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise,
the assessment shall be void (new provisions)
d. Within a period to be prescribed by the implementing rules and regulations, the taxpayer shall be required to
respond to said notice. If the taxpayer fails to respond to said notice, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.
18. Remedy Against an Assessment
a. Protest the assessment administratively.
The taxpayer shall file a request for reconsideration or reinvestigation with the BIR within 30 days from receipt of
the assessment notice.
b. Submit all relevant supporting documents to the BIR.
Within 60 days from filing of protest, all relevant supporting documents should be submitted; otherwise the
assessment shall become final.
c. Appeal to Court of Tax Appeals (CTA), and case will be raffled to a CTA division
Appeal to the CTA within 30 days:
1) From receipt of the adverse (unfavourable) decision of the CIR; or
2) From the lapse of the 180-day period from filing of the protests supporting documents.
Note:
a. There is now a 180-day rule for the BIR to decide on an administrative appeal.
b. Failure to appeal to Court of Tax Appeals shall make the BIR’s decision final, executory and demandable.
d. In case of an adverse decision of the CTA division. The petitioner must first file a motion for reconsideration or a
motion for new trial with the same division within 15 days from receipt of the said adverse. In case of denial of the
said motion.
e. Appeal to the Court of Tax Appeals en banc within 15 days after receipt of the denial of the motion the CTA division.
In case of adverse decision of the CTA en banc. The petitioner must first file a motion for reconsideration or for
new trial with the CTA en banc before the former could appeal with the Supreme Court.
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 f. Appeal to the Supreme Court within 15 days after receipt of unfavourable final decision of the CA, raising questions
of law.
19. Remedy Against an Erroneously or Illegally Paid tax
a. File a formal claim or refund with the BIR within 2 years from the date of payment of the tax.
b. Within 30 days (and within 2 years from the payment made) from receipt of final unfavourable decision on the
claim of refund, file an appeal with CTA division, raising questions of facts and/or law.
c. In case of an adverse decision of the CTA division. The petitioner must first file a motion for reconsideration or a
motion for new trial with the same division within 15 days from receipt of the said adverse decision. In case of
denial of the said motion.
d. Appeal to the Court of Tax Appeals en banc within 15 days after receipt of the denial motion the CTA division. In
case of adverse decision of the CTA en banc. The petitioner must first file a motion for reconsideration or for
new trial with the CTA en banc before the former could appeal with the Supreme Court.
e. Appeal to the Supreme Court within 15 days after receipt of unfavourable final decision of the CA, raising
questions of law.
Note: a. If the tax is paid in instrallment, the two-year period shall be counted from the date of payment.
b. The filing of the claim for refund with the BIR and the Institution of judicial action with the CTA to recover
the tax can be done either simultaneously or one after the other within the 2-year period to protect the
interest of the taxpayer.

20. The Commissioner may, even without written claim therefore, refund or credit any tax, where the face of the return
upon which payment was made, such payment appears clearly to have been erroneously paid.
a. If the Commissioner made the taxpayer asking for refund believe that he would be credited for the
overpayment.
b. If there is an agreement between the taxpayer and the agent of Commissioner that they would wait for the
decision of the SC to guide them in the settlement of the question or questions involved in the fraud.
21. Forfeiture of Refund
A refund check certificate issued, which shall remain unclaimed or uncashed within 5 years from the date of the said
warrant or check was mailed or delivered, shall be forfeited in favor of the Government and the amount shall revert to
the general fraud.
22. Forfeiture of Tax Credit
A tax credit certificate issued, which shall remain unutilised after 5 years from the date of issue, shall, unless
revalidated, be considered invalid, and shall not be allowed as payment for internal revenue tax liabilities of the
taxpayer, and the amount covered by the certificate will revert to the general fund.
23. Transitory Provision
A tax credit certificate issued by the Commissioner of his duly authorized representative prior to January 1, 1998, which
remains unutilised or has a creditable balance as of said date, shall be presented for revalidation with the
Commissioner or his duly authorized representative on or before June 30, 1998.

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