HO.16 - Taxation Remedies

BUSINESS AND TRANSFER TAXATION
Taxation Remedies (Students’ Handouts)
TAX REMEDIES OF THE GOVERNMENT

1. Assessment
• the act or process of determining the tax liability of the taxpayer in accordance with the
laws.
• The law requires that the assessment must be made within 3 years from the date of the
actual filing of the return or the deadline required by law, whichever is later; except when
there is 1) fraudulent returns, 2) no returns filed by the taxpayer, in both cases, the
government has 10 years from the date of discovery to make assessment or 3) waiver of
statute of limitation by the taxpayer.
• The taxpayer has the right to change/modify within three years provided that there is no
notice of audit or investigation of such return, statement or declaration
• Stages of Assessment:
i. Selection of taxpayers to be audited
1. BIR Annual Audit Program
2. Tax Compliance Verification Drive
3. Tax Information
4. Pre-audit of tax returns
5. Direct field observation
ii. Audit of taxpayers
BIR Tax Audit Process
1. Release of Letter of Authority (LA) to the revenue officer
• LA is an official document that authorizes the BIR Revenue Officer to examine
the taxpayer’s books of accounts and other accounting records in order to
determine its correct internal revenue tax liabilities. It should be served with
30 days from the date of issuance and must be an electronic LA printed on
BIR Form1966 issued under BIR Letter of Authority Monitoring System
(LAMS).
2. Conduct of audit examination
• Revenue officers have up to 120 days counted from the date of receipt pf the
eLA by the taxpayer in which to conduct the audit and to submit his report of
investigation.
• Two types of subpoena: 1) duces tecum and 2) as testificandum
3. Reporting on the results of examination
iii. Assessment of taxpayers with unpaid or deficiency tax
1. Pre-Assessment Notice (PAN)
• PAN is a written communication informing the taxpayer of his obligation for
deficiency tax based on audit findings
2. Formal Letter of Demand and Final Assessment Notice (FLD/FAN)
• FLD/FAN is a final declaration of deficiency tax issued to a taxpayer
• Jeopardy assessment – one made by authorize revenue officer without the
benefit of a complete or partial audit in the light of the officer’s belief that the
assessment and collection of a deficiency tax will be jeopardized by the delays
caused by the taxpayers to comply with the audit and investigation
requirements to present his book of accounts and pertinent records or
substantiate all of the deductions, exemptions or credit claimed in his return.
3. Final Decision on a Disputed Assessment (FDDA)
2. Collection – procedures of the government to enforce payment of unpaid taxes from delinquent
taxpayers.
• The government has 5 years from the date of release of the final assessment to the taxpayer to
make collection. When undated, 5 years from the date of receipt of assessment notice.
Government Remedies to Enforce Collection

1. Imposition of tax lien
2. Seizure of taxpayer’s properties
3. Auction sale or forfeiture of taxpayer’s properties
4. Filing of civil or criminal action against the taxpayer
5. Imposition of administrative penalties and fines
6. Suspension of business operations
7. Entering into tax compromise with the taxpayer
Stages of Collection
1. Preliminary collection letter
2. Final notice before seizure letter
Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 1 of 2

BUSINESS AND TRANSFER TAXATION
Taxation Remedies (Students’ Handouts)
3. Warrant of distraint/Levy or Garnishment

4. Research of taxpayer properties
5. Notice of Tax Lien and or Notice of Tax Levy
6. Seizure of properties
7. Auction sale and or forfeiture of properties
8. Filing of civil or criminal action
TAX REMEDIES OF THE TAXPAYER

1. Disputing an Assessment
Content of reply to PAN
• Explanation on matters questioned by the examiner
• Factual and legal bases supporting the taxpayer’s position
• Prayer for full or partial cancellation of the PAN
Requirement for validity of protest

• Nature of protest
• Date of assessment notice
• State the facts, the applicable law, rules and regulations or jurisprudence
• Filed in person or through mail
• All relevant documents must be submitted within 60 days from the filing of the request for re-
investigation
2. Recovery of Erroneously paid taxes
Procedures:
1. File a claim for refund within 2 years from the date of payment
2. File for petition for reconsideration within 30 days if claim for refund is denied
3. Petition for review within 30 days from the receipt of the final decision
4. File for a petition of review upon inaction of the BIR
5. An adverse decision of the CTA shall be repealed within 15 days to the Supreme Court
AUTHORITY TO COMPROMISE
The Cir may compromise payment of internal revenue tax when:
a. A reasonable doubt exists as to the validity of the claim against the taxpayer
b. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax
Minimum compromise settlements:

a. 10% of the basic assessed tax – in case of financial incapacity
b. 40% of the basic assessed tax – for other cases
What may be compromised?

1. Delinquent accounts
2. Pending cases under administrative protest
3. Civil case taxes being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations other than:
a. Those already filed in courts
b. Those involving criminal tax fraud
6. Cases covered by pre-assessment notice contested by the taxpayer
What cannot be compromised?

1. Withholding tax cases
2. Criminal tax fraud cases
3. Criminal violations already filed in courts
4. Delinquent accounts with duly approved schedule of installment payments
5. Cases of reduced assessment agreed upon by the taxpayer
6. Cases which has become final and executory after final judgment of a court
Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 2 of 2

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BUSINESS AND TRANSFER TAXATION

Taxation Remedies (Students’ Handouts)

TAX REMEDIES OF THE GOVERNMENT

Government Remedies to Enforce Collection

Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 1 of 2

3. Warrant of distraint/Levy or Garnishment

TAX REMEDIES OF THE TAXPAYER

Requirement for validity of protest

Minimum compromise settlements:

What may be compromised?

What cannot be compromised?

Based on R.B.Banggawan’s Business and Transfer Taxation (2019) Page 2 of 2

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