TAX REMEDIES

Assessment
- Is the process of collecting and reviewing the income tax return filed by the
taxpayer.
- BIR has 3 years to assess a taxpayer
- Period of investigation: 120 days
-

ASSESSMENT PROCESS
1. Letter of Authority- official documents that empower a Revenue Officer (RO)
to examine the taxpayer’s books of accounts and other records to determine
the correctness of the taxpayer’s liabilities.
*Medicard vs CIR- absence of LOA will make the assessment void due to
violation of due process

CIR- issue A in National Office

Regional Director- in Regional Offices

Exceptions to the issuance of LOA

a. Cases involving civil or criminal tax fraud
b. Policy cases audited by CIR

LOA vs LN
LN- informs the taxpayer of possible assessment
LOA- gives the authority to RO to conduct A

2. Notice of Discrepancy (NOD)- informing the taxpayer of deficiency tax liability.

It aims to afford the taxpayer with fair opportunity to explain his side within 5
days from the receipt of NOD with documents that must be submitted
within 30 days

CIR has 10 days to decide on the reply.

3. Preliminary Assessment Notice (PAN)- issued when there is sufficient basis

to assess the taxpayer for any deficiency tax liabilities.

Requisites: (if not compliant, void)

*Must be in writing
*Shows in detail the facts and the law, rules and regulations or
jurisprudence as basis

PAN Exceptions:
1. Findings is the result of mathematical error
 2. Discrepancy has been determined between the tax withheld and the
amount remitted
3. Tax refund or tax credit claims
4. Excise tax due is not paid
5. Non-exempt persons
Remedy- Has 15 days to reply contesting the finding in the PAN

4. Final Assessment Notice (FAN) or Formal Letter of Demand (FLD)- calls for
the payment of the taxpayer’s deficiency
-issued when taxpayer failed to respond to the PAN or PAN’s reply is
without merit.

Prescriptive period:
If not fraudulent- 3 years from actual filing or return or deadline for filing
If fraudulent- 10 years from discovery
*failure to file
*false return

Execution of Waiver of statute of limitation- executed by taxpayer to toll

the prescriptive period of assessment approved by the CIR
RMC 141 20119. No authority needed to sign by the BIR. No longer
need to accept by the CIR and notarized.

Remedy of the taxpayer

1. File a protest to the CIR within 30 days from the date of receipt of the
FAN
2. Submit supporting documents within 60 days from filing of protes

Type of Protest
a. Request for Reconsideration- plea of re-evaluation based on existing
records (15 or 30 days)
b. Request for Reinvestigation- plea of re-evaluation based on newly
discovered or additional evidence
-must state the nature of the protest
-date of the assessment notice
-applicable law, RR, or jurisprudence
-if granted, toll the prescriptive period
5. Final Decision on a Disputed Assessment (FFDA)- denial of protest. Taxpayer
can elevate the case to the CTA (Rule 42)

Denial of Protest by the CIR

a. Direct Denial- appealable to CTA within 30 days from receipt of LTD
b. Indirect Denial- appealable to CTA within 30 days from the lapse of the
180 day period or wait for CIR decision and appeal it to CTA

Denial of Appeal by the CTA and SC

CTA Division denial- appeal to CTA en banc within 15 days from decision
CTA En Banc denial- appeal to SC Division within 15 days from decision
SC div- RA 9282. File and MR (15 days)

SC- direct na, petition for review under Rule 45 (15 days to file)
65 pag wala ng ordinary recourse, pag wala na remedy

CTA Division- MR thru Rule 42

 CTA En Banc- MR under Rule 43

COLLECTION
If fraudulent- 10 years from discovery of fraud
If not fraudulent- 5 years from receipt of FAN/FLDD

Persons to collect
1M and above- CIR
1M less- Revenue District Officer (RDO)

Methods of collecting
1. Distraint- seizure of personal property, tangible or intangible
a. Actual Distraint- personal property for public auction
b. Garnishment- distraint of bank accounts
c. Constructive Distraint- preservation of property not to be disposed until
authority from BIR is given.
i. Taxpayer is retiring from any business subject to tax
ii. Intends to leave the PH
iii. Removes his property therefrom
iv. Performs any act tending to obstruct the collection

Right of pre-emption
-if all obligations are paid prior to sale, it shall be restored to the owner.

2. Levy- seizure by the government real personal property and interest

Right of redemption
Taxpayer can redeem the property for the period of 1 year (can still possess
the property and entitled to rents and other income thereof

3. Judicial proceedings
a. Filing of civil case for collection
b. File a criminal case (Tax evasion)

COMPROMISE

Grounds:
a. Reasonable doubt as to the validity of the claim against the taxpayer exists
b. Financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax

Minimum amounts
a. In cases of financial capacity, 10% of the basis assessed tax (BAT)
 b. Other cases, 40% of the BAT

Evaluation Board- composed of CIR and 4 Deputy Commissioners

-approves if basic tax exceed 1M
-need approval if settlement is less than prescribed minimum rates
ABATEMENT OR CANCELLATION OF TAX LIABILITY
Grounds:
a. tax appears to be unjustly or excessively assessed
b. administration and collection costs do not justify the collection of amount due
SUSPENSION OF THE RUNNING OF STATUE OF LIMITATION
Grounds:
a. taxpayer’s request for reinvestigation was granted
b. taxpayer cannot be located
c. no property of the taxpayer can be located
d. taxpayer is out of the country
CIVIL PENALTIES (in addition to BAT)
1. Surcharge
a. 25% surcharge
b. 50% surcharge

2. Interest-an increment on any unpaid amount of tax

Train Law- 12% per annum

Kinds of Interest
1. Deficiency Interest- interest on any deficiency tax due
-assessed and collected from the date prescribed for its payment
until full payment or issuance of notice
2. Delinquency Interest- interest imposed on the failure of the taxpayer to
pay tax due
Double Imposition of Interest- bawal iimpose simultaneously and
deficiency and delinquency
Tax Deficiency- amount due and collectible from a taxpayer upon audit
Tax Delinquency- failure of the taxpayer to pay the tax due

REFUND OF TAXES
Requisites:
 a. Tax was erroneously or illegally collected
b. Taxpayer should file a written claim for refund or credit within 2 years from
date of payment
c. If claim is denied---file a petition to refund with CTA

REFUND OF INPUT VAT ON ZERO RATED SALE

-Must be filed within 2 years after the close of the taxable quarter when sale is made
*In case of zero rated sale, payment for the sales must have been made in acceptable
foreign currency
with BSP regulations
*In case of both 0
rated and effectively
0 rated sales, only the
proportionate sale can
be claimed
*In case of transport
of passenger and cargo,
input vat shall be
allocated between 0
rated sales and non—
0 rated sales
WAIVER
SEC. 223. Suspension of Running of Statute of Limitations. - The running of the
Statute of Limitations provided in Sections 203 and 222 on the making of
assessment and the beginning of distraint or levy a proceeding in court for
collection, in respect of any deficiency, shall be suspended 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 sixty (60) days thereafter; when
the taxpayer requests for a reinvestigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address given by him in the return filed
upon which a tax is being assessed or collected: Provided, that, if the taxpayer
informs the Commissioner of any change in address, the running of the Statute of
Limitations will not be suspended; when the warrant of distraint or levy is duly
served upon the taxpayer, his authorized representative, or a member of his
household with sufficient discretion, and no property could be located; and when
the taxpayer is out of the Philippines.

City of Manila v. Cosmos Bottling Corporation, G.R. No. 196681, 27 June 2018

FACTS:
• City of Manila assessed Cosmos for LBT and regulatory fee amounting to 1.2M
for the 1Q of 2007.
• Cosmos protested arguing that Tax Ords (7988, 8011) amending the Rev Code
was declared null and void because the LBT constitutes double taxation. Cosmos
initially paid only 131K but Treas refused and later on denied the protest. Thus,
Cosmos was forced to pay the amount assessed.
• Subsequently, Cosmos filed a complaint with RTC for the refund.
• RTC ruled in favor of Cosmos (Manila is refrained from imposing under Sec 21
if the same is again imposed under Sec 14) but denied the refund.
• On MR at CTA filed by Cosmos, CTA ruled that Sec 21 and 14 of the Rev Code
constitutes double taxation for LBT. So the CTA ordered the refund in favor of
Cosmos.
• City of Manila then filed for a petition for review at the CTA EB alleging that
Cosmos untimely filed its appeal the denial of protest. Manila argued that Cosmos
should file the protest within 30 days, but when it filed for refund, Cosmos
effectively abandoned its protest.

ISSUE:
• WON Cosmos who initially protested the assessment and paid the same may
shift to its claim refund.

HELD:
• Yes. A TP who protested and paid an assessment may later institute an action
for refund. Also, the action filed by Cosmos is not only for refund but also to
question the assessment made by Manila.
• Sec 195 provides for the procedure in contesting the assessment while 196 is
for refund.
• Under 195, TP may protest the assessment within 60 days from receipt of notice
and Treas has 60 days to decide. In inaction, TP may appeal to court.
• Under 196, since treas is not given a period within which to decide, the TP may
filed admin claim within the 2 year period due to inaction of Treas. Also, since 196
does not mention of assessment made by treas, to file for a claim is not dependent
on a protest. This means TP may file a claim for refund without prior protest on the
belief that the assessment is erroneous or illegal. The TP may protest and
alternatively appeal the assessment in court; or pay the file for a refund.
• To clarify, the SC held that TP may protest with or without payment.
o If without payment -195 applies. If there is denial, only recourse is to appeal the
assessment.
o If with payment – 196 may apply. protest must be made at Treas in writing within
60 days from receipt of notice, otherwise the assessment will become final and
executory. In case of inaction or denial, bring court action must be initiated within
30 days from denial of treas.
• Here, Cosmos received the assessment in Jan 15 and protested in Jan 18.
Denial was received in Feb 6. On March 8 (exactly 30 days), Cosmos filed the
action before the RTC of Manila which is within the allowable period.
• As to validity of ordinance, in this case, Sec 14 imposes manuf tax. Sec 21
imposes the same. – Double Taxation | null and void (2006 case). This is because
under the LGC, when a munic/city imposed business tax on manuf, said munic/city
can no longer tax said manuf to a business tax.
• Petition was denied.