“Government Remedies” 2.

Formal Letter of Demand & Final Assessment

Notice (FLD/FAN)
I. ASSESSMENT- determining tax liability of taxpayer  Issued to taxpayer who failed to respond
 Prescriptive Period of Assessment: to PAN within 15 days
3 years from the date of actual filing or deadline  Issued within 15 days from filing or
required by law (whichever is later) submission of response

Exception: INSTANCES WHERE NO PAN IS REQUIRED:

 Fraudulent or non-filing of tax returns: BIR has 10  When the finding of deficiency tax is the
years from discovery result of mathematical error in the
CONSIDERED AS FRAUD: computation of the tax
 income is understated by 30%  When discrepancy has been determined
 expenses is overstated by 30% between the tax withheld and the amount
actually remitted by the withholding agent
STAGES OF ASSESSMENT or CONSIDERATION:  When a taxpayer who opted to claim a
1. Taxpayer’s Selection: refund or tax credit of excess creditable
 High Risk Industries withholding tax for a taxable period was
 Tax Mapping determined to have carried over and
 Tax Information applied the same amount for the current
 Pre-audit year and that of previous
2. Audit of Taxpayers: (BIR Notices)  When the excise tax due on excisable
a. Letter of Authority (LOA) articles has not been pain
 must be served to taxpayer within 30 days  When an article locally purchased or
from date of issuance imported by an exempt person, has been
 must be electronic (eLA) sold, traded or transferred to non-exempt
 1 LOA = 1 taxpayer person.
o PERIOD OF INVESTIGATION:
 120 days from date of receipt 3. Final Decision on a Disputed Assessment (FDDA)
o REVALIDATION:  may be communicated to the taxpayer
 Issued by RDO (once) within 180 days from the filing of protest
 Issued by National Office (twice)
b. Tax Verification Notice (TVN) II. COLLECTION-enforced once assessment has
 verification of one time transaction (ex: achieved finality:
Estate Tax, Donor’s Tax & etc.) a. When taxpayer defaulted in his administrative
c. Letter of Notice remedies
 reminder from BIR informing taxpayer of b. Denial of taxpayer’s protest by CIR
some discrepancy c. Whether or not on appeal, when the
MODE OF CONDUCT: in the place of business of the assessment is upheld by the court
taxpayer  Prescriptive Period of Collection:
 Government has 5 years from date of
Frequency of Taxpayer Examination: release of the final assessment (10 years
 once every taxable year from discovery of fraud) to the taxpayer to
EXCEPTION: make collection
 fraud, irregularities & mistakes  When demand letter is undated, 5-year
 reinvestigation & reexamination prescriptive period is counted from date of
 verification of tax compliance receipt of assessment notice
 exercise of CIR’s power to obtain information Stages of collection
 subpoena duces tecum – summon i. Preliminary collection letter:
taxpayer to produce certain documents  Once assessment has achieved finality, BIR
 subpoena ad testificandum - summon Collection Division will send taxpayer Preliminary
taxpayer to appear or testify Collection Letter signed by RDO
 Taxpayer may pay assessment either by:
ASSESSMENT PROCEDURE: a) Lump sum payment
1. Pre-assessment notice (PAN): b) Installment payment
 Has 15 days from receipt to reply c) Compromise payment
 Failure to reply shall make the assessment ii. Final notice before seizure letter:
final and demandable  Within 10 days from the issuance of Preliminary
 If taxpayer disagrees, FLD/FAN will be Collection Letter, the BIR sends the taxpayer Final
issued Notice before Seizure Letter

  If the taxpayer ignores the final notice, BIR will h. For the protest of reinvestigation, the
resort to enforcement of administrative summary taxpayer has 60 days to submit documents.
remedies i. After submission of protest, wait for 180 days
iii. Warrant of distraint/levy or garnishment : counted from submission of documents or
 Served to the taxpayer after his failure to respond receipt of FAN/ FLD.
to the Final Notice
Limitation: If the protest was denied, the taxpayer can either
1. Shall not be availed when amount of tax is not proceed to:
more than P100 a. Judicial appeal- to Court of Tax Appeals within
2. Shall not be sent earlier than 90 days from date 30 days
the assessment becomes due
b. Administrative appeal- motion for
iv. Research of taxpayer properties:
reconsideration to CIR within 30 days.
 If taxpayer fails to pay his delinquent accounts
after serving WDL, revenue officer shall look for
 If BIR inacted within 180-day period, the taxpayer may
properties of taxpayer in the records of City
either:
Assessor, RD, LTO, SEC, business bureaus & local
a. Wait or;
banks
b. File a petition to CTA within 30 days from lapse of 180-
v. Notice of tax lien &/or notice of tax levy:
day period.
 Used to validate the legal claims or charge of the
government on identified property of taxpayer as
security for payment his tax liability  If denied by CTA, the taxpayer may:*
 Annotated at the back of the title document in the a. Go to CTA-en bank within 15 days;
case of real property b. If denied by CTA-en bank, go to Supreme Court
 Makes the government a priority claimant on the within 15 days;
identified property of delinquent taxpayer c. If denied by Supreme Court, go to Supreme Court-
vi. Seizure of properties: en bank within 15 days.
 CIR shall conduct distraint if amount exceeds P1M,
RDO if P1M or less II. RECOVERY OF ERRONEOUSLY PAID TAX - the
 Term is constructive distraint when government action for recovery should be within 2 years from
freezes taxpayer’s property by requiring person in the date of payment.
control thereof to sign a receipt obligating him to
preserve it  Requisites:
vii. Auction sale and forfeiture of properties 1. The taxpayer should have filed claim for refund
 Within 20 days from levy, revenue officer shall or credit
advertise the property for auction sale for at least 2. If negative/ denied by BIR, proceed to petition
30 days & award it to the highest bidder for review in the CTA within 30 days.
 Proceeds from sale shall be applied to unpaid tax 3. If denied by CTA, do the same process above *
liabilities & balance will be returned to the
taxpayer
viii. Filing of civil or criminal action
 Government may alternatively or simultaneously
pursue filing of civil or criminal action against
taxpayer w/the summary remedies of distraint or
levy

“TAXPAYER’S REMEDIES”

I. Disputing an Assessment-if the tax has not yet

been paid

 PROCESS:
a. Notice of Discrepancy
b. Discussion of discrepancy
c. If cannot discuss, then receipt of PAN.
d. Reply to PAN within 15 days.
e. If no reply, receipt of FLD/FAN
f. Protest after receipt of FAN/ FLD within 30
days.
g. Protest can be either for reconsideration or
reinvestigation