TAX REMEDIES Pre-Assessment notice (PAN)

• is written notice given to a taxpayer informing him of the findings

of the BIR officer(s) relating to a deficiency in his tax return,
Definition of terms: indicating therein the law and the facts on which the assessment
is made and requiring the taxpayer to respond within a given
Tax remedies: period, otherwise, the Commissioner of his dully authorized
• On part of the taxpayer – courses of legal actions which the representative shall issue an assessment based on his findings.
taxpayer can avail of to seek relief from the assessment made by
revenue officers. Formal Letter of Demand (FLD) and Final Assessment Notice (FAN)
• On the part of the government – the courses of action allowed in • is a formal demand or notice sent to the taxpayer requiring
the law to enforce tax collection. payment within a specified time of the tax due from him including
interest and civil penalties.
Tax Assessment • shall be issued by the CIR or his duly authorized
• is an official action of an officer authorized by law in ascertaining representatives.
the amount of tax due under the law from a taxpayer.
• process of determining the correct amount of the tax due in Request for reconsideration – a plea of re-evaluation of an assessment on
accordance with the prevailing tax laws. the basis of existing records without need of additional evidence or
supporting documents. It may involve both a question of fact or law.
Tax audit
• process of examining, going over or scrutinizing the books and Request for reinvestigation - a plea of re-evaluation of an assessment
records of the taxpayer to ascertain the correctness of the tax on the basis of a newly discovered or additional evidence or documents
declared and paid by the taxpayer. that a taxpayer intends to present in the reinvestigation. It may also
involve both a question of fact or law.
Assessment Period
• period in processing, appraising and determining the value of the
subject of taxation, including the computation of tax prescriptions, TAX ASSESSMENT
surcharges and interest to arrive at the specific sum of tax charged
on a person or property.

Letter of Authority (LOA) Taxpayer’s Assessment Government’s Assessment

• is an official document that empowers a Revenue Officer to (thru tax returns) (Before and after payments of tax)
examine, scrutinize a taxpayer’s books of account and other
accounting records in order to determine the taxpayer’s correct Taxpayer’s assessment
internal revenue tax liabilities. In the absence of such an • taxpayer reports his own assessment of his tax liability in his tax
authority, the assessment or examination is null and void. return to the Internal revenue office. (Tax return filed by the
taxpayer)

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Government Assessment Tax Cases need not covered by LOA:
• assessment could be made a. Cases involving civil or criminal tax fraud which fall under the
1. Before a tax return is filed National Investigation Division under the Enforcement and
a. after prescription period expired Advocacy Services of the BIR;
b. if the taxpayer intends to leave the country or close business b. Policy cases under audit by the special teams in the National
(Jeopardy Assessment) Office.
2. After a fraudulent tax return is uncovered c. Issuance of Preliminary Assessment Notice (PAN)
a. Issuance of PAN to the taxpayer informing him of the
• When is the government tax assessment made? findings of revenue officer.
a) When ITR filed by taxpayer filed an accurate return b. The PAN shall be in writing and show in detail the facts and
- within 3- year prescription period the law, rules and regulations on which the proposed
1. after the due date assessment is based, otherwise the assessment is void.
2. from the day the return was filed, where a return is c. The taxpayer has 15 days to reply contesting the findings in
filed beyond the due date. the PAN. Failure to reply, the BIR will issue FAN and FLD.
Note: A return filed before the due date shall be d. Issuance of Final Assessment Notice and Final Letter of Demand
Issued when:
considered as filed on such due date.
a. The taxpayer failed to respond; or
- before the expiration of the 3-year prescription period, the
b. The reply to the PAN was found to be without merit
BIR and the taxpayer may agree on the period of
assessment. (Sec. 22 (b) NIRC)
BIR’s Denial of Protest
- Jeopardy Assessment, if the taxpayer:
1. Direct denial of protest
1. retires from business
2. Indirect denial of protest – if the CIR or his duly authorized
2. leaves the country.
representative fails to act on the taxpayer’s
b) When taxpayer filed a fraudulent return or return not filed
protest within 180 days from the date of submission, the protest may
- within 10 –year prescription period when the BIR discovers
be considered denied.
the falsity, fraud or omission of the taxpayer’s tax return.
REMEDIES OF THE TAXPAYER
Assessment Process:
1. Tax audit or Investigation
Remedies before payment
➢ Examination of the books accounts of the taxpayer by the 1. administrative protest
revenue officer who has the Letter of Authority (LOA). In the 2. request for reconsideration
absence of LOA, the assessment is a null and void. Persons 3. request for reinvestigation
authorized to issue LOA: 4. judicial protest
➢ If taxpayer is
a. under National Office
Remedies after payment
• Commissioner of Internal Revenue
1. claim for refund
b. If taxpayer is under regional offices
2. claim for tax credit
• Regional Director
1. Notice for Informal conference - • File an appeal to the CTA within 30 days from the lapse of 180
• sent by the Revenue Officer to the taxpayer with noted discrepancy days period, If CIR or his duly authorized representative fails to act
• the taxpayer is given 15 days to respond from date of receipt of on the protest
the notice. • Failure to appeal to the CTA shall make the BIR’s decision final,
• failure to respond will warrant endorsement to Assessment Division executor and demandable
of the Revenue Office for appropriate review. • If the appeal is denied by CTA division, file a Motion for
Reconsideration (MR) before the same CTA division within 15 days
2. Preliminary Assessment Notice (PAN) from the receipt of the decision.
• shall be served to the taxpayer or through registered mail – if the
result of the review conducted by the Administrative Division has c) Appeal to the CTA En Banc
established sufficient basis to assess the taxpayer for any deficiency. • If the MR is denied, file an appeal with the CTA end banc within 15
• the taxpayer is given 15 days from receipt thereof to contest the days from the receipt of the decision.
amount being assessed. • If the appeal is denied by the CTA end banc, file MR to the CTA end
• failure to respond will warrant the issuance of Formal Letter of banc within 15 days from the receipt of the decision.
Demand of Payment together with the assessment showing the
computation inclusive of the applicable penalties. d) Appeal to the Supreme Court Division
• If the MR is denied by the CTA end banc, file an appeal with
3. Formal letter of demand the Supreme Court Division with 15 days from the receipt of
• to be responded by the taxpayer within 30 days. CTA end banc decision
• If the appeal is denied by the SC division, file MR to the SC
a) Protest the Assessment division within 15 days from the receipt of the decision.
• The taxpayer shall file a request for reconsideration or
reinvestigation with the BIR within 30 days from receipt of the e) Appeal to the Supreme Court En Banc
assessment notice. • If the MR is denied by the SC division, file an appeal with the
• Failure to file a request for reconsideration or reinvestigation Supreme Court En Banc with 15 days from the receipt of CTA
within 30 days, the assessment shall become final. end banc decision
• Submit all relevant supporting documents to the BIR within 60 • If the appeal is denied by the SC end banc, file MR to the SC
days from filling of protest, (in case of request for reinvestigation) En banc within 15 days from the receipt of the decision.
otherwise the assessment shall become final. • If MR is denied by SC En Banc, there is no more remedy, the
assessment shall become final, executory and demandable.
Note: There is now a 180-day requirement for the BIR to decide
on an administrative appeal.

b) Appeal to the Court of Tax Appeal

• if the protests are denied in whole or in part by the Commissioner,
the taxpayer may appeal to the Court of Tax Appeal within 30 days
from the receipt of letter of denial or unfavorable decision.

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Remedy Against an Erroneously or Illegally paid Tax 2. The filing for claim for refund with the BIR and the
institution of judicial action with CTA to recover the
a. File a formal Claim for refund - tax can be dome either simultaneously or one after
• After payment, a request for actual return in cash of erroneously the other within the 2-year period to protect the
or illegally collected taxes should be made through filing claim interest of the taxpayer.
for tax refund. 3. Failure to appeal to the CTA shall make the BI’s
Notes: decision final, executor and demandable.
1. The request for tax credit or tax refund shall be filed with the
Commissioner within 2 years after the payment of tax or g) appeal to the CTA end banc
penalty. • 15 days from the date of receipt of a CTA division.
2. If applying a tax credit – the 2-year period starts when the tax
crediting was allowed. A partial payment of the tax cannot be Refund or credit Even without written claim and forfeiture of refund
the subject to a claim for refund. a. Refund or credit Even without written claim
3. In any case, no such suit or proceedings shall be filed after the • The Commissioner may, even without written claim therefore
expiration of 2 years from the date of payment of tax or penalty refund or credit any tax, where the face of the return upon
regardless of any new effective cause that may arise after which payment was made, such payment appears clearly to
payment. have been paid.
4. Even without a written claim, the BIR Commissioner may refund
or credit any tax if, on the face of the return which payment was b. Forfeiture of refund
made, it appears clearly to have been erroneously paid. • A refund check or warrant which shall remain unclaimed or
uncashed within 5 years from the date the said warrant or check
b. Submit all relevant supporting documents to the BIR. was mailed or delivered, shall be forfeited in favor of the
• Submit relevant documents within 60 days from filling of claim government and the amount shall revert to the general fund.
for refund.
• c. Forfeiture of Tax Credit:
f) Appeal to the Court of Tax Appeal • A tax credit certificate issued, which shall remain unutilized
• File an appeal with CTA, raising questions of facts and/or law after 5 years from the date of issue, shall, unless revalidated,
within 30 days (but within the 2-year period required for filing a be considered invalid, and shall not be allowed as payment for
formal claim for refund) internal revenue tax liabilities of the taxpayer, and the amount
1. from the receipt of the covered by the certificate will revert to the general fund.
adverse (unfavorable)
decision, or Instances that Suspend the Running of the Two-year Peremptory period.
2. from the lapse of the a. If the Commissioner made the taxpayer asking for refund believe
180-day period. that he would be credited for the overpayment.
Note: b. If there is an agreement between the taxpayer and the amount
1. If the tax is paid in instalments, the 2-year period of the Commissioner that they would wait for the decision of the
shall be counted from the date of final payment. SC to guide them in the settlement of question or questions
involved in the fraud.
Court of Tax Appeals (CTA) g) Exclusive appellate jurisdiction
a) Creation of CTA The CTA shall exercise exclusive appellate jurisdiction to review
R.A. 1125 – the Law creating CTA - as amended by R.A. 9282 by appeal:
which took effect April 22, 2004, which expands the jurisdiction of the 1. Decision of the CIR in cases involving disputed assessments,
CTA. The CTA shall be the same level as the Court of Appeals, refunds of internal revenues, fees and other charges,
possessing all inherent powers of Court of Justice (Sec. 1 R.A. No. penalties in relation thereto, or other matters arising under
1125, as amended by R.A. 9282 NIRC or other laws administered by the BIR;
2. Inaction by the CIR in cases involving disputed assessments,
b) Composition of CTA refunds of internal revenues, fees and other charges,
The CTA shall consist of a Presiding Justice and eight (8) Associate penalties in relation thereto, or other matters arising under
Justices (Sec. R.A.1125, as amended by R.A. 9503, June 12, 2008.) NIRC or other laws administered by the BIR, where the NIRC
provides a specific period action
c) Sitting embank or division 3. Jurisdiction over cases involving criminal offenses.
The CTA end banc or in three Division, each Division consisting 4. 4. Jurisdiction over tax collection cases
of three Justices (Sec. 2 -R.A.1125 an amended by R.A. 9503)

d) What will constitute a Quorum? REMEDIES OF THE GOVERNMENT:

Five justices shall constitute a quorum for session end banc and
2 justices for session of division (Sec. 2, R.A. 1125 as amended by Collection
R.A. 9503.) • The BIR may avail of the remedy of collection when the assessment
becomes final, executory and Demandable.
e) Rendition of a decision or resolution • Any internal revenue tax which has been subject to assessment
The affirmative votes of 5 members of the Court end banc shall may be collected by distraint or levy or by a proceeding in court
be necessary to reverse a decision of a Division but a simple majority within 5 years:
of the Justices present necessary to promulgate resolution or decision 1. If assessment within 3 years or ten-year period – the counting of
in all cases or two (2) members of a Division, as the case may be, shall the 5-year period shall start from the issuance of FAN;
be necessary for the rendition of a decision or resolution in the 2. If assessed based on the period agreed upon between the
division level. (Sec. 2, R.A. 1125 as amended by R.A. 9503.) taxpayer and the Commissioner - the collection shall be made
within the period agreed upon in writing before the expiration
f) Jurisdiction of the CTA (Sec. 7 of R.A.112 as amended: of the 5-year period.
The CTA shall exercise; • The period agreed upon may be extended by a subsequent written
• Exclusive appellate jurisdiction to review by appeal agreement made before the expiration of the period previously
• Jurisdiction over cases involving criminal offense agreed upon.
• Jurisdiction over tax collection cases

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Methods of Collection • Power to lift order of distraint – The Commissioner or his duly
authorized representative shall have the power to lift order or
1. Distraint of Personal Property distraint.
• it is the seizure by the government of taxpayer’s personal property,
tangible or intangible to enforce the payment of taxes. Right of Pre-emption /Release of distraint property upon
a. Actual distraint - payment prior to sale
➢ personal property is seized and physically taken into • if any time prior to the consummation of the sale all
possession by the BIR and offered for sale at public auction. proper charges are paid to the officer conducting
The property is sold to the highest bidder and the proceeds the sale, the goods or effects distrained shall be restored
of the sale are applied to the payment of the tax due. The to the owner.
excess of the purchase price over the claim of the
government shall be returned to the taxpayer. There is no Distinction between Actual and Constructive Distraint
right of redemption Actual Distraint Constructive Distraint
➢ when the amount of the bid for the property is not equal to a) personal property is physically a) personal property is not physically
the claim of the government, or is very much less than the taken taken
actual market value of the property, the same may be
b) the taxpayer is already delinquent b) there is no finding yet of discrepancy,
purchased by the government for the amount of the claim. in the payment of his taxes. only that the taxpayer is leaving the
country or disposing of his property in
b. Garnishment – property owned by the taxpayer but in the favor of the creditor or is in the process of
possession of a third party, e.g. bank accounts. liquidation.
c. Constructive distraint - c) personal property taken is sold in c) personal property is merely held as
➢ the taxpayer or person in possession or control of the order to satisfy the tax delinquency. security to answer for any future tax
taxpayer’s property, is required to sign a receipt covering the delinquency.
property distrained obligating himself to preserve and not to
dispose of the same without the authority of the BIR.
➢ May be availed of in the following cases:
1. The taxpayer is retiring from any business subject to tax.
2. He intends to leave the Philippines
3. He removes the property therefrom
4. He performs any act tending to obstruct the proceeding
for collecting the tax due or which may be due to him.

• Persons authorized to commence distraint proceedings

a. If the amount is more than P 1,000,000 - Commissioner of
Internal Revenue
b. If the amount is P 1,000,000 or less - Revenue District Officer
2. Levy on Real Property – the seizure by the government of real properties Distinction among Warrant of Distraint, Warrant of Levy and Warrant of
and interest in or rights to such properties in order to enforce payment of Garnishment:
taxes. Distraint Levy Garnishment
• When to levy?
After the expiration of the time required to pay the delinquent tax a) as to subject personal personal property personal
or delinquent revenue, real property may be levied upon before, Matter property owned owned by and in property
simultaneously or after the distraint of personal property by and in possession of the owned by the
belonging to the delinquent. possession of taxpayer. taxpayer but in
• How shall levy be affected? the taxpayer. the possession
of a third party.
Levy shall be affected by writing upon a duly authenticated
b) As to disposition purchased by forfeited for the purchased by
certificate showing the name of the taxpayer and the amount of
for want of bidders the gov’t. then gov’t. then sold to the gov’t. then
the tax and penalty due from a description of the property upon
or bids inadequate to resold to meet meet the resold to meet
which levy is made.
satisfy tax deficiency. deficiency. deficiency. deficiency.
• To whom shall the levy be served?
c) as to no advertisement No
Written notice of the levy shall be mailed to or served upon the:
Advertisement advertisement once a week for advertisement
a. Register of deeds of the province or city where the property
is required three weeks. is Required.
is located and
• The remedies of distraint and levy shall not be availed of where
b. Upon the delinquent taxpayer,
the amount of tax involved is not more that P 100.
c. or if he is absent from the Philippines, to his agent or the
manager of the business in respect to which the liability
3. Judicial Proceedings
arose,
d. or if there be none, to the occupant of the property in
a. Filing civil case for collection
question. b. File for criminal case (Tax evasion)

• Redemption of the Property Sold - (levy of property) COMPROMISE

a. the property sold may be redeemed by the delinquent taxpayer • Compromise is a contract whereby the parties by reciprocal
within one year from the date of sale concessions avoid litigation or put an end to one already
b. the owner shall not be deprived of the possession of the commenced.
property sold and shall be entitled to the rents and • May compromise the payment of any internal revenue tax on the
other income thereof until the expiration of the time allowed for following grounds:
redemption. 1. reasonable doubt as to validity of the claim against the
c. if the taxpayer fails to redeem the property, a final deed of sale taxpayer exists, or
is executed in favor of the buyer. 2. the financial position of the taxpayer demonstrates clear
• Further Distraint or Levy inability to pay the assessed tax.
• the remedy by distraint of personal property and levy on realty • The compromise settlement of any tax liability shall be subject to
may be repeated, if necessary, until the full amount due, the following minimum amounts:
including all expenses, is collected.

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 a. For cases of financial incapacity – a minimum compromise rate 3. No property of the taxpayer can be located 4. When the
equivalent of 10%of the basic assessment tax; taxpayer is out of the Philippines.
b. For other cases – a minimum compromise rate equivalent to 40% of
the basic assessed tax; CIVIL PENALTIES
• All criminal violations may be compromised, except: In addition to the basic tax assessed on the taxpayer, the following
1. those already filed in court; civil penalties will also be collected:
2. those involving fraud. 1. Surcharge
• This power cannot be delegated by the Commissioner, except the 2. Interest
following cases:
1. assessment issued by the Regional Office involving basic 1. Surcharge
deficiency taxes of P 500,000 or less, a) 25% Surcharge shall be collected in any of the following cases;
2. minor criminal violations • Failure to file any return and pay the tax due on time
• Instances when approval of the evaluation board is required: • Filing a return with an internal revenue officer other than those
1. When the basic assessed tax involved exceeds P 1 million with whom the return is required to be filed, unless authorized
2. where the settlement offered is less than the prescribed by the CIR.
minimum rates, • Failure to pay deficiency tax within the time prescribed for its
• Composition of the evaluation board payment in the notice of assessment.
1. CIR • Failure to pay the full or part of the amount of tax shown on any
2. 4 Deputy Commissioners return or the full amount of tax due for which no return is
required to be filed.
ABATEMENT OR CANCELLATION OF TAX LIABILITY b) 50% Surcharge shall be collected in any of the following cases;
• Grounds 1. Willful neglect to file the return on time
1. the tax or any portion thereof appears to be unjustly or 2. there is willful neglect if the taxpayer files only after prior notice
excessively assessed; in writing from the BIR.
2. the administration and collection costs involved do not justify • There is a simple neglect (25% surcharge) if the taxpayer
the collection of the amount due. voluntarily files the return after the deadline without notice from
the BIR
Suspension of Running of Statute of Limitation. • Prima facie evidence of false or fraudulent return:
• the running of the 3-year period or the 10-year period on the 1. Substantial overstatement (more than 30%) of deductions
making of assessment and the beginning of distraint or levy or a 2. Substantial under declaration (more than 30%) of taxable
proceeding in court for collection, in respect to any deficiency, sales, receipts or income.
shall be suspended:
1. when the taxpayer requests for reinvestigation which is
granted by the Commissioner.
2. 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 (except if the taxpayer informs the
Commissioner of any change in address).
 2. Interest Illustration: (CPA Review in Taxation by Enrico D. Tabag)
• Increment on any unpaid amount of tax, assessed from the date
prescribed for payment until the amount fully paid. A Company is assessed a deficiency income tax of P 1,000,000,
• Kinds of interest exclusive of interest and surcharge for taxable year 2018. The tax liability
1. Deficiency interest- imposed on any deficiency tax due remained unpaid despite the lapse of June 20, 2020, the deadline for
which interest shall be assessed and collected from the payment stated in the notice and demand issued by the Commissioner.
date prescribed for its payment (whichever comes first) Payment was made on February 10, 2021.
a. Full payment, thereof;
b. Upon issuance of as notice and demand by the 1. The correct amount of surcharge, if any, shall be
CIR of his authorized representative P 250,000 (1,000,000 x 25%)
2. Delinquency interest – imposed on the failure of the tax 2. The correct amount of deficiency interest shall be:
payer to pay: P 145,315.07
a. the amount of tax due on any return required to 3. The correct amount of delinquency interest is:
be filed 103,215.09
b. the amount of the tax due for which no return is 4. The total amount due on February 10, 2021 shall be:
required
c. a deficiency tax, or any surcharge or interest Solution:
thereon on the due date appearing in the notice
Basic tax due 1,000,000.00
and demand of the CIR or his authorized
representative until the amount is fully paid, Add: 25% surcharge 250,000.00
which interest shall form part of the tax. 12% deficiency interest (April
16, 2019 to June 20, 2020)
• Double Imposition of Interest (1,000,000 x 12% x 442 145,315.07 395,315.07
Upon the effectivity of the Train Law, in no case shall the days/365days)
deficiency and delinquency interest be imposed simultaneously. Total amount due, June 30, 2020 1.395,315.07
Add: 12% delinquency tax (from July
1, 2020 to Feb. 10, 2021)
Tax Deficiency vs Tax Delinquency
(1,395,315.07 x 12% x 225 103,215.09
Tax deficiency days/365 days)
• the amount still due and collectible from the taxpayer upon audit or Total amount due, February 10, 2020 1,498,530.16
investigation.
Tax Delinquency
• failure of the taxpayer to pay the tax on the date fixed by law or Note: Simultaneous imposition of deficiency and delinquency tax is not
indicated in the assessment notice (FAN) or letter of demand. allowed under the effectivity of the TRAIN LAW.

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