Tax Remedies
Tax Remedies
Tax Remedies
Government – the
actions allowed by law to
implement the tax laws or
enforce tax collection.
A. DEFINE TAX REMEDIES
• On the part of:
General Rule:
Yes. But there are
exceptions.
I. Tax Audit or Investigation
TAX CASES NEED NOT BE COVERED BY AN LOA
❑ Cases involving civil or criminal tax fraud which fall under
the jurisdiction of the National Investigation Division (NID)
under the Enforcement and Advocacy Services (EAS) of the
BIR; and
EFFECT
I. Tax Audit or Investigation
NOTICE OF DISCREPANCY
- allows the taxpayer to present and explain his side on the
discrepancies found. The discussion of discrepancy shall in no case extend
beyond thirty (30) days from receipt of NOD.
-Failure on the part of the taxpayer to reconcile and present valid documentary
support, will result in the issuance of a deficiency tax assessment through
PAN.
Notice
of
Discrepancy
:
B. ASSESSMENT PROCESS
3. ISSUANCE OF PRELIMINARY ASSESSMENT
NOTICE (PAN)
- It shall show in detail the facts and the law, rules, and regulations, or jurisprudence on
which the proposed assessment is based. It shall be in writing otherwise, void.
- taxpayer has 15 days to reply contesting the finding in the PAN. Remedy
- Failure to reply, the BIR will issue FAN and FLD. Effect
Do all cases need issuance of
PAN?
General Rule:
Yes. But there are
exceptions.
Exception for Issuance of PAN (Sec. 228 Tax Code)
(a) When the finding for any deficiency tax is the result of a mathematical error in the computation
of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount actually
remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding 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
(d) When the excise tax due on excisable articles has not been paid; or
(e) When the 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.
B. ASSESSMENT PROCESS
4. ISSUANCE OF FORMAL LETTER OF DEMAND
(FLD) AND FINAL ASSESSMENT NOTICE (FAN)
- Calling for the payment of taxpayer’s deficiency tax or taxes and shall state
facts, the law, rules and regulations, or jurisprudence on which assessment is based;
otherwise, assessment shall be void.
ISSUED WHEN:
❑ The taxpayer failed to respond to the PAN; or
❑ The reply to the PAN was found to be without merit.
B. ASSESSMENT PROCESS
PRESCRIPTIVE PERIOD
Taxpayer A filed his 2014 annual income tax return which was due on
April 15, 2015 on March 1, 2015. When is the last day of assessment?
Explanation: Where the return is filed beyond the period prescribed by the law,
the 3-year period shall be counted from the day the return is filed (Sec. 203,
NIRC). Hence the counting of the prescriptive period shall be reckoned from
July 1, 2015. The assessment must be served on or before July 1, 2018.
Illustration 3:
• Cosa filed a fraudulent income tax return for the year 2011on
April 11,2012. The Bureau of Internal Revenue (BIR)
discovered the fraud on February 20,2013. The last day for
the BIR to collect or to send an assessment notice is:
Answer: February 20, 2023
B. ASSESSMENT PROCESS
PRESCRIPTIVE PERIOD
The last day for the taxpayer to submit relevant supporting documents
is:
September 2, 2018
Use the following data for the next three(3) questions
• A taxpayer disclosed to you the ff information:
Date of filing the Income Tax Return: March 28, 2016
Date assessment was received: June 20, 2018
Request for reinvestigation was filed: July 4, 2018
Assume that BIR did not act on protest, the last day fro taxpayer to
appeal to the Court of Tax Appeals is:
March 24, 2019
Illustration 2:
• A taxpayer received an assessment notice on January 5,
2018. He files a motion for reconsideration with the BIR
on January 15, 2018. When is the last day for the
submission of complete documents to support his
motion for reconsideration?
Illustration 1
On July 15, 2015, Mr. A filed his 2014 income tax return which should have been filed
April 15, 2015. He paid the tax on August 15, 2015. The BIR issued a deficiency
assessment on August 2, 2017.
METHODS OF COLLECTION
1. Distraint
- it is the seizure by the government of personal property, tangible or
intangible.
METHODS OF COLLECTION
1. Distraint
- it is the seizure by the government of personal property, tangible or intangible.
METHODS OF COLLECTION
1. Distraint
METHODS OF COLLECTION
3. Judicial Proceedings
a. Filing of civil case for collection
b. File a criminal case (Tax evasion)
After learning the methods of collection, does it
violate the essential characteristic of tax where taxes
must not be payable in kind? Why or why not?
• NO. While they involve seizing property or assets from a taxpayer to
satisfy a tax debt, they do not change the fundamental nature of the tax
itself. The property seized is used to fulfill the monetary tax debt, rather
than being accepted as payment "in kind."
D. COMPROMISE
GROUNDS
❑ A reasonable doubt as to the validity of the claim against the taxpayer exists; or
❑ The financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax.
MINIMUM AMOUNTS
❑ For cases of financial incapacity – a minimum compromise rate equivalent of
10% of the basic assessment tax.
❑ For other cases – a minimum compromise rate equivalent to 40% of the basic
assessed tax.
D. COMPROMISE
INSTANCES WHEN APPROVAL OF THE
EVALUATION BOARD IS REQUIRED
❑ Where the basic assessed tax involved exceeds 1 million pesos; or
❑ Where the settlement offered is less than the prescribed minimum rates.
GROUNDS
❑ The tax or any portion thereof appears to be unjustly or
excessively assessed; or
1. Surcharge
2. Interest
F. CIVIL PENALTIES
SURCHARGE - additional fees or penalties imposed on taxpayers for
specific reason
25% surcharge shall be collected in any of the following cases:
* Failure to file any return and pay the tax due on time
* Filing a return with an internal revenue officer other than those with
whom the return is required to be filed, unless authorized by the CIR.
F. CIVIL PENALTIES
SURCHARGE - additional fees or penalties imposed on taxpayers for
specific reason
25% surcharge shall be collected in any of the following cases:
* Failure to pay deficiency tax within the time prescribed for its payment in
the notice of assessment.
* Failure to pay the full or part of the amount of tax shown on any return or
the full amount of tax due for which no return is required to be filed.
F. CIVIL PENALTIES
SURCHARGE
50% surcharge shall be collected in any of the following cases:
* Willful neglect to file the return on time
* There is willful neglect if the taxpayer files only after prior notice in
writing from the BIR.
F. CIVIL PENALTIES
INTEREST – an increment on any unpaid amount of tax, assessed from
date prescribed for payment until the amount is fully paid.
❑ (2018) Upon effectivity of the TRAIN Law – twelve percent (12%) per
annum.
F. CIVIL PENALTIES
INTEREST
KINDS OF INTEREST
1. Deficiency Interest
- imposed on any deficiency tax due which interest shall be
assessed and collected from the date prescribed for its payment (whichever comes
first)
a. Full payment, thereof;
b. Upon issuance of as notice and demand by the CIR of
his authorized representative
F. CIVIL PENALTIES
INTEREST
KINDS OF INTEREST
2. Delinquency Interest - imposed on the failure of the taxpayer to pay the
following:
a. the amount of tax due on any return required to be filed
b. the amount of the tax due for which no return is required
c. a deficiency tax, or any surcharge or interest thereon on the due date
appearing in the notice and demand of the CIR or his authorized
representative until the amount is fully paid, which interest shall form part of
the tax.
F. CIVIL PENALTIES
REQUISITES:
1. A tax was erroneously or illegally collected by the BIR;
2. The taxpayer should file a written claim for refund or tax credit with the CIR
WITHIN TWO (2) YEARS from the DATE OF PAYMENT of the tax or penalty;
and
3. If the claim for refund is denied by the CIR, file a petition for refund with the CTA:
a. Within 30 days from receipt of the denial; AND
b. Within two (2) years from the date of payment of tax or penalty.
Case Study: Ethical dilemma in tax practice
Y/N is a tax consultant working for a small accounting firm. One of your clients, a small
business owner named Lisa, has approached you with a request to underreport her business
income on her tax return. Lisa believes that by understating her income, she can minimize her
tax liabilities and save money. You know that underreporting income is illegal and unethical, but
you are concerned about losing Lisa's business if you refuse to comply with her request.
Ethical Dilemma: You want to maintain a positive relationship with his client and keep her business.
On the other hand, you know that underreporting income is illegal and goes against your professional
ethics and obligations.
What ethical principles and professional standards can you apply to guide
your decision-making?
END OF DISCUSSION