AX Dministration AND Nforcement: Agencies Involved in Tax Administration

172
TAX REMEDIES
TAX REMEDIES
TAX ADMINISTRATION AND ENFORCEMENT
IN GENERAL
Agencies involved in tax administration
1. Bureau of Internal Revenue
2. Bureau of Customs
3. Provincial, city and municipal assessors and treasurers
Bureau of Internal revenue
Headed by the Commissioner and to !eputy Commissioners
"ssistant Commissioners and !ivision Chiefs
Re#ional !irectors
Revenue !istrict $%cers
Revenue &nforcement $%cers or &'aminers
POWERS OF THE COMMISSIONER OF INTERNAL REVENUE
General powers of the Commissioner of Internal Revenue
1. Interpret ta' las and to decide ta' cases.
2. $btain information and to summon, e'amine, and ta(e testimony of persons.
3. )a(e assessments and prescribe additional re*uirements for ta'
administration and enforcement.
BERCHOKE CACLES T TAXATION AXATION MABUHAY EDITION 2000
173
TAX REMEDIES
Power to interpret tax laws
+he poer to interpret the provisions of the ,IRC and other ta' las shall be
under the e'clusive and ori#inal -urisdiction of the Commissioner.
+his poer is sub-ect to revie by the .ecretary of /inance.
Jurisdiction of Commissioner re. tax cases
+he Commissioner has the poer to decide0
1. disputed assessments1
2. refunds of the internal revenue ta'es, fees, or other char#es1
3. penalties imposed in relation thereto1 or
2. other matters arisin# under this Code or other las or portions thereof
administered by the Bureau of Internal Revenue.
+his is sub-ect to the e'clusive appellate -urisdiction of the Court of +a'
"ppeals.
Power of the Commissioner to obtain information and to summon
examine and ta!e testimon" of persons
Commissioner has poer to obtain information and to summon, e'amine, and
ta(e testimony of persons in0
1. ascertainin# the correctness of any return1 or
2. in ma(in# a return hen none has been made1 or
3. in determinin# the liability of any person for any internal revenue ta'1
or
2. in collectin# any such liability1 or
3. in evaluatin# ta' compliance.
.uch poer includes0
174
TAX REMEDIES
1. +o e'amine any boo(, paper, record or other data hich may be
relevant or material to such in*uiry.
2. +o obtain on a re#ular basis from an" person other than the person
hose internal revenue ta' liability is sub-ect to audit or investi#ation,
or from any o%ce or o%cer of the national and local #overnments,
#overnment a#encies and instrumentalities any information.
3. +o summon the person liable for ta' or re*uired to 4le a return, or any
o%cer or employee of such persons, or any person havin# possession,
custody, or care of the boo(s of accounts and other accountin#
records, or any other person, to appear before the Commissioner or his
duly authori5ed representative.
2. +o ta(e such testimony of the person concerned, under oath, as may
be relevant or material to such in*uiry.
3. +o cause revenue o%cers and employees to ma(e a canvass from time
to time of any revenue district or re#ion and in*uire after and
concernin# persons therein ho may be liable to pay any internal
revenue ta'.
Power of the Commissioner to ma!e assessments and prescribe additional
re#uirements for tax administration and enforcement
1. &'amination of returns and determination of the ta' due.
2. "ssess the proper ta' on the best evidence obtainable.
3. Conduct inventory6ta(in#, surveillance and to prescribe presumptive #ross
sales and receipts
2. Issue -eopardy assessments and terminate the ta'able period.
3. Prescribe real property values.
7. In*uire into ban( deposit accounts.
8. "ccredit and re#ister ta' a#ents.
9. Prescribe additional procedural or documentary re*uirements.
175
TAX REMEDIES
$xamination of returns and determination of the tax due
"fter the 4lin# of the return, the Commissioner or his duly authori5ed
representative may authori5e the e'amination of any ta'payer and the
assessment of the correct amount of ta'.
Hoever, failure to 4le a return does not prevent the Commissioner from
authori5in# the e'amination of the ta'payer.
"ny return, statement or declaration 4led in any o%ce authori5ed to receive
the same shall not be ithdran.
Hoever, such may be modi4ed, chan#ed or amended ithin three :3; years
from the date of their 4lin# provided no notice for audit or investi#ation for
such return, statement or declaration has been actually served upon the
ta'payer.
Assess the proper tax on the best evidence obtainable
" Commissioner is #iven the poer to assess de4ciency ta' based on the
best evidence obtainable0
1. hen a report re*uired by la as a basis for the assessment of any
national internal revenue ta' shall not be forthcomin# ithin the time
limit 4'ed by la or rules and re#ulations1 or
2. hen there is reason to believe that any such report is false,
incomplete or erroneous.
In Bonifacia %" Po. &. C'A, the .upreme Court upheld the assessment
made by the Commissioner on the basis of the bottles of ine sei5ed and the
sorn statements of the former employees of the .ilver Cup <ine /actory for
failure of the latter=s proprietor to submit the factory=s boo( of accounts and
related records despite repeated demands by the BIR.
Conduct inventor"(ta!ing surveillance and to prescribe presumptive gross
sales and receipts
Commissioner may, at any time durin# the ta'able year, order inventory6
ta(in# of #oods of any ta'payer as a basis for determinin# his internal
revenue ta' liabilities.
17
TAX REMEDIES
Commissioner may also place the business operations of any person, natural
or -uridical, under observation or surveillance if there is reason to believe that
such person is not declarin# his correct income, sales or receipts for internal
revenue ta' purposes.
Commissioner may also prescribe presumptive #ross sales and receipts in the
folloin# instances0
1. <hen it is found that a person has failed to issue receipts and invoices
in violation of the ,IRC1 or
2. <hen there is reason to believe that the boo(s of accounts or other
records do not correctly re>ect the declarations made or to be made in
a return.
?nder the presumptive #ross sales or receipts method, the
Commissioner, after ta(in# into account the sales, receipts, income, or other
ta'able base of other persons en#a#ed in similar situations or circumstances
or after considerin# other relevant information, prescribe a minimum amount
of such #ross receipts, sales, and ta'able base.
.uch amount so prescribed shall be prima facie correct for purposes of
determinin# the internal revenue ta' liabilities of such person.
Issue )eopard" assessments and terminate the taxable period
" -eopardy assessment is one issued by the Commissioner if he believes that
the collection of the ta' is in -eopardy due to delay and other causes.
+he Commissioner may issue a -eopardy assessment hen it comes to his
(noled#e that a ta'payer is0
1. retirin# from business sub-ect to ta'1 or
2. intendin#
a. to leave the Philippines1 or
b. to remove his property therefrom1 or
c. to hide or conceal his property1 or
177
TAX REMEDIES
3. performin# any act tendin# to obstruct the proceedin#s for the
collection of the ta' for the past or current *uarter or year or to render
the same totally or partly ine@ective.
In such cases, the Commissioner may assess and collect the ta'
immediately ithout the usual formalities. "mon# others, the Commissioner
shall0
1. declare the ta' period of such ta'payer terminated any time1 and
2. send the ta'payer a notice of such decision to#ether ith a re*uest for
the immediate payment of the ta' for the period so declared
terminated and the ta' for the precedin# year or *uarter, or such
portion thereof as may be unpaid.
.aid ta'es shall be due and payable immediately and shall be sub-ect
to all the penalties prescribed by la, unless paid ithin the time 4'ed in the
demand made by the Commissioner.
Prescribe real propert" values
Commissioner is empoered to divide the Philippines into di@erent
5ones or areas and to determine the fair mar(et value of real properties
located in each 5one or area after consultation ith private and public
appraisers.
/or purposes of computin# any internal revenue ta', the value of the
property shall be, hichever is hi#her of0
1. the fair mar(et value as determined by the Commissioner1 or
2. the fair mar(et value as shon by the schedule of values of the
Provincial and City "ssessors.
In#uire into ban! deposit accounts
Commissioner may in*uire into the ban( deposits of0
1. a decedent to determine his #ross estate1 and
2. any ta'payer ho has 4led an application for compromise of his ta'
liability by reason of 4nancial incapacity to pay his ta' liability.
17!
TAX REMEDIES
+here is really no con>ict ith R" 12A3 or the Ba on .ecrecy of Ban(
!eposits "ct in case of compromises due to the 4nancial inability to pay of
the ta'payer since an application for compromise shall not be considered
unless and until the ta'payer aives in ritin# his privile#e under R" 12A3.
.uch aiver constitutes the authority of the Commissioner to in*uire into the
ban( deposits of the ta'payer.
RULE ON ESTOPPEL AND SOME COMPLIANCE RE"UIREMENTS
Rule on no estoppel against the government
It is a settled rule of la that in the performance of its #overnmental
functions, the .tate cannot be estopped by the ne#lect of its a#ents and
o%cers. ,ohere is this more true than in the 4eld of ta'ation.
CCommissioner v. Procter and Gamble Co., D.R. ,o. 77939, "pril 13,
1E99F
.imilarly, estoppel does not apply to deprive the #overnment of its ri#ht to
raise defenses even if these defenses are bein# raised for the 4rst time on
appeal. CCommissioner v. Procter and Gamble Co., D.R. ,o. 77939, "pril
13, 1E99F Hoever, this as reversed in a subse*uent resolution issued by
the .upreme Court in the same case. CCommissioner v. Procter and
Gamble Co., D.R. ,o. 77939, !ecember 2, 1EE1, Resolution;F
$stoppel against the taxpa"er
<hile the principle of estoppel may not be invo(ed a#ainst the #overnment,
this is not necessarily true in the case of the ta'payer.
%ome compliance re#uirements
"ll corporations, companies, partnerships or persons re*uired by la to pay
internal revenue ta'es shall (eep a -ournal and a led#er or their e*uivalents.
+hose earnin# belo P3A,AAA *uarterly may adopt a simpli4ed set of
boo((eepin# records.
+hose earnin# more than P13A,AAA *uarterly shall have their boo(s of
accounts audited and e'amined yearly by independent certi4ed public
accountants.
17#
TAX REMEDIES
+hey have option to (eep subsidiary boo(s as the needs of their business
may re*uire.
"ll boo(s or records must be in a native lan#ua#e, &n#lish or .panish, If not,
translate to these lan#ua#es.
"ll the boo(s of accounts, includin# the subsidiary boo(s and other
accountin# records, shall be preserved for a period be#innin# from the last
entry in such boo( until the last day prescribed by .ection 2A3 ithin hich
the Commissioner is authori5ed to ma(e an assessment.
.aid boo(s and records may be e'amined only once in a ta'able year, ith
some e'ceptions.
ASSESSMENT OF INTERNAL REVENUE TAXES
'ax assessment
"n assessment is the o%cial action of an administrative o%cer in determinin#
the amount of ta' due from a ta'payer, or it may be a notice to the e@ect
that the amount therein stated is due from a ta'payer as a ta' ith a
demand for payment of the ta' or de4ciency stated therein.
"n assessment is a 4ndin# by the ta'in# a#ency that the ta'payer has not
paid his current ta'es. It is also a notice to the e@ect that the amount stated
therein is due as ta' and is a demand for payment thereof.
+he Bocal Dovernment Code de4nes assessment as the act or process of
determinin# the value of a property or portion thereof sub-ect to ta',
includin# the discovery, listin#, classi4cation, and appraisal of properties.
+he BIR assessment is usually embodied in a demand letter or in a BIR form
(non as the assessment notice.
*etter of authorit"
+his is the authority issued by the Revenue Re#ional !irector and #iven to a
revenue o%cer assi#ned to perform assessment functions to e'amine
ta'payers ithin the -urisdiction of the district in order to collect the correct
amount of ta', or to recommend the assessment of any de4ciency ta' due in
1!0
TAX REMEDIES
the same manner that the said acts could have been performed by the
Revenue Re#ional !irector himself.
+inds of assessment
1. .elf assessment
2. !e4ciency assessment
3. Ille#al and void assessment
2. &rroneous assessment
%elf assessment
$ne in hich the ta' is assessed by the ta'payer himself.
+he amount of ta' is re>ected in the ta' return that is 4led by him and the
ta' assessed is paid at the time he 4les the return. +his system of 4lin# of
return and payment of ta' is (non as the Gpay6as6you64leH system.
+a' so assessed is (non as self assessed ta'.
,e-cienc" assessment
+his is an assessment made by the ta' assessor himself hereby the correct
amount of the ta' is determined after an e'amination or investi#ation is
conducted.
+he liability is determined and is thereafter assessed for the folloin#
reasons0
1. +he amount ascertained e'ceeds that hich is shon as the ta' by the
ta'payer in his return1
2. ,o amount of ta' is shon in the return1 or
3. +he ta'payer did not 4le any return at all.
Illegal and void assessment
+his is an assessment herein the ta' assessor has no poer to act at all.
1!1
TAX REMEDIES
$rroneous assessment
+his is an assessment herein the assessor has the poer to assess but errs
in the e'ercise of the poer.
Principles governing tax assessments
1. "ssessments are prima facie presumed correct and made in #ood faith.
2. "ssessments should not be based on presumptions but on actual facts.
3. "ssessment is discretionary on the Commissioner ho cannot therefore be
compelled to assess a ta' hen he or she believes that there is no basis for
such assessment.
2. +he authority vested in the Commissioner to assess ta'es may be dele#ated.
Hoever, it is settled that the poer to ma(e -nal assessments cannot be
dele#ated.
3. "ssessments must be directed to the ri#ht party.
Investigative power of the Commissioner. factual basis of assessments
Inasmuch as assessments are based on facts, the Commissioner is #iven the
poer to obtain information hich serves as basis for said assessments, and
is also #iven the means to secure them. C.ee poers of the CommissionerF
/eans emplo"ed in the assessment of taxes
1. &'amination of returns and determination of the ta' due.
2. "ssess the proper ta' on the best evidence obtainable.
3. Conduct inventory6ta(in#, surveillance and to prescribe presumptive #ross
sales and receipts
2. Issue -eopardy assessments and terminate the ta'able period.
3. Prescribe real property values.
7. In*uire into ban( deposit accounts.
1!2
TAX REMEDIES
8. "ccredit and re#ister ta' a#ents.
9. Prescribe additional procedural or documentary re*uirements.
'he net worth method
" very e@ective method of determinin# ta'able income and the de4ciency
income ta' due thereon is the net orth method or hat is otherise (non
as the inventory method of income tax verifcation.
+he method is an e'tension of the accountin# principle0 "ssets minus
liabilities e*uals net orth. +he ta'payer=s net orth is determined both at
the be#innin# and at the end of the same ta'able year. +he increase or
decrease in net orth is ad-usted by addin# all non6deductible items and
subtractin# therefrom non6ta'able receipts.
+he le#al basis for the use of the net orth method is the authority of the
Commissioner to adopt an accountin# method that clearly re>ects the
income.
Conditions for the use of the net worth method
1. +hat the ta'payer=s boo(s do not clearly re>ect his income or the ta'payer
has no boo(s, or if he has boo(s, he refuses to produce them.
2. +hat there is evidence of a possible source or sources of income to account
for the increases in net orth or the e'penditures.
3. +hat there is a 4'ed startin# point or openin# net orth.
2. +hat the circumstances are such that the method does re>ect the ta'payer=s
income ith reasonable accuracy and certainty and proper and -ust additions
of personal e'penses and other non6deductible e'penditures ere made and
correct, fair and e*uitable credit ad-ustments ere #iven by ay of
eliminatin# non6ta'able items.
Re#uisites of a valid assessment
1. Post6reportin# notice or notice for an informal conference after the ta' audit.
2. Pre6assessment notice sent to the ta'payer, e'cept in several instances.
1!3
TAX REMEDIES
3. +he ta'payers shall be informed in ritin# of the la and the facts upon
hich the assessment is made.
2. "ssessment must be made ithin the prescriptive period.
Pre(assessment notice
+his is a notice in ritin# hich is sent to the ta'payer at the address
indicated in his return or at his last (non address as stated in his notice of
chan#e of address if the Commissioner or his duly authori5ed representative
4nds that ta'es should be assessed a#ainst the ta'payer. "s such, the
ta'payer is 4rst noti4ed of said 4ndin#s before an assessment is issued.
1!4
TAX REMEDIES
0hen pre(assessment notice not re#uired
1. <hen the 4ndin# for any de4ciency ta' is the result of a mathematical error
in the computation of the ta' as appearin# on the face of the return1
2. <hen a discrepancy has been determined beteen the ta' ithheld and the
amount actually remitted by the ithholdin# a#ent1
3. <hen a ta'payer ho opted to claim a refund or ta' credit of e'cess
creditable ithholdin# ta' for a ta'able period as determined to have
carried over and automatically applied the same amount claimed a#ainst the
estimated ta' liabilities for the ta'able *uarter or *uarters of the succeedin#
ta'able year1
2. <hen the e'cise ta' due on e'cisable articles has not been paid1 or
3. <hen an article locally purchased or imported by an e'empt person, such as,
but not limited to, vehicles, capital e*uipment, machineries and spare parts,
has been sold, traded or transferred to non6e'empt persons.
,e-cienc" v. delin#uenc"
!e4ciency is the amount by hich the ta' due e'ceeds the sum of the
amount of the ta' shon on a ta'payer=s return plus amounts previously
assessed or collected as de4ciency, less any credits, refunds, or other
payments due the ta'payer, i.e. the amount a ta'payer is de4cient in his ta'
payments.
!elin*uency is the state of a person upon hom the personal obli#ation to
pay the ta' has been 4'ed by laful assessment and he thereafter fails to
pay the ta' ithin the time prescribed by la.
PERIOD OF LIMITATION UPON ASSESSMENT AND COLLECTION
ASSESSMENT
General Rule
1!5
TAX REMEDIES
"ssessment shall be made ithin three :3; years after the last day prescribed
by la for the 4lin# of the return or from the day the return as 4led in case
the return as 4led beyond the period prescribed by la.
$xceptions
1. "ssessment may be made ithin ten :1A; years after the discovery of the
falsity, fraud or omission in the folloin# cases0
a. in case of a false or fraudulent return ith intent to evade ta'1 or
b. failure to 4le a return.
2. In case the Commissioner and the ta'payer a#ree in ritin# to a di@erent
period before the e'piration of the ori#inal prescriptive period. +he period so
a#reed upon may be e'tended by subse*uent ritten a#reement before the
e'piration of the period previously a#reed upon.
0hen is assessment deemed made1
It is not the issue date of the demand andIor notice that is the rec(onin#
point in prescription but rather it is the date hen the demand letter is
released, mailed or sent to the ta'payer that constitutes an actual
assessment.
+he .upreme Court held in a case that so lon# as the release thereof is
e@ected before prescription sets in, the assessment is deemed made on time
even thou#h the same is actually received by the ta'payer after the
e'piration of the prescription period. CBasilan $states Inc. v.
Commissioner, 21 .CR" 18F +he la does not re*uire that the demand or
notice be received ithin the prescriptive period.
Important considerations on prescription of the government2s right to
assess taxes
1. !ate of 4lin# of ta' returns
2. &@ect of 4lin# of an amended return
3. &@ect of the 4lin# of a ron# return :as if no return 4led, thus, 1A6year
prescriptive period;
1!
TAX REMEDIES
2. Period applicable hen the la does not re*uire the 4lin# of a return :1A6year
prescriptive period unless ta'payer 4les a return to enable him to avail of the
bene4t of the three6year prescriptive period;
1!7
TAX REMEDIES
Amended return
+he .upreme Court held that here the amended return is substantially
di@erent from the ori#inal return, the ri#ht of the Bureau of Internal Revenue
to assess the ta' is counted from the 4lin# of the amended return.
CCommisioner v. Phoenix Assurance Co. *td., B61E128, )ay 2A, 1E73F
3alse v. fraudulent return
!istinction must be made beteen false returns due to mista(es,
carelessness or i#norance and fraudulent returns ith intent to evade ta'es.
+he fraud contemplated by la is actual and not constructive. It must amount
to intentional ron# doin# ith the sole ob-ect of avoidin# the ta'. It
necessarily follos that a mere mista(e cannot be considered as fraudulent
intent. +hus, if both the petitioner and the respondent Commissioner
committed mista(es in ma(in# the entries in the returns and the assessment
respectively under the inventory method of determinin# ta' liability, it ould
be unfair to treat the mista(es of the petitioner as tainted ith fraud and
those of the respondent=s ta' de4ciency for each year from 1E27 to 1E31,
inclusive. CA4nar v. Commissioner, B62A37E, "u#ust 23, 1E82F
3raud
/raud is a *uestion of fact and the circumstances constitutin# fraud must be
alle#ed and proved.
/raud must be a product of a deliberate intent to evade ta'es. Hence, mere
underdeclaration does not necessarily imply fraud.
/raud must be actual, not constructive. It must amount to intentional ron#
doin# ith the sole purpose of avoidin# the ta'. " mere mista(e cannot be
considered as fraudulent intent.
0aiver of the statute of limitations
.ection 222:b; of the ,IRC allos the ta'payer and the #overnment to e'tend
by mutual a#reement the prescriptive periods for the assessment and
collection of ta'es.
.uch a#reement must be in ritin#.
1!!
TAX REMEDIES
+he aiver must be e'ecuted by the parties before the lapse of the three6
year prescriptive period. " aiver is ine@ectual if it is e'ecuted beyond the
ori#inal prescriptive period.
+he e'tended period may a#ain be e'tended provided the ne period be
a#reed upon before the lapse of the e'tended period.
Procedure for waiver of prescriptive period under R/5 67(87
1. <aiver must be in prescribed form
2. <aiver must be si#ned by the ta'payer himself or his authori5ed
representative
3. +he Commissioner or his duly authori5ed a#ent must si#n the aiver
indicatin# the BIR=s acceptance of the aiver
COLLECTION
General Rule
Collection may be instituted ithin 4ve :3; years folloin# the assessment of
the ta'. C.ection 222JF
$xception
" proceedin# in court for collection, ithout assessment, may be instituted
ithin ten :1A; years after the discovery of falsity, fraud, or omission in the
case of a false or fraudulent return ith intent to evade ta' or failure to 4le a
return. C.ection 222:a;, ,IRCF
0hen does the three("ear prescriptive period start to run1
+he period of limitation to collect is counted from the assessment of the ta'.
"ssessment is deemed made at the time the demand or assessment notice
has been sent, released or mailed to the ta'payer.
+he actual sendin# or release to the ta'payer of the assessment notice or
demand is, therefore, necessary in order to determine the actual date hen
the ta' bein# collected as assessed.
1!#
TAX REMEDIES
0hen is the tax deemed collected for purposes of the prescriptive period1
Collection throu#h summary remedies is e@ectuated by summary methods
hen the #overnment avails of the distraint and levy procedure.
If collection is to be e@ected throu#h -udicial remedies, the collection of the
ta' is be#un by the 4lin# of the complaint ith the proper court.
Hoever, if the decision of the Commissioner on a protested assessment is
appealed to the Court of +a' "ppeals, the collection of the ta' is considered
be#un hen the #overnment 4les its anser to the ta'payer=s petition for
revie.
/a" there be a )udicial action to collect a tax liabilit" even if there is no
previous assessment1
Kes. " proceedin# in court for collection L ithout assessment L may be
instituted ithin ten years after the discovery of falsity, fraud, or omission in
the case of a false or fraudulent return ith intent to evade ta' or failure to
4le a return. C.ection 222:a;, ,IRCF
Prescription of the government2s right to recover an erroneousl" refunded
tax
.ame as the three6year prescriptive period for ma(in# assessments.
CGuagua $lectric Co. Inc. v. Commissioner, 1E .CR" 8EAF
%uspension of the running of the %tatute of *imitations
+he runnin# of the .tatute of Bimitations provided in .ections 2A3 and 222 on
the ma(in# of assessment and the be#innin# of distraint or levy or a
proceedin# in court for collection, in respect of any de4ciency, shall be
suspended under any of the folloin# circumstances0
1. <hen the Commissioner is prohibited from ma(in# the assessment or
be#innin# the distraint or levy or proceedin# in court and for si'ty :7A;
days thereafter1
2. <hen the ta'payer re*uests for a reinvesti#ation hich is #ranted by
the Commissioner1
1#0
TAX REMEDIES
3. <hen the ta'payer cannot be located in the address #iven by him in
the return 4led upon hich a ta' is bein# assessed or collected, unless
the ta'payer has informed the Commissioner of any chan#e in address1
2. <hen the arrant of distraint or levy is duly served upon the ta'payer,
his authori5ed representative, or a member of his household ith
su%cient discretion, and no property could be located1 and
3. <hen the ta'payer is out of the Philippines.
$xamples when the Commissioner is prohibited from assessing or
collecting the tax
1. +he 4lin# of a petition for revie in the Court of +a' "ppeals from the decision
of the Commissioner on a protested assessment interrupts the runnin# of the
prescriptive period for collection. CRepublic v. +er 9 Co. *td., 19 .CR"
2A8F
2. <hen the Court of +a' "ppeals en-oins the collection of the ta' under .ection
11 of R" 1123.
Re#uest for reinvestigation which should be granted or acted upon b" the
Commissioner
It should be emphasi5ed that a mere re*uest for reinvesti#ation ithout any
correspondin# action on the part of the Commissioner does not interrupt the
runnin# of the prescriptive period.
0ill an extra)udicial demand on the taxpa"er interrupt prescription1
,o. .ection 22 of the ,IRC enumerates the instances hen prescription is
interrupted. +he servin# of an e'tra-udicial demand is not one of them.
REMEDIES OF THE TAXPAYER
IN GENERAL
Remedies of taxpa"er
1. Remedy before payment of ta'0 Protest of assessment
1#1
TAX REMEDIES
2. Remedy after payment of ta'0 Claim for ta' refund or credit
1#2
TAX REMEDIES
PROTEST OF ASSESSMENT
Procedure
+a'payer may protest administratively the assessment by 4lin# a re*uest for
reconsideration or reinvesti#ation ithin thirty :3A; days from receipt of the
assessment.
<ithin si'ty :7A; days from the 4lin# of the protest, ta'payer shall submit all
relevant supportin# documents, otherise the assessment becomes 4nal.
If the protest is denied in hole or in part, or is not acted upon ithin one
hundred ei#hty :19A; days from submission of documents, the ta'payer
adversely a@ected by the decision or inaction may appeal to the Court of +a'
"ppeals ithin thirty :3A; days from receipt of the decision or from the lapse
of the one hundred ei#hty :19A;6day period1 otherise, the decision shall
become 4nal, e'ecutory and demandable. C.ection 229, ,IRCF
!ecision of the Court of +a' "ppeals may be appealed to the Court of "ppeals
throu#h a veri4ed petition for revie ithin 4fteen :13; days from receipt of
decision of the C+". +his may be e'tended for another 4fteen :13; days upon
proper motion and the payment of the full amount of the doc(et fee before
the e'piration of the re#lementary period. ,o further e'tension shall be
#ranted e'cept for the most compellin# reason and in no case to e'ceed 13
days. C.ection 2, Rule 23, Rules of CourtF
!ecision of the Court of "ppeals is appealable to the .upreme Court throu#h
a petition for revie by certiorari ithin 4fteen :13; days from receipt of the
C" decision.
,isputed assessment
+his is an assessment hich has been protested by the ta'payer. Its e@ect is
to suspend the prescriptive period to collect the ta' due.
$nly disputed assessments are appealable to the Court of +a' "ppeals. "
ta'payer ho received an assessment and ho did not protest such
assessment cannot 4le an appeal to the Court of +a' "ppeals, as the
assessment is not disputed.
,ecisions of the Regional ,irector
1#3
TAX REMEDIES
It should be noted that the Re#ional !irector may also render decisions on
protests.
Revenue Re#ulations 12693 authori5es appeals to the Court of +a' "ppeals
from the decisions of the Re#ional !irectors on administrative protest ithin
the same thirty6day period. .ection 8 of Republic "ct ,o. 1123, hoever,
mentions only decisions of the Commissioner.
Be that as it may, it is very ell ithin the perimeter of correct procedure if
the ta'payer, instead of #oin# directly to the Court of +a' "ppeals, appeals
the Re#ional !irector=s decision to the Commissioner considerin# that, after
all, it is the Commissioner ho has the 4nal authority to decide
administrative protests.
'wo wa"s of protesting administrativel"
1. R$%&$'( )*+ +$,*-'./$+0(.*-0 +his refers to a plea for re6evaluation of an
assessment on the basis of e'istin# records ithout need of additional
evidence. It may involve a *uestion of fact or la or both.
2. R$%&$'( )*+ +$.-1$'(.20(.*-0 +his refers to a plea for re6evaluation of an
assessment on the basis of nely6discovered or additional evidence. It may
also involve a *uestion of fact or la or both.
$:ect of failure of the taxpa"er to -le an administrative protest or to
appeal the Commissioner2s decision to the Court of 'ax Appeals
+he assessment becomes 4nal and unappealable. "s such, it ma(es the
assessed ta' collectible.
CLAIMS FOR REFUND AND CREDIT OF TAXES
Refund v. credit
+hese are remedies of the ta'payer after payment of the ta'.
Both are modes of recoverin# ta'es hich are either erroneously or ille#ally
paid to the #overnment.
+a' refund ta(es place hen there is actually a reimbursement of the ta'. In
ta' credit, the #overnment applies the amount determined to be
1#4
TAX REMEDIES
reimbursable, after proper veri4cation, a#ainst any sum that may be due and
collectible from the ta'payer.
0hen ma" claim for refund or credit be -led1
1. <hen ta' has been erroneously or ille#ally assessed or collected.
2. <hen any penalty is claimed to have been collected ithout authority.
3. <hen any sum is alle#ed to have been e'cessively or in any manner
ron#fully collected. C.ection 22E, ,IRCF
2. Commissioner is also #iven the authority to refund the value of internal
revenue stamps hen they are returned in #ood condition by the purchaser
and, in his discretion, redeem or chan#e unused stamps that have been
rendered un4t for use and refund their value upon proof of destruction.
C.ection 2A2, ,IRCF
;ature of erroneousl" paid or illegall" assessed or collected taxes
+here is erroneous payment of ta'es hen a ta'payer pays under a mista(e
of fact as for instance in a case here he is not aare of an e'istin#
e'emption in his favor at the time the payment as made. .uch payments
are held to be not voluntary and, therefore, can be recovered or refunded.
+a'es are ille#ally collected hen payments are made under duress.
Re#uisites for refund or credit
1. " ritten claim for refund or credit must 4rst be 4led ith the Commissioner1
2. +he claim for refund or credit must be a cate#orical demand for
reimbursement1 and
3. It must be 4led ithin to years from the date of payment of the ta' or
penalty re#ardless of any supervenin# cause that may arise after payment.
N*($0 Payment under protest is not re*uired. .ection 22E of the ,IRC provides that
a suit or proceedin# for refund or credit may be maintained hether or not
such ta', penalty, or sum has been paid under protest or duress.
1#5
TAX REMEDIES
0hen pa"ment under protest re#uired
1. In real property protest cases
2. Protest in customs cases
0h" is a written claim for refund necessar"1
1. +o a@ord the Commissioner an opportunity to correct the action of
subordinate o%cers.
2. +o notify the #overnment that the ta'es sou#ht to be refunded are under
*uestion and that, therefore, such notice should be borne in mind in
estimatin# the revenue available for e'penditure.
'wo things to be established before refund or credit is granted
1. +here as an actual collection and receipt by the #overnment of the ta'
sou#ht to be recovered. +his re*uires factual proof.
2. +here is le#al basis for #rantin# the refund or credit.
Procedure for refund or credit
1. /ile claim in ritin# ith the Commissioner. +his is a condition precedent
before one can 4le action ith the Court of +a' "ppeals for refund or credit.
2. If claim is denied or is not acted upon by the Commissioner, the ta'payer
must 4le an appeal to the Court of +a' "ppeals ithin thirty :3A; days after
receipt of the decision of the Commissioner.
3. Both the ritten claim and the appeal to the Court of +a' "ppeals must be
4led ithin the to6year prescriptive period.
'he two("ear prescriptive period for overpaid #uarterl" corporate income
tax
In the case of an overpaid *uarterly income ta' for corporations, the
prescriptive period of to years ithin hich a claim for refund should be
4led is counted, not from the time the corporation 4les its *uarterly income
ta' return and pays the ta' thereon, but from the date the -nal
ad)ustment return is -led after the end of the taxable "ear.
CCommissioner v. '/< %ales Inc., 2A3 .CR" 192F
1#
TAX REMEDIES
Prescriptive period for taxes withheld
In the case of ta'es ithheld under the ithholdin# ta' system, the to6year
prescriptive period for refunds is counted not from the date the ta' is
ithheld and remitted to the Bureau of Internal Revenue but from the end
of the taxable "ear.
'axes pa"able in installments
In cases of ta'es hich are payable in installments, the to6year prescriptive
period is counted from the payment of the last installment. CCommissioner
v. Palanca, 19 .CR" 2E7F
%uspension of the two("ear prescriptive period
+he period for claimin# claims for refund is suspended provided to
conditions are present0
1. +here is a pendin# liti#ation beteen the to parties, i.e. the
#overnment and the ta'payer as to the proper ta' to be paid and of
the proper interpretation of the ta'payer=s charter in relation to the
disputed ta'1 and
2. +he Commissioner in that disputed case a#reed to abide by the
decision of the .upreme Court as to the collection of the ta' relative
thereto. CPana" $lectric Co. v. Collector B61A382, )ay 29, 1E39F
Refund without claim
+he Commissioner may, even ithout a ritten claim therefor, refund or
credit any ta', here on the face of the return upon hich payment as
made, such payment appears clearly to have been erroneously made.
3orfeiture of refund and tax credit
" refund chec( or arrant hich shall remain unclaimed or uncashed ithin
4ve :3; years from the date said arrant or chec( as mailed or delivered
shall be forfeited in favor of the Dovernment and the amount thereof shall
revert to the #eneral fund.
1#7
TAX REMEDIES
" ta' credit certi4cate hich shall remain unutili5ed after 4ve :3; years from
the date of issue shall, unless revalidated, be considered invalid.
$#uitable recoupment
It is a principle hich allos a ta'payer hose claim for refund has been
barred due to prescription to recover said ta' by settin# o@ the prescribed
refund a#ainst a ta' that may be due and collectible from him.
+his rule is not applicable in the Philippine -urisdiction.
*egal capacit" of withholding agents to claim tax refund
Corporate ithholdin# a#ents in the Philippines of non6resident forei#n
corporations are entitled to claim the refund of e'cess ithholdin# ta' paid
on income of said corporations in the Philippines.
+he .upreme Court ruled that a ithholdin# a#ent should be alloed to claim
the ta' refund because, under the la, it is the one ho is held liable for any
violation of the ithholdin# ta' la should such a violation occur.
CCommissioner v. 0ander Phils. Inc., D.R. ,o. 79389, "pril 13, 1E99F
Interest on tax refunds
+he rule on this matter is that the #overnment cannot be re*uired to pay
interest on ta'es refunded to the ta'payer. C%weene" v. Commissioner, B6
12189, "u#ust 21, 1E3EF
&'ceptions
1. <hen the Commissioner acted ith patent arbitrariness. "rbitrariness
presupposes ine'cusable or obstinate disre#ard of le#al provisions.
CCommissioner v. &ictorias /illing Corp. et.al., B61E778,
,ovember 2E, 1E77F
2. In cases of refunds or credits made after three months from "pril 13 to
employees for any e'cess of the ta'es ithheld, the rate of hich is si'
percent :7M; per annum. C.ection 8EJ, ,IRCF
COURT OF TAX APPEALS
1#!
TAX REMEDIES
*aw creating the C'A
Republic "ct ,o. 1123
0h" was the C'A created1
1. +o have a centrali5ed body ell6versed in ta' matters L a re#ular court
formin# part of the -udicial system hich could e'clusively hear and
determine ta' cases.
2. +o prevent delay in the disposition of ta' cases in vie of the bac(lo# of civil
and criminal cases in the re#ular courts. C=rsal v. Court of 'ax Appeals,
1A1 Phil 2AEF
;ature of the C'A
1. It is a -udicial, not merely an administrative, body.
2. It is a court of special -urisdiction and, as such, can only ta(e co#ni5ance of
such matters as are clearly ithin its -urisdiction.
3. It is not #overned strictly by the technical rules of evidence.
5rgani4ation #uorum and disposition of cases b" the C'A
+he C+" is composed of a Presidin# Nud#e and to "ssociate Nud#es, each of
hom is appointed by the President from a list of nominees prepared by the
Nudicial and Bar Council. .uch appointments need no con4rmation.
"ny to -ud#es of the C+" shall constitute a *uorum and the concurrence of
to -ud#es shall be necessary to promul#ate any decision thereof. C.ections 1
and 2, R" 1123F
Cases brou#ht before the C+" shall be decided ithin thirty :3A; days after
the submission thereof for decision, hich shall be in ritin#, statin# clearly
and distinctly the facts and the la on hich they are based, and si#ned by
the -ud#es ho concurred thereith. C.ection 12, R" 1123F. +his re*uirement,
hoever, is merely directory.
Jurisdiction of the C'A
1##
TAX REMEDIES
C+" shall e'ercises e'clusive appellate -urisdiction to revie by appeal the
folloin#0
1. !ecisions of the Commissioner of Internal Revenue involvin# disputed
assessments1 refunds of internal revenue ta'es, fees or other char#es1
penalties imposed in relation thereto1 or other matters arisin# under
the ,IRC or other la or part of la administered by the Bureau of
Internal Revenue.
2. !ecisions of the Commissioner of Customs in cases involvin# liability
for customs duties, fees or other money char#es1 sei5ure, detention or
release of property a@ected1 4nes, forfeitures, or other penalties
imposed in relation thereto1 or other matters arisin# under the
Customs Ba or other la or part of la administered by the Bureau of
Customs. C.ection 8, R" 1123F
Nurisdiction over decisions of the Bocal Board of "ssessment "ppeals is no
lod#ed ith the Central Board of "ssessment "ppeals.
;ecessit" of decisions in order to vest the C'A with )urisdiction
!ecisions of either the Commissioner of Internal Revenue or the
Commissioner of Customs is of the essence in appeal of cases to the C+" for
it is a'iomatic in ta'ation that mere assessments of the Commissioner are
not appealable to the C+". It is settled that assessments are not decisions of
the Commissioner.
In a case, the .upreme Court held that the ord GdecisionH in .ection 8 of R"
1123 means decisions of the Commissioner on the protest of the ta'payer
a#ainst the assessments. !e4nitely, the ord does not si#nify the
assessment itself. CCommissioner v. &illa, B623E99, Nanuary 2A, 1E79F
In much the same ay that mere assessments are not appealable, rulin#s of
the Commissioner are not li(eise appealable to the C+".
Compromise penalties and the C'A
Collection of compromise penalties comes ithin the scope of .ection 8 of R"
1123 hich spea(s of Gpenalties imposed in relation thereto1H and that
therefore it follos that the C+" has -urisdiction thereon. C=.%. *ife
Insurance Co. v. Commissioner, C+" Case ,o. 1278, !ecember 2E, 1E72F
200
TAX REMEDIES
0hat decision is appealable1
<hen it constitutes the 4nal action ta(en by him or his authori5ed deputies
ith respect to the ta'payer=s liability.
+he appealable decision is that letter of denial here the Commissioner not
only demanded payment of the amount assessed but herein he also #ave
the arnin# that in the even the ta'payer failed to pay the same, the
Commissioner ould be constrained to enforce the collection thereof by
means of the remedies prescribed by la. C%urigao $lectric Co. v. Court of
'ax Appeals, 38 .CR" 323F
Issuance of a arrant of distraint or levy does not constitute a denial of the
protest or a 4nal action by the Commission on the protest. CCommissioner
v. =nion %hipping, 93 .CR" 328F
Hoever, the 4lin# of a -udicial action for collection, i.e. criminal and civil
action durin# the pendency of an administrative protest, constitutes a denial
of the protest. CCommissioner v. =nion %hippingF In such a situation, the
ta'payer may 4le an appeal ith the Court of +a' "ppeals.
201
TAX REMEDIES
0hose decisions are appealable1
!ecisions of the Commissioner of Internal Revenue are by statutory provision
appealable to the C+" but it appears that under Revenue Re#ulations 12693,
decisions of the Re#ional !irector of a revenue re#ion in the BIR are also
appealable.
+here is a court rulin# to the e@ect that the decisions of Re#ional !irectors
may be appealed to the C+". C3ortale4 Jr. v. Collector, Resolution, C+"
Case ,o. 1328, !ecember 22, 1E72F
"ppeals in customs cases seem to be limited only to decisions of the
Commissioner of Customs.
0ho ma" appeal to the C'A1
"ny person, association or corporation a@ected by a decision of the
Commissioner of Internal Revenue or the Collector of Customs or any
Provincial or City Board of "ssessment "ppeals may 4le an appeal in the C+".
Collection case in R'C while appeal pending in the Court of 'ax Appeals
If the Bureau of Internal Revenue, durin# the pendency of the appeal in the
Court of +a' "ppeals, 4les a civil action in the R+C for collection of the ta'
liability, the ta'payer may 4le a motion in the R+C for the dismissal of the
case on the #round that there is no basis for collectin# the ta' due here the
assessment thereof is still under dispute in the Court of +a' "ppeals.
'ax collection not suspended during appeal
"n appeal to the C+" from a decision of the Commissioner shall not suspend
the payment or collection of the ta' liability of the ta'payer unless a motion
to that e@ect shall have been presented to the C+" and #ranted by it on the
#round that such collection -eopardi5es the interest of the #overnment andIor
the ta'payer.
;o in)unction to restrain tax collection
G$-$+03 R&3$0 ,o court shall have the authority to #rant an in-unction to
restrain the collection of any national internal revenue ta', fee or char#e
imposed by the ,IRC. C.ection 219, ,IRCF
202
TAX REMEDIES
E4,$5(.*-0 C+" may suspend or restrain the collection of the ta' hen, in its
opinion, the collection of the ta' may -eopardi5e the interest of the
#overnment andIor the ta'payer. C.ection 11, R" 1123F
Re#uisites for in)unction
1. +hat the collection of the ta' may -eopardi5e the interest of the #overnment
andIor the ta'payer.
2. +hat the ta'payer is illin# to deposit the amount e*ual to the ta'es
assessed or to 4le a bond amountin# to not more than tice the value of the
ta' bein# assessed.
3. +hat the C+" may issue an in-unction only in the e'ercise of its appellate
-urisdiction.
'he thirt"(da" prescriptive period of appeal
+he thirty6day prescriptive period starts to run from the date the ta'payer
receives the appealable decision of the Commissioner.
+he 3A6day period is -urisdictional. +he failure of the ta'payer to appeal from
a decision of the Commissioner on time renders the assessment 4nal,
e'ecutory and demandable.
Re*uests or motions 4led by the ta'payer ith the BIR for the reconsideration
of the Commissioner=s decision operate to suspend the runnin# of the
prescriptive period of appeal to the C+".
Hoever, mere reiterations of previous petitions for reconsideration do not
suspend the runnin# of the prescriptive period. Pro-forma motions, hich do
not raise ne issues, ill not suspend the period.
;on(extendibilit" of the >7(da" period through tax refunds
<here the assessment of a disputed ta' has become 4nal and e'ecutory on
account of the failure of the ta'payer to appeal ithin the re#lementary 3A6
day period, the assessment may no lon#er be disputed throu#h the simple
e'pedient of payin# the protested ta' and then by subse*uently claimin# it
as a refund ithin the period of to years from date of payment.
203
TAX REMEDIES
Interlocutor" orders
Interlocutory orders of the C+" are not appealable.
Appeal from decisions of the C'A
$ne motion for reconsideration may be alloed for decisions of the C+".
!ecisions of the C+" are appealed to the Court of "ppeals throu#h a veri4ed
petition for revie. C.ections 1 and 3, Rule 23, Rules of CourtF
"ppeals period is 4fteen :13; days from receipt of the decision or -ud#ment.
+he Court of "ppeals may #rant an additional period of 4fteen :13; days only
ithin hich to the 4le the petition for revie. ,o further e'tension shall be
#ranted e'cept for the most compellin# reasons and in no case to e'ceed
4fteen :13; days. C.ection 2, Rule 23, Rules of CourtF
3indings of fact of C'A not reviewable
/indin#s of fact of the C+", hen supported by substantial evidence, is 4nal.
,amages in C'A proceedings
.ection 17 of R" 1123 provides that where an appeal is found to be frivolous
or that proceedings have been instituted merely for delay, the C! may
assess damages against the appellant in an amount not exceeding P"##
which shall be collected in the same manner as fne or other penalties
authori$ed by law.
REMEDIES OF THE GOVERNMENT
IN GENERAL
Remedies of the government
1. +a' lien
2. Compromise
3. !istraint
204
TAX REMEDIES
2. Bevy
3. Civil action
7. Criminal action
8. /orfeiture
9. .uspension of business operations in violations of O"+
E. &nforcement of administrative 4ne
TAX LIEN
'ax lien
<hen a ta'payer ne#lects or refuses to pay his internal revenue ta' liability
after demand, the amount so demanded shall be a lien in favor of the
#overnment from the time the assessment as made by the Commissioner
until paid ith interest, penalties, and costs that may accrue in addition
thereto, upon all property and ri#hts to property belon#in# to the ta'payer.
C.ection 21E, ,IRCF
Bien shall not be valid a#ainst any mort#a#ee, purchaser or -ud#ment creditor
until notice of such lien shall be 4led by the Commissioner in the Re#ister of
!eeds of the province or city here the property of the ta'payer is located.
COMPROMISE
Compromise v. abatement
?nli(e compromise hich involves a reduction of the ta'payer=s liability,
abatement of ta' means that the entire ta' liability of the ta'payer is
cancelled.
Compromise and abatement have di@erent #rounds.
Grounds for compromise
1. " reasonable doubt as to the validity of the claim a#ainst the ta'payer e'ists1
or
205
TAX REMEDIES
2. +he 4nancial position of the ta'payer demonstrates a clear inability to pay
the assessed ta'.
Grounds for abatement
1. <hen the ta' or any portion thereof appears to be un-ustly or e'cessively
assessed.
2. <hen the administration and collection costs involved do not -ustify the
collection of the amount due.
Compromise of criminal violations
"ll criminal violations may be compromised e'cept0
1. those already 4led in court1 and
2. those involvin# fraud.
*imitations on compromise
/or cases of 4nancial incapacity, a minimum compromise rate e*uivalent to
1AM of the basic assessed ta'1 and
/or other cases, a minimum compromise rate e*uivalent to 2AM of the basic
assessed ta'.
<here the basic ta' e'ceeds one million pesos :P1,AAA,AAA; or here the
settlement o@ered is less than the prescribed minimum rates, the
compromise shall be sub-ect to the approval of the &valuation Board hich
shall be composed of the Commissioner and the four !eputy Commissioners.
,elegation of the power of compromise
+he Commissioner may dele#ate his poer to compromise to the !eputy
Commissioners and the Re#ional !irectors sub-ect to such limitations and
restrictions as may be imposed under rules and re#ulations to be
promul#ated for the purpose.
DISTRAINT AND LEVY
20
TAX REMEDIES
Collection b" distraint and lev"
Both are summary administrative enforcement remedies and cannot be
availed of here the amount of ta' involved is not more than P1AA.
!istraint is enforced on personal property of the ta'payer hile levy is
enforced on real property.
In distraint, forfeiture by the #overnment is not provided, hile in levy,
forfeiture is authori5ed.
+he ta'payer is not #iven the ri#ht of redemption ith respect to distrained
personal property, hile such ri#ht is #ranted in case of real property levied
upon and sold, or forfeited, to the #overnment.
Bevy may be made before, simultaneously or after distraint.
Actual v. constructive distraint
"ctual distraint is resorted to hen delin*uency in the payment sets in, that
is, hen at the time re*uired for payment, a person fails to pay his ta'
obli#ation. It consists of actual sei5ure and distraint of personal property of
the ta'payer.
In constructive distraint, no actual delin*uency is necessary before it may be
resorted to. It may be availed of in the folloin# instances0 a; +a'payer is
retirin# from business sub-ect to ta'1 b; He intends to leave the Philippines1 c;
He removes his property therefrom1 d; He hides or conceals his property1 or
e; He performs any act tendin# to obstruct the proceedin#s for collectin# the
ta' due or hich may be due from him. In addition, constructive distraint may
also be resorted to hen the ta'payer is already delin*uent.
Constructive distraint is a preventive remedy hose aim is to forestall a
possible dissipation of the ta'payer=s asset hen delin*uency ta(es place.
+here are di@erent procedures in enforcin# actual and constructive distraint.
?ow to e:ect constructive distraint1
It shall be e@ected by re*uirin# the ta'payer or any person havin# possession
or control of such property to si#n a receipt coverin# the property distrained
and obli#ate himself to preserve the same intact and unaltered and not to
207
TAX REMEDIES
dispose of the same in any manner hatever ithout the e'press authority of
the Commissioner.
If the ta'payer or any other person refuses or fails to si#n the receipt, the
revenue o%cer e@ectin# the constructive distraint shall proceed to prepare a
list of such property and, in the presence of to itnesses, leave a copy
thereof in the premises here the property distrained is located, after hich
the said property shall be deemed to have been placed under constructive
distraint.
Procedure for actual distraint
1. Commencement of distraint proceedin#s
2. .ervice of arrant of distraint
3. ,otice of sale of distrained property
2. .ale of property distrained
/anner of serving warrant of distraint
1. Doods, chattels, e@ects or other personal property
+he o%cer servin# the arrant of distraint shall ma(e or cause to be
made an account of the #oods, chattels, e@ects or other personal property
distrained, si#ned by himself, hich includes a statement of the sum
demanded and note of the time and place of the sale.
" copy shall be left either ith the oner or person from hose
possession such #oods, chattels, or e@ects or other personal property ere
ta(en, or at the dellin# of business of such person and ith someone of
suitable a#e and discretion.
2. .toc(s and other securities
.toc(s and other securities shall be distrained by servin# a copy of the
arrant of distraint upon the ta'payer and upon the president, mana#er,
treasurer or other responsible o%cer of the corporation, company or
association, hich issued the said stoc(s or securities.
3. !ebts and credits
20!
TAX REMEDIES
!ebts and credits shall be distrained by leavin# ith the person oin#
the debts or havin# in his possession or under his control such credits, or ith
his a#ent, a copy of the arrant of distraint.
+he arrant of distraint shall be su%cient authority to the person
oin# the debts or havin# in his possession or under his control any credits
belon#in# to the ta'payer to pay to the Commissioner the amount of such
debts or credits.
2. Ban( accounts
Ban( accounts shall be #arnished by servin# a arrant of #arnishment
upon the ta'payer and upon the president, mana#er, treasurer or other
responsible o%cer of the ban(.
?pon receipt of the arrant of #arnishment, the ban( shall turn over to
the Commissioner so much of the ban( accounts as may be su%cient to
satisfy the claim of the Dovernment.
Purchase b" government at sale upon distraint
+he Commissioner or his deputy may purchase the property distrained in
behalf of the ,ational Dovernment hen0
1. the amount bid for the property under distraint is not e*ual to the
amount of the ta'1 or
2. the amount is very much less than the actual mar(et value of the
articles o@ered for sale.
Property so purchased may be resold by the Commissioner or his deputy.
Procedure on lev" of real propert"
1. .ervice of arrant of levy
2. "dvertisement of the sale
3. Public sale of the property under levy or forfeiture of the property to the
#overnment for ant of bidder
20#
TAX REMEDIES
2. Redemption of property or consolidation of onership and title in the
purchaser
?ow to e:ect lev"1
Internal revenue o%cer shall prepare a duly authenticated certi4cate shoin#
the name of the ta'payer and the amount of the ta' and penalty due from
him.
.uch certi4cate shall operate ith the force of a le#al e'ecution throu#hout
the Philippines.
Bevy shall be e@ected by ritin# upon said certi4cate a description of the
property upon hich levy is made. "t the same time, ritten notice of the
levy shall be mailed to or served upon the Re#ister of !eeds of the province
or city here the property is located and upon the delin*uent ta'payer, or if
he is absent from the Philippines, to his a#ent or mana#er, or to the occupant
of the property in *uestion.
Advertisement of sale
Postin# a notice of sale at least 3A days at the main entrance of the municipal
or city hall and in a public and conspicuous place in the city or municipality
here the property is located
Publication once a ee( for three ee(s in a nespaper of #eneral circulation
in the municipality or city here the property is located
Redemption of real propert" sold
!elin*uent ta'payer have the ri#ht to redeem the real property sold by him
or any one for him ithin one :1; year from the date of sale.
+a'payer must pay the amount of public ta'es, penalties, and interest from
the date of delin*uency to the date of sale, to#ether ith interest on said
purchase price at the rate of 13M per annum from the date of purchase to
the date of redemption.
+he oner shall not, hoever, be deprived of the possession of the said
property and shall be entitled to the rents and other income thereof until the
e'piration of the time alloed for its redemption.
210
TAX REMEDIES
3orfeiture to government for want of bidder in sale of real propert"
Internal revenue o%cer conductin# the sale of real property levied shall
declare the property forfeited to the Dovernment in satisfaction of the claim
hen0
1. there is no bidder for real property e'posed for sale1 or
2. the hi#hest bid is for an amount insu%cient to pay the ta'es, penalties
and costs.
Resale of real estate ta!en for taxes
+he Commissioner shall have char#e of any real estate obtained by the
Dovernment in payment or satisfaction of ta'es, penalties or costs arisin#
under the ,IRC or in compromise or ad-ustment of any claim thereof.
+he Commissioner may, upon #ivin# not less than 2A days notice, sell and
dispose of the said property at public auction or, ith the prior approval of
the .ecretary of /inance, dispose of the same at private sale.
FORFEITURE
3orfeiture
+he e@ect of forfeiture is to transfer the title to the speci4c thin# from the
oner to the #overnment.
I- ,0'$ *) 5$+'*-03 5+*5$+(60 +he forfeiture of chattels and removable
4'tures of any sort is enforced by sei5ure and sale or destruction of the
speci4c forfeited property.
I- ,0'$ *) +$03 5+*5$+(60 +he forfeiture of real property is enforced by a
-ud#ment of condemnation and sale in a le#al action or proceedin#, civil or
criminal, as the case may re*uire.
3orfeiture of propert" used in unlicensed business or dies used for
printing false stamps etc.
"ll chattels, machinery, and removable 4'tures of any sort used in the
unlicensed production of articles sub-ect to e'cise ta' shall be forfeited.
211
TAX REMEDIES
!ies and other e*uipment used for the printin# or ma(in# of any internal
revenue stamp, label or ta# hich is in imitation of or purports to be a laful
stamp, label or ta# shall also be forfeited.
3orfeiture of goods illegall" stored or removed
?nless otherise speci4cally authori5ed by the Commissioner, all articles
sub-ect to e'cise ta' should not be stored or alloed to remain in a distillery,
distillery arehouse, bonded arehouse or other place here made, after the
ta' thereon has been paid1 otherise, all such articles shall be forfeited.
"rticles ithdran from any such place or from customs custody or imported
into the country ithout the payment of the re*uired ta' shall li(eise be
forfeited.
CIVIL AND CRIMINAL ACTIONS
Civil and criminal actions
Civil and criminal actions and proceedin#s instituted in behalf of the
Dovernment under the authority of the ,IRC or other la enforced by the
Bureau of Internal Revenue shall be brou#ht in the name of the Dovernment
of the Philippines and shall be conducted by le#al o%cers of the Bureau of
Internal Revenue, but no civil or criminal action for the recovery of ta'es or
the enforcement of any 4ne, penalty or forfeiture under this Code shall be
4led in court ithout the approval of the Commissioner. C.ection 22A, ,IRCF
In a fraud assessment hich has become 4nal and e'ecutory, the fact of
fraud shall be -udicially ta(en co#ni5ance of in the civil or criminal action for
the collection thereof.
Civil action
Civil action, as a mode of ta' collection, is resorted to hen a ta' liability
becomes collectible.
Collectibility of a ta' arises in the folloin# instances0
1. <hen a ta' is assessed but the assessment becomes 4nal and
unappealable because the ta'payer fails to 4le an administrative
protest.
212
TAX REMEDIES
2. <hen a protest a#ainst the assessment is 4led by the ta'payer and a
decision is rendered by the Commissioner but said decision becomes
4nal, e'ecutory and demandable for failure of the ta'payer to 4le an
appeal.
" civil action may also be 4led in order to collect the so6called self assessed
ta'.
,o civil action for the recovery of ta'es shall be 4led ithout the approval of
the Commissioner.
Insu@cient protest allowing collection case
In ,a"rit v. Cru4 CB63EE1A, .eptember 27, 1E99F, the .upreme Court ruled
that the re*uest for reconsideration cannot be considered as a protest
a#ainst the assessment. "ccordin# to the .upreme Court, the failure of the
heirs to substantiate their claim a#ainst the assessment due to the non6
submission of their position paper -usti4ed the Commissioner in collectin# the
estate and inheritance ta'es in the settlement proceedin#s.
In Republic v. *edesma CB61E83E, /ebruary 29, 1E7EF, the .upreme Court
held that the ta'payer=s failure to dispute the assessment e@ectively by
complyin# ith the conditions laid don by the Bureau of Internal Revenue
provided a le#al basis for the #overnment to collect the ta'payer=s liability by
ordinary civil action.
213
TAX REMEDIES
Is Commissioner re#uired to rule on a pending protest before -ling a
collection case1
,o. In Republic v. *iam 'ian 'eng %ons Inc. C17 .CR" 392:1E77;F, the
.upreme Court held that nohere in the +a' Code is the Commissioner
re*uired to rule 4rst on a ta'payer=s re*uest for reinvesti#ation before he can
#o to court for the purpose of collectin# the ta' assessed. "ccordin# to the
.upreme Court, the le#islative policy is to #ive the Commissioner much
latitude in the speedy and prompt collection of ta'es because it is on ta'ation
that the #overnment depends to obtain the means to carry out its operations.
,ote hoever that a civil or criminal case is tantamount to a denial of the
re*uest for reinvesti#ation. +hus, the ta'payer may 4le an appeal ith the
Court of +a' "ppeals. CCommissioner v. =nion %hippingF
Criminal action
+he 4lin# of a criminal action is one of the reco#ni5ed modes of collectin#
delin*uent ta'es. .ection 1A3 of the ,IRC further states that the -ud#ment in
the criminal case shall not only impose the penalty but shall also order
payment of the ta'es sub-ect of the criminal case as 4nally decided by the
Commissioner.
Criminal action is, hoever, not resorted to as a collection remedy only. +here
are other cases not involvin# non6payment of ta'es here criminal action is
utili5ed.
Important considerations regarding criminal action
1. ,o criminal action for the recovery of ta'es or the enforcement of a 4ne shall
be 4led in court ithout the approval of the Commissioner. C.ection 22A,
,IRCF
2. Criminal actions instituted in behalf of the #overnment under the authority of
the ,IRC or other la enforced by the Bureau of Internal Revenue shall be
brou#ht in the name of the #overnment and shall be conducted by le#al
o%cers of the Bureau of Internal Revenue. C.ection 22A, ,IRCF
3. +he ac*uittal of the ta'payer in a criminal action does not necessarily result
in the e'oneration of said ta'payer from his civil liability to pay ta'es.
214
TAX REMEDIES
2. In a criminal action that as instituted a#ainst the ta'payer for havin# 4led a
false and fraudulent return and failure to pay ta'es, the .upreme Court held
that the subse*uent satisfaction of the ta' liability by payment or prescription
ill not operate to e'tin#uish the ta'payer=s criminal liability.
Payment of the ta' due after apprehension shall not constitute a valid
defense in any prosecution for violation of any provision of the ,IRC or in any
action for forfeiture of unta'ed articles. C.ection 233, ,IRCF
3. .ubsidiary imprisonment is provided for in cases of non6payment of the 4ne
due to the ta'payer=s insolvency but not for failure to pay the ta' due to the
ta'payer=s insolvency.
.ection 29A provides that0 %f the person convicted for violation of any
provisions of this Code has no property with which to meet the -ne imposed
upon him by the court, or is unable to pay such fne, he shall be sub&ect to a
subsidiary personal liability.
7. In =ngab v. Cusi, the .upreme Court held that no assessment is re*uired
before a criminal prosecution. +his as modi4ed in a later case,
Commissioner v. Court of Appeals, here the .upreme Court ruled that
assessment is necessary before the criminal prosecution of /ortune +obacco.
+he .upreme Court, hoever, harmoni5ed this decision ith the earlier one.
C.ee later discussionF
8. In cases of violations committed by associations, partnerships, or
corporations, the penalty shall be imposed on the partner, president, #eneral
mana#er, branch mana#er, treasurer, o%cer6in6char#e, and employees
responsible for the violation.
Civil liabilit" in tax criminal cases
In ordinary criminal cases, the civil liability is incurred by reason of the
o@ender=s criminal act.
In ta'ation, the civil liability to pay ta'es arises not because of any felony but
upon the ta'payer=s failure to pay ta'es. Criminal liability in ta'ation arises as
a result of one=s liability to pay his ta'es. Conse*uently, the e'tinction of
one=s criminal liability does not necessarily result in the e'tin#uishments of
his civil liability to pay ta'es.
215
TAX REMEDIES
'ith regard to the tax proper, the state correctly points out in its brief that
the ac(uittal in the criminal case could not operate to discharge the
petitioner from the duty to pay the tax since that duty is imposed by statute
prior to and independent of any attempts on the part of the taxpayer to
evade payment. he obligation to pay the tax is not a mere conse(uence of
the felonious acts charged in the information, nor is it a mere civil liability
derived from crime that would be wiped out by the &udicial declaration that
the criminal acts charged did not exist. CCastro v. Collector, 2 .CR" 1AE3F
21
TAX REMEDIES
;eed for assessment before criminal action
=ngab v. Cusi A*(BC8C8(6B /a" >7C8D7E
Puirico ?n#ab 4led a motion to *uash the criminal complaints a#ainst him in
vie of his pendin# protest a#ainst the assessment made by the Bureau of
Internal Revenue. +he .upreme Court ruled that his contention is ithout
merit. <hat is involved here is not the collection of ta'es here the
assessment of the Commissioner may be revieed by the Court of +a'
"ppeals but a criminal prosecution for violation of the ,IRC hich is ithin
the co#ni5ance of the Court of /irst Instance :no R+C;.
<hile there can be no civil action to enforce collection before the assessment
procedures in the ,IRC have been folloed, there is no re*uirement for the
precise computation of the ta' before there can be criminal prosecution
under the ,IRC.
" crime is complete hen the violator has (noin#ly and illfully 4led a
fraudulent return ith intent to evade and defeat the ta'.
Commissioner of Internal Revenue v. Court of Appeals FC88GH
"ssessment re*uired before criminal prosecution of /ortune for ta' evasion
can be pursued.
+he .upreme Court di@erentiated this case from =ngab v. Cusi by rulin#
that, even thou#h this is also a criminal prosecution, there must be a prima
facie shoin# of a illful attempt to evade ta'es before one can proceed ith
such prosecution. In =ngab, there as illful attempt to evade ta'es hile,
in the case at bar, there as none, as /ortune as even payin# ta'es
accordin# to the BIR re*uirements. +hus, there is still need for a 4nal
determination of the ta' due before criminal prosecution can be commenced
a#ainst /ortune.
ADDITIONS TO THE TAX
Additions to the tax
217
TAX REMEDIES
"dditions to the ta' are increments to the basic ta' incident to the ta'payer=s
non6compliance ith certain le#al re*uirements li(e the ta'payer=s refusal or
failure to pay ta'es on time andIor violations of ta'in# provisions in the la.
0hat are the additions to the tax1
1. Civil penalty or surchar#e
2. Interest
3. $ther civil penalties and administrative 4nes
Civil penalt" or surcharge
+he civil penalty or surchar#e may either be 23M or 3AM of the ta'
dependin# on the nature of the violation.
+he payment of the surchar#e is mandatory and the Commissioner is not
vested ith any authority to aive or dispense ith the collection thereof.
"n e'tension of time to pay ta'es #ranted by the Commissioner does not
e'cuse payment of the surchar#e.
+he 3AM surchar#e is not a criminal penalty but a civil or administrative
sanction provided primarily as a safe#uard for the protection of the .tate
revenue and to reimburse the #overnment for the heavy e'pense of
investi#ation and the loss resultin# from the ta'payer=s fraud.
Cases where the civil penalties or surcharges are imposed
1. 23M
a. /ailure to 4le any return and to pay the ta' due thereon as re*uired by
the ,IRC or rules
b. /ilin# a return ith an internal revenue o%cer other than those ith
hom the return is re*uired to be 4led.
c. /ailure to pay the de4ciency ta' ithin the time prescribed for its
payment in the notice of assessment.
21!
TAX REMEDIES
d. /ailure to pay the full or part of the amount of ta' shon on any return,
or the full amount of ta' due for hich no return is re*uired to be 4led,
on or before the date prescribed for its payment.
2. 3AM
a. In case of illful ne#lect to 4le the return ithin the period prescribed
by the ,IRC or rules
b. In case a false or fraudulent return is illfully made
%ubstantial underdeclaration or overdeclaration
" substantial underdeclaration of ta'able sales, receipts or income, or a
substantial overstatement of deductions shall constitute prima facie evidence
of a false or fraudulent return.
/ailure to report sales, receipts or income in an amount e'ceedin# 3AM of
that declared per return and a claim of deductions in an amount e'ceedin#
3AM of actual deductions shall render the ta'payer liable for substantial
underdeclaration of sales, receipts or income or for overstatement of the
deductions.
Interest
+his is an increment on any unpaid amount of ta' assessed at the rate of
2AM per annum or such hi#her rate as may be prescribed by the re#ulations
from the date prescribed for payment until the amount is fully paid.
Classes of interest
1. !e4ciency interest
2. !elin*uency interest
3. Interest on e'tended payment
,e-cienc" interest
"ny de4ciency in the ta' due shall be sub-ect to the interest of 2AM per
annum hich shall be assessed and collected from the date prescribed for its
payment until the full payment thereof.
21#
TAX REMEDIES
0hen delin#uenc" interest imposed1
!elin*uency interest is imposed in case of failure to pay0
1. +he amount of the ta' due on any return re*uired to be 4led1 or
2. +he amount of ta' due for hich no return is re*uired1 or
3. " de4ciency ta' or any surchar#e or interest thereon on the due date
appearin# in the notice and demand of the Commissioner.
Rate is 2AM per annum until the amount is fully paid hich interest shall form
part of the ta'.
Interest on extended pa"ment
+his is imposed hen ta'payer has opted to pay by installment but he fails to
pay the ta' or any installment on the prescribed date for payment.
It is also imposed here Commissioner has authori5ed the e'tension of the
time for payment of the ta'.
Administrative -nes or penalties
1. /ailure to 4le certain information returns
2. /ailure of a ithholdin# a#ent to collect and remit the ta'
3. /ailure of a ithholdin# a#ent to refund e'cess ithholdin# ta'
STATUTORY OFFENSES AND THEIR PENALTIES
General points re. crimes and o:enses
"ny person convicted of a crime penali5ed by the ,IRC shall, in addition to
bein# liable for the payment of the ta', be sub-ect to the penalties imposed in
the Code.
220
TAX REMEDIES
Payment of the ta' due after apprehension shall not constitute a valid
defense in any prosecution for violation of any provision of the ,IRC or in any
action for the forfeiture of unta'ed articles.
"ny person ho illfully aids or abets in the commission of a crime penali5ed
in the ,IRC or ho causes the commission of any such o@ense by another
shall be liable in the same manner as the principal.
If the o@ender is not a /ilipino citi5en, he shall be deported immediately after
servin# the sentence ithout further proceedin# for deportation.
If the o@ender is a public o%cer or employee, the ma'imum penalty
prescribed for the o@ense shall be imposed and, in addition, he shall be
dismissed from the public service and perpetually dis*uali4ed from holdin#
any public o%ce, to vote and to participate in any election.
If the o@ender is a Certi4ed Public "ccountant, his certi4cate as a CP" shall,
upon conviction, be automatically revo(ed or cancelled.
In the case of associations, partnerships or corporations, the penalty shall be
imposed on the partner, president, #eneral mana#er, branch mana#er,
treasurer, o%cer6in6char#e, and employees responsible for the violation.
Give examples of crimes and o:enses
1. "ttempt to evade or defeat ta'
"ny person ho illfully attempts in any manner to evade or defeat
any ta' imposed under the ,IRC or the payment thereof.
2. /ailure to 4le return, supply correct and accurate information, pay ta',
ithhold and remit ta' and refund e'cess ta'es ithheld on compensation
3. ?nlaful pursuit of business
"ny person ho carries on any business for hich an annual
re#istration fee is imposed ithout payin# the ta' as re*uired by la.
2. ?nlaful possession or removal of articles sub-ect to e'cise ta' ithout
payment of the ta'
221
TAX REMEDIES
3. /ailure or refusal to issue receipts or sales or commercial invoices, violations
related to the printin# of such receipts or invoices and other violations
Prescription for violations of an" provision of the ;IRC
"ll violations of any provision of the ,IRC shall prescribe after 4ve :3; years.
Prescription shall be#in to run from the day of the commission of the violation
of the la, and if the same be not (non at the time, from the discovery
thereof and the institution of -udicial proceedin#s for its investi#ation and
punishment.
+he prescription shall be interrupted hen proceedin#s are instituted a#ainst
the #uilty persons and shall be#in to run a#ain if the proceedin#s are
dismissed for reasons not constitutin# -eopardy.
+he term of prescription shall not run hen the o@ender is absent from the
Philippines.
0hen is informer2s reward given1
"n informer=s reard is #iven to persons instrumental in the0
1. discovery of violations of the ,IRC1 and
2. discovery and sei5ure of smu##led #oods.
Re#uisites for informer2s reward for violations of the ;IRC
+his may be claimed by any person, e'cept an internal revenue o%cial or
employee, or other public o%cial or employee, or his relatives ithin the si'th
de#ree of consan#uinity.
Person voluntarily #ives de4nite and sorn information, not yet in the
possession of the Bureau of Internal Revenue. Information should not refer to
a case already pendin# or previously investi#ated or e'amined by the
Commissioner or any of his a#ents.
Information leads to the discovery of frauds upon the internal revenue las or
violations of any of the provisions thereof.
222
TAX REMEDIES
+here is recovery of revenues, surchar#es and fees andIor the conviction of
the #uilty party andIor the imposition of any 4ne or penalty. In the reverse, if
no revenue, surchar#es or fees be actually recovered or collected, such
person shall not be entitled to a reard.
Reard shall be e*uivalent to ten percent :1AM; of the revenues, surchar#es
or fees recovered andIor any 4ne or penalty imposed and collected or
P1,AAA,AAA per case, hichever is loer.
+he same amount of reard shall be also #iven to an information here the
o@ender has o@ered to compromise the violation of la committed by him
and his o@er has been accepted by the Commissioner and collected from the
o@ender.
,iscover" and sei4ure of smuggled goods
+o encoura#e the public to e'tend full cooperation in eradicatin# smu##lin#, a
cash reard e*uivalent to 1AM of the fair mar(et value of the smu##led and
con4scated #oods or P1,AAA,AAA per case, hichever is loer.
Reward sub)ect to income tax
+he cash reards of informers shall be sub-ect to income ta' collected as a
4nal ithholdin# ta', at the rate of ten percent :1AM;.

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