GCRO - Top290 - PG - April2019 PDF

Topic 290
Collection Procedures
& Tax Remedies
General Course for Revenue Officers CPTR 290 Slide –

VER 2.0 – August 2018
Objectives
List the legal basis in the revenue officers’ duty to assess and
collect internal revenue taxes, fees and charges;
Determine prescriptive rules governing assessment and
collection;
Identify exceptions to the period of the limitation on
assessment and collection of taxes;
Define delinquent accounts and manage accounts
receivable;
Enumerate the relevant records and processes in controlling
and accounting of Account Receivables (AR) Dockets; and
Identify steps in the management and disposition of
forfeited/acquired assets
General Course for Revenue Officers CPTR 290 Slide – 2
Topic Outline
I. Legal Basis
II. Prescriptive Rules Governing Assessment and
Collection
III. Exception as to Period of Limitation of
Assessment and Collection
IV. Accounts Receivable Management
V. Abatement/ Cancellation of Tax Liability/
Compromise Settlement
VI. Acquired Assets
Legal Basis
The statutory basis of the Commissioner of
Internal Revenue's powers are on Title I, Title VIII
and Title X of the National Internal Revenue
Code (NIRC) as amended. Sections 2 and 6 (a) of
the said code specifically states that the BIR
may assess and collect all internal revenue
taxes, fees and charges; enforcement of
forfeiture and penalties; and execute all
judgment in all cases decided by the Court of
Tax Appeals (CTA) and other courts in its favor.

Prescriptive Rule
To Assess:
Except as provided in Section 222, Internal Revenue taxes shall be assessed
within three (3) years after last day prescribed by law for the filing of the return,
and no proceeding in court without assessment for the collection of such
taxes shall begin after the expiration of such period. (Section 203, NIRC).
To Collect:
Any Internal Revenue tax which has been assessed
within the period of limitation as prescribed in
paragraph (a) of section 222 of the Tax Code may be
collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of
the tax [Section 222(c), NIRC].
Section 203 – Period of Limitation upon
Assessment and Collection
Except as provided in Section 222, internal revenue taxes
shall be assessed within three (3) years after the last day
prescribed by law for the filing of the returns, and no
proceeding in court without assessment for the collection
of such taxes shall be begun after the expiration of such
period: Provided, That in a case where a return is filed
beyond the period prescribed by law, the three (3) – year
period shall be counted from the day the return was filed.
For purposes of this Section, a return filed before the last
day prescribed by law for the filing thereof shall be
considered as filed on such last day.
Section 223 – Suspension of Running of
Statute of Limitations
The running of the Statute of Limitations provided in Section 203 and 222
on the making of assessment and the beginning of distraint or levy or a
proceeding in court for collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner is prohibited
from making the assessment or beginning distraint or levy or proceeding in
court and for sixty (60) days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the taxpayer
cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected: Provided, That, if the taxpayer
informs the Commissioner of any change in address, the running of the
Statute of Limitations will not be suspended; when the warrant of distraint
or levy is duly served upon the taxpayer, his authorized representative, or a
member of his household with sufficient discretion, and no property could
be located; and when the taxpayer is out of the Philippines.
Exceptions to the Period of Limitation
1. Assessment of false and fraudulent returns with
the intent to evade tax shall be assessed any time
within ten (10) years after the discovery of the
falsity, fraud or omission.
2. If before the expiration of the time provided for by

Section 203, of the Tax Code, for the assessment of
the tax, both the CIR and the taxpayer have agreed
in writing to its assessment within the period
agreed upon.
Exceptions to the Period of Limitation
3. Any internal revenue tax which has been assessed
within the period of limitation may be collected by
distraint or levy or by proceeding in court within
five (5) years following the assessment of the tax.
4. Any internal revenue tax which has been assessed

within the period agreed upon between the CIR
and the taxpayer may be collected by distraint or
levy or by a proceeding in court within five (5) years
following the assessment of the tax.
Account Receivable/Delinquent Account
Refers to the amount of tax due

from a taxpayer who failed to pay
the same within the time
prescribed for its payment.

Sources of AR/DA
I. Non-payment of tax due from Self-Assessed Taxes (SAT):
a) Dishonored check;
b) Tax due per return filed by taxpayers who failed to pay
the same within the time prescribed for its payment; and
c) Non-payment o the 2nd installment due from individual
taxpayers who availed of installment payments of
income tax under Sec. 56 (A) (2) of the Tax Code, as
amended.

Sources of AR/DA
II. Non-payment of tax due from Unprotested Final
Assessment Notice (FAN) or Final Decision on Disputed
Assessment (FDDA)
- Result of audit or compliance checks conducted
pursuant to Return Processing System (RPS)
assessment, pre-audit, short audit, package audit,
assessment through Letter Notice (LN), and such other
assessments issued in the course of verifying the level
of tax payer’s compliance.

AR/DA
When should a Tax be Considered Delinquent?
a) Failure to file request for reinvestigation/
reconsideration within thirty (30) days from
receipt of the Final Assessment Notice (FAN);
b) Failure to submit documents in support of
the request for reinvestigation within sixty
(60) days from filing of the request;
AR/DA
c) Failure to appeal to the Court of Tax Appeals
(CTA) within thirty (30) days from receipt of the
decision denying the request for
reinvestigation/ reconsideration or in case of
inaction on the part of the Bureau, from the
lapse of the one hundred eighty (180) days from
the submission of the required documents;
AR/DA
d) Failure to appeal CTA’s decision on the case
with the higher court as a result of which the
decision became final and executory; and
e) Decision/Resolution of the CTA/Supreme
Court (SC) in favor of the BIR which became
final and executory.
Reporting Process of AR/DA

Collection Enforcement Process
Unprotested
FAN/FDDA Arrears
Assessment Division Receivable
Management
Accounts and
Section (AMS)
Collection
Team I
Enforcement
Team II
Section (RACES)
Unpaid Self- Team III
Collection Division
Assessed Taxes Collection Division
RDO

Functions of Arrears Management Section
Functions of Team I: (Information Stage)
1. Identify/Classify/Prioritize
2. Issuance of Notices
Preliminary Collection Letter (PCL)
Final Notice Before Seizure (FNBS)
3. Locating the actual/present address of the taxpayer
4. Submit all the necessary reports to document all the
actions taken.
REMINDER: Activities must be done within twenty-five (25)
working days from receipt of AR/DA docket/case.
Functions of Team II: (Enforcement Stage)
\Activities taken after failure of the taxpayer to settle his/her
outstanding tax liabilities despite of the issuance of PCL and FNBS:
Locate possible assets of the subject delinquent taxpayer;
Issuance of Warrant of Garnishment;
Issuance of Warrant of Distraint and/or Levy;
Garnishment/Seizure of personal and/or real properties;
Submit all the necessary reports to document all the
actions taken.
REMINDER: Activities must be executed within sixty (60) working days
from receipt of AR/DA docket/case.
Functions of Team III: (Conversion and Disposal Stage)
Final stage of the collection enforcement function
Conversion of seized and forfeited properties into
cash and remit the same to the coffers of the
government
Keep track and provide analysis of AR/DA
dockets being handled by the Arrears
Management Section

Forfeited Assets Management Unit (FAMU)
Under Collection Service

In-charge of conversion and disposal of seized
and forfeited properties of Arrears Management
Section of the Revenue Regions within Mega
Metro Manila (RRs 4-9A & B)
Monitors the conversion and disposal of seized
and forfeited properties of the Arrears
Management Section of the Revenue Regions
outside Mega Metro Manila
Monitoring and Reporting of AR/DA
Newly Created Newly Created
Manually Reported in
Self-Assessed AR/DA Arising from
the GCL Report
AR/DA from RDO Assessment
***Procedure on How to Use ARMS

Will be thoroughly Discussed in the
ARMS Training***
Should be Encoded in ARMS Should be Encoded in ARMS

and Status Must be Updated as and Status Must be Updated as
the Collection Enforcement the Collection Enforcement
General Activities Progress
Course for Revenue Officers Activities Progress
CPTR 290 Slide – 22
General Control Ledger (GCL) Report
In order to account and track all AR/DAs, all
concerned offices handling AR/Das are required to
submit monthly GCL report, including the Inventory
List of AR/DAs as prescribed under RMO No. 22-
2015. The GCL reports are the sources of information
stored in AR/DA database maintained in Excel file
by the Accounts Receivable Monitoring Division
(ARMD).
Accounts Receivable Management System
Accounts Receivable Management System (ARMS) is a web-
based system that enables the establishment of accurate
AR/Das database covering all concerned BIR offices for easy
monitoring/tracking and timely generation of the required
correspondences and reports.
NOTE: The Bureau is currently maintaining both manual and on-line
reporting and monitoring of AR/DA until such time that ARMS is
fully functional.

Monitoring and Reporting of
AR/DA
OM No. 12-09-001 dated September 5, 2012
Creation of Accurate Inventory of Accounts
Receivable/Delinquent Accounts (AR/Das)
OM No. 3-2013 dated April 15, 2013
Submission of Revised Form of General Control
Ledger and Updates on Delinquent Accounts
Monitoring and Reporting of AR/DA
RMO No. 11-2014 dated February 7, 2014
Policies, Guidelines, Procedures in the Periodic Clean-Up of
Accounts Receivable/Delinquent Accounts
RMO No. 22-2015 dated February 7, 2014
Amending Certain Portions of RMO No. 11-2014 relative to
the Policies, Guidelines and Procedures in the Periodic
Clean-Up of Accounts Receivable/Delinquent Accounts

Tax Docket
A tax docket is a record of the case; usually consists of
the following documents:
Assessment Records
1. Letter of Authority (LA) / Letter Notice (LN)
Tax Verification Notice (TVN)
2. Request for the presentation of Book of
Accounts / records / documents
3. Audit Program
Tax Docket
4. Working Paper / Supporting documents
5. Verification Reports (BIR Form series 0500/1717)
6. Memorandum Report
7. PAN
8. FAN
9. Copy of BIR Form 40
Tax Docket
Collection Records
1. Case History Sheet
2. Memorandum of Assignment (MOA)
3. Preliminary Collection Letter (PCL)
4. Final Notice Before Seizure (FNBS)
5. Warrant of Distraint and/or Levy (WDL) -
BIR Form 1301
6. Request letter to LRA
7. Notice of Tax Lien (NTL)
8. Letter to taxpayer re: Service of NTL to the
Register of Deeds
9. Notice of Encumbrance
Tax Docket
10. General Information Sheet (GIS by SEC)
11. Aliquot Share
12. Constructive Seizure of Personal Property
(CSOPP) – BIR Form 2801
13. Warrant of Garnishment (WG) – BIR Form 1302
14. Notice of Actual Seizure of Personal Property
(NASOPP) – BIR Form 2802
15. Memorandum Requesting Advertisement of Sale
of Seized Personal Property
16. Notice of Sale (NOS) – BIR Form 2803 (for seized
personal property)
Tax Docket
17. Certificate of Sale of Personal Property
18. Minutes/Reports of Sale of Personal Property
19. Memorandum of Release of Distrained Personal
Property
20. Bill of Sale to Satisfy Tax Liabilities (for stocks
and other securities)
21. Notice of Levy (NOL) – BIR Form 2802-A
22. Notice of Sale (NOS) – BIR Form 2803 [for levied
real property]
Tax Docket
23. Memorandum Requesting for Authority to
Publish Notice of Sale
24. Proof of Publication of Notice of
Sale/Contract between BIR and Publisher
25. Letter to Taxpayer re: Publication of Notice of
Sale
26. Ocular Inspection Report
27. Application for BID
28. Abstract of Canvass
Tax Docket
29. Declaration of Forfeiture of Real Property
(DOFRP) – BIR Form 1306
30. Minutes/Records of Auction Sale
31. Consolidation of Real Property in Favor of Govt.
32. Certificate of Sale on Real Property
33. Deed of Conveyance of Real Property
34. Certificate of Redemption
35. Deed of Absolute Sale
Note: Every action taken with corresponding progress report
How Taxpayers Respond to
Collection Letters
1. Pay Tax Liability
Payment in full
Payment in installment
Payment through compromise settlement
(RR 30-2002)
Payment through abatement of Penalties
(RR 13-2001)
2. Protest issuance of collection letters
3. Ignore collection letters
Payment in Full
Scenario 1. Late filing of the tax return and late payment
of the tax due thereon.
Illustration: Income tax return for the calendar year

2017 was due for filing on April 15, 2018 but the taxpayer
voluntarily filed his tax return, without notice from the BIR,
only on June 30, 2018. The tax due per return amounts to
P100,000.00. In this case, the taxpayer shall be liable for
delinquency penalties consisting of 25% surcharge, plus 20%
interest per annum, computed from the due date of the tax
until date of actual payment, computed as follows:
Payment in Full
Income tax due per return P100,000.00
Add: 25% surcharge for late filing
and late payment
(P100,000.00 x 25%) P25,000.00
20% interest per annum
from 4/15/18 to 6/30/18
(P100,000.00 x .0415524) 4,155.24 29,155.24
Total amount due (excluding suggested
compromise for late filing and late
payment of the tax) P129,155.24
Only one 25% surcharge shall be imposed for late filing of the return and
late payment of the tax.
Payment in Full
Scenario 2. The tax return, without prior authorization
from the BIR, is filed on time but filed through an internal
revenue officer other than with whom the return is required
to be filed (filing of a tax return with the wrong venue).
Illustration: The taxpayer’s 2017 income tax return is

required to be filed through the Authorized Agent Bank
(AAB) under the jurisdiction of RDO East Makati. But, without
prior authorization from the BIR, the taxpayer filed his tax
return and paid the tax through the AAB under the
jurisdiction of RDO Davao City. The tax due per return is
P100, 000.00.
Payment in Full
Add: 25% surcharge for filing the return
at wrong venue 25,000.00
Total amount due P125,000.00

Less: Amount paid 100,000.00
Amount still due P 25,000.00

Payment in Full
Scenario 3. Late filing of the return and late payment
of the tax due to taxpayer’s willful neglect.
Illustration: The taxpayer did not file his income tax

return for the calendar year 2017 which was due for filing
on April 15, 2018. He was notified by the BIR of his failure
to file the tax return, for which reason, he filed his tax
return and paid the tax, only after the said notice, on June
30, 2018. The tax due per return is P100,000.00.
Payment in Full
Add: 50% surcharge for willful neglect
to file the return and late payment
of the tax due (P100,000.00 x 50%) P50,000.00
20% interest per annum*
from 4/15/18 to 6/30/18
(P100,000.00 x 0.2415524) 24,155.24 74,155.24
compromise penalty for late filing of the return
and late payment of the tax due) P174,155. 24
*Consider effect of TRAIN Law
Payment in Full
Scenario 4. Late payment of a deficiency tax
assessed per Final Assessment Notice and
Letter of Demand. In general, the deficiency tax
assessed shall be paid by the taxpayer within
the time prescribed (due date) in the
Assessment Notice and letter of demand,
otherwise, such taxpayer shall be liable for the
delinquency penalties incident to late
payment.
Payment in Full
Illustration: XYZ CORPORATION filed its final adjustment income
tax return for calendar year 2017 with a net taxable income of
P500,000.00. At the applicable income tax rate of 35% for the year 2017,
its income tax amounted to P175,000.00. However, upon investigation, it
was disclosed that its income tax return was false or fraudulent because
it did not report a taxable income amounting to another P500,000.00. On
its net income of P1,000,000.00 per investigation, the income tax due is
P350,000.00. Deducting its payment per return filed, the deficiency,
excluding penalties, amounted to P175,000.00. It was duly informed of
this finding through a Preliminary Assessment Notice. Failing to protest
on time against the preliminary assessment notice, a formal letter of
demand and assessment notice was issued on May 31, 2018 calling for
payment of the deficiency income tax on or before June 30, 2018, as
shown:
Payment in Full
Income tax due per investigation P350,000.00
Less: Income tax paid per return 175,000.00
Deficiency income tax P175,000.00
Add: 50% surcharge for filing a fraudulent or
false return (P175,000.00 times 50%) P87,500.00
from 4-15-18 to 6-30-18
(P175,000.00 x .2415524) 42,271.67
129.771.67
Payment in Full
Assuming that the aforementioned deficiency income tax
assessment against XYZ CORPORATION, in the amount of
P304,771.67, is not paid by June 30, 2018, the deadline for
payment of the assessment, and the taxpayer failed to file a
protest within the reglamentary period (thirty (30) days from
receipt of the assessment notice), the assessment
becomes final and executory. Assuming further, that the
corporation pays its tax assessment only by July 31, 2018,
the delinquency penalties for late payment shall be
computed as follows:

Payment in Full
Total deficiency income tax assessed
on May 31, 2018 P304,771.67
Add: 25% surcharge for late payment
(304,771.67 x 25%) P76,192.92
from 7-1-18 to 7-31-18
(P304,771.67 x .0166667) 5,079.54 81,272.46
compromise penalty for late payment) P386,044.13

Payment in Installment
Scenario No. 1: In case the application for installment
payment was made on or before the due date for the
payment of the tax.
Illustration: XYZ Corporation, due to financial

incapacity, requested to pay in four (4) monthly
installments, starting June 30, 2018, its deficiency income
tax liability for the year 2017 in the amount of P304,771.67
per Final Assessment Notice issued on May 31, 2018, with
due date on June 30, 2018. Its request for installment
payment has been duly approved.
In this case, the 25% surcharge shall not be
imposed for payment of the tax since its deadline
for payment has been duly extended. However,
delinquency interest of 20% per annum shall be
imposed, computed based on the “unpaid
amount”. The computation of the interest shall be
based on the diminishing balance or unpaid
amount of the tax, inclusive of the deficiency
interests and surcharge.
Total deficiency income tax assessed on May 31, 2018 P304,771.67
Less: 1st installment on 6/30/18 76,192.92
Balance as of 6/30/18 P228,578.75
Add: 20% interest per annum from 6/30/18 to 7/31/18
(P228,578.75 x .0166667) 3,809.66
Amount due on 7/31/18 P232,388.41
Less: 2nd installment on 7/31/18
(P76,192.92 + P3, 809.66 interest) 80,002.58
Balance as of 7/31/18 P152,385.83

Balance as of 7/31/18 P152,385.83
Add: 20% interest per annum
from 7/31/18 to 8/31/18
(P152,385.83 x .0166667) 2,539.77
Amount due on 8/31/18 154,925.60
Less: 3rd installment on 8/31/18
(P76,192.92 + P2,539.77 interest) 78,732.69
Balance as of 8/31/18 P76,192.91
from 8/31/18 to 9/30/18
(P76,192.91 x .0166667) 1,269.89
4th and final installment on 9/30/09 P77,462.80
Computation of installment payment of the cases in table format
Date of Equal Surcharge Delinquency Amount Balance

Installment Monthly Interest Payable
Installment
Amount P304,771.67
assessed
6/30/2009 P76,192.92 0.00 P0.00 P76,192.92 228,578.75
7/31/2009 76,192.92 0.00 3,809.66 80,002.58 152,385.83
8/31/2009 76,192.92 0.00 2,539.77 78,732.69 76,192.91
9/30/2009 76,192.92 0.00 1,269.89 77,462.80 0
P304,771.67 - P7,619.32 P312,390.99
Scenario No. 2: In case the application for installment
payment was made on July 31, 2018 after the due date for the
payment of the tax, June 30, 2018.
Total deficiency income tax assessed on May 31, 2018

P304,771.67
Add: 25% surcharge
(P304,771.67 x 25%=P76,192.92/4) 19,048.23
from 6/30/18 to 7/31/18
(P304,771.67 x .0166667) 5,079.54
Amount due on 7/31/18 P328,899.44
Amount due on 7/31/18 P328,899.44
Less: Amount payable on 7/31/18
1st installment (P304,771.67/4) P76,192.92
Surcharge (P76,192.92/4) 19,048.23
Interest 5,079.54 100,320.69
Balance as of 7/31/18 P228,578.75
Add: 25% surcharge
(P304,771.67 x 25% = P76,192.92/4) 19,048.23
20% interest per annum from 7/31/18 to 8/31/18
(P228,578.75 x .0166667) 3,809.66
Amount due on 8/31/18 P251,436.64
2nd installment (P304,771.67/4) P76,192.92
Surcharge (P76,192.92/4) 19,048.23
Interest 3,809.66 99,050.81
Balance as of 8/31/18 P152,385.83
Balance as of 8/31/18 P152,385.83
Add: 25% surcharge (P304,771.67 x 25%
= P76,192.92/4) 19,048.23
20% interest per annum. from 8/31/18 to 9/30/18
(P152,385.83 x .0166667) 2,539.77
Amount due on 9/30/18 P173,973.83
3rd installment (P304,771.67/4) P76,192.92
Surcharge (P76,192.92/4) 19,048.23
Interest 2,539.77 97,780.92
Balance as of 9/30/18 P 76,192.91
Add: 25% surcharge
(P304,771.67 x 25% = P76,192.92/4) 19,048.23
20% interest per annum from 9/30/18 to 10/31/18
(P76,192.91 x .0166667) 1,269.89
4th and final installment on 10/31/18 P96,511.03
Computation of installment payment of the cases in table format
Date of Equal Surcharge Delinquency Amount Balance
Installment Monthly Interest Payable
Installment
Amount P304,771.67
assessed
7/31/2009 P76,192.92 P19,048.23 P5,079.54 P100,320.69 228,578.75
8/31/2009 76,192.92 19,048.23 3,809.66 99,050.81 152,385.83
9/30/2009 76,192.92 19,048.23 2,539.77 97,780.92 76,192.91
10/31/2009 76,192.92 19,048.23 1,269.89 96,511.03 0
P304,771.67 P76,192.92 P12,698.86 P393,663.45

Cases which May be Compromised
Delinquent accounts
Cases under administrative protest after issuance of the Final
Assessment Notice (FAN) and the cases are still pending in
the regional offices, revenue district offices, Legal Service,
Large Taxpayer Service (LTS) and Collection Service
Civil tax cases being disputed before the courts
Collection cases filed in courts
Criminal violations, other than those already filed
in court or those involving criminal fraud
(Section 2, RR 30 - 2002)

Cases which May Not be Compromised
Withholding tax cases, unless applicant invokes
provisions of Law that cast doubt on the taxpayer’s
obligation to withhold
Delinquent accounts with duly approved schedule of
installment payment
Criminal tax fraud cases confirmed as such by the CIR or
his duly authorized representative
Criminal violations already filed in court

Cases which May Not be Compromised
Cases where final reports of reinvestigation
or reconsideration have been submitted
resulting to the reduction of the original
assessment and the taxpayer is agreeable
to such findings
Cases which become final and executory
after final judgment of a court, where
compromise is requested on the ground of
doubtful validity
Estate tax cases where compromise is
requested on the ground of financial
incapacity (Section 2, RR 30 - 2002)
Basis for Acceptance of
A. DOUBTFUL VALIDITY - 40% of Basic Tax (minimum)
Delinquent account is one resulting from jeopardy
assessment (Assessment is made without the benefit of
complete audit).
Assessment seems to be arbitrary in nature, appearing
to be based on presumptions and there is reason to
believe that it is lacking in legal and factual basis.
The taxpayer failed to file an administrative protest on
account of alleged failure to receive assessment notice.

The taxpayer failed to file a request for
reinvestigation/reconsideration within thirty (30)
days from the receipt of Final Assessment Notice.
The Taxpayer failed to elevate to the CTA an adverse
decision of the Commissioner or his authorized
representative.
Assessments were issued on and after January 1,
1998 where demand notice failed to comply with the
formalities prescribed under Section 228, NIRC.
Assessments are based on “Best Evidence Obtainable”
rule and there are reasons to believe that the assessment
can be disputed by sufficient evidence.
The assessment was issued within the period for

assessment as extended by virtue of the taxpayer
execution of waiver of the statute of limitations wherein
the validity or authenticity thereof is being questioned.
(Section 3.1, RR 30-2002)
B. FINANCIAL INCAPACITY - 10% of basic tax (minimum)
Taxpayer had ceased operation or already dissolved.
Taxpayer is suffering from surplus or earnings deficit
resulting to impairment in the original capital by at least 50%.
Taxpayer is suffering from net worth deficit (total liabilities
exceed total assets).
Taxpayer is purely compensation income earner with no
other sources of income.
Taxpayer has been declared by competent authority as
bankrupt or insolvent (Section 3.2, RR 30-2002).

Policies on Compromise Settlement
(RMO 22-2001)
No compromise for reason of financial incapacity shall be considered
unless taxpayers waives in writing his right to secrecy of bank deposits.
The taxpayer is required to submit the Affidavit of No Tax Credit
Certificate (TCC) claim.
No compromise for reason of doubtful validity shall be considered when
the assessed basic tax has been adjusted as a result of
reinvestigation/reconsideration and the taxpayer agrees to the said
adjustment.
Assessment confirmed by the lower court but appealed to a higher court
cannot be compromised on the ground of doubtful validity.
Offer of compromise shall meet all the conditions and requirements
prescribed by law and regulations.

(RR 30-2002 and RMO 22-2001)
Assessments subject for compromise shall be covered by Preliminary
Assessment Notice (PAN) or Final Assessment Notice (FAN) issued by
the Assessment Division.
Jeopardy assessment shall refer to those issued without the benefit of a
complete or partial audit by an authorized revenue officer who has
reason to believe that the assessment and collection of the deficiency
tax will be jeopardized by delay because of the taxpayer’s failure to
present his books of accounts and records.
Non-operating companies shall refer to those which have discontinued
operation permanently.
Assessments which consist solely of increments can be settled through
compromise. For this purpose, the increments due shall be considered
as the basic tax due.
(RR 30-2002, RMO 22-2001 and RMO 20-2007)
Evaluation of offers of compromise shall, in all cases, be
conducted by Technical Working Groups (TWGs) in the national
and regional levels.
The taxpayer is required to pay the amount offered before the
application for compromise maybe evaluated by the National
Evaluation Board (NEB) or the Regional Evaluation Board (REB).
TCCs shall not be allowed as payment of the offers of
compromise.
Evaluation of compromise shall be done on a per tax type basis.
The NEB or REB shall notify the taxpayer of the denial of his
application and the reason of its denial.
Authority to Abate or Cancel
a Tax Liability (RR 13-2001 and RR 15-2006)
The CIR may abate or cancel a tax liability when:
Tax or any portion thereof appears to be unjustly
or excessively assessed.
Administration and collection cost involved do not
justify the amount to be collected.
Taxpayer is dead, leaving no distrainable/leviable
property.
Collection of the delinquent account has been
prescribed.

Authority to Cancel Assessment (ATCA)
ATCA shall be issued to any of the following instances:
a) The difference between the amounts of the original tax
assessment and the reduced tax assessment after the
originally issued FAN/FLD has been modified, amended, or
declared “null and void” covered by a final administrative
decision by the CIR or his duly authorized revenue official
as shown in the FDDA duly numbered for monitoring and
tracking purposes, after the conduct of review/evaluation/
reconsideration of the factual and/or legal bases raised in
its protest/appeal/motion for reconsideration, therefore, as
defined under RR No. 12-99 as amended by RR Nos. 18-
2013 and 7-2018;
b) Final approval of the corresponding application for
compromise settlement and abatement or cancellation
of penalties pursuant to Section 204 (a) of the Tax Code
and its implementing regulations;
c) Decision by the competent court/s where the
assessment was either modified, amended or declared
“null and void” with finality as shown in the entry of
judgment;
d) Declaration that the AR/DA case is uncollectible due to
insolvency by a competent court in a final and
executory judgment;
e) Taxpayer’s availment of the tax amnesty which are
included in the List of the Tax Amnesty Availers
provided by the Office of the Commissioner or
Deputy Commissioner, Operations Group;
f) Condonation of the assessment by virtue of law,
provided the required documentations thereon
have been submitted, evaluated and thereafter
approved by the Commissioner or his authorized
Revenue Official;
g) When the right of the government to assess/collect the
corresponding deficiency/delinquent taxes has
prescribed in accordance with Sections 203 and 222 of
the tax Code, as amended, and the cancellation due to
the aforesaid reason has been approved by the CIR
based on the recommendation of the National
Committee on prescribed Cases that was created for
this purpose; and
h) AR/DA case/s that are recommended for write-off and
approved by the CIR or his duly authorized
representative.
Grounds for Write-Off:
1) Individual taxpayer is deceased and no distrainable or
leviable assets could be found;
2) Permanent cessation of business;
3) Dissolution;
4) Taxpayer is a general partnership and the individual
partners are already deceased;
5) AR/DA case/s with a total amount due of Php20,000.00
and below, provided that all collection enforcement
summary remedies have been fully exhausted; and
6) Such other meritorious cases which the Commissioner
may deemed necessary to be covered by ATCA.
Remedies for the Collection of Delinquent
Accounts (Section 205, NIRC)
By distraint of goods, chattels, and other
personal properties of whatever character,
including stocks and other securities, debts,
credits, bank accounts and interest in and
right to personal properties; by levy upon
real property and interest in or rights to real
property
By civil or criminal action

Cost of Collecting Delinquent Accounts
The Bureau of Internal Revenue shall advance
the amount needed to defray the cost of
collection by means of civil or criminal action,
including the expenses incurred in the
advertisement and sale of the distrained and
levied properties, as well as the preservation
or transportation of personal property
distrained (Section 205, NIRC).
Memorandum of Assignment (MOA)
MOA is a written instruction given to a case officer to:
1. Verify whether the delinquent account is already settled
2. Serve and execute the Warrant of Distraint and/or Levy
and other administrative summary processes to enforce
collection of delinquent account
3. Conduct an extensive search of properties (personal
and real) of the delinquent taxpayer
4. Submit Progress Report on the current status of the AR

Warrant of Distraint
and/or Levy (WDL)
A Warrant of Distraint and/or Levy (BIR Form 1301) is an
authority given to the Head or Chief of a Collecting Office to
go after the properties (personal and real) of a delinquent
taxpayer to enforce the collection of his tax liabilities.
Distraint refers to the seizure of the personal property,
tangible and intangible, by the government for the
satisfaction of a delinquent account.
Levy refers to the seizure of the real properties by the
government for the satisfaction of a delinquent account.
Effect of the Failure to Issue and Execute the
Warrant of Distraint and/or Levy
Any official who fails to issue or execute the WDL
within thirty (30) days after the expiration of the
time prescribed in Section 207, NIRC, or who is
found guilty of abusing the exercise thereof by
competent authority shall be automatically
dismissed from the service after due notice and
hearing (Section 273, NIRC).

Real Property
Article 415. The following are immovable properties:
1. Land, buildings, roads and constructions of all kinds adhered to
the soil;
2. Trees, plants, and growing fruits, while they are still attached to
the land or form an integral part of an immovable;
3. Everything attached to an immovable in a fixed manner, in such
a way that it cannot be separated therefrom without breaking
the material or deterioration of the object;
4. Statues, reliefs, paintings or other objects for use or
ornamentation, placed in buildings or on lands by the owner of
the immovable in such a manner that it reveals the intention to
attach them permanently to the tenements;
Real Property
5. Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may
be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
6. Animal houses, pigeon-houses, beehives, fish ponds or breeding
places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently
attached to the land, and forming a permanent part of it; the
animals in these places are included;
7. Fertilizer actually used on a piece of land;

Real Property
8. Mines, quarries, and slag dumps, while the matter
thereof forms part of the bed, and waters either
running or stagnant;
9. Docks and structures which, though floating, are
intended by their nature and object to remain at a
fixed place on a river, lake, or coast; and
10. Contracts for public works and services and other real
rights over immovable property.
Source: New Civil Code of the Philippines
Personal Property
Article 416. The following are immovable properties:
1. Those movables susceptible of appropriation which are not
included the preceding article
2. Real property which by any special provision of law is considered
as personal
3. Forces of nature which are brought under control by science
4. In general, all things which can be transported from place to place
without impairment of the real property to which they are fixed
Source: New Civil Code of the Philippines
Notice of Tax Lien (NTL)
Notice of Tax Lien is filed by the Chief,
Collection Division with the Register of
Deeds/Assessor’s Office of the city or
province where the real property of the
delinquent taxpayer is located in order to
validate the legal claim or the charge by the
government against him.

NTL Process
Arrears Management Register of Taxpayer
Section Deeds/Assessor
Process NTL
Files NTL with Receives NTL (Note:

Register of Make sure that date of
Deeds/Assessor receipt is indicated)
Records in RD’s Book of

Notices A
NTL Process

NTL Process

NTL Process

Distraint
Distraint refers to the seizure of personal property (tangible
or intangible) by the government to enforce the
payment of a tax liability.
Mode of enforcing the distraint
1. Actual Distraint (Always with Assessment Notice)
1.1 Constructive Seizure
1.2 Actual Seizure
2. Constructive Distraint (With or Without
Assessment Notice)
No court shall have the authority to grant injunction to
restrain the collection of internal revenue taxes
(Section 218, NIRC).
Officers Authorized to
Distraint Personal Properties
Authorized Officer Amount Involved
Commissioner or his duly In excess of Pho 1M
authorized representative
Chief, Collection Division Less than Php 1M
Source: Section 207, NIRC

Actual Distraint Process
Actual distraint of personal property
involves the CONSTRUCTIVE SEIZURE
of the personal property (tangible or
intangible) of the delinquent taxpayer to
partially satisfy his/her tax obligation



Constructive Distraint
Constructive Distraint is issued to safeguard the interest of the
government when a delinquent taxpayer or any taxpayer who,
in the opinion of the commissioner, is intending to:
retire from a business subject to tax
leave the Philippines
transfer his properties outside of the Philippines
hide or conceal his properties
perform any act to obstruct the proceedings to collect
the tax
NOTE: There is no definite tax due in constructive distraint.

How Constructive Distraint of Personal Property is
Effected (Section 206, NIRC)
List down the personal properties subject to distraint
using MEMORANDUM RECEIPT (BIR Form 2801);
Require the taxpayer or any person having possession or
control of the personal property placed under
constructive distraint to sign the Memorandum Receipt
(BIR Form 2801);
Recite to the taxpayer or the person having possession or
control of the personal property placed under
constructive distraint his obligation to preserve the same
intact and unaltered and not to dispose the same without
the express authority of the Commissioner;
How Constructive Distraint of Personal Property is
Effected (Section 206, NIRC)
In case the taxpayer or the person having
possession or control of the personal property
placed under constructive distraint refuses to sign
the Memorandum Receipt, leave a copy thereof in
the premises where the property distraint is
located in the presence of two witnesses; and
Indicate in the Memorandum Receipt the sum
demanded, if any.
Liability of Persons whose Personal Property
is Placed Under Constructive Distraint
Persons who sell, transfer, encumber or dispose the
property under Constructive Distraint shall be:
a) Fined in the amount of not less than twice the
value of the property (but not less than Php
5,000.00)
b) Imprisoned for not less than two years and one
day but not more than four years
[Section 276, NIRC]
Warrant of Garnishment
It is a proceeding in the nature of attachment
wherein the credits, properties or effects of a
delinquent taxpayer in the hands of a third
party may be made to satisfy the collection
of his tax liabilities being enforced by a
warrant of the Bureau of Internal Revenue.

Warrant of Garnishment Process

Warrant of Garnishment Process

Failure to Surrender Property Placed
Under Distraint and Levy
Any person who fails or refuses to surrender any of such property
or right shall be liable in his own person and his estate to the
government in a sum equal to the value of the property or rights
not to surrender but not exceeding the amount of the taxes
(including penalties and interest) for the collection of which such
warrant had been issued, together with cost and interest if any,
from the date of such warrant. In addition, such person shall, upon
conviction for each act or omission, be punished by a fine of not
less than five thousand pesos (Php 5,000.00), or suffer
imprisonment of not less than six (6) months and one (1) day but not
more than two (2) years or both [Section 277, NIRC].

Sale of Distrained Personal Property(ies)
and the Disposition of its Proceeds





Nature of Levy on Real Property
Levy refers to the seizure of real properties and interest
in or right to such properties by the government in order
to enforce the collection of the tax
Notice of Levy refers to the written notice of the seizure
of a real property by the CIR addressed to the
City/Municipal Assessor in the case of untitled real
properties. It is addressed to the Register of Deeds of the
city or province where it is situated in the case of titled
real properties, for annotation of the same at the back of
the Tax Declaration (TD) or at the back of the title, in
order to enforce collection of the delinquent taxes due
from a taxpayer (BIR Form 2802-A).
Policies on Levy on Real Properties
Real property may be levied upon before, simultaneously
or after the distraint of personal property of the
delinquent taxpayer to enforce collection of his tax
liability (Section 207 (B), NIRC).
A duly authenticated certificate (Notice of Levy) showing
the name of the taxpayer and the amount of the tax and
penalty due from him shall be prepared by any internal
revenue officer designated by the Commissioner or his
authorized representative. Said certificate shall operate
with the force of a legal execution throughout the
Philippines (Section 207 (B), NIRC/BIR Form 2802-A).

A levy shall be effected by writing upon said certificate a
description of the property upon which the levy is made
(Section 207 (B), NIRC/BIR Form 2802-A).
Notice of Levy shall be served to:
a) Register of Deeds of the province or city where the
property is located
b) Assessor of the city/municipality where the untitled
real property is located
c) Delinquent taxpayer or if he is absent from the
Philippines, to his agent or his manager; or if there
be none, to the occupant of the property

In case the Notice of Levy on real property is not issued
before or simultaneously with the Warrant of Distraint on
personal property and the personal property is not sufficient
to satisfy the tax delinquency, the Commissioner or his
authorized representative shall proceed with the levy on real
property within thirty (30) days after the execution of the
Warrant of Distraint (Section 207 (B), NIRC).
Report on the service of the Notice of Levy shall be
submitted within ten (10) days after the same was served
(Section 207 (B), NIRC).
Real properties under CUSTODIA LEGIS or property
held in trust shall not be subjected to levy (example:
real properties of a bank under receivership shall not
be subjected to levy). However, the BIR may file a
third party claim on these real properties.
The real property should be clearly described on the
Notice of Levy. A mistake or confusion on the
description of the real property and the name of the
owner of the said real property will void the auction
sale.
Contents of the Notice of Levy
(BIR Form 0702)
Name and address of the Register of Deeds to
whom the NOL is served.
Name and address of delinquent taxpayer.
Number of The Certificate of Title (TCT), area
and location of the real property.
Request letter stating that the Notice of Levy
be annotated at the back of the TCT.
Contents of the Notice of Levy
(BIR Form 0702)
Instruction that no transfer or any kind of
disposition of such real properties shall be
made without prior consent or authority of the
CIR or his duly authorized representative.
Name and address of the taxpayer to whom a
copy of the NOL is furnished.
Certification of the revenue officer that the
NOL was served to the Register of Deeds and
to the delinquent taxpayer.
Notice of Levy Process




Policies on the Advertisement and
Sale of Levied Real Properties
Within twenty (20) days after levy, the case officer shall
advertise the real property or a usable portion thereof as
may be necessary to satisfy the tax liability (Section 213,
NIRC).
The case officer shall make an ocular inspection of the
levied real property to identify the same with certainty.
The ocular inspection report shall include the following:
a. Picture of the real property
b. Location plan
c. Status of the property (example: planted rice with
residential house)
Policies on the Advertisement and
Sale of Levied Real Properties
The advertisement of the auction sale shall cover a period of at least
thirty (30) days. The Notice of Sale shall be published once a week for
three (3) weeks in a newspaper of general circulation in the municipality
or City where the real property is located. Notice of Sale, together with
the guidelines of the auction sale, shall, likewise, be posted at the
bulletin boards of the municipal building or City Hall and in public and
conspicuous place in the locality, as well as in the bulletin boards of the
concerned revenue district officer and the Collection Division (Section
213, NIRC).
At anytime before the fixed date for the sale, the levying officer may
discontinue all proceedings when the taxpayer pays the tax liability.
Note: If the taxpayer settles his tax liability when the Notice of Sale (NOS)
was already published in the newspaper, he should refund to the BIR the
cost of publication.
Contents of the Notice of Sale
BIR Form 2803
1. The amount of tax and penalties due such as:
basic tax
surcharge
updated interest due
2. Time and place of sale
3. Name and address of the taxpayer against whom the
property is distrained and/or levied
4. Exact location and description of the property to be
sold
Contents of the Notice of Sale
BIR Form 2803
5. Terms of payment (indicated in the RULES
OF AUCTION SALE)
6. Statement that reads: “The Bureau of Internal
Revenue reserves the right to reject any or
all bids received”
7. Time and place of execution of the Notice of
Sale
8. Authorized signatory of the Notice of Sale
Advertisement/Publication of
Notice of Sale Processes

Advertisement/Publication of
Notice of Sale Processes

Preparatory Steps in the
Auction Sale of Real Property
1. Review the record of the case to determine if all the necessary
procedures in compliance to due process are served and
done.
2. If the real property is unregistered and the evidence of
ownership is only a TAX DECLARATION (TD) and/or even if
TITLED but the said property can not be IDENTIFIED and
LOCATED, the RDO shall request the BUREAU OF LANDS
and/or the LAND REGISTRATION AUTHORITY to provide a
geodetic engineer or surveyor to conduct the survey. The RDO
may also employ the services of a PRIVATE GEODETIC
ENGINEER for the said purpose. The expenses of the survey
will be funded by the FINANCE DIVISION of the regional office
concerned
3. Form the AUCTION SALE TEAM who shall be
composed of:
Auction Sale Committee
Advisers
Secretariat
4. The functions of the Auction Sale Committee shall be
incorporated in the Regional Revenue Special Order
which include the following:
a. Post the Notice of Sale at the bulletin boards of
the municipality/city hall and other public places
in the said municipality/city
b. Conduct an ocular inspection of the property to
determine with certainty the location of the real
property, as well as the current status of the real
property
c. Prepare guidelines and/or rules on the conduct
of the bidding
d. Determine the minimum bid price for the real
property to be auctioned
e. Conduct the auction sale bidding
f. Cause the inscription and/or registration of
the sale with the Register of Deeds of the
municipality/city/province where the
subject real property is located
g. Sign all pertinent documents related to the
auction sale
h. Perform other matters inherent and relevant
to the Auction Sale

5. Determine the minimum bid for the property to be sold.
The Minimum Bid/Floor Price for real properties pursuant
to the provisions of Section 6(E) of the National Internal
Revenue Code of 1997, as amended, shall be the highest
among the following:
The latest Fair Market Value as determined by the
Commissioner based on the prevailing Department
Order bearing on the published Schedules of Zonal
Values of Real Properties;
The FMV shown in the latest tax declaration issued by
the provincial, city or municipal assessor;
5. Determine the minimum bid for the property to be sold. The
Minimum Bid/Floor Price for real properties pursuant to the
provisions of Section 6(E) of the National Internal Revenue Code of
1997, as amended, shall be the highest among the following:
The purchase price offered/proposed by the former owner or
any interested party by way of negotiated sale of the acquired
real property; and
The corresponding or proportionate amount of deficiency
internal revenue taxes, including the delinquency penalties,
which were given up by the government as a result of the
forfeiture proceedings, including the costs of forfeiture and
maintenance of the subject property.
6. Determine the FMV and/or ZONAL VALUE of the
property to be sold at public auction. The fair market
value of the real properties can be obtained from: (a)
accredited real estate dealers; (b) municipal/city
assessors and treasurers; and (c) recent selling price
of real properties sold in the locality as shown in the
capital gains tax return filed with the RDO.

7. In cases where the fair market value/zonal value of the
real properties to be sold is much bigger than the actual
tax liability, including the increments incident to
delinquency and expenses of sale, and the real property
is capable of further subdivision; prior arrangement shall
be made with the delinquent taxpayer to delineate which
portion of his land shall be taken for sale. The delineation
has to be mentioned in the Notice of Sale as to which
portion of the lot is to be sold thru auction sales. The
revenue officer is not precluded from choosing the
portion of the land which can easily be sold.
8. If the lot is small, but the fair market value of which
is much bigger than the tax liability and expenses
of sale, and the lot is no longer capable of further
subdivision, as in a one hundred (100) square meter
lot, it should be sold at fair market value and the
excess of the proceeds of the sale over the tax
liability and expenses of sale shall be turned over
to the delinquent taxpayer.
9. Arrange for a representative of the Commission on
Audit to act as witness to the auction sale.
Procedures on Auction Sale and Awards
The Case Officer:
1. Reads the Notice of Sale aloud for everyone
present to hear and set the minimum bid of the
government.
2. Calls all the participants or bidders; name of the
taxpayer or his/her representative shall also be
called, whether present or not.
The Secretariat:
1. Records the names and addresses of the bidders
present as well as the witnesses to the bidding
process.
Procedures on Auction Sale and Awards
2. Distributes the “Guidelines for Auction Sale” and the application
for bid forms.
Note: Contents of the Bid Form:
Date of the application
Name and address of the bidder
Description of the real property
Name of the owner of the real property
Minimum bid of the government
Amount of bid
Mode of payment
Signature of the applicant
Signature of the Revenue Officer, Asst. Revenue
District Officer, Revenue District Officer and
Regional Director
Procedures on Auction Sale
and Awards
3. Collects all the bid forms from participating bidders and put their
quoted price in the Abstract of Canvass to determine the highest
bidder.
Note: Contents of the Abstract of Canvass
Name and address of the taxpayer
Amount of liability
Description of the property
Floor price
Name and address of bidders
Amount of their bids
Name of the Revenue Officer assigned to the case
Witnesses
The Abstract of Canvass should be noted by the Regional
Director/Revenue District Officer
and Awards
4. Forfeit the real property in favor of the
government if the highest bid is lower than the
minimum bid of the government or if there is no
bidder.
5. Declares the bidder as the highest bidder as the
winner if the bid price is higher than the
minimum bid of the government.

and Awards
6. Accepts payment from winning bidder.
Whenever possible, immediate payment at the
time of sale shall be considered. If it is
determined that this option cannot be used, like
when the amount of the minimum bid amount is
too large, consideration shall be given to other
payment options. All payments shall be made in
cash or in manager’s check payable to the
Commissioner of Internal Revenue.
and Awards
7. Issues a Provisional Certificate of Sale of Real Property to the
winning bidder after payment to the bureau has been made.
The winning bidder is awarded a Deed of Conveyance upon
failure of the taxpayer to exercise his right to redemption.
In case the proceeds of sale exceed the tax liability plus
expenses of collection and auction sale, the residue thereof
shall be returned to the delinquent taxpayer. If the taxpayer
refuses to accept the same, it shall be deposited to the court
or to the bank under the taxpayer’s name. The taxpayer shall
be notified of the bureau’s action.

and Awards
8. Issues a Declaration of Forfeiture of Real
Property if the highest bid is lower than the
minimum bid of the government or if there is
no bidder present,.
9. Prepares and attaches to the record of the case

a report of the Public Auction Sale.

Forfeiture of Real Property in favor of the
Government (Section 215, NIRC)
The Real Property is declared forfeited if the highest bid is lower than the
bid of the government or if there is no bidder present. The following
procedures shall be followed:\
1. Issue a Declaration of Forfeiture of Real Property. The original copy
shall be filed with the Register of Deeds concerned and the duplicate
copy shall be sent to the taxpayer.*
2. Enter in the records of the Revenue District Office the report of the
proceedings within two (2) days after forfeiture. A copy of the
minutes/report of sale shall be attached to the record of the case.
* It shall be duty of the Register of Deeds concerned, upon registration of the Declaration
of Forfeiture at his office, to transfer immediately the title of the property forfeited to the
government upon failure of the taxpayer to exercise his right to redemption within one
(1) year without the necessity of an order from a competent court.
Redemption of the
Real Property Sold
1. If there is a winning bidder, within one (1) year from the
date of sale (date of registration with the Register of
Deeds), the delinquent taxpayer or anyone in his behalf
shall have the right of paying the amount of taxes,
penalties and interests thereon from the date of
delinquency to the date of sale. The amount includes
the interest of the purchase price at the rate of fifteen
percent (15%) per annum from the date of purchase to
the date of redemption (Section 214, NIRC).
Redemption of the
Real Property Sold
2. If the property is forfeited in favor of the government, the taxpayer or
anyone in his behalf shall have the right to redeem the real property
within one year from the date of forfeiture by paying the amount of taxes,
penalties and the interests thereon and the costs of sale and maintenance
of the real property.
Note: The owner shall not be deprived of the possession of the property
and shall be entitled to the rents and other income thereof until the
expiration of time allowed for its redemption (Section 214, NIRC). However, if
the winning bid is not sufficient to satisfy the taxpayer’s liability, the Case
Officer has the option to garnish any income that can be derived from the
real property.

Redemption of the Real Property Sold
Computation of Amount Payable by the Taxpayer in Redeeming a
Property Subject of an Auction Sale in Satisfaction of Tax Liabilities
Illustration: XYZ CORPORATION filed its final adjustment income tax
return for calendar year 2017 with a net taxable income of
P500,000.00. At the applicable income tax rate of 35% for the year
2017, its income tax amounted to P175,000.00. However, upon
investigation, it was disclosed that its income tax return was false or
fraudulent because it did not report a taxable income amounting to
another P500,000.00. On its net income of P1,000,000.00 per
investigation, the income tax due is P350,000.00. Deducting its
payment per return filed, the deficiency, excluding penalties,
amounted to P175,000.00. The taxpayer was duly informed of this
finding through a Preliminary Assessment Notice.
Due to failure to protest on time against the preliminary assessment notice, a formal
letter of demand and assessment notice was issued on May 31, 2018 demanding for
the payment of the deficiency income tax on or before June 30, 2018, as shown
below:
Calendar Year 2017 Deficiency Income Tax Assessment
Income tax due per investigation P350, 000.00
Less: Income tax paid per return 175,000.00
Deficiency income tax P175, 000.00
Add: 50% surcharge for filing a fraudulent
or false return (P175,000.00 x 50%) P87,500.00
from 4-15-18 to 6-30-18
(P175,000.00 x .2415524) 42,271.67 129,771.67
Redemption of the
Real Property Sold
Scenario 1: Computation of the total amount to be paid by the taxpayer to
redeem the property if the purchase price (winning bid) is more than the tax
liability including the delinquency penalties
Assuming that the aforementioned deficiency income tax assessment
against XYZ CORPORATION, in the amount of P304, 771.67, is not paid by
June 30, 2017, the deadline for payment of the assessment, and the taxpayer
failed to file a protest within the reglamentary period (thirty (30) days from
receipt of the assessment notice), thus, the assessment has already become
final and executory. A Warrant of Distraint and/or Levy (WDL) was issued
and served upon the taxpayer. In spite of the service of the WDL, the
taxpayer still failed to pay its deficiency income tax liability. A Notice of Tax
Lien was filed with the Register of Deeds (NTL) and the corresponding
Notice of Levy (NOL).
Redemption of the
Real Property Sold
The NTL and NOL were annotated on the title of a parcel of land with
an area of 200 square meters (sq. m.) belonging to the taxpayer. The
copies of the filed NTL and NOL were furnished the taxpayer;
however, the taxpayer still failed to pay its tax liabilities. The property
was advertised for auction sale on June 30, 2018. The minimum bid
was set at the zonal value of P3,000.00 per sq. m. (200 sq.m. x
P3,000.00 = P600,000.00). The property was sold to the bidder with the
highest bid of P650,000.00. The BIR incurred expenses on the sale
(publication, DST, miscellaneous expenses, etc.) amounting to
P42,000.00. The taxpayer was given the right to redeem the property
within one (1) year from the date of the auction sale plus 15% of the
winning bid amount.
Below is the computation on how much the taxpayer will pay to redeem its property.

(P304,771.67 x 25%) P76,192.92
from 6-30-17 to 6-30-18
(P304, 771.67 x .20) 60,800.00 136, 992.92
Compromise penalty for late payment)
during the auction sale P441,764.59
Add: Expenses of the sale (publication,
maintenance of the property, DST,
miscellaneous expenses, etc.) 42,000.00
Total Amount to be Deducted from the Purchase Price P483,764.59
Purchase price (winning bid amount) P650,000.00
Less: Tax due + delinquency penalties
+ expenses of sale 483,764.59
Amount to be Returned to the Taxpayer P166, 235.41
Computation of the Redemption Amount:

Add: 15% of the purchase price
(P650, 000.00 x 15%) 97,500.00
Gross Redemption Amount Payable
by the taxpayer P757,500.00
Less: Amount to be returned to the taxpayer
(in case the said amount has not yet
been returned to the taxpayer) 166,235.41
Net Redemption Amount Payable by the Taxpayer P591,264.59
Scenario 2: Computation of the total amount to be paid by the
taxpayer to redeem the property if the purchase price (winning bid) is
less than the tax liability including the delinquency penalties:
Assuming that the aforementioned deficiency income tax assessment
against XYZ CORPORATION, in the amount of P304,771.67, is not paid
by June 30, 2018, the deadline for payment of the assessment, and the
taxpayer failed to file a protest within the reglamentary period (thirty
(30) days from receipt of the assessment notice, thus, the assessment
has already become final and executory. A Warrant of Distraint and/or
Levy (WDL) was issued and served upon the taxpayer. In spite of the
service of the WDL, the taxpayer still failed to pay its deficiency
income tax liability. A Notice of Tax Lien was filed with the Register of
Deeds (NTL) and the corresponding Notice of Levy (NOL).
The NTL and NOL were annotated on the title of a parcel of land with
an area of 200 square meter (sq. m.) belonging to the taxpayer. The
copies of the filed NTL and NOL were furnished the taxpayer;
however, it still failed to pay its tax liabilities. The property was
advertised for auction sale on June 30, 2018. The minimum bid was set
at the zonal value of P1,000.00 per sq. m. (200 sq. m. x P1,000.00 =
P200,000.00). The property was sold to the bidder with the highest bid
of P250,000.00. The BIR incurred expenses on the sale (publication,
DST, miscellaneous expenses, etc.) amounting to P42,000.00.The
taxpayer was given the right to redeem the property within one (1) year
from the date of the auction sale plus 15% of the winning bid amount.

Below is the computation on how much the taxpayer will pay to redeem its property.
(P304,771.67 x 25%) P 76,192.92
from 6-30-17 to 6-30-18
(P304,771.67 x .20) 60,800.00 136,992.92
compromise penalty for late payment)
during the auction sale P441,764.59
Less: Amount to be applied to the tax liability
Purchase Price (winning bid amount) P250,000.00
Less: Expenses of sale (publication,
DST, miscellaneous expenses, etc.) 42,000.00 208,000.00
Balance of tax liability P233,764.59
Computation of the Redemption Amount:
Balance of tax due after the auction sale

P233,764.59
from 6/30/2018 to 6/30/2019
(P233,764.59 x .20) 46,752.92
(P250, 000.00 x 15%) 37,500.00 287,500.00
Amount Payable by the Taxpayer P568,017.51
Computation of the Amount to be Returned to the Winning

Bidder:

P250,000.00 x 15%) 37,500.00
Amount to be Returned to the Winning Bidder P287,500.00

Acquired Assets
Definition:
These are properties, either personal or real,
whose ownership has been transferred to the
government through summary remedies in full or
partial satisfaction of a delinquent taxpayer’s tax
liability or liabilities.
Classification of Acquired Assets
1. Personal Properties
2. Real Properties
Acquired Assets
Policies of the BIR on Acquired Assets
(Adopted in a Revenue Memorandum Order under consideration)
All acquired/forfeited real properties transferred
in the name of the Republic of the Philippines,
having passed the one year redemption period
shall be converted into cash within three years
from the date of acquisition/forfeiture.
Sale of acquired properties shall be strictly
monitored by the Collection Service and the
Collection Division of the Regional Office
concerned.
Acquired Assets
The actual conduct of the auction sale of acquired
real properties obtained by the government in
satisfaction of taxpayer’s tax liabilities shall be
implemented by the National/Regional Auction Sale
Committee created under a Revenue Special Order
(RSO) or Regional Revenue Special Order (RRSO).
Sale by public auction of forfeited properties shall be
witnessed by a Commission on Audit (COA)
representative to ensure that the processes to be
undertaken are in accordance with existing laws and
regulations.
Acquired Assets
The publication of Notice of Sale (NOS) shall be
made at least 20 days prior to the actual date of
public auction. The NOS shall be posted in the
BILLBOARD of the municipality/city where the real
properties are located, likewise, it shall also be
posted at the BILLBOARD of the Regional and District
Offices having jurisdiction over the subject real
properties. A sign “THIS GOVERNMENT PROPERTY IS
FOR SALE, INTERESTED PARTIES MAY CALL THE
NEAREST BIR OFFICE” shall be planted and/or
placed at the location of the real properties.
Acquired Assets
Single winning bidder may be accepted on the
seized and forfeited property, subject to the
prescribed minimum bid price and posting of the ten
percent (10%) bond thereon, unless the Bids and
Awards Committee-Acquired Assets (BAC-AA)
allows otherwise, in meritorious circumstances. The
amount of BOND shall be equivalent to 10% of the
minimum bid price. This amount shall form part of
the price of the winning bidder (RMO 31-2016).
Acquired Assets
The winning bidder shall be responsible at his
own expense for the ejection of squatters
and/or occupants, if any, in the auctioned
properties.
All taxes and expenses relative to the transfer
and issuance of Certificate of Title and/or Tax
Declaration shall be borne by the winning
bidder immediately upon signing and approval
of the Certificate of Sale.
Acquired Assets
There should be at least one bidder for every
property to have a VALID BIDDING PROCESS.
Negotiated or private sale of real properties
shall be resorted to as a consequence of failed
public bidding for two consecutive times,
subject to the approval of the Secretary of
Finance and pursuant to Section 216 of the
NIRC.
Acquired Assets
Procedures in Transferring the Title of Forfeited
Real Properties to the Republic of the Philippines
1. Identify actual location, values, ownership of
all acquired assets.
2. Prepare an AFFIDAVIT OF CONSOLIDATION
OF TITLE.
3. Register the same in the Office of the Register
of Deeds where the real property is located.

Acquired Assets
Management and Administration of Acquired
Assets
The Revenue District Officer is the
ADMINISTRATOR of all acquired assets in his
district. However, due to frequent re-shuffle of
Revenue District Officers, a permanent Revenue
Officer can be appointed in his stead.

Acquired Assets
Duties and Responsibilities of an Administrator of
Acquired Assets
1. Maintain an ANALYSIS OF SEIZED AND
FORFEITED PROPERTY to be attached to the
record of the AR case.
2. Act with dispatch so that the title and/or tax
declaration of the property is transferred from
the name of the taxpayer to the name of the
Republic of the Philippines.

Acquired Assets
3. Gather the civil fruits/income of the property
and account the proceeds thereof.
4. Pursue subsequent sale of the property,
either through public bidding or negotiated
sale.
5. Submit Monthly Inventory of Acquired Assets
to the Chief, Collection Division and to the
Assistant Commissioner–Collection Service.
Further Sale of Forfeited Property
After a real property has been absolutely forfeited to the government, the
Commissioner has the authority to sell the property in payment or satisfaction
of taxes, penalties, or other costs of collection. The Commissioner has the
option to sell the real property via:
Public Auction (by giving public notice not less than 20 days prior to the
actual date of sale)
Negotiated Sale (with prior approval of the Finance Secretary)
Negotiated or private sale of acquired/forfeited real assets shall be resorted
to after two (2) failed public biddings, subject to the approval of the Secretary
of Finance, pursuant to the provisions of Section 216 of the NIRC of 1997, as
amended. Relative thereto, the administrative remedy of foreclosure sale of
levied real properties in payment of taxes where there is no bidder shall not
be considered as failed public bidding for purposes of negotiated sale.

Procedures in a Negotiated Sale of
Acquired Real Properties
1. The Revenue District Officer performs the following:
a. Requires the buyer to make a written offer
addressed to the Commissioner of Internal
Revenue (CIR), through the Revenue District
Officer/Regional Director, if there is an
interested buyer of the real property absolutely
forfeited by the government.
b. Evaluates if the offer is to the best interest of the
government;
c. Prepares a memorandum recommending the approval of
the offer, discussing the background of the case and citing
the reasons for the negotiated sale, for signature of
Revenue District Officer. Prepare also a letter to the
Secretary of Department of Finance (DOF) requesting
approval of the negotiated case for the signature of the
Commissioner.
d. Forwards to the Regional Director, Assistant Commissioner
for Collection and Commissioner the docket together with
the memorandum and letter to the Secretary of DOF for
their signature and approval.
2. Once approved and signed, the Office of the
Commissioner shall forward the docket and all
pertinent documents thereto, together with the
approved memorandum and signed letter, to the
Secretary of DOF.
3. Upon receipt from the DOF the approved
negotiated sale, the RDO shall prepare a Deed of
Sale for signature of the Commissioner.
Processes when the Offer for
Negotiated Sale is Disapproved
If the offer for a Negotiated Sale is not approved,
the Revenue Officer shall inform the buyer thru a
letter of the disapproval and reasons for the
non-acceptance of the offer. The Revenue
Officer may inform the buyer as to what an
acceptable offer might be and encourage the
buyer to file an amended offer.
When the buyer does not file an amended offer
for a negotiated sale, the Revenue Officer shall
consider holding another auction sale.

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Topic 290

General Course for Revenue Officers CPTR 290 Slide –

General Course for Revenue Officers CPTR 290 Slide – 4

2. If before the expiration of the time provided for by

4. Any internal revenue tax which has been assessed

Refers to the amount of tax due

General Course for Revenue Officers CPTR 290 Slide – 10

General Course for Revenue Officers CPTR 290 Slide – 11

General Course for Revenue Officers CPTR 290 Slide – 12

General Course for Revenue Officers CPTR 290 Slide – 16

General Course for Revenue Officers CPTR 290 Slide – 17

General Course for Revenue Officers CPTR 290 Slide – 20

Under Collection Service

***Procedure on How to Use ARMS

Should be Encoded in ARMS Should be Encoded in ARMS

General Course for Revenue Officers CPTR 290 Slide – 24

General Course for Revenue Officers CPTR 290 Slide – 26

Illustration: Income tax return for the calendar year

Illustration: The taxpayer’s 2017 income tax return is

Total amount due P125,000.00

General Course for Revenue Officers CPTR 290 Slide – 38

Illustration: The taxpayer did not file his income tax

General Course for Revenue Officers CPTR 290 Slide – 44

General Course for Revenue Officers CPTR 290 Slide – 45

Illustration: XYZ Corporation, due to financial

General Course for Revenue Officers CPTR 290 Slide – 48

Date of Equal Surcharge Delinquency Amount Balance

Total deficiency income tax assessed on May 31, 2018

General Course for Revenue Officers CPTR 290 Slide – 54

General Course for Revenue Officers CPTR 290 Slide – 55

General Course for Revenue Officers CPTR 290 Slide – 56

General Course for Revenue Officers CPTR 290 Slide – 58

The assessment was issued within the period for

General Course for Revenue Officers CPTR 290 Slide – 61

General Course for Revenue Officers CPTR 290 Slide – 62

General Course for Revenue Officers CPTR 290 Slide – 65

General Course for Revenue Officers CPTR 290 Slide – 71

General Course for Revenue Officers CPTR 290 Slide – 73

General Course for Revenue Officers CPTR 290 Slide – 75

General Course for Revenue Officers CPTR 290 Slide – 77

General Course for Revenue Officers CPTR 290 Slide – 80

Files NTL with Receives NTL (Note:

Records in RD’s Book of

General Course for Revenue Officers CPTR 290 Slide – 82

General Course for Revenue Officers CPTR 290 Slide – 83

General Course for Revenue Officers CPTR 290 Slide – 84

Chief, Collection Division Less than Php 1M

Source: Section 207, NIRC

General Course for Revenue Officers CPTR 290 Slide – 86

General Course for Revenue Officers CPTR 290 Slide – 87

General Course for Revenue Officers CPTR 290 Slide – 88

General Course for Revenue Officers CPTR 290 Slide –

NOTE: There is no definite tax due in constructive distraint.

General Course for Revenue Officers CPTR 290 Slide – 94

General Course for Revenue Officers CPTR 290 Slide – 95

General Course for Revenue Officers CPTR 290 Slide –

General Course for Revenue Officers CPTR 290 Slide – 97

General Course for Revenue Officers CPTR 290 Slide – 98

General Course for Revenue Officers CPTR 290 Slide – 99

General Course for Revenue Officers CPTR 290 Slide – 100

General Course for Revenue Officers CPTR 290 Slide – 101

General Course for Revenue Officers CPTR 290 Slide – 102