TAX REMEDIES

Chapter Overview and Objectives

This chapter provides an overview of:
1. tax remedies available to the government in enforcing assessments and
collections
2. tax remedies available to the taxpayer in contesting tax assessments or
recovering erroneously paid taxes

TAX REMEDIES: An Introduction

Philippine taxes are self-assessing. Taxpayers compute their taxes, file tax returns,
and then pay to the government. The self-assessment method has an inherent risk:
under-compliance or noncompliance.
The government is not totally at the mercy of taxpayers. The government can
resort to its legally mandated procedures to enforce the determination and
collection of the correct amount of tax from the taxpayers. These procedures are
referred to as “government remedies.”
On the other hand, taxpayers may be improperly assessed taxes by the government.
At times, the taxpayer may erroneously pay taxes. The law provides the taxpayer
procedures for disputing assessments and in recovering taxes erroneously paid.
These procedures are called “taxpayers’ remedies.”
TAX REMEDIES OF THE GOVERNMENT
PRIMARY REMEDIES OF THE GOVERNMENT
1. Assessment
2. Collection

Assessment is the act or process of determining the tax liability of a taxpayer in

accordance with tax laws. Assessment also pertains to the notice sent by the
government to the taxpayers informing them of their unpaid or still unpaid tax
obligations coupled with a demand to pay the same.

Collection pertains to the procedures of the government to enforce payment of

unpaid taxes from delinquent taxpayers.
ASSESSMENT
An assessment calling for the payment of a deficiency tax or unpaid tax can only
be made after the government has established the correct or reasonably correct
amount of tax of the taxpayer.
Powers of the CIR Relative to the Determination of Correct Tax
Relative to the determination of the correct taxes of the taxpayer, the
Commissioner of Internal Revenue is empowered to:
a. obtain data and information from third parties
b. conduct inventory surveillance
c. examine and inspect the books of accounts of a taxpayer
d. prescribe presumptive gross sales and receipts
PRESCRIPTIVE PERIOD OF ASSESSMENT
The General Rule: 3 years
The law requires that assessment must be made within 3 years from the date of the
actual filing of the return or the deadline required by law, whichever is later.
Illustration 1: Early filing or filing on the deadline
Horacio filed his 2019 annual income tax return which was due on April 15, 2020
on March 1, 2020.
A return filed before the last day prescribed by law for filing thereof shall be
considered filed on such last day (Sec. 203, NIRC). The counting of the
prescriptive period shall be reckoned from April 15, 2020. The government must
serve the assessment to the taxpayer on or before April 15, 2023.
Illustration 2: Late filing
Assume instead that Horacio filed his 2019 annual income tax return on July 1,
2020.
Where the return is filed beyond the period prescribed by law, the 3-year period
shall be counted from the day the return is filed (Sec, 203, NIRC). Hence, the
counting of the prescriptive period shall be reckoned from July 1, 2020. The
assessment must be served on or before July 1, 2023.