Remedies, Tarrif and Custom, Local Government Tax, Real Property and Esate and Other Taxes

8/22/2019 Remedies, Tarrif and Custom, Local Government Tax, Real Property and Esate and Other Taxes

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NOTES & CASES IN TAXATION PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

1

COURT OF TAX APPEALS

RA 9282 took effect on April 23, 2004. The role of the judiciary is to be sympathetic or be

vigilant court which would check injustice or abuses of

the legislative and administrative agents of the state in

their exercise of power of taxation.

The role of the courts is limited to the application andinterpretation of tax laws.

Rationale for the Creation of CTA

1. To prevent delay in the disposition of tax cases by thethen CFI in view of the backlog of civil, criminal and

cadastral cases accumulating in the dockets of such

courts.

2. To have a body with specialized knowledge whichordinary judges are not likely to possess, thus providing

for an adequate remedy for a speedy determination of

tax cases.

Nature of the CTA

It is a court of special jurisdiction and can act only inmatter where it has exclusive original jurisdiction as

well as in aid of its appellate jurisdiction.

CTA proceedings need not be governed strictly bytechnical rules of evidence.

GR - SEC. 218 NIRC. Injunction not Available to Restrain Collection

of Tax. No court shall have the authority to grant an

injunction to restrain the collection of any national internal

revenue tax, fee or charge imposed by this Code.

Exception

Sec. 9RA 9282. No appeal taken to the CTA from the decision

of the CIR or the COC or the RTC, provincial, city or municipal

treasurer or the Secretary of Finance, the Secretary of Trade

and Industry and Secretary of Agriculture, as the case may be

shall suspend the payment, levy, distraint, and/or sale of any

property of the taxpayer for the satisfaction of his tax liability as

provided by existing law: Provided, however, That when in the

opinion of the Court the collection by the aforementioned

government agencies may jeopardize the interest of the

Government and/or the taxpayer the Court any stage of the

proceeding may suspend the said collection and require the

taxpayer either to deposit the amount claimed or to file a

Reference Reviewer on Taxation Vol. 1 & 2 by Prof. A.

Domondon, Reviewer on Taxation by Victorino Mamalateo,

Tax Law and Jurisprudence by Justice Jose Vitug and Justice

Ernesto Acosta, And Revenue Regulations 2-2003.

Unauthorized users shall be punished by the law of karma and

they will not pass the examination they shall take or be

unsuccessful and unhappy in life page ii

surety bond for not more than double the amount with the

Court.

ExclusiveAppellate Jurisdiction to Review by Appeal

1. Decisions of the CIR in cases involving disputedassessments, refunds of internal revenue taxes,

fees or other charges, penalties in relation thereto,

or other matters arising under the National

Internal Revenue or other laws administered bythe BIR. Division

2. Inaction by the CIR in cases involving disputedassessments, refunds of internal revenue taxes,

fees or other charges, penalties in relations

thereto, or other matters arising under the NIRC

or other laws administered by the BIR where the

NIRC provides a specific period of action, in

which case the inaction shall be deemed a denial.

Division

3. Decisions, orders or resolutions of the RTCs inlocal tax cases originally decided or resolved by

them in the exercise of their original or appellate

jurisdiction; If Original DIVISION; If Appellate

EN BANC4. Decisions of the Commissioner of Customs in

cases involving liability for customs duties, fees

or other money charges, seizure, detention or

release of property affected, fines, forfeitures or

other penalties in relation thereto, or other matters

arising under the Customs Law or other laws

administered by the BOC;Division

5. Decisions of the CBAA in the exercise of itsappellate jurisdiction over cases involving the

assessment and taxation of real property originally

decided by the provincial or city board of

assessment appeals;En Banc

6. Decisions of the Secretary of Finance on customscases elevated to him automatically for reviewfrom decisions of the Commissioner of Customs

which are adverse to the Government under Sec.

2315 of the TCCDivision

7. Decisions of the Secretary of DTI, in the case ofnonagricultural product, commodity or article, and

the Secretary of Agriculture in the case of

agricultural product, commodity or article,

involving dumping and countervailing duties

under Sec 301 and 302, respectively, of the TCC,

and safeguard measures under RA 8800, where

either party may appeal the decision to impose or

not to impose said duties.Division

The appellate jurisdiction of the CTA is not limited tocases which involve decisions of the CIR on mattersrelating to assessments or refunds. It gives the CTA the

jurisdiction to determine if the warrant of distraint and

levy issued by the BIR is valid and to rule if the Waiver

of Statute of Limitations was validly effected [PHIL.

JOURNALISTS, INC., v. CIR 447 SCRA 214]

Jurisdiction over cases involving Criminal Offenses

1. Exclusive original jurisdiction over all criminaloffenses arising from violations of the NIRC or


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TCC and other laws administered by the Bureau

of Internal Revenue or the BOC: Provided,

however, That offenses or felonies mentioned in

this paragraph where the principal amount o taxes

and fees, exclusive of charges and penalties,

claimed is less than One million pesos or where

there is no specified amount claimed shall be tried

by the regular Courts and the jurisdiction of the

CTA shall be appellate. Any provision of law orthe Rules of Court to the contrary

notwithstanding, the criminal action and the

corresponding civil action for the recovery of civil

liability for taxes and penalties shall at all times

be simultaneously instituted with, and jointly

determined in the same proceeding by the CTA,

the filing of the criminal action being deemed to

necessarily carry with it the filing of the civil

action, and no right to reserve the filling of such

civil action separately from the criminal action

will be recognized.

Exclusive appellate jurisdiction in criminal offenses:

1. Over appeals from the judgments, resolutions ororders of the RTCs in tax cases originally

decided by them, in their respected territorial

jurisdiction.

2. Over petitions for review of the judgments,resolutions or orders of the RTCs in the exercise

of their appellate jurisdiction over tax cases

originally decided by the MeTC, MTC and

MCTC in their respective jurisdiction.

The civil case for the collection of unpaid customsduties and taxes cannot be simultaneously instituted

and determined in the same proceedings as the criminal

cases before the Sandiganbayan, as it cannot be made

the civil aspect of the criminal cases filed before it. Saidobligation is not a consequence of the felonious acts

charged in the criminal proceeding nor is it a mere civil

liability arising from crime that could be wiped out by

the judicial declaration of non-existence of the criminal

acts charged [PROTON PILIPINAS v. REPUBLIC 504 SCRA

528]

The determination of the validity or invalidity of the TaxCredit Certificates cannot be regarded as a prejudicial

issue that must first be resolved with finality in the

Criminal Cases filed before the Sandiganbayan [supra]

Jurisdiction over Tax Collection Cases

1. Exclusive original jurisdiction in tax collectioncases involving final and executory assessmentsfor taxes, fees, charges and penalties: Provided,

however, That collection cases where the principal

amount of taxes and fees, exclusive of charges

and penalties, claimed is less than One million

pesos shall be tried by the proper MTC, MeTC

and RTC.

2. Exclusive appellate jurisdiction in tax collectioncases:

a. Over appeals from the judgments, resolutionsor orders of the RTC in tax collection cases

originally decided by them, in their respective

territorial jurisdiction.

b. Over petitions for review of the judgments,resolutions or orders of the Regional Trial

Courts in the Exercise of their appellate

jurisdiction over tax collection cases

originally decided by the MeTC, MTC andMCTC, in their respective jurisdiction.

Instances where the CTA would have jurisdiction even if there is no

decision yet by the CIR

1. Where the Commissioner has not acted on the disputedassessment after a period of 180 days from submission

of complete supporting documents, the taxpayer has

period of 30 days from the expiration of the 180 day

period within which to appeal to the CTA [Last par. Sec.

228]

2. Where the Commissioner has not acted on anapplication for refund or credit and the 2 year period

from the time of payment is about to expire , the

taxpayer has to file his appeal with the CTA before the

expiration of the 2 years from the time the tax was

paid.

Instances where the CTA would have jurisdiction even if there is no

decision of the Commissioner of Customs

1. Decision of the DTI Sec. or the Sec. of Agriculture inanti-dumping and countervailing duty cases are

appeallable to the CTA within 30 days from receipt of

such decision

2. In case of automatic review by the Sec. of Finance inseizure or forfeiture cases where the value of the

importation exceeds P5 million or where the decision of

the Collector of Customs which fully or partially releases

the shipment seized is affirmed by the Comm. of

Customs3. In cases of automatic review by the Sec. of Finance of a

decision of a Collector of Customs acting favorably upon

a customs protest.

The legal remedies under the NIRC available to theaggrieved taxpayer may be classified into the tax

remedies with respect to

1. Assessment2. Collection and3. refund of internal revenue taxes

The remedies may also be classified into theadministrative or the judicial remedies.

The legal remedy under the NIRC available to anaggrieved taxpayer at administrative level with respect

to refund or recovery of tax erroneously or illegally

collected is to file a claim for refund or credit with the

CIR [1st

Par. Sec. 229]

The legal remedy under the NIRC available to anaggrieved taxpayer at judicial level with respect to

refund or recovery of tax erroneously or illegally

collected is the filing of a suit or proceeding with the

CTA before the expiration of the 2 years from the date


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of payment of the tax regardless of any supervening

cause that may arise after payment [2nd

Par. Sec. 229]

or within 30 days from receipt of the denial by the CIR

of the application for refund or credit [Sec. 11 RA 1125]

REMEDIES

DISPUTED ASSESSMENT

SEC 228.Protesting of Assessment.When the Commissioner

or his duly authorized representative finds that proper taxes

should be assessed, he shall first notify the taxpayer of his

findings: Provided, however, That a pre-assessment notice

shall not be required in the following cases:

a. When the finding for any deficiency tax is theresult of mathematical error in the computation of

the tax as appearing on the face of the return;

b. When a discrepancy has been determined betweenthe tax withheld and the amount actually remitted

by the withholding agent; or

c. When a taxpayer who opted to claim a refund ortax credit of excess creditable withholding tax for

a taxable period was determined to have carriedover and automatically applied the same amount

claimed against the estimated tax liabilities for the

taxable quarter or quarters of the succeeding

taxable year; or

d. When the excise tax due on excisable articles hasnot been paid; or

e. When an article locally purchased or imported byan exempt person, such as, but not limited to,

vehicles, capital equipment, machineries and spare

parts, has been sold, traded or transferred to non-

exempt persons.

The taxpayers shall be informed in writing of the law and

the facts on which the assessment is made; otherwise, theassessment shall be void.

Within a period to be prescribed by implementing rules and

regulations, the taxpayer shall be required to respond to said

notice. If the taxpayer fails to respond, the Commissioner or

his duly authorized representative shall issue an assessment

based on his findings.

Such assessment may be protested administratively by filing

a request for reconsideration or reinvestigation within 30

days from receipt of the assessment in such form and

manner as may be prescribed by implementing rules and

regulations. Within 60 days from filing of the protest, all

relevant supporting documents shall have been submitted;otherwise, the assessment shall become final.

If the protest is denied in whole or in part, or is not acted

upon within 180 days from submission of documents, the

taxpayer adversely affected by the decision or inaction may

appeal to the CTA within 30 days from receipt of the said

decision, or from the lapse of the 180-day period; otherwise,

the decision shall become final, executory and demandable.

OUTLINE of TAX REMEDIES of a TAXPAYER & the Government

relative to Assessment of Internal Revenue Taxes

DISPUTED ASSESSMENT

1. THE TAXPAYER FILES HIS TAX RETURN2. A LETTER OF AUTHORITY IS ISSUED BY THE BIR

EXAMINER TO AUDIT OR EXAMINE THE TAX RETURNAND DETERMINE WHETHER THE FULL AND COMPLETES

TAXES HAS BEEN PAID

The Letter of Authority [LA] should indicate accuratelythe year or years to be examined and the name of the

examiner authorized to examine. The LA must be

served to the taxpayer within 30 days from its date of

issue, otherwise it becomes null and void. An LA issued

by an RDO which does not have jurisdiction over the

taxpayer has no force and effect.

Once an LA has been issued a tax return cannot beamended.

3. IF THE EXAMINER IS SATISFIED THAT THE TAX RETURN ISTRULY REFLECTIVE OF THE TAXABLE TRANSACTION ANDALL TAXES HAVE BEEN PAID THE PROCESS ENDS.

HOWEVER IF THE EXAMINER IS NOT SATISFIED THAT

THE TAX RETURN IS TRULY REFLECTIVE OF THE TAXABLE

TRANSACTION AND THAT THE TAXES HAVE NOT BEEN

FULLY PAID, A NOTICE OF INFORMAL CONFERENCE IS

ISSUED INVITING THE TAXPAYER TO EXPLAIN WHY HE

SHOULD NOT BE SUBJECT TO ADDITIONAL TAXES

4. IF THE TAXPAYER ATTENDS THE INFORMALCONFERENCE AND THE EXAMINER IS SATISFIED WITH

THE EXPLANATION OF THE TAXPAYER, THE PROCESS IS

AGAIN ENDED.

If the taxpayer fails to respond within 15 days from dateof receipt of the notice for informal conference, he shall

be considered in default, in which case, the RDO or the

Chief of the Special Investigation Division of the

Revenue Regional Office, or the Chief of Division in the

National Office, as the case may be, shall endorse the

case with the least possible delay to the Assessment

Division of the Revenue Regional Office or to the

Commissioner or his duly authorized representative, as

the case may be, for appropriate review and issuance of

a deficiency tax assessment, if warranted [RR 12-99 Sec.

3 3.1.1]

If after review and evaluation by the AssessmentDivision or by the Commissioner or his duly authorized

representative, as the case may be, it is determined

that there exists sufficient basis to assess the taxpayer

for any deficiency tax or taxes, the said Office shall issue

to the taxpayer, at least by registered mail, a

Preliminary Assessment Notice [PAN] for the proposed

assessment, showing in detail, the facts and the law,

rules and regulations, or jurisprudence on which the

proposed assessment is based [RR 12- 99 Sec. 3 3.1.2]


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The PAN requires the taxpayer to explain within 15 days from

receipt why no notice of assessment and letter of demand

for additional taxes should be directed to him

If the taxpayer fails to respond within 15 days from dateof receipt of the PAN, he shall be considered in default,

in which case, a formal letter of demand and

assessment notice shall be caused to be issued by the

said Office, calling for payment of the taxpayer'sdeficiency tax liability, inclusive of the applicable

penalties [RR 12- 99 Sec. 3 3.1.2]

GR - Notice of informal conference is required before the issuance

of a PAN and a PAN is required before the issuance of assessment

notice.

Exceptions - The notice for informal conference and the

preliminary assessment notice shall not be required in any of the

following cases, in which case, issuance of the formal assessment

notice for the payment of the taxpayer's deficiency tax liability

shall be sufficient:

1. When the finding for any deficiency tax is the result ofmathematical error in the computation of the tax

appearing on the face of the tax return filed by thetaxpayer; or

2. When a discrepancy has been determined between thetax withheld and the amount actually remitted by the

withholding agent; or

3. When a taxpayer who opted to claim a refund or taxcredit of excess creditable withholding tax for a taxable

period was determined to have carried over and

automatically applied the same amount claimed against

the estimated tax liabilities for the taxable quarter or

quarters of the succeeding taxable year; or

4. When the excise tax due on excisable articles has notbeen paid; or

5. When an article locally purchased or imported by anexempt person, such as, but not limited to, vehicles,

capital equipment, machineries and spare parts, hasbeen sold, traded or transferred to non-exempt persons

[RR 12-99 SEC 3. 3.1.3]

Requirements of Due Process for Validity of Assessment Notice

1. The issuance of a notice for informal conference2. A pre-assessment notice must be furnished the

taxpayer advising him that proper taxes should be

assessed.

5. IF THE CIR IS SATISFIED WITH THE EXPLANATION OF THETAXPAYER THEN THE PROCESS IS AGAIN ENDED. IF THE

TAXPAYER IGNORES THE PAN BY NOT RESPONDING OR

HIS EXPLANATION IS NOT ACCEPTED BY THE CIR THEN A

NOTICE OF ASSESSMENT AND A LETTER OF DEMAND IS

ISSUED BY THE COMMISSIONER OR HIS DULY

AUTHORIZED REPRESENTATIVE.

The letter of demand calling for payment of thetaxpayer's deficiency tax or taxes shall state the facts,

the law, rules and regulations, or jurisprudence on

which the assessment is based, otherwise, the formal

letter of demand and assessment notice shall be void.

The same shall be sent to the taxpayer only by

registered mail or by personal delivery [RR 12-99 SEC 3.

3.1.4]

Rationale to give the taxpayer the opportunity torefute the findings of the examiner and give a more

accurate and detailed explanation regarding

assessments.

SEC. 203. Period of Limitation upon Assessment andCollection. Except as provided in Sec. 222, internal

revenue taxes shall be assessed within 3 years after the

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 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 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.

The notice of assessment must be issued by the CIRwithin a period of 3 years from the time the tax returnwas filed or should have been filed whichever is the

latter of the two events. Where the taxpayer did not file

a tax return or where the tax return filed is false or

fraudulent, then the CIR has a period of 10 years from

discovery of the failure to file a tax return or from

discovery of the fraud within which to issue an

assessment notice. The running of the above

prescriptive periods may however be suspended under

certain circumstances.

Requisites of a Valid Assessment

1. It must be issued within the prescribed period2. As a GR it may be issued only after a pre-assessment

notice has been served upon the taxpayer

3. It must conform to the formal requisites for the validityof a formal letter of demand and assessment notice.GR Prescriptive periods for making assessments - at any time

within 3 years EXCEPTIONS:

1. After the last day prescribed by law for the filing of thereturn

2. Where a return is filed beyond the period prescribed bylaw, the 3-year period shall be counted from the day

the return was filed

3. Where the return was filed before the last dayprescribed by law for the filing thereof, it shall be

considered as filed on such last day [Sec. 203]

Exceptions - Instances where the 3 year period does not apply

1. In case of false or fraudulent return to evade thepayment of tax At anytime within 10 years after the

discovery of the falsity or fraud

2. In case of failure to file a return At anytime within 10years after the discovery of the omission to f ile a return

3. If before the expiration of the 3 year period for theassessment of the tax, there is an agreement in writing

between the taxpayer and the BIR Commissioner the

period agreed upon which may be extended by

subsequent written agreements made before the

period previously agreed upon.


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Under Section 203 CIR had 3 years from the last day forthe filing of the return to send an assessment notice to

petitioner. An assessment is made within the

prescriptive period if notice to this effect is released,

mailed or sent by the CIR to the taxpayer within said

period. Receipt thereof by the taxpayer within the

prescriptive period is not necessary but this rule does

not dispense with the requirement that the taxpayer

should actually receive, even beyond the prescriptiveperiod, the assessment notice [BARCELON, ROXAS

SECURITIES, INC. v. CIR 498 SCRA 126]

The release, mailing, or sending of the notice be clearlyand satisfactorily proved. Mere notations made without

the taxpayers intervention, notice, or control, without

adequate supporting evidence, cannot suffice;

otherwise, the taxpayer would be at the mercy of the

revenue offices, without adequate protection or

defense [supra]

The failure of the respondent to prove receipt of theassessment by the Petitioner leads to the conclusion

that no assessment was issued. Consequently, the

governments right to issue an assessment for the saidperiod has already prescribed [supra]

The 3 year prescriptive period has a total of 1095 days[BPI v. CIR Oct. 17, 2005]

The 3 year prescriptive period within which the CIR mayassess a taxpayer of expanded withholding tax shall be

counted from the last day required by law for filing a

monthly remittance return which is 10 days after the

end of each calendar month [save December] and 25

days after the end of December for taxes withheld from

the last compensation/income payment for the said

month [HPCO AGRIDEV CORP. v. CIR CTA CASE July 18,

2002]

Effect of amended return - The prescriptive periodwithin which to assess is counted from the date of filing

the amended return and not the date when the original

return was filed.

Rationale for the prescriptive period or statute oflimitations for assessment - Though the statute of

limitations on assessment and collection of national

internal revenue taxes benefits both the Government

and the taxpayer, it principally intends to afford

protection to the taxpayer against unreasonable

investigation. The indefinite extension of the period for

assessment is unreasonable because it deprives the said

taxpayer of the assurance that he will no longer be

subjected to further investigation for taxes after the

expiration of a reasonable period of time.

Laws on prescription should be liberally construed infavor of the taxpayer. Reason for the purpose of

safeguarding taxpayers from an unreasonable

examination, investigation or assessment, our tax laws

provide a statute of limitations on the collection of

taxes.

Assessment

**It is a finding by the taxing agency that the taxpayerhas not paid his correct taxes. The purpose of which is

to ascertain the amount that a taxpayer should pay. It

also signals the time when penalties and interests begin

to accrue against the taxpayer. It must be sent to and

received by a taxpayer, and must demand payment of

the taxes described therein within a specific period. An

assessment is deemed made only when the collector ofinternal revenue releases, mails or sends such notice to

the taxpayer [CIR v. PASCOR REALTY & DEVT. CORP. GR

128315. June 29, 1999]

Internal revenue taxes are self-assessing. A selfassessed tax a tax that the taxpayer himself assesses or

computes and pays to the taxing authority.

The notice was not sent to the taxpayer for the purposeof giving effect to the assessment, and said notice could

not produce any effect [VDA. DE GABRIEL v. CIR 421

SCRA 266]

When an estate is under administration, notice must besent to the administrator of the estate, since it is thesaid administrator, as representative of the estate, who

has the legal obligation to pay and discharge all debts of

the estate and to perform all orders of the court [supra]

Initiation by BIR of criminal prosecution is not anassessment notice because this was not sent to the

taxpayer and does not demand payment of the tax

within a certain period of time.

**An assessment of a deficiency is not necessary to acriminal prosecution for willful attempt to defeat and

evade the income tax. A crime is complete when the

violator has knowingly and willfully filed a fraudulent

return with intent to evade and defeat the tax [UNGAB

v. CUSI]

Since the registered wholesale price of the goods,approved by the BIR, is presumed to be the actual

wholesale price, therefore, not fraudulent and unless

and until the BIR had made a final determination of

what is supposed to be the correct taxes, the taxpayer

should not be placed in the crucible of criminal

prosecution [CIR v. CA GR 119322. June 4, 1996]

CRIMINAL CHARGE FOR

VIOLATION OF THE NIRC

ASSESSMENT

Should be supported by a

prima facie showing of failure

to file a required return

The fact of failure to file a

return need not proven in an

assessment

Such is not so with a criminal

charge

Before an assessment is issued

the is by practice required the

issuance of a pre-assessment

notice to the taxpayer

Instituted to penalize the

taxpayer for violation of the

Tax Code

The purpose of the issuance of

an assessment is to collect the

tax

A taxpayers actual knowledge of the basis of theassessment, such that it or he was able to intelligently


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protest the assessments is sufficient compliance with

the requirement under Sec. 228.

Assessments are prima facie correct and made in goodfaith. Reason Lifeblood theory.

SEC 222.Exceptions as to Period ofLimitation of Assessment

andCollection of Taxes.

a. In the case of a false or fraudulent return withintent to evade tax or of failure to file a return, thetax may be assessed, or a proceeding in court for

the collection of such tax may be filed without

assessment, at any time within 10 years after the

discovery of the falsity, fraud or omission:

Provided, That in a fraud assessment which has

become final and executory, the fact of fraud shall

be judicially taken cognizance of in the civil or

criminal action for the collection thereof.

b. If before the expiration of the time prescribed inSec. 203 for the assessment of the tax, both the

Commissioner and the taxpayer have agreed in

writing to its assessment after such time, the tax

may be assessed within the period agreed upon.The period so agreed upon may be extended by

subsequent written agreement made before the

expiration of the period previously agreed upon.

c. Any internal revenue tax which has been assessedwithin the period of limitation as prescribed in

paragraph (a) hereof may be collected by distraint

or levy or by a proceeding in court within 5 years

following the assessment of the tax.

d. Any internal revenue tax, which has been assessedwithin the period agreed upon as provided in

paragraph (b) hereinabove, may be collected by

distraint or levy or by a proceeding in court within

the period agreed upon in writing before the

expiration of the 5-year period. The period soagreed upon may be extended by subsequent

written agreements made before the expiration of

the period previously agreed upon.

e. Provided, however, That nothing in theimmediately preceding Section and paragraph (a)

hereof shall be construed to authorize the

examination and investigation or inquiry into any

tax return filed in accordance with the provisions

of any tax amnesty law or decree.

Fraud

An act or omission which amounts to intentionalwrongdoing with the sole object of avoiding the tax

Fraud is a question of fact and the circumstancesconstituting fraud must be alleged and proved in the

court. Actual, not presumed, fraud shall be the bench

mark of liability.

Fraud must be proved to exist by clear and convincingevidence amounting to more than mere

preponderance, and cannot be justified by mere

speculation.

Prima Facie evidence of a false or fraudulent return

1. A substantial underdeclaration of taxable sales, receiptsor income, or a substantial overstatement of

deductions, as determined by the Commissioner or his

duly authorized representative pursuant to rules and

regulations issued by the Sec. of Finance

2. Failure to report sales, receipts or income in an amountexceeding 30% of that declared per return, constitute

substantial underdeclaration of sales receipts, orincome.

3. A claim of deductions in an amount exceeding 30% ofactual deductions constitutes overstatement of

deductions [Sec. 248 B]

4. There is a prima facie evidence of a false or fraudulentreturn when the taxpayer has willfully and knowingly

filed it with intent to evade a part or all of the tax legally

due from him [UNGAB v. CUSI]

FALSE RETURN FRAUDULENT RETURN

merely a deviation from the

truth due to mistake

implies intentional or deceitful

entry with intent to evade the

taxes due

not subject to 50% fraud

penalty

subject to the 50% fraud

penaltydoes not subject the taxpayer

to criminal penalties

may subject the taxpayer to

criminal penalties

Waiver

It is an agreement between the taxpayer and the BIRthat the period to issue an assessment and collect the

taxes due is extended to a date contained therein.

A waiver of the statute of limitations under the NIRC, toa certain extent, is a derogation of the taxpayers right

to security against prolonged and unscrupulous

investigations and must therefore be carefully and

strictly construed.

A taxpayer is stopped from questioning the validity of awaiver extending the period to assess by his act of

paying the assess taxes covered by the same waiver.

Requisites for agreement waiving the 3 year period

1. Entered before the expiration of the 3 year period forthe assessment of the tax

2. In writing3. Signed both by the taxpayer and the BIR Commissioner4. The waiver must be for a definite period beyond the

ordinary prescriptive period for assessment and

collection. The period agreed upon can still be extended

by a subsequent written agreement, provided that it is

executed prior to the expiration of the first period

agreed upon [PHIL. JOURNALISTS v. CIR 447 SCRA 214]

Characteristics of an Invalid Waiver

1. The waiver is defective if it does not specify a definiteagreed date between the BIR and the taxpayer within

which to formally assess and collect

2. Waiver is defective if signed only by the RevenueDistrict Officer and not by the Commissioner

3. Waiver is not complete if copies were not furnished tothe taxpayer


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SEC 223. Suspension of Running of Statute of

Limitations. The running of the Statute of Limitations

provided in Secs. 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 a

proceeding in court and for 60 days thereafter; whenthe 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.

Events that Suspend/Interrupt the prescriptive period to assess thetax

1. When the Commissioner is prohibited from making theassessment or beginning distraint or levy or a

proceeding in court and for 60 days thereafter

2. When the taxpayer requests for a reinvestigation whichis granted by the Commissioner

3. When the taxpayer cannot be located in the addressgiven by him in the return filed upon which a tax is

being assessed or collected

4. When the warrant of distraint or levy is duly servedupon the taxpayer, his authorized representative, or a

member of his household with suff icient discretion, and

no property could be located;

5. When the taxpayer is out of the Philippines.6. THE TAXPAYER SHOULD THEN FILE AN ADMINISTRATIVE

PROTEST BY FILING A REQUEST FOR RECONSIDERATION

OR REINVESTIGATION WITHIN 30 DAYS FROM RECEIPT

OF THE ASSESSMENT NOTICE.

The taxpayer shall state the facts, the applicable law,rules and regulations, or jurisprudence on which his

protest is based, otherwise, his protest shall be

considered void and without force and effect [RR 12-99

SEC 3. 3.1.5]

If the taxpayer fails to file a valid protest against theformal letter of demand and assessment notice within

30 days from date of receipt thereof, the assessmentshall become final, executory and demandable [RR 12-

99 Sec. 3 3.1.5] and the BIR could use its administrative

and judicial remedies in collecting the tax.

Remedies under the NIRC available to an aggrieved Taxpayer at

the Administrative Level with respect to assessment of internal

revenue taxes

1. Upon receipt of a pre-assessment notice, the taxpayershall respond to the same within 15 days from receipt

which is the period provided for by implementing rules

and regulations [3rd

par. Sec. 228]

2. Upon the issuance of an assessment notice, thetaxpayer shall protest administratively by filing a

request for reconsideration or reinvestigation within 30

days from receipt of the assessment in such form and

manner as may be prescribed by the implementing

rules and regulations.

3.

Within 60 days from filing of the protest, all relevantsupporting documents shall have been submitted;

otherwise, the assessment shall become final [par. 4

Sec. 228]

Provisional assessment cannot supersede an earlierassessment which had become final and executor.

Where the assessment has become final, executor andcollectible the taxpayer cannot pay the tax, ask for a

refund and when denied appeal to the CTA. Reason

He would be doing indirectly, what he could not do

directly, that is open an assessment that has become

final.

The taxpayer could not immediately interposed anappeal to the CTA because there is no decision yet of

the CIR that could be the subject of a review. There is

no need to pay under protest.

PROTEST it is the act by the taxpayer of questioningthe validity of the imposition of the corresponding

delinquency increments for internal revenue taxes as

shown in the notice of assessment and letter of

demand.

Protest under the NIRC Protest under other Special

Laws

Protest under the NIRC as well

as under the LGC for local

taxes does not require

payment of the taxes being

protested.

Under the TCC, payment of the

protested custom duties is a

requirement. So, also with the

LGC for real property taxes,

where the issue is

reasonableness and

excessiveness of the tax being

collected but not where the

issue is validity or legality of the

tax or solution indebeti.

Protest under the NIRC should

be filed within 30 days from

receipt of the assessment

notice.

For real property taxation, the

protest is to be filed at the time

of the payment of the tax being

protested

Even if the protest did not categorically state or use thewords reinvestigation and reconsideration, the sameare to be treated as letters of reinvestigation and

reconsideration.

Two kinds of protest to an assessment

1. Request for reconsideration refers to a plea for a re-evaluation of an assessment on the basis of the existing

records without evidence. It may involve a question of

fact or law or both.

2. Request for reinvestigation - refers to a plea for a re-evaluation of an assessment on the basis of newly


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8

discovered or additional evidence that a taxpayers

intends to presenting the reinvestigation.

A request for reinvestigation, and not a request forreconsideration, interrupts the running of the statute of

limitations on the collection of the assessed tax [CIR v.

PHIL. GLOBAL COMMUNICATIONS 506 SCRA 427]

Where a taxpayer demands a reinvestigation, the timeemployed in reinvestigating should be deducted from

the total period of limitation [supra]

GR No prior payment of the assessed internal revenue tax is

required when protested or disputed;

Exceptions

1. If there are several issues involved in the formal letteror demand assessment notice but the taxpayer only

disputes or protests against the validity of some of the

issues raised, the taxpayer shall be required to pay the

deficiency tax or taxes attributable to the undisputed

issues, in which case, a collection letter shall be issued

to the taxpayer calling for payment of the said

deficiency tax, inclusive of the applicable surchargeand/or interest.

2. No action shall be taken on the taxpayers disputedissues until the taxpayer has paid the deficiency tax or

taxes attributable to the said undisputed issues. The

prescriptive period for assessment or collection of the

tax or taxesattributable to the disputed issues shall be

suspended.

Formal Requirements for an administrative protest

1. The taxpayer shall state the facts, the applicable law,rules and jurisprudence on which his protest is based,

otherwise, his protest shall be considered void and

without force and effect.

2. If there are several issues involved in the disputedassessment and the taxpayer fails to state the facts, theapplicable law, rules and regulations, or jurisprudence

in support of his protest against some of the several

issues on which the assessment is based, the same shall

be considered undisputed issue or issues, in which case,

the taxpayer shall be required to pay the corresponding

deficiency tax or taxes attributable thereto.

3. The taxpayer shall submit the required documents insupport of his protest within 60 days from the date of

filing of his letter of protest, otherwise the assessment

shall become final, executor and demandable.

Requisites for grant of protest, dispute or reinvestigation

1. Showing that the protest was seasonably filed within 30days from receipt of the assessment notice

2. Compliance with the formal requirements for anadministrative protest

3. Proof that the assessment is wrong4. Proof that the assessment is merely a presumption and

not based on actual facts

5. Showing of the correct and just assessment.7. WITHIN 60 DAYS FROM FILING OF THE PROTEST, ALL

RELEVANT SUPPORTING DOCUMENTS SHALL HAVE

BEEN SUBMITTED; OTHERWISE, THE ASSESSMENT

SHALL BECOME FINAL, EXECUTORY AND DEMANDABLE.

Once the assessment has become final andcollectible, not even the BIR Commissioner could

change the same.

8. IF THE PROTEST IS DENIED IN WHOLE OR IN PART, OR ISNOT ACTED UPON WITHIN 180 DAYS FROMSUBMISSION OF DOCUMENTS, THE TAXPAYER

ADVERSELY AFFECTED BY THE DECISION OR INACTION

MAY APPEAL TO THE CTA WITHIN 30 DAYS FROM

RECEIPT OF THE SAID DECISION, OR FROM THE LAPSE

OF THE 180-DAY PERIOD, WITH AN APPLICATION FOR

THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION

TO ENJOIN THE BIR FROM COLLECTING THE TAX

SUBJECT OF THE APPEAL. OTHERWISE, THE DECISION

SHALL BECOME FINAL, EXECUTORY AND DEMANDABLE.

The decision of the Commissioner or his duly authorized

representative shall:

1. Sate the facts, the applicable law, rules andregulations, or jurisprudence on which such

decision is based, otherwise, the decision shall bevoid, in which case, the same shall not be

considered a decision on a disputed assessment;

and

2. That the same is his final decision [RR 12-99 Sec. 33.1.6]

If the decision is void for failure of the BIRCommissioner to comply with the said requirements,

then it is as if there is no decision, and the taxpayer

must interpose an appeal within 30 days from the lapse

of 180 days period from submission of the complete

and supporting documents

If the protest is denied, in whole or in part, by theCommissioner or his duly authorized representative, thetaxpayer may appeal to the CTA within 30 days from

date of receipt of the said decision, otherwise, the

assessment shall become final, executory and

demandable [Sec. 3.1.5, RR 12-99]

In case the Commissioner failed to act on the disputed assessment

within the 180-day period from date of submission of documents,

a taxpayer can either:

1. File a petition for review with the CTA within 30 daysafter the expiration of the 180-day period; or

2. Await the final decision of the Commissioner on thedisputed assessments and appeal such final decision to

the CTA within 30 days after receipt of a copy of such

decision [RCBC v. CIR 522 SCRA 144]

However, these options are mutually exclusive, andresort to one bars the application of the other [supra]

After availing the first option, i.e., filing a petition forreview which was however filed out of time, petitioner

can not successfully resort to the second option, i.e.,

awaiting the final decision of the Commissioner and

appealing the same to the CTA, on the pretext that

there is yet no final decision on the disputed


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9

assessment because of the Commissioners inaction

[supra]

A final demand letter from the BIR, reiterating to thetaxpayer the immediate payment of a tax deficiency

assessment previously made, is tantamount to a denial

of the taxpayers request for reconsideration. Such

letter amounts to a final decision on a disputed

assessment and is thus appealable to the CTA [CIR v.ISABELA CULTURAL CORP. G.R. No. 135210. July 11,

2001]

A demand letter for payment of delinquent taxes maybe considered a decision on a disputed or protested

assessment. The determination on whether or not a

demand letter is final is conditioned upon the language

used or the tenor of the letter being sent to the

taxpayer [OCEANIC WIRELESS NETWORK v. CIR 477

SCRA 205]

The authority to make tax assessments may bedelegated to subordinate officers. Said assessment has

the same force and effect as that issued by the

Commissioner himself, if not reviewed or revised by thelatter such as in this case [supra]

Acts of the CIR considered as denial of a protest which serve as

basis for appeal to the CTA

1. Filing by the BIR of a civil suit for the collection of thedeficiency tax is considered a denial of the request for

reconsideration

2. An indication to the taxpayer by the Commissioner inclear and unequivocal language of his final denial not

the issuance of the warrant of distraint and levy. What

is the subject of the appeal is the final decision not the

warrant of distraint.

3. A BIR demand letter sent to the taxpayer after hisprotest of the assessment notice is considered as the

final decision of the Commissioner on the protest.4. A letter of the BIR Commissioner reiterating to a

taxpayer his previous demand to pay an assessment is

considered a denial of the request for reconsideration

or protest and is appealable to the CTA

5. Final notice before seizure considered asCommissioners decision of taxpayers request for

reconsideration who received no other response.

Only Commissioners final decision denying the disputeis subject of appeal.

9. THE APPEAL IS TO BE HEARD BY A DIVISION. IF THEDIVISIONS DECISION IS UNFAVORABLE TO THE

TAXPAYER, HE COULD THEN FILE A MOTION FOR

RECONSIDERATION OR NEW TRIAL WITH THE DIVISION

WITHIN 15 DAYS FROM NOTICE. THE DIVISIONS

UNFAVORABLE ACTION ON THE MOTION FOR NEW

TRIAL OR RECONSIDERATION MAY FILE A PETITION FOR

REVIEW WITH THE CTA EN BANC. THE ADVERSE RULING

OF THE CTA EN BANC IS APPEALABLE TO THE SC

THROUGH A VERIFIED PETITION FOR REVIEW ON

CERTIORARI WITHIN A PERIOD OF 15 DAYS FROM

RECEIPT OF THE CTA ADVERSE DECISION, WHICH

PERIOD IS EXTENDIBLE FOR 30 DAYS

If the assessment notice has become final, executoryand collectible and the BIR files a collection suit in

court, the taxpayer may use affirmative defenses but

not negative defenses which are deemed waived for

failure to raise the same in the administrative

proceedings. Estoppel could not be raised as a defense

because the government is not estopped by the acts of

its agents.

Motion for reconsideration is essential to file petitionfor review with CTA. The motion for reconsideration

need not conform to a particular form of procedure.

Remedies under the NIRC available to an aggrieved taxpayer at

the judicial level with respect to assessment of internal revenue

taxes

1. If the protest is denied in whole or in part, or is notacted upon within 180 days from submission of

documents, the taxpayer adversely affected by the

decision or inaction may appeal to the CTA within 30

days from receipt of the said decision, or from the lapse

of the 180-day period; otherwise, the decision shall

become final, executory and demandable.

2. The appeal is to be heard by a division. If the Divisionsdecision is unfavorable to the taxpayer, he could then

file a motion for reconsideration or new trial with the

Division within 15 days from notice. The Divisions

unfavorable action on the motion for new trial or

reconsideration may file a petition for review with the

CTA en banc. The adverse ruling of the CTA en banc is

appealable to the SC through a verified petition for

review on certiorari within a period of 15 days from

receipt of the CTA adverse decision, which period is

extendible for 30 days

GR - New issues cannot be raised for the first time on appeal.

Exceptions

1. Defense of prescription2. Errors of administrative officials.

Two rules on Prescription

1. ASSESSMENT 3 years computed from the time the taxreturn was filed or should be filed whichever is later.

However, where there is no return filed or what was

filed was a false and fraudulent return, then the

prescriptive period is 10 years computed from the

discovery of the falsity or of the fraud, or of the failure

the tax return

2. COLLECTION 5 years from the issuance of anassessment notice. Where the return is false or

fraudulent, or no return was filed, the deficiency taxes

may be collected even without assessment within 10

years from the discovery of the falsity or of the fraud, or

of the failure the tax return

UNDISPUTED ASSESSMENT

1. The CIR files an ordinary action for the collection of thetax before a regular court or the CTA, depending upon

the jurisdictional amount

2. Any decision of the trial court sustaining an undisputedassessment would be appealable to the CTA then to the

SC in accordance with the ROC. Any decision of the CTA


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10

upon the tax collection may be appealed to the SC

through a verified petition for review.

Methods that may be utilized by the commissioner to determine

the correct taxable income of the taxpayer if the latters record or

methods of accounting are not reflective of his true income

[Known as best evidence obtainable rules]

1. NET WORTH METHOD A method of reconstructingincome which is based on the theory that if thetaxpayers net worth has increased in a given year in an

amount larger that his reported income, he has

understated his income for the year. The net worth on a

fixed starting date is compared with the net worth on a

fixed ending date. Any increase in net worth is

presumed to be income not declared for tax purposes.

FORMULA: ASSETS LIABILITIES = NET WORTH

2. Cash expenditure method When during a taxableyear, a taxpayer incurs expenditures, the source of

which could not be explained [such as from gifts,

donations, income subject to final taxes, disposal of

previously paid, excluded or tax exempt income] the

amount of expenditures is presumed to be income for

the taxable year subject to income tax

3. Percentage method It is the equivalent of ratioanalysis of percentages considered typical of the

business under investigation to indicate potential areas

of revenue adjustment in examination where revenue

records do not exist. The computed amount of

revenues based on the percentage computation is

compared to the amount of revenues reflected on the

return. The percentages used may be obtained from the

taxpayer, industry publications; prior years audit results

or third parties. The comparison will provide an

indication of the possibility of revenue being

understated.

4. Bank deposit method Unexplained increases in bankdeposits, not coming from excluded income, raise the

presumption that the increases are unreported income

subject to tax.5. Unit value method The determination or verification

of gross receipts may be computed by applying price

and profit figures to known ascertainable quality of

business of the taxpayer.

6. Third party information or access to records method The BIR inquires from third parties through access of

records. This is usually done in order to verify gross

receipts and non-availability of needed information

through other methods.

7. Surveillance and assessment method -8. Such method as in the opinion of the BIR Commissioner

clearly reflect the income.

II. COLLECTION

When the BIR validly issues an assessment, within the3-year period or the 10-year period, whichever was

applicable, the law provided another 5 years after the

assessment for the collection of the tax due thereon

through the administrative process of distraint and/or

levy or through judicial proceedings [CIR v. PHILIPPINE

GLOBAL COMMUNICATION 506 SCRA 427]

The 5-year period for collection of the assessed taxbegan to run on the date the assessment notice had

been released, mailed or sent by the BIR [supra]

SEC. 205. Remedies for the Collection of Delinquent Taxes.

The civil remedies for the collection of internal revenue

taxes, fees, or charges, and any increment thereto resulting

from delinquency shall be:

a. By distraint of goods, chattels, or effects, andother personal property of whatever character,including stocks and other securities, debts,

credits, bank accounts, and interest in and rights to

personal property, and by levy upon real property

and interest in or rights to real property; and

b. By civil or criminal action.Either of these remedies or both simultaneously may be

pursued in the discretion of the authorities charged with

the collection of such taxes: Provided, however, that the

remedies of distraint and levy shall not be availed of where

the amount of tax involved is not more than P100.

The judgment in the criminal case shall not only impose thepenalty but shall also order payment of the taxes subject of

the criminal case as finally decided by the Commissioner.

The BIR shall advance the amounts needed to defray costs

of collection by means of civil or criminal action, including

the preservation or transportation of personal property

distrained and the advertisement and sale thereof, as well as

of real property and improvements thereon.

Government remedies for enforcement and collection of internal

revenue taxes

1. Criminal proceedings as may be warranted by thecircumstances filed before the regular court, or with the

CTA2. Civil Remedies which may judicial or administrativea. Judicial actions before the regular courtsb. Administrative actions

1. Distraint of personal Property eitheractual or constructive [Secs. 206 & 207]

2. Levy on real estate [Sec 207 B]3. Enforcement of tax lien [Sec. 219]4. Enforcement of forfeiture of real and

personal properties [Sec. 224]

5. Non-issuance of clearance for travel [PD1183]

6. The power of the Comm. Tocompromise under Sec. 204

7. The giving of rewards to informers whogave information as to violations of taxlaws

8. Deportation of aliens who violate anytax legislations of the Phil.

9. Filing of performance bond to assurecompliance with certain tax laws or

regulations

10. Surcharges or penalties for the paymentof tax

11. Authority of the Comm. To effect arrestin certain cases


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12. Power of the Comm. To obtain,information, examine, summon and

take testimony from government

officers or agencies and other persons

13. Authority of tax officers to examine andinspect book of accounts and other

accounting records of the taxpayer.

Distinction of Taxpayers Remedies

Tax Assessments Claim of Refund for Taxes

Taxpayer has a period of 30

days from receipt of an

assessment within which to

dispute the same

the taxpayer is given a period

of two years within which to

apply for a refund counted

from payment

The period to appeal from the

denial of the taxpayers

dispute is 30 days from receipt

of BIRs denial

the taxpayer in refunds has

likewise the same period but

the said 30 days must be

within 2 years from the

payment of the tax

Generally the taxpayer has to

wait for the BIRs decision on

the application for refund

before he could appeal to theCTA

There is no need for the

taxpayer to wait for the BIRs

decision on the application for

refund or credit, if the 2 yearperiod is about to expire

RA 9282 SEC. 7. C. Jurisdiction over tax collection case

as herein provided:

1. Exclusive original jurisdiction in tax collectioncases involving final and executory assessments

for taxes, fees, charges and penalties: Provided,

however, That collection cases where the principal

amount of taxes and fees, exclusive of charges and

penalties, claimed is less than One million pesos

shall be tried by the proper MTC, MeTC and RTC.

2. Exclusive appellate jurisdiction in tax collectioncases:

a. Over appeals from the judgments,resolutions or orders of the RTCs in tax

collection cases originally decided by

them, in their respective territorial

jurisdiction.

b. Over petitions for review of thejudgments, resolutions or orders of the

RTCs in the exercise of their appellate

jurisdiction over tax collection cases

originally decided by the MTC in their

respective jurisdiction.

Prescriptive periods for collection of internal revenue taxes

1. Within 5 years from the issuance of an assessmentnotice where there was a return filed, the return is notfalse and fraudulent, and the assessment is not an

extended one issued after an agreement between the

taxpayer and the BIR to suspend the running of the

prescriptive period

2. Where the internal revenue taxes has been assessedwithin the prescriptive period of 10 years after the

discovery of the falsity, fraud or omission in the filing of

the tax return the prescriptive period is within 5 years

following the assessment of the tax.

3. Where the assessment was issued within a periodagreed upon between the taxpayer and the BIR, this is

an extended assessment which could be collected

within a period of 5 years from issuance of the

assessment.

Under Sec. 222 c the warrant of distraint and/or levyneed not be fully executed to suspend the prescriptive

period for collection of the tax. It is enough that theproceedings have validly began or commenced and that

their execution has not been suspended by reason of

the voluntary desistance of the BIR Commissioner.

Various periods for payment of selected internal revenue taxes

Income Taxes

1. In general. Income taxes shall be paid by the personthereof at the time the return is filed [sec. 56 A] Known

as pay as you go system or pay as you file system

2. Where the income tax due from tramp vessels, theshipping agents and/or the husbanding agents, and in

their absence, the captains thereof are required to file

the return herein provided and pay the tax due thereon

before their departure.

3. When the tax due is in excess of P2,000, the taxpayerother than a corporation may elect to pay the tax in 2

equal installments in which case, the first installment

shall be paid at the time the return is filed and the

second installment, on or before July 15 following the

close of the calendar year

4. For income derived from the sale or exchange of sharesof stocks not traded through a local stock exchange a

retrun shall be filed and the tax shall be paid within 30

days after each transaction. For an individual a final

consolidated return shall be filed on or before April 15

of each year covering all stock transactions of the

preceding taxable year [Sec. 52 D in relation to Sec. 56

A]

5. Income from the sale or disposition of real propertyclassified as capital the return shall be paid and the taxpaid within 30 days following each sale or other

disposition.

Estate Taxes

Shall be paid at the time the return is filed which iswithin 6 months from the decedents death

Donors Tax

Shall be paid at the time the donors tax return is filedwhich is filed which is 30 days after the date the gift is

made.

Summary of governmental remedies for the collection of

delinquent internal revenue taxes

1. Judicial Action Civil or Criminal

2. Civil or administrative remedies By distraint of goods, chattels, or effects, and

other personal property of whatever

character, including stocks and other

securities, debts, credits, bank accounts, and

interest in and rights to personal property

and by


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12

levy upon real property and interest in orrights to real property [SEC. 205]

Conditions for the exercise of remedies

1. Either of these remedies or both simultaneously maybe pursued in the discretion of the authorities charged

with the collection of such taxes:

2. The remedies of distraint and levy shall not be availedof where the amount of tax involved is not more thanP100.

Conditions for the court action for collection of delinquent taxes

a. No proceeding in court without assessment for thecollection of internal revenue taxes shall be begun after

the expiration of the 3 or 10 year period for assessment

as the case may be. Note while the assessment is still

pending with the Commissioner of Internal Revenue it

cannot serve as the basis for the collection by distraint

or levy or by judicial action.

Constructive Distraint

b. The service of a notice upon the taxpayer that he couldnot dispose of his personal property until he has paid

the tax deficiency.

Grounds for effecting constructive distraint

The Commissioner may place under constructive distraint the

property of a delinquent taxpayer or any taxpayer who, in his

opinion, is

1. Retiring from any business subject to tax, or is2. Intending to leave the Philippines or to3. Remove his property therefrom or to4. Hide or conceal his property or to5. Perform any act tending to obstruct the proceedings for

collecting the tax due or which may be due from him.

The constructive distraint of personal property shall be effected

by

1.requiring the taxpayer or any person2.having possession or control of such property3.to sign a receipt covering the property distrained and4.obligate himself to5.preserve the same intact and unaltered and6.not to dispose of the same in any manner whatever,

without the express authority of the Commissioner.

In case the taxpayer or the person having the possession and

control of the property sought to be placed under constructive

distraint refuses or fails to sign the receipt herein referred to ,

the revenue officer effecting the constructive distraint shall

1. proceed to prepare a list of such property and, in thepresence of 2 witnesses, leave a copy thereof in the

premises where the property distrained is located,

2. after which the said property shall be deemed to havebeen placed under constructive distraint.

Summary Remedies [Sec. 207]

1. Actual distraint of personal property - The physicaltaking of taxpayers personal property to answer for his

tax liability.

The Commissioner or his duly authorizedrepresentative, if the amount involved is in

excess of One million pesos

the Revenue District Officer, if the amountinvolved is One million pesos or less

2. Levy on Real PropertyGarnishment [Sec. 208]

The taking of personal properties usually cash or sum ofmoney, owned by a delinquent taxpayer which is in the

possession of a third party.

CONSTRUCTIVE DISTRAINT ACTUAL DISTRAINT

the BIR does not take physical

possession of the personal

property

The personal property is

actually taken

there is no finding yet of a

discrepancy, only that the

taxpayer is leaving the country

or disposing of his property in

fraud of creditors or is in the

process of liquidation

The taxpayer is already

delinquent in the payment of

his taxes

the personal property is merely

held as security to answer for

any future tax delinquencies

The personal property is taken

to be sold in order to satisfy

tax delinquencies

The purpose is protection ofgovernment revenues and

ensure that there are

properties of the taxpayer

which the government could

proceed against after a

determination of the amount of

delinquency taxes

The deficiency taxes arealready determined

The timely service of a warrant of distraint or levysuspends the running of the period to collect the tax

deficiency in the sense that the disposition of the

attached properties might well take time to accomplish,

extending even after the lapse of the statutory period

of collections.

Redemption of property sold

Period within 1 year from the date of the sale. It may redeem by the taxpayer or anyone for him. Redemption shall be made by payment of the amount

of the public taxes, penalties, and interest thereon from

the date of delinquency to the date of sale, together

with interest on said purchase price at the rate of 15%

per annum from the date of purchase to the date of

redemption [Sec. 214]

Tax Lien

A legal claim or charge on property either real orpersonal as security for the tax obligation.

The unpaid tax constitutes as a burden upon allproperty and property rights belonging to the

delinquent taxpayer. It is a warning to all potential

buyers of that property that any proceeds of the sale

should be applied to the tax deficiency.

Tax lien superior to judgment claim of private property.Reason - The tax lien attaches not only from the service

of the warrant of distraint of personal property but

from the time the tax became due and payable


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Tax Liens under the NIRC - Upon any internal revenue tax like

1. Income tax lien2. Estate and donor's taxes lien3. Value-added tax lien4. Other percentage taxes lien5. Excise taxes lien6. Documentary stamp taxes lien7. Miscellaneous taxes fees and charges liens Taxes lien superior to judgment claim of private

property. A tax lien attaches not only from the service

of the warrant of distraint of personal property but

from the time the tax become due and payable.

Warrant of

distraint

Levy Garnishment

Subject Matter -

personal property

owned by and in

the possession of

the taxpayer

Real property

owned by and in

the possession of

the taxpayer.

Personal property

owned by the

taxpayer but in the

possession of a third

party

As to disposition

for want of

bidders or bidsinadequate to

satisfy tax

deficiency -

Personal property

distraint or

garnished are

purchased by the

government and

resold to meet the

deficiency.

Real property

subject to levy is

forfeited to theGovt. then sold to

meet the

deficiency.

As to

advertisement of

Sale - There is no

newspaper

publication

required for the

sale of personal

property distrained

or garnished

Sale of real

property subject to

levy is required to

be published once

a week for 3 weeks

in a newspaper of

general circulation

in the municipality

or city where the

property is located.

FORFIETURE SEIZURE

ownership is transferred to

the government

Taxpayer retains ownership of

property seized

In the disposition of the

proceeds of forfeited

properties the excess shall not

return to the taxpayer

Reverse is true with seizure.

***SEC 204. Authority of the Commissioner to

Compromise, Abate and Refund or Credit Taxes.

A. The Commissioner may compromise the payment of any

internal revenue tax, when:

1. A reasonable doubt as to the validity of the claimagainst the taxpayer exists provided that the

minimum compromise entered into is equivalent to

40% of the basic tax or

2. The financial position of the taxpayerdemonstrates a clear inability to pay the assessed

tax provided that the minimum compromise

entered into is equivalent to 10% of the basic

assessed tax

In the above instances the Comm. Is allowed to enter into a

compromise only if the basic tax involved does not exceed 1

million, and the settlement offered is not less than theprescribed percentages.

B. Abate or cancel a tax liability, when:

1. The tax or any portion thereof appears to beunjustly or excessively assessed; or

2. The administration and collection costs involveddo not justify the collection of the amount due.

All criminal violations may be compromised except: (a)

those already filed in court, or (b) those involving fraud.

Related Provision

**SEC. 7. Authority of the Commissioner to Delegate

Power. The Commissioner may delegate the powersvested in him under the pertinent provisions of this Code

to any or such subordinate officials with the rank

equivalent to a division chief or higher, subject to such

limitations and restrictions as may be imposed under rules

and regulations to be promulgated by the Secretary of

Finance, upon recommendation of the Commissioner:

Provided, however, That the following powers of the

Commissioner shall not be delegated:

a. The power to recommend the promulgation ofrules and regulations by the Secretary of Finance;

b. The power to issue rulings of first impression or toreverse, revoke or modify any existing ruling of

the Bureau;

c. The power to compromise or abate, under Sec.204(A) and (B) of this Code, any tax liability:

Provided, however, That assessments issued by the

regional offices involving basic deficiency taxes of

P500,000 or less, and minor criminal violations, as

may be determined by rules and regulations to be

promulgated by the Secretary of Finance, upon

recommendation of the Commissioner, discovered

by regional and district officials, may be

compromised by a regional evaluation board

which shall be composed of the Regional Director

as Chairman, the Assistant Regional Director, the

heads of the Legal, Assessment and Collection

Divisions and the Revenue District Officer having

jurisdiction over the taxpayer, as members; andd. The power to assign or reassign internal revenue

officers to establishments where articles subject to

excise tax are produced or kept.

Compromise requires mutual agreement between theBIR and the taxpayer. A compromise being by its nature

mutual in essence requires agreement.

A compromise agreement must be strictly construed.


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***Tax cases which may be the subject of a compromise

1. Delinquent accounts2. Cases under administrative protest after issuance of the

FAN to the taxpayer which are still pending in the

Regional offices, Revenue District Office and other

offices in the National Office

3. Civil tax cases being disputed before the courts4. Collection cases filed in courts5.

Criminal violations other than those filed in court orthose involving tax frauds [RR 30-2002]

***Taxes which could not be the subject of a compromise

1. Withholding tax cases, unless the applicant-taxpayerinvokes provisions of law that cast doubt on the

taxpayers obligation to withhold

2. Criminal tax fraud cases confirmed as such by the CIR orhis duly authorized representative;

3. Criminal violations already filed in court;4. Delinquent accounts with duly approved schedule of

installment payments;

5. Cases where final reports of reinvestigation orreconsideration have been issued resulting to reduction

in the original assessment and the taxpayer is agreeable

to such decision by signing the required agreementform for the purpose. On the other hand, other

protested cases shall be handled by the Regional

Evaluation Board (REB) or the National Evaluation Board

(NEB) on a case to case basis;

6. Cases which become final and executory after finaljudgment of a court, where compromise is requested

on the ground of doubtful validity of the assessment;

and

7. Estate tax cases where compromise is requested on theground of financial incapacity of the taxpayer [RR 30-

2002]

Abatement

It is the diminution or decreased in the amount of taximposed.

III. REFUND OF INTERNAL REVENUE TAXES

They are in the nature of tax exemptions. Taxes are the lifeblood of the nation, therefore statutes

that allow exemptions are construed strictly against the

grantee and liberally in favor of the government.

He who claims a refund or exemption from taxes hasthe burden of justifying the exemption by words too

plain to be mistaken and too categorical to be

misinterpreted.

***SEC. 204 C] Credit or refund taxes erroneously or

illegally received or penalties imposed without authority,

refund the value of internal revenue stamps when they are

returned in good condition by the purchaser, and, in his

discretion, redeem or change unused stamps that have been

rendered unfit for use and refund their value upon proof of

destruction.

No credit or refund of taxes or penalties shall be allowed

unless the taxpayer files in writing with the Commissioner a

claim for credit or refund within 2 years after the payment

of the tax or penalty: Provided, however, That a return

filed showing an overpayment shall be considered as a

written claim for credit or refund.

A Tax Credit Certificate validly issued under the provisions

of this Code may be applied against any internal revenue

tax, excluding withholding taxes, for which the taxpayer is

directly liable. Any request for conversion into refund ofunutilized tax credits may be allowed, subject to the

provisions of Sec. 230 of this Code: Provided, That the

original copy of the Tax Credit Certificate showing a

creditable balance is surrendered to the appropriate revenue

officer for verification and cancellation: Provided, further,

That in no case shall a tax refund be given resulting from

availment of incentives granted pursuant to special laws for

which no actual payment was made.

No refund of documentary stamp taxes. Reason Because they are levied upon the privilege, opportunity

or facility to execute certain instrument, irrespective of

whether the contracts are subsequently declared

rescissible, void, voidable or unenforceable.

***SEC 229. Recovery of Tax Erroneously or Illegally

Collected. No suit or proceeding shall be maintained in any

court for the recovery of any national internal revenue tax

hereafter alleged to have been erroneously or illegally

assessed or collected, or of any penalty claimed to have

been collected without authority, or of any sum alleged to

have been excessively or in any manner wrongfully

collected, until a claim for refund or credit has been duly

filed with the Commissioner; but such suit or proceeding

may be maintained, whether or not such tax, penalty, or sum

has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed afterthe expiration of 2 years from the date of payment of the tax

or penalty regardless of any supervening cause that may

arise after payment: Provided, however, That the

Commissioner may, even without a written claim therefor,

refund or credit any tax, where on the face of the return

upon which payment was made, such payment appears

clearly to have been erroneously paid.

Related Provision

RRCTA R8 SEC. 3. Who may appeal; period to file petition. a] A

party adversely affected by a decision, ruling or the inaction of

the CIR on disputed assessments or claims for refund of

internal revenue taxes, or by a decision or ruling of the CoC,

theSecretary of Finance, the Secretary of Trade and Industry,

the Secretary of Agriculture, or a RTC in the exercise of its

original jurisdiction may appeal to the Court by petition for

review filed within 30 days after receipt of a copy of such

decision or ruling, or expiration of the period fixed by law for

the CIR to act on the disputed assessments. In case of inaction

of the CIR on claims for refund of internal revenue taxes

erroneously or illegally collected, the taxpayer must file a

petition for review within the two-year period prescribed by

law from payment or collection of the taxes.


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*Grounds for claiming refund or tax credit

1. The tax have been erroneously or illegally assessed orcollected [one that is levied without statutory authority]

2. The penalty have been collected without authority3. Any sum which have been excessive or in any manner

wrongfully collected

4. The tax was paid by mistake5. Failure to use excess income tax credit against quarterly

income taxes for the next taxable year.

A judicial claim for refund or tax credit in the CTA is byno means an original action but rather an appeal by way

of petition for review of a previous, unsuccessful

administrative claim [ATLAS CONSOLIDATED v. CIR 518

SCRA 425]

Tax credit

Refers to an amount that is subtracted directly fromones total tax liability. It is an allowance against the tax

itself or a deduction from what is owed by a taxpayer to

the government.

Examples oftax credits are withheld taxes, payments ofestimated tax, and investment tax credits [CIR v.

Central Luzon Drug 456 SCRA 414]

Tax deduction

A subtraction from income for tax purposes or anamount that is allowed by law to reduce income prior

to [the] application of the tax rate to compute the

amount of tax which is due. An example of a tax

deduction is any of the allowable deductions

enumerated in Sec. 34. [supra]

Tax credit from tax refund

A tax refund requires a physical return of the sumerroneously paid by the taxpayer, while a tax credit

involves the application of the reimbursable amount

against any sum that may be due and collectible from

the taxpayer.

Tax Credit Tax Deduction

Reduces the tax due, including

whenever applicable the

income tax that is determined

after applying the

corresponding tax rates to

taxable income

Reduces the income that is

subject to tax in order to

arrive at taxable income.

Used only after the tax has

been computed

Before

Requisites for a judicial claim for refund of input vat

1. The taxpayer must not only prove that it is a VATregistered entity and that it filed its claim within theprescriptive period.

2. It must substantiate the input VAT paid by purchaseinvoices or official receipts

*Procedure for recovery by taxpayers of internal revenue taxes

1. Taxpayer files a claim for refund or credit with the CIR2. Within 2 years from payment taxpayer may file a

petition for review for recovery with the CTA Division.

The decision of the CIR appealable to the CTA within 30

days from receipt but within 2 years from payment of

the tax

3. A decision of the CTA Division denying the petition maybe the subject of a motion for reconsideration or new

trial with the same division

4. A decision of the CTA Division denying the motion forreconsideration or new trial may be the subject of a

petition for review to be filed with the CTA en banc.

5.

A decision of the CTA En banc adverse to the taxpayermay be appealed to the SC through a petition for review

on certiorari within 15 days from receipt of the adverse

decision, extendible for a period of 30 days

For indirect taxes like an excise tax the proper partywho can question or seek a refund of the tax is the

person on whom the tax is imposed by law and who

paid the tax even when he shifts the burden thereof to

another.

**Withholding agent could file application for refund.Since the withholding agent who is required to deduct

and withhold any tax is made personally liable for such

tax, subject to and liable for deficiency assessments,

surcharges and penalties should the amount of the taxwithheld be finally found to be less than that required

to be withheld by law, then he is a taxpayer.

But for purposes of tax amnesty a withholding tax agentis not a taxpayer.

Period for claiming tax credit or refund of internal revenue taxes or

penalties

1. Within 2 years after the payment of the tax or penalty2. For corporations the 2 year prescriptive period should

be computed from the time of filing the Final

Adjustment Return [FAR] or Annual Income Tax return

and final payment of the tax for that year. Reason it is

only upon the filing of the FAR that a corporation could

ascertain whether it made profits or incurred losses inits business operations and determine whether it is

liable or not for the payment of income tax.

Sec. 229 is intended to apply to suits for the recovery ofinternal revenue taxes or sums erroneously, excessively,

illegally or wrongfully collected [CIR v. PNB 474 SCRA

303]

An availment of a tax credit due for reasons other thanthe erroneous or wrongful collection of taxes may have

a different prescriptive period. Absent any specific

provision in the Tax Code or special laws, that period

would be 10 years under Art. 1144 CC [supra]

**Rules for computation of 2 year period for filing suit

1. The 2 year period is computed regardless of anysupervening cause that may arise after the payment

2. If the tax is paid in installments, count the period fromthe last installment. Reason It is only upon full

payment where it could be determined whether there

was an overpayment.

3. Notice by the BIR that the refund is being processedand that the notice of the refund shall be mailed does

not stop the running of the period


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4. For payment effected through selling of the propertylevied, seized or distraint at the time of the application

proceeds to the tax deficiency, not of the time of the

sale

5. If the property was purchased by the government orforfeited in favor of the government, at the time of the

purchase or forfeiture

6. In computing the 2 year period with respect to excisetaxes particularly on petroleum, the date of thepayment is counted from the date of removal pursuant

to Sec. 158.

Computation of 2 year period forwithheld taxes

1. Final withholding taxes from the 25th day after theclose of each calendar quarter

2. Creditable withholding taxes - from the last day of themonth following the close of the quarter during which

the withholding was made.

Computation of 2 year period for return of VAT on zero rated

sales

Counted from the date of filing of the quarterly VATreturn which is within 25 days after the close of each

taxable quarter. It is only after the filing of the quarterlyVAT liability or refundability can be determined.

Computation of 2 year period for refund of gross receipts of

percentage taxes

Com

Remedies, Tarrif and Custom, Local Government Tax, Real Property and Esate and Other Taxes

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Transcript of Remedies, Tarrif and Custom, Local Government Tax, Real Property and Esate and Other Taxes