TAX REMEDIES

According to the SC, government and taxpayers must stand on

reasonably equal terms.
Basically, the remedies that may be availed of by the Government or the
taxpayer may be grouped into:
a. Administrative remedies
b. Judicial remedies
If the tax law is silent on administrative remedies, the government may
still avail of the usual administrative remedies such as Distraint of
personal property, or Levy on real property. But that may be resorted to
by the government in the collection of taxes are:
a. Distraint of personal property
b. Enforcement of tax lien
c. Levy on real property.
Distrain and levy can only be done if notice is given.

If the tax law is silent on administrative remedies, the taxpayer may still
avail of the usual administrative remedies of protest and refund for
purposes of convenience and expediency.

If the tax law is explicit on administrative remedies, the taxpayer must

observe the principle of exhaustion of administrative remedies. Under the
Tax Code, if an assessment is made by the BIR, the remedy of the
taxpayer is to protest first the assessment. It is the decision of the BIR on
that disputed assessment that is being appealed to the CTA.

In claiming for tax refund, the taxpayer have to file first a written claim
for refund with the BIR Commissioner.

Exception to the Principle of Exhaustion

Remedies:
a. if it involves judicial questions
b. if it involves disregards of due process
c. if it involves an illegal act.

of

Administrative

Judicial Remedies:
IF the tax law is silent on judicial remedies, the government can still avail
of the usual judicial remedy. Example: filing an action for collection with
the court.
If the tax is silent on judicial remedies, the taxpayer may file a special
civil action for declaratory relief. But this does not apply as far as the
NLRC or the TCC is concerned because these particular tax laws are
explicit on this judicial remedies.
If the tax law is explicit on judicial remedies, the government should
observe the provisions of the law.
Example:
The filing of an action for collection with the Court must be
approved by the BIR Commissioner.
Distinction between the Distraint and Levy
Distraint of personal property
1. The subject matter is personal property, stocks and securities, bank accounts, debts
and credits.
2. In the event that the taxpayer failed to pay the tax, the BIR will issue warrant of
distraint.

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3. The only requirement is posting of notice of sale in 2 public or conspicuous places
4. If the bid is not equal to the amount of tax liability, the BIR may purchase the
property distrained for and in behalf of the government.
5. There is no right of redmption
6. There is that remedy of constructive distraint of personal property.
Levy of real property
1. The subject property is real property
2. What is issued is in the nature of an authenticated certificate describing the property
and stating the name of the taxpayer as well as the amount due
3. Requires not only posting but also publication of the notice of sale in a newspaper of
general circulation in 3 consecutive weeks.
4. If the bid is not equal to the tax liability of there is no bidder, the BIR may forfeit
such real property levied by the government.
5. There is right of redemption within 1 year from the date of sale plus 15% interest.
6. There is no such remedy as constructive levy of property.
Constructive Distraint can only be resorted to under the following situation: Code:
C.A.R.L.)
1. When a taxpayer cancels or hides his property
2. If he performs any act which will obstruct the collection efforts of the BIR
3. If he is retiring from business subject to tax
4. When he is about to leave the Philippines
Enforcement of the tax lien:
If the taxpayer failed despite receipt of notice to pay the BIR, a lien is
created against the properties of the taxpayer.

It is the discretion of the BIR to avail itself of remedies which may result
in the expeditious collection of taxes.

Case: Which is preferred, the claim of the government arising from tax lien or the
claim of the workers predicated on the judgment rendered by the NLRC?
Held: The claim of the government arising from tax lien is superior to the claim of a
private litigant predicated on a judgment.
Exception:
The claim of the laborers may be superior under Art. 110 of the Labor
Code when the employer was declared bankrupt of judicial liquidation.

*In observing the provisions of the tax code in regard to distraint or levy,
the BIR cannot apply or invoke the presumption of regularity in
administrative proceedings.
So, if the procedure had been questioned by the taxpayer, it is not
for the taxpayer to prove that the procedures under the NLRC in regard
to distraint on levy had been complied with.

Revenue taxes are self-assessing taxes.

Requisites of Assessment:
1. Written notice stating that the amount is due as tax.
2. Written notice must contain a demand for the payment of such tax.

Assessment is not a condition sine qua non for purposes of collecting

taxes. This is so because demand is not required. The rule under Art.
1169 of the NCC that demand is required before a person may incur in
delay cannot be applied. Taxpayer incurred in delay if he fails to pay the
tax on date fixed by Tax Code.

Assessments, made by the BIR Commissioner are presumed correct. The

presumption does not violate the due process under the Constitution
because the presumption is merely disputable.

Normally, the BIR may require the taxpayer to submit reports,

documents, books of accounts and other report to establish his tax
liability. In the absence of these reports, documents, etc., the BIR may
determine the tax liability by using other methods.

*The BIR can determine the tax liability of the taxpayer on the basis of
that so-called best evidence obtainable in the absence of said reports etc.
In one case, agents of the BIR used the books of account seized as a
result of raid by means of search warrant.

NET WORTH OR INVENTORY METHOD (also called Net Investigatory Method)

- This is another method that may be employed by the BIR in determining
the tax liability of the taxpayer. This is an expansion of that accounting
principle, assets less liabilities equals net worth.
Assessment is made when it is mailed, released or sent.
Example:
If it was received by the taxpayer in a particular date (Dec. 5, 1997), you
should count the prescriptive period for making an assessment from the date it was
mailed, released or sent by the BIR and not from the receipt of the notice of assessment
by the taxpayer.
The assessment may be subject to revision by the BIR. If revised, the prescriptive
period will commence to run from the safe when such revised assessment is mailed,
released or sent. So, it is not from the date the original assessment is mailed etc. but
from the date the revised assessment has been mailed.
The making of assessment is prescriptible.

The rule is, the BIR may collect taxes with or without prior
assessment.
PRESCRIPTIVE PERIOD FOR MAKING
AN ASSESSMENT & COLLECTION

I. Return filed is not false

or fraudulent
a. Return was file but
there
exist
a
deficiency
b. Return was filed but
no payment has
been made
II.
Failure/Falsify/Fraudulent
a. Intentional failure to
file a return
b. False return
c. Fraudulent return

With prior assessment

Without prior assessment

3 years from the date of

actual filing. If it was filed
earlier than the date fixed
by the Tax Code.

3 years from the date of

actual filing or from the
last day fixed by law for
filing such return.

COLLECTION: Within
years from the date
assessment

3
of

10
years
from
the
discovery of such omission
of failure, falsity or fraud
COLLECTION:
from
the
assessment.

3 years
date
of

Taxes may be collected even

without prior assessment
and prescriptive period is
10
years
from
the
discovery of failure or
omission, falsity or fraud.

Notes:
The rule is if prior assessment has been made, the BIR can avail of the
administrative and judicial remedy. But if without prior assessment, the BIR can only
avail of the judicial remedies.
Return must be the one prescribed by the BIR. SO, if you file your Books
of Accounts in lieu of that return, that does not constitute return.
PRINCIPLES GOVERNING THE FILING OF AN ACTION FOR COLLECTION
BY THE BIR
Collection is proper under the following situations:
a. BIR assessment is considered final and executory, if no protest or dispute has
been made by the taxpayer. IF protested by the taxpayer but he did not appeal,
the BIR decision on such protest, the effect is that the BIR decision shall be
considered final and executory.
b. IF he appeal the decision of the BIR of the Commissioner to the CTA but he did
not appeal the decision of the CTA to CA, the decision of the CTA shall be final
and executory.
c. If he appeal to the CA but the CA decision affirming that decision of the BIR was
not appealed to the SC, CA decision shall be final and executory.
d. If appealed to SC but SC affirm the decision of the CA, SC decision is final and
executory.

If the decision of the BIR is final and executory, the assessment made
cannot be questioned. The issue of prescription can no longer be raised
except if the BIR submitted the particular issue for the resolution of the
Court, that is considered as waiver on the part of the BIR and such issue
of prescription may be subject to resolution.
There is no provision in the TAX Code that prohibits the BIR from filing
an action for collection even if the resolution on the motion for
reconsideration on the assessment made is still pending.
When the case is pending before the CTA, collection may also be made by
filing of an answer to the petition for review with the CTA. This is
tantamount to a filing of collection of tax. This will also stop the running
of the prescriptive period for collection of taxes.
Collection of taxes is prescriptible.

GROUNDS FOR THE SUSPENSION OF PRESCRIPTIVE PERIOD IN THE

COLLECTION OF TAXES: (Code: N.A.P.O.C.A.R.)
1. No property could be allocated;
2. Agreement between the BIR and the taxpayer to the effect that the prescriptive period
shall be suspended pending the negotiation;
3. If the BIR is Prohibited from a distraint or levy of real property;
4. If the taxpayer is Out of the Philippines;
5. If the address of the taxpayer Cannot be located;
6. The filing of an Answer to the petition for review executed by a taxpayer with the CTA;
7. When a Request for reinvestigation has been granted by the BIR.
PRINCIPLES IN CRIMINAL ACTION
1. The filing of an action requires the approval of the BIR Commissioner. Also, the filing
of civil action requires the approval of the BIR Commissioner. BUT this is not
jurisdictional. This is merely a formal defect which can be cured.
2. The purpose of filing criminal action is to impose statutory penalties.
3. The payment of tax liability does not extinguish the criminal liability of the taxpayer
arising from the violation of the provision of the Tax Code. This is so because the civil

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liability arises from the failure of the taxpayer to pay and this does not arise from
felonious act.
4. The acquittal of the taxpayer from criminal liability does not carry with it the
extinguishments of civil liability.
5. The penalty of subsidiary imprisonment applies only to the failure of the taxpayer to
pay the penalties. But, the Tax Law is silent on the failure of the taxpayer to pay his
deficiency or delinquency tax.
DEFICIENCY VS. DELINQUENCY

In deficiency, the taxpayer filed a return but the same was deficient.
Deficiency is the difference between the tax due and the tax paid.

In delinquency, the taxpayer did not file a return.

FALSE RETURN vs. FRAUDULENT RETURN

In the case of false return, this is a deviation from the truth. It may be the
result of mistake, error, or negligence of the taxpayer. It is not always intentional
because it may be the result of an honest opinion of the CPA.
In fraudulent return, there is always the intent to defraud the government to
evade taxes. It is always intentional and deliberate.

Criminal action may be suspended if the taxpayer is absent from the

Philippines.

FIVE (5) years the prescriptive period for filing a criminal action for
violations of the provision of the Tax Code.

In the case of refusal to pay the tax, the 5-year prescriptive period will
commence to run from the date final notice or demand has been served
upon the taxpayer.

As regards violation of the Tax Code, if the violation is known the 5-year
prescriptive period shall commence to run from the date of the discovery
of the violation and the institution of judicial proceedings for
investigation and punishment. The law uses the conjunction and. So, it
will commence to run only from the time the BIR referred the case to the
Fiscals Office or City Prosecutor. In effect, it is always in the control of
the BIR.

REMEDIES OF THE TAXPAYER

BEFORE PAYMENT, the taxpayer may dispute or protest the assessment. He may also
invoke the power of the BIR Commissioner to compromise tax liability.
If you RECEIVED AN ASSESSMENT by the BIR, the remedies are:
a. File a request for reconsideration of the assessment or this is a claim for reevaluation of the assessment based on the existing records.
b. File a request for investigation of the assessment --- it is also a claim for a reevaluation of the assessment on the basis of newly discovered evidence, or
additional evidence that the taxpayer intends to present in the reinvestigation.
WHERE TO FILE:
(a) & (b) >>>>> BIR Commissioner
ISSUES which may be raised >>>>> Question of law or fact

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or both questions of law and fact
WHEN >>>>>>>>>>>>>>>>>>>>>>> Within 30 days from
receipt of such assessment
IF the request for investigation or reconsideration has been denied by the BIR:
1. File a motion for reconsideration of the decision with the BIR; OR
2. Appeal the decision with the CTA.
*** Motion for reconsideration must raise new grounds, meaning grounds which have
not been raised in that request for reconsideration or reinvestigation. Otherwise, it is
just a pro-forma motion, it will not suspend the period within which to appeal the BIR
decision to the CTA which is 30 days from receipt of the BIR decision.
ISSUES that may be raised on appeal with the CTA >>> Questions of
Law or fact OR both
If CTA affirms the decision of the BIR:
Appeal the CTA decision to CA.
ISSUES >>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Questions of law
WHEN
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Within 15 days from receipt of the
CA decision
The taxpayer may, instead of filing a protest, file a written claim for refund.
REQUISITES FOR FILING REFUND:
1. This must be filed within the two (2) year period from the date of payment;
2. The fact of withholding must be proven;
3. This must be included in the income tax return of the taxpayer;
4. It must be shown that the payment or the amount stated in the return was received
by the government.
WHERE TO FILE REFUND:
ISSUES:

--- BIR
--- Questions of law or fact OR
--- both OR
--- the taxes are illegally or erroneously collected

ILLEGALLY COLLECTED TAX vs. ERRONEOUSLY COLLECTED TAX:

Illegally collected tax means it violates certain provision of the law. It may not
be authorized by a peculiar Tax Law or statute.
Erroneously collected tax means there may be a law passed but there was a
mistake in the collection.
WHEN TO FILE:
Within 2 years from the date of payment
> Payment must be proven in contemplation of Tax Law, there is payment when the tax
liability is fully paid. So, if it is payable in installment, there can only be payment when
the final installment has been paid.