TAX

ADMINISTRATION AND REMEDIES

A. TAX ADMINISTRATION (Sections 1-21, NIRC)

Officials of the BIR:

1.
2.
3.
4.
5.

Commissioner of Internal Revenue (CIR)

4 Deputy Commissioners: Commissioners of Information Systems, Legal, Operations, and Resource Management
19 Regional Directors coinciding with the 19 revenue regions
184 Revenue District Officers
Revenue enforcement officers and examiners

A.1. Powers and Duties of the BIR (Section 2, NIRC)

1. To assess and collect national internal taxes, fees and charges;
2. To enforce all forfeitures, penalties and fines connected therewith;
3. To execute judgment in all cases decided in its favour by the CTA and the ordinary courts; and
4. To effect and administer the supervisory and police powers conferred upon it by the Tax Code or other special laws.

A. 2. General Powers of the CIR
st
1. Power to Interpret the Tax Code and Other Tax Laws (exclusive and original jurisdiction) (Section 4 1 par., NIRC)
o
o

Subject to review by the Secretary of Finance (SOF);

CIR merely recommends to the SOF the issuance of a revenue regulation;
Who has the power to review and interpret the Tax Code and other tax laws? The Secretary of Finance. Whenever the
BIR issues a regulation which is adverse to you, you dont go to the CTA to question it. What you do is to go to the SOF.
The power of the CIR to interpret in the form of revenue regulations is sort of recommendatory. The CIR recommends to
the SOF and its the latter who issues these revenue regulations. But its different with the revenue rulings because the
ruling is really set by the CIR, as a general rule.

How do we distinguish a revenue regulation from a revenue ruling?

o

Revenue Regulations are general interpretations whereas Revenue Rulings are more specific and address to the to the
particular and actual needs of the taxpayer.
There is a particular set of facts on which the interpretation of the CIR is applied to. It could be that the ruling applies to
you granting that all the particular facts of said ruling are applicable to you. If not, then you cannot make use of the
ruling as basis for your position.
nd

2. Power to Decide Disputed Assessments, Refunds, Penalties and Other Matters (Section 4 2 par., NIRC)
o

Subject to the appellate jurisdiction of the CTA

If there is a protest filed by the taxpayer and the CIR issues an adverse decision, the taxpayer will have to go to the CTA.
You make a differentiation. If its interpretation of a tax law in the form of a revenue ruling or regulation, you question it
before the SOF. If its an assessment made by the BIR, you question it before the CTA.

3. Power to obtain information and to summon, examine and take testimony of persons (Section 5, NIRC)
o

To examine any book, paper, record, or other date which may be relevant or material to such inquiry;

If youve heard about taxpayers having been subjected to a review of the BIR, the BIR actually issues a letter requiring
the presentation of books. The BIR can always require submission of all documents relating to accounting.

To obtain information from:
i.
The taxpayer himself;
ii.
Any office or officer of the national and local governments, government agencies and instrumentalities
including the BSP and GOCCs
iii.
Third Party Information

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E.g. The BIR was able to look into Judy Ann Santoss tax information by making use of third parties who
had transacted with her on commercial or endorsement matters. The BIR made a comparison between the
declarations of those companies and what she reported. They tried to match it and since it did not match,
someone must not have reported correctly. Before, you dont require the tax identification number of all
parties involved in a transaction. Currently, if you want to file certain documents with the BIR, its a
requirement that you should be able to know the TIN of all parties involved in the transaction.
o

o
o

To summon the person liable for tax or required to file a return, or any officer or employee of such person or any
person having possession, custody or care of the books of accounts and other accounting records containing entries
relating to the business of the person liable for tax, or any other person, to appear before the CIR or his duly authorized
representative at a time and place specified in the summons and to produce such books, papers records or other data,
and to give testimony;

To take such testimony of the persons concerned under oath as may be relevant or material to such inquiry; and

To cause revenue officers and employees to make a canvass from time to time of any revenue district or region and
inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons
owning or having the care, management or possession of any object with respect to which a tax is imposed.

4. Power to Make Assessment (Section 6, NIRC)

a. Examination of Returns and Determination of Tax Due
o

If no return is filed, there will still be an assessment based on the Best Evidence Obtainable.

b. Assess the proper tax on the Best Evidence Obtainable

Only in the following cases:
i.
ii.

If a person fails to file a return or other document at the time prescribed by law; or
The taxpayer wilfully or otherwise files a false or fraudulent return or other document.
Best Evidence Obtainable any data, record, papers, documents or any evidence gathered by the internal revenue
officers from government offices or agencies, corporations, employers, clients or patients, tenants, lessees, vendees
and from all other sources, with whom the taxpayer had previous transactions or from whom he received any income,
after ascertaining that a report required y law as basis for the assessment of any internal revenue tax has not been filed
or when there is reason to believe that any report is false, incomplete or erroneous.
Net Worth Method method wherein the BIR can determine the proper taxes for a taxpayer who has not fully
declared its income or paid properly its taxes for a number of years.

c. Conduct Inventory-taking, Surveillance and to Prescribe Presumptive Gross Sales and Receipts
o

Surveillance is undertaken when there is reason to believe that a person is not declating his correct income, sales
or receipts for internal revenue tax purposes;

Presumptive Gross Sales and Receipts is imposed when there is reason to believe that the taxpayer is incorrectly
declaring his income, using data at similar businesses within the same industry [Averaging Method].

For example, you have a bakery. What the BIR can do is that within your area, they will look at the other bakeries,
try to get their data, do an averaging and on the basis thereof, if they determine that you reported less sales than
that of the average then the BIR can make an average sales for you and that would be used as data to determine
your tax liability. So you look at similar entities, do an averaging then compare it with your own data.
d. Issue Jeopardy Assessments and Terminate Taxable Period
GR: BIR can only make assessments after a complete and full audit has been made insofar as the documents obtainable
are concerned.

EXC: Jeopardy Assessment may be issued, without the benefit of a full and partial audit in light of the Revenue Officers
belief that the assessment and collection of the deficiency tax will be jeopardized by delay caused by the taxpayers
failure to:

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a.
b.

Comply with audit and investigation requirements to present his books of accounts and/or pertinent records;
Substantiate all or any of the deductions, exemptions or credit claimed in his return and the prescriptive period to
collect and/pr assess is about to elapse.

When tax period may be terminated: (should be accompanied by a request to immediately pay the taxes due):

1. The taxpayer is retiring from business subject to tax;
2. He intends to leave the Philippines or remove property therefrom;
3. He hides or conceals his property;
4. He performs an act tending to obstruct the proceedings for the collection of the tax for the past or current
quarter or year to render the same totally or partially ineffective unless such proceedings are begun
immediately.
Other instances
1.
2.

When the taxpayer changes his/her/its accounting period from calendar year to fiscal year or fiscal year to
calendar year;
When the taxpayer changes status from Non-VAT to VAT-registered.

Termination of taxable period means that you have to make a return right away even if your accounting period has
not yet been completed. But there are specific grounds mentioned in the Tax Code of when the CIR can actually
terminate the tax period as enumerated above.
5. Power to Prescribe Real Property Values (Section 6(E), NIRC)
For purposes of computing any internal revenue tax, the value of the property shall be whichever is higher of:
1.
2.

The fair market value as determined by the CIR; or

The fair market value as shown in the schedule of values of the Provincial and City Assessors for real estate tax
purposes.

6. Power to Inquire into Bank Deposits (Section 6(F), NIRC)

The CIR is authorized to inquire into bank deposits of:
1.
2.

3.

A decedent to determine his gross estate;

Any taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his
tax liability and waives in writing his privilege under the Bank Secrecy Law or other laws; and
Its as if this ground falls under the voluntary consent of the person who owns the bank account.
A specific taxpayer subject of a request for the supply of tax information from a foreign tax authority pursuant to an
international convention or agreement on tax matters to which the Philippines is a signatory or a party of (Section 6(F),
NIRC as amended by RA 10021).
The basis of this is RA 10021 (Exchange of Information on Tax Matters Act of 2009) where the foreign tax
authority can inquire into the bank account of a particular person in relation to taxes it ought to pay to that
foreign jurisdiction. There is actually a revenue regulation for this. The most important provision there is that if
this specific ground is invoked, there is a need to make a request from the tax authority of a foreign country.
You must be able to establish that there really is an account existing in the Philippines and that is the only
connection they have in relation to the tax of the subject person which is ought to be paid. In other words, they
just have to establish that it is really necessary for purposes of determining the tax liability of such person.
What is so interesting about this law is that if ever there is a request from a foreign tax authority, whatever
information the BIR gathers here can also be used to assess that same person.

Conditions under RA 10021

i.
the identity of the person under examination or investigation;
ii.
A statement of the information being sought;
iii.
The tax purpose for which the information is being sought;
iv.
Grounds for believing that the information requested is held in the Philippines;
v.
The name and address of any person believed to be in possession of the requested information, to
the extent known;
vi.
A statement that the request is in conformity with the law and administrative practise of the foreign
tax authority;

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vii.

A statement that the requesting foreign authority has exhausted all means available in its own
territory to obtain the information.

7. Power to Prescribe Additional Procedural or Documentary Requirements (Section 6(H), NIRC)

8. Power Not to Allow the Withdrawal of any Return, Statement or Declaration, Although the Same may be Amended (Section
rd
6(A)3 par., NIRC)
o

Any return, statement or declaration filed in the BIR shall not be withdrawn but may be modified, changed or amended
within 3 years from the date of such filing, provided that no notice for audit or investigation of such return, statement or
declaration has, in the meantime, been actually served upon the taxpayer.
The general rule is that whenever a return is filed, it will stay there, you cannot do anything about it. But you can make
additional filing thats why you can modify, amend or change any information there. Does that mean that you can
withdraw the return filed earlier and exchanged it with another return? No. The return, once filed, will stay with the BIR.
You just have to file a new return containing the corrected information. Changing, amending or modifying a return can
only be done within 3 years from the time of filing and granting that there has been no notice of investigation was ever
issued to the taxpayer otherwise you cannot amend the return you filed. Whats the reason for that? Because it would
be very convenient for any taxpayer who received a notice of investigation to change his return in order to escape
liability. So it would be useless on the part of the BIR to investigate since the taxpayer would have changed the
information in the return o coincide with whatever was investigated.

A.3. Delegable Powers of the CIR (Section 7, NIRC)

GR: The CIR may delegate the powers vested in him to subordinate officials with rank equivalent to a division chief or higher.
Exceptions:
1.
2.

3.
4.

Power to recommend the promulgation of rules and regulations by the SOF;

Power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the BIR;
For example, motor vehicles owned by companies are considered ordinary assets and are vatable whenever
sold. So thats the current position of the BIR on the matter. What if the new CIR will issue an opinion that its
no longer vatable? That ruling can only be issued by the CIR because it is a modification of a ruling previously
made.
Power to compromise or abate any tax liability except assessments issued by the regional offices involving basic
deficiency taxes of P500,000.00 or less and minor criminal violations;
Power to assign or reassign internal revenue officers to establishments where the articles subject to excise tax are
produced or kept.
If ever there are excisable taxes in SM, is it necessary that the CIR would assign a revenue officer to check on
these articles? No because that is an area where these excisable articles are being sold. What is provided in the
Tax Code is establishments where these articles are produced or kept. So if its a place for selling, the CIR need
not be the one who will make the assignment of a revenue officer. The CIR can just delegate it to someone else.
But if its a place for production or warehousing then the CIR should be the one to make the assignment or
reassignment.
What is the reason for this? Because its very easy to get away with excise taxes. From one production line to a
plant, supposedly theres excise tax involved already. The moment it is produced and transferred to the
warehouse, excise tax is supposed to accrue. So if imong papiyungon ang nagtan aw dha nga BIR personnel
then you can get away with excise tax. And if this BIR personnel is already very close to the owner of the entity
then it would be very easy to collude. And so they are required to be reassigned, I think, every two years. But
then again, this would be impractical.

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B. REMEDIES
OVERVIEW
Remedies of the Government
I.

II.

As to the Nature of Proceedings

A. Administrative Remedies
1. Tax Lien
2. Distraint or garnishment
3. Levy
4. Forfeiture
5. Compromise and Abatement
6. Penalties and Fines
7. Suspension of Business Operations

B. Judicial
1. Civil
2. Criminal

As to Procedure
A. Assessment and Collection
B. Collection without Assessment

Remedies of the Taxpayer

I.

II.

Before Payment
A. Administrative Remedies
1. Protest against Assessment
2. Entering into a Compromise
B. Judicial Remedies

After Payment
A. Administrative Remedies
1. Claim for Tax Refund or Tax Credit
2. Judicial Remedies
The general rule is that before you resort to judicial remedies, you must first resort to administrative remedies.

Remedies Of The Government

ASSESSMENT
Noun notice to the effect that the amount therein stated is due from the taxpayer as a tax with a demand for
payment of the tax or deficiency stated therein.
Verb official action of an administrative officer in determining the amount of tax due from a taxpayer.
Computing actually how much is the tax due is already considered an assessment.
Kinds of Assessment:
1.

2.

Self-assessment tax is assessed by the taxpayer himself

th
th
Usually, every April 15 for individual taxpayers and in the case of corporations, every 15 day of the 4 month
following the close of their taxable period.
Deficiency Assessment made by the tax assessor himself whereby the correct amount of the tax is determined after
an examination or investigation is conducted.
a. Deficiency Tax one where the taxpayer has already paid the amount of tax due but the BIR later on found
that such amount was incorrect.
b. Delinquency Tax one where the taxpayer failed to pay the amount of the tax due after having been assessed.

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The BIR personnel will then retrieve all the records of the taxpayer, make their own computation and compare it to
the return filed. If they notice that there is a discrepancy they will then issue a deficiency assessment. It will embody
the deficiency tax. Lets say for example, you made your return last April 15. You paid P1million. The when the BIR
made their own computation, it turned out that the amount due is P1.5million. The P500K is considered the
deficiency tax. If you failed to pay after demand made by the BIR, the P500K is now a delinquency tax. Deficiency
tax if there is no assessment yet made by the BIR but once there is an assessment already and you failed to pay, it
now becomes a delinquency tax.
3.
4.

5.

Illegal and Void Assessment tax assessor has no power to assess at all.
This is an assessment made without authority. This could happen, for example, when the BIR made an
assessment after the period to assess has already elapsed or prescribed.
Erroneous Assessment tax assessor but committed a mistake in the exercise thereof.
For example, the BIR made an assessment but it turned out that the computation was wrong. It was without
basis which usually happens since everything under the sun seems to be subject to tax. Whether its exempt or
not does not matter already.
Jeopardy Assessment made by an authorized Revenue Officer without the benefit of a complete or partial audit, in
light of the ROs belief that the assessment and collection of a deficiency tax will be jeopardized by delay caused by the
taxpayers failure to:
a. Comply with audit and investigation requirements to present his books of accounts and/or pertinent record, or
b. Substantiate all or any of the deductions, exemptions of credits claimed in his return.

Assessment Process:
I. Issuance of a Letter of Authority (LOA)
o

LOA is an official document that empowers a Revenue Officer to examine, investigate and audit a taxpayers books of
accounts and other accounting records in order to determine the taxpayers correct internal revenue tax liabilities.

Requirements of a valid LOA:
1. The taxpayer has to be properly identified;
2. The LOA must be given to the proper address;
3. Taxes to be audited must be identified (it is enough to say NIRC Taxes);
4. It has to specify the year to be audited (which should not exceed one (1) year); and
5. It is signed by the proper officer.

Letter Notice (LN) issued by the CIR or his alter ego to the taxpayer who has been found to have incurred
discrepancies, either under-declaration of his sales or over-declaration of his expenses under a no-contact audit
approach.

II. Actual Audit/Investigation

III. Issuance of a Preliminary Assessment Notice (PAN)
IV. Issuance of Formal Letter of Demand and Assessment Notice (FAN)
Rule: PAN must first be issued by the BIR before issuing a Fan and Letter of Demand.
Exceptions:
1.
2.

3.

Mathematical error appears on the face of the return;

Discrepancy between tax withheld and tax remitted exists;
The contemplation here is that the amount of tax withheld is more than the amount of tax remitted.
Theres no more need from PAN because the withholding agent clearly committed fraud not only to
the government but also to the taxpayer.
Double availment of Tax Credit/Refund and Carry-Over;
You applied for tax credit and you are granted a tax credit certificate. It turned out that you carried
over your excess. Say for example, during the year, the total taxes you paid on the third quarter is
P1million. Come fourth quarter, it turned out that the taxes you ought to pay is only P800K. What are
you supposed to do with the P200K? There are options given you under the Tax Code (Section 76). If
you already availed of one of those three options under Section 76, you cannot avail anymore of the
other options. Theyre mutually exclusive. So if ever, it turned out of two options, then there is no more
need of the PAN because theres mistake on your part.

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4.
5.

Excise Tax on excisable goods has not been paid;

Again, its very easy to get away with excise taxes.
Article purchased by exempt person is transferred to non-exempt person.
This usually happens in the case of technical importation.

N.B.: The taxpayers shall be informed in writing of the LAW and the FACTS on which the assessment is made; otherwise,
the assessment shall be void (Section 228, NIRC).
o

An assessment is deemed made when the FAN is finally released, mailed and sent to the taxpayer.

Dissussion:
There is no more Notice of Informal Conference so the assessment process has become somewhat easier. Now, the PAN is
automatically issued. First, there is the issuance of a LOA which presupposes that the taxpayer is under audit or investigation.
The general rule is that within the region, only the Regional Director can issue a LOA. However, once the national office of the BIR
issues a LOA, the regional officers can no longer issue a LOA. There power has already been superseded by that of the national
office. One taxpayer can only be issued one LOA for a particular tax. But a LOA could contain many taxes for as long as it involves
only one tax period as discussed in the case of Sony. How does it differ from a Letter Notice? Take note, that under a LOA, the
taxpayer is informed that he is subject to an investigation. Under LN, the taxpayer is not informed. He will just be informed right
away that this is the amount of taxes that hes supposed to pay out of the investigation the BIR conducted out of third party
information. LN can be issued while LOA will have to proceed to an actual investigation. In LN, there is no more need for
information from the taxpayer himself since it already results from an investigation conducted by the BIR from third parties.
If you dont agree, then the BIR will issue a PAN. With the current administration and based on the current revenue regulation,
PAN is issued as a matter of course. The BIR will automatically issue a PAN probably because they notice that this has become a
problem with the due process requirement in courts. Also, theyve taken away the Notice of Informal Conference from the
procedure after all its never really mentioned in the law. What is mentioned in the law is the LOA and the PAN. The BIR cannot
get away with the issuance of the PAN unless it falls under any of the exceptions where PAN can be dispensed with. If after the
Reply of the taxpayer to the PAN, the BIR thinks that there is no legal basis to reconsider its position, then it will issue a Formal
Letter of Demand and Assessment Notice or Final Assessment Notice (FAN). This is the notice that you will have to question. But
this is the remedy of the government in case you dont pay taxes. So after a FAN has been issued, the taxpayer will file a Protest
within 30 days. If the BIR still doesnt agree, then the taxpayer will now have to resort to court. That will be the time that the
judicial process will come in.
When do you say that an assessment has already been made by the government? Is it when the BIR issues a PAN or a FAN? Only
when a FAN has been issued and it is deemed made when the FAN has already been finally released, mailed or sent to the
taxpayer. Thats when the government is said to have made use of the remedy of assessment. Take note that whenever the
government makes an assessment, the taxpayer must be duly informed of the law and the facts on which the assessment is
based otherwise the same is void.
*Q and A
COLLECTION
Administrative Methods for Collection of Taxes:
1.

2.

Tax Lien (Section 219, NIRC) denotes a legal claim or charge on property as security for the payment of some debt or
obligation.
a. Personal Property at the time the tax becomes due and payable;
b. Real Property from the time of registration with the Register of Deeds.

Distraint/Garnishment
o Applies to personal property only

a. Constructive Distraint issued when there is no actual tax delinquency yet as preventive remedy to forestall
possible dissipation of the taxpayers assets under the following cases:

1. A taxpayer is retiring from business subject to tax;
2. A taxpayer is intending to:
i.
Leave the Philippines or remove his property therefrom; or
ii.
Hide or conceal his property;
3. A taxpayer is performing any act tending to:

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i.
ii.

Obstruct the proceedings for the collection of the tax for past or current year; or
Render the same totally or partly ineffective unless such proceedings are begun immediately.

How effected: Section 206, NIRC

a.

b.

By requiring the taxpayer or any person having possession or control of such property to sign a receipt
covering the property distrained and obligate himself to preserve the same intact and unaltered and not to
dispose of the same in any manner whatever without the express authority of the Commissioner;

In case the person refuses or fails to sign the receipt, the revenue officer effecting the constructive
distraint shall prepare a list of the property and in the presence of two (2) witnesses, leave a copy thereof
in the premises where the property distrained is located.

Constructive Distraint
Actual Distraint
No tax delinquency yet
There is tax delinquency
No actual or physical seizure of the property; There is actual or physical seizure of property
taxpayer is just obligated to preserve and not to
dispose of the property
Procedure: Sec. 206, NIRC
Procedure: Sec. 207-212, NIRC

b.

Actual Distraint- resorted to when there is actual tax delinquency and the taxpayer fails to pay his obligation
which consists in the actual seizure and taking of personal property of the taxpayer.
How effected (short version):
1. Commencement of distraint proceeding either by CIR or duly authorized representative (more than P1M
delinquency tax) or RDO (P1M and below delinquency tax)
2. Service of warrant of distraint
3. Report on the distraint (by the sheriff serving the warrant)
4. Notice of sale of distrained property
5. Sale at public auction

c.

Garnishment- special kind of distraint. the taking of personal properties, usually cash or sums of money, owned by a
delinquent taxpayer which is in the possession of a third party. There could be distraint of intangible properties like
your bank account or shares of stock or dividends or going after the debtors of the taxpayer.
Just like constructive distraint, you write a letter mentioning about the warrant of distraint being issued against the
taxpayer and since you are in a possession of a property to which the taxpayer has an interest, you are hereby
precluded from making any disposition of such property within your possession or control. So if its a bank account,
the bank should refuse any withdrawal or set off of such bank account.

1.

Levy- applies to real property only. There is no physical seizure of the real property (like constructive distraint). So a
warrant of levy shall be issued to the taxpayer, a copy of which shall be furnished to the RDO stating that this property
is now subject of a levy and that any disposal thereof will be subject to the consent of the CIR. You cannot make any
transfer without authority from the CIR.
When: (NIRC, Sec. 207 (B)) Before, simultaneously, or after the distraint proceedings is effected.
How effected:
1. Issuance of warrant of Levy
2. Service of the warrant of levy
Once the warrant of levy has been served the taxpayer can no longer disposed. If sold, all proceeds shall be
used to pay the taxpayers liabilities. Whoever holds the property after the service of the warrant is subject to
the lien of the government against such property. The levy attaches to the property once the warrant has been
served.
3. Advertisement of sale
2. Public sale of property

3.

Forfeiture- divesture of property without compensation, in consequence of a default or offense.

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Resorted to when:

there is no bidder or the amount of the bid is not sufficient to cover the tax liabilities

DISTRAINT

LEVY

Refers to personal property

Refers to real property

Assessment is not required in all

instances. If its constructive, its not
necessary that there be delinquency

There must always be an

assessment. Applicable only when
there is delinquency

No right of redemption (since its

personal

One (1) year redemption period

properties)
No forfeiture proceedings
If not sold in public auction, govt will
have to purchase the properties and
apply the proceeds to the tax liability

Forfeiture in favour of govt if no

serious bidder. There is no just
compensation. (Not eminent domain)

4.

Compromise and Abatement

A. Compromise
1.

Definition: a contract whereby the parties by making reciprocal concessions, avoid litigation or put an end to
one already commenced (Civil Code, Art. 2028)

2.

Requisites:

i the taxpayer has tax liability

Ii there must be an offer of an amount to be paid by the taxpayer;
Iii there must be acceptance of the offer in settlement of the original claim

3.

Authority:

i Commissioner; or
Ii Regional Evaluation Board, in case the assessment involves basic deficiency tax (BDT) of
P500,000 or less and minor violations discovered by regional and district officials.

4.

Grounds:

1. Doubtful Validity- minimum @40% of BDT

2. Financial Incapacity- 10%, 20% or 40% depending on the condition of taxpayer. But under
the tax code, the minimum is 10%

5.

When required to secure approval of National Evaluation Board:

**in addition to authority of Commissioner or Regional Evaluation Board whenever
a. The basic tax involved exceeds P1M; or
b. The settlement offered is less than the prescribed minimum

6.

Allowed Cases: (R.R. 30-2002)

1. Delinquent accounts
2. Cases under administrative protest after issuance of FAN pending before the BIR
3. Civil tax cases being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations not yet filed in court except criminal tax fraud
*this is always asked
Prohibited Cases: (R.R. 7-2001)
1. Withholding tax cases- is not the taxpayers tax, you only remit it
2. Criminal tax fraud cases confirmed by CIR or his representatives
-means the CIR/representative has approved that a criminal tax fraud should be filed.
Whether filed in court or not, so long as criminal tax fraud is involved.
3. Criminal violations already filed in court (not criminal tax fraud)

7.

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4. Delinquent accounts with duly approved schedule of installment payments

-because already entered into compromise which is why there is schedule of installment
payments
5. Cases where final reports of reinvestigation or reconsideration have been issued where the taxpayer
is agreeable
-because already entered into agreement
6. Cases which are already final and executory after final judgment
-. So as not to make a farce out of the proceedings of the court
7. Estate tax cases on the ground on financial incapacity
how come there is financial incapacity when there must be an estate that estate tax is paid
up
B. Abatement
1.

Definition: cancellation of the taxpayers entire tax liability

There can be cancellation of only surcharge or interest penalty or other penalties.

2.
Grounds:

3.
4.

5.

1. The tax or any portion thereof appears to be unjustly or excessively assessed

2. The administration and collection costs involved do not justify the collection of the
amount due
Authority: CIR only
Unjust/Excessive Tax Cases (under Ground #1):
a. Filing of return/payment at the wrong venue
b. Mistake in tax payment due to erroneous written official advice of a Revenue Officer
-if theres a ruling issued by previous CIR stating that a TP is not taxable, but the new CIR has
ruled he is taxable, there is corresponding surcharges and interest penalties. The TP there can
abate the surcharges and interest penalties and pay only the basic taxes.
c. Failure to file a return due to:

i. Prolonged labor dispute

ii. Force majeure
iii.Legitimate business reverses
only surcharges and penalties can be abated because it remains that there is tax liability its
just that you were not able to file return on time because of the foregoing
d. Non-compliance due to difficult interpretation of the law
e. Failure is due to cause beyond taxpayers control
f. Late payment under meritorious circumstances
e. Other similar or analogous cases

Penalties and Fines- so TP will be compelled to pay the taxes due

Imposition of Addition to Taxes:

*Surcharges- 25% or 50% depending on whether false/ fraudulent return

involved
*Interest Penalty- 20%
*Compromise Penalty- new RR on schedule. Lowest= P1,000, even if late for
only one day.

Surcharge only has two rates:

1. 25% Civil Penalty or Surcharge
(a) Failure to file any return and pay the tax due thereon; or
(b) Filing a return with an internal revenue officer other than those with whom the return is required to be filed; or
(c) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or
(d) Failure to pay the full or part of the amount of tax shown on any return or the full amount of tax due for which no return is
required to be filed, on or before the date prescribed for its payment. (Sec. 248)
2.

50% Civil Penalty or Surcharge

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The 50% surcharge is not a criminal penalty but a civil or administrative sanction provided primarily as a safeguard for the
protection of the State revenue and to reimburse the Government for the heavy expense of investigation and the loss resulting
from the taxpayers fraud (Castro vs. CIR, L-12174, Apr. 26, 1962)
(a) In case of willful neglect to file the return within the period prescribed by the Code, or
(b) In case a false or fraudulent return is willfully made

6.

Suspension of Business Operations

1. Understatement of taxable sale or receipt by 30% or more based on sales (Ground)
2. Duration: not less than 5 days
VALUE ADDED TAX. The CIR or his authorized representative is empowered to suspend the business operations and temporarily close
the business establishment of any person for any of the following violations:
1. In the case of a VAT-registered person
(a) Failure to issue receipts or invoice
(b) Failure to file a VAT return
(c) Understatement of taxable sales or receipts by 30% or more of his correct taxable sales or receipts for the taxable quarter.
2. Failure of any person to register who is mandatorily subject to VAT.
The temporary closure of the establishment shall be for duration of not less than 5 days and shall be lifted only upon compliance with
whatever requirements prescribed by the CIR in the closure order.

Interest
20% INTEREST (per annum)
The interest shall be computed only on the basic deficiency tax (surcharge is not included in the computation).
1. Deficiency Interest
Any deficiency in the tax due shall be subject to the interest of 20% per annum which shall be assessed and collected from the date
prescribed for its payment until the full payment thereof (Sec. 249[B], NIRC).
2. Delinquency Interest In case of failure to pay:

The amount of the tax due on any return required to be filed; or

The amount of the tax due for which no return is required;

JUDICIAL REMEDIES of the Government:
A. Civil Action
1. By filing a civil case for collection of a sum of money with proper regular court (MTC or RTC)
2. By filing an answer to the petition for review filed by taxpayer with CTA
FANBIR decisionCTA (petition for review), where BIR also has the right to file an answer
B.

Criminal Action
Common Criminal Cases:
1.

Attempt to evade or defeat tax; and

2.

Failure to file return, supply correct and accurate information, pay tax, withhold and remit tax and refund
excess taxes withheld on compensation.

The judgment in the criminal case shall not only impose the penalty but shall also order the payment of taxes
subject of the criminal case as finally decided by the Commissioner
Assessment is NOT a requirement to file a criminal action. (Ungab v. Cusi, Adamson v. CA)
PRESCRIPTIVE PERIODS
I.

ASSESSMENT

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th

Rule: (NIRC, Sec 203) Internal revenue taxes shall be assessed within three (3) years after (1,095 day) reckoned from
a. The last day prescribed by law for the filing of return; or
b. The day the return was filed, if in default
Prescriptive Period for Filing of Return:
Income tax: 15th day of the 4th month following the close of the taxable year

If individual: April 15 , pertaining to taxes of previous year.

Estate tax: 6 mos from the date of death

VAT: 25th day of the month following the close of the quarter
Donors Tax: 30 days from the donation was made; its just at the end of the year there is a final return consolidating it.
Withholding tax: 10th day of the month following (withholding)
Date of Filing

Deadline

Income Tax:

April 15, 2015 (last day to file)

April 15, 2018

April 10, 2015

April 15, 2018 (Rule a.)

April 20, 2015 (late/default)

April 20, 2018 (Rule b.)

rd

VAT: 3 Quarter

Oct. 25, 2015 (last day to file)

Oct. 25, 2018

Oct. 15, 2015

Oct. 25, 2018 (Rule a.)

Oct. 30, 2015(late/default)

Oct. 30, 2018 (Rule b.)

Estate tax. Date of death: Dec 25

June 25, 2015 (last day to file)

June 25, 2018

June 20, 2015

June 25, 2018 (Rule a.)

June 30, 2015(late/default)

June 30, 2018 (Rule b.)

Withholding tax: January 2015

Feb 10, 2015 (last day to file)

Feb 10, 2015

Feb 9, 2015

Feb 10, 2015 (Rule a.)

Feb 29, 2015 (late/default)

Feb 28, 2015 (if not leap yr)

Exceptions: (NIRC, Sec. 222)
a) False or Fraudulent Return10 years after discovery
b) Failure to file a Return/No Return10 years after discovery
c) There is a waiver (to toll the running of the prescriptive period)
Requirements for a valid waiver:
1. The waiver must be in the proper form prescribed by RMC 20-90
2. The waiver must be signed by the taxpayer himself or his duly authorized representative
3. The waiver should be duly notarized
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has
accepted and agreed to the waiver;
5. Both the date of execution by the taxpayer and date of acceptance by the BIR should be before
the expiration of the period of prescription or before the lapse of the period agreed upon in case
a subsequent agreement is executed;
6. The waiver must be executed in 3 copies.
Reckoning Point:
1.
2.

Date of Actual Assessment (released, mailed or sent)

Date of Substantial Amendment (that which changes the tax liability of the taxpayer)
**ground for amendment: mistake in your namenot a substantial amendment
**change of total sales: if negative P1M, but you want to amend it to P2Msubstantial bec. can affect
NOLCO (corpo or individual, related to business/trade)

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II.

COLLECTION
Rule: Three (3) years from date of final assessment notice, if there is a return (NIRC, Sec 203)
Exceptions: Five (5) years from date of final assessment notice
a) False or Fraudulent Return
b) Failure to file a Return/No Return

Exception to the Exceptions: Ten (10) years from date of discovery if the government will collect without
assessment. (NIRC, Sec 222 (a))

Reckoning point:
a. Collection through summary remedies
b. Collection through judicial remedies

Grounds for Suspension of Statute of Limitations (NIRC, Sec. 223)

--the same for assessment and collection
1. When the CIR is PROHIBITED from making the assessment or beginning the distraint or levy or a
proceeding in court, AND 60 days thereafter;
2. When the taxpayer requests for a REINVESTIGATION which is GRANTED by the CIR;
3. When the taxpayer cannot be located in the ADDRESS given by him in the return UNLESS he informs the
CIR of any change in his address;

As a matter of fact under the latest amended rules on assessment 18-2013(?) it is provided there that
the BIR can already issue or send an assessment on the last known address of the taxpayer and the last
known address need not be the one registered. So long as the BIR has knowledge of the address that
would already suffice.

4. When the warrant of distraint or levy is duly served, AND No property is located
5. When the taxpayer is out of the Philippines
III. CRIMINAL CASES
Rule: (NIRC, Sec 281) All violations of any provision of this Code shall prescribe after five (5) years
Reckoning Point:
1. From the day of the commission of the violation of the law; or
2. If the same be not known at the time, from the discovery thereof AND the institution of judicial
proceedings for its investigation and punishment.
Technically, it is imprescriptible because it requires the institution of judicial proceedings before the five year
period will start to run. If the BIR will not file a case, then it will never prescribe.

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REMEDIES OF THE TAXPAYER

N.B.: Protest over an assessment as well as claim for refund or credit can only be initially done administratively.
I. BEFORE Payment

PROTEST or may enter into compromise

LOAPANTP files a reply within 15 daysBIR will issue FANTP may protest within 30 days from the receipt of FAN

TYPES:

i. Request for Reconsideration- plea for a reevaluation of an assessment on the basis of existing
records. No requirement for submission of supporting documents. Reconsider decision without
looking into other evidence. 180 days to wait for the decision of BIR reckons from date of submission
of protest.
ii. Request for Reinvestigation-plea for the reevaluation of the assessment on the basis of newly-
discovered evidence or additional evidence. Supporting documents should be submitted. (60 days
period to submit+ 180 days to wait for the decision of the BIR reckons from the date of submission of
supporting docs)

REQUISITES:

1. In writing
2. Addressed to the CIR
3. It must be accompanied by a waiver of the Statue of Limitations in favor of the
government

PROCEDURES IN PROTESTING AN ASSESSMENT

1.

The taxpayer shall file his Protest within 30 days from receipt of the FAN.

2.

The taxpayer shall submit all relevant supporting documents within 60 days from date of filing of protest
(only if Request for Reinvestigation)
Relevant Supporting Documents- those documents necessary to support the legal basis in disputing a tax
assessment as determined by the taxpayer.

3.

The CIR has 180 days from receipt of relevant supporting documents/receipt of the Protest within which
to decide. Two scenarios may transpire therefrom:
a.

BIR decides within the said 180-day period, if adverse to taxpayer, he may file an appeal to CTA (Rule
43) within 30 days from date of receipt of decision. From CTA, appeal to SC (Rule 45) within 15 days.

b.

BIR does not act on the protest within the said 180-day period, taxpayer may (mutually exclusive):
1. File an appeal to CTA within 30 days from the lapse of 180 days period; or
2. Wait for the decision and if adverse, file an appeal within 30 days from receipt of such
decision.

*Read New Cases! Causes changes in the remedies.

4.

If CTA decides adversely, file an appeal before the Supreme Court (Rule 45) within 15 days receipt of such
decision.

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II. AFTER Payment

REFUND/CREDIT

GROUNDS:

a. Tax is erroneously or illegally collected

b. Penalty is collected without authority
c. Sum collected is excessive or in any manner wrongfully collected

REQUISITES:

a. Must be in writing
b. Filed within two (2) years from date of payment
c. Show proof of payment

N.B.: Taxpayer should not wait for the decision of the CIR; both the claim for refund and subsequent appeal must be
filed to CTA within the 2-year period. This does not account to supervening event.

Appeal to CTA should be within 30 days from receipt of decision, but this may change (shorter) on account of the
remaining 2 year period from date of payment, because the 2 year period does not account to supervening event.

If the TP received the decision of BIR 10 days before the expiration of the 2-year period, the TP should appeal to CTA
within the 10 remaining days of the 2-year period.

If the BIR made a decision after the 2-year period, TP can no longer question the decision because the remedy to go to
court has already prescribed.

If you learned that the 2-year period is about to lapse on that day, you file both to BIR and CTA.

Judicial Remedies:
1. Civil Action- action for damages for any whimsical or capricious act resulting to actual damages to the taxpayer
2. Criminal Actionagainst erring official

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