TAX REMDEIES UNDER NIRC a.

Tax lien

b. Distraint and levy

Remedies of Taxpayer c. Forfeiture of real property

These are legal actions which a taxpayer can d. Suspension of business operation
avail to seek relief from the undue burden or
e. Non-availability of injunction to
oppressive effect of tax laws, or as means to
restrain collection of tax
check possible excesses by revenue officers in
the performance of their duties.

2. Judicial remedies
Remedies before payment a. Ordinary civil action
1. Administrative remedies b. Criminal action
a. Protest of assessment;

i. Reconsideration ASSESSMENT
ii. Reinvestigation

b. Compromise; and Kinds of assessments

c. Abatement

2. Judicial Remedies 1. Self-assessment (Section 56[A], NIRC) – When

the taxpayer computes his own liability, files his
return and pays the tax based on his
Remedies after payment computation

1. Administrative remedies

a. Tax refund 2. Deficiency assessment (Section 56[B], NIRC) –

this occurs upon discovery of the BIR that the
b. Tax credit
self assessment was either deficient or when no
2. Judicial remedies return was made by the taxpayer (Ingles, 2015).

Remedies of the Government General Rule:

Internal Revenue Taxes are self-

These are courses of action provided or allowed
in the law to implement the tax laws or enforce
tax collection.
1. Administrative remedies
assessing and do not require the
issuance of an assessment notice in
order to establish the tax liability of a
taxpayer (Tupaz v.Ulep, 316 SCRA 118).
The NIRC follows the pay-as-you-file
system of taxation under which the
taxpayer computes his own tax liability,
 prepares the return, and pays the tax as 2. Contains the law and the facts on which the
he files the return. assessment is based;

3. Contains a demand for payment within the

prescribed period;
XPNs:
4. Must be served on and received by the
1. When the taxable period of a
taxpayer.
taxpayer is terminated (Sec. 6 [D], NIRC)

2. In case of deficiency tax liability

arising from a tax audit conducted by
the BIR (Sec. 56 [B], NIRC)
3. Tax lien (Sec. 219, NIRC) 4. Dissolving
corporation (Sec. 52 [c], NIRC) 5.
Improperly Accumulated Earnings Tax
(Sec. 29, NIRC) ---
An assessment notice is formal notice to the
taxpayer stating that the amount thereon is due
as a tax and containing a demand for the
payment thereof (Alhambra Cigar and Cigarette
Mfg. Co. v Collector, 105 PR 1337, 1959; CIR v.
Pascor Realty and Development Corp., 309 SCRA
402, 1999). To be valid, the taxpayer must be
informed in writing of the law and the facts on
which assessment is made (Sec. 228 NIRC).

Requisites of a valid assessment

Modes of Service

The taxpayers shall be informed in writing of

the law and the facts on which the assessment 1. Personal service,
is made; otherwise, the assessment shall be
2. Service by mail, or
void.
3. Substituted delivery
Moreover, the regulations provide that the
Formal Letter of Demand and Final Assessment
Notice (FLD/FAN) shall be issued by the
Service to the tax agent/practitioner, who is
Commissioner or his duly authorized
appointed by the taxpayer, shall be deemed
representative. The FLD/FAN calling for payment
service to the taxpayer (RR 18-2013).
of the taxpayer's deficiency tax or taxes shall
state the facts, the law, rules and regulations, or
jurisprudence on which the assessment is based;
otherwise, the assessment shall be void (RR 18- Constructive Method of Income Determination
13).

Some of the methods that BIR may use to

Based on the foregoing, the requisites of a valid
assessment are as follows:
1. In writing and signed by the BIR;
determine whether a taxpayer has not reported
all of his income during a particular taxable year
are: 1. Net worth method 2. Cash expenditure
method 3. Percentage method 4. Bank deposit
method 5. Unit and value method 6. Third party
information or access to records method 7.
Surveillance and assessment method 8. Such
methods as in the opinion of the BIR
Commissioner clearly reflect the income
Net worth method
A method of reconstructing income which is
based on the theory that if the taxpayer’s net
worth has increased in a given year in an
amount larger than his reported income, he has
understated his income for the year.
It is a method of determining income where a
government can prove with reasonable
certainty the increase of taxpayer’s net worth at
a given date by reasonable inference with
independent evidence such as bank deposits or
purchase of assets (U.S. case of Holland v. U.S.,
348, U.S., 121).
To compute for taxpayer’s net worth, the
formula is ASSETS – LIABILITIES = NETWORTH.
His net worth at the beginning of the taxable
year is then compared with his net worth at the
end of the year. Any increase in the net worth is
presumed to be income not declared for tax
purposes.
Jeopardy assessment
A delinquency tax assessment made without
the benefit of a complete or partial
investigation by an authorized revenue officer
who has reason to believe that the assessment
and collection of a deficiency tax will be
jeopardized by delay caused by the taxpayer’s
failure to: a. Comply with audit and
investigation requirements to present his books
of accounts and/or pertinent records, or b.
Substantiate all or any of the deductions,
exemptions or credits claimed in his return (Sec.
3 (1)(a), R.R. 30-2002).
NOTE: This is issued when the revenue officer
finds himself without enough time to conduct
an appropriate or thorough examination in view
of the impending expiration of the prescriptive
period for assessment. To prevent the issuance
of a jeopardy assessment, the taxpayer may be
required to execute a waiver of the statute of
limitations.
PRESCRIPTIVE PERIOD FOR ASSESSMENT
Basic rules on Prescription
1. When the tax law itself is silent on
prescription, the tax is imprescriptible;
2. When no return is required, tax is
imprescriptible and tax may be assessed at any
time as the prescriptive periods provided in Sec.
203 and 222, NIRC are not applicable. Remedy
of the taxpayer is to file a return for the
prescriptive period to commence.
3. Prescription is a matter of defense, and it
must be proved or established by the taxpayer
relying upon it.
3 Important Prescriptive Periods:
1. Period to assess tax
2. Period to collect tax
3. Period to file a criminal action (Mamalateo,
2014)
Date of filing the return
Prescriptive period – Assessment
Prescriptive period – Collection
Before due date
3 years from due date
5 years from receipt of FAN by taxpayer;
NOTE: If taxpayer files fraudulent return or did
not file any return, the BIR may collect without
assessment within 10 years of filing of
fraudulent return or discovery of non-filing
Prescriptive periods for making assessments
GR: The right to assess must be done within
three years from the date of: 1. Actual filing of
the return, or 2. From the last date prescribed
by law for the filing of such return, whichever is
later.
Why “whichever is later”? This is to benefit the
government, so they have more time to make
the assessment on the taxpayer (Ingles, 2015).
XPNs:
1. False or fraudulent return with intent to
evade tax: within 10 years from discovery of
falsity or fraud 2. Failure to file any return at all:
within 10 years from discovery of omission to
file a return 3. Waiver of statute of limitations in
writing, which must be made before the
expiration of the period of assessment of taxes:
period agreed upon.
NOTE: The period agreed upon may be
extended by subsequent written agreements
made before the period previously agreed
upon.
Amendment Return considered Substantial
when:
1. There is under declaration (exceeding 30% of
that declared) of taxable sales, receipts or
income; or
2. There is overstatement (exceeding 30% of
deductions) (Sec. 248(B), NIRC).
If the taxpayer files the wrong return, it is as
though the taxpayer filed no return at all. This is
true even if all the necessary information was
reflected in the erroneous return. In situations
like this, the 10-year prescriptive period will
apply (Ingles, 2015, citing several cases).
Waiver of the Statute of Limitations
Section 222 (b) of the NIRC, as amended,
provides that the CIR or her duly authorized
representative and the taxpayer or its
authorized representative may agree in writing
as to a specific future date within which to
assess the taxpayer for internal revenue taxes
for a given taxable period, before the expiration
of the period to assess taxes.
The waiver of the Statute of Limitations should
not be construed as a waiver of the right to
invoke the defense of prescription but rather an
agreement between the taxpayer and the BIR to
extend the period to a date certain, within
which the latter could still assess or collect
taxes due. The waiver does not mean that the
taxpayer relinquishes the right to invoke
prescription unequivocally (BPI v. CIR, GR No.
139736, October 17, 2005).
The taxpayer’s waiver of statute of limitation
does not cover taxes already prescribed
(Republic v. Lim De Yu, G.R. No. L-17438, April
30, 1964).
Extended assessement
An assessment issued as a result of the waiver
of the prescriptive period is known as an
“extended assessment”, which has a
prescriptive period for collection of five (5)
years from the time of issuance of the
assessment.
Taxpayer estopped from questioning validity of
waivers
In case a taxpayer executed five waivers and
delivered them to CIR, one after the other and
allowed the latter to rely on them and did not
raise any objection against their validity until he
was assessed, said taxpayer is estopped from
questioning the validity of its waivers. The
application of estoppel is necessary to prevent
the undue injury that the government would
suffer because of the cancellation of
assessment of taxpayer’s tax liabilities (CIR v.
Next Mobile Inc., G.R. No. 212825, December
07, 2015).
Taxpayer is also estopped from questioning the
waiver if it had impliedly admitted the validity
of the said waivers. Had it believed that the
waiver was invalid and that the period to assess
had effective prescribed, the taxpayer could
have refused to make any payment based on
any assessment against it (RCBC v. CIR, G.R.
170257, September 7, 2011).
FALSE, FRAUDULENT RETURNS AND NON-
FILING OF RETURNS
Fraud not presumed for neglect to file required
return
An honest mistake as to the valuation of the
property cannot be indicative of fraud (Republic
v. Heirs of Jalandoni, G.R. No. L-18384,
September 20, 1965).
There is a prima facie evidence of false or
fraudulent return when the taxpayer
substantially underdeclared his taxable sales,
receipts or income, or substantially overstated
his deductions. The taxpayer’s failure to report
sales, receipts or income in an amount exceeding
30% of that declared per return, and a claim of
deduction in an amount exceeding 30% of actual
deduction shall render the taxpayer liable for
substantial under declaration and over
declaration, respectively, and will justify the
imposition of the 50% surcharge on the
deficiency tax due from the taxpayer (Sec. 248,
NIRC). ---
Importance of distinguishing between a “false
return” and a “fraudulent return”
The two returns are different but have the same
prescriptive periods to be assessed, which is 10-
years. The importance in distinguishing the two
lies in the application of the penalty surcharge.
Actual fraud, not constructive fraud, is subject
to 50% penalty surcharge. For the surcharge to
apply, it must be intentional fraud.
Negligence, whether slight or gross, is not
equivalent to fraud with intent to evade the tax
contemplated by law (Ingles, 2015).
Just because the 10-year period applies, it
doesn’t nescessarily mean that the taxpayer will
be penalized with the 50% surcharge. When a
taxpayer files a false return and not a
fraudulent one, the 10-year period applies but
the 50% surcharge will not (Aznar v. CTA, G.R.
No. L-20569, August 23, 1974).
Suspension of running of Statute of Limitations
Grounds for suspension of the prescriptive
period for both the power to assess and the
power to collect:
1. When taxpayer cannot be Located in the
address given by him in the return, unless he
informs the CIR of any change in his address
thru a written notice to the BIR;
2. When the taxpayer is Out of the Philippines
3. When the Warrant of distraint and levy is
duly served upon the taxpayer, his authorized
representative or a member of his household
with sufficient discretion and no property is
located;
Only period to collect is suspended
4. Where the CIR is prohibited from making the
assessment or beginning distraint or levy or a
proceeding in court for 60 days thereafter, such
as where there is a Pending petition for review
in the CTA from the decision on the protested
assessment (Republic v. Ker & Co., GR L-21609;
September 29, 1966);
5. Where CIR and the taxpayer Agreed in writing
for the extension of the assessment, the tax
may be assessed within the period so agreed
upon
6. When the taxpayer Requests for
reinvestigation which is granted by the
Commissioner;
Note: Only the period to collect is suspended
because assessment has been done at this point
(Ingles, 2015).
7. When there is an Answer filed by the BIR to
the petition for review in the CTA (Hermanos v.
CIR, GR. No. L-24972. September 30, 1969)
where the court justified this by saying that in
the answer filed by the BIR, it prayed for the
collection of taxes.
ADDITIONS TO TAX
They are imposed in addition to the tax
required to be paid. Section 247 of the NIRC
provides that the additions to the tax or
deficiency tax apply to all taxes, fees and
charges imposed by the NIRC.
Tax laws imposing penalties for delinquencies
are intended to hasten tax payments by
punishing evasions or neglect of duty in respect
thereof. The intention of the law is to
discourage delay in the payment of taxes due to
the Government and, in this sense, the penalty
and interest are not penal in nature but
compensatory for the concomitant use of the
funds by the taxpayer beyond the date when he
is supposed to have paid them to the
government (Ingles, 2015, citing Philippine
Refining Company vs CA).
(A) Civil Penalties or Surcharge
A civil penalty, also know as surcharge, is
imposed by law as an addition to the basic tax
required to be paid (Sec. 248, NIRC). It is a civil
administrative sanction provided as a safeguard
for the protection of the State revenue and to
reimburse the government for the expenses of
investigation and the loss resulting from the
taxpayer’s fraud. A surcharge added to the main
tax is subject to interest.
Two categories of civil penalties
i. 25% Surcharge There shall be imposed a
penalty equivalent to 25% surcharge of the
amount due in the following cases: [FTOP]
a. Failure to File any return and pay the tax due
thereon as required under the provisions of the
NIRC or rules and regulations on the date
prescribed,
b. Failure to pay the deficiency tax within the
Time prescribed for its payment in the notice of
assessment
In cases of late payment of a deficiency tax
assessed, taxpayer shall be liable for the
delinquency interest incident to late payment
(RR 18-2013).
c. Unless otherwise authorized by the CIR, filing
a return with an internal revenue officer Other
than those with whom the return is required to
be filed d. Failure to Pay the full or part of the
amount of tax shown on any return required to
be filed under the provisions of the NIRC or
rules and regulations, 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 [A], NIRC)
NOTE: There is no 25% surcharge when tax
return is filed on time and paid the full amount
stated in the return, but subsequently
discovered that the return filed and the amount
paid was erroneous (Ingles, 2015).
ii. 50% Surcharge a. Willful neglect to file the
return within the period prescribed
If the taxpayer voluntarily files the return
without notice from BIR, only 25% surcharge
shall be imposed for late filing and late payment
of tax. But if the taxpayer files the return after
prior notice in writing from BIR, then the 50%
surcharge will be imposed. Thus: - No demand
from the BIR and the taxpayer pays, albeit late,
25% - With demand by the BIR, 50% (Ingles,
2015).

b. False or fraudulent return is willfully made
The fraud contemplated by law is actual fraud,
not constructive fraud. It must be intentional
fraud, consisting of deception willfully and
deliberately done or resorted to. Negligence,
whether slight or gross, is not equivalent to
fraud with intent to evade the tax contemplated
by law (Aznar vs. CTA).
(B) Interest
Kinds of interest in income taxation:
1. General interest – There shall be assessed
and collected on any unpaid amount of tax,
interest at the rate of twenty percent (20%) per
annum, or such higher rate as may be
prescribed by rules and regulations, from the
date prescribed for payment until the amount is
fully paid (Section 249 (A), NIRC)
2. Deficiency interest – Any deficiency in the tax
due shall be subject to interest at the rate of
20% per annum, which interest shall be
assessed and collected from the date prescribed
for its payment until the full payment thereof
(Sec. 249 (B), NIRC).
3. Delinquency interest – There shall be
assessed and collected on the unpaid amount,
interest at the rate of 20% per annum until the
amount is fully paid, which interest shall form
part of the tax, in case of failure to pay: -
Amount of tax due on any return required to be
filed, or - Amount of tax due for which no return
is required, or - Deficiency tax, or any surcharge
on interest thereon on the due date appearing
in the notice and demand of the CIR (Sec. 249
(C), NIRC).
NOTE: Deficiency interest on deficiency income
tax accrues and commences from the date of
assessment as shown in the assessment notice.
4. Interest on extended payment – There shall
be assessed and collected interest at the rate of
20% per annum on the tax or deficiency tax or
any part thereof unpaid from the date of notice
and demand until it is paid: - If any person
required to pay the tax is qualified and elects to
pay the tax on installment, but fails to pay the
tax or any installment hereof, or any part of
such amount or installment on or before the
date prescribed for its payment, or - Where the
CIR has authorized an extension of time within
which to pay a tax or a deficiency tax or any
part thereof (Sec. 249 (D), NIRC).
(C) Compromise penalties
It is a certain amount of money which the
taxpayer pays to compromise a tax violation.
Compromise penalties are paid in lieu of
criminal prosecution, and cannot be imposed in
the absence of a showing that the taxpayer
consented thereto. If an offer of compromise is
rejected by the taxpayer, the compromise
penalty cannot be enforced through an action in
court or by distraint and levy. The CIR should
file a criminal action if he believes that the
taxpayer is criminally liable for violation of the
tax law as the only way to enforce a penalty
(Dimaampao, J. 2015).
Deficiency Assessment Process
A. Tax Audit (including the Letter of Authority)
B. Issuance of Preliminary Assessment Notice
(PAN)
C. Reply
D. Issuance Formal Letter of Demand and Final
Assessment Notice (FLD/FAN).
E. Disputed assessment
(A) LETTER OF AUTHORITY
It is an official document that empowers a
Revenue Officer (RO) to examine and scrutinize
a taxpayer’s books of accounts and other
accounting records, in order to determine the
taxpayer’s correct internal revenue tax liabilities
(Sec. 13, NIRC).
Cases which need not be covered by a valid LA
1. Cases involving civil or criminal tax fraud
which fall under the jurisdiction of the tax fraud
division of the Enforcement Services; and
2. Policy cases under audit by the Special Teams
in the National Office (RMO 36-99).
Service of Letter of Authority
It must be served to the taxpayer within 30 days
from its date of issuance; otherwise, it shall
become null and void. The taxpayer shall then
have the right to refuse the service of this LA,
unless the LA is revalidated.
Tax audit
This includes the examination of books of
accounts and other accounting records of the
taxpayers by revenue officers (RO) to determine
the correct tax liability (Mamalateo, 2014).
A RO is allowed only 120 days to conduct the
audit and submit the required report of
investigation from the date of receipt of a LA by
the taxpayer. If the RO is unable to submit his
final report of investigation within the 120day
period, he must then submit a Progress Report
to his Head of Office, and surrender the LA for
revalidation.
Principle of estoppel
The error made by a tax official in the
assessment of his tax liabilities does not have
the effect of relieving the taxpayer from the
obligation to pay the full amount of his tax
liability, for taxes are fixed by law and the
government is never estopped to collect the
legitimate taxes because of errors committed
by its agents (Commissioner v. Atlas
Consolidated Mining Co., 102 SCRA 246).
(B) PRELIMINARY ASSESSMENT NOTICE (PAN)
If after review and evaluation 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
a PAN for the proposed assessment. It shall
show in detail the facts and the law, rules and
regulations, or jurisprudence on which the
proposed assessment is based (R.R. No. 18-
2013, emphasis supplied). NOTE: Prior to the
issuance of the PAN, the taxpayer may be
allowed to make voluntary payments of
probable deficiency taxes and penalties (RMO
11-2014).
Requirements of a valid PAN
limited to, vehicles, capital equipment,
machineries and spare parts, has been sold,
traded or transferred to non-exempt persons
(Sec. 228, NIRC); or
5. When a taxpayer who opted to claim a
refund or tax credit 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 (Sec. 3.1.2, R.R. No. 18-2013).

1. In writing; and
(C) REPLY TO PAN
2. Should inform the taxpayer of the law and
the facts on which the assessment is made (Sec.
228, NIRC) The taxpayer has 15 days from receipt of PAN to
file a written reply contesting the proposed
assessment.
Exceptions to issuance of PAN

Effect of taxpayer’s failure to respond to PAN

GR: There must be a PAN issued by the BIR
before issuing a Formal Letter of Demand (FLD)/
Final Assessment Notice (FAN).
XPN: PAN is not required in the following
instances:
The taxpayer shall be considered in default, in
which case, a FLD/FAN shall be issued calling for
payment of the taxpayer's deficiency tax
liability, inclusive of the applicable penalties
(Par. 2, Sec. 3.1.1, R.R. No. 18-2013).

1. When the finding for any deficiency tax is the

result of Mathematical error in the computation
of the tax appearing on the face of the tax
return filed by the taxpayer; or The failure to file a reply to PAN will not bar the
taxpayer from protesting the FAN because PAN
2. When the Excise tax due on excisable articles
is not the final assessment which can be
has not been paid; or
protested as contemplated under the NIRC.
3. When a Discrepancy has been determined
between the tax withheld and the amount
actually remitted by the withholding agent; or (D) FORMAL LETTER OF DEMAND AND FINAL
ASSESSMENT NOTICE (FLD/FAN)
4. When an article locally purchased or
imported by an Exempt person, such as, but not
Issuance of FLD/FAN
The CIR or his duly authorized representative
may issue FLD/FAN:
1. If there is no need to issue a PAN, because
the circumstances show that it fall within the
exceptions for the issuance of PAN;
2. If the taxpayer is in default for failure to
respond to a PAN within a period of 15 days
from the receipt of PAN; or
3. If the CIR or his duly authorized
representative does not agree with the
justifications stated by the taxpayer in his reply
to the PAN (Domondon, 2014).
The FLD/FAN calling for payment of the
taxpayer's deficiency tax or taxes shall state the
facts, the law, rules and regulations, or
jurisprudence on which the assessment is
based; otherwise, the assessment shall be void
(R.R. No. 18-2013).
taxes, an FLD/FAN shall be issued within 15 days
from filing/submission of the taxpayer’s
response, calling for payment of the taxpayer's
deficiency tax liability, inclusive of the
applicable penalties (R.R. No. 18-2013,
emphasis supplied).
NOTE: An FDL/FAN issued beyond 15 days from
filing/submission of the taxpayer’s response to
the PAN shall be valid, provided that, it is issued
within the period of limitation to assess internal
revenue taxes. The nonobservance of the 15-
day period, however, shall constitute an
administrative infraction and the revenue
officers who caused the delay shall be
subject to administrative sanctions as provided
for by law and pertinent revenue issuances
(RMO 11-2014).
(E) DISPUTED ASSESSMENT
Remedies of the taxpayer after the issuance of a
FAN

The FAN and FLD should always go together.

The law requires that the factual and/or legal
The taxpayer may protest the assessment
bases of the assessment must be stated, and
within 30 days from receipt. Otherwise, the
this requirement is not satisfied by the issuance
assessment becomes final, executory,
of FAN alone, a letter of demand fills up the
demandable and not appealable to the CTA.
void and explains to the taxpayer how the
deficiency assessment was arrived at, including
the reasons and legal bases for the assessment
The protest comes in the form of either a
(Mamalateo, 2014).
written request for reconsideration or
reinvestigation.

Period to issue FLD/FAN

If the taxpayer, within 15 days from date of

receipt of the PAN, responds that he/it
disagrees with the findings of deficiency tax or
COLLECTION
The government is given two ways to collect:
1. Summary or administrative remedies, and
2. Judicial remedies
The legislature may adopt any reasonable
method for the effective enforcement of the
collection of taxes, subject to:
1. The right of the person to notice; and
2. The opportunity to be heard.
Requisites
GR: Collection is only allowed when there is
already a final assessment made for the
determination of the tax due.
XPN: Judicial action to collect the tax liability is
permitted even without an assessment when
the taxpayer files a false or fraudulent return
with intent to evade the tax, or fails to file a
return.
In the above cases, collection must be done
within 10 years after the discovery of falsity,
fraud, or omission.
However, once an assessment is made against
the taxpayer, the government cannot avail of
the 10-year period in Section 222(A). If the
assessment is made, then the period to collect
is five years from the assessment and not 10
years (Ingles, 2015).
In sum, as a rule, the government can only file a
proceeding in court to collect once the
assessment has become final and unappealable.
Assessments are deemed final when:
1. The taxpayer failed to file a protest 30 days
from receipt of the assessment
2. After the 180-day period and the CIR has not
yet acted on the protest, the taxpayer fails to
appeal it
3. After 30 days from the receipt of the decision
of the CIR the taxpayer fails to appeal
Collectibility of tax liability arises in the
following instances:
1. Self-assessed tax shown in the return was not
paid within the date prescribed by law - Internal
revenue taxes are self-assessing and no further
assessment by the government is required to
create the tax liability. The taxpayer is
immediately considered as deliquent with
respect to the unpaid amount of tax;
2. When final assessment is not protested
administratively within 30 days from the date of
receipt;
3. Failure to question assessment served upon
the decedent’s heirs (Marcos II v. Court of
Appeals, 273 SCRA 47);
4. Non-compliance with the condition laid in the
approval of protest - construed as if no protest
was filed; 5. Failure to file a timely appeal to the
CTA on the final decision of the Commissioner
or his authorized representative on the
disputed assessment.
Prescriptive periods
GR: The prescriptive period to collect taxes due
is five years from the date of assessment.
XPNs:
1. False or fraudulent return with with intent to
evade the tax: within 10 years from discovery
without need of assessment
2. Failure or omission to file return: within 10
years from discovery without need of
assessment
3. Waiver in writing executed before the the
five-year period expires: period agreed upon
Summary:
REGULAR RETURN WAS MADE
FALSE, FRAUDULENT, OR FAILURE TO FILE A
RETURN
Collection with prior assessment
Collection should be made within 5 years from
the date of assessment, either by:
1. Summary proceedings; or
2. Judicial proceedings (Sec.222 [c], NIRC)
Collection without prior assessment
Collection is within 10 years from discovery, of
the falsity, fraud or omission to file a return.
Limited to purely judicial remedies (Section
222[A]).
Computation of the prescriptive period
The assessment of the tax is deemed made and
the period for collection of the assessed tax
begins to run on the date the assessment notice
had been released, mailed or sent by the BIR to
the taxpayer. Thus, failure of the BIR to file a
warrant of distraint or serve a levy on taxpayer's
properties nor file collection case within the
prescriptive period is fatal.
Guidelines that must be observed with respect
to administrative remedies
BASIS GOVERNMENT TAXPAYER If Express Must
observe the legal parameters set forth in the
law (e.g. procedure for distraint of personal
property (Sec. 207 [A], NIRC), for levy on real
property (Sec. 207 B) and enforcement of tax
lien (Sec. 219) Must observe the doctrine of
exhaustion of administrative remedies. Thus,
before the taxpayer may question an
assessment before the CTA, he must first file an
administrative protest before the BIR. (Same is
true with claims for refunds) If Implied Both
may avail of the usual remedies for convenience
and expediency.

(A) PROTESTING AN ASSESSMENT
Administrative protest
The taxpayer or its authorized representative or
tax agent may protest administratively against
the aforesaid FLD/FAN within thirty (30) days
from date of receipt thereof.
Administrative protest is the act by the taxpayer
of questioning the validity of the imposition of
the corresponding delinquency increments for
internal revenue taxes as shown in the notice of
assessment and letter of demand.
Requisites of a protest
1. In writing;
2. Addressed to the CIR or his duly athorized
representative;
3. Accompanied by a waiver of the Statute of
Limitations in favor of the Government.
Without the waiver the prescriptive period will
not be tolled (BPI v. CIR, G.R. No. 139736,
October 17, 2005);
4. State the facts, applicable law, rules and
regulations or jurisprudence on which the
protest is based otherwise the protest would be
void; and
5. Must contain the following: a. Name of the
taxpayer and address for the immediate past 3
taxable years; b. Nature of the request,
specifying the newly discovered evidence to be
presented; c. Taxable periods covered by the
assessment; d. Amount and kind of tax involved
and the assessment notice number; e. Date of
receipt of the assessment notice or letter of
demand; f. Itemized statement of the finding to
which the taxpayer agrees (if any) as basis for
the computation of the tax due, which must be
paid upon filing of the protest; g. Itemized
schedule of the adjustments to which the
taxpayer does not agree; h. Statements of facts
or law in support of the protest; and i.
Documentary evidence as it may deem
necessary and relevant to support its protest to
be submitted 60 days from the filing thereof.
Protested assessment is the same as disputed
assessment.
Effect of a protest against an assessment
Prescriptive period provided by law to make
collection by distraint or levy or by a proceeding
in court is interrupted once a taxpayer protests
the assessment and requests for its
cancellation.
Period to file protest
The taxpayer or its authorized representative or
tax agent may protest administratively against
the FLD/FAN within thirty (30) days from date of
receipt thereof.
Form, content and validity of protest
The taxpayer protesting an assessment may file
a written request for reconsideration or
reinvestigation defined as follows:
1. Request for reconsideration — refers to a
plea of re-evaluation of an assessment on the
basis of existing records without need of
additional evidence. It may involve both a
question of fact or of law or both. 2. Request for
reinvestigation — refers to a plea of re-
evaluation of an assessment on the basis of
newly discovered or additional evidence that a
taxpayer intends to present in the
reinvestigation. It may also involve a question of
fact or of law or both.
The taxpayer shall state in his protest (i) the
nature of protest whether reconsideration or
reinvestigation, specifying newly discovered or
additional evidence he intends to present if it is
a request for reinvestigation, (ii) date of the
assessment notice, and (iii) 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.
Request for reconsideration
Request for reinvestigation
A claim for re-evaluation of the assessment
based on existing records without need of
additional evidence.
A claim for re-evaluation of the assessment
based on newly-discovered or additional
evidence.
It may involve a question of fact or law or both.
It may also involve a question of fact or law or
both.
It does not toll the statute of limitations.
It tolls the statute of limitations.
NOTE: A motion for reconsideration of the
denial of the administrative protest does not
toll the 30-day period to appeal to the CTA
(Fishwealth Canning Corporation v. CIR, G.R. No.
179343, January 21, 2010).
Judicial Remedies
In case the CIR decides adversely or if no
decision yet after the lapse of 180 days, the
taxpayer may appeal to the CTA Division, 30
days from the receipt of the decision or from
the lapse of the 180 days otherwise the decision
shall become final, executory and demandable
(RCBC v. CIR, G.R. No. 168498, April 24, 2007).
If the decision is adverse to the taxpayer, he
may file a motion for reconsideration or new
trial before the same Division of the CTA within
15 days from notice thereof.
In case the resolution of a Division of the CTA
on a motion for reconsideration or new trial is
adverse to the taxpayer, he may file a petition
for review with the CTA en banc.
The ruling or decision of the CTA en banc may
be appealed with the Supreme Court through a
verified petition for review on certiorari
pursuant to Rule 45 of the 1997 Rules of Civil
Procedure.
COMPROMISE AND ABATEMENT OF TAXES

Distinguish Compromise from Abatement
COMPROMISE ABATEMENT Nature Involves a
reduction of the taxpayer’s liability through a
mutual agreement. Involves the cancellation of
the entire tax liability of a taxpayer.
Authorized Officer CIR, REB, NEB CIR
Grounds 1. Reasonable doubt as to the validity
of assessment; 2. Financial incapacity of the
taxpayer 1. The tax or any portion thereof
appears to be unjustly or excessively assessed;
or 2. The administration and collection costs
involved do not justify the collection of the
amount due.
Compromise
In case of tax assessment, compromise is the
contract between the government and the
taxpayer to setlle the liability.
Court cannot compel the CIR to compromise in
cases when such is allowed, in order to assure
that no improper compromise is made to the
prejudice of the Government.
NOTE: Compromise as amount of paid by the
taxpayer to settle his tax liability is different
from compromise penalty which is the amount
paid by the taxpayer to compromise tax
violation and paid in lieu of criminal
prosecution. (Refer to Additions to Tax.)
Requisites for Compromise
1. Tax liability of the taxpayer;
2. An offer of the taxpayer of an amount to be
paid by him; and
3. The acceptance (the CIR or the taxpayer) of
the offer in the settlement of the claim
Authority of the CIR to compromise taxes
The CIR may compromise the payment of any
internal revenue tax, when:
a. A reasonable doubt as to the validity of the
claim against the taxpayer exists provided that
the minimum compromise entered into is
equivalent to 40% of the basic tax (Doubtful
Validity);
b. The financial position of the taxpayer
demonstrates a clear inability to pay the
assessed tax provided that the minimum
compromise entered into is equivalent to 10%
of the basic assessed tax (Financial Incapacity),
Minimum compromise rates Based on doubtful
validity 40% of the basic assessed tax Based on
financial incapacity 10% of the basic assessed
tax
Where the basic tax involved exceeds P1M or
where the settlement offered is less than the
prescribed minimum rates, the compromise
shall be subject to the approval of the National
Evaluation Board (NEB). In other words,
compromise settlement lower than the
minimum amount prescribed above may be
entered subject to the approval of NEB.
Offers of compromise of assessments issued by
the Regional Offices involving basic deficiency
taxes of
Doubtful Validity
There is reasonable doubt on the validity of the
assessment when:
1. The delinquent account or disputed
assessment is one resulting from a Jeopardy
assessment.
2. The assessment seems to be Arbitrary in
nature, appearing to be based on presumptions
and there is reason to believe that it is lacking in
legal and/or factual basis.
3. The taxpayer Failed to file an administrative
protest on account of the alleged failure to
receive notice of assessment and there is
reason to believe that the assessment is lacking
in legal and/or factual basis.
4. The taxpayer Failed to file a request for
reinvestigation/reconsideration within 30 days
from receipt of final assessment notice and
there is reason to believe that the assessment is
lacking in legal and/or factual basis.
5. The taxpayer Failed to elevate to the CTA an
adverse decision of the CIR, or his authorized
representative, in some cases, within 30 days
from receipt thereof and there is reason to
believe that the assessment is lacking in legal
and/or factual basis.
6. The assessment were issued on or after
January 1, 1988, where the demand notice
allegedly failed to comply with the Formalities
prescribed under Section 228 of the NIRC of
1997.
7. Assessments made based on the “Best
Evidence Obtainable Rule” and there is reason
to believe that the same can be disputed by
sufficient and competent evidence.
8. Assessment was issued within the
prescriptive period for assessment as extended
by the taxpayer’s execution of Waiver of the
Statute of Limitations the validity or
authenticity of which is being questioned or at
issue and there is strong reason to believe and
evidence to prove that it is not authentic (Sec.
3.1, RR 30-2002).
9. The assessment is based on an issue where a
court of competent jurisdiction made an
Adverse decision against the bureau, but for
which the Supreme Court has not decided upon
with finality (R.R. 8-2004).
Financial Incapacity
The offer for compromise based on financial
incapacity may be accepted upon showing that:
1. The taxpayer is a Compensation income
earner with no other source of income and the
family’s gross monthly compensation income
does not exceed the levels of compensation
income provided for Sec. 4.1.1. of Revenue
Regulations 30-2002 and it appears that the
taxpayer possesses no other
leviable/distrainable assets, other than his
family home
NOTE: Sec. 4.1.1 of RR 30-2002: “If taxpayer is
an individual whose only source of income is
from employment and whose monthly salary, if
single, is P10,500 or less, or if married, whose
salary together with his spouse is P21,000 per
month, or less, and it appears that the taxpayer
possesses no other leviable/distrainable assets,
other than his family home”
2. The taxpayer has been declared by any
competent tribunal/authority/body/
government agency as Bankrupt or insolvent.
3. The corporation ceased operation or is
already Dissolved;
Provided, that tax liabilities corresponding to
the Subscription Receivable or Assets
distributed/distributable to the stockholders
representing return of capital at the time of
cessation of operation or dissolution cannot be
compromised.
4. The taxpayer, as reflected in its latest Balance
Sheet supposed to be filed with the Bureau of
Internal Revenue, is suffering from surplus or
earnings deficit resulting to Impairment in the
original capital by at least 50%;
That amounts payable or due to stockholders
other than business-related transactions which
are properly includible in the regular “accounts
payable” are by fiction of law considered as part
of capital and not liability, and that the
taxpayer has no sufficient liquid asset to satisfy
the tax liability
5. The taxpayer is suffering from a Net worth
deficit (total liabilities exceed total assets)
computed by deducting total liabilities (net of
deferred credits and amounts payable to
stockholders/owners reflected as liabilities,
except business related transactions) from total
assets (net of pre-paid expenses, deferred
charges, pre-operating expenses, as well as
appraisal increases in fixed assets,) taken from
the latest audited financial statements,
In the case of an individual taxpayer, he has no
other leviable properties under the law other
than his family home.
Requisites for financial incapacity as ground for
compromise settlement
1. Clear inability to pay the tax; and
2. The taxpayer must waive in writing his
privilege of the secrecy of bank deposit under
RA 1405 or other general or special laws, which
shall constitute as the CIR’s authority to inquire
into said bank deposits (Sec. 6 [F], NIRC).
Grounds for denial of compromise settlement
based on financial incapacity
1. If the taxpayer has a Tax Credit Certificate,
issued under the NIRC, or
2. If the taxpayer has a pending claim for tax
refund or tax credit with the BIR, Department of
Finance OneStop-Shop Tax Credit and Duty
Drawback Center (Tax Revenue Group or
Investment Incentive Group) and/or the courts,
or
3. If the taxpayer has an existing finalized
agreement or prospect of future agreement
with any party that resulted or could result to
an increase in the equity of the taxpayer at the
time of the offer for compromise or at a definite
future time, or
4. If the taxpayer failed to execute a waiver of
his privilege of the secrecy of bank deposits
under Republic Act No. 1405 or under other
general or special laws (R.R. 30-2002).
Limitations on the Power to Compromise a Tax
Liability
The CIR is allowed to enter into a compromise
only if the basic tax involved does not exceed
P1M and the settlement offered is not less than
the prescribed percentages (Sec. 204 [A], NIRC).
1. Minimum compromise rate:
A. For cases of “financial incapacity”
a. If taxpayer is an individual whose only source
of income is from employment and whose
monthly salary, if single is P10,500 or less or if
married, whose salary together with his spouse
is P21,000 per month, or less and it appears
that the taxpayer possesses no other available
distrainable assets other than his family home –
10%
b. If taxpayer is an individual without any source
of income – 10%
c. Taxpayer is under any of the following
conditions i. zero net worth – 10% ii. negative
net worth – 10% iii. dissolved corporations –
20% iv. already non-operating companies for a
period of: (a) 3 years or more as of the date of
application for compromise settlement - 10%;
(b) less than 3 years – 20% v. Surplus or earning
deficit resulting to impairment in the original
capital by at least 50% - 40% vi. Declared
insolvent or bankrupt unless taxpayer falls
squarely under any situation as discussed
above, thus resulting to the application of the
appropriate rate – 10%
B. For cases of “doubtful validity” – a minimum
compromise rate equivalent to 40% of the basic
tax assessed (Sec. 4, R.R. 30-2002).
2. Subject to approval of Evaluation Board: a.
When basic tax involved exceeds P1,000,000; b.
Where the settlement offered is less than the
prescribed minimum rates (Sec. 204, NIRC); c.
When the CIR is not authorized to compromise.
Cases which may be compromised:
1. Delinquent accounts
2. Cases under Administrative protest after
issuance of the Final Assessment Notice to the
taxpayer which are still pending in the RO, RDO,
Legal Service, Large Taxpayer Service, Collection
Service, Enforcement Service, and other offices
in the National Office
3. Cases covered by pre-assessment notices but
taxpayer is Not agreeable to the findings of the
audit office as confirmed by the review office
4. Civil tax cases disputed before the courts
5. Collection cases filed in courts 6. Criminal
violations except: a. Those already filed in
courts; and b. Those involving criminal tax
fraud (Sec.3, R.R. 30-2002).
Cases which cannot be compromised:
1. Criminal tax Fraud cases, confirmed as such
by the CIR or his duly authorized representative.
2. Cases where Final reports of reinvestigation
or reconsideration have been issued resulting to
reduction in the original assessment and the
taxpayer is agreeable to such decision by
signing the required agreement form for the
purpose.
3. Cases which become Final and executory
after final judgment of a court, where
compromise is requested on the ground of
doubtful validity of the assessment.
Extent of Commissioner’s Power to Compromise
4. Estate tax cases where compromise is Criminal violations
requested on the ground of financial incapacity
of the taxpayer.
a. Before the complaint is filed with the
5. Withholding tax cases, unless the applicant –
Prosecutor’s Office – full discretion to
taxpayer invokes provisions of law that cast
compromise except those involving fraud;
doubt on the taxpayer’s obligation to withhold.
6. Criminal violations already filed in courts. b. After the complaint is filed with the
Prosecutor’s Office but before the information
7. Delinquent accounts with duly approved
is filed with the court – can still compromise
schedule of installment payments (Sec.3, R.R.
provided that the prosecutor gives his consent;
30-2002).
c. After the information is filed with the court –
no longer permitted to compromise with or
without the consent of the Prosecutor (People
NOTE: The CTA may issue an injunction to
v. Magdaluyo, G.R. No. L-1595, April. 20, 1961).
prevent the government from collecting taxes
under a compromise agreement when such
would be prejudicial to the government.
2. Civil cases – Before litigation or at any stage
of the litigation, even during appeal, although
legal propriety demands that prior leave of
When must compromise be made
court should be obtained.

1. Criminal cases – It must be entered into

Remedies in case the taxpayer refuses or fails to
prior to the institution of the
follow the tax compromise
corresponding criminal action arising
out of a violation of the provisions of
the NIRC. A compromise can never be
1. Enforce the compromise a. If it is a judicial
entered into after final judgment
compromise, it can be enforced by mere
because by virtue of such final
execution. A judicial compromise is one where a
judgment the Government had already
decision based on the compromise agreement
acquired a vested right (Roviro v.
is rendered by the court on request of the
Amparo, G.R. No. L- 5482, May 5, 1982).
parties. b. Any other compromise is extrajudicial
and like any other contract can only be
enforced by court action. 2. Regard it as
NOTE: A compromise validly entered into
rescinded and insist upon original demand (Art.
between the CIR and the taxpayer prior to
2041, NCC).
the institution of the corresponding criminal
action arising out of a violation of the
provisions of the NIRC becomes a bar to
Prescriptive period to enforce compromises
such criminal action (People v. Magdaluyo,
G.R. No. L-16235, Apr. 20, 1965).
As a rule, the obligation to pay tax is based on
law. But when, for instance, a taxpayer enters
d. The assessment is brought about or resulted
into a compromise with the BIR, the obligation
from taxpayer’s non-compliance with the law
of the taxpayer becomes one based on contract.
due to a difficult Interpretation of said law.
Compromise is a contract whereby the parties,
by reciprocal concessions, avoid litigation or put
an end to one already commenced (Art. 2028
NCC). Since it is a contract, the prescriptive e. The taxpayer fails to file the return and pay
period to enforce the same is 10 years based on the correct tax on time due to Circumstances
Art. 1144 NCC reckoned from the time the beyond his control.
cause of action accrued.

NOTE: The abatement shall only cover the

Abatement and cancellation of tax liability surcharge and the compromise penalty and not
the interest.

Grounds for abatement (Sec. 204[B], NIRC)

f. The taxpayer’s mistake in payment of his tax
is due to Erroneous written official advice of a
revenue officer (Sec. 2, R.R. 13-2001).
1. The tax or any portion thereof appears to be
unjustly or excessively assessed: [W-SLICE]

2. The administration and collection costs

involved do not justify the collection of the
a. The filing of the return/payment is made at
amount due: [AWORD]
the Wrong venue.

a. Abatement of penalties on assessment

b. The taxpayer fails to file the return and pay
the tax on time due to, i. Substantial losses
from prolonged labor dispute; ii. Force majeure;
iii. Legitimate business reverses.
NOTE: The abatement shall only cover the
surcharge and the compromise penalty and not
the interest imposed under Sec. 249, NIRC
c. There is Late payment of the tax under
meritorious circumstances (i.e. Failure to beat
confirmed by the lower court but Appealed by
the taxpayer to a higher court. b. Abatement of
penalties on Withholding tax assessment
under meritorious circumstances. c. Abatement
of penalties on assessment reduced after
Reinvestigation but taxpayer is still contesting
reduced assessment. d. Abatement of penalties
on Delayed installment payment under
meritorious circumstances. e. Such Other
circumstances which the CIR may deem
analogous to the enumeration above (Sec. 3,
R.R. 13-2001).

bank cut-off time, surcharge erroneously

imposed.)
RECOVERY OF TAX ERRONEOUSLY OR
ILLEGALLY COLLECTED
Requisites for a claim of tax refund or tax credit:

Remedies of taxpayer after payment

1. There is tax collected erroneously or illegally,
or a penalty collected without authority, or a
sum excessively or wrongfully collected (Sec.
1. Tax refund - Actual reimbursement of tax 2.
229, NIRC).
Tax credit – Government issues Tax Credit
Certificate (TCC) which may be applied against
any internal revenue tax, excluding withholding
NOTE: Payment under protest is not required.
taxes, for which the taxpayer is directly liable
(Sec. 204 [C], NIRC).

2. There must be a written claim for refund filed

by the taxpayer with the CIR (Vda. De Aguinaldo
Grounds for claim for refund and tax credit
v. CIR, G.R. No. L-19927, February 26,1965).

1. Tax is erroneously or illegally assessed

or collected; 2. Penalty is imposed
without authority; and 3. Sum collected
is excessive or in any manner wrongfully
collected.
2.
Illegally collected tax vis-a-vis erroneously
collected tax
XPN: a. When on the face of the return upon
which payment was made, such payment
appears clearly to have erroneously paid, the
CIR may refund or credit the tax even without a
written claim (Sec. 229, NIRC). b. A return filed
showing an overpayment shall be considered as
a written claim for credit or refund (Sec. 204 (C),
NIRC). (2002, 2010 Bar)

3. Must be a categorical claim for refund or

credit; - It is for the CIR to afford an opportunity
Distinguish tax refund from tax credit
to correct the action of subordinate officers;
and - To notify the Government that such taxes
have been questioned and the notice should
TAX REFUND TAX CREDIT As to purpose The then be borne in mind in estimating the
taxpayer asks for restitution of the money paid revenue available for expenditure (Bermejo v.
as tax. There is actual reimbursement The CIR, G.R. No. L-3029, July 25, 1950).
taxpayer asks that the money paid be applied to
his existing tax liability except withholding taxes
Reckoning point of the 2-year period 2-yr period
4. Must be filed within 2 years from date of
to file the claim with the CIR starts after the
payment of the tax or penalty regardless of any
payment of the 2-yr period starts from the date
supervening cause that may arise after
such credit was allowed – in case credit is tax or
payment. No suit or proceeding shall be
penalty wrongly made
instituted after the expiration of the such
period; and (2008 Bar)
5. The taxpayer must present proof of payment
of the tax.
Payment under protest is not a requirement
A suit or proceeding for tax refund may be
maintained “whether or not such tax, penalty or
sum has been paid under protest or duress”
(Sec. 204 [3], NIRC).
When payment under protest required
It is necessary in claims for refund for real
property taxes under Sec. 252, LGC and for
customs duties under Sec. 2308, TCC.
Rule on government’s liability for interests on
tax refunds
GR: There can be no interest on refund of tax in
the absence of statutory provision clearly and
expressly directing or authorizing such
payment.
XPNs: 1. If interest is authorized by law; 2.
Arbitrariness in the collection of tax; 3. Under
Sec. 79C [2] with respect to income taxes
withheld on the wages of the employees.
NOTE: An action is not arbitrary when exercised
honestly and upon due consideration where
there is room for two opinions, however much
it may be believed that an erroneous conclusion
was reached. Arbitrariness presupposes
inexcusable or obstinate disregard of legal
provisions (Philex Mining Corp. v. CIR, G.R.
120324, April 21, 1999).
Tax Refund or Tax Credit may be Forfeited to
the Government
1. Tax Refund – When a refund check or
warrant remains unclaimed or uncashed within
5 years from date of mailing or delivery. 2. Tax
Credit – a Tax Credit Certificate which remains
unutilized after 5 years from date of issue, shall
be invalid. Unless revalidated (Sec. 230, NIRC).
Two-year prescriptive period
No credit or refund of taxes or penalties shall be
allowed unless the taxpayer files in writing with
the CIR a claim for credit or refund within 2
years after the payment of the tax or penalty
(Sec 204(C), NIRC).
No suit or proceeding shall be filed after the
expiration of 2 years from the date of payment
of the tax or penalty regardless of any
supervening cause that may arise after payment
(Sec 229, NIRC).
It is necessary that the tax be paid in full, and
that the claim for refund in the BIR as well as
the proceedings in the CTA be commenced
within 2 years counted from the payment of the
tax.
Thus, as a rule, the two-year prescriptive period
runs from the payment of tax. However, the
The two-year period for filing tax refund is not
following instances provide for different
jurisdictional
commencement of the two-year period.

The Supreme Court held that even if the two-

Tax is paid in installments (For individuals):
year period had already lapsed, the same is not
From the date of the final payment
jurisdictional and may be suspended for reasons
of equity and other special circumstances (CIR v.
PNB, 474 SCRA 303).
Payments effected through the withholding
tax system: From the date it falls due at the end
of the taxable year
Founded on moral and equitable grounds, the
following circumstances may stay the two-year
period:
In case of payments effected through
withholding tax system, the tax liability is 1. Assurance on the part of the BIR that steps
deemed paid when the same falls due at the were being taken to credit taxpayer with the
end of the tax year. This is because a taxpayer, amount sought to be refunded;
resident or non-resident, who contributes to
2. An agreement or understanding with the BIR
the withholding tax system, do not really
that they await the result of a pending cases
deposit an amount to the CIR, but, in truth,
involving similar issue raised in the claim for
performs and extinguishes his tax obligation for
refund (Panay Electric Co., Inc. v. CIR, 103 Phil
the year concerned (Gibbs v. CIR, G.R. No. L-
819). Waiver of prescription in an action for
17406, November 29, 1965).
refund

Overpaid quarterly corporate income tax:

From the date the final adjustment return is
filed after the end of the taxable year. The
period is counted from the actual filing, not the
last day allowed by law to file.

The filing and payment of the quarterly income

tax should only be considered as mere
installments of the annual tax due. These
quarterly payments should be treated as
advances or portions of the annual income tax
due, to be adjusted at the end of the year, its
Final Adjustment Return (CIR v. TMX Sales, G.R.
No. 83736, January 15,1992 reiterated in CIR v.
CA, G.R. No. 117254, January 21, 1999).