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TARIFF AND CUSTOMS LAWS

Substantive Aspect of Tariff and Customs Laws


Meaning and Scope
Section 3514 (TCC)
Provides that Tariff and Customs Laws include not only the provisions of the code itself and
regulations pursuant thereto but all other laws and regulation which are subject to enforcement by
the Bureau of Customs or otherwise within its jurisdiction. It extend not only to the provisions of the
Tariff Customs Code but to all other laws as well; like Central Bank Circulars, the enforcement of
which is entrusted to the Bureau of Customs.
Nature of Customs Duties and Tariff
1.

Custom duties:
Are duties which are one charged upon commodities on their being imported into or
exported out of a country.

2.

Tariff:
Means a book of rates, a table or catalogue drawn usually in alphabetical order containing
the names of several kinds of merchandise with the duties to be paid for the same as settled
or agreed upon between several states that holds commerce together.

Concept of Goods for Customs duty purposes:


As to Imported Articles:
All articles when imported from any foreign country into the Philippines shall be subject to
duty upon each importation even thought previously exported from the Philippines. Except as
otherwise specifically provided for in the code or other laws:
As to Exported Articles

Certain articles like specific types of wood, mineral plant, vegetable and animal products
are subject to tariff and premium duties.
Note: Articles: When used with reference to importation or exportation includes goods, wares and
merchandise and, in general anything that maybe made the subject of exportation and importation.
Pertinent Case:
4 US dollars, having ceased to be legal tender in the Philippines, fall within the meaning of
the term merchandise (Bastida vs. Acting Commissioner of Customs, et al, L-24011, Oct. 24,
1970)
Articles / Goods Covered under the Tariff and Customs Code:
1. Articles subject to duty
General Rule: All articles when imported from a foreign country including those previously
exported from the Philippines one subject to duty unless otherwise specifically provided for
in the Tariff and Customs Code or other laws. (Sec. 100, TCS)
2. Prohibited Importations
Classifications:
A.

Articles which are absolutely prohibited:


1.
2.
3.
4.
5.

B.

weapons of war
gambling devices
narcotics or prohibited drugs
immoral, obscene or insidious articles
those prohibited under special laws
Articles Qualifiedly Prohibited:

Refers to those which maybe imported but subject to, and after compliance with, certain
conditions.
Pertinent Cases:

1.

Where such conditions as to warrant lawful importation neither do nor exist, the
legal effects of the importation of qualifiedly prohibited articles are the same as those
of absolutely prohibited articles. (Auyong Hian vs CTA, 59 SCRA 110)

2.

Prohibited importations one subject to forfeiture whether the shipper and the
consignee are one and the same person. (UTE PATEROR vs. Bureau of Customs,
193 S 132)

3.

Conditionally-free importations:
These are articles which are exempt from import duties upon compliance with the
formalities prescribed with regulations promulgated by the Commission of Customs
with the approval of the Secretary of Finance. (Sec. 105, TCC)
This article includes:
1.

Those prohibited for in Sec. 105 of the Tariff and Customs Code;

2.

Those granted to government agencies, government-owned or controlled


corporations with agreement with foreign countries;

3.

Those given to international institutions, entitled to exemption by agreement


or special laws; and

4.

Those that maybe granted by the President upon NEDAs recommendation.

Liability for Custom Duties


General Rule: All importations / exportation of articles / goods are subject to customs duties.
Exceptions:
1. Exempt under the TCC.
2. Exemption granted to government agencies, instrumentalities with existing contracts,
commitment, agreements or obligations with foreign countries.
3. Exempt international organizations pursuant to agreements or special laws; and
4. Exempt by the President upon recommendation of NEDA.

Liability of Importer for Custom Duties:


1. A personal debt which can be discharged only by payment in full thereof;
2. A lien upon the imported article while they are in custody or subject to the control of the
government.
Valuation of the Goods:
Invoice value of the goods plus:
1.
2.
3.
4.
5.

freight
insurance
cost
expenses, and
other necessary expenses.

Note: Imported goods must be entered into a custom house at their port of entry otherwise they
shall be considered as contraband and the importer is liable for smuggling.
Import entry
It is a declaration in the Bureau of Customs showing particulars of the imported article
that will enable the customs authorities to determine the correct duties.
1. When importation does begin?
Importation begins when the carrying vessel or aircraft enters the jurisdiction of the
Philippines with the intention to unlade therein.
2. When is it terminated / ended?
Importation is deemed terminated upon payment of duties, taxes and other charges due
upon the articles pr secured to be paid at a port of entry and the legal permit for withdrawal
shall gave been granted or in case said articles are free of duties, taxes and other charges,
until they have legally left the jurisdiction of the customs (Sec. 1202, TCC)

Note: All imported articles into the Philippines, whether subject to duty or not, shall be entered
through a customs house at a port of entry.
1.

Port of Entry
Means a domestic open to both foreign and continuous trade including airport of entry.

2.

Exportation
It is the bringing out of goods from the Philippines territorial jurisdiction.

3.

Under Executive Order # 26, Series of 1986, Export taxes, except on logs, have been
suspended

Kinds of Custom Duties


A. Regular / Ordinary Duties
These are duties imposed on imported articles that enter the country of the Philippines in
avoidance with the schedules and classifications provided under the Tariff and Customs
Code.
Classification:
1.

Advalorem Duty
Duty based on the value of the imported article.

2.

Specific Duty
Duty based on the dutiable weight of goods number or measurement.

B. Special Duties
Imposed in addition to regular or ordinary duties principally in order to protect local
industries against unfair competition from foreign manufacturers or procedures; consumer
against possible deceptions; and national interest.
Classifications:

1.

Dumping Duty
Imposed by the secretary of Finance upon the recommendation of the Tariff Commission
when:
a.

The price of the imported article is deliberately or continually fixed at less than the
fair market value or cost of production; and

b.

Importation would cause or likely cause and injury to local industries engaged in
the manufacture or production of the same or similar articles or prevent their
establishment.
Amount of special duty: extent of the under pricing.

2.

Countervailing duty
Special duty imposed on imported articles which are granted any kind or form of subsidy
by the government in the country or origin or exportation, the importation of which has
caused or threatens to cause material injury to a domestic industry or has materially
relaided the growth or, prevents the establishment of a domestic industry. (RA #8751)
Requisites:
1.

The levy of an excise tax or inland tax or local goods of the same or similar class
as the article imported or the grant of subsidy to the foreign exporter by his
government; and

2.

The importation is likely to insure materially established local industries or prevent


their establishments.
Amount of special duty: Equal to the bounty or subsidy or subvention.

3.

Marking Duty
Special duty of five percent (5%) advalorem imposed or articles properly marked,
collected by the commissioner, except when such article is exported or destroyed under
the customs supervision and prior to final liquidation of the corresponding entry.
Purpose: To prevent possible deception of the consumers.

4.

Discriminatory/Retaliatory duty
Imposed on imported goods whenever it is found as a fact that the country of origin
discriminates against the commerce of the Philippines in such a manner as to place the
commerce of the Philippines at a disadvantage compared with the commerce of any
foreign country.

5.

Duties imposed under the Flexible Tariff Clause (Sec. 401, TCC)
Import duties which are modified by the President upon investigation of the Tariff
Commissions and recommendation of the National Economic Development Authority in
the interest of national economy, general welfare and national security.

The President is given by the Tariff and Customs Code ample powers to adjust tariff rates Sec. 401
of TCC; empowers the president to:
1.

Increase, reduce, or remove existing protective rates of import duty;

2.

Establish import quota or to ban imports of any commodity;

3.

Impose and additional duty on all imports not exceeding 10% advalorem whenever
necessary.

Limitations imposed regarding the Flexible Tariff Clause:


1. Conduct by the Tariff Commission of an investigation in which a public hearing shall be hold
wherein interested parties shall be afforded reasonable opportunity to be present, produce
evidence and to be heard;
2. The commission shall also hear the views and recommendations of any government office,
agency or instrumentality concerned;
3. The commission shall submit their findings and recommendations to the NEDA within 30
days after the termination of the public hearings. The NEDA thereafter, submits its
recommendation to the President.

Administrative Aspect of
Tariff and Customs Laws
Agencies directly concerned with Tariff and Customs Administration:
TARIFF COMMISSION
Officials of the Tariff Commission are the chairman and 2 member Commissioners, all
appointed by the President.
Functions:
A. Investigative Powers:
1.

Administration and the fiscal and industrial effect of the Tariff and Customs laws of
this country now in force or when hereafter be enacted;

2.

Relations between the rates of duty on raw materials and the finished or partly
finished products;

3.

Effects of ad valorem and specific duties and of compound, specific and ad valorem
duties;

4.

All questions relative to the arrangement of schedules and classification of articles in


several sections of the tariff law;

5.

Tariff relations between the Philippines and the Foreign countries, commercial
treaties, preferential provisions, economic alliances, the effect of export bounties and
preferential transportation rate;

6.

Volume of importations compared with domestic production and consumption;

7.

Conditions, causes and effects relating to completion of foreign industries with those
of the Philippines, including dumping and cost of production;

8.

In general, to investigate the operation of customs and tariff laws, including their
relations to the national revenues, their effect upon the industries or labor of the country
and to submit reports of its investigation;

9.

Nature and composition and the classification and heading number for customs
revenue and other related purposes.

B. Administrative Assistance to the President and Congress


1.

Ascertain conversion costs and costs of production:


a.

b.
2.

In the principal growing, producing or manufacturing:


1.

Centers in the Philippines whenever possible;

2.

Centers in foreign countries; whenever necessary;


Including effects of tariff modifications or import restriction or prices.

Select and describe representative articles imported to the Philippines similar to or


comparable with those locally produced

3.

Ascertain imposts costs of such representative articles so selected.

4.

Ascertain the growers producers or manufacturers selling prices.

5.

Submit annual reports of these to the President of the Philippines, copies of which
shall be furnished to the NEDA, BSP, Dept. of Finance and the Bureau of Investments.

BUREAU OF CUSTOMS
Composed of one chief and 2 assistant chiefs known as commissioner of customs,
appointed by the President respectively.
Functions of the Bureau of Customs (CASE)
1. Control smuggling and related frauds.
2. Assessment and collection of Revenues from imported articles and all other impositions
under the tariff and customs laws.
3. Supervision and control over due entrance and clearance of vessels and aircraft engaged in
foreign commerce.

4. Enforcement of Tariff and Custom Code and related laws.


5. Supervision on control over the handling of foreign mails arriving in the Philippines.
6. Supervise and control all import and export cargos for the protection of the government
revenue.
7. Exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs
laws.
Other Powers:
1. Supervision of collection districts and ports of entry, coast ruse trade, vessels an aircrafts
used in foreign trade;
2. Ascertainment, collection and recovery of import duty;
3. Warehousing of imported articles; and
4. Administrative proceedings like search , seizure and arrest, including forfeitures.
Commissioner of Customs is vested with authority to:
A.

Assess

B.

Collect
1.

All lawful revenues from imported articles;

2.

All other dues, fees, charges, fines and penalties.

Procedural Aspect of
the Tariff and Customs Laws
Nature of Customs Protest; Seizures and Forfeiture cases
There are two kinds of proceedings in the Bureau of Customs, these are:
a. Customs protest cases- deal safely with liability for customs, duties, fees and other charges.
b. Seizure and forfeiture cases- refer to matters involving smuggling or the act of any person
who fraudulently imports or brings into the Philippines, or assists in so doing, any article
contrary to law, or shall receive, conceal, buy, sell or in any manner facilitate the
importation, concealment, or sale of such auricles after importation, knowing the same to
have been imported contrary to law smuggling includes the exportation act of articles in a
manner contrary to law. (Sec. 3154, TCC).
Procedure in Custom Protest Cases
These are the steps:
1.

2.

The collector of customs shall cause all the articles entering the jurisdiction of his district
and destined for importation through his port to be entered at the customs house. He shall
appraise and classify such articles, and shall assess and collect the duties, taxes and other
charges thereon. He shall also hold possession of all imported articles upon which duties,
taxes, and other charges have not been paid of secured to be paid.
The importer / owner makes the payment after the final liquidation.

3.

The importer / owner adversely affected by the collectors ruling may file a written protest
with the Collector of custom at the time of payment or within 15 days thereafter.

4.

The Collector of Customs issues an order for hearing within 15 days from receipt of the
protest and renders his decision within 30 days from the termination of hearing.

5.

In case an adverse decision is rendered within the 30-day period from the termination,
the importer/owner may appeal to the Commissioner of Customs within 15 days after
notification of decision or lapse of the 30-day period to decide. The importer/ owner may
give written notice to the collector and one copy furnished to the Commissioner of his desire

to have the matter reviewed by the Commissioner. The Collector shall forthwith transmit all
the seconds of the proceedings to the Commissioner.
6.

In case an adverse decision is rendered, the importer/ owner may appeal to the Court of
Tax Appeals within 30 days from receipt of the decision; and

7.

In case an adverse decision is still rendered, the importer/ owner may appeal to the
Court of Appeals and the Supreme Court.

Automatic Review in Customs Proceedings


Whenever the decision of the Collector is adverse to the Government, said decision is
automatically elevated to the Commissioner for review, and if such decision is affirmed by the
commissioner, the same shall be automatically elevated to and finally received by the Secretary
of Finance.
Rationale: It is intended to protect the interest of the Government in the collection of
taxes and custom duties in seizures and protest cases. Moreover, a favorable decision will no
be appealed by the taxpayer and certainly a collector will not appeal his own decision (See
Yaokasin vs. Commissioner of Customs, et al. G.R. No. 84111; Dec. 22, 1989.)
Automatic Review Applies to:
1)

Custom Protest Cases

2)

Seizures and Forfeiture Cases

Custom Seizures and Forfeiture Cases


Basic Concepts:
a)

Jurisdiction of Customs in Seizures and Forfeiture


Related Provisions:
The territorial jurisdiction of the Bureau of Customs embraces all seas within the jurisdiction
of the Philippines, and over all coasts, ports, harbors, bays, rivers and inland waters
whether navigable or not from the sea. (Sec. 603, TCC)

Extra-Territorial jurisdiction
(Right of Hot Pursuit):
Whether a vessel becomes a subject to a seizure by reason of an act done in the Philippine
waters, in violation of the Tariff and Customs Laws, a pursuit of such vessel, begins with the
jurisdictional waters may contain beyond the maritime zone, and the vessel may be seized
in the high seas. (Sec. 603, TCC).
Imported articles which Maybe the subject to seizures for violation of the Tariff and
Customs laws maybe pursued in their transportation in the Philippines by land, water or air,
and such jurisdiction exerted over them at any place therein as may be necessary for the
due enforcement of the law. (Sec. 603, TCC)
Pertinent Case:
The Supreme Court upheld the seizure and forfeiture as valid despite the fact that the
importation had not yet begun and that the seizure was affected outside the Philippine
waters. The Supreme Court held that the authority of a nation within its own territory is
absolute and exclusive. The power to secure itself from injury may certainly be exercised
beyond the limits of its territory. (Qiluh Asaali, et al. vs. Commissioner of Customs, L24170, Feb. 28, 1969).
b)

Place where Searchers and Seizures may be conducted


1)

Right of the Police \ officers to Enter Enclosure


Any person exercising police power conferred under such code may at any time enter,
pass through, or search any land or enclosure, or any warehouse, store or other
building, not being a dwelling house.
A warehouse, store or other building or enclosure used for the keeping or storage
of article does not become a dwelling house within the meaning hereof merely by reason
of the fact that a person employed as a watchman lives in the place, nor will the fact that
his family stays there with him alter the case.

2)

Search of Dwelling House


A Dwelling house may be entered and searched only upon warrant issued by a judged.

Note: Except in the case of the search of a dwelling house, persons exercising police
authority under the customs may effect search and seizure without a search warrant in
the enforcement of custom laws.
3)

Right to search vessels or Aircraft and Persons or Articles Conveyed therein


It is lawful for any person exercising police authority under the TCC to go aboard any
vessel or aircraft within the limits of any Collection district and to inspect, search and
examine said vessel or aircraft and any other trunk, package, box as envelope on board,
and to search any person on board the said vessel or aircraft if underway, to use all
necessary force to compel compliance; and if it shall appear that any breach or violation
of the customs and tariff laws of the Philippines has been committed, whereby or in
consequence of which such vessel or aircraft, or the article, or any part thereof on, on
board of or imported by such vessel or aircraft is liable to forfeiture, to make seizure of
the same.
Note: 1) Such power shall extend to the removal of any false bottom, partition,
bulkhead or other obstruction. 2) No proceeding herein shall give rise to any claim fro
the damage caused to the article or vessel or aircraft.

1)

Right to Search Vehicles, Beast and Persons


It shall also be lawful for a person exercising authority to open and examine any box,
trunk, envelope or other container, wherever found when he has reasonable cause to
suspect the presence of dutiable or prohibited article or article introduced into the
Philippines contrary to law and likewise to stop, search ad examine any vehicle, beast or
person reasonably suspected of holding or conveying such article.

2)

Search of Persons Arriving from Foreign Countries


All persons coming in the Philippines from the foreign countries shall be liable to
detention and search by the Customs Authorities under such regulations as may be
prescribed relative thereto. (Sec. 603, TCC)

Non-necessity of Search Warrant


General Rule: Persons exercising police authority under the customs laws may effect search and
seizures without a search warrant in the enforcement of customs laws. (See Sec. 2208, TCC)

Exception: In the case of a dwelling house (Pacis etc. vs. Pamaran, March 15, 1974).
Reason: On grounds of practicality.
Pertinent Cases on Searches and Seizures
1)

The legality of a search can be contested only by the party whose rights have been
impaired thereby and that the objection to an unlawful search and seizure is purely personal
and cannot be availed of by third parties. (Nasiad, et al. vs. CTA, Nov. 29, 1994)

2)

Warrants of seizure and detention issued by the Collector of C covering the seizure of
imported goods are not general warrants issued in violation of Section 3 (now section 4),
rule 126 of the Rules of Court. Upon effecting the seizure of the goods, the Bureau of
Customs acquired exclusive jurisdiction not only over the case but also over the goods
seized for the purpose of enforcing the tariff and Customs laws. (Chia vs. Acting Collector of
Customs, Sept. 26, 1989)

3)

The proceedings upon search warrants must be absolutely legal, for there is not a
description of process known to the law, the execution of which is more distressing to the
citizen. Perhaps there is none which excites such intense feeling in the consequence of its
humiliating and degrading effect. The warrants will always be constured strictly without
however, going the full length of requiring technical accuracy. No presumptions of regularity
are to be invoked in aid of process when an officer undertakes to justify under it. (Uy vs.
BIR, Oct. 20, 2000)

Customs Forfeiture Actions


1. What kind of Actions are Customs Forfeiture?
An action for the forfeiture of seized goods in the Bureau of Customs is an action in rem, or
action taken against the Imported goods themselves independently arising from any criminal
action or action in personam that may result as a consequence of a violation of an existing
law. Lack of knowledge by the owner does not generally render the vessel immune from
forfeiture. However, the forfeiture of a private carrier used in the conveyance of illegally
imported or exported articles requires knowledge on the part of the carrier-owner or his
agent of the unlawful act. A prima facie presumption shall exist against the vessel, vehicle or
aircraft under any of the following circumstances:

1.

If the conveyance has been used for smuggling at least twice before;

2.

If the owner is not in the business for which the conveyance is generally used; and,

3.

If the owner is not financially in a position to own such conveyance.

Pertinent Cases:
Acting Commissioner of Customs
vs. CTA
The dismissal of the criminal charge in the Fiscals office against respondent Andrulis does
not constitute re judicata in the forfeiture proceedings. Forfeiture is in rem, whereas a
criminal action is in personam. Conviction in the criminal action is not a bar to forfeiture.
Results of a criminal proceeding being dependent on the evidence therein will not necessarily
influence judgment in the forfeiture proceedings.
Llamado vs. Commissioner of Customs
123 SCRA 118
A Cessna plane carrying persons engaged in the smuggling of untaxed blue seal cigarettes,
landed at an airstrip in Alabat, Quezon Province. The plane was also used to bring in de
gaza kerosene lanterns and kerosene used to light the airstrip to facilitate the loading of the
cigarettes. The plane was subject to forfeiture pursuant to Sec. 2530 (a) of the Tariff and
Customs Code. It is not necessary that the vessel or aircraft must carry the contraband. It is
not likewise essential that the vessel or aircraft must come from a foreign country.
Commissioner of Customs vs.
CTA and Jose Pascual
138 SCRA 581
The Supreme Court ruled that the forfeiture of Pascuals vessel used in the illegal
importation of untaxed cigarettes is justified.
Forfeiture, according to the Citing the case of Vierneya vs. Commissioner of Customs (July
30, 1968), is in the nature of proceedings in rem and is directed against the res. The fact

that the owner of the vessel had no actual knowledge that the vessel was illegally used
does not render the vessel immune from forfeiture. This is so because the forfeiture action
is against the vessel itself.
Note: The said vessel was duly authorized to engage in coasturse trade but has no
certificate of public convenience.
Transglobe International Inc.
vs. Court of Appeals
G.R. No. 126634,
January 25, 1999.
Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and
not against the owner. It is the nature of a proceeding in rem, i.e. directed against the res or
imported article and entails a determination of the legality of their importation. In this
proceeding, it is in legal contemplation the property itself which commits the violation and is
treated as the offender, without reference whatsoever to the character or conduct of the
owner.
2. Forfeiture Cases and the Doctrine Primary Jurisdiction
The Doctrine of primary jurisdiction provides that the Bureau of Customs acquired exclusive
jurisdiction over imported goods for the purpose of the enforcement of the Customs laws
from the moment the goods are actually in its possession or control even if no warrant of
seizure or detention had previously been issued by the collector of the Customs. Primary
jurisdiction is vested in seizures and forfeiture proceedings in the collector and the
Commissioner or the Customs to the exclusion of the regular courts. (Commissioner of
Customs vs. Navarro, L-33146, May 31, 1977)
Rationale of the doctrine: It is anchored on the policy of placing no necessary hindrance
on the Governments drive not only to prevent smuggling and other frauds upon Customs
but also to render effective the collection of import and export duties duet to the State. (Jao,
et, al. vs. Court of Appeals, et al. G.R. Nos. 104604 and 111223, Oct. 6, 1995).
Pertinent Cases:
1.

Proceedings for the forfeiture of goods illegally imported are civil and administrative
not criminal in nature since they do not result in the conviction of the wrongdoer nor in

the imposition upon him of a penalty (Collector vs. Villaluz, L-34038, June 18, 1976;
Commissioner vs. Navarro, supra; Republic vs. Bocar, supra).
2.

Proof beyond reasonable doubt is not required to warrant forfeiture (Feeder


International vs. CA, 197 SCRA 842).

3.

The Collector of Customs, when sitting in forfeiture proceedings, constitutes a


tribunal upon which the law expressly confess jurisdiction to hear and determine all
questions touching on the forfeiture and further disposition of the illegal imported
mechanics (Government of the P.I. vs. Gale, 24 Phil 95; Auyong Hian vs. CTA, 19
SCRA 10).

4.

Jurisprudence is replete with cases which have held that regional trial courts are
devoid of any competence to pass upon the validity of seizure and forfeiture proceedings
conducted in the Bureau of Customs and to enjoin, or otherwise interfere with these
proceedings. The Collector of Customs sitting in the seizure and forfeiture proceedings
has exclusive jurisdiction to hear and determine all questions touching on the seizure
and forfeiture proceedings of dutiable goods. The regional trial courts are preclude from
assuming cognizance over such even though petition for certiorari, prohibition, or
mandamus.

5.

Even if a Customs seizure is illegal, exclusive jurisdiction still belongs to the Bureau
of Customs (Jao, et. al vs. CA, supra).

6.

To seize or not to seize is discretionary on Customs, so mandamus does not lie.


However, in case of grave abuse by customs, petitioner can file certiorari proceedings
(Provident Tree Farms, Inc. vs. Batario, Jr. etc et. al G.R. No. 92285, March 28, 1994).

3. Procedure Governing Seizure and Forfeiture Cases


The steps are the following:
1.

The imported articles are seized and a warrant for the detention of the property is
issued by the collector of Customs;

2.

If the owner or importer desires to secure the release of the property for legitimate,
the Collector may surrender it upon the filing of a sufficient bond; provided that the
articles the importation of which is prohibited by law shall not be released under bond.

3.

The Collector of Customs makes a report of the seizure to the seizure to the
Commissioner on Audits.

4.

The Collector shall give the owner or importer of property or his agent a written
notice of the seizure and shall give him an opportunity to be heard;

5.

Notice to an unknown owner shall be effected by posting for fifteen days (15) days in
the public corridor of the custom-house of the district in which the seizures was made,
and, in the discretion of the Commissioner by publication in a newspaper or by other
means a he shall consider desirable;

6.

The Collector of Customs schedules the hearing and renders his decision after the
hearing is conducted;

7.

In case the decision of the Collector of Customs is adverse to the importer/ owner,
within fifteen (15) days after notification in writing by the collector of his action or
decision the importer/ owner may give written notice to the Collector and one copy
furnished to the Commissioner of his desire to have the matter reviewed by the
Commissioner. Thereupon, the collector shall forthwith transmit all the records of the
proceeding to the Commissioner;

8.

In case the decision of the collector of Customs is affirmed by the Commissioner of


Customs, or in case of inaction on the part of the Commissioner of Customs, the
importer/ owner may appeal to the court of Appeals within 30 days from notice of the
decision; and

9.

In case an adverse decision is still rendered, the importer/ owner may appeal to the
Court of Appeals and the Supreme Court.
Note: If the Collector renders a decision adverse to the Government, such decision shall
automatically, be elevated to and reviewed by the Commissioner; and if the Collectors
decision is affirmed by the Commissioner, such decision shall be automatically elevated
to, and be finally be reviewed by the secretary of Finance.
If within 30 days from receipt of the record of the case by the Commissioner or by the
Secretary of Finance, as the case may be, no decision is rendered by either of them, the
decision under review shall become final and executory.

Settlement of Seizures

Subject to the approval of the commissioner of the district collector may while the case is
still pending except when there is fraud:
a)

Accept the settlement of any seizure case- provided that the owner, importer, exporter or
consignee or his agent shall offer to pay a fine; or

b)

In case of forfeiture- the owner, importer, exporter, consignee or his shall offer to pay
for the domestic market value of the seized article.
Note: The commissioner may accept the settlement of any seizure case on appeal in the
same manner.
Effect of Settlement: The property shall be forthwith released and all the liabilities which
may or might attack to the property by virtue of the offense which was the occasion of the
seizure and all the liability which might have been incurred under any cash deposit or bond
given by the owner or agent in respect to such property shall be deemed to be discharged.
Settlement of any seizure case shall not be allowed:
a.

where the importation is absolutely prohibited or,

b.

Where the release of the property could be contrary to the law.

Pertinent Cases:
1)

Redemption of forfeited property is unavailing of three (3) instances:


a)

when there is fraud,

b)

where the importation is absolutely prohibited, or

c)
2)

Where the release of the property would be contrary to law. (Transglobe


International, Inc. vs. C.A, supra)

The fraud contemplated by law must be actual and not constructive. It must
be intentional fraud, consisting of deception willfully and deliberately done or resorted to
in order to induce another to give up some right. (Farolan vs. CTA and Bagong Buhay
Trading, 217 SCRA 298)

Remission of Customs, Duties and Compromise


The Collector of customs has the discretion
a)

Remit the assessment and collection of customs duties, taxes and other charges where
the aggregate amount is less than ten (10) pesos; and

b)

He may dispense with the seizure of article of the less than ten ( 10) pesos in value
except:
1)

in cases of prohibited importation; or,

2)

habitual or intentional violation of tariff and customs laws.

Subject to the approval of the Secretary of Finance, the Commissioner of Customs may
compromise cases involving the imposition of fines, surcharges and forfeitures unless otherwise
specified by law.
Administrative Penalties under the Tariff and Customs Code
These include:

a.

a.

Surcharges

b.

Fines

c.

Forfeitures

The code imposes surcharges for:


1.

failure to pay liquidated charges;

2.
3.

unauthorized withdrawal of imported articles from bonded warehouses;


failure to supply the consular or invoice when acquired;

4.

undervaluation, misclassification or misdeclaration; and,

5.
b.

failure or refusal to give evidence or submit documents for examination


A fine may be imposed in the following case:

1.

Any dutiable article is found in the baggage of an arriving passenger which is not
included in the baggage declaration;

2.

breach of bond;

3.

unlawful boarding as leaving of vessel or aircraft;

4.
5.

unloading of cargo before arrival at ports of destination, or at improper time or place


after arrival; and
failure to supply the requisite manifest.

c. The penalty of forfeiture is imposed in the cases enumerated in Section 2530 of the
Tariff and Customs Code.
The requisite for forfeiture are:
1. The wrongful making by the owner, importer, ex-porter or consignee of any
declaration or affidavit or the wrongful making as delivery by the same persons of
any invoice, letter or paper touching on the importation or exportation of
merchandise; and
2. That such declaration, affidavit, invoice, letter or paper I false.

Remedies under the


Tariff and Customs Code

A.

Government Remedies:
a.

Extrajudicial
1.

Enforcement or tax lien


A tax lien attaches on the goods, regardless of the ownership while still in the
custody or control of the government
Proceeds of sale are applied to the tax due. Any deficiency or excess is for the
account or credit, respectively of the taxpayer
This is availed of when the importation is neither nor improperly made

2.

Seizures
Generally applied when the penalty is fine or forfeiture which is imposed when the
importation is unlawful and it may be exercised even where the articles are not or no
longer in Customs Custody, unless the importation is merely attempted.
In the case of attempted importation, administrative fine or forfeiture may
be affected only;
a.
b.

3.

while the goods are still within the customs jurisdiction, or


in the hands or under the control of the importer or person who is aware
thereof.

Sale of Property
Property in the customs custody shall be subject to sale under the following conditions;
a.
b.

abandoned articles;
articles entered under warehousing entry not withdrawn nor the duties and
taxes paid thereon within the period provided under Section 1908, TCC;

c.

seized property, other than contraband, after liability to sale shall have been
established by proper administrative or judicial proceedings in conformity with the
provision of this code: and

d.

Any articles subject to a valid lien for customs duties, taxes or other charges
collectible by the Bureau of Customs, after the expiration of the period allowed for
the satisfaction of the same.

Note: Goods in the collectors possession or of Customs authorities pending payment of


customs duties are beyond the reach of attachment.
b.

Judicial Action
The tax liability of the importer constitutes a personal debt to the government, enforceable
by action (Sec. 1204, TCC)
This is availed of when the tax lien is lost by the release of the goods.

B.

Taxpayers Remedies
Administrative Recourse
Claim for refunda written claim for refund may be submitted by the importer:
1.

In abatement uses such as:


a.
b.

on missing packages;
deficiencies in the contents of packages or shortage before arrival of the goods in
the Philippines;

c.

articles lost or destroyed after such arrival,

d.

articles lost or destroyed

e.

dead or injured animals; and

f.

for manifest classical errors; (see section 1701-1708, TCC)

2.

Judicial relief
In drawback cases where the goods are re-exported
a.

Protest
see the earlier discussions on Customs Protest Cases

b.

In seizure cases
see earlier discussion on the subject

c.Settlement of case by the payment of fine or redemption of forfeited property


see earlier discussions on the subject
Note: The owner or importer may abandon either expressly or By importation in favor of
the Government thus relieving himself of the tax liability but not from the possible
criminal liability.
The taxpayer may appeal to the Court of Appeals which has exclusive jurisdiction to
review decisions of the Commissioner of Custom in cases involving:
a)
b)

liability for customs duties, fees or other money charges;


seizures, detention or release of property affected;

c)

fines forfeitures or other penalties imposed in relation thereto; and

d)

other matters arising under the customs Law or other laws administered by the
Revenue of Customs.

Remedies of the Government


Enumeration of the Remedies
Administrative
1.

Distraint of Personal Property

2.

Levy of Real Property

3.

Tax Lien

4.

Compromise

5.

Forfeiture

6.

Other Administrative Remedies

Judicial
7.

Civil Action

8.

Criminal Action

Distraint of Personal Property


Distraint- Seizure by the government of personal property, tangible or intangible, to enforce
the payment of faces, to be followed by its public sale, if the taxes are not voluntarily paid.
a.

Actual There is taking of possession of personal property out of the taxpayer into that
of the government. In case of intangible property. Taxpayer is also diverted of the power of
control over the property;

b.

Constructive The owner is merely prohibited from disposing of his personal


property.

Actual Distraint.
Made on the property only of a delinquent
taxpayer.
There is actual taking or possession of the
property.
Effected by having a list of the distraint property
or by service or warrant of distraint or
garnishment.
An immediate step for collection of taxes where
amount due is definite.

Constructive Distraint
May be made on the property of any taxpayer
whether delinquent or not
Taxpayer is merely prohibited from disposing
of his property.
Effected by requiring the taxpayer to sign a
receipt of the property or by leaving a list of
same
Such immediate step is not necessary; tax due
may not be definite or it is being questioned.

Requisites:
1. Taxpayer is delinquent in the payment of tax.
2. Subsequent demand for its payment.
3. Taxpayer must fail to pay delinquent tax at time required.
4. Period with in to assess or collect has not yet prescribed. In case of constructive distraint,
requisite no. 1 is not essential (see Sec. 206 TC)
When remedy not available:
Where amount involved does not exceed P100 (Sec. 205 TC). In keeping with the
provision on the abatement of the collection of tax as the cost of same might even be more than
P100.
Procedure:
1. Service of warrant of distraint upon taxpayer or upon person in possession of taxpayers
personal property.
2. Posting of notice is not less than two places in the municipality or city and notice to the
taxpayer specifying time and place of sale and the articles distrained.
3. Sale at public auction to highest bidder
4. Disposition of proceeds of the sale.
Who may effect distraint
1. commissioner or his due authorized representative
2. RDO
How Actual Distraint Effected
1. In case of Tangible Property:

Amount Involved
In excess of P1,000,000.00
P1,000,000.00 or less

a. Copy of an account of the property distrained, signed by the officer, left either with
the owner or person from whom property was taken, at the dwelling or place of
business and with someone of suitable age and discretion
b. Statement of the sum demanded.
c. Time and place of sale.
2. In case of intangible property:
a. Stocks and other securities
Serving a copy of the warrant upon taxpayer and upon president, manager, treasurer
or other responsible officer of the issuing corporation, company or association.
b. Debts and credits
1.

Leaving a copy of the warrant with the person owing the debts or having in his
possession such credits or his agent.

2.

Warrant shall be sufficient authority for such person to pay CIR his credits or
debts.

c. Bank Accounts garnishment


1.

Serve warrant upon taxpayer and president, manager, treasurer or


responsible officer of the bank.

2.

Bank shall turn over to CIR so much of the bank accounts as may be
sufficient.

How constructive Distraint Effected


1. Require taxpayer or person in possession to
a.

Sign a receipt covering property distrained

b.

Obligate him to preserve the same properties.

c.

Prohibit him from disposing the property from disposing the property in any manner,
with out the authority of the CIR.

2. Where Taxpayer or person in possession refuses to sign:


a.
b.

Officer shall prepare list of the property distrained.


In the presence of two witnesses of sufficient age and discretion, leave a copy in the
premises where property is located.

Grounds of Constructive Distraint


1. Taxpayer is retiring from any business subject to tax.
2. Taxpayer is intending to leave the Philippines; or
3. To remove his property there from.
4. Taxpayer hides or conceals his property.
5. Taxpayer acts tending to obstruct collection proceedings.
Note:
1. Bank accounts may be distrained with out violating the confidential nature of bank accounts
for no inquiry is made. BIR simply seizes so much of the deposit with out having to know
how much the deposits are or where the money or any part of it came from.
2. If at any time prior to the consummation of the sale, all proper charges are paid to the officer
conducting the same, the goods distrained shall be restored to the owner.
3. When the amount of the bid for the property under distraint is not equal to the amount of the
tax or is very much less than the actual market value of articles, the CIR or his deputy may
purchase the distrained property on behalf of the national government.
Levy of Real Property
Levy Act of seizure of real property in order to enforce the payment of taxes. The property
may be sold at public sale, if after seizure; the taxes are not voluntarily paid. The requisites are the
same as that of distraint.

Procedure:
1. International Revenue officer shall prepare a duly authenticated certificate showing
a. Name of taxpayer
b. Amount of tax and
c. Penalty due.
-

enforceable through out the Philippines

2. Officer shall write upon the certificate a description of the property upon which levy is made.
3. Service of written notice to:
a.

The taxpayer, and

b.

RD where property is located.

4. Advertisement of the time and place of sale.


5. Sale at public auction to highest bidder.
6. Disposition of proceeds of sale.
The excess shall be turned over to owner.
Redemption of property sold or forfeited
a. Person entitled: Taxpayer or anyone for him
b. Time to redeem: one year from date of sale or forfeiture
-

Begins from registration of the deed of sale or declaration of forfeiture.

Cannot be extended by the courts.

c. Possession pending redemption owner not deprived of possession


d. Price: Amount of taxes, penalties and interest thereon from date of delinquency to the date
of sale together with interest on said purchase price at 15% per annum from date of
purchase to date of redemption.
Distraint and Levy compared
1. Both are summary remedies for collection of taxes.
2. Both cannot be availed of where amount involved is not more than P100.
3. Distraint personal property
Levy real property
4. Distraint forfeiture by government, not provided
Levy forfeiture by government authorized where there is no bidder or the highest bid is not
sufficient to pay the taxes, penalties and costs.
5. Distraint Taxpayer no given the right of redemption
Levy Taxpayer can redeem properties levied upon and sold/forfeited to the government.
Note:
1. It is the duty of the Register of Deeds concerned upon registration of the declaration of
forfeiture, to transfer the title to the property with out of an order from a competent court
2. The remedy of distraint or levy may be repeated if necessary until the full amount, including
all expenses, is collected.
Enforcement of Tax Lien
Tax Liena legal claim or charge on property, either real or personal, established by law as a
security in default of the payment of taxes.
1. Nature:

A lien in favor of the government of the Philippines when a person liable to pay a tax
neglects or fails to do so upon demand.\
2. Duration:
Exists from time assessment is made by the CIR until paid, with interests, penalties and
costs.
3. Extent:
Upon all property and rights to property belonging to the taxpayer.
4. Effectivity against third persons:
Only when notice of such lien is filed by the CIR in the Register of Deeds concerned.
Extinguishment of Tax Lien
1. Payment or remission of the tax
2. Prescription of the right of the government to assess or collect.
3. Failure to file notice of such lien in the office of register of Deeds, purchases or judgment
creditor.
4. Destruction of the property subject to the lien.
In case Nos. 1 and 2, there is no more tax liability. Under nos. 3 and 4, the taxpayer is still
liable.
Enforcement of Tax Lien vs. Distraint
A tax lien is distinguished from disttraint in that, in distraint the property seized must be
that of the taxpayer, although it need not be the property in respect to the tax is assessed. Tax lien
is directed to the property subject to the tax, regardless of its owner.
Note:
1. This is superior to judgment claim of private individuals or parties

2. Attaches not only from time the warrant was served but from the time the tax was due and
demandable.
Compromise
Compromisea contract whereby the parties, by reciprocal concessions, avoid litigation or
put an end to one already commenced.
Requisites:
1. Taxpayer must have a tax liability.
2. There must be an offer by taxpayer or CIR, of an amount to be paid by taxpayer.
3. There must be acceptance of the offer in settlement of the original claim.
When taxes may be compromised:
1. A reasonable doubt as to the validity if the claim against the taxpayer exists;
2. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
3. Criminal violations, except:
a.

Those already filed in court

b.

Those involving fraud.

Limitations:
1. Minimum compromise rate:
a. 10% of the basic tax assessed in case of financial incapacity.
b. 40% of basic tax assessed other cases.
2. Subject to approval of Evaluation Board
a.

When basic tax involved exceeds P1,000,000.00 or

b.

Where settlement offered is less than the prescribed minimum rates.

Delegation of Power to Compromise


General Rule: The power to compromise or abate shall not be delegated by the
commissioner.
Exception: The Regional Evaluation Board may compromise the assessment issued by the
regional offices involving basic taxes of P 500 K or less.
Remedy in case of failure to comply:
The CIR may either:
1. enforce the compromise, or
2. Regard it as rescinded and insists upon the original demand.
Compromise Penalty
1. It is a certain amount of money which the taxpayer pays to compromise a tax violation.
2. It is pain in lieu of a criminal prosecution.
3. Since it is voluntary in character, the same may be collected only if the taxpayer is willing to
pay them.
Enforcement of forfeiture
Forfeitureimplies a divestiture of property with out compensation, in consequence of a
default or offense. It includes the idea of not only losing but also having the property transferred to
another with out the consent of the owner and wrongdoer.
1. Effect: Transfer the title to the specific thing from the owner to the government.
2. When available:
a. No bidder for the real property exposed for sale.
b. If highest bid is for an amount insufficient to pay the taxes, penalties and costs.

With in two days thereafter, a return of the proceeding is duly made.

3. How enforced:
a.

In case of personal property by seizure and sale or destruction of the specific


forfeited property.

b.

In case of real property by a judgment of condemnation and sale in a legal


action or proceeding, civil or criminal, as the case may require.

4. When forfeited property to be destroyed or sold:


a.

To be destroyed by order of the CIR when the sale for consumption or use of
the following would be injurious to the public health or prejudicial to the enforcement
of the law: (at least 20 days after seizure)
1.

distilled spirits

2.

liquors

3.

cigars

4.

cigarettes, and other manufactured products of tobacco

5.

playing cards

6.

All apparatus used in or about the illicit production of such articles.

b.

To be sold or destroyed depends upon the discretion of CIR


1.

All other articles subject to exercise tax, (wine, automobile, mineral products,
manufactured oils, miscellaneous products, non-essential items a petroleum
products) manufactured or removed in violation of the Tax Code.
2.
Dies for printing or making IR stamps, labels and tags, in imitation of or
purport to be lawful stamps, labels or tags.

5. Where to be sold:
a.

Public sale: provided, there is notice of not less than 20 days.

b.

Private sale: provided, it is with the approval of the Secretary of Finance.

6. Right of Redemption:
a.

Personal entitled taxpayer or anyone for him

b.

Time to redeem with in one (1) year from forfeiture

c.

Amount to be paid full amount of the taxes and penalties, plus interest and cost
of the sale

d.

To whom paid Commissioner or the Revenue Collection Officer

e.

Effect of failure to redeem forfeiture shall become absolute.

Note: The Register of Deeds is duty bound to transfer the title of property forfeited to the
government with our necessity of an order from a competent court.
Other Administrative Remedies
1.

2.

Requiring filing of bonds in the following instances:


a.

Estate and donors tax

b.

Excise taxes

c.

Exporters bond

d.

Manufacturers and importers bond


Requiring proof of filing income tax returns

Before a license to engage in trade, business or occupation or to practice a profession can


be issued.

3.

Giving reward to informers Sum equivalent to 10% of revenues, surcharges or fees


recovered and/or fine or penalty imposed and collected or P1, 000,000.00 per case,
whichever is lower.

4.

Imposition of surcharge and interest.

5.

Making arrest, search and seizure


Limited to violations of any penal law or regulation administered by the BIR, committed with
in the view of the Internal Revenue Officer or EE.

6.

Deportation in case of aliens on the following grounds


a.
b.

7.

Knowingly and fraudulently evades payment of IR taxes.


Willfully refuses to pay such tax and its accessory penalties, after decision on his tax
liability shall have become final and executory.
Inspection of books

Books of accounts and other accounting records of taxpayer must be preserved, generally
within three years after date the tax return was due or was filed whichever is later.
8.

Use of National Tax Register

9.

Obtaining information on tax liability of any person

10.

Inventory Taking of stock-in-trade and making surveillance.

11.

Prescribing presumptive gross sales or receipt:


a.

Person failed to issue receipts and invoices

b.

Reason to believe that records do not correctly reflect declaration in return.\

12.

Prescribing real property values

13.

Inquiring into bank deposit accounts of

a.
b.
14.

A deceased person to determine gross estate


Any taxpayer who filed application for compromise by reasons of financial incapacity
his tax liability.
Registration of Taxpayers.

Judicial Remedies
Civil and Criminal Actions:
1.

Brought in the name of the Government of the Philippines.

2.

Conducted by Legal Officer of BIR

3.

Must be with the approval of the CIR, in case of action, for recovery of taxes, or
enforcement of a fine, penalty or forfeiture.

A. Civil Action
Actions instituted by the government to collect internal revenue taxes in regular courts
(RTC or MTCs, depending on the amount involved)
When assessment made has become final and executory for failure or taxpayer to:
a.

Dispute same by filing protest with CIR

b.

Appeal adverse decision of CIR to CTA

B. Criminal Action
A direct mode of collection of taxes, the judgment of which shall not only impose the
penalty but also order payment of taxes.
An assessment of a tax deficiency is not necessary to a criminal prosecution for tax
evasion, provided there is a prima facie showing of willful attempt to evade.
Effect of Acquittal on Tax Liability:

Does not exonerate taxpayer his civil liability to pay the tax due. Thus, the government
may still collect the tax in the same action.
Reason: Tax is an obligation, does not arise from a criminal act.
Effect of Satisfaction of Tax Liability on Criminal Liability
Will not operate to extinguish taxpayers criminal liability since the duty to pay the tax is
imposed by statute, independent of any attempt on past of taxpayers to evade payment.
This is true in case the criminal action is based on the act to taxpayer of filing a false and
fraudulent tax return and failure to pay the tax.
Note: The satisfaction of civil liability is not one of the grounds for the extinction of criminal action.

Prescriptive Periods /
Statute Of Limitation
Purpose:
For purposes of Taxation, statue of limitation is primarily designed to protect the rights of the
taxpayers against unreasonable investigation of the taxing authority with respect to assessment
and collection of Internal Revenue Taxes.
Prescription of Governments Right to Assess Taxes:
General Rule: Internal Revenue Taxes shall be assessed within three (3) years after the last day
prescribed by law for the filing of the return or from the day the return was filed, in case it is filed
beyond the period prescribed thereof. (Section 203 of the Tax Code)
Note:
1.

A return filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day.

2.

In case a return is substantially amended, the government right to assess the tax shall
commence from the filing of the amended return (CIR vs. Phoenix, May 20, 1965; Kei & Co.
vs. Collector, 4 SCRA 872)

3.

In computing the prescriptive period for assessment, the latter is deemed made when
notice to this effect is released, mailed or sent by the Commissioner to the correct address
of the taxpayer. However, the law does not require that the demand/notice be received
within the prescriptive period. (Basilan Estates, Inc. vs. Commissioner 21, SCRA 17;
Republic vs. CA April 30, 1987)

4.

An affidavit executed by a revenue office indicating the tax liabilities of a taxpayer and
attached to a criminal complaint for tax evasion, cannot be deemed an assessment. ( CIR
vs. Pascoi Realty Corp. June 29, 1999)

5.

A transcript sheets are not returns, because they do not contain information necessary
and required to permit the computation and assessment of taxes (Sinforo Alca vs.
Commissioner, Dec. 29, 1964)

Exceptions: (Sec. 222 ic)


1. Where no return was filed - within ten (10) years after the date of discovery of the omission.
2. Where a return was filed but the same was false or fraudulent within ten (10) years from
the discovery of falsity or fraud.
Nature of Fraud:
a.

Fraud is never presumed and the circumstances consisting it must be alleged and
proved to exist by clear & convincing evidence (Republic vs. Keir, Sept. 30, 1966)

b.

The fraud contemplated by law is actual and not constructive. It must amount to
intentional wrongdoing with the sole object of avoiding the tax. A mere mistake is not a
fraudulent intent. (Aznar case, Aug. 23, 1974)

c.

A fraud assessment which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for the collection thereof.
(Sec. 222 paragraph (a))

Fraud may be established by the following : (Badges of Fraud)


a.

Intentional and substantial understatement of tax liability of the taxpayer.

b.

Intentional and substantial overstatement of deductions of exemption

c.

Recurrence of the foregoing circumstances.

Instances/Circumstances negating fraud:


a.

When the Commissioner fails impute fraud in the assessment notice/demand for
payment.

b.

When the Commissioner failed to allege in his answer to the taxpayers petition for
review when the case is appealed to the CTA.

c.

When the Commissioner raised the question of fraud only for the first time in his
memorandum which was filed the CTA after he had rested his case.

d.

Where the BIR itself appeared, not sure as to the real amount of the taxpayers net
income.

e.

A mere understatement of income does not prove fraud, unless there is a sufficient
evidence shaving fraudulent intent.

3. Where the commissioner and the taxpayer, before the expiration of the three (3) year period
of limitation have agreed in writing to the extension of said period.
Note: Limitations:
a.

The agreement extending the period of prescription should be in writing and duly
signed by the taxpayer and the commissioner.

b.

The agreement to extend the same should be mode before the expiration of the
period previously agreed upon.

4. Where there is a written waiver or renunciation of the original 3-year limitation signed by the
taxpayer.

Note: Limitations:
a.
b.
c.

The waiver to be valid must be executed by the parties before the lapse of the
prescriptive period.
A waiver is inefficient I it is executed beyond the original three year.
The commissioner can not valid agree to reduce the prescriptive period to less than
that granted by law.

Imprescriptible Assessments:
1. Where the law does not provide for any particular period of assessment, the tax sought to
be assessed becomes imprescriptible.
2. Where no return is required by law, the tax is imprescriptible.
3. Assessment of unpaid taxes, where the bases of which is not required by law to be reported
in a return such as excise taxes. (Carmen vs. Ayala Securities Corp., Nov. 21, 1980)
4. Assessment of compensating and documentary stamp tax.

Prescription of Governments
Right to Collect Taxes
A. General Rule:
1.

Where an assessment was made Any internal revenue tax which has been
assessed within the period of limitation may be collected by distraint or levy or by
proceeding in court within 5 years following the date of assessment.

2.

Where no assessment was made and a return was filed and the same is not
fraudulent or false- the tax should be collected within 3 years after the return was due or
was filed, whichever is later.

B. Exceptions:
1.

Where a fraudulent/false return with intent to evade taxes was filed a proceeding in
court for the collection of the tax may be filed without assessment, at anytime within ten
years after the discovery of the falsity or fraud.
Note: The 10-year prescriptive period for collector thru action does not apply if it appears
that there was an assessment. In such case, the ordinary 5-year period (now 3 years)
would apply (Rep. vs. Ret., March 31, 1962)

2.

When the taxpayer omits to file a return a court proceeding for the collection of
such tax may be filed without assessment, at anytime within 10 years after the discovery
of the omission.

3.

Waiver of statute of limitations any internal revenue tax, which has been assessed
within the period agreed upon, may be collected be distinct or levy of by a proceeding in
court within the period agreed upon in writing before the expiration of 5-year period.

4.

Where the government makes another assessment on the basis of reinvestigation


requested by the taxpayer the prescriptive period for collection should be counted from
the last assessment. (Rep. vs. Lopez, March 30, 1963)

5.

Where the assessment is revised because of an amended return the period for
collection is counted from the last revised assessment.

6.

Where a tax obligation is secured by a surety bond the government may proceed
thru a court action to forfeit a bond and enforce such contractual obligation within a
period of ten years.

7.

Where the action is brought to enforce a compromise entered into between the
commission and the taxpayer the prescriptive period is ten years.

C. When tax is deemed collected for purposes of the prescriptive period.


1.

Collection by summary remedies It is effected by summary methods when the


government avail of distraint and levy procedure.

2.

Collection by judicial action The collection begins by filing the complaint with the
proper court. (RTC)

3.

Where assessment of the commissioner is protected & appealed to the CTA the
collection begin when the government file its answer to taxpayers petition for review.

Rules of Prescription in Criminal Cases


Rule: All violations of any provision of the tax code shall prescribe after five (5) years.
Note:
When it should commence?
The five (5) year prescriptive period shall begin to run from the:
a.
b.

Day of the commission of the violation, if know.


If not known, from the time of discovery and the institution of judicial proceeding for its
investigation and punishment.
When it is interrupted:

a.

When a proceeding is instituted against the guilty person

b.

When the offender is absent from the Philippines.


When it should run again:
When the proceeding is dismissed for reason not Constituting jeopardy.
When does the defense of prescription may be raised:

a.

In civil case If not raised in the lower court, it is bailed permanently; if can not be raised
for the first time on appeal.

b.

In criminal case It can be raised even if the case has been decided by the lower court
but pending decision on appeal.

Interruption of the Prescriptive Period


1.

Where before the expiration of the time prescribed for the assessment of the tax, both
the commissioner and the taxpayer have consented in writing to its assessment after such
time, the tax may be assessed prior to the expiration of the period agreed upon.

2.

The running of statute of limitations on making an assessment and the beginning of


distraint/levy or a proceeding in court for collection shall be suspended for the period.
During which the Commissioner is prohibited from making the assessment or beginning
distraint/levy or a proceeding in court and for 60 days thereafter; e.g.
a.

Filing a petition for review in the CTA from the decision of the Commissioner. The
commissioner is prevented from filing an ordinary action to collect the tax.

b.

When CTA suspends the collection of tax liability of the taxpayer pursuant to Section
11 of RA 1125 upon proof that its collection may jeopardizes the government and /or the
taxpayer.
c.

When the taxpayer requests for reinvestigation which is granted by


commissioner.
Note: A mere request for reinvestigation without any action or the part of the
Commissioner does not interrupt the running of the prescriptive period. The request
must not be a mere pro-former. Substantial issues must be raised.

d.

When the taxpayer cannot be located in the address given by him in the return.
Note: If the taxpayer informs the Commissioner of any change in address the statute
will not be suspended.

e.

When the warrant of distraint or levy is duly served upon any of the following
person:
1.

taxpayer

2.

his authorized representative

3.
f.
g.

Member of his household with sufficient discretion and no property could be


located.
When the taxpayer is out of the Philippines.

In criminal cases for violation of tax code the period shall not run when the
offender is absent from the Philippines.

Note: A petition for reconsideration of a tax assessment does not suspend the criminal
action. Reason: No requirement for assessment of the tax before the criminal action may
be instituted.
Nota Bene:
1. The law on prescription remedial measure should be interpreted liberally in order to protect
the taxpayer.
2. The defense of prescription must be raised by the taxpayer on time, otherwise it is deemed
waived.
3. The question of prescription is not jurisdictional, and as defense it must be raised
reasonably otherwise it is deemed waived.
4. The prescriptive provided in the tax code over ride the statute of non-claims in the
settlement of the deceaseds estate.
5. In the event that the collection of the tax has already prescribed, the government cannot
invoke the principle of Equitable recumbent by setting- off the prescribed tax against a tax
refused to which the taxpayer is entitled.