Administrative Remedy

Administrative Remedy
Every citizen has the duty to pay tax in accordance with the law, but he or she
also has the right to appeal for remedy in case any administrative act on the
part of the tax collection authority in a tax matter is found to be either improper
or contrary to law, and if his or her right or rights have been violated. There are
four levels of administrative remedy for tax matters: recheck, appeal and
administrative lawsuit. For recheck, an application should be made to the tax
collection authority that originally handled the case; for appeal , the matter
should be referred to a competent superior authority. For an administrative
lawsuit, the case should be referred to the Administrative Court under the
Judicial Yuan. However, no appeal can be made unless a recheck has first been
sought and no administrative lawsuit can be filed without an appeal having first
been filed. In spite of the general procedures for collection and administrative
remedies, appeals for remedy concerning domestic taxes on imported goods
which are levied by Customs are governed by the Customs Law and the
Customs Preventive Law, while other current cases of administrative remedy for
taxation come under other different jurisdictions depending on what the
competent superior authority is of the tax collection agency concerned, as
shown in the following table:

Agency
originally Administrative
Recheck Appeal
Handling the lawsuit
case

Taipei / Kaohsiung National Tax Admi

nistrations And National Tax Administ Ministry of Fi Administrative Co
National tax cases
rations of Northern / Central / Souther nance (MOF) urt
n Taiwan Province

Local tax cases in Ci Tax Administrations of Taipei / Kaohs Taipei / Kaohs Administrative Co
ties directly Under t iung City iung Metropol urt
he Municipa Govern is Government
ment s

Taiwan Provin
Local tax cases in T Prefectural & City Tax Collection Age Administrative Co
cial Governme
aiwan Province ncies of Taiwan urt
nt

National & local Ta Fukien Provin

Kinmen / Lienchiang County Tax Offi Administrative Co
x cases in Fukien Pr cial Governme
ces urt
ovince nt

A. Recheck
A taxpayer may, if he should find the determination unacceptable, request a
recheck in accordance with the following provisions by filing a petition with the
tax collection authority that originally handled the case in a prescribed form
stating the reasons and accompanied by documentary evidence:

 In cases where the amount of tax leviable or payable retroactively is stated

in a tax assessment notification, and has been delivered to the taxpayer,
the petition to recheck should be made within 30 days after the expiry of
the payment period.

 In cases where no amount of tax leviable or payable retroactively is stated

in the tax assessment notification, a petition for recheck can be made
within 30 days after the delivery of the tax assessment notification.

Any taxpayer or his/her agent who fails to make the petition to recheck within
the above-mentioned time limit because of natural calamity, emergency or
other irresistible event, can, within a one-month period after the cause of the
delay has ceased, make a request for rehabilitation supported by concrete
evidence. However, if the taxpayer has already failed to make the petition to
recheck for over a year after the expiry of the above-mentioned time limit, then
he is not allowed to request the rehabilitation. While he is making a request for
rehabilitation, he must complete all the imperative procedures for recheck. The
tax collection authority shall complete the recheck and issue a written
determination to the taxpayer concerned within two months after receipt of the
petition for recheck. In case the tax collection authority fails to make a
determination after the expiry of the two-month period, the taxpayer may
proceed to file an appeal.

B. Appeal
A taxpayer who is unconvinced of the recheck determination by the tax
collection authority may appeal the determination in accordance with the
provisions of the Law of Appeal within 30 days from the day after receipt of the
recheck determination. He may further reappeal within 30 days from the day
after receip of the appeal decision. But no appeal can be filed with respect to
items not having been rechecked or not having been objected to in the original
petition for recheck. However, any case for which the taxpayer has filed for
administrative remedy can be forthwith appealed without having to go through
the recheck process, provided it has been adjudged in the process of
administrative remedy by an appellate authority or by the Administrative Court
that “the original judgement be annulled and reviewed”, and provided the
case has been rechecked by the tax collection authority but the taxpayer
concerned remains unconvinced of the new decision.

C. Administrative Lawsuit
When a taxpayer remains unconvinced of a appeal decision, after having filed a
appeal in accordance with the law against an administrative act of taxation by a
tax agency of the Central Government or a local government because he
regards the said administrative act to be prejudicial to his rights or when three
months have passed since a appeal was filed and no decision has yet been
made, or when two months have passed since the period for decision on appeal
has been extended and no decision has yet been made, he may then file an
administrative lawsuit with the Administrative Court within two months from
the day after the delivery of the appeal decision upon the expiry of the period
during which the appellate authority by law should make a decision. The
decision of the Administrative Court is binding on all relevant organizations as
far as the particular case is concerned.

Tax Remedies
Notes in Tax Remedies
February 24, 2009

PRE-ASSESSMENT NOTICE impt!!!

A pre-assessment notice is served by the Government upon the taxpayer under any of the
following circumstances:
1. if the taxpayer fails to file a return where return is required;
2. if he files a return but fails to pay the tax;
3. if he files a return and pays the tax, but payment is insufficient because certain deductions
claimed are disallowed by the BIR.

After the taxpayer’s receipt of the pre-assessment notice, any of the following
situations can take place:
1. taxpayer accepts liability and pays the tax as appearing on the pre-assessment notice;
2. taxpayer disagrees with the pre-assessment notice and responds by explaining that he is
not liable;
3. taxpayer pays the tax and later on files a written claim for refund;
4. taxpayers enters into a compromise agreement with the BIR;
5. taxpayer ignores the pre-assessment notice.

The tax code states that the period to respond shall be prescribed by implementing rules and
regulations. If the taxpayer fails to respond within such period (30 days), a final assessment
shall issue.

ORDINARY PERIOD FOR ASSESSMENT

The right of the government to asses and later on to collect the tax is subject to prescription,
upon the lapse of which it can no longer exercise this right.

Section 203, of the tax code provides that internal revenue taxes shall be assessed within 3
years after the last day prescribed by law for the filing of the return. The same provision of
law lays down the rules as to when the 3 year prescriptive period for assessment begins:

1. if the return is filed before the last day prescribed by law for the filing thereof, it shall be
considered as filed on the last day;
2. if the return is filed on the last day prescribed by law, then it is considered as filed on such
day;
3. if the return is filed beyond the period prescribed by law, the 3 year period shall be
counted from the day the return is filed.

So it is clear, that the reckoning point for the 3 year prescriptive period is flexible; if the
return is filed on or before the deadline, the reckoning point is the deadline; if filed beyond
the deadline, the reckoning point is the date the return is actually filed. The 3 year period for
assessment begins to run from such a date.

FINAL ASSESSMENT...IMPT!

A final assessment issues:

1. if the taxpayer, having received a pre-assessment notice fails to respond within the period
provided for by the rules and regulations;
2. under the 5 circumstances enumerated under section 228 of the tax code where pre-
assessment notice is not necessary

Section 228. enumerates the exceptional circumstances where a pre-assessment notice is

not necessary: IMPT!!!

1. when the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return;
2. when a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
3. 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;
4. when the excise tax due on excisable articles has not been paid, or
5. when an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded,
or transferred to non-exempt persons.

Under the foregoing circumstances, the taxpayer shall immediately receive a final assessment
without the benefit of pre-assessment notice.

REMEDIES AVAILABLE TO THE GOVERNMENT IN THE COLLECTION OF THE INCOME

TAX...VERY IMPT!!

1. ADMINISTRATIVE
a. Distraint of personal property;
b. Levy of personal property
c. Enforcement of forfeiture of property
d. Enforcement of tax lien
e. Requiring the filing of bonds
f. Requiring proof of filing income tax returns
g. Deportation of aliens
h. Inspection of books of accounts.

2. JUDICIAL
a. ordinary civil action
b. criminal action

DISTRAINT- seizure by the government of personal property, tangible or intangible, to

enforce the payment of taxes to be followed by its public sale if the taxes are not voluntarily
paid.

Kinds of Distraint
a. Actual- there is taking of possession of the personal property out of the taxpayer into that
of the government;
b. Constructive- the owner is merely prohibited from disposing of his property.

LEVY- A summary administrative remedy, seizure of real property to enforce payment of

taxes.

A written notice of levy, containing a description of the property upon which levy is made,
the name of the taxpayer and the amounts of the tax and penalty due from them is served
upon the taxpayer.

FORFEITURE- a divestiture of property without compensation, in consequence of a default

or offense. In case of chattels and removal of fixtures of any sort, forfeiture is enforced by
seizure and sale or destruction of the specific forfeited property. The forfeiture of real
property is enforced by a judgment of condemnation and sale in a legal action or proceeding,
civil or criminal, as the case may require.

TAX LIEN- a legal claim or charge on property either real or personal established by law as a
security in default of the payment of taxes. The tax, together with interest, penalties and
cost that may accrue in addition thereto is a lien upon all property and rights to property
belonging to the taxpayer. The lien however, shall not be valid against any mortgagee,
purchaser or judgment creditor until legal notice of such liens should be filed by the
Commissioner of internal revenue in the Office of the Register of Deeds of the province or
city where the property of the taxpayer is located. The lien attaches when the taxpayer
neglects or refuses to pay the tax after demand, but relates back from the time when
assessment was made by the Commissioner.
REQUIRING THE FILING OF BONDS- Filing of performance bond to secure the payment of
taxes or compliance with certain provisions of tax laws and regulations. This may be required
by the BIR for the issuance of a tax clearance.

REQUIRING PROOF OF FILING INCOME TAX RETURNS. – Before a license to engage in

trade or business or occupation or to practice a profession can be issued to a person,
partnership, association or corporation, he must submit to the officer issuing such license or
permit, proof that he has filed his income tax return during the preceding year and that
income taxes due have been paid thereon.

DEPORTATION OF ALIENS- any alien who

1. knowingly and fraudulently evades the payment of any internal revenue tax or
2. willfully refuses to pay such tax and its accessory penalties after the decision on the tax
liability rendered by the Commissioner of Internal Revenue, or the CTA or any competent
judicial tribunal shall have become final and executor, is subject to deportation. The penalty
of deportation is not a bar to any proceeding taken by the government to enforce collection
of tax delinquency.

INSPECTION OF BOOKS OF ACCOUNTS

JUDICIAL ACTION
1. Civil Action- After the assessment made by the Commissioner of Internal Revenue has
become final and executory for failure of the taxpayer to dispute the same and appeal the
disputed assessment to the Court of Tax Appeals, the government may institute civil actions
to collect internal revenue taxes in the Regional Trial Court and the Metropolitan Trial Court,
City and municipal courts.

2. Criminal Action- maybe pursued by the authorities for the collection of delinquent
taxes. An assessment of a tax deficiency is not necessary to a criminal prosecution for tax
evasion. The crime is complete when the violator has knowingly and willfully filed a
fraudulent return or neglected to file a return with intent to evade the tax. If the taxpayer is
acquitted, the government may still collect the tax in a civil action, because the payment of
a tax is an obligation imposed by statute and does not arise from a criminal act.

Prescriptive period for collection.

Where an assessment was made, the period for collection by judicial action or by distraint or
levy is within 3 years after the date of assessment. Where no assessment was made and a
return was filed, and the same is not false or fraudulent, the period for collection by a
proceeding in court is within 3 years after the return was due or filed whichever is later,
except:

Where a return required to be filed was not filed, or even if filed the same is false or
fraudulent, and made with the intent to evade the tax, the period is ten years after
discovery of the omission to file the return or from the discovery of the falsity or fraud. The
other exception relative to the prescriptive periods for assessment are also applicable.

Where the government makes another assessment on the basis of a reinvestigation

requested by the taxpayer, or a revised assessment because of an amended return or as a
result of a reinvestigation asked for by the taxpayer, the period is counted from the last
assessment or the last revised assessment.

Where the action is brought to enforce a compromise agreement into between the
commissioner and the taxpayer, the prescriptive period is ten years from the time the cause
of action accrues as fixed in the civil code.

The running of the statute of limitation on the making of an assessment, the

beginning of distraint or levy or any proceeding in court for collection is
suspended: IMPT!!!!!

1. for the period during which the Commissioner of Internal Revenue is prohibited from
making tax assessment or beginning the distraint or levy or any proceeding in court and for
sixty days thereafter;

2. when the taxpayer requests for a reinvestigation which is granted by the commissioner;

3. when the taxpayer cannot be located in the address given by him in the return filed upon
which a tax is being assessed or collected, unless the taxpayer informs the Commissioner of
any change in address;

4. when the warrant of distraint and levy is duly served upon the taxpayer, his authorized
representative, or with a member of his household with sufficient discretion and no property
could be located; and

5. When the taxpayer is out of the Philippines.