BM1804

Tax Remedies

Remedies of the Government

Definition, Scope, and Prescriptive Period

Tax remedies on the part of the government are resolves of the government to collect taxes and enforcement
of necessary actions against the problematic taxpayer. The government can use administrative and judicial
remedies in the collection of taxes (Valencia & Roxas, 2016). Simply, the basic purpose of remedies is to
maintain equilibrium between the interest of the State and the taxpayer.

Prescriptive period is the time frame which the government can enforce the powers set by the law.

Administrative Remedies (De Vera, 2018):

 Distraint - The government seizes personal properties to carry out the payment of taxes.
• Actual Distraint – the actual confiscation of the personal property by the government.
• Constructive Distraint – the taxpayer is banned from disposing of his property.

Requisites to exercise the remedy of distraint (De Vera, 2018):

a. The taxpayer is delinquent (except in constructive).
b. The demand has been made.
c. The taxpayer fails to pay the said tax at the allotted time.
d. The period has not yet prescribed.

Persons authorized to exercise actual distraint or garnishment (De Vera, 2018):

a. Commissioner of Internal Revenue (CIR) - more than P1,000,000
b. Revenue District Officer- P1,000,000 or less

Procedure for actual distraint or garnishment (De Vera, 2018):

a. Commence of distraint proceedings by CIR or Revenue District Officer
b. Issuance/ Services of the Warrant of Distraint upon the delinquent taxpayer
c. Posting of Public Auction Sale Notices in two (2) conspicuous places in the locality
d. Public Auction Sale

Cases when a taxpayer may be subject under constructive distraint (De Vera, 2018):
a. If the taxpayer is retiring from any business subject to tax;
b. If the taxpayer intends to: (1) leave the Philippines, (2) remove his property therefrom, and (3) hide or
conceal his property; and
c. If the taxpayer is performing any act tending to obstruct proceedings for collecting the tax due or which
may be due from him.

Procedures for the constructive distraint of personal property (De Vera, 2018):
a. CIR serves the warrant of constructive distraint to the delinquent taxpayer.
b. The taxpayer must sign the receipt and obligate himself to preserve the thing distraint.
c. Upon failure to sign the receipt, (a) proceed to prepare a list of such property and (b) in the presence of
two (2) witnesses, leave a copy thereof in the premises where the property distrained is located, after
which the said property shall be deemed to have been placed under constructive distraint.

 Levy – the government seizes real properties to carry out the payment of taxes.

Procedures for Levy

a. Prepare a certificate of levy.
b. Issue/Serve notice to the taxpayer and Registry of Deeds
c. Advertisement of the public auction sale
d. Public auction sale

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A levied property may be redeemed within one (1) year from the date of sale, together with interest on the
purchase price at 15% per annum from the date of sale to the date of redemption (De Vera, 2018).

DISTRAINT LEVY

Personal property Real property

Forfeiture by the government is not provided. Forfeiture is authorized.

The right of redemption is granted in case of real

The taxpayer is not given the right of redemption
property levied upon and sold, or forfeited by the
with respect to distrained personal property.
government.
Table 1. The Distinction of Distraint and Levy
Source: Quicknotes Taxation, 2013. p. 68

Judicial Actions

There are two (2) judicial actions available to the government: civil actions and judicial actions.

 Civil Actions. These are actions instituted by the government to collect internal revenue taxes. It is normally
resorted to (De Vera, 2018):
a. The taxpayer was assessed and becomes final and irrevocable for failure to file an administrative
protest with the CIR within 30 days from receipt; or
b. When a protest against assessment is filed, and the decision of the CIR was rendered, but the said
decision becomes final, executory, and demandable for the failure of the taxpayer to appeal the decision
to the Court of Tax Appeal (CTA) within 30 days from the receipt of the decision.

 Criminal Actions. The CIR may file a criminal complaint about a delinquent taxpayer. The taxpayer may
be imprisoned not by reason of non-payment of the assessed tax, but criminal prosecution of violations of
the NIRC.

Jurisdiction over civil and criminal actions (De Vera, 2018)

a. Court of Tax Appeals - one (1) million pesos and above amount of fees, charges, and penalties
b. Regional Trial Court, Municipal Trial Court, and Metropolitan Trial Court - less than one (1) million
amount of fees, charges, and penalties

Remedies of the Taxpayer

Definition, Scope, and Prescriptive Period

Tax remedies on the part of the taxpayer are resolves or legal actions of the taxpayer to be discharged from
undue assessment and oppressive imposition of taxes by the government.

Prescriptive period is the time frame which the taxpayer can enforce the remedies available to them.

Administrative Remedies:
 Protest – This a challenge against an assessment, which normally, a taxpayer subject to assessment will
contradict the final demand of the BIR by filing a formal letter addressing the BIR Commissioner questioning
the validity of the assessment made by stating clearly the laws and facts of the petition (De Vera, 2018).

Before the payment, the taxpayer can file a petition for reconsideration or reinvestigation within 30 days
from receipt of assessment with the CIR. And within 60 days from filling of protest, all relevant supporting
documents should have been submitted. Otherwise, the assessment shall become FINAL (cannot be
disturbed) (De Vera, 2018).

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 Refund – This is a remedy in case of excessive or erroneous payment of a tax with the BIR. This can be
an erroneous or illegal collection of tax, a collection of penalty without authority, and excessive collection.
Requisites of Tax Refund or Tax Credit (De Vera, 2018):
a. It must be in writing.
b. It must be filed with the CIR within two (2) years after the payment of the tax or penalty.
c. It must be evidenced by proof of payment.

Judicial Remedies (De Vera, 2018):

 Civil Actions (De Vera, 2018):

a. Appeal to the Court of Tax Appeals – within 30 days from receipt of the decision on the protest or from
the lapse of 180 days due to the inaction of the Commissioner whichever comes first
b. Action for damages against a revenue officer by reason of any act done in the performance of official
duty

 Criminal Actions (De Vera, 2018):

a. Filling of the criminal complaint against erring BIR officials and employees
b. Injunction – when the CTA is in its opinion, the collection by the BIR may jeopardize the taxpayer.

Additions to Tax (Surcharges, Interest, Compromise Penalty)

In addition to basic tax that is to be paid by the taxpayer, these penalties will also be collected (Tabag, 2018):
• Surcharge
o 25% surcharge shall be collected in each of the following independent cases (Tabag, 2018):
a. Failure to file any return and pay the tax due on time
b. Filing a return with an internal revenue officer other than those with whom the return is required to
be filed unless authorized by the CIR
c. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment
d. Failure to pay the full or part of the amount of tax shown on any return, or the full amount of tax due
for which no return is required to be filed
o 50% surcharge shall be collected if there’s a willful neglect to file the return on time and files only after
prior notice from the BIR.
• Interest – a 20% cumulative per year of any unpaid tax liability running from the date of the prescribed
payment until the amount is fully paid
• Compromise Penalty – the amount of money which the taxpayer pays to compromise tax violation. This is
paid in lieu of criminal prosecution.

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Assessment. This is a preliminary investigation and notice to the taxpayer of tax liability based on factual facts
and evidence. This may result in a levy or distraint once the said investigation is proven to be true.
Tax Audit or Investigation
Issuance of Preliminary
Assessment Notice (PAN)
Replied within 15 days from
the date of receipt of PAN?
NO
BIR will issue a FINAL
Assessment Notice (FAN)
File a protest within 30 days
from the date of receipt of
the FAN
BIR denies the protest
File an appeal to Court of
Tax Appeal (CTA) 30 days
from the receipt of denial or
within 30 days from the
lapse of 180-day period
DECISION IS FINAL
AND
IRREVOCABLE
Figure 1. Summary of Assessment Procedure and Remedies of the Taxpayer
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BIR inspects the books of the taxpayer and accounting records
by issuing a Letter of Authority (LA)
A notice given by the Regional Assessment Division or the
Commissioner containing the facts and laws, rules and
regulations or jurisprudence
Two (2) Types of Protest
• Request for Reconsideration – a request to evaluate or
question the said law or facts based on the records without
the need.
• Request for Reinvestigation – questioning the facts or law
on the basis of the freshly discovered evidence.
Taxpayer should submit the necessary documents 60 days
from filing a protest in the case of Request for
Reinvestigation.
File a motion for
reconsideration to the CTA
CTA denies the appeal
division within 15 days from
the receipt decision
Denied
Appeal to CTA en banc
within 15 days
Denied
Appeal to Supreme Court
Denial of SC en banc (SC) within 15 days
Appeal to SC en banc
Appeal to SC within 15 days
within 15 days
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Collection. After the assessment procedure, or when it becomes final and executory, the BIR may avail the
remedy of the collection (Tabag, 2018).

Within five (5) years from issuance of Final

With Prior Assessment
Assessment Notice (FAN)
Without A return filed is not false or fraudulent. Three (3) years from:
Prior a. Actual filing of return; or
Assessment b. Deadline for filing whichever is later.
a. A return filed is fraudulent; or 10 years from discovery
b. No return was filed.
Table 2. Prescriptive Period
Source: CPA Reviewer in Taxation, 2018. p. 616

Refund of Taxes (Tabag, 2018)

1. The BIR erroneously or illegally collected a tax.
2. The taxpayer should have a written claim for refund or tax credit with the CIR within two (2) years from the
date of payment of the tax or penalty.
3. If the claim for refund is denied by the CIR, file a petition for refund with CTA:
a. Within 30 days from the receipt of the denial; and
b. Within two (2) years from the date of payment of the tax or penalty.

References:
Bureau of Internal Revenue. (2018). Guide to Philippines tax law research. Retrieved from Bureau of Internal
Revenue: https://www.bir.gov.ph
De Leon, H. S. & De Leon, H. M. (2016). The law on income taxation. Quezon City: REX Printing Company,
Inc.
Department of Finance. (2018). TAX 101. Retrieved from Department of FInance: http://www.dof.gov.ph
De Vera, J. L. (2018). Quicknotes in taxation. Manila: GIC Enterprises & Co.,Inc.
Hoffman, W. H. & Smith, J. E. (2014). Individual income taxes. Mason: Cengage Learning.
Tabag, E. D. (2018). CPA reviewer in taxation. Manila: Professional Review and Training Center.
Valencia, E. G. & Roxas, G. F. (2016). Income taxation. Baguio City: Valencia Educational Supply.

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