TAXATION

FAR EASTERN UNIVERSITY – MANILA

TAX REMEDIES OF THE TAXPAYER (2501)

Summary: Remedies of the taxpayer

a. Where tax has not been paid

1. Protest or dispute the assessment – request for reconsideration or reinvestigation, which must be made within 30 days from
receipt of the assessment, and within 60 days from filing of protest, all relevant supporting documents shall have been
submitted otherwise assessment shall become final.

2. Appeal to the Court of Tax Appeals

If protest is denied or is not acted upon by the CIR within 180 days, after the submission of documents, the taxpayer adversely
affected, may appeal within 30 days from receipt of said decision to the Court of Tax Appeals.

b. Where tax has been paid

1. Remedy – claim for a refund.
2. Grounds for claiming for refund
a. Tax was erroneously collected
b. Tax was illegally collected

3. Request for refund

a. File a written claim to the CIR within 2 years from date of payment of the tax
b. Within the period of 2 years also, institute judicial action with CTA for the recovery of the tax.

Taxpayers Remedies Taxpayers may be improperly assessed taxes by the government. At times, the taxpayer may
1. Disputing an assessment erroneously pay taxes. The law provides the taxpayer procedures for disputing assessments and in
2. Recovery of erroneously recovering taxes erroneously paid. These procedures are called ‘’taxpayers remedies’’
paid taxes

1. Disputing an assessment - if the tax has not yet been paid

Summary of Rule: Disputing an assessment

Government Side

BIR denial or lapse of 180 - day whichever CTA adverse

NIC PAN FAN comes first decision

30 days 15 days 30 days 60 days 180 days 30 days 15 days

reply motion file petition petition for review on

for supporting for certiorari (SC)
reinvesti - documents review
gation (CTA)

OR

motion for Judicial Remedies*

reconsideration 180 days
OR
Wait for BIR action*

Administrative Remedies

*mutually exclusive remedies

Taxpayer's side

2. Recovery of erroneously paid taxes - if the tax is already paid

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Summary of rules: Recovery of erroneously paid taxes

Government side

CTA adverse
BIR denial decision

30 days 15 days

Payment of Claim for Petition for Petition for

tax refund review review on
(CTA)* certiorari
(SC)

2 Years

*with or without BIR denial of claim for refund

Taxpayer's side

I. DISPUTING AN ASSESSMENT

1. Upon receipt of the Pre-Assessment Notice (PAN), the taxpayer must explain his position within 15 days.

2. Upon receipt of the Formal Assessment Notice/Formal Letter of Demand, the taxpayer must file a formal protest in
30 days.
Types of Protest
a. Request for reconsideration - no new issues or evidence to be raised
b. Request for re-investigation - new issues or evidence will be raised
In the case of request for re-investigation, the taxpayer must submit the necessary documents in support of his position within 60 days
from the date of filing of the protest.

3. The taxpayer shall wait for BIR action within 180 days which shall be counted from:
a. The submission of documents - for request for re-investigation
b. The receipt of the FAN/FLD - for request for reconsideration

BIR denial or adverse decision

If a duly authorized representative of the CIR denies the protest or issues an adverse decision, the taxpayer may
interpose either a/an:

a. Judicial appeal - file a petition for review with the CTA within 30 days from the receipt of the adverse
decision
b. Administrative appeal - file a motion for reconsideration with the CIR within 30 days from the receipt of
adverse decision

The final decision (FDDA) of the CIR may be appealed to the CTA within 30 days from the receipt of the
adverse decision.

BIR inaction within the 180-day period

The BIR may not act on the protest within the 180-day period. The taxpayer may either:
a. Wait for BIR decision after the lapse of the 180-day period, or
b. File a petition for review with the CTA w/in 30-days from the lapse of the 180-day period (Judicial appeal)

These two options are mutually exclusive. Hence, if the taxpayer opted for the first option, the taxpayer can no
longer proceed to the CTA.

4. Upon the receipt of an adverse ruling from the CTA, the taxpayer may, w/in 15 days:

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 a. file a motion for reconsideration or new trial under the same division, or
An adverse decision of the CTA in division may be appealed to the CTA w/in 15 days. The CTA may grant additional 15 days
leeway after payment of the docket fee. An adverse decision of the CTA may be appealed w/in 15 days to the Supreme Court.

b. File a petition for review on certiorari to the Supreme Court

An adverse ruling from the Supreme Court may be subject to a motion for reconsideration after which the final decision can no
longer be appealed.

Content of Reply to PAN

The taxpayer's reply to the PAN shall include:
a. Explanation on the matters questioned by the examiner
b. Factual and legal bases supporting the taxpayer's position
c. Prayer for full of partial cancellation of the PAN

Requirement for the validity of a protest:

1. The taxpayer must indicate the nature of protest.
2. The taxpayer must state the date of the assessment notice.
3. The taxpayer should state the facts, the applicable law, rules, and regulations or jurisprudence on w/c the
protest is based.
4. The protest must be filed by the taxpayer or their duly authorized representatives, in person or through
registered mail w/ return card w/ the concerned Regional director, Assistant Commissioner-LTS or Assistant-
Commissioner-Enforcement Service, as the case may be.
5. All relevant documents must be submitted w/in 60 days from the filing of the request for re-investigation.

Suspension of the prescriptive period

It's settled under jurisprudence that the 60-day period applies only to a request for re-investigation and not to a
request for reconsideration.
The suspension of the prescriptive period applies only upon approval of the request for re-investigation. The act
of requesting for re-investigation doesn’t, by itself, suspends the running of the prescriptive period of collection.
The prescriptive period of collection will be suspended only when the BIR grants the request for re-investigation.

Protest needs to be categorical

The taxpayer shall categorically raise all issues in the FAN/FLD that he objects and individually backs his
objection by stating the facts, law, rules and regulations and jurisprudence supporting his position. It must be
recalled that the assessments on uncontested issues will become final, executor and demandable by the
government.

II. RECOVERY OF ERRONEOUSLY PAID TAXES

AUTHORITY OF THE CIR TO COMPROMISE, ABATE, AND REFUND OR CREDIT TAXES

AUHTORITY TO COMPROMISE

Conditions for Compromise:

The CIR may compromise the payment of internal revenue tax, when:
a. A reasonable doubt exist as to the validity of the claim against the taxpayer exists
b. The financial position of the taxpayer demonstrate a clear inability to pay the assessed tax

Minimum of compromise settlements:

a. 10% of the basic assessed tax - in case of financial incapacity
b. 40% of the basic assessed tax - for other cases

Compromise is generally considered by tax experts as the remedy of last resort or the last ditch remedies. In some cases,
compromise can be a win-win solution for both the government and the taxpayer.
Who will approve the offer of compromise by taxpayers?
a. Office of the Commissioner of Internal Revenue
b. National Evaluation Board (NEB)
c. Regional Evaluation Board (REB)

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The compromise of taxes is w/in the judgment and discretion of the Commissioner of Internal Revenue, except in the ff.
cases:

Compromise by the NEB

The NEB shall approve the offer compromise when:
1. the basic tax involved exceeds P1M or
2. the settlement offered is less than the prescribed minimum rates
Composition of the NEB:
a. The CIR
b. The four Deputy Commissioners
All the decisions of the NEB, favorable or unfavorable, shall have the concurrence of the CIR.

Compromise by the REB:

The REB shall approve the offer for compromise for:
a. Assessment issued by Regional offices involving basic deficiency tax of P500,000 or less
b. Minor criminal violations discovered by Regional and District offices
Composition of the REB:
a. Regional director - as chairman
b. Assistant Regional Director
c. Chief, Legal Division
d. Chief, Assessment Division
e. Chief, Collection Division
f. Revenue District Officer having jurisdiction of the taxpayer-applicant

If the offer of the compromise is less than the prescribed rates, the same shall always be subject to the approval of the NEB.
The CIR alone can enter into compromise when the basic tax involved doesn’t exceed P1M and the settlement isn’t below the
prescribed percentages.

What may be compromised?

1. Delinquent accounts
2. Pending cases under administrative protest
3. Civil tax cases being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations other than:
a. Those already filed in courts
b. Those involving criminal tax fraud
6. Cases covered by pre-assessment notice contested by the taxpayer

What can't be compromised?

1. Withholding taxes
2. Criminal tax fraud cases
3. Criminal violations already filed in courts
4. Delinquent accounts with duly approved schedule of installment payments
5. Cases of reduced assessment agreed upon by the taxpayer
6. Cases which has become final and executor after final judgment of a court

AUTHORITY OF THE CIR TO ABATE TAXES

Under Section 204 of the NIRC, the CIR is authorized to abate or cancel a tax liability under the ff. conditions:
1. The tax or any portion of which appears to be unjustly or excessively assessed
2. The administrative or collection costs involved don’t justify the collection of the amount due
3. The taxpayer is dead, leaving no distrainable or leviable property
4. The taxpayer is abroad leaving no forwarding address with no distrainable or leviable property
5. The taxpayer is a corporation who already dissolved and all subscribed shares of stock have been fully paid
6. The tax case has already prescribed

PROBLEMS

Problem 1 Tax Assessment/Refund Procedures

Instruction: Determine the last day to exercise the rights of the taxpayer.

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Case A:
Date of tax return filed April 15, 2011
Date of material non-inclusion of income
Discovered June 20, 2012
Question: When is the last day to amend the tax return?

Case B:
Date of tax return filed April 15, 2011
Date of tax return amended October 20, 2012
Question: When is the deadline to assess tax return?

Case C:
Date of fraudulent tax return filed April 15, 2011
Date when tax fraud was discovered by BIR April 15, 2015
Question: When is the deadline to file a proceeding in court for tax collection?

Case D:
Date of tax return was not filed April 15, 2011
Date when the omission was discovered by BIR April 15, 2012
Question: When is the deadline to assess tax return?

Case E:
Date of tax erroneously paid April 15, 2011
Date of claim for refund was filed with BIR May 20, 2013
No decision on the claim of refund was made
Question: When is the last day to appeal to the CTA?

Case F:
Date of tax erroneously paid June 10, 2011
Date of claim for refund was filed with BIR March 3, 2012
Date of BIR decision of denial was received April 5, 2013
Question: When is the last day to appeal to the CTA?

Case G:
Date of tax erroneously paid June 10, 2011
Date of claim for refund was filed with BIR June 10, 2012
Date of refund check received July 15, 2012
Date when BIR decision to grant refund was delivered AUGUST 1, 2012
Question: If the refund check was not encashed, when is the starting date for the government to forfeit it?

Case H:
Date of tax erroneously paid June 10, 2011
Date of claim for refund was filed with BIR June 10, 2012
Date of tax credit certificate July 30, 2012
Date when BIR decision was received August 21, 2012
Question: If the tax credit certificate was not utilized or revalidated, when is the starting date for the
government to revert it to the general fund?

Case I:
Date of assessment was received January 2, 2011
Petition for reconsideration was filed with BIR January 12, 2011
Documents to support petition submitted January 22, 2011
No decision on the protest as of July 12, 2011
Question: When is the latest day to appeal to the CTA?

Case J:
Assessment received January 5, 2011
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 Petition for reconsideration filed with BIR February 1, 2011
Documents to support petition submitted February 7, 2011
Decision of BIR denying the petition March 22, 2011

2nd request for reconsideration filed with BIR March 30, 2011
Decision on 2nd request denied April 12, 2011
Question: When is the last day to appeal to the CTA?

Case K:

Date when assessment was received October 1, 1999

Petition for reconsideration was filed with BIR October 9, 1999
BIR decision of denial was received July 2, 2000
Second request for reconsideration was filed
with the BIR July 15, 2000
Date revised assessment was received July 5, 2001

The last day to appeal to the Court of Tax Appeals is on:

Case L:
Date of appeal to the CTA April 21, 2011
Date of adverse decision of the CTA June 1, 2011
Date the CTA adverse decision received June 10, 2011
Question: When is the last day to appeal to the Supreme Court?

Case M:
Date of appeal to the CTA June 10, 2011
Date of adverse decision of the CTA June 20, 2011
Date the CTA adverse decision received June 25, 2011
Question: When is the last day to appeal to the Supreme Court?

Case N:
Date the real property was levied January 5, 2011
Date the real property levied was sold March 1, 2011
Question: When is the last day to redeem the real property?

Problem 2 Compromise
The following cases are available from the records of the BIR resulting from compromise proposals of corporations:
Basic Tax Surcharge Interest
Delinquent accounts P 500,000 P 125,000 P 100,000
Pending cases under administrative protest 900,000 450,000 180,000
Criminal violation not filed in courts 1,000,000 250,000 200,000
Withholding tax cases 2,000,000 500,000 400,000
Criminal violations filed in courts 5,000,000 2,500,000 1,000,000
Totals P9,400,000 P3,825,000 P1,880,000

Required: How much is the amount of compromise allowed using the following reasons (independent assumptions):

Case 1: Financial incapacity

Case 2: Financial incapability due to surplus deficit resulting to impairment in original capital by at least 50%.
Case 3: Doubtful validity of assessment.

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