TAX REMEDIES

UNDER THE NIRC

BIR COLLECTION GOAL 2016
 RMO 2-2016 sets the collection goal of
the BIR this 20016
2.025 Trillion
21% increase
 Compared to the collection goal of 2015

1.674 Trillion
 Collection goal for Iloilo City this 2016
amounts to
40+ Billion
What is taxation?
 Itis a mode by which a government make
exactions for revenue in order to support
their existence and carry out their
legitimate objective.

 Itis the most pervasive and the strongest

of all the powers of the government.

 Taxes are the lifeblood of the government,

without which, it cannot subsist.
“Taxation is the destructive power which
interferes with the personal and property
rights of the people and takes from them a
portion of their property for the support of
the government.”
Paseo Realty & Dev. Corp. vs. Court of Appeals
Taxation should be exercised with caution
to minimize the injury to the proprietary
rights of a taxpayer. It must be exercised
fairly, equally and uniformly, lest the tax
collector kill the ‘hen that lays the golden
eggs.’ In order to maintain the general
public’s trust and confidence in the
government, this power must be used
justly and not treacherously.
  Roxas y Cia vs. CTA, 23 SCRA 276
• GOVERNMENT REMEDIES
• TAXPAYER REMEDIES
GOVERNMENT REMEDIES
Powers of the BIR (Sec. 2)
• To assess and collect all national
internal revenue taxes, fees and
charges
• To enforce forfeitures, fines and
penalties
• To execute judgments in all cases
decided in its favor by the tax court
and ordinary courts
• To administer supervisory and police
powers conferred upon it by law
BIR ORGANIZATIONAL STRUCTURE

• NATIONAL OFFICE (Sec. 3, NIRC)

– Commissioner of Internal Revenue
• 4 Deputy Commissioners + National Evaluation Board
– Assistant Commissioners (Large Taxpayers Service –
Regular and Excise), Enforcement Service, Legal Service,
Collection Service)
» Division Chiefs (LTRAD, LTETD, National Investigation
Division, and Policy Cases Division)
• REGIONAL OFFICES
– Regional Directors
• Assistant Regional Directors
– Division Chiefs (Assessment, Collection, and Legal)
» Revenue District Officers, LTDO, and Special
Investigation Division
Powers of the Commissioner
of Internal Revenue
• Power to interpret tax laws and decide
tax cases (Sec. 4)
• Power to obtain information and to
summon and examine (Sec. 5)
• Power to make assessments and
inquire into bank deposits (Sec. 6)
• Authority to delegate power (Sec. 7)
• Duty to ensure provision and
distribution of forms, receipts, etc.
(Sec. 8)
Power to interpret tax laws
and decide tax cases (Sec. 4)
The CIR has the EXCLUSIVE AND ORIGINAL
jurisdiction to:
• Interpret the provisions of the NIRC and other
tax laws, subject to review by the Secretary
of Finance
• Decide –
• Disputed assessments
• Refunds of internal revenue taxes, fees,
penalties
• Other matters arising from the NIRC,
subject to review by the CTA
“A general interpretative rule issued by
the CIR may be relied upon by taxpayers
from the time the rule is issued up to its
reversal by the Commissioner or this
Court. “

CIR v. San Roque, G.R. No. 187485, February 12, 2013)

Power to obtain information and
to summon and examine(Sec. 5)
The CIR is authorized by law to do a
whole host of things in –
• Ascertaining the correctness of any
return, or
• Making a return when none has been
made, or
• Collecting any such liability, or
• Evaluating tax compliance, or
• In determining the liability of any
person for tax
The CIR is authorized to:
• Examine any document which may be
relevant or material to an inquiry;
• Obtain information from a third party in
relation to an investigation or audit of a
taxpayer;
• Summon the taxpayer or any person
holding records of the taxpayer to appear
before the CIR and produce documents
• Take testimonies of the person concerned;
• Cause BIR employees to canvass around
and inquire on persons who may be liable
for any internal revenue tax
“The law allows the BIR access to all
relevant or material records and data in
the person of the taxpayer. In fact, the
BIR can accept documents which cannot
be admitted in a judicial proceeding
where the Rules of Court are strictly
observed“

Fitness by Design v. CIR, G.R. No. 177982,

October 17, 2008
TAX ASSESSMENT BY THIRD PARTY
LETTER NOTICE
• The examination could be made through the
tax returns, reports, and submissions of
other taxpayers whom the subject taxpayers
had transacted with
• Normally covers allegations for deficiency
income tax liabilities, value added tax or
percentage tax liabilities
• RMO No. 13-2012 dated March 29, 2012
provides guidelines, procedures and
minimize processing time of handling LNs
Third-party information data
matching programs:
• Reconciliation of Listing for
Enforcement System – Summary List
of Sales and Purchases (TRS-RELIEF) –
RMO No. 30-2003
• Bureau of Customs Data Program
(TRS-BOC) – RMO 34-2004
• Tax Reconciliation System (TRS-LN) –
RMO 28-2007, as further amended by
RMO No. 7-2010
Power to make assessments and
inquire into bank deposits (Sec. 6)
A. Examination of returns and
assessment of tax due
• Failure to file a return shall not
prevent the Commissioner from
authorizing the examination of any
taxpayer
Any return, statement of declaration
filed shall NOT be WITHDRAWN

Provided: Within 3 years from the date

of such filing, the same may be –
a. Modified,
b. Changed, or
c. Amended

Provided, further: NO notice for AUDIT

or INVESTIGATION of such return,
statement or declaration has been
actually served upon the taxpayer
B. Assessment on “Best evidence
obtainable” – applies:
a. Tax report required by law for the
purpose of assessment is not
available, or
b. Tax report is incomplete or
fraudulent

•. The law allows the BIR access to all

relevant or material records and
data in the person of the taxpayer.
C. Authority to conduct Inventory-
taking, surveillance and prescribe
presumptive gross sales and receipts
(1)Order inventory-taking
(2)Conduct surveillance, if there is
reason to believe that taxpayer is not
declaring his correct income
(3)Prescribe a minimum amount of gross
receipts when –
(a) taxpayer failed to issue receipts and
invoices;
(b) There is reason to believe that the
books of accounts do not correctly
reflect declarations
D. Authority to terminate taxable year
E. Authority to Prescribe Real Property
Values
F. Authority to Accredit and Register Tax
Agents
G. Authority to Prescribe Additional
Procedural or Documentary
Requirements
H. To make a canvass of taxpayers in
the region or district
I. Authority to inquire into bank deposit
accounts and other related
information held by financial
institutions

Bank deposits can be examined only in the

following instances:
a. A decedent to determine his gross
estate;
b. Any taxpayer who has filed an
application for compromise based on
financial incapacity; or
c. Pursuant to an international convention
or tax agreement, which the Philippines
is a signatory (RA 10021)
May bank deposits be disclosed by a
commercial bank to the Commissioner of
Internal Revenue, in connection with a
tax investigation being conducted by
revenue officials, without violating the
relevant bank secrecy laws?
No, there are only 3 instances wherein
the CIR may inquire into the bank
deposits of a taxpayer. Disclosure in
relation with a tax investigation is not one
of the instances allowed by law.
In case a taxpayer files an application to
compromise the payment of his tax
liabilities on his claim that his financial
position demonstrates a clear inability to
pay the tax assessed, his application shall
not be considered unless and until he
waives in writing his privilege under RA
1405, RA 6426.

Waiver shall constitute the authority of

the Commissioner to inquire into the
bank deposits of the taxpayer.
 Request for supply of tax information
from a foreign tax authority
 R.A. 10021 – Act to allow the exchange of information by
BIR on tax matters
 Sec. 2. Any general or special law notwithstanding, and for the
purpose of complying with the provisions on exchange of
information contained in tax treaties, CIR is authorized to
obtain any information, including but not limited to bank
deposits and other related information held by financial
institutions, as may be required to respond to a request by a
treaty country.
 Sec. 3. Once information is gathered, BIR is likewise
authorized to use, for tax assessment, verification, audit and
enforcement purposes, such information from financial
institutions.
 Sec. 4. Any such information shall not constitute an unlawful
divulgence of information under the Tax Code, and CIR is
designated as the competent authority.
 Sec. 5. Income tax returns of specific taxpayers subject of a
request for exchange of information by a foreign tax authority shall
be open for inspection upon the order of the President of the Phil,
under rules and regulations prescribed by the Secretary of Finance.
 Sec. 6. Any information received by foreign tax authority from BIR
shall be treated as absolutely confidential in nature and shall be
disclosed only to persons or authorities, including courts and
administrative bodies, involved in the assessment or collection of,
the enforcement or prosecution in respect of, or the determination
of appeals in relation to, the taxes covered by such conventions or
agreements.
 Sec. 10. A taxpayer shall be notified in writing by the CIR that a
foreign tax authority is requesting for exchange for information
held by financial institutions within 60 days from receipt of said
request.
Revenue Regulation No. 10-2010
Oct 6, 2010
In 2011, the Commissioner of the US
Internal Revenue Service (IRS) requested
in writing the CIR to get the information
from a bank in the Philippines, regarding
the deposits of a US citizen residing in the
Philippines, who is under examinations by
officials of the US IRS, pursuant to the US-
Philippine Tax Treaty and other existing
laws. Should the BIR Commissioner
agree to obtain such information from the
bank and provide the same to the IRS?
Yes, R.A. 10021 has amended the NIRC to
allow the CIR to inquire into the bank
deposits upon request of a foreign taxing
authority.
Authority to delegate power (Sec. 7)
Powers that cannot be delegated:
1. To recommend the promulgation of
rules and regulations by the Secretary
of Finance;
2. To issue rulings of first impression or
to reverse, revoke or modify any
existing ruling of the Bureau;
3. To compromise or abate any tax
liability but if P500,000 or less, she
can delegate
4. To assign or reassign officer to
establishments were excise tax
articles are produced or kept
TAX ASSESSMENT
It is an official action by an administrative
officer to determine the tax due of the
taxpayer

It consists of:
• Computation of the amount of tax that
must be paid by the taxpayer
• Coupled with a demand to pay the tax
within a specified period of time
Remedies of the GOVERNMENT

ASSESSMENT
COLLECTION
 KINDS OF ASSESSMENT:
1. Self-assessment – when taxpayer
computes his own liability, files his
return, and pay the tax based on his
computation (Sec. 56[a])

2. Deficiency assessment – occurs

upon discovery of the BIR that the self-
assessment was either deficient, or
when no return was made by the
taxpayer (Sec. 56[b])
Power to issue an assessment is with the
CIR. However, he can authorize any
revenue officer to conduct an
assessment.

There must be a clear grant of authority

before a delegated revenue officer can
conduct an assessment. The grant is
embodied in a Letter of Authority.

The period or year covered for

assessment should be specifically
indicated in the Letter of Authority.
The revenue examiner went beyond the authority
conferred by LOA. A LOA authorizes or empowers a
designated revenue officer to examine, verify and
scrutinize a taxpayer’s books and records in relation to his
internal revenue tax liability for a particular period. The
LOA, the examiners were authorized to examine Sony’s
book of accounts and other account records for the period
“1997 and unverified prior years.” However, CIR’s basis
for deficiency vat for 1997 was 1998. They acted without
authority in arriving at the deficiency vat assessment. It
should be considered without force and effect – a nullity.

A LOA should cover taxable period not exceeding 1 year.

The practice of issuing LOA covering audit of “unverified
prior years” is prohibited.

CIR vs. Sony Philippines, Inc.

CTA 90, May 17, 2007)
Taxpayers shall be informed in writing of
the law and the facts on which the
assessment is made; otherwise, the
assessment shall be void. (Sec. 228)

The law requires that the legal and

factual bases of the assessment be
stated in the formal letter of demand and
assessment notice, not in any other
document or paper issued by the CIR.
Before a delegated revenue officer can
conduct said examination or assessment,
there must be a clear grant of authority.
This grant is embodied in a Letter of
Authority. CIR v. Sony Philippines, Inc.
G.R. No. 178697, November 17, 2010

The assessment by tax examiners are

presumed correct and made in good faith.
The taxpayer has the duty to prove
otherwise. Sy Po. V. CTA
G.R. No. 81446, August 18, 1998
Notices may be served in the following
modes:

1. Personal service (delivery to known

address);

2. Substituted service (leaving notice

with someone at taxpayer’s known
address);

3. Service by mail.
Period of limitation upon assessment
and collection (Sec. 203)
Gen. Rule: The right to assess must be
done within three (3) years from:

• The day the return was ACTUALLY

FILED;
• From the LAST DAY for filing the return
(if the return was filed before the last
day prescribed by law),

 Whichever is LATER
Return was filed BEFORE the last day
prescribed by law – considered FILED on
the LAST DAY prescribed by law

Filed on the LAST DAY prescribed by law –

filed on such day

Filed BEYOND the period prescribed by

law – counted from the day the return
was filed
Exceptions:
1. False or fraudulent return with intent to
evade taxes – within 10 years from
DISCOVERY of falsity or fraud

2. Failure or omission to file a return –

within 10 years after discovery of failure
or omission to file the return

3. Waiver of statute of limitations in

writing, which must be made before the
expiration of the three-year period of
assessment of taxes: period agreed
upon
If the taxpayer files an amended return
which is substantially different from the
original return, the period of prescription
of the right to issue the deficiency
assessment should be counted from
the filing of the amended return, and
not the original return.
CIR vs. Phoenix Assurance Co., Ltd.,
Gr. No. L-19727, May 20, 1965)
If the taxpayer files a wrong return, it is
as though he filed no return at all. This is
true even if all the necessary information
was reflected in the erroneous return. In
situations like this, the 10-year
prescriptive period will apply.
Butuan Sawmill, Inc. v. CA,
Gr. No. L-20601, February 28, 1966
Where the return was made in the wrong
form, the filing thereof did not start the
running of the period of limitation, and
where the return was very deficient; there
was no return at all. If the taxpayer failed
to observe the law, Sec. 332 of the NIRC –
grants CIR a 10 year period within which
to bring an action for tax collection.
CIR v. Lilia Gonzales
In determining if prescription to assess
has indeed set in, the important date to
remember is the date when the demand
letter or notice is released, mailed or sent
by the CIR to the taxpayer.
Basilan Estates, Inc. v. CIR
Gr. No. L-22492, September 25, 1967)
PRESERVATION OF BOOKS AND ACCOUNTS
AND OTHER ACCOUNTING RECORDS

• Must be preserved for 3 years (last day

prescribed by law for assessment) –
Sec. 235 of NIRC

Revenue Regulation 17-2013, September 27,

2013
• Increased the period for preservation of
books from 3 years to 10 years
Fraud, falsity and the imposition of
10-year period
Fraud is a question of fact and the
circumstances constituting fraud must be
alleged and proved in court. Fraud is
never lightly to be presumed because it is
a serious charge. Hence, if fraud is not
proven, the Government cannot use the
10-year period to make the assessment.
CIR v. Ayala Securities Corporation,
Gr. No. L-29485, March 31, 1976)
Claiming fictitious expenses as
deductions is a proof of falsity or fraud in
the income tax return.
Tan Guan v. CTA
Gr. No. L-23676, April 27, 1967)
WAIVER of PRESCRIPTION (Sec.
222)
The taxpayer and the government may
extend by mutual agreement in writing
the prescriptive period for the
assessment and collection of taxes.
The requisites of valid waiver:
1. The waiver must be in proper form
(RMO 20-90);

2. The waiver must be signed by the

taxpayer himself of his duly authorized
representative;
• Delegation of authority must be in
writing and duly notarized;

3. The waiver must be duly notarized;

4. The CIR or the revenue official authorized
by him must sign the waiver indicating
the BIR’s acceptance and agreement to
the waiver. The date of such acceptance
by the BIR should be indicated;

5. Both the date of execution by the

taxpayer and the date of acceptance by
the BIR should be prior to the expiration
of the period of prescription or before the
lapse of the period agreed upon in case a
subsequent agreement is executed;
Imposition of Penalties (Sec. 247)
Penalties and interests apply to ALL
taxes, fees and charges imposed by the
NIRC

Tax laws imposing penalties for

delinquencies are intended to hasten tax
payments by punishing evasions or
neglect of duty in respect thereof.

Penalty and interest are not penal but

compensatory.
 SURCHARGE
25% 50%
1. Failure to file any return and 1. Willful neglect to file a
pay the tax due return within the period
2. Filing a return with an prescribed by law
internal revenue officer 2. False or fraudulent return is
other than those with whom willfully made
the return is required to be 3. Prima facie evidence of a
filed; false and fraudulent return
3. Failure to pay the deficiency when substantial under
within the time prescribed declaration of taxable
in the notice of assessment; income or substantial
4. Failure to pay the full or part overstatement of
of the amount of tax stated deductions (failure to
in the return on or before declare an amount
the date prescribed for its exceeding 30% for taxable
payment. income or actual
deductions)
Interest (Sec. 249)
Kinds of interest:
1. General interest
2. Deficiency interest
3. Delinquency interest; and
4. Extended payment interest.

Rate: 20% per annum

 Rules on Assessment of the NIRC,
Civil Penalties and Interest(RR 12-99)
Richie Rich forgot to file on April 15. He
filed on June 30.

Penalties:
• 25% surcharge for late filing
• 20% general interest from due date up
to time paid

Amount to be paid:
TAX DUES + 25% surcharge + 20%
interest
Richie Rich is having a vacation, he paid
on April 15 in Boracay. He did not bother
to file in Iloilo City his registered RDO.

Penalties:
• 25% surcharge for willful neglect
• NO INTEREST paid on time

Amount to be paid:
TAX DUES + 25% surcharge
Richie Rich did not file on April 15. He
didn’t care until a demand letter was sent
to him by the BIR to pay by June 30. He
paid on June 30.

Penalties:
• 50% surcharge for late filing
• 20% general interest from due date up
to time paid

Amount to be paid:
TAX DUES + 25% surcharge + 20%
interest
Richie Rich filed his return on April 15 and paid
P10,000. He didn’t care until a demand letter was
sent to him by the BIR to pay by June 30. He paid on
June 30. Upon pre-audit, it was discovered that there
was an error in computation. The correct amount
due is P20,000. He was assessed deficiency income
tax in a letter demand and assessment notice, the
telling him to pay by June 30. He did.

Penalties:
• 20% general interest from due date up to
time paid

Amount to be paid:
TAX DUES + 20% interest
Criminal action
• No criminal action for the recovery of
taxes shall be filed without the
approval of the CIR

• Acquittal of taxpayer in a criminal case

does not exonerate him from tax
liability

• 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
Criminal action
• No criminal action for the recovery of
taxes shall be filed without the
approval of the CIR

• Acquittal of taxpayer in a criminal case

does not exonerate him from tax
liability

• The crime is complete when the

violator has knowingly and willfuly filed
a fraudulent return or neglected to file
a return with intent to evade the tax
Willful blindness doctrine:
A taxpayer can no longer raise the
defense that the errors on their tax
returns are not their responsibility or that
it is the fault of the accountants they
hired.

The only thing that needs to be proven is

that the taxpayer was aware of his
obligation to file the tax return but he
nevertheless voluntarily, knowingly, and
intentionally failed to file the required
returns.
People vs. Kintanar, January 16, 2013
The Court, therefore, finds the records bereft of any
evidence to establish the key element of willfulness
on the part of the accused to supply the correct and
accurate information on her subject return. The
burden of proof is on the prosecution to prove
beyond reasonable doubt that accused willfully failed
to supply correct and accurate information. Stated
differently, the prosecution must prove that the
accused, a Filipino citizen residing in ti1e Philippines,
is required not only to file an income tax return on
income from all sources, on or before the fifteenth
(15th) day of April of each year, covering the income
for the preceding taxable year, but also to supply
correct and accurate information thereof, and that
any failure thereof is done willfully.
PP. vs. Judy Ann Santos,
CTA Case No. 0-012, January 16, 2013
Prescription in Criminal Cases
Prescriptive period: 5 years

Failure to refusal to pay taxes due – from

the service of final notice and demand for
payment of the deficiency taxes

Filing of false or fraudulent returns – from

the discovery and institution of judicial
proceedings for its investigation and
punishment
 CRIMINAL CASES
• Payment of tax due after apprehension
shall not constitute a valid defense in
any prosecution

• Sec. 254 to Sec. 268 – violations by

taxpayers
• Sec. 269 to Sec. 273 – violations by
government officers
• Sec. 274 to 280 – other penal
provisions
COLLECTION
The government can only file a
proceeding in court to collect once the
assessment has become final and
unappealable (Sec. 203)

Exception:
1. False or fraudulent return with intent
to evade tax
2. Failure to file a return

Collection may be filed without

assessment at any time within 10 years
from the discovery of the falsity, fraud, or
Remedies for Collection of taxes:
1. Administrative Remedies
(a)Distraint of personal property
(b)Levy of real property
(c) Enforcement of forfeiture of
property
(d)Enforcement of tax lien
(e)Requiring of filing of bonds
(f) Requiring proof of filing income tax
returns
(g)Deportation of aliens
(h)Inspection of books of accounts
2. Judicial Remedies
(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

Commissioner – more than 1 million

RDO – 1 million or less
Kinds of distraint:

1. Actual distraint – actual delinquency in tax

payment is necessary

2. Constructive distraint – no actual

delinquency is necessary, resorted to when
tax payer is
(a) Retiring from any business subject to tax;
(b)Intends to leave the Philippines
(c) Intends to remove his property from the
Philippines
(d)Intends to hide or conceal this property
(e) Performs any act tending to obstruct the
proceedings from collecting the tax due
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
Forefeiture – a divestiture or property
without compensation, in consequence of
a default or offense.

Chattels and removal of fixtures of

any sort – seizure and sale or destruction
of the specific forfeited property

Real property – enforced by a judgment

of condemnation and sale in a legal action
or proceeding, civil or criminal, as the
case may require
Requiring the filing of bonds – may be
required by the BIR for issuance of tax
clearance

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
Compromise and abatement
• Remedy to both the government and
taxpayer
• Authority of CIR to compromise and
abate tax liabilities cannot be
delegated

Exception:
1. For assessments issued by the regional
offices involving basic deficiency taxes
of P500,000 or less; and
2. Minor criminal violations
 COMPROMISE
Grounds Minimum Compromise
Rate
Doubtful validity of the 40% of the basic
claim against taxpayer assessed tax
Financial incapacity of 10% of the basic
the taxpayer assessed tax

Gen. Rule: All criminal violations may be

compromised
Exception:
1) Those already filed in court;
2) Those involving fraud.
Cases which may be compromised are:
1. Delinquent accounts;
2. Pending administrative cases under
administrative protest after issuance of
final assessment notice to the
taxpayer;
3. Civil tax cases being disputed before
the courts;
4. Collection cases filed in courts;
5. Criminal violation - except
(a) already filed in court
(b) involving criminal tax fraud
Cases that cannot be compromised:
1. Withholding tax cases;
2. Criminal tax fraud cases confirmed as such by
the CIR or his duly authorized representative;
3. Criminal violations already filed court;
4. Delinquent accounts with duly approved
schedule of installment payments
5. Cases where final reports of reinvestigation or
reconsideration
6. Cases which become final and executory after
final judgment
7. Estate tax case where compromise is
requested on the ground of financial
incapacity of the taxpayer
Abatement and cancellation of tax
liability (Sec. 204)
Grounds:

1. Taxes or any portion thereof appears to

be unjustly or excessively assessed; or

2. The administration and collection costs

involved do not justify the collection of
the amount due.
Prescriptive period for collection
Gen. Rule: 5 years from the date of
assessment

Exceptions:
1. False and fraudulent return with
intent to evade taxes – 10 years from
discovery without need for prior
assessment
2. Failure or omission to file a return
– 10 years from discovery without need
for assessment
3. Waiver in writing executed before
the 5-year period expires
 PRESCRIPTIVE PERIOD
ASSESSMENT VS. COLLECTION
Regular Return False,
was made Fraudulent, or
Failure to File a
Return
Assessment 3 years 10 years from
discovery
Collection 5 years from 5 years from
assessment assessment

If govt does not

make
assessment – 10
years from
discovery
Suspension of running of statute of
limitations (Sec. 223)
Grounds:

1. When the CIR is prohibited from

making an assessment or beginning
distraint and levy or a proceeding in
court and for 60 days thereafter

2. The taxpayer requests for

reinvestigation which is granted by the
CIR
REINVESTIGATION RECONSIDERATIO
N
Plea for re-evaluation Plea for a re-evaluation
on the basis of newly- of an assessment on
discovered or additional the basis of existing
evidence that a records without need of
taxpayer intends to additional evidence
present
Mere evaluation of
existing records

Suspends the running Does not suspend the

of prescriptive period running of prescriptive
period
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

4. When the warrant of distraint and levy

is duly served upon the taxpayer, his
authorized representative and no
property could be located

5. When the taxpayer is out of the

Philippines
 TP files a
PROTEST
LETTER
TP has
TP has 60 days BIR Denial
30days to
from protest (representative
protest
letter to )
ISSUANCE OF
FLD/FAN submit appeal
supporting
TP has 15 documents CIR
days to (reinvestigatio
respond n
ISSUANCE OF
PAN 30 days from
the denial or Wait for the
after 180 decision of BIR
BIR finds
days of
deficiency
inaction
FILING OF CTA Denial
TAX RETURN
 Remedies of the
TAXPAYER
PROTEST OR DISPUTE THE
ASSESSMENT
REFUND OR RECOVERY OF
ERRONEOUSLY OR ILLEGALLY
COLLECTED TAXES
DEFINITION, NATURE AND
EFFECT
1. Tax Assessment – a finding by the
tax authority that the taxpayer has not
paid the correct taxes, a written notice
to a taxpayer to the effect that the
amount stated is due as a tax and
containing a demand for the payment
thereof
2. Tax Audit – a systematic review of an
individual’s or an organization’s account.
The process of examining, going over, or
scrutinizing the books and records of the
taxpayer. It can only be performed upon
a Letter of Authority issued by the
Commissioner

3. Letter of Authority - an official

document that empowers a revenue
officer to examine and scrutinize a
taxpayer’s books of accounts and other
accounting records, in order to determine
the taxpayer’s correct internal revenue
tax liabilities
4. Pre-assessment notice – a
communication issued by the Regional
Assessment Division, or any concerned
BIR office informing a taxpayer who has
been audited of the findings of the
Revenue Officer following a review of
these findings

5. Final assessment notice – a notice

given to the taxpayer by the BIR
informing him of the amount of deficiency
tax for which the taxpayer is being
assessed on the findings of the BIR upon
failure of the taxpayer to respond to a
PAN or after an examination has been
6. Jeopardy assessment – tax assessment
made by an authorized Revenue Officer
without the benefit of complete or partial
audit, in light of the RO’s belief that the
assessment and collection of a deficiency
tax will be jeopardized by delay caused
by taxpayer’s failure to:
a) Comply with audit and investigation
requirements to present his books of
accounts and/or pertinent records; or
b) Substantiate all or any of the
deductions, exemptions or credits
claimed in his return
7. Deficiency and delinquency
DELINQUENT DEFICIENT
1. Self-assessed tax per 1. Amount by which the tax
return filed by the imposed by law exceeds
the amount shown as tax
taxpayer on the by the taxpayer upon his
prescribed date was return; or
not paid at all or 2. If no amount is show as
partially paid the tax by the taxpayer
2. Deficiency tax upon his return or if no
return is made by the
assessed by the BIR taxpayer, then the
became final and amount which the tax as
executory determined by the CIR or
representative exceeds
the amounts previously
assessed
 DELINQUENCY
Can be immediately
collected administratively
through the issuance of a
warrant of distraint and levy
or judicial action
The filing of a civil action for
the collection in the
ordinary court is a proper
remedy
Subject to administrative
penalties such as 25%
surcharge, interest and
compromise penalty
DEFICIENCY
Same process but has to go
through the process of filing
the protest against the
assessment and the denial
of such protest by the BIR
Filing of a civil action at the
ordinary court for the
collection of a deficiency tax
during pendency of protest
may be the subject of a
motion to dismiss
Generally not subject to the
25% surcharge although
subject to interest and
compromise penalty
PROTESTING AN ASSESSMENT
(REMEDY BEFORE PAYMENT)
Step one: Issuance of the Preliminary
Assessment Notice (PAN)
• Taxpayer is given 15 days from receipt of PAN
to respond
• If he doesn’t respond (default) – Formal
Letter of Demand and Final Assessment
Notice (FLD/FAN) shall be issued
• If he responds, a FLD/FAN will be issued
within 15 days from the filing/submission
of the taxpayer’s response
PRE-ASSESSMENT NOTICE
 5-Day Letter
 Signed by the Revenue District Officer
 Gives taxpayer the opportunity to explain in
writing his position on the findings of revenue
officers; otherwise, findings will be
considered as correct and report will be
forwarded to Chief, Assessment Division
 15-Day Letter
 Signed by the Chief, Assessment Division or
Regional Director
 Gives taxpayer the opportunity to explain in
writing his position on the findings of revenue
officers; otherwise, findings will be
considered as correct and FAN will be issued
The sending of PAN to taxpayer to inform
him of the assessment made is but part
of the “due process requirement in the
issuance of a deficiency tax assessment,”
the absence of which renders nugatory
any assessment made by the tax
authorities
CIR v. Metro Star Superama, Inc.,
Gr. No. 185371, December 8, 2010
When a PAN is not needed and FLD/FAN
can be issued outright
1. Any deficiency tax is the result of
mathematical error in the computation
of the tax evident on the face of the return
2. Discrepancy between the tax withheld and
the amount actually remitted by the
withholding agent
3. Taxpayer opted to claim a refund or tax
credit for excess creditable withholding
tax carried it over and automatically applied
the amount claimed against the estimated
tax liabilities for the taxable quarter of the
succeeding taxable year
4. Excise tax due on excisable articles
has not been paid

5. When an article locally purchase or

imported by an exempt person has
been sold, traded or transferred to a
non-exempt person
REPLY TO PAN
 WHEN TO FILE REPLY?
 Within 15 days from date of receipt of PAN
 Extension or further extension may be requested
from BIR
 CONTENT OF REPLY?
 Explanation to every item of income or deduction
or other matter questioned by revenue officer
 Factual and/or legal bases, including applicable
jurisprudence
 Prays for total or partial cancellation of PAN
 QUESTION OF FACT OR LAW
 Question of fact: Truth or falsity?
 Question of law: Law on certain set of facts?
 DUE PROCESS OF LAW
 Issuance of FAN and Demand Letter is tantamount
to denial of Reply to PAN. Essential elements of
due process are notice and opportunity to present
one’s side (Phil. Health Care Providers vs. CIR)
 Step two: Issuance of the Formal Letter
Demand and Final Assessment Notice
(FLD/FAN)
 LEGAL EFFECTS OF ISSUANCE OF FAN?
 Creates legal obligation on the part of taxpayer
to pay tax to government
 If taxpayer files timely protest, assessment
does not become final and executory
 Taxpayer does not have to pay the deficiency
tax assessment, but deficiency interest shall
start to run from date the tax was due up
to date of payment
 Business of taxpayer does not become illegal by
reason of non-payment of deficiency tax, unlike
local business taxes
 ESSENTIAL REQUIREMENTS
 FAN (BIR FORM 17.08) contains name, address,
and TIN; kind of tax; period covered; basic tax
and penalties; date tax must be paid
 FAN and demand letter must state facts, law or
jurisprudence; otherwise, assessment is void
(CIR v. Enron Subic Power Corporation, G.R. No.
166387, Jan. 19, 2009)
 Taxpayer was fairly informed since it was able
to categorically explain how assessment came
about (Toledo Power Co. vs. CIR)
 PAN has audit sheet but did not explain how
assessment was arrived. Demand letter did
not contain the information on law and facts
(HPCO Agridev Corp vs. CIR)
 Signed by Commissioner or his authorized
representative
 Issued within the prescriptive period under the
law or the extended period agreed upon
between the parties
 Served by personal delivery or by registered
mail
Step three: Protest the FAN

When to file: Within 30 days from the receipt of the

FLD/FAN

Where to file: Commissioner of Internal Revenue

 CONSEQUENCES OF ABSENCE OF VALID AND
TIMELY PROTEST
 Makes assessment final and executory; merit of
the case or validity of the assessment can not be
raised by taxpayer
 Appeal to CTA by taxpayer is no longer available
or ineffective; CTA cannot acquire jurisdiction
over the case; motion to dismiss may be filed by
BIR
 BIR may pursue collection of taxes and penalties,
administratively and/or judicially
 Compromise of assessment is still possible
How to file: written request for
reconsideration or reinvestigation

Ways of protesting administratively:

1. Request for reconsideration –

based on existing records without
need of additional evidence

2. Request for reinvestigation – based

on newly-discovered evidence
taxpayer intends to present in the
reinvestigation
The protest must state the following:

1. Nature of the protest (reconsideration

or reinvestigation);

2. Date of the FLD/FAN; and

3. Applicable rules, law, etc.

•. If the protest lacks any of these, it shall

be considered VOID and without force
and effect
REQUEST FOR REINVESTIGATION
• Submit all relevant supporting documents
from 60 days from the date of the filing of
his letter of protest

Period to decide: CIR must decide within 180

days from the submission of relevant
documents

• CIR may either: (a) deny or (b) inaction

within 180 days from filing of protest
(reconsideration) or submission of newly-
discovered evidence within 60 days
(reinvestigation)
REMEDY OF TAXPAYER IF PROTEST IS
DENIED

If protest is DENIED–
1. By the Commissioner – appeal to CTA
within 30 days from the date of receipt
of decision, otherwise final and
executory
2. By duly authorized representative –
appeal to the Commissioner within 30
days from receipt of decision
• Decision of Commissioner – appeal
to CTA within 30 days from receipt of
the decision of the CIR
If CIR fails to act on the protest within
180 days
1. Appeal to CTA within 30 days after the
lapse of 180 day period; or
2. Wait for CIR’s decision

Option is granted to the taxpayer; hence,

the CIR cannot state that the appeal to
the CTA is late if the taxpayer chooses to
wait for the final decision, even if it is
beyond the 180 day period.
Lascona Land Co. Inc. v. CIR
G.R. No., 171251, March 5, 2012
Step four: Issuance of the Final Decision
on a Disputed Assessment (FDDA)
• Issued when the CIR or his representative
acts on the protest

FDDA must state the following:

1. The facts, the applicable rules and
regulations or jurisprudence on which the
decision is based;
2. The decisions is the final decision.

•. Failure to comply with first requirement,

decision is void
CLAIMING FOR REFUND AND
CREDIT OF TAXES
(REMEDY AFTER PAYMENT)
TAX REFUND – actual reimbursement of
the tax

TAX CREDIT – the government issues a

tax credit certificate or tax credit memo
covering the amount determined to be
reimbursable can be applied after proper
verification against any sum that may be
due and collectible from the taxpayer
 TAX REFUND TAX CREDIT
There is ACTUAL This can be applied
reimbursement against any sum
that may be due
and collectible from
the taxpayer, except
withholding taxes
Not transferrable
(RR 14-2011)
Instances when a claim for refund
may be availed of:

1. Erroneously or illegally assessed or

collected internal revenue taxes;

2. Penalties imposed without authority; or

3. Any sum alleged to have been

excessive or in any manner wrongfully
collected.
When to file: Filed within 2 years after
the payment of tax or penalty

General Rule: Two-year prescriptive

period is mandatory, after the lapse of
the two-year period, there can no longer
be proceedings for refund

Exception:
1. When the taxpayer and the
government agree to wait for the
outcome of a case
General Rule: Two-year prescriptive
period runs from the payment of the
tax

Exception:
1. Overpaid quarterly corporate
income tax – after a final adjustment
return is accomplished
2. Overpaid withholding taxes – end of
the taxable year
3. Creditable withholding taxes –
filing of taxpayer’s final adjustment
return
4. Tax paid in installments – date of
Where to file: CIR (administrative) or
CTA (judicial)

ADMINISTRATIVE CLAIM FOR REFUND

(BIR)
How to file:
1. Filing a WRITTEN claim for credit or
refund
a. It must be filed within the period
b. Substantive basis in law; and
c. Documents to support or
substantiate the claim
• A return filed showing overpayment shall
be considered as a written claim

• Documents to support a claim for refund is

necessary because a claim for
refund/credit partakes of the nature of an
exemption and is strictly construed
against the claimant.

• CIR can refund WITHOUT a written claim

when on the face of the return upon which
payment was made, such payment
appears clearly to have been erroneously
paid
JUDICIAL CLAIM FOR REFUND (CTA)
Taxpayer can either:
1. File a claim directly to the CTA without need
to wait for the action of the CIR; or

2. Appeal the decision of denial of the CIR –

within 30 days from receipt of decision

Both the claim for refund and appeal to the CTA

must be done within the 2-year period

Hence, if the period is about to expire, and the

CIR has not acted upon the claim, the taxpayer
may file an appeal with the CTA, without
awaiting the decision of the CIR
REFUND OR CREDIT FOR
CORPORATIONS (Sec. 76- Final
Adjustment Return)

Final Adjustment Return – filed if the

sum of the quarterly tax payments made
during taxable year is NOT EQUAL to the
total tax due of the entire taxable income
of that year

Quarterly income tax payments is LESS

THAN the annual income tax due (QT <
ATD) –
• Pay the balance of the tax still due
Quarterly income tax payments is
MORETHAN the annual income tax due
(QT > ATD) – taxpayer can either:

1. File for a TAX REFUND; or

2. Avail a TAX CREDIT; or

3. CARRY-OVER the excess credit

against the estimated income tax
liabilities of the succeeding quarter
How to choose: by marking the
corresponding option box provided in the
Final Adjustment Return(FAR)

• Failure to signify one’s intention in the

FAR does not mean outright barring of
a valid request for a refund

• Carry-over option – if chosen, choice

is considered IRREVOCABLE for the
taxable period
 HAVE A GREAT
DAY!!

AT TY. BRIANNA KAY A.

TENEFRANCIA-
DE LOS SANTOS, REB