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Course : C- AE26: Income Taxation Module :

Module No. 3: Tax Remedies Time Frame : 1.5 hours

A. Overview
COLLEGE OF ACCOUNTANCY C-AE26, Module No.3
Second Semester | AY 2021-2022

This learning material discusses the tax remedies and procedures that the government and
taxpayers may apply in order to determine the correct amount of taxes that the taxpayer
must pay to the government.

This is relevant to Accountancy students because this will help them know the procedures
on how to apply for tax refund in case they have excess tax payments or how to make
proper advice to their future employers and clients.

You will be able to achieve the desired learning outcomes by devoting time and effort in
studying this material, listening and participating actively in the online discussion, and
accomplishing the tasks assigned in the Classwork section of the Google Classroom for this
course.

B. Desired Learning Outcomes

After studying this module, you should be able to:

 1. Identify the tax remedies available to the government in enforcing assessment and
collections;
2. Determine the tax remedies available to taxpayers in contesting tax assessment ; 3.
Determine the tax remedies available to taxpayers to recover excess tax payments;

C. Values Integration

In studying this module, it is hoped that you will be able to develop and manifest the
following UA Core Value/s:
✓ Servant Leadership

✓ Integrity

✓ Excellence

✓ Service Orientation

✓ Teamwork

Faculty: Ligaya T. David, CPA, MBA AY 2021-2022 2 Page 1 of 10

D. Content/Discussion
COLLEGE OF ACCOUNTANCY
✓ Obedience C-AE26, Module
No.3
✓ Open Communication Second Semester | AY 2021-2022

TAX REMEDIES – procedures that the government and taxpayers may adopt in order
to determine that tax liabilities of taxpayers are properly determined and paid.

In the Philippines, we use the self-assessment method to determine the tax

liabilities of taxpayers. Taxpayers compute their taxes, file the returns and pay the
tax due to the government. This method has inherent risk: under compliance or non
compliance.

Government Remedies – legally mandated procedures to enforce the determination

and collection of taxes.
 a. Assessment - act of determining the tax liabilities of a taxpayer in accordance
with the tax law. After the government (BIR) has established the correct amount
of tax liabilities, an assessment notice will be sent to the taxpayer, and inform
him to pay the tax deficiency of the unpaid taxes.
b. Collection – pertains to the procedures of the government to enforce payment of
unpaid taxes from delinquent taxpayers.

PRESCRIPTIVE PERIOD OF ASSESSMENT

General Rule: The law requires that assessment must be made within three years from
the date of the actual filing of the return or the deadline required by law, whichever is
later.

If the taxpayer file his return before the due date, the assessment, the prescriptive
period is three years after the due date; and in case of late filing of returns, the
prescriptive period is three after the return was actually filed.

DEADLINES OF VARIOUS TAXES

1. ANNUAL INCOME TAX

a. Individual taxpayers – April 15 of the following year
b. Corporation – on the 15th day of the fourth month following the end of the
taxpayer’s year end

2. Capital Gains tax

a. Capital gains tax on sale of domestic corporation
1. Transactional return – 30 days from the date of sale

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COLLEGE OF ACCOUNTANCY
C-AE26, Module No.3
Second Semester | AY 2021-2022

2. Annual return – on the 15th day of the fourth month following the end of the
taxpayer’s year end

b. Capital gains tax return on sale of real properties – 30 days from the date of sale

3. Withholding tax returns

a. Withholding of final tax and fringe benefits tax – first two months of the quarter –
10 days following the month of withholding; third month of the quarter – end of
the following month.(manual filing)
b. Expanded withholding tax – first two months of the quarter – 10 days following
 the month of withholding; third month of the quarter – end of the following
month.( manual filing)
Note: for EFPS taxpayers, they are given 5 days extension to pay the tax due. This is
applicable on the first two months.

c. Withholding tax on compensation income – 10 days following the end of each

calendar month and for December, the due date is January 15 of the following
year.

4. Transfer tax returns

a. Donor’s tax return – within 30 days from date of donation
b. Estate tax return – within one year from the date of decedent’s death

5. Business tax returns

a. Non VAT taxpayers – Quarterly Percentage tax Return (BIR Form 2551Q) –
within 25 days after the end of the quarter
b. VAT Taxpayers - Monthly VAT Returns for the first two months of the quarter
(2550M) within 20 days after the end of the month; Quarterly VAT Returns (
2550Q) within 25 days after the end of the quarter (manual filing)
Note: for EFPS taxpayers, they are given 5 days extension to pay the tax due.
This is applicable on the first two months.

6. Documentary Stamps Tax Returns (BIR form 2000) – five days from the end
of the month.

TAXPAYERS’ REMEDIES – procedures provided by the law to the taxpayers for disputing
assessments and recovering taxes erroneously paid.

Any return, statement of declaration filed within any office authorized to receive the same
may not be withdrawn. However, the taxpayer has the right to modify, change or amend the

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COLLEGE OF ACCOUNTANCY
C-AE26, Module No.3
Second Semester | AY 2021-2022

returns within three years from the date of filing as long as there is no notice of audit or
investigation of the return has been served to the taxpayer.

EXCEPTION TO THE 3-YEAR PRESCRIPTION RULE

A. Fraudulent returns – understatement of income or overstatement of income by 30%

B. Willful neglect to file the return – non filing of the return for 3 years
C. Waiver of the statutes of limitation by the taxpayer – when the taxpayer request for re
 investigation of his assessment which is granted by the CIR, the CIR and the taxpayer
usually agree for the temporary suspension of the prescriptive period for not less than
6 months to give way to the reinvestigation

Note: in case of fraudulent returns and willful neglect to file the return, the prescriptive
period is 10 years from the discovery of the fraud and non-filing of the return.

STAGES OF ASSESSMENT

1. Selection of taxpayer to be audited based on the audit program of the BIR, tax
compliance verification drive (tax mapping), tax information furnished by tax
informants, pre audit of annual tax returns and direct field observation by revenue
officers
2. Audit of the taxpayers
3. Assessment of the taxpayers with unpaid or deficiency tax

BIR TAX AUDIT PROCESS

1. Release of Letter of Authority (LA) to the revenue officer, Letter Notice or Tax
Verification Notice – it must be serve to the taxpayer within 30 days from date of issue 2.
Conduct of audit investigation - 120 days from date of receipt of LA by the taxpayer 3.
Reporting on the results of examination – if there is sufficient evidence/basis to assess the
taxpayer for any deficiency tax or taxes, the revenue officer shall recommend the issuance
of assessment to the taxpayer in his report. This will include:
a. Basic tax due
b. Surcharge – 25 % in case of simple neglect and 50% in case of willful neglect c.
Interest – double of the rate prescribed for forbearance of money; currently at 12% d.
Compromise penalty – a settlement for the government not to enforce criminal
prosecution.

ASSESSMENT PROCEDURES

1. Pre-assessment Notice (PAN) – a written communication issued by the Regional

Assessment Division or any other concerned BIR office informing the taxpayer of his
obligation for tax deficiency based on audit findings of a revenue officer.

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C-AE26, Module No.3
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2. Formal Letter of Demand and Final Assessment Notice (FLD/FAN) – is a final declaration
of deficiency tax issued to a taxpayer who defaulted by failing to respond to the PAN
within 15 days of its receipt or whose reply to the PAN is unmeritorious.
DISPUTE OF ASSESSMENT – protest filed by the taxpayer within 30 days upon receipt thereof

TYPES OF TAXPAYERS’ PROTEST

A. Request for reconsideration – a plea for a re-evaluation of an assessment on the basis of

existing records without the need of an additional evidence which may involve a
question of facts or of law or both
B. Request for re investigation – is a plea of re-evaluation of an assessment on the basis of
newly discovered or additional evidence that the taxpayer intends to present in the re
investigation which may also involve a question of fact or of law or both. The taxpayer
must submit additional relevant evidence within 60 days from the day of filing a
protest.

FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) – it must be communicated to the

taxpayer within 180 days from the filing of his protest.

JUDICIAL APPEAL – protest on FDDA by filing a petition for review with the Court of Tax
Appeal.

COLLECTION – procedure enforced by the government once the assessment achieves finality
under the following circumstances

A. When the taxpayer defaulted in his administrative remedies

1. Failure of the taxpayer to reasonably respond to the PAN
2. Failure of the taxpayer to reasonably protest the FLD/FAN
B. Denial of the taxpayer’s protest by the CIR or his authorized representative
C. Whether or not an appeal, when an assessment is upheld by the court

Note: Collection is enforceable once assessment became final and executory. There is non
injunction of tax collection. In order to prevent the payment of interest, surcharge and other
penalties or charges on assessment, a taxpayer may pay the contested assessment under
protest. He can file a refund later when the disputed assessment is partially or wholly decided
in his favor.

Government Remedies to Enforce Collection

1. Imposition of tax lien
2. Seizure of the taxpayer’s properties (distraint or levy)
3. Auction sale or forfeiture of the taxpayer’s properties
4. Filing of civil or criminal action against the taxpayer

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COLLEGE OF ACCOUNTANCY
C-AE26, Module No.3
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 5. Imposition of administrative penalties and fines
6. Suspension of business operation
7. Entering into a tax compromise with the taxpayer

STAGES OF COLLECTION

1. Preliminary Collection Letter – signed by RDO who has jurisdiction over the taxpayer 2.
Final Notice before Seizure Letter – sent within 10 days from issuance of PCL 3. Warrant of
Distraint/Levy or Garnishment – remedies under NIRC: seizure of taxpayer
property (distraint/levy) and civil or criminal action. WDL is served to the taxpayer if
he failed to respond to the Final Notice. Distraint or levy shall not be availed of if the
amount of tax is not more than P100. It shall not be sent earlier than 90 days from the
date the assessment has become due and demandable except if the amount shown on
the tax return is not paid on time or if the individual failed to pay the second install of
his income tax due.
4. Research of the taxpayer properties
5. Notice of Tax Lien and/or Notice of Tax Levy – it is used to validate the legal claims or
charge of the government on identified property of the taxpayer either personal or real,
as security for the payment of his tax liabilities.
6. Seizure of properties
7. Auction sale and/or forfeiture of properties – within 20 days from levy, the revenue
officer conducting the proceeding shall advertise the property for auction for at least 30
days. The property shall be awarded to the highest bidder. If the amount raised is not
sufficient to cover the taxpayer’s liability, the government shall forfeit the property. The
taxpayer has up to one year from date of auction sale or forfeiture within which to
redeem the property.
8. Filing of civil or criminal action

RATE PROGRAM – RUN AFTER TAX EVADERS - is intended to identify and prosecute high
profile tax evaders.

PRESCRIPTIVE PERIOD FOR COLLECTION – the government has 5 years from the date of
release of the final assessment to the taxpayer to make collection.

SUSPENSION OF THE STATUTES OF LIMITATION

1. Request for reinvestigation of the taxpayer which is granted by the CIR 2. When the CIR
is prohibited from making assessment or from the beginning distraint or levy or a
proceeding in court
3. When the taxpayer cannot be located in the address given by him
4. When the warrant of distraint or levy is served and no properties can be located
5. When the taxpayer is out of the country

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 COLLEGE OF ACCOUNTANCY
C-AE26, Module No.3
Second Semester | AY 2021-2022

SUMMARY OF PRESCRIPTION RULES: COLLECTION

A. WITH A PRIOR ASSESSMENT – 5 years from assessment by summary proceedings or by

judicial action
B. WITHOUT PRIOR ASSESSMENT – 10 years from the discovery of fraud or falsity by
judicial action only

TAX REMEDIES OF THE TAXPAYER

1. DISPUTING AN ASSESSMENT – if the taxpayer has not yet paid the assessment, he must
explain his position within 15 days upon receipt of the pre-assessment notice. Or upon
receipt of the Formal Assessment Notice/Formal letter of Demand (FAN/FLD), the
taxpayer must file a formal protest in 30 days. The taxpayer may file request for
reconsideration or request for re-investigation. He shall wait for the BIR action within
180 days which shall be counted from the date of submission of documents or receipt of
FAN/FLD. If the protest was denied, the taxpayer may file a petition with the Court of
Tax Appeal (Judicial Appeal) within 30 days from the receipt of the adverse decision or
a motion for reconsideration (Administrative Appeal) with the CIR within 30 days from
the receipt of the adverse decision. In case of adverse decision from CTA and CIR, the
taxpayer may file within 15 days a motion for reconsideration or a new trial under the
same division or file a petition for review to the Supreme Court.

Content of Reply to PAN – explanation on the matters questioned by examiner; factual

and legal bases supporting the taxpayer’s position and prayer for full or partial
cancellation of the PAN

Requirements 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 laws, rules and regulations or
jurisprudence in which the protest is based
4. The protest must be filed by the taxpayer or his authorized representatives, in
person or through registered mail with return card with the concerned Regional
Director, Assistant Commissioner – LTS or Assistant Commissioner – Enforcement
Service as the case may be
5. All relevant documents must be submitted within 60 days from the filing of the
request for reinvestigation

Note: The 60 day period applies only on the request for re investigation and upon its
approval.
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Compromise – the remedy of last resort. If the taxpayer has exhausted all the remedies, he may
settle his tax liability by way of compromise upon compliance of the conditions set by the BIR.

2. RECOVERY OF ERRONEOUSLY PAID TAXES

A. File a Claim for refund or credit within 2 years from the date of payment of the tax B. If
the claim was denied, the taxpayer may file a petition for reconsideration within 30 days
from receipt of the denial and within the two-year prescriptive period from the date of
payment of the tax
C. An adverse final decision of the CIR shall be appealed by filing a petition for review
before the CTA within 30 days from the receipt of the final decision and within the two
year prescriptive period
D. If the BIR did not act on the claim for refund or credit, the taxpayer must file a petition
for review before the CTA before the expiration of the two year prescriptive period E. An
adverse decision of the CTA shall be appealed within 15 days to the Supreme Court.

Refund or credit not allowed – on payment of documentary stamp tax or payment on

tax assessment that became final and executory.

Counting of the 2-year prescriptive period

1. The 2-year period is counted from the date of filing of the Final Adjusted Return, not
from the date of the quarterly income tax return
2. For VAT payments – the 2 year prescriptive period is counted from the date of filing of
the quarterly VAT returns, not from the monthly payments
3. If the tax paid is paid in installment, the 2 year period is counted from the last
installment 4. For withholding taxes
a. Final withholding tax – 25th day after the close of each calendar quarter b. Creditable
withholding tax - last day of the month following the close of the quarter during which
the withholding was made

FORFEITURE OF REFUND – Refund check issued by the BIR must be claimed or encashed
within five years from the date said warrant or check was mailed or delivered.

FORFEITURE OF TAX CREDIT – tax credit must be utilized within 5 years from the date of
issue, unless revalidated.

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

Conditions for compromise – when there is reasonable doubt that exists as to the validity of
the claims against the taxpayer and the financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax

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COLLEGE OF ACCOUNTANCY
C-AE26, Module No.3
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Minimum of compromise settlement

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

WHO WILL APPROVE THE OFFER OF COMPROMISE BY TAXPAYER?

A. Office of Commissioner of Internal Revenue ( if the amount does not exceed P1M) B.
National Evaluation Board – if the basic tax involved exceeds P1M and the settlement
offered is less than the prescribed minimum rates (CIR and 4 Deputy Commissioner? C.
Regional Evaluation Board – if the assessment issued by the Regional Office involving a
basic deficiency tax of P500,000 or less and minor criminal violations discovered by
Regional and District Office ( Regional Director, Assistant Regional Director, Chief – Legal
Division’ Chief – Assessment Division, Chief – Collection Division’ Revenue District Officer
having jurisdiction over the taxpayer-applicant)

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 court
5. Criminal violations other than those filed in courts and those already involving criminal
tax fraud
6. Cases covered by pre-assessment notices contested by the taxpayer

WHAT CANNOT BE COMPROMISED?

1. Withholding tax cases
2. Criminal tax fraud cases
3. Criminal violations already filed in court
4. Delinquent accounts with duly approved schedule of installments
5. Cases of reduced assessment agreed upon by taxpayer
6. Cases which have become final and executory after final judgment of a court

AUTHORITY OF THE COMMISSIONER TO ABATE TAXES

1. The tax or any portion of it which appears to be unjustly or excessively assessed 2. The
administrative or collection costs involved don not 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 distrainable or leviable property
5. The taxpayer is a corporation which was already dissolved and all subscribed shares of
stock have been fully paid
6. The tax case has already prescribed

E. Assessment of Learning

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COLLEGE OF ACCOUNTANCY
C-AE26, Module No.3
Second Semester | AY 2021-2022

For the self-regulated assessment of what you had learned from this module, please
accomplish the progress check/activity posted in our Google Classroom and submit it on or
before due date.

F. References

Banggawan, R. B. (2019). Income Taxation Laws, Principles and Applications. Baguio

City: Real Excellence Publishing.

Ampongan, O. E. (2015). CPA Review in Taxation. Iriga City, Philippines: Ampongan,

Omar Erasmo G.

De Leon, H. S., & De Leon, H. M. (2016). The Fundamentals of Taxation. Manila City,
Philippines: REX Book Store.

De Leon, H. S., & De Leon, H. M. (2016). The Law on Income Taxation (with Illustration,
Problem and Solution. Manila City, Philippines: REX Book Store.

Duncano, D. A. (2017). Easy Guide to Taxation for Entrepreneurs. Mandaluyong City:

Anvil Publishing, Inc.

Duncano, D. A. (2016). National Internal Revenue Code of 1997 As Amended Updated

with Annotations. Mandaluyong City, Philippines: Anvil Publishing, Inc.

Congratulations for having completed this module!

See you in the next module!
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