REMEDIES

(ATTY. RAEGAN CAPUNO LECTURE)

1. Remedies in General
a. Compromise
b. Abatement

2. Remedies of the Government:

a. Assessment
b. Collection

3. Remedies of the Taxpayer:

a. Before payment:
-file administrative protest (BIR)
- file judicial protest (court)
b. After payment:
-Protest Assessment
- Refund/ Credit

ABATEMENT

Q: What is meant by abatement of tax liability?

A: It is the cancellation of a tax liability

Q: When is the CIR authorized to abate or cancel a tax

liability?
A:
1. The tax 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. (Sec. 204[B], NIRC)

REMEDIES OF THE GOVERNMENT

ASSESSMENT

Q: When is the taxpayer required to file an income tax

return?

A: It depends on who the taxpayer is.

• Individual- On or before April 15of the following
taxable year
th th
• Corporation- If calendar year, same as individual; if fiscal year 15 day of the 4 month following the close of the
taxable year.

Q; After filing your return, what will happen?

A:
• Assuming you filed your return:
It will now open an opportunity for the BIR to scrutinize, examine, audit your return in order to determine whether you accurately
and properly filed your income tax return.

§ BIR’s SIDE:
Letter of Authority (LOA) must be issued first in order for the BIR to examine your return. It is a document authorizing a revenue
officer to examine or audit a specific return or taxpayer. Without such, all subsequent proceeding will be VOID. PAN or Fan will
be void if issued w/o LOA.
- may be issued by the national office or regional
office of BIR within their jurisdiction
- national office’s jurisdiction is QC since its office
is located in QC

After LOA was issued, within the period of 30 days, this must be served to the taxpayer to informed that his books of account
will be examined.
-if not served, all subsequent proceedings will be void, however, the revenue officer may ask for revalidation of the LOA.
-if issued by regional office, can be revalidated
only once
-if issued by the national office, can be
revalidated for 2 times

After which, the revenue officer has the period of 120 days to complete the examination. If revenue officer failed to complete
the examination after 120 days, he needs to notify the regional/ national office.
- If he failed to notify regional/national office, it does not affect the validity of the assessment; the only effect is the
the revenue officer will be subjected to disciplinary action.

Q: How many times can a book of a taxpayer be examined

by the BIR?

A:
G.R: Only once.
XPN: Sec. 235
Provided, That for income tax purposes, such examination and inspection shall be made only once in a taxable year, except in
the following cases:
(a) Fraud, irregularity or mistakes, as determined by the Commissioner;
(b) The taxpayer requests reinvestigation;
(c) Verification of compliance with withholding tax laws and
regulations;
(d) Verification of capital gains tax liabilities; and
(e) In the exercise of the Commissioner's power under Section 5(B) to obtain information from other persons in which case,
another or separate examination and inspection may be made.
- Sec. 5 pertains to the power of the Comm. to examine books of accounts. Pwede i-examine ng Comm. ang
books ng isang tao pero ang purpose is to

TRANSCRIBED BY K.DIAL 1
determine the accuracy or the information filed by
another taxpayer.
- Matching System: Sabi ni A (taxpayer), eto lamang ang purchases ko, si B ang supplier ko. pwede i- examine
ngayon si B, yung supplier if match sila ng books nung taxpayer. If later in. eto naman si B ang nakatanggap ng LOA, di nya
pwede sabihin na di na pwede i-examine yong book nya kasi na- examine na nung chineck ang accuracy ng books ni A kasi
exemption yun under Sec. 235 (e).

§ TAXPAYER’S SIDE

Periods within which an assessment may be made (Section

203):
- If the return is filed, the presumption is that the return is properly filed. So sa problem if there is no indication
naman ng fraud, presume na proper.
- when a return is properly filed, the BIR has a
period of 3 years to make an assessment.
- if filed on or before April 15: the 3-year period will
begin on the deadline or April 15.
- if filed after April 15: the 3-year period will begin
on the date it was filed, with penalty.
Q: Why is it important to determine whether the return is
ordinary or special?
A: To determine the period within which assessment may be made and to determine when will the period of collection
will begin. Since the government remedies are Assessment and Collection, there is no point to assess when there will be no
collection.

Extraordinary Circumstance (Sec. 222)

- Period to assess: 10 years
- Period to collect: additional 5 years

Ordinary Circumstance (Sec. 203)

- there is no mention as to the period of collection
- BPI vs CIR (2007) Period to collect is 5 years in
ordinary circumstance
- CIR vs UST Co. (July 2014): the period to collect
in only 3 years
Ordinary Extraordinary
Circumstance Circumstance
Law Sec. 203 Sec. 222
governing
Period of 3 years 10 years from
Assessmen On or before April discovery
t 15: deadline
After: date of
filling
Period of 3 years (CIR vs UST 5 years
Collection Co.)
Assessment is There are 2
required for the options:
validity of the 1. 10 years to
collection assess and 5 years
to collect (15
years);

2. no assessment,
immediately
proceed to
collection within
the period of 10
years only.

Q: Are you allowed to amend your return?

A:
GR: Yes.
XPN: If it is already under examination. Pag nakatanggap na
ng LOA, di na pwede mag amend.

Q: If an amended return is filed, when will the 3-year

period begin?

A: Phillips Assurance vs CIR

Formal amendment: on the date when the original return
was filed;
Substantial amendment: on the date when the amended
return was filed.

Q: When is an amendment formal or if substantial?

A: Formal: when the amendment will not affect the taxpayer’s taxable income such as address, TIN no. Substantial: if it will
have an effect on the taxable income such as when the taxpayer claims an additional deduction or may dineclare na new
income.
 EXCEPTION TO SEC. 203:
SEC. 222- in case of extraordinary returns (false or fraudulent return or failure to file a return) the period to assess is 10
years which will begin upon discovery of fraud, fraudulent return, or omission to file a return.

COLLECTION

• Ordinary circumstance (Sec. 203): there will be no

action in court for assessment without an assessment.

• Extraordinary circumstance (Sec. 222):

- make an assessment within 10 years and
collection in additional 5 years or a total of 15 years; or
- immediately proceed to collection within 10 years w/o the benefit of assessment, the only effect is lesser period

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Types of Collection:

1. Judicial- done by BIR but thru the court by filing a

civil or criminal action;
2. Administrative- done by the BIR itself w/o court
intervention

Judicial Collection Administrative Collection

Civil or criminal action Distraint or levy
Period of collection Does not prescribe
prescribes: 3 years under
ordinary circ. and 5 years
under extraordinary circ.
Basis: Sec. 203 and 222
talks refers to court
collection

Modes of Administrative Collection:

1. Distraint which pertains to personal property; or

2. Levy which pertains to real property.
Notice of Levy is indicated in title of the real property stating that such property is subject to a tax claim; it is a constructive
notice to the whole world
 DISTRAINT
- may be actual or constructive
- distraint muna, if di sapat, isabay na ang levy

Constructive distraint (Sec. 206)- Notice requiring the taxpayer or any person having possession or control of such property
personal property to keep it intact, unaltered and not to dispose of the same, unless with authority from the government.

Q: When is constructive distraint available? A:

a. when taxpayer is retiring from any business subject to tax, or is intending to leave the Philippines; or
b. intending to remove his property therefrom or to hide or conceal his property or to perform any act tending to obstruct the
proceedings for collecting the tax due or which may be due from him.

Q: Pag nakuha na ng government yong property mo, what

happens next?
A: There will be an auction.

Q: What will be the remedy of the taxpayer?

A: Right of Pre- emption- pay the tax liability before the
auction (Sec. 210)

Q: What if you are not able to exercise your right of pre-

emption?

A: The auction will proceed.

- With bidder:
o Sufficient bid- if the offer is more than the tax liability, the excess will be returned to the owner of the
property sold. (Sec.209)
o Insufficient bid (di sapat yung offer para mabayaran ung tax liability)-there will be further distraint (Sec. 217)

- W/o bidder:
o the government will purchase the
property
o the government will again put the property in auction and all proceeds will go to the government, even
when there is an excess, it will not be returned since the owner now is the government, it will be remitted to
the national treasury (Sec. 212 [2])

LEVY

Right of pre-emption may be exercised by paying the tax

liability before auction (Sec. 213)

Q: What if you are not able to exercise your right of pre-

emption?
A: The auction will proceed.
- With bidder:
o Sufficient bid- if the offer is more than the tax liability, the excess will be returned to the owner of the
property sold. (Sec.209)
o Insufficient bid (di sapat yung offer para
mabayaran ung tax liability)-there will
be further distraint (Sec. 217)

- W/o bidder:
o the government will be forfeiture of the
property (Sec. 215) *not purchase
o the government will again put the property under auction and all proceeds will go to the
government, even when there is an excess, it will not be returned since the owner now is the government, it will
be remitted to the national treasury (Sec. 212 [2])

Right of Redemption- right to redeem the property within

the period of 1 year after the sale (Sec. 214)
 - available only in levi, not in distraint

Distraint Levi
Personal property Real property

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REMEDIES OF THE TAXPAYER

Jeopardy assessment- tax assessment made by the revenue

officer w/o the benefit of full or partial assessment -- VOID

After the lapse of 120 days, the BIR will issue a Preliminary
Assessment Notice (PAN).

Q: Is PAN mandatory?
A: NO. Sec. 228 provides exemptions.
SEC. 228. Protesting of Assessment. A pre- assessment
notice shall not be required in the following cases:
(a) result of mathematical error in the computation of
the tax as appearing on the face of the return; or
(b) there is a discrepancy between the tax withheld
and the amount actually remitted by the withholding agent;
or

Posting of notice in not Advertisement of the time

less than 2 public places in and place of sale within 20
the municipality or city days after the levy by
and notice to taxpayer posting of notice and by
specifying the time and publication for three
place of sale and the consecutive weeks.
articles distrained
is required
Residue over and above Residue to be returned to
what is required to pay the the owner.
entire claim, including
expenses, shall be
returned to the owner of
the property sold

If w/o bidder- the property If w/o bidder- there will be

will be purchased by the forfeiture of the real
gov’t property in favor of the
gov’t
Remedy of taxpayer- right Remedy of taxpayer- right
of pre- emption only of pre- emption and
redemption

Q: What if the property levied turned out to be under mortgage? Who has a better right, the gov’t or the mortgagee?

A: i-qualify mo dapat
In case of national internal revenue taxes, for the gov’t to have a better right than the mortgagee, notice of levi to the Registry of
Deeds where the property is located must have been served prior to the actual levi, otherwise, the mortgagee has a better
right. (Sec. 219)

If the tax involved is a local tax, it does not matter whether the lien is registered or not, the government or the LGU has a better
right.
 Q: Can you file an injunction when the government
already started the collection on delinquency tax?

A: No. SEC. 218. Injunction not Available to Restrain Collection of Tax. - No court shall have the authority to grant an
injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.
- The injunction referred in this section is a
preliminary injunction which is to restrain the collection, if what is filed is a preliminary mandatory injunction,
that can be filed
- It must be a national internal revenue tax, pag
local tax pwede
- The court referred in this section is RTC. However, CTA can issue an injunction.

Modes of Judicial Collection:

1. Civil; or
2. Criminal.
(c) 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; or
(d) When the excise tax due on exciseable articles has
not been paid; or
(e) When the 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.

Within the period of 15days from the receipt of the PAN,

the taxpayer may file a reply to the PAN.
*he may opt not to file a reply
- of the BIR is convinced with the reply, they will dissolve
the assessment
-if not, BIR will issue Final Assessment Notice (FAN) or Formal Letter of Demand (FLD)

Q: Is FAN mandatory?
A: Yes, the issuance of FAN is the time when assessment
has been made—3yrs or 10yrs
*FAN is considered as made when it is sent, released or mailed. It must be made within the 3ys or 10yr period. The operative act
is the act of sending, releasing or mailing, not receipt by the taxpayer. (Basilan vs CIR)
- After issuance of FAN, collection may now start
-FLD must contain the facts of the case, law or jurisprudence applicable and a demand—if not stated, FAN is void.
Samar II vs CIR- Even when FAN was not issued, the taxpayer cannot claim that they were not notified of their liability when
there has been several exchange of communications between the taxpayer and the BIR. The SC said in such a case, that the taxpayer
was already notified thru such communications of its liability which constitute as substantial compliance.

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PROTEST

- After issuance of FAN, the taxpayer has the period

of 30days to file a protest.
- The protest may either be a request for
reconsideration or a request for reinvestigation.

Q: What if the FAN consists of deficient VAT and deficient income tax and the taxpayer wants to protest only the VAT and pay the
income tax, is that a case of payment under protest?

A: No. There is no payment under protest of NIRC taxes

such as VAT.

Kinds of Protest:
1. Protest under the NIRC
2. Protest under the LGC
 3. Protest under the tariff and Customs Code

*of all the 3 protests, there is only payment under protest

in LGC, in case of real property tax.
Request for Request for
Reconsideration Reinvestigation
Claim for re- evaluation Claim for reinvestigation is
based on existing records based on newly-
w/o need of additional discovered or additional
evidence evidence
Does not toll the statute of Tolls the statute of
limitations (period to limitations
collect) *must be granted
(Sec. 223)

2. If the period of 180 days expired but the BIR has no decision yet, it can be treated as an inaction which means denial. You
have 30days from the expiration of 180 days to appeal to CTA Division

3. Upon the expiration o the 180 days, you wait for the decision of the Commissioner and upon the receipt of the decision,
appeal to the CTA Division (RCBC and Lascuna Lands vs CIR)

* 1 and 2 are mutually exclusive

In case of adverse decision in the CTA, file an MR, talo pa

din go to CTA En Banc, if talo pa din go to SC via Rule 45.

Q: What if after you file your protest regarding the FAN, BIR it did not notify you with its decision but instead, filed a collection
suit in RTC?

A: It will be treated as a denial and you can go now to the CTA Division. Remember that you cannot file an injunction here since it
is filed in RTC. Once it is in CTA, you may now file for injunction to enjoin the collection.
- File the injunction by filing an appeal. Such appeal shall be considered as the principal action, you can now apply
for provisional remedy of injunction.

Upon receipt of the Request for reconsideration or reinvestigation, the BIR has the period of 180 days to decide.
- If you filed a Request for reinvestigation, you still have additional 60 days to submit supporting documents. After ng 60
days, saka palang mag start yung 180 days

-Before the lapse of 180 days, the BIR may have a decision
already.

Q: What can happen during the period of 180 days? A: There can be 3 instances.

1. In case of adverse decision:

o go to the CTA Division within the period
of 30days upon receipt to appeal.

• Not CTA en banc agad. There are only 2 instances

when you can go directly to CTA en banc:
1. Decisions from the RTC involving local taxes,
2. Decisions of the Central Board of Assessment Appeals in real property taxes

WAIVER

Taxpayer may issue a waiver to extend the period of

assessment beyond that which is allowed by law (Sec. 222)

Requisites:
1. It must comply with the rules on Revenue Regulation Order 20-90;
2. Must be executed before the expiration of the
original period to assess;
3. The period of extention must be definite, specific
dapat, i.e until Jan. 1, 2018;
4. Signed by both the taxpayer and the Commissioner or authorized representative;
5. Copy must be given to taxpayer to serve as Notice
of Acceptance.

COMPROMISE

Grounds:

1. Financial incapacity or clear inability of the

taxpayer to pay;
2. Doubtful validity of the assessment.

Compromise rate:

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o Financial incapacity or clear inability of the
taxpayer to pay- 10% of the basic assessed tax
o Doubtful validity of the assessment- 40% of the
basic assessed tax.

If the basic tax involved exceeds P1 million or when the

settlement offered is less than the prescribed minimum
rates the approval of the National Evaluation Board is
needed.
- National Evaluation Board is composed by the
Commissioner and 4 Deputies.

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Filing of Return

BIR will serve LOA

Examination of Accounts

120 days to complete the examination

 Issue PAN (not mandatory)

Taxpayer to file a reply (not