TAX REMEDIES

- On the part of the Government — these are courses or action provided by or

allowed in the law to implement the tax laws or enforce tax collection.
- On the part of the taxpayer – legal actions which a taxpayer can avail of to
seek relief from the undue burden or oppressive effect of tax laws.

 Assessment Process
TAX AUDIT OR INVESTIGATION
- BIR conducts an audit by issuing Letter of Authority
- Letter of Authority – official document that empowers revenue officer to
examine and scrutinize a taxpayer’s books of accounts and other accounting records, in
order to determine the taxpayers correct internal revenue tax liabilities. In the
absence of such an authority, the assessment or examination is a nullity.
- "No assessments can be issued or no assessment functions or proceedings can
be done without prior approval and authorization of the Commissioner of the BIR or his
duly authorized representative through an LOA. The concept of an LOA is therefore
clear and unequivocal. Any tax assessment issued without an LOA is a violation of the
taxpayer's right to due process and is therefore "inescapably void"

 Persons Authorized to Issue LOA

TAXPAYER  PERSON AUTHORIZED 
Under the jurisdiction of the National Commissioner of Internal Revenue
Office  (CIR) 
Under the jurisdiction of the regional Regional Director
offices 
TAX CASES NEED NOT BE COVERED BY AN LOA 

(1) Cases involving civil or criminal tax fraud which fall under the jurisdiction of
the National Investigation Division (NID) under the Enforcement and Advocacy
Services (EAS) of the BIR; and
(2) Policy cases under audit by the special teams in the National Office.

 Effect of the Issuance of LOA

A tax return, statement or declaration filed by a taxpayer may be modified,
changed amended within three (3) years from the date of filing.  
However, when an LOA or investigation of such tax return, statement-or has
been actually served upon the taxpayer, amendment shall no longer be allowed 

LETTER NOTICE vs. LETTER OF AUTHORITY

Letter Notice (LN) is entirely different and serves a different purpose than an
LOA. It is not found in the NIRC (Tax Code) and is not an authority to conduct an
audit or -examination of the taxpayer leading to the issuance of
deficiency assessments. Due process demands that after an LN has served its purpose,
the revenue officer should have properly secured an LOA before proceeding with the
further examination and assessment of taxpayer (RMC 75-2018). 
 Issuance of Notice of Discrepancy (NOD)
 NOD replaces Notice of Informal Conference (NIC)
 Prior to NOD, the taxpayer shall be informed, in writing, by the Revenue
District Office or by the Special Investigation Division, as the case may be (in
the cases of Revenue Regional Offices) or by the Chief of Division concerned
(in the case of the BIR National Office) of the discrepancy or discrepancies
in the taxpayer's payment of his internal revenue taxes for the purpose of
Informal Conference as required under RR 7-2018, in order to afford the
taxpayer with an opportunity to present his side of the case. 
 NIC was replaced by NOD under RR 22-2022 issued on September 15, 2020. 

 Notice of Discrepancy (NOD)

 The Notice of Discrepancy aims to fully afford the taxpayer with fair
opportunity to present and explain his side on the discrepancies found. The
Revenue officer who audited the taxpayer's records shall, among others,
state in the initial report of investigation his findings of discrepancies. 
 The NOD allows the taxpayer to present and explain his side on the
discrepancies found within five (5) days from receipt of the NOD.
  Should the taxpayer need more time to present other documents in response
to the NOD, the submission of documents may be extended for a period not
exceeding thirty (30) days from receipt of the NOD. 
 Failure on the part of the taxpayer to reconcile and present valid documentary
support against the noted discrepancies will result in the issuance of a
deficiency tax assessment through Preliminary Assessment Notice (PAN)
covering the deficiency tax assessment

 Issuance of Preliminary Assessment Notice (PAN)

PRELIMINARY ASSESSMENT NOTICE (PAN) 
- If after review and evaluation by the Commissioner or his duly authorized
representative, as the case may be; it is determined that there exists sufficient basis
to assess the taxpayer for any deficiency tax or taxes, the said Office shall issue to
the taxpayer a Preliminary Assessment Notice (PAN) for the proposed assessment.
- A PAN is a communication issued by the Regional Assessment Division or by
the commissioner or his duly authorized representative informing a taxpayer who has
been audited of the findings of the revenue officer. 
- The PAN shall be in writing and shall show in detail the facts and the law,
rules and regulations or jurisprudence on which the proposed assessment is based,
otherwise, the assessment is void. 

MANDATORY NATURE OF SERVICE OF PAN PRIOR TO FINAL ASSESSMENT

NOTICE 
- As a general rule, issuance of PAN prior to FAN is part of the "due process
requirement", the absence of which renders nugatory any assessment made by the tax
authorities. 

REMEDY OF THE TAXPAYER 

- The taxpayer has 15 days to reply contesting the finding in the PAN. 
EFFECT OF FAILURE TO REPLY 
- The taxpayer is considered in default and the BIR will then issue a Final
Letter of Demand (FLD) and a Final Assessment Notice (FAN) calling for payment of
the taxpayer's deficiency tax liability, inclusive of the applicable penalties (RR 18-
2013). 

 Issuance of Formal Letter of Demand (FLD) and Final Assessment Notice

(FAN)

- The FLD/FAN shall be issued by the Commissioner or his duly authorized

representative. 
- The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes
shall state the facts, the law, rules and regulations, or jurisprudence on which the
assessment is based; otherwise, the assessment shall be void (RR 18-2013). 

WHEN ISSUED? 
1) The taxpayer failed to respond to the PAN; or 
2) The reply to the PAN was found to be without merit. 

 Prescriptive Period

Return filed is not fraudulent 3 years from 

1. Return filed is fraudulent or
2. No return was filed
A. Actual filing of return or,
B. Deadline for filin
Whichever is LATER
10 years from discovery

 Remedy of the taxpayer

1. File a protest to the CIR or his authorized representative within 30 days from date
of receipt of FAN. 

Types of Protest 
1. Request for Reconsideration -  plea of re-evaluation of an assessment on the
basis of existing records without need of additional evidence. It may involve both a
question of fact or of law or both. 

2. Request for Reinvestigation - Refer to a plea of re-evaluation of an

assessment on the basis of newly discovered or additional evidence that a taxpayer
intends to present in the reinvestigation. It may also involve a question of fact or
of law or both. 

The taxpayer shall state in his protest

 A. The nature of protest whether reconsideration or reinvestigation, specifying
newly discovered or additional evidence he intends to present if it is a request for
reinvestigation; 
B. Date of the 'assessment notice; and 
C. The applicable law, rules and regulations, or jurisprudence on which his protest is
based, otherwise, his protest shall be considered void and without force and effect. 
2. Submit all supporting documents within 60 days from filing of protest (in case of
request for reinvestigation under RR 18-2013). 

 Final Decision on a Disputed Assessment (FDDA)

- If the BIR do not agree with the protest, then a Final Decision on Disputed
Assessment (FDDA) will be issued, where the taxpayer has the right to elevate the
case to the CTA. 
- The decision of the Commissioner or his duly authorized representative shall
state the: (RR 13-2018) 
a. Facts, the applicable law, rules and regulations, or jurisprudence on which such
decision is based, otherwise, the decision shall be void; and 
b. That the same is his final decision. 

 Ways to Deny Protest

1. Direct denial of protest
2. Indirect denial of protest -  If the CIR or his duly authorized representative fails to
act on the taxpayer's protest within 180 days from date of submission, the protest
may be considered denied. 

 Remedy of the Taxpayer

DIRECT DENIAL File an appeal with the Court of Tax

Appeals (CTA) Division within 30 days
from receipt of letter of denial. 
INDIRECT  File an appeal with the CTA Division within
30 days from the lapse of the 180
day period. 

OR

Await the final decision of the CIR or his

duly authorized representative and appeal
such final decision to the CTA within 30
days after the receipt of a copy of such
decision 

 Collection
- The BIR may avail of the remedy of collection when the assessment becomes
final, executory and demandable. 
Section 222 of the Tax code, as amended - EXCEPTIONS AS TO PERIOD OF
LIMITATION OF ASSESSMENT AND COLLECTION OF TAXES

Section 222 (a). In the case of a false or fraudulent return with intent to
evade tax or of , the tax may be assessed, or a proceeding in court for the failure to
file a return collection of such tax may be filed without assessment, at any time within
ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a
fraud assessment which has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for the collection thereof. 

Section 222(c). Any internal revenue tax which has been assessed within the
period of limitation as prescribed in paragraph (a) hereof may be collected by distraint
or levy or by a proceeding in court within five (5) years following the assessment of the
tax. 

 Methods of Collection
1. Distraint - the seizure by the government of personal property, tangible or
intangible to enforce the payment of taxes. 
A. Actual Distraint — personal property is physically seized by the BIR and
offered for sale at public auction. The property is sold to the highest bidder and the
proceeds of the sale are applied to the payment of the tax due. 
B. Garnishment - is the distraint of bank accounts. 
C. Constructive Distraint - the person in possession of personal property is
made to sign a receipt, undertaking that he will preserve the property and will not
dispose of the property without the express authority of Bureau of Internal Revenue
(BIR). 

CONSTRUCTIVE DISTRAINT MAY BE AVAILED OF IN THE FOLLOWING

CASES: 
a. The taxpayer is retiring from any business subject to tax. 
b. He intends to leave the Philippines. 
c. He removes his property therefrom. 
d. He performs any act tending to obstruct the proceeding for collecting the
tax due or which may be due from him. 

PERSON AUTHORIZED TO COMMENCE DISTRAINT PROCEEDINGS 

Amount Involved Person Authorized
More than PI 000 000  CIR 

PI 000 000 or less  Revenue District Officer 

2. Levy - the seizure by the government of real properties and interest in or rights to

such properties in order to enforce the payment of taxes. 

RIGHT OF REDEMPTION 
 For period of one (1) year from the date of sale, the property may be redeemed
by the taxpayer. During this period, the taxpayer is not deprived of the
possession and fruits from the property. If the taxpayer fails to redeem the
property, a final deed of sale is executed in favor of the buyer. 
3. Judicial proceedings 
a. Filing of civil case for collection 
b. File a criminal case (Tax Evasion) 
 
 COMPROMISE
1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or 
2) The financial position of the taxpayer demonstrates a clear inability to pay the
assessed tax. 

All criminal violations may be compromised except: 

- Those already filed in court; or 
- Those involving fraud. 

MINIMUM AMOUNTS 
1) For cases of financial incapacity, a minimum compromise rate equivalent to
ten percent (10%) of the basic assessed tax; and 
2) For other cases, a minimum compromise rate equivalent to forty percent
(40%) of the basic assessed tax. 

Instances when approval of the evaluation board is required

1) Where the basic tax involved exceeds one million pesos or 
2) where the settlement offered is less than the prescribed minimum rates. 

Composition of the Evaluation board

1) CIR
2) 4 Deputy Commissioner

 ABATEMENT OR CANCELLATION OF TAX LIABILITY 

1) The tax or any portion thereof appears to be unjustly or excessively
assessed; or 
3) The administration and collection costs involved do not justify the collection
of the  amount due.

 SUSPENSION OF RUNNING OF STATUTE OF LIMITATION

The prescriptive period for assessment and the beginning of distraint or levy or
a proceeding in court for collection of any tax deficiency may be suspended under the
following situations:
1) Taxpayer's request for reinvestigation was granted; 
2) Taxpayer cannot be located in the address given in the return; 
3) No property of the taxpayer can be located; or 
4) The taxpayer is out of the country. 

 CIVIL PENALTIES
In addition to the basic tax assessed on the taxpayer, the following civil penalties will
also be collected: 
1) Surcharge 
2) Interest 

SURCHARGE 

A 25% surcharge shall be collected in any of the following cases: 

1) Failure to file any return and pay the tax due on time. 
2) Filing a return with an internal revenue officer other than those with whom
the return is required to be filed, unless authorized by the Commissioner of Internal
Revenue. 
3) Failure to pay the deficiency tax within the time prescribed for its payment
in the notice of assessment. 
4) Failure to pay the full or part of the amount of tax shown on any return, or
the full amount of tax due for which no return is required to be filed. 

A 50% surcharge shall be collected in any of the following cases: 

1) Willful neglect to file the return on time. 
2) There is willful neglect if the taxpayer files only after prior notice in writing
from the BIR. 

Prima facie evidence of false or fraudulent return: 

1) Substantial overstatement (more than 30%) of deductions. 
2) Substantial under declaration (more than 30%) of taxable sales, receipts or
income. 

INTEREST
Interest is an increment on any unpaid amount of tax, assessed from the date
prescribed for payment until the amount is fully paid. 
Prior to TRAIN Law - twenty percent (20%) per annum. 
Upon effectivity of the TRAIN Law - twelve percent (12%) per annum. 

KINDS OF INTEREST 
(1) Deficiency interest-  Interest imposed on any deficiency tax due, which
interest shall be assessed and collected from the date prescribed for its payment until
(whichever comes first): 
a. Full payment thereof; 
b. Upon issuance of a notice and demand by the Commissioner or his
authorized representative. 

(2) Delinquency interest- refers to interest imposed on the failure of the

taxpayer to pay the following: 
a. The amount of tax due on any return required to be filed; 
b. The amount of the tax due for which no return is required; or 
c. A deficiency tax, or any surcharge or interest thereon on the due
date appearing in the notice and demand of the CIR or his authorized
 representative until the amount is fully paid, which interest shall form part of
the tax. 
DOUBLE IMPOSITION of Interest Upon the effectivity of the TRAIN Law, -in no-
case shall the deficiency and delinquency interest be imposed simultaneously. 

 REFUND OF TAXES
Requisites:
1) A tax was erroneously or illegally collected by the BIR; 
2) The taxpayer should file a written claim for refund or tax credit with the CIR
WITHIN TWO (2) YEARS from the DATE OF PAYMENT of the tax or penalty; 
3) If the claim for refund is denied by the CIR, file a petition for refund with the
CTA: 
a. Within 30 days from receipt of the denial; AND 
b. Within two (2) years from the date of payment of the tax or penalty