TAX REMEDIES

I. Period for Assessment and Collection (Statute of Limitation)

A. Assessment is a notice to the taxpayer requiring payment within a specified time of the
tax due from him including interest and civil penalties.

B. Return filed was not false or fraudulent

1. Collection with prior assessment
a. Assessment shall be made within 3 years from the date of filing of return or
from last day required by law for filing, if the return was filed before such last
day;
b. Collection shall be made within 5 years from the date of assessment, either by
summary of proceedings or judicial proceedings.
2. Collection without prior assessment – no proceeding in court without assessment
for the collection shall begin after the expiration of the 3-year period.

C. Return filed was false or fraudulent with intent to evade tax or no return was filed
1. Collection with prior assessment
a. Assessment shall be made at any time within 10 years after discovery of the
falsity, fraud or omission;
b. Collection shall be made within 5 years from the date of assessment, either by
summary of proceedings or judicial proceedings.
2. Collection without prior assessment – a proceeding in court for the collection of tax
may be filed without assessment at any time within 10 years after discovery of the
falsity, fraud or omission.
Note: If before the expiration of the 3-year period, both the Commissioner and the
taxpayer have agreed in writing to its assessment after such time:
1) Assessment may be made within the period agreed;
2) The period so agreed upon may be extended by the subsequent written
agreement before the expiration of the 5-year period following the
assessment by summary of proceedings or judicial proceedings.

D. Suspension of running of statute of limitation – the running of 3-year period or the 10-
year period on the making the assessment and the beginning of the distraint or levy or
a proceeding in court for collection, with respect to any deficiency, shall be suspended:
1. For the period during which the Commissioner is prohibited from making the
assessment or beginning the distraint or levy or any proceeding in court and for 60
days thereafter;
2. The period so agreed upon may be extended by the subsequent written agreement
before the expiration of the 5-year period following the assessment by summary of
proceedings or judicial proceedings.

II. Authority of the Commissioner

The Commissioner may:
1. Compromise the payment of any internal revenue tax
Basis for acceptance of compromise settlement:
a. Reasonable doubt as to validity of the claim against the taxpayer exists. The offer
to compromise a delinquent account or disputed assessment on the ground of
reasonable doubt as to the validity of the assessment may be accepted when it is
shown that:
1) The delinquent account or disputed assessment is one resulting from a
jeopardy assessment;

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 2) The assessment seems to arbitrary in nature, appearing to be based on
presumption and there is reason to believe that it is lacking in legal and/or
factual basis;
3) The assessment were issued on or after January 1, 1998, where the demand
notice allegedly failed to comply with formalities prescribed by the Tax Code;
4) Assessments made based on the “Best Evidence Obtainable Rule” and there is
reason to believe that the same can be disputed by sufficient and competent
evidence;
5) The assessment was issued within the prescribed period for assessment as
extended by the taxpayer’s execution of Waiver of Statute of Limitations the
validity or authenticity of which is being questioned or at issue and there is
strong reason to believe and evidence to prove that it is not authentic;
6) The assessment is based on an issue where the court of competent jurisdiction
made an advance decision against the Bureau, but for which the Supreme
Court has not decided upon with finality;
7) The taxpayer failed to file an administrative protest on account of alleged failure
to receive notice of assessment and there is reason to believe that the
assessment is lacking in legal and/or factual basis;
8) The taxpayer failed to file a request for reinvestigation or reconsideration within
30 days from receipt of final assessment notice and there is reason to believe
that the assessment is lacking in legal and/or factual basis;
9) The taxpayer failed to elevate to the CTA and adverse decision of the CIR, or his
duly authorized representative, in some cases, within 30 days from receipt of
such adverse decision and there is reason to believe that the assessment is
lacking in legal and/or factual basis.
b. Financial Incapacity - the financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax. However, the following are situations where offer
of compromise settlement on the ground of financial incapacity shall not be
considered:
1) Taxpayer with Tax Credit Certificate (TCC) issued, on hand, or in transit;
2) Taxpayer with pending claim for tax refund or tax credit with the BIR,
Department of Finance One-Stop-Shop Tax Credit and Drawback Duty Center
(Tax Revenue Group or Investment Incentive Group) and/or the court;
3) Taxpayer with existing finalized agreement or prospect of future agreement with
any party that resulted or could result to an increase in the equity of the
taxpayer at the time of the offer for compromise or at a definite future time;
4) Taxpayer does not waive in writing his privilege of the secrecy of bank deposits.
Note: a. Prescribed minimum compromise rates:
 Financial incapacity – 10% of the basic assessed tax (in general)
– 20% for dissolved corporations, non-operating
companies for a period of less than 3 years and
those declared insolvent or bankrupt
– 40% for those companies with original capital is
impaired by at least 50%
 Other cases (doubtful validity) – 40% of the basic assessed tax;
– lower than 40% subject to prior
approval
by the National Evaluation Board
b. Compromise settlement subject to approval of the National Evaluation
Board composed of the Commissioner and the four (4) Deputy
Commissioners:
 Where the basic tax exceeds P500,000 (may be delegated to the
Regional Evaluation Board [REB] which is composed of the Regional
Director, Assistant Regional Director, Chief of Legal Division, Chief of
Assessment Division, Chief of Collection Division and Revenue District
Officer); or
 Where the settlement offered is less than the prescribed minimum rates.

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 c. Cases which may be compromised:
 Delinquent accounts except those with duly approved schedule of
installment payments;
 Cases under administrative protest after issuance of the Final Notice of
Assessment to the taxpayer which, are still pending in the Regional
Officers (RO), Revenue District Office (RDO), Legal Service, Large
Taxpayer Service (LTS), Collection Service, Enforcement Service and
other offices in the National Office;
 Civil tax cases being disputed before the others;
 Collection cases filed before the courts; or
 Criminal violations, other than those already filed in court or those
involving criminal tax fraud.
d. Criminal violation may also be compromised, except:
 Withholding tax cases, unless the applicant taxpayer invokes provisions
of law that cast doubt on the taxpayer’s obligation to withhold
 Criminal tax fraud cases confirmed as such by the Commissioner of
Internal Revenue or his duly authorized representative;
 Criminal violations already filed in court;
 Delinquent accounts with duly approved schedule of installment
payments;
 Cases where final reports of reinvestigation or reconsideration have
been issued resulting to reduction in the original assessment and the
taxpayer is agreeable to such decision by signing the required
agreement form for the purpose;
 Cases which become final and executory after final judgment of a court,
where is requested on the ground of doubtful validity of the assessment;
or
 Estate tax cases where compromise is requested on the ground of
financial incapacity of the taxpayer.
2. Abatement or cancel tax liability (The CIR has the sole authority to abate or cancel tax,
penalties and/or interest)
Tax liability may be abated or cancelled when:
a. The tax or any portion thereof appears to be unjustly or excessively assessed.
Instances when penalties and/or interest imposed may be abated or cancelled on
the ground that the imposition is unjust and excessive:
1) When the filing of the return/payment is made at the wrong venue;
2) When the filing of the return/payment of his tax is due to erroneous written
official advice of a revenue officer;
3) When the taxpayer fails to file and pay the tax on time due to substantial losses
from prolonged labor dispute, force majeure or legitimate business reverses,
provided hwoever, that abatement shall only cover the surcharge and the
compromise penalty and not the interest);
4) When the assessment is brought about or the result of the taxpayer’s non-
compliance with the law due to a difficult interpretation of the said law;
5) When the taxpayer fails to file the return and pay the correct tax on time due to
circumstances beyond his control, provided however, that abatement shall
cover only the surcharge and the compromise penalty and not the interest;
6) Late payment of the tax under meritorious circumstances – it include cases
such as: one day late filing due to failure to beat bank cut-off time, use of wrong
tax form but correct amount of tax remitted, filing of amended return under
meritorious circumstances, surcharge erroneously imposed, late filing of return
to unresolved issue on clarification or valuation of real property, offsetting of
taxes of the same kind, automatic offsetting of overpayment of one king of
withholding tax against underpayment of another kind, late remittance of
withholding tax on compensation of expatriates for services rendered in the
Philippines pending the issuance by the SEC of the license to the Philippine
branch office or subsidiary, wrong use of TCC where Tax Debit Memo (TDM) was

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 not properly applied for, and some other instances which the Commissioner
may deem analogous to the enumeration above.
b. The administration and the collections costs involved do not justify the collection of
the amount due. This case involves the following:
1) Assessment confirmed by lower court but appealed by the tax on time due to a
higher Court;
2) Withholding tax assessment under meritorious circumstances;
3) Delayed installment payment under meritorious circumstances;
4) Assessment reduced after reinvestigation but taxpayer is still contesting
reduced assessment; and
5) Such other instances which the Commissioner may deem analogous to the
enumeration above.
For cases 1 to 4, the abatement of the surcharge and the compromise penalty shall
be allowed only upon written application by the taxpayer signifying his willingness to
pay the basic tax and interest or basic tax only, whichever is applicable under
prevailing circumstances.
3. Credit or refund:
a. Taxes erroneously or illegally received or penalties imposed without authority;
b. The value of internal revenue stamps when returned in good condition by the
purchaser;
c. The value, upon proof of destruction, of unused that are unfit for use.
Note: a. No credit or refund of taxes or penalties shall be allowed unless the
taxpayer
files in writing with the Commissioner a claim for credit or refund within 2
years after the payment of the tax or penalty.
b. A return filed showing an overpayment shall be considered as a written
claim for the credit or refund;
c. A Tax Credit Certificate (TCC) validly issued under the provisions of the Tax
Code may be applied against any internal revenue tax (excluding withholding
taxes) for which the taxpayer is directly liable.

III. Remedies of the Government

A. Remedies of the Government for the Collection of Delinquent Taxes:
1. The civil remedies for the collection of internal revenue taxes, fees or charges and
any increment thereto resulting from delinquency shall be by:
a. Summary proceedings:
;

1) Distraint of personal property (either by actual or constructive distraint)

a) Actual distraint – the physical taking of the taxpayer’s personal property
to answer for his tax deficiency;
b) Constructive distraint – the service of the notice upon the taxpayer that
he could not dispose of his personal property until he has paid his tax
deficiency.
Distinction between actual and constructive distraint:
Actual Distraint Constructive Distraint
a. Personal property is physically a. Personal property is not
taken physically taken
b. The taxpayer is already b. There is no finding yet of a
delinquent in payment of his discrepancy, only that the
taxes taxpayer is leaving the country or
disposing of his property in fraud
of creditors or is the process of
liquidation
c. Personal property taken is sold c. Personal property is merely held
in order to satisfy the tax as security to answer for any
delinquency future tax delinquency

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 Note: a. Persons who shall seize and distraint personal property (actual
distraint):
 Amount of delinquent tax is more than P1,000,000 –
Commissioner or his authorized representative;
 Amount of delinquent tax is P1,000,000 or less – Revenue
District Officer.
b. The Commissioner or his duly authorized representative shall
have the power to lift order of distraint.
2) Levy upon real property and interest in or rights to real property
a) After the expiration of the time required to pay the delinquency tax or
delinquent revenue, real property may be levied upon before,
simultaneously or after the distraint of personal property belonging to
the delinquent;
b) Levy shall be affected by writing upon a duly authenticated certificate
showing the name of the taxpayer arid the amount to the tax and penalty
due from him a description of the property upon which levy is made;
c) Written notice of the levy shall be mailed to or served upon the:
i. Register of Deeds of the province or city where the property is
located, and upon the delinquent taxpayer; or
ii. If he is absent from the Philippines, to his agent or the manager of
the business in respect to which the liability; or
iii. If there is none, to the occupant of the property in question.

Distinction among Warrant of Distraint, Levy and Garnishment

Distraint Levy Garnishment

a. As to subject Personal property Real property Personal property
matter owned by and in owned by and in owned by the
possession of the the possession of taxpayer but in
taxpayer the taxpayer the possession of
a third property
b. As to Purchased by the Forfeited to the Purchased by the
disposition for Government then Government then Government then
want of resold to meet sold to meet resold to meet
bidders or deficiency deficiency deficiency
bids
inadequate to
satisfy tax
deficiency
c. As to No advertisement Advertised once a No advertisement
advertisement is required week for three is required
for sale weeks
b.
udicial proceedings
1) Civil action; or
2) Criminal action.
Note: a. Either of the summary or judicial or both simultaneously may be pursued
in
the discretion of the authorities charged with the collection of such taxes.
b. The remedies of distraint and levy shall not be availed of where the
amount
tax involved is not more than P100.
c. The judgment in the criminal case shall not only impose the penalty but
shall also order payment of the taxes subject of the criminal cases as
finally decided by the Commissioner.

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 d. Tax Lien – is a legal claim or charge on property, either real or personal,
as security from the payment of a tax obligation.
e. The remedy for enforcement of statutory penalties of all sorts shall be by
criminal or civil action, as the particular situation may require, subject to
the approval of the Commissioner.

B. Remedies of the delinquent taxpayer upon distraint and/or levy of real/personal

property:
1. If anytime prior to the consummation of the sale, all proper charges are paid to the
officer conducting the sale, the goods or effects distrained shall be restored to the
owner (delinquent taxpayer);
2. The property sold maybe redeemed by the delinquent taxpayer within one year from
the date of sale by paying:
a. The amount of public taxes;
b. Penalties;
c. Interest thereon from the date of delinquency to the date of sale; with
d. 15% interest per annum of the purchase price from date of purchase to the
date of redemption.
The owner shall not deprived of the possession of the property sold and shall be
entitled to the rents and other income until expiration of the time allowed for
redemption.

C. Injunction not available to restrain collection tax:

1. 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 the Tax Code;
2. The Court of Tax Appeals (CTA) can issue injunctions while in the exercise of its
appellate jurisdiction in cases pending before it (this is an exception to injunction
rule);
3. The CTA may enjoin collection of taxes if in its opinion the same may jeopardize the
interest of the government and/or the taxpayer.

IV. Remedies of the Taxpayer

A. Protesting assessment
1. When the Commissioner or his duly authorized representative finds that proper
taxes should be assessed, he shall notify the taxpayer of his findings.
2. A pre-assessment notice shall not be required in the following cases:
a. When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or
b. When a discrepancy has been determined between the tax withheld and the
amount actually remitted by the withholding agent; or
c. When the taxpayer who opted to claim a refund or tax credit of excess
creditable 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 quarters of the succeeding taxable year; or
d. When the excise tax due on excisable articles has not been paid; and
e. When an 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.
3. The taxpayer shall be informed in writing of the law and the facts on which the
assessment is made; otherwise the assessment shall be void.
4. Within the period to be prescribed by the implementing rules and regulations, the
taxpayer shall be required to respond to said notice. If the taxpayer fails to respond,

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 the Commissioner or his duly authorized representative shall issue an assessment
based on his findings.

B. Remedy against assessment

1. Protest the assessment administratively;

The taxpayer shall file a request for reconsideration or reinvestigate with the BIR
within 30 days from receipt of the assessment notice.

2. Submit all relevant supporting documents to the BIR

Within 60 days from filing of protest, all relevant supporting documents shall have
been submitted; otherwise the assessment shall become final.

3. Appeal to Court of Tax Appeals (CTA)

Appeal to the CTA shall be made within 30 days:
a. From the receipt of the adverse (unfavorable) decision of the BIR; or
b. From the lapse of the 180-day period from the submission of the required
supporting documents if no decision has been made by the BIR.
Note: Failure to appeal to CTA shall make the BIR’s decision final, executory and
demandable.

4. Appeal to the Court of Appeals (CA) shall be made within 15 days after receipt of an
unfavorable decision of the CTA;

5. Appeal to the Supreme Court shall be made within 15 days after receipt of
unfavorable final decision of the CA, raising question of law.

C. Remedy against an erroneously or illegally paid tax

1. File a formal claim for refund with the BIR within 2 years from the date of payment
of tax.
2. Within 30 days (but within 2 year period required for filing a formal claim for refund)

a. From receipt of unfavorable decision on the claim for refund, file an appeal with
CTA, raising questions of facts and/or law; or
b. From the lapse of the 180-day period from the submission of the required
supporting documents if no decision has been made by the BIR.
6. Within 15 days from receipt of an unfavorable decision of CTA, file an appeal with
CA.
7. Within 15 days from receipt of an unfavorable final decision of CA, file an appeal
with SC, raising question of law.

Note: a. If the tax paid is in installment basis, the two-year period shall be counted
from
the date of final payment;
b. The filing of the claim for refund with the BIR and the institution of judicial
action with the CTA to recover the tax can be done either simultaneously or
one after the other within the 2-year period to protect the interest of
taxpayer.
c. The Commissioner may, even without written claim therefore, refund or
credit any tax, where the face of the return upon which payment was made,
such payment appears clearly to have been erroneously paid.
d. Instances that suspend the running of the 2-year preemptory period:
1) If the Commissioner made the taxpayer asking for refund believes that
he would be credited for the overpayment;

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 2) If there is an agreement between the taxpayer and the agent of the
Commissioner that they would wait for the decision of the SC to guide
them in the settlement of the question or questions involved in the fraud.
e. A refund check or warrant which shall remain unclaim or uncashed within 5
days from the date of the said warrant or check was mailed or delivered,
shall be forfeited in favor of the Government and the amount shall revert to
the general fund.
f. A tax credit certificate issued, which shall remain unutilized after 5 years
from the date of issue, shall, unless revalidated, be considered invalid, and
shall not be allowed as payment for internal revenue tax liabilities of the
taxpayer, and the amount covered by the certificate will revert to the general
fund.