TP may be had system

a. Tax Remedies Under the National Internal Revenue Valid only for 30 days No limitation
i. Assessment of Internal Revenue Taxes Revenue Officer has 10 No limitation
1. Procedural Due Process in Tax Assessments days from receipt of LOA
a. If issued in violation of due process rights of taxpayer  null to conduct examination of
and void. TP
b. Assessment flowchart
i. Issuance of LOA Reassignment or Transfer of Revenue Officer
ii. Issuance of Notice of Discrepancy requires issuance of a new or amended LOA
1. Discussion of discrepancy – wthin 30 days from  Lack of new LOA: tantamount to absence of
issuance of nD LOA  void assessment
iii. Issuance of PAN  Effect: a usurpation of power of CIR or his duly
1. Reply to PAN – within 15 days from date of authorized reps
receipt  Memorandum of assignment  not enough,
a. Failure to reply: default issued by RDO, not the CIR or his reps
b. Issuance of Formal Letter of
Demand/Final Assessment Notice Assessment must be within scope of LOA
2. Failure to issue PAN  Limited to the one taxable period stated therein
iv. Issuance of FLD/FAN
1. Protest to FLD/FAN – admin protest within 30
days from date of receipt 2 Issuance of Notice of Discrepancy – issued if found to be liable for
a. Admin protest  written request for Notice of deficiency tax
reconsideration or reinvestigation. Discrepancy
v. Issuance of FDDA – final decision Discussion of discrepancy – within 30 days from receipt
of ND
1 Issuance of What: revenue officer must first be clothed with authority  Opportunity to present side, explain discrepancy
LOA to conduct examination and issue assessment  Must submit all necessary documents supporting
Absent authority  assessment null claim within 30 days after receipt of ND

LOA – empowers and enables revenue officer to
examine boosk of accounts and other accounting records
for assessment
Who may issue LOA: CIR or his deputies:
1) Regional directors
2) Deputy commissioners
3) Other officials authorized by CIR
4) Assistant commissioners
5) Head revenue executive assistants
LOA is not the same as Letter Notice
LOA LN
Addressed to revenue Not in NIRC, only for
officer, specifically notifying TP that a
required under NIRC discrepancy is found
before an examination of a based on BIR’s relief
IO endorses case for issuance of PAN if
1) TP is still liable for deficiency tax or taxes
2) TP does not address discrepancy through
payment of deficiency taxes
3) TP does not agree with findings
3 Issuance of PAN – issued by CIR or duly authorized rep if there
Preliminary exists sufficient basis to assess TP for any deficiency tax
Assessment or taxes
Notice  Shows in detail facts and law, rules and
regulations, or jurisprudence
 Purpose: to inform TP of initial findings of
BIR, required to reply
Reply to PAN – within 15 days from receipt
 Failure to respond: default  issuance of
FLD/FAN calling for payment of TP’s
deficiency tax liability, inclusive of applicable
 penalties
 Responds, but disagrees  FLD/FAN issued
within 15 days from filing/submission of TP’s
response
Failure to issue PAN: absence of PAN renders nugatory
any assessment made by tax authorities
 Part of due process
Issuance of PAN must precede FLD/FAN
 If sent successively, but received in same date –
not valid, deprived of opportunity
When PAN not required (NIRC 228)
1) Finding for deficiency tax is a result of
mathematical error in computation of tax
2) Discrepancy determined between tax withheld
and amount actually remitted
3) TP opted to claim refund or tax credit of excess
CWT for TP – determined to be 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
4) Excise tax due on excisable articles has not
been paid; or
5) Article locally purchased or imported by an
exempt person has been sold, traded or
transferred to non-exempt persons
NOTE: In the above, issuance of FAN outright.
4 Issuance of FLD/FAN – caling for payment of deficiency taxes or
Formal Letter taxes
of  Computation of tax liabilities _ demand for
Demand/Final payment within a prescribed period
Assessment  Relevance
Notice o Service  obligation to pay arises
o Penalties and interests begin to accrue
against TP
 Must be sent to and received by TP – and must
demand payment of taxes described therein
within a specific period
Protest to FLD/FAN – admin protest  written request
for reconsideration or reinvestigation.
5 Issuance of FDDA – shall state
Final Decision 1) Facts, applicable law, rules and regulations, or
on Disputed jurisprudence on which such decision is based
Assessment  void if not
2) That the same is his final decision
NOTE: FDDA (CIR decision on assessment) v FAN
(assessment only) – separate and distinct. Nullity of
FDDA will not result in nullity of FAN.
2. Requisites of a valid assessment
a. In writing
b. Demands payment of tax due, including applicable penalties, not
merely the computation
c. Contains a definite amount of tax liability for which TP is
accountable
d. Provide due date for payment
e. Be issued and served upon TP within the applicable prescriptive
period to assess
f. State facts and law on which assessment is based
3. Tax Delinquency v Tax Deficiency
Tax Delinquency Tax Deficiency
Failure to pay tax due on due date fixed Amount still due and collectible from
by law or indicated in assessment notice TP upon audit or investigation
or letter of demand
Subject to delinquency interest Subject to deficiency interest
4. Prescriptive Period for Assessment
a. Generally
i. Rationale for prescription: safeguard interests of PT
from unreasonable investigation
ii. Ordinary Period to Assess: within 3 years from
1. last day prescribed by law for filing of return; or
2. from date of filing, if filed beyond that period
iii. Extraordinary period to assess: within 10 years after
discovery of falsity, fraud, or omission
1. Allowed in case of:
a. false return - deviation from truth,
intentional or not, brought by mistake,
carelessness, or ignorance
b. fraudulent return with intent to evade tax –
intentional or deceitful entry with intent to
evade taxes due
c. failure to file return -failure to file return on
date prescribed by law, rules or regulations
 2. Prima Facie Evidence of False or Fraudulent
Return
a. Substantial under-declaration of taxable
sales, receipts, or income
i. What: failure to report in amount
exceeding 30% of that declared per
return
b. Substantial overstatement of deductions
i. What: exceeding 30% of actual
deduction
c. Effect: BOP on TP to overcome
presumption against it, CIR need not
immediately present evidence to support
falsity.
b. Suspension of Running of Statute of Limitations
i. Suspension of Prescriptive Period to Assess and
Collect by Force of Law
1. During time CIR or rep is prevented from making
an assessment or beginning distraint or levy or
proceeding in court for 60 days
2. When:
a. TP requests for reinvestigation – granted by
CIR
b. TP cannot be located in address stated in
return filed, upon which a tax is being
assessed or collected.
i. If TP informs CIR of change in
address  running of SOL will not
be suspended.
c. Warrant of distraint or levy is duly served
upon TP, his or her authorized rep or a
member of his or her household with
sufficient discretion, and no property could
be located; and
d. TP is out of the Philippines
ii. Suspension of Prescriptive Period to Assess by
Agreement of the Parties
1. Agreement must be made before expiration of time
prescribed for assessment of tax.
a. May then be extended by subsequent
written agreement.
2. Bilateral agreement  requires signature of both
CIR and TP to give birth to a valid agreement
3.Effect of invalid waiver  assessment becomes
void
a. Defects in the waiver = period for CIR to
assess tax is not extended.
b. Assessment – considered issued beyond the
prescriptive period, void and of no legal
effect.
iii. Requirements for Valid Waiver
1. Requirements
a. RMO No. 20-90, as amended
2. Examples of defective waivers
a. Failure to
i. State specific date within which BIR
may assess and collect revenue taxes
ii. Sign by CIR or his duly authorized
rep
iii. Indicate date of acceptance
iv. Furnish taxpayer a copy of the
waiver
v. Indicate on the original copies of the
waivers date of receipt by TP of
their file copy
b. Execution of waivers without written
authority of TP’s rep to sign waiver on
their behalf
c. Absence of proof that TP was furnished a
copy of the waiver
d. Failure to specify kind and amount of tax
due
e. Waiver – referring to a request for
extension of time within which to present
additional documents, not for
reinvestigation or reconsideration of the
pending internal revenue case.
3. Both parties at fault in executing defective waivers
 in pari delicto
a. They cannot be allowed to come to court
and insist on its invalidity.
ii. Taxpayer’s Remedies
1. Protesting an Assessment
a. Period to File Protest
i. Admin protest against FLD/FAN – within 30 days from
date of receipt
1. Request for reconsideration – plea of re-
evaluation of an assessment on the basis of existing
records
 2. Request for reinvestigation – plea of re-
evaluation of an assessment on the basis of newly
discovered or additional evidence
ii. State in Protest:
1. Nature of protest
2. Date of assessment notice
3. Applicable laws, rules and regulations, or
jurisprudence
a. If none  protest void and without force
and effect
b. Submission of supporting documents
i. Reinvestigation (only) – submit all relevant documents
within 60 days from date of filing
c. Effect of failure to file protest  assessment becomes final,
executory, and demandable.
d. Action of the commissioner on the protest filed
i. Period: 180 days to act on disputed assessments.
ii. Possible actions:
1. Grant protest and cancel assessment
2. Wholly or partially deny protest; or
3. Fail to act within said period
iii. Recourse of TP:
1. Wholly or partially denied by
a. CIR or rep  appeal to CTA within 30
days from receipt of whole or partial denial
b. CIR’s authorized rep  admin appeal to
CIR within 30 days from receipt of whole
or partial denial of protest
i. If denied  appeal to CTA within
30 days from date of receipt of
decision (failure  decision final,
executory, demandable)
ii. NOTE: mr is allowed, but it will not
toll 30-day period to appeal to CTA.
2. Fails to act upon protest
a. Appeal to CTA – within 30 days from lapse
of 180 day period; or
b. Await final decision – appeal final decision
to CTA within 30 days after receipt of such
decision
c. NOTE: 2 options are mutually exclusive
and resort to one bars the application of the
other.
2. Compromise and Abatement of Taxes
a. Compromise of Taxes
i. Grounds to enter into compromise agreements
1. Doubtful validity of assessment
a. Min compromise rate: 40% of basic
assessed tax
2. Financial incapacity of tax payer
a. Min. compromise rate: 10% of basic
assessed tax
ii. What may be compromised:
1. Delinquent accounts
2. Cases under admin protest after issuance of
FLD/FAN to TP still pending in Regional offices,
etc
3. Civil tax cases being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations, other than those already filed
in court or those involving criminal tax fraud
iii. What may not be compromised
1. Withholding tax cases
a. XP: Applicant-taxpayer invokes provision
of law that cast doubt on TP’s obligation to
withhold
2. Criminal tax fraud cases confirmed as such by CIR
or his or her duly authorized rep
3. Criminal violations already filed in court
4. Delinquent accounts with duly approved schedule
of installment payments
5. Cases where final reports of reinvestigation or
reconsideration have been issued – resulting to
reduction in original assessment
a. TP is agreeable to such decision by signing
required agreement for the purpose
6. Cases which become final and executory after final
judgement of a court – where compromise is
requested on ground of doubtful validity of
assessment
7. Estate tax cases where compromise is requested on
ground of financial incapacity of TP
iv. When approval of NEB required:
1. Basic tax involved exceeds 1M
2. Settlement offered is less that prescribed minimum
rates
a. 40% for doubtful validity
b. 10% of financial incapacity
v. When approval of REB is required
1. Offer of compromise – assessments involving basic
deficiency taxes of 500k pesos or less
2. Minor criminal violations – discovered by Regional
and District Offices
vi. Authority of CIR
1. GR: authority of CIR to compromise is purely
discretionary; courts cannot interfere with exercise
of discretionary functions, absent GAD
a. Compromise agreement  final and
definite settlement of controversy between
parties, res judicata.
b. Abatement or Cancellation of Taxes
i. What: diminution or decrease in amount of tax imposed
or lessening any unpaid portion of a tax liability, inclusive
of increments.
ii. CIR – has sole authority to abate or cancel taxes
iii. Grounds for Abatement or Cancellation of Taxes
1. Unjustly or excessively assessed tax
a. Example:
i. Filing of return/payment of tax is
made at wrong venue
ii. Mistake in payment is due to
erroneous written official advice of a
revenue officer
iii. Fails to file return and pay tax on
time due to substantial losses form
prolonged labor disputes, etc (extent
of abatement: surcharge and
compromise penalty, not interest
imposed)
iv. Assessment is result of TP’s non-
compliance with law due to a
difficult interpretation of the said
law
v. Failure to file return and pay correct
tax on time due to circumstances
beyond his control (extent:
surcharge and compromise penalty)
vi. Late payment of tax under
meritorious circumstances
vii. Other cases similar or synonymous
thereto
2. Admin and collection costs involved do not justify
collection of amount due
a. Examples
 i. Abatement of penalties on whichever is sooner
assessment confirmed by lower
court, but appealed by TP to a higher b. Admin claim for refund – file an admin claim for refund with
court CIR within 2 years after payment of tax or penalty.
ii. Abatement of penalties on i. Return showing overpayment – considered as a written
withholding tax assessment under claim or credit for refund.
meritorious circumstances ii. Start of 2 year period: date of filing of adjusted tax
iii. Abatement of penalties on delayed return
installment payment under iii. Purpose of admin claim: serve as a notice of warning to
meritorious circumstances CIR that court action would follow unless tax or penalty
iv. Abatement of penalties on alleged to have been collected is refunded.
assessment reduced after c. Filing of Judicial Claim – within 2 years from date of payment
reinvestigation but TP is still of tax or penalty, regardless if any supervening cause that may
contesting reduced assessment arise after payment. (NOTE: both admin and judicial claim have
v. Other instances which CIR may the same prescriptive period)
deem analogous to enumeration i. Requirement: filing of admin claim
above. 1. mere filing is enough. No need to wait for action
on the admin claim.
3. Recovery of Tax Erroneously or Illegally Collected d. Specific requirements for refund of creditable withholding
a. Erroneously or illegally collected tax (CWT)
i. levied without statutory authority; or i. Requisites for entitlement
ii. upon property not subject to taxation 1. Claim for refund filed within 2 year reglementary
iii. officer having no authority to levy tax period
iv. illegal in some respect 2. ITR shows that income payment received is being
declared part of TP’s gross income
Refund of Erroneously Refund of Excess and 3. Fact of withholding is established by a copy of
or Illegally Collected Unutilized Input VAT withholding tax statement or certificate, duly
Tax issued by payor to payee, showing amount paid and
What Collected without No excessive collection, at income tax withheld.
statutory authority, etc time input tax is collected, a. Certificate of Creditable Tax Withheld at
(see above) amount paid is correct and Source – competent proof to establish the
proper fact that taxes are withheld.
Filing of admin Make within 2 years Make within 2 years from b. Not necessary for person who executed and
claim from payment of tax in close of taxable quarter from prepared CWT to be presented and testify
accordance with NIRC which sales were made personally
204C c. Proof of actual remittance of creditable
Admin claim must always precede filing of judicial claim taxes withheld is nto a condition to claim
Period to decide No time period to decide Within 90 days from for a refund.
on admin claim on admin claim submission of receipts, iii. Gov’t Remedies for Collection of Delinquent Taxes
invoices, etc 1. Requisites
Filing of Judicial Within 2 years from 1) Within 30 days after a. Civil Remedies for Collection – civil remedies for collection of
Claim payment of tax, even if receipt of CIR’s internal revenue taxes, fees, or charges, and any increment
there is no decision on decision on admin resulting from delinquency shall be:
admin claim claim i. Summary admin remedies
2) After expiration of 1. Distraint of goods
90 day period,
 2. Levy upon real property and interest in rights to
real property
3. NOTE: allowed only when it has accorded
taxpayer administrative due process (assessment)
ii. Judicial remedies
1. Civil
2. Criminal
iii. NOTE: either of these remedies or both may be pursued,
based on discretion of authorities charged with collection
of same.
b. Distraint of personal property
i. Actual distraint of personal property; and
ii. Constructive distraint of personal property, may be
effected when:
1. TP is retiring from business subject to tax
2. TP intending to leave Ph
3. TP intending to remove his or her property from
PH
4. TP is intending to hide or conceal his or her
property; or
5. TP is intending to perform any act tending to
obstruct proceedings for collecting tax due or
which may be due form him or her
c. Requisites
i. Distraint of Personal Property
1. Warrant of distraint – must be issued by
a. CIR – amount is excess of 1M
b. RDO – amount involved is 1M or less
2. How issued: upon TP or 3rd party in possession of
property within applicable prescriptive period
ii. Procedure for Distraint of Personal Property
1. Make an account of personal property, signed
by himself
2. Stocks and other securities  serve copy of
warrant of distraint upon TP and president,
manager, treasurer, or other responsible officer of
the corp, company, or association, which issued
said stocks or securities
3. Debts and credits
2. Prescriptive periods
Ordinary Period Assessment issued within 3 years 3 years to collect
to Collect
Extraordinary Assessment issued within 10 years 5 years to collect
Period to Collect due to:
1) False or fraudulent return
with intent to evade
2) Failure to file return
i. Suspension of running of Statute of Limitations
1. Period to collect is suspended for period during
which CIR or his or her duly authorized
representative is prevented from making an
assessment or beginning distraint or levy or a
proceeding in court for 60 days thereafter, under
any of the following circumstances:
a. TP requests for a reinvestigation which is
granted by the CIR
b. TP cannot be located in address given by
him in return
i. XP: TP informs CIR of any change
in address  running of SOL will
not be suspended
c. Warrant of distraint or levy duly served
upon TP, his or her authorized rep, or
member of his or her household with
sufficient discretion
d. TP is out of the PH
b. Prescirption of Cirminal Action – after 5 years
i. Begins from:
1. Day of commission of violation of the law
2. If day is not known at that tiem  discovery and
institution of judicial for its investigation and
punishment
ii. Interruption of prescription:
1. when proceedings are instituted against guilty
persons
a. Begins to run again if proceedings are
dismissed for reasons not constituting
jeopardy
2. Institution of criminal action  filing of
information in court, shall interrupt running period
of prescription
3. Offender is absent from Ph
iv. Civil penalties
1. Delinquency Interest and Deficiency Interest
a. Generally: not imposed simultaneously
i. Rate: double the legal interest for loans or forbearance of
money, absent an express stipulation as set by the BSP.
b. Differentiation
 i. Deficiency Interest: interest imposed on deficiency tax
due – assessed and collected from date prescribed for
payment until
1. Full payment
2. Upon issuance of a notice and demand by the CIR
or his or her authorized rep
ii. Delinquency Interest: interest imposed on failure to pay:
1. Amount of tax due on any return to be filed; or
2. Amount of tax due for which no return is required;
or
3. Deficiency tax or any surcharge or interest on due
date appearing notice and demand of CIR, until
amount is fully paid, which interest shall form part
of the tax
2. Surcharge
a. Rate: 25% of amount due
i. XP: willful neglect or if false or fraudulent return is
willfully made  50% of amount due
b. When imposed:
i. Failure to file return and pay tax due
ii. Filing a return with officer other than those with whom
return is required to be filed
1. XP: authorized by CIR
c. Exemption to pay Surcharge and Interest
i. Good faith and honest belief that one is not subject to tax
on basis of previous interpretation of gov’t agencies
3. Compromise Penalty
a. GR: all criminal violations of the NIRC may be compromised
b. XP:
i. Already filed in court
ii. Involving fraud
c. Requirements:
i. Agreement or conformity of taxpayer
ii. Predicate agreement between parties – mutuality