2a. SAC Module 200 PG - Dec2022

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SAAC Module 200 (eVer 2.0-Dec 2022) 1
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e  Determine the modes of settlement
c for delinquent accounts; and
 Identify applicable government
t remedies for collection of delinquent
i accounts.
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s SAAC Module 200 (eVer 2.0-Dec 2022) 2
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t I. Modes of Settlement
l (Taxpayer Remedies)
i II. Government Remedies
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Modes of Settlement/Extinguishment
I. Cash
II. Full payment
III. Approved installment payment
IV. Payment in kind through forfeiture
V. Approved application of compromise settlement
VI. Approved application for abatement of penalties
VII. Approved recommendation for write off or
cancellation of the tax liability

Payment of the Tax Liability in Full
Late filing of the tax return and late payment of the tax due thereon.
Seatwork 1B: Income tax return for the calendar year 2015 was
due for filing on April 15, 2016 but the taxpayer voluntarily filed
his tax return, without notice from the BIR, only on June 30,
2016. The tax due per return amounts to P300,000.00. The
taxpayer shall be liable for delinquency penalties consisting of
____ percent surcharge, plus ____ percent interest per annum.
Compute for the total amount of tax dues (excluding suggested

compromise for late filing and late payment of the tax).

Late filing of the tax return and late payment of the tax due thereon.
Seatwork 1b: Income tax return for the calendar year 2018 was
due for filing on April 15, 2018 but the taxpayer voluntarily filed
his tax return, without notice from the BIR, only on June 30,
2018. The tax due per return amounts to P100,000.00. The
taxpayer shall be liable for delinquency penalties consisting of
____ percent surcharge, plus ____ percent interest per annum.
Compute for the total amount of tax dues (excluding suggested

compromise for late filing and late payment of the tax).

The tax return, without prior authorization from the BIR, is filed on time
but filed through an internal revenue officer other than with whom the
return is required to be filed (filing of a tax return with the wrong venue).
Seatwork 2: The taxpayer’s 2020 income tax return is
required to be filed through the Authorized Agent
Bank (AAB) under the jurisdiction of RDO East Makati.
But, without prior authorization from the BIR, the
taxpayer filed his tax return and paid the tax through
the AAB under the jurisdiction of RDO Davao City. The
tax due per return is P100, 000.00.
Compute for the amount still due.

Late filing of the return and late payment of the tax due to taxpayer’s
willful neglect.
Seatwork 3: The taxpayer did not file his income tax return for
the calendar year 2018 which was due for filing on April 15,
2019. He was notified by the BIR of his failure to file the tax
return, for which reason, he filed his tax return and paid the tax,
only after the said notice, on June 30, 2020. The tax due per
return is P100,000.00.
Compute the total amount due from the taxpayer (excluding

suggested compromise penalty for late filing of the return and
late payment of the tax due.

Late payment of a deficiency tax assessed per Final Assessment Notice and Letter of Demand. In
general, the deficiency tax assessed shall be paid by the taxpayer within the time prescribed (due
date) in the Assessment Notice and letter of demand, otherwise, such taxpayer shall be liable for
the delinquency penalties incident to late payment.
Seatwork 4: XYZ CORPORATION filed its final adjustment income tax return for
calendar year 2018 with a taxable due of P175,000.00. However, upon investigation, it
was disclosed that its income tax return was false or fraudulent because it did not
report a taxable income amounting to another P500,000.00. On its net income of
P1,000,000.00 per investigation, the income tax due is P350,000.00. Deducting its tax
payment per return filed, the deficiency tax, excluding the penalties, amounted to
P175,000.00. XYZ Corporation was duly informed of this finding through a Preliminary
Assessment Notice. Failing to protest on time against the preliminary assessment
notice, a Formal Letter of Demand and Assessment notice was issued on May 31,
2020 calling for payment of the deficiency income tax on or before June 30, 2020. The
said notice and demand was received by the taxpayer on June 5, 2020.

Income tax due per investigation P350,000.00

Less: Income tax paid per return 175,000.00
Deficiency income tax P175,000.00
Add: 50% surcharge for filing a fraudulent or
false return (P175,000.00 times 50%) 87,500.00
12% interest per annum from 4/16/19 to 5/31/2020
(P175,000.00 X 411/365 x 12%) 23,646.58 111,146.58
Total Tax Due P286,146.58
Assuming that the aforementioned deficiency income tax assessment against XYZ CORPORATION, in
the amount of P286,146.58, is not paid by June 30, 2020, the deadline for payment of the
assessment, and the taxpayer failed to file a protest within the reglamentary period thirty [30] days
from receipt of the assessment notice), the assessment becomes final and executory. Assuming
further, that the corporation pays its tax assessment only by September 30, 2020,
Compute for the delinquency penalties for late payment.

Company NOP has been assessed deficiency income tax of P1,000,000.00, exclusive of interest and surcharge,
for taxable year 2015. The tax liability has remained unpaid despite the lapse of June 30, 2017, the deadline
for payment stated in the notice and demand issued by the Commissioner. Assuming that payment was made
by the taxpayer only on June 30, 2018. The civil penalties for late payment shall be computed as follows:
Compute the total amount due :
Basic Tax Due – Income Tax P1,000,000.00
Add: 25% Surcharge for late payment 250,000.00
20% Deficiency Interest from
April 16, 2016 to June 30, 2017 (440 days) 241,095.89 491,095.89
Total Deficiency Tax, June 30,2017 P 1,491,095.89
Computation for the delinquency penalty

Total Deficiency Income tax P 1,491,095.89
Add: 25% Delinquency Surcharge 372,773.97
20% Deficiency Interest (07/01/2017 – 12/31/2017) 149,518.11
12% Delinquency interest (01/01/2018 – 06/30/2018) 88,240.20 610,532.28
Total Amount Due as of June 30, 2018 2,101,628.17

In case the application for installment payment was made on or before

the due date for the payment of the tax.
Seatwork 5: XYZ Corporation, due to financial incapacity,
requested to pay in four (4) monthly installments, starting June
30, 2021, its deficiency income tax liability for the year 2018 in the
amount of P286,146.58 per Final Assessment Notice issued on May
31, 2021, with due date on June 30, 2021. Its request for
installment payment has been duly approved.
In this case, the 25% surcharge shall not be imposed for payment
of the tax since its deadline for payment has been duly extended.
However, delinquency interest of 12% per annum shall be
imposed, computed based on the “unpaid amount”

Payment of the Tax Liability on Installment Basis
1. Show the computation of the interest based on the

diminishing balance or unpaid amount of the tax (inclusive of the
deficiency interests and surcharge in four monthly installments).
2. Show the computation for amount payable in case the

application was made on July 31, 2021 after the tax due date
payment of June 30, 2021 (Note: show the computation in the
first, second, third and fourth installments).

1. Below is the computation of the installment payment of the

above cases in table format:
Date of Equal Monthly Delinquency Amount
Surcharge Balance
Installment Installment Interest Payable
Amount
Assessed 286,146.58
30/06/2021 71,536.65 - 71,536.65 214,609.94
31/07/2021 71,536.65 - 2,116.70 73,653.35 143,073.29
31/08/2021 71,536.65 - 1,411.13 72,947.78 71,536.65
30/09/2021 71,536.65 - 682.05 72,218.70 -
286,146.58 - 4,209.88 290,356.46

1. Below is the computation of the installment payment of the

above cases in table format:
Date of Equal Monthly Delinquency Amount
Surcharge Balance
Installment Installment Interest Payable
Amount
Assessed 286,146.58
30/06/2021 71,536.65 17,884.16 2,822.27 92,243.08 214,609.94
31/07/2021 71,536.65 17,884.16 2,116.70 91,537.51 143,073.29
31/08/2021 71,536.65 17,884.16 1,364.10 90,784.91 71,536.65
30/09/2021 71,536.65 17,884.16 705.57 90,126.38 -
286,146.58 - 7,008.64 364,691.87

Receipt and Preliminary Evaluation of the
Application for Installment Payment Agreement (IPA)
1. The different IPA modes available are as follows:

a) Guaranteed Plan;
b) Individual Taxpayer with Business or ITB Express Plan;
c) Streamlined Plan; and
d) Regular Plan
The delinquent taxpayers may avail of the applicable IPA mode,

subject to the requirements, terms and conditions provided
under each mode, as briefly described under “Summary of
Installment Payment Agreement (IPA)” (Please refer to Handout 1)

Applications for installment payment shall not be accepted where

any of the following conditions exists:
a) The tax case is covered by the Run After Tax Evaders (RATE)
Program, or involves criminal fraud.
b) The taxpayer has the financial capacity to pay the

delinquent accounts in full at once.

Applications for installment payment shall not be accepted

where any of the following conditions exists:
c) More revenues can be immediately recovered by the

BIR over time by immediately undertaking forfeitures
and disposals of the assets.
d) The taxpayer has a track record of not meeting their

obligations under the previous installment
arrangement(s).

2. The Application for Installment Payment Agreement

(AIPA) (Please refer to Handout 2) shall be accomplished
and signed by the taxpayer himself, in case of individual, or
by the duly authorized company officer preferably the
President, or the Vice President for Finance, or the
Treasurer, in case of juridical entities.

3. Supplemental Information on Application for Installment

Payment Agreement in case the taxpayer-applicant is a
natural person (Please refer to Handout 2.1). The
information contained in the supplemental form are
necessary to expedite the evaluation and approval of the
request for IPA. These information are considered
materially relevant in the evaluation of the application
considering that, for individual taxpayers, these
information are not normally disclosed in the tax returns
being filed by the taxpayer-applicant with the BIR.

4. Arrears Management Section (AMS) Head to conduct

initial evaluation. The conduct of initial evaluation on the
appropriateness of the installment plan being availed of by
the taxpayer must be immediately undertaken by the
concerned AMS Head upon receipt of the AIPA from the
delinquent taxpayer. In the course of the initial evaluation
of the application for IPA, the following conditions must
be satisfied:

a. Absence of any approved IPA that is still subsisting or the

applicant shall not have defaulted or undergone an
untimely revocation of previously approved IPA. However,
in case the delinquent taxpayer intends to avail the
Regular Plan mode, it/he/she should not have defaulted
from or has undergone an untimely revocation of
previously approved IPA.
b. Must have filed all the prescribed tax returns and paid the
taxes due thereon for the last three (3) years, except for
the Guaranteed Plan.

c. Submission of a completely accomplished application duly

notarized and attached with the appropriate documentary
stamp tax.
d. Payment of an application fee according to such amount

as prescribed under each IPA (Please refer to Handout 1)
using the Official Receipts Form.

e. Payment of a minimum of ten percent (10%) of the total

deficiency tax, inclusive of all penalties; provided, however,
that, in cases where there are cash deposits in the different
banks of the delinquent taxpayer that have been subjected
to Warrants of Garnishment by this Bureau, the total amount
thereof shall be deducted first from the total amount of
deficiency tax before computing the 10% initial payment.
The resulting balance, if any, shall be the subject of the
installment agreement.
f. Submission of a duly notarized waiver of prescription of the

Statutory of Limitation, in appropriate cases.

5. Notwithstanding the stage where collection enforcement

actions on a case docket have been pursued by the Seizure
Agents (i.e., sending out of collection letters, service and
execution of warrants, or disposition of seized/forfeiture of
properties), all taxpayers, whether individual or juridical
entities, with outstanding delinquent tax cases with the
Arrears Management Section (AMS) may, at their option,
settle the same, through entering into an Installment
Payment Agreement (IPA) with this Bureau.

6. Installment plans shall be negotiated and agreed upon on

a per case basis. In the event that the taxpayer offered to
pay his unpaid tax liabilities and the covering case docket
involves more than one tax case or tax type, separate
installment plans shall be created for each and every
delinquent account case.

Processing, Evaluation and Approval of IPA
A Document Locator Number (DLN) shall be

assigned for each and every application IPA
DLN received from the delinquent taxpayer.
The application for IPA shall be on a per tax type basis

consisting of the basic delinquent tax due and the applicable
Per Tax penalties, subject to the criteria prescribed for each type of
Type IPA.
The maximum period term for an approved IPA may be extended to

not more than the life of the original agreement, depending on the
financial capacity of the delinquent taxpayer after taking consideration
Max of the liquidity and substantial number of other assets of the
delinquent taxpayer which have not yet been subjected to warrants,
Period
otherwise known as “free assets”. However, such extension shall be
Term made only once and no further extension shall be allowed.

Except for the delinquent Income taxpayer Earning Pure

Compensation under the modes of Guaranteed Plan and ITB
Express Plan, the copies of the latest audited financial
statements of the delinquent taxpayer to e used in the
Latest Audited evaluation of the financial capacity of the taxpayer shall be
officially requested directly from the RDO having jurisdiction
FS
over the delinquent taxpayer.
In evaluating the latest audited financial statements for purposes

of determining the financial capacity to pay the installment
obligations of the delinquent taxpayer, the sustainability of the
business shall be assessed using the appropriate tests, such as
but not limited to, cash flow tests, e.g. gross profit margin, aged
FS Analysis creditor analysis, creditor turnover days, etc., as well as balance
sheet tests, e.g. working capital, current ratio, net assets, etc.

The delinquent taxpayer shall be required to submit a Waiver of the

Secrecy of Bank Deposits for purposes of determining whether or not
the taxpayer has sufficient bank accounts to cover the payment of the
delinquent accounts. In case of refusal to execute the said waiver, it
Waiver of the
may be construed as an indication that the taxpayer is hiding
Secrecy of its/his/her liquid assets to delay the settlement of the delinquent
Bank Deposits accounts, and the same shall be used as basis for the denial of the
request for approval of IPA.
The approval of the IPA shall, in no way, result to the suspension of

the collection enforcement activities. In order to ensure that
assets can still be seized from the taxpayer after the expiration of
the IPA term, in case the taxpayer renege in its/his/her
commitment to settle all its tax obligations within the effectivity of
Collection the IPA, all the necessary enforcement actions up to the execution
Enforcement of warrants (e.g. seizure of personal assets and annotation of tax
liens on the titles of real properties, etc.) shall be pursued.
For this purpose, only the conduct of auction sale on seized assets
shall be temporarily suspended during the effectivity of the IPA.

The sale or disposition of these seized assets, however, shall be

immediately pursued once the IPA has been revoked due to non-
compliance by the taxpayer of his commitments under the
Sale/ approved IPA. Furthermore, the approval of the IPA shall not give
rise to the Lifting Order to invalidate the issued warrants and
Disposition of notices of tax liens until such time that all the delinquent accounts,
Assets including the delinquency penalties, are fully paid by the taxpayer.
Sound judgment shall be exercised at all times based on facts and

circumstances of the proposed agreement, taking further
consideration the expiration of the prescriptive period of
Prescriptive limitation for the collection of the delinquent case while the
Period approved IPA is in effect.

- During the evaluation, discussion and/or negotiation stage of

any mode of IPA, the delinquent taxpayer shall not be, at all times,
allowed or permitted to dictate the amounts to be settled as well
as the terms and conditions thereof.
- The BIR shall make a counter offer on the IPA terms once it has
Not Allowed to been determined, based on the financial circumstances of the
Dictate Amount taxpayer, that it/he/she can afford to make installment payments
at higher amounts and within the shorter period of time than what
was reflected in the application form
When the delinquent taxpayer has already filed an application for

compromise settlement or abatement of penalties and paid the
Held in appropriate amount therefor, the evaluation by the concerned
evaluation board, shall be held in abeyance
abeyance

Upon approval of the selected mode of IPA, the Waiver of

Prescription of the Statutes of Limitations submitted by the
delinquent taxpayer shall be duly accepted by the Chief, Regional
Waiver of Collection Division, pursuant to the existing guidelines and policies
Prescription on the execution of valid waivers of prescription. The execution of
the waiver of prescription is mandatory especially when the
collection case is expiring within any 12-month period.
Each and every duly approved IPA shall be immediately assigned

with respective reference number prepared in the following
order:
a. IPA Code;
b. Year of Issue;
c. RDO Number from where the delinquent tax docket originated;
Reference
and
Number
d. Office Control Number
The Office Control Number shall be serially and chronologically

numbered according to the time and date of each mode of IPA.

Since the Accounts Receivable Monitoring Systems (ARMS) was

already deployed, the Installment Payment Module of the said
system shall, at all times, be used in the creation of any approved
IPA. The installment payments made by the concerned taxpayers
ARMS must be timely encoded thereat because the said module has a
built-in capability to track the status of each and every approved
IPA at any given time
For all modes of IPA upon which all the installment payments for
the total delinquent taxes due are fully paid and, therefore
considered closed, the concerned AMS shall fully observe the
guidelines and procedures under the pertinent provisions of
Closed Cases existing revenue regulations for the use of the ARMS to manage
and close the case as well as the physical disposition of case
dockets for safekeeping by the Regional Administrative Division.

Grounds for the Cancellation/Revocation of IPA
1. Failure to pay the full amount due at the scheduled date

pursuant to the approved IPA. In order to fully track all
payments made for each IPA, Payment Form (BIR Form No.
0605) shall accordingly be separately prepared and issued
per type of tax.
However, in case of default with any of the scheduled date

of payment, the delinquent taxpayer may request for the
restructuring of the approved IPA, subject to the prior
approval of the authorized revenue office/official
authorized, and prior payment of another processing fee for
the evaluation of request for IPA restructuring.

Grounds for the Cancellation/Revocation of IPA
2. Non-compliance with all the tax laws and existing rules

and regulations within the entire duration of the term
of the approved IPA.
3. Discovery of any false or misleading information that

was submitted by the taxpayer when it/he/she applied
for IPA.

Reportorial Requirements
Monthly report (Please refer to Handouts 4 and 5) in hard
and soft copies shall be submitted on or before every tenth
(10th) day immediately following the calendar month, in
accordance with following manner:
Concerned Person to Prepare To Whom to be Submitted
Office and Submit
Revenue Chief, Collection Regional Director and Chief,
Region with Division Accounts Receivable
AMS Monitoring Division (ARMD),
and Project Manager of
Centralized Arrears
Management Project

Reportorial Requirements
Concerned Person to Prepare To Whom to be Submitted

Office and Submit
Large Taxpayer ACIR, LTS, Chief, ARMD, and
Collection Project Manager of Centralized
Chief, LTCED
Enforcement Arrears Management Project
Division
ACIR, LTS, Chief, ARMD and
Large Taxpayer Project Manager of Centralized
Chief, LTD
Divisions Arrears Management Project

Activity
1. Form two groups.

2. Discuss and answer the question: What
are the cases that MAY/CANNOT be
compromised? Write your answers in
meta-cards provided.
3. Present your group outputs to the class.

Modes of Settlement (Taxpayer’s Remedies)
A. Compromise settlement or reduction of tax liability

 CIR and NEB or REB may reduce the payment of any tax
liability;
 All criminal violations may be compromised except :
those filed in court and those involving fraud;
 Where basic tax per tax type involved exceeds P500,000
or settlement offered is less than prescribed minimum
rates, the offer for compromise settlement shall be
subject to approval of NEB. If the amount is P500,000 and
below, the same shall be subject to approval of REB.
Reference: RR 30-2002

What are the cases that MAY be compromised?
1. Delinquent accounts;
2. Cases under administrative protest after issuance of
FAN;
3. Civil tax cases being disputed before the courts;
4. Collection cases filed in court; and
5. Criminal violations, other than those already filed in
court and involving criminal tax fraud.
Reference: RR 30-2002

Grounds for compromise settlement

1. Doubtful Validity of the Assessment – when there is a
reasonable doubt as to the validity of the claim against
the taxpayer, minimum payment of 40% of the basic tax
due .
Documentary Requirements:
 Form 2107 – Application for Compromise
Settlement
 Letter Request from taxpayer – Legal and Factual
Basis
 Waiver of Prescription
 Sworn Statement of No Tax Credit Certificate
Reference: Sec 204, NIRC


2. Financial Incapacity – the financial position of the
taxpayer demonstrates clear inability to pay the assessed
tax, compromise minimum rate equivalent to 10% of the
basic assessed tax.
 Form 2107 – Application for Compromise
Settlement;
 Letter Request from taxpayer – Legal and Factual
Basis;
 Waiver of Prescription;
 Sworn Statement of No tax Credit Certificate;


2. Financial Incapacity
 Income Tax with Audited Financial Statement – Three
Years;
 Sworn Statement of No Tax Credit Certificate on hand or in
transit or claim fro tax refund or TCC;
 A certification from his employer on his prevailing
monthly salary, including allowances;
 A sworn statement that he has no other source of income
other than from employment;


2. Financial Incapacity
 A sworn statement that he derives no income from any
source whatever;
 The “Notice of Dissolution” submitted to SEC or other
similar or equivalent document. A copy of the order
declaring bankruptcy or insolvency shall be submitted;
and
 Waiver of the Secrecy of Bank Deposit under R.A. 1405.

B. Abatement or cancellation of tax, penalties and /or

interest
 Generally, the CIR has the sole authority to abate or cancel
surcharge and compromise penalties only, however in
meritorious instances, the CIR may likewise abate the
interest as well as basic tax assessed, provided, however, that
cases for abatement or cancellation of tax, penalties and/or
interest shall be coursed through the Technical Working
Committee (TWC) .
 The application for abatement or cancellation of tax,
penalties and /or interest should be acted upon by the
processing office and reviewing office within 5 days from
receipt by the said office. The BIR National Office has 30 days
within which to act on the case.
Reference: RR 13 – 2001

Grounds for abatement or cancellation
1. Imposition of the tax or any portion thereof appears to

be unjustly /excessively assessed.
2. The administration and collection costs involved do not

justify the collection of the amount due.

Activity
1. Participants will be divided into four (4)

groups.
2. Discuss and answer the question: What
are indications of an assessment with
doubtful validity? Cite examples for each.
3. Present your group outputs to the class.

Indications of Doubtful Validity
1. Jeopardy Assessment
 Tax assessment without the benefit of complete or
partial audit by an authorized revenue officer
 No partial or complete audit by authorized Revenue
Officer
 Due to taxpayer’s failure to comply with audit and
investigation requirements to present his books of
accounts and
 Failed to substantiate all or any of the deductions,
exemptions or credits claimed in his return.

Indications of Doubtful Validity
2. Arbitrary Assessment*
 Based on presumption and there is a reason to believe
that it is lacking in legal and or factual basis.
 Assessments must be based on actual facts and proved
by competent evidence not imposed based on unverified
information or disputed presumptions [CIR vs.
Embroidery & Garments GR 96262].
*Note: failure to comply summons/SDT, NOT Qualified

Grounds for Doubtful Validity
Taxpayer failed to file an administrative protest on
account of the alleged failure to receive notice of
assessment and there is a reason to believe that it is
lacking in legal and factual basis.
Issuance of PAN is part of the due process – procedural and

substantial [CIR vs. Metro Star Superama Inc., Dec. 8, 2010, GR
185371]

Taxpayer failed to file an administrative protest on account of
the alleged failure to receive notice of assessment and there
is a reason to believe that it is lacking in legal and factual
basis.
Mailing – if the taxpayer denies ever having received an
assessment from the BIR, it is incumbent upon the latter to
prove by competent evidence that such notice was indeed
received by the addressee… direct denial thereof shifts the
burden to the party favored by the presumption to prove that
the mailed letter was indeed received by the address [Republic
vs. CA 149 SCRA 351]

basis.
Note: For reinvestigation cases, if within 60 days, the
documents are not submitted, taxpayer is considered
disqualified to invoke the ground of doubtful validity of the
assessment. Taxpayer did not receive FAN despite notifying
BIR of change in address thru the BIR Form No. 1905. FAN was
received by unauthorized representative. Return to Sender
(RTS) Taxpayer failed to receive FDDA.

basis.
Note: Taxpayer failed to receive Final Decision on Disputed

Assessment (FDDA). Unacted protest on PAN and FAN
Source: RR 9-2013

Assessment was issued on or after January 1, 1998 where

demand notice allegedly failed to comply with formalities
under Sec. 228 of the 1997 NIRC [RR 12-1999, amended by RR
18-2013]

Assessments made based on the “Best Evidence Obtainable (BEO) Rule”
and the same can be disputed by sufficient and competent evidence.
 BEO : 1) when a report required by law as basis for the

assessment of any national internal revenue tax shall not
be forthcoming within the time fixed by laws or rules and
regulations or 2) when there is reason to believe that any
such report is false, incomplete or erroneous (Net Worth
Method of Assessment [GR No. 81446 – Bonifacia Sy Po])

Assessment was issued within the prescriptive period and was
extended by the taxpayer’s execution of Waiver of Statute of
Limitations. Also, when the validity or authenticity of the assessment is
being questioned and there is strong reason to believe (including
evidence to prove) that it is not authentic.
 Signatory is without authority; for corporate or juridical

entity – the authorized officer under existing laws or
with authority from Board of Directors or similar
authorities
 Person must clearly state his/her designation and
authority to act for and in behalf of the taxpayer
Source: RR 9-2013

Assessment was based on an issue where a court or competent

jurisdiction made an adverse decision against the BIR but for which
the Supreme Court has not decided upon with finality.
Source: RR 9-2013

Workshop
Case Study
on Doubtful
Validity

Financial Incapacity

Grounds for Financial Incapacity
1. Corporation ceased operation or is already dissolved
2. The taxpayer as reflected in its latest Balance Sheet supposed to be filed
with the BIR, is suffering from surplus or earnings deficit resulting to
impairment in the original capital by at least 50% (with exception)
3. The taxpayer is suffering from a net worth deficit computed by
deducting total liabilities from total assets taken from the latest audited
financial statements (with exception);
4. The taxpayer is a compensation income earner with no other source of
income and the family’s gross monthly compensation does not exceed
the levels of compensation … and it appears that the taxpayer
possesses no other leviable or distrained assets, other than his family
home; or
5. The taxpayer has been declared by any competent
tribunal/authority/body/government agency as bankrupt or insolvent
(with exception).

Indications of Financial Incapacity
No leviable property
1. Real property excluding one’s family home

 Real rights – to receive rent where ownership
is vested with another
 Properties by nature (buildings), intention
(machinery), destination (fish and other
animals in leased property), attachments
(paintings)

Indications of Financial Incapacity
No leviable property
2. Personal property including:

 Cash and other cash items
 Investment in shares of stocks including shares in
business
 Vehicles (air, land and sea)
 Jewelry
 Accounts receivable
 Other personal assets of value (e.g., golf sets)

Brief Review of Property Classification*
1. Ownership – mere possession for personal and public

document for real property
2. Inheritance /estate tax – right of legatee is different right
of a devisee
3. Tax laws – tax rates and regulatory procedures are different
for real estate and personal property
4. Contract laws – on the form- disposition in public
document
*Note: Need for distinction because different rules may apply to each –
inheritance, tax, contract and commercial laws

Brief Review of Property Classification*
5. Prescription for recovery of ownership and possession –

different suit and prescriptive period.
6. Law on sales – if the structure or mineral is to be separated
by the seller, it is considered as sale of personal property
however if it is the buyer, considered as sale of real
property.
7. Law on credits – a chattel mortgage over a fixture has a
priority over the real estate mortgage of the real property
where it is attached. First is specific while the REM is the
default. Has to be registered with Registry of Deeds.

All things which are or may be the
object of appropriations are
considered either:
Immovable or Real properties; or

Movable or Personal properties.

Immovable or Real Property
1. Land, buildings, roads and construction of all kinds adhered to

the soil;
2. Trees, plants, and growing fruits, while they are attached to the
land or form an integral part of an immovable*;
3. Everything attached to an immovable in a fixed manner , in
such a way that it cannot be separated without breaking the
material or deterioration of the object;
4. Statues, reliefs, paintings, or other objects used for
ornamentation, placed in a building or on land by the owner of
the immovable in such a manner that it reveals the intention
to attach them permanently to the tenement;
Note: Natural fruits (fructus naturales) are real while industrial (fructus
industriales) and civil fruits are personal.

5. Machinery, receptacles, instruments or implements intended

by the owner of the tenement for an industry or works which
may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works;
6. Animal houses, pigeon-houses, beehives, fish ponds or
breeding places of similar nature, in case their owner has
placed them or preserves them with the intention to have
them permanently attached to the land, and forming as
permanent part of it, including the animals in these places;
7. Fertilizer actually used on a piece of land;

8. Mines, quarries, and slag dumps (part of the bed), and water
(either running or stagnant);
9. Docks and structures which, though floating, are intended by
their nature and object to remain at a fixed place on a river,
lake, or coast;
10. Contracts for public works, and servitudes and other real rights
over an immovable property (REM)

Movable or Personal Property
1. Those movables that are susceptible of appropriation which

are not included as real property;
2. Real property which by any special provision of law is
considered as personal property;
3. Forces of nature which are brought under control by science
(example: solar or windmills); and
4. All things which can be transported from place to place
without impairment of the real property to which they are
fixed/attached.

Personal Property (Intangible)
1. Obligations and actions which have for their object movables

or demandable sums such as patents, copyrights, leases,
receivables; and
2. Shares of stock of agricultural, commercial and industrial

entities, although they may have real estate. Others like
mineral, oil or quarry leases.

Indicators of Financial Capacity: Individual
1. Heir to an estate with property/ies*

2. Engage in business or other commercial activities and such
business or commercial activity is a going concern, whether
regularly or seasonally.
3. Currently employed with a monthly salary in excess of P10,000
4. Ran for an elective position (within the last 2 elections) in any
public position
5. Occupying an appointive position in government including
political subdivisions and GOCCs
Notes: - whether the estate is settled or not

- the exclusion under RR 30 – 2002 refers to an estate itself; the heir is an
applicant to an entirely different tax liability/ies.

6. Partners of a registered unlimited general partnership (liability

extend and jointly solidarily with other partners on debts
incurred by the partnership)
7. Existence of a property: All species of property and forms of
ownership [1] except family home and tools of trade excluded
under Civil law. For family home, only one is allowed; and
[2] must be of such value that approximates the definition of
financial incapacity.
*Note: [1] Including joint and qualified ownership

[2] In case of those whose marriage is governed by Sharia Law

8. Existence of a property:
a. In the name of the spouse unless -
 Property arrangement (pre-nuptial) is complete separation of
property and tax debt
 Did not redound to the benefit of the family
b. In the name of a minor children unless proof of capacity is clearly
established like child actor or recipient of a gratuitous transfer –
either gift from third party or the child is an heir from an estate.
c. Financial Statement shows a property even if the net worth is
negative. Negative net worth = Liabilities is greater than assets.
Asset except for COCI is recorded at cost under the Philippine
Accounting Standards and Tax Laws. Insolvency, suspension of
payment and rehabilitation are not grounds for F/I

9. Adjudged as judgment creditor

10. With ONETT transactions showing both acquisitions and
dispositions of assets
11. Membership in exclusive clubs, sports clubs, resorts, etc.

Indicators of Financial Incapacity: Individual
1. The entity is still a going concern. NIRC requirements:

a. Ceased business operation must
 be actual and effective; and
 have completely indicated its intention to stop operating
(mere suspension by reason of say labor strike will not
suffice)
b. Thus, a corporation under:
 Suspension of payment
 Receivership
 Rehabilitation
2. Impairment of capital less than the 50% threshold

Indicators of Financial Incapacity: Individual
3. Corporate entity is a member of a conglomerate or similar – either

partially or wholly owned
4. Corporate entity is a branch or a subsidiary of a foreign
corporation still doing business
5. Corporate entity is owned or closely held as a holding company of
well-known stockholder/s in the business community (also those
regarded as famous personalities)
6. Partnerships registered as unlimited partnership
7. Negative net worth = Liabilities is greater than assets. Asset
except for COCI is recorded at cost under the Philippine
Accounting Standards and Tax Laws.

Workshop
Case Study
on Financial
Incapacity

Financial Statement Analysis

Financial statements form part of the process of financial

reporting. A complete set of financial statements
normally include:
• Statement of Operation/Income Statement
• Statement of Financial Position/Balance Sheet
• Statement of Changes in Financial Position (which may
be presented in a variety of ways, for example, a
statement of cash flows or a statement of funds flow)
• Notes and other Statements and explanatory material
that are an integral part of the financial statements.

Objective
The objective of financial statements is to provide

information about the financial position, performance
and changes in financial position of an enterprise that is
useful to a wide range of users in making economic
decisions.

Users of financial statements include present and potential:
• Investors – the providers of risk capital and their advisers are

concerned with the risk inherent in, and return provided by, their
investments. They need information to help them determine
whether they should buy, hold or sell. Shareholders are also
interested in information to help them to assess the ability of the
enterprise to pay dividends.
• Employees – interested in information about the stability and
profitability of their employers, to assess the ability of the
enterprise to provide remuneration, retirement benefit and
employment opportunities.

• Lenders – interested in information that enables them to

determine whether their loans and the interest attaching to
them, will be paid when due.
• Suppliers and other trade creditors – interested in information
that enables them to determine whether amounts owing to them
will be paid when due. Trade creditors are likely to be interested in
an enterprise over a shorter period than lenders unless they are
dependent upon the continuation of the enterprise as a major
customer.

• Customers – have an interest in information about the

continuance of an enterprise, especially when they have a
long term involvement with or are dependent on the
enterprise.
• Governments and their agencies – interested in information
in order to regulate the activities of enterprise, determine
taxation policies and as a basis for national income and
similar statistics.

• Public – enterprises affect members of the public in a variety

of ways. For example, enterprises may make a substantial
contribution to the local economy in many ways, including
the number of people they employ and their patronage of
local suppliers. Financial statements may assist the public by
providing information about the trends and recent
developments in the prosperity of the enterprise and the
range of its activities.

It involves careful selection of data from financial

statements in order to assess and evaluate the firm’s past
performance, its present condition and future business
potentials. The purpose is to assist statement users in
predicting the future.

Section 204 NIRC
Authority of the Commissioner to compromise, abate, and

refund/credit taxes. – The Commissioner may compromise the
payment of any internal revenue tax when:
a. A reasonable doubt as to validity of the claim against the

taxpayer exists; or
b. The financial position of the taxpayer demonstrates a
clear inability to pay the assessed tax.

Techniques Used in Financial Statement Analysis
1. Horizontal Analysis (Trend Analysis)

2. Vertical Analysis
3. Ratio Analysis
4. Analysis of variation in gross profit and net income
5. Cash flow analysis

1. Horizontal Analysis (Trend Analysis)
- involves comparison of figures shown in the financial
statements of two or more consecutive periods. The difference
between the figures of the two periods is calculated, and the
percentage change from one period to the next is computed
using the earlier period as the base.
Formula:
Most Recent Value – Base Period Value
Percentage Change = ____________________________________
Based Period Value

Example:
2017 2016 Pesos Percent

Sales P 3,280 P 2,950 P 330 11% *
Cost of Sales 2,580 2,064 516 20%**
Gross Profit P 700 P 886 (P186) (21%)***
*Percentage Change = P 3,280 – P 2,950 = 11%

P 2,950
**Percentage Change = P 2,580 – P 2,064 = 20%
P 2,064
***Percentage Change = P 700 – P 886 = (21%)
P 886

2. Vertical Analysis
the process of comparing figures in the financial statements

of a single period. It involves converting of figures in the statements
to a common base. This is accomplished by expressing all the figures
in the statements as percentages of an important item such as total
assets (in the balance sheet) or total or net sales (in the income
statement). These converted statements are called common-sized
statements or percentage composition statements.

Example:
COMPARE CORPORATION
Income Statement
For the year Ended December 31, 2017
2017 Percent
Sale P 2,280 100.0%
Less cost of sales 2,120 64.6
Gross income P 1,160 35.4
Less operating expenses: Selling P 350 10.7
Administrative 420 12.8
Total operating expenses P 770 23.5
Income from operation P 390 11.9
Less interest expense 30 1.0
Income before tax P 360 10.9
Less income tax 126 3.8
Net income P 234 7.1

3. Ratio Analysis
Ratios are calculated from the financial statements to

provide users of such statements with relevant information about
the firm’s liquidity, use of leverage, asset management, cost
control, profitability, growth and valuation.

3. Ratio Analysis
 Current Ratio measures the amount of liquidity available to pay for

current liabilities.
Current Ratio = Current Assets
Current Liabilities
 Acid Test or Quick Ratio same as current ratio but does not include
inventories.
Acid Test or Quick Ratio= Quick Assets
Current Liabilities

3. Ratio Analysis
 Inventory Turnover Ratio measures the amount of inventory needed

to support a given level of sales.
Inventory Turnover Ratio = Cost of Goods Sold

Ave. Inventory
 Accounts Payable Turnover Ratio measures the speed with which

the company pays its suppliers.
Accounts Payable Turnover Ratio = Total Credit Purchases
Ave. Accounts Payable

3. Ratio Analysis
 Fixed Asset Turnover Ratio measures the company’s ability to generate

sales from a certain base of fixed assets.
Fixed Asset Turnover Ratio = ________Net Annual Sales_________

Fixed Assets – Acc. Depreciation
 Debt to Equity Ratio shows the extent to which management is willing to

fund operations with debt rather that equity.
Debt to Equity Ratio = Long Term Debt + Short Term Debt + Leases
Equity
Debt Ratio = Total Liabilities
Total Assets

3. Ratio Analysis
 Working Capital Turnover Ratio measures a company’s ability to generate

sales from a certain base of working capital.
Working Capital Turnover Ratio = ____________Net Sales_____________

(Working Cap. Beg + Working Cap. End)/2
 Times-Interest-Earned Ratio indicates the margin of safety for payment of

fixed interest charges.
Times-Interest-Earned Ratio = Earnings Before Interest and Tax (EBIT)

Interest Expense

3. Ratio Analysis
 Fixed Charge Coverage shows the ability a company to pay for its
fixed cost.
Fixed Charge Coverage= (EBIT) + Lease Expenses

Interest Expense + Lease Expenses
 Break Even Point reveals the sales level at which a company breaks
even.
Break Even Point = ____Total Fixed Cost____

Contribution Margin Ratio

3. Ratio Analysis
 Contribution Margin Ratio shows the profit left after variable cost are
subtracted from sales.
Contribution Margin Ratio= Sales – Variable Costs
Sales
Variable Costs = All Costs – Fixed Costs
 Gross Profit Ratio shows revenue minus the cost of goods sold as a
proportion of sales.
Gross Profit Ratio = Sales – Cost of Sales

Sales

3. Ratio Analysis
 Margin of Safety calculates the amount by which sales must drop
before a company reaches its breakeven point.
Margin of Safety Ratio = Current Sales Level – Break Even Point

Current Sales Level
 Net Profit Ratio calculates the amount of profit after taxes and all
expenses have been deducted from net sales.
Net Profit Ratio = Net Profit

Net Sales

3. Ratio Analysis
 Return On Equity (ROE) shows company profit as percentage of
fixed assets and working capital.
Return on Equity = Net Income

Total Equity
 Return On Assets (ROA) shows a company profit as a percentage of

assets utilized.
Return On Assets = Net Income

Total Assets

3. Ratio Analysis
Sales (10,000 units @ P 10.00) P 100,000.00

Variable cost 60,000.00
Contribution Margin P 40,000.00
Fixed cost 25,000.00
Net Profit P 15,000.00
Compute the following:

1. Break-even point in pesos & in units.
2. Margin of safety & margin of safety ratio.

3. Ratio Analysis
BEP(p) = P 25,000.00/.40
= P 62,500.00
BEP(u) = P 25,000.00/P 4.00

= 6,250 units
MoS = P 100,000.00 – P 62,500.00

= P 37,500.00
MSR = P 37,500.00/P 100,000.00 = 37.5 %

Format Of The Statement Of Cash Flows
ANG PROBINSYANO COMPANY
Statement of Cash Flows
For the year ended December 2017
Cash flows from operating activities:

List of individual items xxx
Net cash provided (used) by operating activities xxx
Cash flows from investing activities:

Net cash provided (used) by investing activities xxx
Cash flows from financing activities:

Net cash provided (used) by financing activities xxx
Net increase (decrease) in cash xxx
Cash balance, beginning of period xxx
Cash balance, end of period xxx

3. Ratio Analysis
Simplified Statement of Cash Flow
Cash Receipts xxx

Less: Cash Disbursements xxx
Net increase (decrease) in cash xxx
Add: Cash balance, beginning of period xxx
Cash balance, end of period xxx

The BIR is COUNTING on the

Seizure Agents
to be a GROUP of
Effective and Efficient
CHAMPIONS
of the
Revenue Collection Program.

Workshop
Case Study on
Financial
Statement
Analysis
Government’s Remedies
Authority to Impose Civil Remedies
After exhausting all possible persuasive

collection efforts and the taxpayer still refuses to
voluntarily settle its outstanding tax liabilities,
the BIR can exercise its vast coercive power to
ensure that the said unpaid tax liabilities are duly
and timely collected…

The CIR’s authority to distrain, levy, garnish,

forfeit or sell, and dispose of the properties of a
delinquent taxpayer is anchored on the following
provisions of law:
1. Sections 205 (Remedies for the Collection of Delinquent Taxes),
206 Constructive Distraint of the Property of a Taxpayer), and
207 (Summary Remedies) of the NIRC of 1997,
2. Section 218 (Injunction Not Available to Restrain Collection of
Tax) of the NIRC; and
3. Section 11 of Republic Act (RA) No. 1125 (An Act Creating the
Court of Tax Appeals (CTA)

What if taxpayer DOES NOT pay?
1. Warrant of Distraint and/or Levy (BIR Form

No. 1301)
2. Warrant of Garnishment (BIR Form No. 1302)
3. Notice of Tax Lien
4. Notice of Encumbrance
5. Notice of Levy

Government’s Remedies for
Collection of Delinquent Accounts
1. Warrant of Distraint and/or Levy (WDL) (BIR Form

1301)
The authority granted to internal revenue officers to distrain

personal property of whatever character and to levy upon
the real property and interest in or rights to real property of
a delinquent taxpayer.
Kinds of Service
• Actual
• Constructive
Reference: OM 13-03-001


1301)
Procedures in the Constructive Service of the WDL

• If the Taxpayer (individual or corporation) refuses to
acknowledge the receipt of the WDL, the Revenue
Officer/Seizure Agent shall:
- Indicate the date and time of the service of the
warrant on the acknowledgement receipt portion;
- Have two credible witnesses, preferably two officers
of the BIR, sign in the spaces provided for the
witnesses;


1301)

• If the Taxpayer (individual or corporation) refuses to acknowledge
the receipt of the WDL, the Revenue Officer/Seizure Agent shall:
- Sign over printed name as the service officer/seizure agent and
indicate taxpayer’s residential/office address, contact number
where the taxpayer could be reached;
- Leave the duplicate copy of the warrant at the premises of the
taxpayer;


1301)

• If the Taxpayer (individual or corporation) refuses to acknowledge
the receipt of the WDL, the Revenue Officer/Seizure Agent shall:
- Retain the original copy and other copies of the warrant to be
attached to the docket; and
- Prepare and submit a progress report to the RDO/LTDO/LTCED
Chief not later than the following day of the constructive
service of the warrant.


1301)
Procedures in case of Non-service of the WDL
In case the taxpayer could not be located:
a. If the taxpayer is an individual, the Revenue Officer/Seizure Agent shall:
- Exhaust all measures to locate the taxpayer. This can be done by
checking with the barangay, public utility companies, local licensing
office of LGUs, Bureau of Immigration and Deportation (BID) records, etc.:
- Make a progress report to the RDO/LTDO/LTCED Chief stating therein the
reasons for the non-service of WDL not later than the following day and
attach the said report to the docket of the case;


1301)
a. If the taxpayer is an individual, the Revenue Officer/Seizure Agent shall:
- Exercise diligence in searching/locating for property/ies of the taxpayer,
whether real and personal, tangible or intangible, that can be
levied/distrained upon to satisfy the full payment of its his/her unpaid
tax liability; and
- Prepare a Notice of Tax Lien (NTL).


1301)
b. If the taxpayer is a corporation, the Revenue Officer/Seizure Agent
shall:
- Check with the Security and Exchange Commission (SEC) the
current status of the corporation if it has dissolved or has ceased
operations;
- Secure a copy of the Articles of Incorporation and the latest
General Information Sheet (GIS) from the SEC;


1301)

b. If the taxpayer is a corporation, the Revenue Officer/Seizure Agent
shall:
- Check the records of the barangay, public utility companies,
administrator of the building where the company formerly
holds office to determine whether the corporation has already
ceased operations;

2. Warrant of Garnishment (WG) (BIR Form 1302)
A proceeding in the nature of attachment wherein the

credits, properties or effects of a delinquent taxpayer in the hands
of a third person/entity may be made to satisfy the collection of
his/her/its tax liabilities being enforced by a warrant issued by the
BIR.


How to effect WG?
- Prepare WG for approval of the Regional Director;

- Serve the duly approved WG to banks where the delinquent taxpayer
and to the other parties having possession or in control of the
taxpayer's garnishable assets; and
- Claim the Garnished deposits/salaries/receivables/ other assets from
the concerned third parties and remit the same to the AAB in
accordance with the rules and regulations for purposes of applying
the same to the delinquent taxpayer's outstanding tax liabilities.

The following personal properties of the taxpayer may be garnished:

- Salaries from the employer of the taxpayer;
- Deposits with a bank;
- Stocks and bonds from financial institutions that safe-keep stocks
and bonds certificates (e.g. the Philippine Stock Exchange (PSE)
and the Bureau of the Treasury (BTr);
- Rental income of the taxpayer from the lessee/tenant; and
- Trade and other receivables form customers and other debtors.

Actual Distraint – refers to the act of enforcing/executing the WDL

through the actual confiscation of the personal properties of a
delinquent taxpayer.
- It is done simultaneously or after the service of WDL.
- It should be done with an assessment either in the form of FAN
or SAT.

Procedures in the Actual Seizure of Personal Property
The Revenue Officer/Seizure Agent shall:

- Fill-out the Notice of Actual Seizure Personal Property (NASPP) (BIR
Form 2802) for signature by the authorized signatory;
- Make arrangement with a hauling/handling company for the
hauling/transportation of the seized personal properties;
- Proceed to the place where the personal properties of the subject
taxpayer is located and list-down the goods, chattels, effects or other
personal property to be seized/distrained in the NASPP;


- Serve the duly accomplished NASPP with the list of the personal
property/ies seized/distrained to the taxpayer or person having
possession or control of such taxpayer’s property/ies.
- Recite to the taxpayer or person having possession or control of such
taxpayer’s property is obligation under the NIRC of 1997;


- Instruct the hauling/handling company to load the personal properties
seized into the track/vehicle and deliver the same to the Office of the
RDO for safekeeping;
- Exercise due diligence in safeguarding, preserving and maintaining the
seized/distrained personal properties in good condition to avoid their
loss, pilferage, deterioration, etc;



- Record the details of the seized/distrained personal properties in the
Registry of Seized Personal Properties being maintained in the district/LTS
office for the purpose; and
- If the taxpayers fails to pay the tax liability, including the increments
incident to delinquency, and the cost of preservation and transportation of
the seized/distrained personal properties, within twenty (20) days from the
date of service of the NASPP, proceed with the auction sale of the
seized/distrained properties.



- Record the details of the seized/distrained personal properties in the
Registry of Seized Personal Properties being maintained in the district/LTS
office for the purpose; and
- If the taxpayers fails to pay the tax liability, including the increments
the seized/distrained personal properties, within twenty (20) days from the
date of service of the NASPP, proceed with the auction sale of the
seized/distrained properties.

Constructive Distraint – a preventive remedy by the government aimed

to forestall possible dissipation of the taxpayers assets when the taxpayer
is:
- Retiring from any business subject to tax.
- Intending to leave or remove his property from the Philippines.
- Intending to hide of conceal his property.
- Intending to perform any act tending to obstruct the proceedings
for collecting the tax due from him.

Procedures in the Constructive Distraint/Seizure of Personal Property

- Fill-out BIR Form No. 2901 – Constructive Seizure of Personal Property
Seized under the Authority of the NIRC-CSPP/Constructive Distraint of
Personal Property-CDPP for signature by the authorized signatory;
- Proceed to the place where the personal properties of the subject
taxpayer is located and list down the goods, chattels, effects, or other
personal property to be seized/distrained in the approved CSPP;


- Serve the duly accomplished CSPP with the list of the personal property
seized/distrained to the taxpayer or person having possession or control
of such taxpayer’s property.
- Recite to the taxpayer or person having possession or control of such
taxpayer’s property his obligation under the NIRC of 1997, as amended; and


- If the taxpayer fails to pay the tax liability, including the increments
the seized/distraint personal properties, within twenty (20) days from the
service of the CSPP, proceed with the actual seizure of the personal
properties, placed under constructive seizure.

A written notice issued by the Commissioner of

Internal Revenue to validate the legal claim or charge by
the government on the properties of a delinquent
taxpayer.



- Prepare a written request to the concerned register of Deeds
and/or the Assessor’s Office for information on the taxpayer’s
property holdings, for signature by the head of office; and
- Receive the formal reply from the Register of Deeds and/or the
Assessor’s Office.

A written notice issued by the Commissioner of

Internal Revenue to denote/validate the legal claim or charge
by the government on the distrained properties of a
delinquent taxpayer. (e.g. motor vehicles by land, air or water,
etc.)

Procedures in Filing the Notice of Encumbrance
Prepare and send Notice of Encumbrance to be signed by the

Regional Director, LTDO/ACIR-LTS/ACIR –CS to pertinent registry office
(e.g. LTO/Maritime Industry Authority (MARINA)/Civil Aeronautics
Authority of the Philippines (CAAP)/Intellectual Property Office (IPO)
notifying that the taxpayer has pending tax liability and that the BIR
has claim to such properties.

5. Notice of Levy (NOL)
Lifting of NTL/NOL
The tax lien may be extinguish under any of the following instances:
- Full payment by the taxpayer of the unpaid tax liabilities, including
all the applicable delinquency penalties due thereon;
- Approval and full payment of the taxpayer’s offer for compromise
settlement or abatement of penalties;
- Full or partial cancellation of the original assessment as a result of
reinvestigation or reconsideration of the assessment;

Lifting of NTL/NOL
- Prescription of the Bureau’s right to assess and/or collect the
unpaid tax liabilities under the Statute of Limitation;
- The taxpayer has made an escrow account with any commercial
bank, in favor of the BIR in the amount not less than his/her/its tax
liability;

Lifting of NTL/NOL
- Full destruction of the property subject to the lien;
- The competent court has issued a final and executory order for the
lifting thereof; and
- Under other meritorious cases, provided the interest of the
government is not jeopardized and upon prior approval by the
Commissioner.

Procedures in Lifting the NTL/NOL

The Revenue Officer shall:
- Check compliance with the conditions for the lifting of the NTL/NOL;
- Prepare letter on the Lifting of the NTL/NOL and have it signed by the
duly authorized signatory;
- Serve the original copy of the lifting order to the concerned Register of
Deeds or Assessor’s Office and attach one (1) copy thereof to the docket
of the case for records purposes; and
- Prepare and send a letter to the taxpayer with the information that the
NTL/NOL has already been lifted.

Collection of Delinquent
Accounts
Court actions – by civil action for collection of sum of money and or by filing
criminal action with the proper regular court or both simultaneously.
(Criminal case under NIRC Sec 254, 255, 280).
If the person convicted for violation of any of the provisions of this Code
has no property with which to meet the fine imposed upon him by the
court, or is unable to pay such fine, he shall be subject to a subsidiary
personal liability at the rate of one (1) day for each Eight pesos and fifty
centavos (P8.50) subject to the rules established in Article 39 of the Revised
Penal Code (Sec. 280, NIRC).

2a. SAC Module 200 PG - Dec2022

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SAAC Module 200 (eVer 2.0-Dec 2022) 3

SAAC Module 200 (eVer 2.0-Dec 2022) 4

Compute for the total amount of tax dues (excluding suggested

SAAC Module 200 (eVer 2.0-Dec 2022) 5

Compute for the total amount of tax dues (excluding suggested

SAAC Module 200 (eVer 2.0-Dec 2022) 6

Compute for the amount still due.

SAAC Module 200 (eVer 2.0-Dec 2022) 9

Compute the total amount due from the taxpayer (excluding

SAAC Module 200 (eVer 2.0-Dec 2022) 11

SAAC Module 200 (eVer 2.0-Dec 2022) 13

Income tax due per investigation P350,000.00

SAAC Module 200 (eVer 2.0-Dec 2022) 14

Computation for the delinquency penalty

SAAC Module 200 (eVer 2.0-Dec 2022) 15

In case the application for installment payment was made on or before

SAAC Module 200 (eVer 2.0-Dec 2022) 18

1. Show the computation of the interest based on the

2. Show the computation for amount payable in case the

SAAC Module 200 (eVer 2.0-Dec 2022) 20

1. Below is the computation of the installment payment of the

30/06/2021 71,536.65 - 71,536.65 214,609.94

31/07/2021 71,536.65 - 2,116.70 73,653.35 143,073.29

31/08/2021 71,536.65 - 1,411.13 72,947.78 71,536.65

30/09/2021 71,536.65 - 682.05 72,218.70 -

286,146.58 - 4,209.88 290,356.46

SAAC Module 200 (eVer 2.0-Dec 2022) 21

1. Below is the computation of the installment payment of the

30/06/2021 71,536.65 17,884.16 2,822.27 92,243.08 214,609.94

31/07/2021 71,536.65 17,884.16 2,116.70 91,537.51 143,073.29

31/08/2021 71,536.65 17,884.16 1,364.10 90,784.91 71,536.65

30/09/2021 71,536.65 17,884.16 705.57 90,126.38 -

286,146.58 - 7,008.64 364,691.87

SAAC Module 200 (eVer 2.0-Dec 2022) 22

1. The different IPA modes available are as follows:

The delinquent taxpayers may avail of the applicable IPA mode,

SAAC Module 200 (eVer 2.0-Dec 2022) 23

Applications for installment payment shall not be accepted where

b) The taxpayer has the financial capacity to pay the

SAAC Module 200 (eVer 2.0-Dec 2022) 24

Applications for installment payment shall not be accepted

c) More revenues can be immediately recovered by the

d) The taxpayer has a track record of not meeting their

SAAC Module 200 (eVer 2.0-Dec 2022) 25

2. The Application for Installment Payment Agreement

SAAC Module 200 (eVer 2.0-Dec 2022) 26

3. Supplemental Information on Application for Installment

SAAC Module 200 (eVer 2.0-Dec 2022) 27

4. Arrears Management Section (AMS) Head to conduct

SAAC Module 200 (eVer 2.0-Dec 2022) 28

a. Absence of any approved IPA that is still subsisting or the

SAAC Module 200 (eVer 2.0-Dec 2022) 29

c. Submission of a completely accomplished application duly

d. Payment of an application fee according to such amount

SAAC Module 200 (eVer 2.0-Dec 2022) 30

e. Payment of a minimum of ten percent (10%) of the total

f. Submission of a duly notarized waiver of prescription of the

SAAC Module 200 (eVer 2.0-Dec 2022) 31

5. Notwithstanding the stage where collection enforcement

SAAC Module 200 (eVer 2.0-Dec 2022) 32

6. Installment plans shall be negotiated and agreed upon on

SAAC Module 200 (eVer 2.0-Dec 2022) 33