TAX REMEDIES

REMEDY
Refers to the course of action
that you can take in order to
achieve what you want.
REMEDY
Collection is the end goal of taxation.
What is the relationship between
Assessment and Collection?
ASSESSMENT
 The term "assessment" refers to the determination of
amounts due from a person obligated to make
payments. In the context of national internal revenue
collection, it refers the determination of the taxes due
from a taxpayer under the National Internal Revenue
Code of 1997.
 (SMI-ED PHILIPPINES TECHNOLOGY, INC. vs. CIR, G.R. No.
175410)
ASSESSMENT
 “Assess” means:
 To impose a tax
 To charge with a tax
 To declare a tax to be payable
 To apportion a tax to be paid or contributed
 To fix a rate
 To fix or settle a sum to be paid by way of a tax
 To set, fix, or charge a certain sum to each taxpayer
 To settle, determine or fix the amount of tax to be paid
(Mamalateo)
ASSESSMENT AND COLLECTION
 Assessment precedes collection except when
the unpaid tax is a tax due per return as in the
case of a self-assessed income tax under the
pay-as-you-file system in which case collection
may be instituted without need of assessmen**t
pursuant to Sec. 56 of the NIRC (Dimaampao)
Presumption of Correctness of
Assessment
 CIR VS. HANTEX, G.R. No. 136975
 as a general rule, tax assessments by tax examiners are presumed
correct and made in good faith. All presumptions are in favor of
the correctness of a tax assessment. It is to be presumed, however,
that such assessment was based on sufficient evidence.
 However, the prima facie correctness of a tax assessment does not
apply upon proof that an assessment is utterly without foundation,
meaning it is arbitrary and capricious. Where the BIR has come out
with a "naked assessment," i.e., without any foundation character,
the determination of the tax due is without rational basis.
Presumption of Correctness of
Assessment
 CIRVS. HANTEX, G.R. No. 136975
 As the Court held in Collector of Internal Revenue v.
Benipayo, in order to stand judicial scrutiny, the
assessment must be based on facts. The presumption of
the correctness of an assessment, being a mere
presumption, cannot be made to rest on another
presumption.
Presumption of Correctness of
Assessment
 CIR vs. BPI, G.R. No. 134062
 Tax assessments by tax examiners are presumed correct
and made in good faith. The taxpayer has the duty to
prove otherwise. In the absence of proof of any
irregularities in the performance of duties, an assessment
duly made by a Bureau of Internal Revenue examiner
and approved by his superior officers will not be
disturbed. All presumptions are in favor of the correctness
of tax assessments.
Net Worth Method of Investigation
 Assets– Liabilities = Net Worth
 Holland vs. US (348 U.S. 121)
 If the government can prove with reasonable certainty the
taxpayer’s net worth, that is the excess of assets and
liabilities at a given date or starting point, and if the
government is then able to prove by independent evidence
that the taxpayer’s net worth has increased at the end of
the taxable year in question, then the inference is
reasonable and therefore permissible that the increase in
net worth represents the income of the taxpayer.
Net Worth Method of Investigation
 Allowed under Section 43 of the Tax Code which allows the
CIR to use any method of computation or accounting which
would more clearly reflect the income of the taxpayer.
 SEC. 43. General Rule. - The taxable income shall be computed upon
the basis of the taxpayer's annual accounting period (fiscal year or
calendar year, as the case may be) in accordance with the method of
accounting regularly employed in keeping the books of such
taxpayer, but if no such method of accounting has been so
employed, or if the method employed does not clearly reflect the
income, the computation shall be made in accordance with such
method as in the opinion of the Commissioner clearly reflects the
income. X X X
Net Worth Method of Investigation
 When can the CIR resort to the Net Worth Method of
Investigation?
1. no such method of accounting has been so employed, or
2. if the method employed does not clearly reflect the income.
REMEDIES FOR THE COLLECTION OF TAXES
 DISTRAINT / LEVY (Sec. 205)
 CIVIL OR CRIMINAL ACTION (Sec. 205)
 COMPROMISE (Sec. 204)
 TAX LIEN (Sec. 219)
 FORFEITURE (Sec. 224)
 CIVIL PENALTIES (Sec. 248)
DISTRAINT AND LEVY
 Distraint,
Levy, and Garnishment may be pursued
simultaneously with civil or criminal action in the
discretion of the authorities charged with the
collection of such taxes.
DISTRAINT AND LEVY
 DISTRAINT – a remedy whereby the collection of
the tax is enforced on personal properties;
 LEVY – refers to the seizure of real properties for the
satisfaction of the collection of delinquent taxes;
 GARNISHMENT – the enforcement of a tax liability
by attaching the bank deposits of the delinquent
taxpayer and turning over the same to the CIR.
DISTRAINT
 TWO TYPES OF DISTRAINT:
1. Actual – resorted to when a person fails to pay his
delinquent tax due at the time required for payment.
 Actual seizure and taking possession
2. Constructive – no actual tax delinquency is needed.
DISTRAINT
 When may CONSTRUCTIVE DISTRAINT be availed of?
1. Taxpayer is retiring from any business subject to tax
2. Intends to leave the PH
3. Removes his property from the PH
4. Performs any act tending to obstruct the proceedings for
collecting the tax due or which may be due from him.
 Constructivedistraint – a preventive remedy to forestall
hiding or possible dissipation of the taxpayer’s assets
when tax delinquency takes place.
DISTRAINT
 How is CONSTRUCTIVE DISTRAINT effected?
 The constructive distraint of personal property shall be
affected by requiring the taxpayer or any person having
possession or control of such property to sign a receipt
covering the property distrained and obligate himself to
preserve the same intact and unaltered and not to dispose of
the same, in any manner whatever, without the express
authority of the Commissioner.
LEVY (Sec. 207 (B)
 (B) Levy on Real Property. - After the expiration of the time required to pay the delinquent
tax or delinquent revenue as prescribed in this Section, real property may be levied upon,
before, simultaneously, or after the distraint of personal property belonging to the
delinquent. To this end, any internal revenue officer designated by the Commissioner or
his duly authorized representative shall prepare a duly authenticated certificate showing
the name of the taxpayer and the amounts of the tax and penalty due from him. Said
certificate shall operate with the force of a legal execution throughout the Philippines.
 Levy shall be affected by writing upon said certificate a description of the property upon
which levy is made. At the same time, written notice of the levy shall be mailed to or
served upon the Register of Deeds for the province or city where the property is located
and upon the delinquent taxpayer, or if he be absent from the Philippines, to his agent or
the manager of the business in respect to which the liability arose, or if there be none, to
the occupant of the property in question.
DISTRAINT AND LEVY
 SEC.217. Further Distraint or Levy. - The remedy by distraint of
personal property and levy on realty may be repeated if
necessary until the full amount due, including all expenses, is
collected.
CIVIL ACTION
 TWO ways of enforcement through Civil Action:
1. By filing a civil case for the collection of a sum of money
with the proper court;
2. By filing an answer to the petition for review filed by the
taxpayer with the CTA.

Note: needs the approval of the CIR.

CIVIL ACTION
 This Court has consistently held that "a judicial action for the
collection of a tax is begun by the filing of a complaint with the
proper court of first instance, or where the assessment is
appealed to the Court of Tax Appeals, by filing an answer to
the taxpayer's petition for review wherein payment of the tax is
prayed for.“
 Fernandez Hermanos vs. CIR, GR L-21551, Sept. 30, 1969
CIVIL ACTION
 Jurisdiction over civil actions:
 Delinquent taxes with basic tax amounting to 1 MILLION or MORE
shall be filed with the CTA.
 RTC retains jurisdiction over basic tax in the amounts up to LESS
THAN 1 MILLION.
CRIMINAL ACTION
 Also needs the approval of the CIR;
 The tax liability of a delinquent taxpayer may be
collected through the filing of a criminal action;
 Aside from collection, Criminal Action is also used for the
enforcement of statutory penalties. (Sec. 221)
 Thejudgement in criminal cases shall not only impose the
penalty but shall also order the payment of the taxes
subject of the criminal case. (Sec. 205)
CRIMINAL ACTION
 Extinction of one’s criminal liability does not necessarily result in
the extinguishment of his civil liability.
 Subsequent satisfaction of the taxes (Civil Liabilities) will not
extinguish the criminal liability.
 The filing of the criminal action implies the filing also of the civil
action, and no reservation thereto may be made. (Sec. 7(B)(1)
R.A. 1125, as amended)

 Is an assessment necessary prior to the institution of a criminal

action?
 (SEE: UNGAB VS. CUSI)
DOCTRINE OF WILLFUL BLINDNESS
The accused’s mere reliance on the
representations made by his accountant,
with deliberate refusal or avoidance to
verify the contents of his income tax
return and to inquire on its authenticity
constitutes “wilful blindness” –
COMPROMISE
Compromise- is a contract whereby the
parties, by making reciprocal concessions
avoid litigation or put an end to one
already commenced.
 Implies mutual agreement between the parties.
 There must be an agreement between the
parties
COMPROMISE
 SEC. 204 (A) The CIR may compromise the payment of any
internal revenue tax, when:
 (1) A reasonable doubt as to the validity of the claim against
the taxpayer exists; (DOUBTFUL VALIDITY)
 (2) The financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax. (FINANCIAL INCAPACITY)
COMPROMISE
All criminal violations may be
compromised, except:
1. those already filed in court, or
2. those involving fraud.

SEC. 204
ABATEMENT
SEC. 204 (B) The CIR may abate or cancel a tax
liability, when:
(1) The tax or any portion thereof appears to
be unjustly or excessively assessed; or
(2) The administration and collection costs
involved do not justify the collection of the
amount due.
OTHER REMEDIES
 Tax Lien
 Forfeiture
 Civil Penalties