ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 45  May 2023 CPA Licensure Examination

TAX-1702
TAXATION A. TAMAYO  E. BUEN  G. CAIGA  C. LIM  K. MANUEL

TAX REMEDIES
A. TAX REMEDIES OF THE GOVERNMENT
1. Remedies for the Collection of Delinquent Taxes.
a. Civil remedies for the The civil remedies for the collection of internal revenue taxes, fees, or charges, and
collection of internal revenue any increment thereto resulting from delinquency shall be by:
taxes, fees, or charges, and 1) Summary proceedings:
any increment thereto a) Distraint of personal property and
resulting from delinquency b) Levy upon real property and interest in or rights to real property.
2) Judicial proceedings:
a) Civil action or
b) Criminal action.
b. Summary or judicial Either of the summary or judicial or both simultaneously may be pursued in the
proceedings may be discretion of the authorities charged with the collection of such taxes.
simultaneously pursued
c. Distraint and levy cannot be The remedies of distraint and levy shall not be availed of where the amount of tax
availed when amount is not involved is not more than P100.
more than P100
d. Judgment of criminal case The judgment in the criminal case shall not only impose the penalty but shall also
shall also order payment of order payment of the taxes subject of the criminal cases as finally decided by the
taxes Commissioner.
2. Distraint of Personal Property
a. Distinction Between Actual and Constructive Distraint
Actual Distraint Constructive Distraint
1) Personal property is physically 1) Personal property is not physically taken.
taken.
2) The taxpayer is already 2) There is no finding yet of a discrepancy, only that the taxpayer is leaving the
delinquent in payment of his country or disposing of his property in fraud of creditors or is in the process of
taxes. liquidation.
3) Personal property taken is sold 3) Personal property is merely held as security to answer for any future tax
in order to satisfy the tax delinquency.
delinquency.
b. Persons who shall seize and 1) Amount of delinquent tax is Commissioner or his duly authorized
distraint personal property more than P1,000,000 representative.
(actual distraint) 2) Amount of delinquent tax is Revenue District Officer
P1,000,000 or less
c. Power to lift order of distraint The Commissioner or his duly authorized representative shall have the power to lift
order of distraint.
d. Release of distraint property If anytime prior to the consummation of the sale all proper charges are paid to the
upon payment prior to sale officer conducting the sale, the goods or effects distrained shall be restored to the
owner.
3. Levy on Real Property
a. When to levy After the expiration of the time required to pay the delinquent tax or delinquent
revenue, real property may be levied upon before, simultaneously or after the
distraint of personal property belonging to the delinquent taxpayer.
b. How shall levy be effected Levy shall be effected by writing upon a duly authenticated certificate showing the
name of the taxpayer and the amount of the tax and penalty due from him a
description of the property upon which levy is made.
c. To whom shall the levy be Written notice of the levy shall be mailed to or served upon the:
mailed or served 1) Register of Deeds of the province or city where the property is located, and
2) Upon the delinquent taxpayer,
3) Or if he is absent from the Philippines, to his agent or the manager of the
business in respect to which the liability arose.
4) Or if there is none, to the occupant of the property in question.
d. Redemption of property sold 1) The property sold maybe redeemed by the delinquent taxpayer within one year
from the date of sale by paying:
a) the amount of public taxes,
b) penalties and
c) interest thereon from the date of delinquency to the date of sale with
d) 15% interest per annum of the purchase price from date of purchase to the
date of redemption.
2) The owner shall not be deprived of the possession of the property sold and shall
be entitled to the rents and other income thereof until the expiration of the time
allowed for redemption.
e. Further distraint or levy The remedy by distraint on personal property and levy on realty maybe repeated, if
necessary, until the full amount due, including all expenses, is collected.
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4. Distinction Among Warrant of Distraint, Warrant of Levy and Warrant of Garnishment.

Distraint Levy Garnishment

a. As to subject matter Personal property owned by Real property owned by and Personal property owned by
and in possession of the in the possession of the the taxpayer but in the
taxpayer taxpayer possession of a third party
b. As to disposition for want Purchased by the Forfeited to the Purchased by Government
of bidders or bids Government then resold to Government then sold to then resold to meet
inadequate to satisfy tax meet deficiency. meet the deficiency. deficiency.
deficiency.
c. As to advertisement for No advertisement is Advertised once a week for No advertisement is
sale. required. three weeks required.

5. Injunction not Available to Restrain Collection of tax

a. Injunction not available No court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by Tax Code.
b. CTA can issue injunctions The Court of Tax Appeals can issue injunctions while in the exercise of its appellate
jurisdiction in cases pending before it. This is an exception to no injunction rule.
c. CTA may enjoin collection The CTA may enjoin collection of taxes if in its opinion the same may jeopardize the
interest of the government and/or the taxpayer.

6. Tax Lien and Remedy for Enforcement of Statutory Penal Provision

a. Tax lien A legal claim or charge on property, either real or personal, as security from the payment
of a tax obligation.
b. Remedy for enforcement The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil
of statutory penal action, as the particular situation may require, subject to the approval of the Commissioner.
provision

7. Period for Assessment and Collection (Summarized)

a. Period of limitation upon assessment and collection.

Period of Internal revenue taxes shall be assessed within 3 years after the due date, or from the day the
assessment return was filed, where a return is filed beyond the due date.

Note: A return filed before the due date shall be considered as filed on such due date.
b. Return filed was 1) Collection with prior assessment
not false or a) Assessment shall be made within 3 years from the date of filing of return or from the last day
fraudulent required by law for filing, if the return was filed before such last day;

b) Collection shall be made within 5 years from the date of assessment, either by:
(1) Summary proceedings, or
(2) Judicial proceedings

2) Collection without prior assessment

a) No proceeding in court without assessment for the collection shall be begun after the
expiration of the 3-year period.
c. Return filed was 1) Collection with prior assessment.
false or a) Assessment shall be made at any time within 10 years after discovery of the falsity, fraud or
fraudulent with omission;
intent to evade
tax or no return b) Collection shall be made within 5 years from the date of assessment, either by:
was filed (1) Summary proceedings, or
(2) Judicial proceedings.

2) Collection without prior assessment

a) A proceeding in court for the collection of tax may be filed without assessment at any time
within 10 years after the discovery of the falsity, fraud or omission.
d. Extension of 1) If before the expiration of the 3-year period, both the Commissioner and the taxpayer have
assessment agreed in writing to its assessment after such time, assessment maybe made within the period
agreed.

2) The period so agreed upon may be extended by the subsequent written agreement before the
expiration of the 5-year period following the assessment by:
a) Summary proceedings, or
b) Judicial proceedings.

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8. Suspension of Running of Statute of Limitation
Instances where the The running of the period on the making of assessment and the beginning of distraint or levy or a
running of Statute of proceeding in court for collection, in respect of any deficiency, shall be suspended for the period
Limitation during which the Commissioner is prohibited from making the assessment or beginning distraint or
levy or any proceeding in court and for 60 days thereafter:
1) when the taxpayer requests for a reinvestigation, which is granted by the Commissioner;
2) when the taxpayer cannot be located in the address given by him in the return filed
upon which a tax is being assessed or collected (except if the taxpayer informs the
Commissioner of any change in address);
3) when the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property
could be located;
4) when the taxpayer is out of the Philippines.

B. TAX REMEDIES OF THE TAXPAYER

1. Definition of Terms
a. Assessment Assessment is the official action of an officer authorized by law in ascertaining the amount of
tax due under the law from a taxpayer.
b. Assessment notice Assessment notice is a formal demand sent to the taxpayer requiring payment within a
specified time of the tax due from him including interest and civil penalties.
2. Exceptions to Prior Notice of the Assessment
Cases when pre- A pre-assessment notice shall not be required in the following cases:
assessment notice shall 1) When the finding for any deficiency tax is the result of mathematical error in the
not be required (Formal computation of the tax as appearing on the face of the return; or
Letter of Demand and 2) When a discrepancy has been determined between the tax withheld and the amount
Final Assessment Notice actually remitted by the withholding agent; or
shall be issued outright) 3) When the taxpayer who opted to claim a refund or tax credit of excess creditable tax for a
taxable period was determined to have carried over and automatically applied the same
amount claimed against the estimated tax liabilities for the taxable quarters of the
succeeding taxable year; or
4) When the excise tax due on excisable articles has not been paid; or
5) When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded
or transferred to non-exempt persons.
3. Due Process in the Issuance of a Deficiency Tax Assessment (Remedy Against an Assessment) (RR 18-2013
as amended under Revenue Regulations No. 7-2018 as further amended under RR No. 22-2020)
a. Notice Discrepancy If a taxpayer is found to be liable for deficiency tax or taxes in the course of investigation conducted
(replaced Notice for by a Revenue Officer, the taxpayer shall be informed through a Notice of Discrepancy (NOD).
Informal Conference)
(Sec. 2, RR No. 22-2020) The NOD aims to fully afford the taxpayer with an opportunity to present and explain his side on the
discrepancies found.

The Revenue Officer who audited the taxpayer's records shall, amonq others, state in the initial
report of investigation his findings of discrepancies.

Based on the said Officer’s submitted report of investigation, the taxpayer shall be informed, in
writing, by the Revenue District Office or by the Assessment Division/Regional Investigation Division,
as the case mav be (in the case of Revenue Reqional Offices) or bv the Chief of Division concerned
(in the case of the BIR National Office) of the discrepancv or discrepancies in the taxpaver's
pavment of his internal revenue taxes, for the purpose of the “Discussion of Discrepancy".

The Discussion of Discrepancy shall in no case extend beyond thirtv (30) davs from receipt of the
Notice of Discrepancy. It is during the Discussion of Discrepancy that the taxpayer is given the
opportunity to present his side of the case and explain the discrepancy found during the
investigation of the Revenue Officer assigned and submit documents to support the explanation or
arguments.
lf the taxpaver disagrees with the discrepancy/discrepancies detected during the audit/investigation,
the taxpayer must present an explanation and provide documents to support his explanation. The
documents must be submitted during the discussion. Should the taxpayer need more time to
present the documents, he may submit such documents after the discussion. The taxpayer must
submit all necessary documents that support his explanation within 30 days after the receipt of the
Notice of Discrepancy.
If after being afforded the opportunity to present his side through the Discussion of Discrepancy, it
is still found that the taxpayer is still liable for deficiency tax or taxes and the taxpayer does not
address the discrepancy through payment of deficiency taxes or the taxpayer does not agree with
the findings, the investigating office, shall endorse the case to the reviewing office and approving
official in the National Office or the Revenue Regional Office, for issuance of a deficiency tax
assessment in the form of a Preliminary Assessment Notice within ten (10) days from the conclusion
of the Discussion.
Failure on the part of Revenue Officers to complv with the periods indicated herein shall be meted
with penaltv as provided bv existinq laws, rules and requlations.
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b. Preliminary Assessment If after review and evaluation by the Commissioner or his duly authorized representative, as the case
Notice (PAN) may be, it is determined that there exists sufficient basis to assess the taxpayer for any deficiency
tax or taxes, the said Office shall issue to the taxpayer a Preliminary Assessment Notice (PAN) for
the proposed assessment.

It shall show in detail the facts and the law, rules and regulations, or jurisprudence on which the
proposed assessment is based

The taxpayer has to respond within fifteen (15) days from date of receipt of the PAN.
c. Formal letter of demand If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN, he shall be
assessment notice considered in default, in which case, a Formal Letter of Demand and Final Assessment Notice
(FLD/FAN) shall be issued calling for payment of the taxpayer's deficiency tax liability, inclusive of
the applicable penalties.

If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that he/it
disagrees with the findings of deficiency tax or taxes, an FLD/FAN shall be issued within fifteen (15)
days from filing/submission of the taxpayer’s response, calling for payment of the taxpayer's
deficiency tax liability, inclusive of the applicable penalties.

The Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued by the
Commissioner or his duly authorized representative.

The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the
law, rules and regulations, or jurisprudence on which the assessment is based; otherwise, the
assessment shall be void.
d. Protest the assessment The taxpayer or its authorized representative or tax agent may protest administratively against the
aforesaid FLD/FAN within thirty (30) days from date of receipt thereof.

The taxpayer protesting an assessment may file a written request for reconsideration or
reinvestigation.

Request for reconsideration refers to a plea of re-evaluation of an assessment on the basis of

existing records without need of additional evidence. It may involve both a question of fact or of law
or both.

Request for reinvestigation refers to a plea of re-evaluation of an assessment on the basis of newly
discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may
also involve a question of fact or of law or both.
e. Submit all relevant For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in
supporting documents to support of his protest within sixty (60) days from date of filing of his letter of protest, other-wise,
the BIR the assessment shall become final.

The term “relevant supporting documents” refer to those documents necessary to support the legal
and factual bases in disputing a tax assessment as determined by the taxpayer.

The sixty (60)-day period for the submission of all relevant supporting documents shall not apply to
requests for reconsideration.

Furthermore, the term “the assessment shall become final” shall mean the taxpayer is barred from
disputing the correctness of the issued assessment by introduction of newly discovered or additional
evidence, and the FDDA shall consequently be denied.
f. Appeal to Court of Tax If the protest is denied, in whole or in part, by the Commissioner’s duly authorized representative,
Appeals (CTA) division or the taxpayer may either:
request for 1) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the
reconsideration to the said decision; or
Commissioner 2) elevate his protest through request for reconsideration to the Commissioner within thirty (30)
days from date of receipt of the said decision.

No request for reinvestigation shall be allowed in administrative appeal and only issues raised in the
decision of the Commissioner’s duly authorized representative shall be entertained by the
Commissioner.

If the protest is not acted upon by the Commissioner’s duly authorized representative within one
hundred eighty (180) days counted from the date of filing of the protest in case of a request for
reconsideration; or from date of submission by the taxpayer of the required documents within sixty
(60) days from the date of filing of the protest in case of a request for reinvestigation, the taxpayer
may either:
1) appeal to the CTA within thirty (30) days after the expiration of the one hundred eighty
(180) -day period; or
2) await the final decision of the Commissioner’s duly authorized representative on the
disputed assessment.

If the protest or administrative appeal, as the case may be, is denied, in whole or in part, by the
Commissioner, the taxpayer may appeal to the CTA within thirty (30) days from date of receipt of
the said decision. Otherwise, the assessment shall become final, executory and demandable.
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A motion for reconsideration of the Commissioner’s denial of the protest or administrative appeal, as
the case may be, shall not toll the thirty (30)-day period to appeal to the CTA.
If the protest or administrative appeal is not acted upon by the Commissioner within one hundred
eighty (180) days counted from the date of filing of the protest, the taxpayer may either:
1) appeal to the CTA within thirty (30) days from after the expiration of the one hundred
eighty (180)-day period; or
2) await the final decision of the Commissioner on the disputed assessment and appeal such
final decision to the CTA within thirty (30) days after the receipt of a copy of such decision.
It must be emphasized, however, that in case of inaction on protested assessment within the 180-
day period, the option of the taxpayer to either:
1) file a petition for review with the CTA within 30 days after the expiration of the
180-day period; or
2) await the final decision of the Commissioner or his duly authorized representative on the
disputed assessment and appeal such final decision to the CTA within 30 days after the
receipt of a copy of such decision, are mutually exclusive and the resort to one bars the
application of the other.
g. File an appeal with the 15 days from date of receipt of adverse decision of a CTA Division
CTA en banc
h. File a verified petition for 15 days from the receipt of adverse decision or ruling of the CTA en banc
review with Supreme
Court

4. Remedy Against an Erroneously or Illegally Paid Tax.

a. File a formal claim for File a formal claim for refund with the BIR within 2 years from the date of payment of the tax.
refund
b. Submit the relevant Submit the relevant documents within sixty (60) days from filing of claim for refund.
documents

c. File an appeal with CTA File an appeal with CTA, raising questions of facts and/or law within 30 days (but within the 2-year
period required for filing a formal claim for refund):
1) from receipt of final unfavorable decision on the claim for refund or
2) from the lapse of 180 days.
Notes: 1) If the tax is paid in installments, the two-year period shall be counted from the date of
final payment.
2) The filing of the claim for refund with the BIR and the institution of judicial action with
the CTA to recover the tax can be done either simultaneously or one after the other
within the 2-year period to protect the interest of the taxpayer.
d. File an appeal with the 15 days from date of receipt of adverse decision of a CTA Division
CTA en banc
e. File a verified petition for 15 days from the receipt of adverse decision or ruling of the CTA en banc
review with Supreme
Court

5. Refund or Credit Even Without Written Claim and Forfeiture of Refund

a. Refund or credit even The Commissioner may, even without written claim therefor, refund or credit any tax, where the face of
without written claim the return upon which payment was made, such payment appears clearly to have been erroneously paid.
b. Forfeiture of refund A refund check or warrant which shall remain unclaimed or uncashed within 5 years from the date the
said warrant or check was mailed or delivered, shall be forfeited in favor of the Government and the
amount shall revert to the general fund.
c. Forfeiture of tax A Tax Credit Certificate issued, which shall remain unutilized after 5 years from the date of issue, shall,
credit certificate unless revalidated, be considered invalid, and shall not allowed as payment for internal revenue tax
liabilities of the taxpayer, and the amount covered by the certificate will revert to the general fund.

Any TCC which remains unutilized for more than one (1) year at any given interval of time during its
validity shall be converted into cash with prior written notice by the BIR, subject to the availability of
funds in accordance with the procedural requirements that will be issued by the BIR for this purpose.
(Sec. 2 b), RR No. 14-2020)

6. Instances that Suspend the Running of the Two-Year Peremptory Period.

Suspension of the a. If the Commissioner made the taxpayer asking for refund believe that he would be credited for the
running of the two-year overpayment.
peremptory period b. If there is an agreement between the taxpayer and the agent of the Commissioner that they would
wait for the decision of the SC to guide them in the settlement of the question or questions involved
in the fraud.

- = END = -

“The success of tomorrow depends on the work today.” - David Frost

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