THE COLLECTION MANUAL

CHAPTER III
DELINQUENT ACCOUNTS
CM 300 OVERVIEW

Collection of Accounts Receivables supports the mission of the Bureau of Internal

Revenue in its mandate to collect the correct amount of taxes from taxpayers. While
accounts receivables represent only about 1/10 of 1 % of the Bureau’s total collections,
intensified efforts in their collection creates strong impact on taxpayers to voluntarily pay
their tax obligations. Accordingly, effective and efficient receivable accounts
management will not only contribute to increased tax collections but can be a tool to
enhance taxpayers’ compliance.

The accounts receivable emanates from the following:

1. Non-payment of tax due arising from:

a. Dishonored check;

b. Non-payment of second installment of the income tax of the individual

taxpayer; and

c. Non-payment of tax due per return.

2. Non-payment of tax due per Final Assessment Notice (FAN) or Final Decision on
Disputed Assessment (FDDA) within the prescribed period of thirty (30) days
from the issuance of the FAN per Monthly Summary of Taxes Assessed (BIR
Form No. 40.00) or the FDDA.

a. Result of audit or compliance checks conducted pursuant to Returns

Processing System (RPS) assessment, pre-audit or table audit, short audit,
package audit, assessment through Letter Notice (LN), and such other
assessments issued in the course of verifying the level of taxpayer’s
compliance; and

b. Valid stopfiler.

This Chapter covers the accounts receivables, including delinquent accounts, being
handled by the Collection Service through the Collection Enforcement Division (CED),
the Collection Section of the Revenue District Office (RDO)/Large Taxpayer District
Office (LTDO), the Collection Division of the Regional Office and the Large Taxpayer
Collection Enforcement Division (LTCED) of the Large Taxpayer Service (LTS). The
enforcement of collection of the Bureau’s receivables is performed by using a variety of
collection techniques which are discussed in detail in this Chapter.1

DEFINITION OF TERMS

For purposes of this Manual and in order to provide clarity and better understanding of
the policies and procedures in the implementation thereof, the words and phrases herein
provided are defined as follows:

1. Accounts Receivables – refer to the amount of tax due from a taxpayer who failed
to pay the same within the time prescribed for its payment arising from a self-
assessed tax, or a deficiency tax assessment issued by the Bureau. These accounts
also include deficiency tax assessments covered by FANs even if the same are still
subject matters of administrative or judicial protests filed by taxpayers within the
prescribed reglamentary period.

2. Delinquent Accounts – refer to Accounts Receivables that arose from unpaid self-
assessed taxes or tax assessments which are already considered as final and
executory due to any of the following:

a. failure to file a protest within thirty (30) days from receipt of the
assessment;

b. failure to submit all relevant supporting documents within sixty (60) days
from filing of the administrative protest;

c. failure to appeal to the Court of Tax Appeals (CTA) within thirty (30) days
from receipt of the BIR decision denying the administrative protest; and

d. issuance by the competent Court of final adverse decision on the assessed

taxes, in favor of the BIR.

3. Assessment – refers to the act or process of establishing, fixing, or determining the

tax liability of a taxpayer. It is also a demand made on a concerned taxpayer to
settle the amount indicated in a valid assessment notice. It also signals the time
when penalties and interests on any unpaid tax liability begin to accrue against the
taxpayer. As a general rule, it is a preliminary but essential step to the enforcement
of collection prior to the issuance of warrants of distraint and levy; and it is
required to establish a cause for judicial action against the taxpayer.

4. Deficiency tax assessment – is an assessment made by an authorized Revenue

Officer whereby the correct amount of the tax due from a taxpayer is determined
after the conduct of audit, examination or investigation of the taxpayer’s tax
returns/declarations filed, books of accounts, records, documents and/or other third-
1
The collection techniques discussed in this chapter is drawn basically from the provisions of the National Internal
Revenue Code (NIRC) of 1997, as amended, specifically Title VIII- (Remedies) and relevant revenue issuances.
Some procedures are based on best practices of the implementing units while others are new and improved
procedures.

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 party information.

5. Self-Assessment – refers to one in which the tax due is assessed by himself, and
the amount of tax assessed is reflected in the tax return/declaration that is filed by
him and the tax assessed is paid at the time he files the tax return/declaration.

6. Jeopardy Assessment – it is an assessment made by an authorized Revenue

Officer without the benefit of complete or partial audit, in the light of the said
official’s belief that the assessment and collection of a deficiency tax will be
jeopardized by delay caused by the taxpayer’s failure to comply with the
audit/investigation requirements to present his books of accounts and/or other
pertinent records, substantiate all or any of the deductions, exemptions or credits
claimed in the filed return. In order to prevent the issuance of a jeopardy
assessment, the taxpayer may be required to execute a waiver of the statute of
limitations.

7. Preliminary Assessment – refers to an initial or tentative assessment that is made

when it is determined that there exist sufficient basis to assess the taxpayer for any
deficiency tax or taxes. A notice on the preliminary assessment is being formally
issued and the same must show, in detail, the facts and the law, rules and
regulations, or jurisprudence on which the proposed assessment is based. As a rule,
the taxpayer is accorded the chance to respond to the proposed assessment fifteen
(15) days from receipt thereof; otherwise, he will be considered in default, and a
formal letter of demand and final assessment notice calling for the payment of the
deficiency tax liability, inclusive of the applicable penalties, shall be caused to be
issued.

8. Final Assessment – refers to a formal assessment issued against a taxpayer which

accompanies the formal demand letter that contains the statement of the facts, the
law, rules and regulations, or jurisprudence on which an assessment is made.

9. Undisputed Final Assessment – is an assessment that was not protested within the
time allowed by law thereby making the same final, executory and demandable.

10. Disputed Assessment – refers to an assessment made where the taxpayer contests
the legality or validity of the assessment and request that the same be cancelled or
withdrawn.

11. Erroneous Assessment – refers to an assessment made by a person who has the
authority to act but the same is erroneous or he errs in the exercise of that power.

12. Letter of Demand – refers to the formal communication issued to the taxpayer
calling for the payment of final deficiency tax assessment, including all applicable
penalties. In order to be considered valid, the formal demand letter must clearly
state, in detail, the facts and the law, rules and regulations, or jurisprudence on
which the proposed assessment is based.

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 13. Request for Reconsideration – refers to a plea for a re-evaluation of an
assessment on the basis of existing records without the need of additional evidence.
It may involve both a question of fact or of law or both.

14. Request for Reinvestigation – refers to a plea for a 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 law or both.

15. Basic tax due - refers to any of the following:

a. Unpaid tax shown on the return filed;

b. Tax due shown on the assessment notice and letter of demand, excluding
surcharge, interest and suggested compromise penalty;

c. Unpaid second installment of income tax due per return filed; and

d. Amount of dishonored check.

CM 301 ASSIGNMENT OF DOCKETS FOR COLLECTION

ENFORCEMENT [Refer to FC 301]

The Assessment Division of the Regional Office/LTS shall forward the Monthly
Summary of Taxes Assessed (BIR Form No. 40.00) (Annex 300-1.1), for both the
unprotested/delinquent and the protested assessments, and the dockets listed therein
to the concerned RDO/LT Audit Divisions/LTDO, thru the Regional Administrative
Division/Records Division in the National Office (NO). The copies of these monthly
reports shall likewise be transmitted to the concerned Regional Collection Division and
the Collection Enforcement Division in the national office.

For cases or dockets emanating from the National Investigation Division (NID) in the
National Office, the BIR Form No. 40.00 and the case dockets shall be forwarded to the
concerned home RDO of the taxpayer, thru the Records Division, for the necessary
enforcement of collection thru summary administrative remedies.2

The Regional Administrative Division/Records Division in the National Office shall:

1. Receive BIR Form No. 40.00 and the dockets for microfilming/scanning/imaging
of dockets. As a rule, all dockets of tax cases involving an amount of
Php10,000.00 or over, dockets of court cases irrespective of the amount, and
dockets of less than Php10,000.00 where the microfilming thereof has been
recommended by the department head concerned shall be forwarded to the
Records Division for microfilming before the assessment notices or demand
2
Memorandum of Deputy Commissioner Nelson M. Aspe dated 25 July 2007 transferring the responsibility of
enforcing collection summary remedies for national office cases, other than LTS cases, from Collection Service to
the concerned regional offices having jurisdiction over the taxpayer.

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 letters are sent to the taxpayers concerned or before the tax case is filed in court.3

2. Batch the dockets in a maximum of 10 dockets per batch and transmit the dockets
and copies of BIR Form No. 40.00 to the RDO/LTDO/LTCED having jurisdiction
over the case; and

3. Furnish the Collection Division of the Regional Office/CED with the copy of BIR
Form No. 40.00 reports.

The Collection Division of the Regional Office/LTS shall record and index the dockets
listed in BIR Form No. 40.00 for monitoring purposes. All items/information found in
BIR Form No. 40.00 shall be transcribed to the index card.

Upon receipt of the dockets and copies of BIR Form No. 40 thru the Regional
Administrative Division/Records Division, the RDO/Chief, LTDO/Chief LTCED shall
forward the same to the Collection Section-RDO/LTDO/Collection Enforcement Section-
LTCED for the assignment of dockets to a Case Officer/Seizure Agent for necessary
action relative to the immediate enforcement of collection of the accounts receivables.

The Collection Section- RDO/LTDO/LTCED shall:

1. Receive the dockets, transcribe in the General Control Ledger (GCL) (BIR Form
No. 12.53) (Annex 300-1.2) all the pertinent information reflected in BIR Form
No. 40.00 for each and every case;

2. Transcribe in BIR Form No. 12.53 all the relevant information on other Accounts
Receivable dockets that were received from other offices (Transfer-in-Accounts-
GCL), as well as the delinquent accounts not covered by assessment notices such
as unpaid self-assessed taxes, unpaid second installment cases, and cases
involving dishonored checks;

3. Prepare a Memorandum of Assignment (MOA) (Annex 300-1.3) for each and

every docket, assigning the case dockets to Case Officers/Seizure Agents, for
verification and the enforcement of summary remedies, and forward the same
together with the docket of the case to the Revenue District Officer/LTDO
Chief/LTCED Chief for review and signature; and

4. Require the designated Revenue Officer/Seizure Agent to receive the MOA,

together with the docket of the case, once the same has been signed by the
Revenue District Officer/LTDO Chief/LTCED Chief, and retain a copy of the
MOA for monitoring purposes.

The Revenue Officer/Seizure Agent shall:

3
Revenue Memorandum Order (RMO) No. 45-68 Policies and Procedures on the Microfilming Applications in the
BIR.

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 1. Receive the signed MOA and the docket of the case;

2. Verify if the assigned accounts receivable/delinquent account has already been

paid or settled. If paid, secure a copy of the official receipt evidencing the full
settlement thereof. If not yet paid or settled, immediately demand from the
taxpayer the payment of the said receivables. If taxpayer still fails or refuses to
pay the tax liability notwithstanding the said demand for payment, proceed to the
applicable enforcement action against the taxpayer thru administrative summary
remedies; and

3. Include the cases received in the inventory of tax cases for collection enforcement
thru summary remedies. Such cases entered into the inventory shall form part of
the Bureau's AR/DA database and shall serve as guide in future appropriate
actions thereon by concerned officers (Refer to CM 302-
Management/Handling of Accounts Receivables/Delinquent Accounts).

CM 302 MANAGEMENT/HANDLING OF ACCOUNTS RECEIVABLES

(ARs)/DELINQUENT ACCOUNTS (DAs) [Refer to FC 302]

For purposes of establishing accurate and updated AR/DA profile of the Bureau, the
timely recognition of each and every AR/DA created as well as the updating of their
respective status shall be undertaken on a regular basis. This requires regular updating of
the AR's/DA's case history sheets and indexing of all cases referred to the concerned
office and subsequently referred to the case officer/seizure agent. Likewise and for
purposes of readily determining the relative collectability of these ARs/DAs, the said
timely and regular updating shall cover the proper/current classification and aging of
these accounts. This shall also serve as basis for the prioritization of the AR/DA cases to
be subjected to enforcement action and the determination of appropriate collection
enforcement remedies to be applied on each and every case.

Any BIR office in possession of any AR/DA docket shall be responsible in the updating
of the prescribed case history sheets and other pertinent files/records, as well as the
current classification of the AR/DA case, in case there is any change in the status and
classification thereof.

A. Conduct of the Inventory, Classification and Aging of AR/DA

The concerned BIR office having physical possession of the AR/DA docket shall:

1. Update the Case History Sheet (Annex 300.1.4) or make one if there is none yet;

2. Update the index cards/file pertaining to ARs/DAs referred to their Office. If

there is none yet, accomplish an Index Card to record the name of taxpayer (in

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 case of individual taxpayer, indicate family name before the given name), TIN
and address, total amount of AR/DA (indicate amount of basic tax, surcharge,
interest and compromise penalty), date of assessment, assessment number, tax
type/s, period covered, collection prescription date, originating Revenue District
Office number, date of receipt of the docket, and the name of the Revenue Officer
to whom the case was assigned/referred to;

3. Classify AR/DA cases as to collectible, suspense and uncollectible; and further

classify based on the definitions provided below:

3.1. Collectible DA – FAN/FDDA- refers to AR emanating from a Final

Assessment Notice (FAN) or Final Decision on Disputed Assessment
(FDDA) issued by the Bureau for deficiency internal revenue taxes. In
addition, AR/DA covered by approved installment plan shall be included
in this classification.

3.2. Collectible DA – Unpaid Self-Assessed Taxes – refers to AR resulting

from any of the following:

a. Tax due per return filed by taxpayers who failed to pay the same
within the time prescribed for its payment; or

b. Non-payment of the 2nd installment due from individual taxpayers who

availed of installment payments of income tax under Section 56 (A)
(2) of the Tax Code, as amended.

3.3. Collectible DA - Dishonored Checks – refers to AR resulting from tax

payment made thru bank draft or check but was denied by drawee-bank
due to drawer-taxpayer’s insufficiency of funds in his/her/its bank
accounts, accounts closure, or for other reasons of dishonor as prescribed
under the Negotiable Instruments Law.

3.4. Collectible DA – With Application for Compromise – refers to accounts

covered by an application for the compromise settlement program of the
Bureau or the taxpayers have offered to compromise the deficiency taxes
due from them under Section 204 (A) of the Tax Code, as amended.

3.5. Collectible DA – With Application for Abatement – refers to accounts

wherein taxpayers have applied for abatement under an abatement
program offered by the Bureau or have requested for abatement under
Section 204 (B) of the Tax Code, as amended.

3.6. Uncollectible DA – Suspense – refers to DA where any of the following

circumstances are present:
a. Taxpayer is deceased leaving no distrainable and leviable assets.
However, if the assessment issued is for both spouses and the other

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 spouse is still living, the same should not be considered as
uncollectible.

b. Taxpayer is serving life imprisonment without distrainable and

leviable assets.

c. Taxpayer is suffering from lingering illness and not capable of earning

a living, without distrainable and leviable assets.

d. Taxpayer is declared insolvent by the court or is found to be incapable

of earning a living upon verification, and without distrainable and
leviable assets.

e. Taxpayer is an individual and his/her whereabouts is unknown,

without distrainable and leviable assets.

f. The taxpayer is a foreign national who came to the Philippines as a

consultant, or a foreign corporation who has done business in the
Philippines, and left after the completion of the project leaving no
distrainable and leviable assets.

g. Taxpayer is a domestic corporation, which was verified to have ceased

operations or has been officially dissolved, with no distrainable or
leviable assets and its subscribed shares of stock have been fully paid;
Provided, it has been determined that the whereabouts of its
responsible officers could no longer be located.

3.7. Uncollectible DA – Write Off – refers to DA where write off may be

effected due to any of the reasons enumerated below, subject to the
existing rules and regulations thereon.:

a. DA case where the Final Assessment Notice was not received by the
taxpayer due to change of address, notwithstanding the Bureau’s
timely receipt of information on such change of address from the said
taxpayer and the period to assess has already prescribed (without
prejudice to the institution of applicable administrative sanction
against the erring Bureau official/s.

b. Period to collect has already prescribed (without prejudice to the

institution of applicable administrative sanction against the erring
Bureau official/s.

c. A decision was already rendered by the Court declaring the account as

uncollectible, and such decision has become final and executory.

d. The DA is considered uncollectible, as decided by the Bureau’s

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 National Evaluation Board (NEB).

e. The administration and collection costs involved do not justify the

collection of the total amount due –

e.1 where the total amount due (per case docket) per assessment
notice is Five thousand pesos (Pp5,000.00) and below, subject to
adjustment to its present value using the Consumer Price Index
(CPI), as published by the National Statistics Office (NSO),when
deemed necessary; or

e.2 where the total amount due per assessment notice is more than the
above amount, subject to final approval by the National
Evaluation Board.

However, if the docket involves assessments of more than one (1) tax
type, the aggregate amount thereof should be subject to the above
threshold.

3.8. AR - Protested- refers to AR where a request for reinvestigation or

reconsideration has been filed due to the following reasons:

a. A written protest (legal or factual) was timely filed by the taxpayer but
still awaiting the final resolution by the assessing office; or

b. The taxpayer failed to receive the assessment notice/letter because it

was sent to the address reflected in the filed tax return or the address
indicated in the BIR’s ITS-Registration System notwithstanding BIR’s
receipt of a notice of change of address or a notice of business
cessation; or

c. The taxpayer failed to receive the assessment notice/letter because it

was inadvertently sent to the wrong address.

3.9. Collectible AR - Non-filing/Non-payment – refers to AR originating

from failure of a taxpayer to file a return or pay the tax due (e.g. stop-filer
cases or automatic system- created receivables).

4. Assign the corresponding classification code indicated below and reflect in the
upper right portion of the Case History Sheet and Index Card:

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 Collectible DA: Classification Code
Collectible DA-FAN/FDDA DAF
Collectible DA-Unpaid Self-Assessed Tax DAU
Collectible DA- Dishonored Checks DAD
Collectible DA- with Application for Compromise DAC
a. Doubtful Validity
Jeopardy Assessment
Arbitrary Assessment
b. Financial Incapacity
Net Worth Deficit
Impaired Capitalization
Ceased Operations
Collectible DA- with Application for Abatement DAA
a. The tax or any portion thereof
appears to be unjustly or
excessively assessed;
b. The administration and
collection costs involved do not
justify the collection of the
amount due.
Uncollectible DA:
Uncollectible DA- Suspense DAS
Uncollectible DA- Write-off DAW
Collectible AR:
Collectible AR- with Protest ARP
Collectible AR- Non-filing/Non-payment ARN

5. Prepare a report on Inventory List of Accounts Receivable/Delinquent Account

Cases (Annex 300-1.5);

6. Age the accounts, in the case of AR/DA, based on the date when the FAN or
FDDA becomes final and executory, whichever comes later. The FDDA date is
only applicable if the request for reinvestigation has been officially granted before
the prescription date, pursuant to existing rules and regulations.

Illustrative Examples

Q1 JMS Enterprises received an assessment notice from BIR on January 5,

2002. JMS Enterprises forgot about the assessment notice and did not file
a protest on the same. On February 5, 2007, JMS Enterprises received a
Final Notice before seizure from the BIR. Has the period to collect from

JMS Enterprises prescribed?

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A1 YES. The Bureau has 5 years or 1,825 (365 x 5) days from February 5,
2002 within which to enforce collection, remedies from JMS Enterprises.
Thus, the Bureau has only until February 4, 2007 within which to enforce
collection remedies.

Q2 Same Facts above but supposing that February 4, 2007 has been declared
a public holiday, can the BIR still enforce collection remedies on February
5, 2007?

A2 NO. There is no pretermission in extinctive prescription. Thus, a holiday

or non-working day will not move the prescription date to the next
working date.

Q3 JMS Enterprises received an Assessment Notice from the BIR on January

5, 2002, and timely filed a request for reinvestigation on the assessment
on February 2, 2002. The BIR came out with a Final Decision on
Disputed Assessment (FDDA) on January 3, 2003, reiterating the
assessment issued on January 5, 2002. JMS Enterprises received the
FDDA on January 10, 2003. What is the last day for the BIR to enforce
collection remedies?

A3 January 10, 2003

+ 30 days

February 9, 2003
+ 5 years*

February 8, 2008

*Sections 222 (c) and 222 (d) of the Tax Code expressly provide for the
five-year period within which to collect taxes. Accordingly, the number
of days in a year, whether or not there are leap years within the said five-
year period, has no bearing in the counting of the due date for the
enforcement of collection remedies by the BIR..

Q4 JMS Enterprises received an assessment notice from the BIR on January

5, 2002. JMS Enterprises filed a request for reinvestigation on January
25, 2002. The BIR resolved the request for reinvestigation via issuance of
a FDDA on February 5, 2007, reiterating the assessment. Accompanying
the FDDA is a warrant of distraint and levy. Has the BIR’s right to
collect on the assessment prescribed?

A4 YES. The BIR’s right to collect had already prescribed on January 4,

2007. There was no indication that the taxpayer’s request for
reinvestigation filed on January 25, 2002 had been granted by the
Commissioner. Thus, the prescriptive period for collection was not tolled

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 by the request for reinvestigation filed by JMS Enterprises.

Q5 JMS Enterprises received an assessment notice from the BIR on January

5, 2002. JMS Enterprises filed a request for reinvestigation on January 25,
2002. The BIR replied on February 15, 2002 stating that it is granting
reinvestigation and that the matter has been assigned to certain revenue
officers for reinvestigation. Several communications between the taxpayer
and the BIR ensued in the course of the reinvestigation. On April 15,
2008, a FDDA was issued by the BIR, reiterating the assessment notice
protested by the taxpayer. JMS Enterprises received the FDDA on
September 1, 2008. It failed to file a petition before the Court of Tax
Appeals within 30 days from receipt of the FDDA. Instead, JMS
Enterprises filed a request for Compromise Settlement under Section 204
of the National Internal Revenue Code of 1997 under the ground of
doubtful validity of the assessment. On February 15, 2014, the National
Evaluation Board denied taxpayer’s application for compromise.
Taxpayer was apprised of said denial and a warrant of distraint and levy
was served on taxpayer on February 16, 2014. Has the period to collect on
the assessment prescribed?

A5 NO. The right to collect on the assessment has not prescribed. As

enunciated in the case of Commissioner of Internal Revenue (CIR) vs
Consolidated Mining Co., L-11527, Nov. 25, 1958:

“x x x There are cases however where a taxpayer may be prevented

from setting up the defense of prescription even if he has not previously
waived it in writing as when by his repeated requests or positive acts the
Government has been, for good reasons, persuaded to postpone collection
to make him feel that the demand was not unreasonable or that no
harassment or injustice is meant by the government.” (Italics supplied.)

In the case at hand, the filing by the taxpayer of their request for a
compromise settlement constituted a positive act for which the
Government was persuaded to postpone collection to make him feel that
no harassment or injustice is meant by the BIR.

Q6 JMS Enterprises received the FDDA on January 2, 2005. It filed a petition

before the Court of Tax Appeals on January 31, 2005. During the
pendency of the case, the BIR and JMS Enterprises were advised to
explore possibilities of amicable settlement as part of pre-trial
proceedings. JMS Enterprises accordingly filed an offer for compromise
settlement. Atty. Juan dela Cruz of the BIR Collection Service, knowing
the provisions of the law and the pertinent decided cases well,
immediately asked JMS Enterprises to execute a waiver of statute of
limitations for collection under RMO 2-90. Accordingly, JMS Enterprises
executed a waiver of statute of limitations on February 18, 2006 agreeing

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 to suspend the period of collection up to February 23, 2008. On February
24, 2008, Atty. De la Cruz asked the taxpayer to further waive the
prescriptive period for collection for another year. Thus, on February 27,
2008, JMS Enterprises executed a waiver under the provisions of RMO 2-
90, further extending the prescriptive period for collection until February
28, 2009. Still, nothing happened with the compromise offer of the
taxpayer. On March 10, 2010, the CTA Decision came out finding JMS
Enterprises liable for the entire assessment. JMS Enterprises appealed the
decision before the CTA En Banc, which affirmed the decision of the
lower division. The case reached the Supreme Court, and on February 15,
2011, a final decision of the Supreme Court was received by the BIR
finding JMS Enterprises liable for the taxes assessed. Armed with the
decision, the BIR immediately enforced collection remedies, which JMS
Enterprises vehemently resisted.

The taxpayer is arguing that collection proceedings cannot anymore be

enforced. It argues that the collection on the assessment prescribed as
early as January 1, 2010.

A6 The taxpayer is not correct. While it may be argued that the mere filing of
a case in court will not suspend the running of the prescriptive period for
collection, the waivers executed by the taxpayer suspended the running of
the prescriptive period for collection. As of February 18, 2006, only 412
of the 1,825 days collection period had passed (counted from January 2,
2005). The first waiver froze the period of collection to 412 days, leaving
the BIR 1,413 days more to collect on the assessment. Naturally, the
suspension of the prescriptive period was lifted when the first waiver
expired. Thus, the prescriptive period for collection started to run again
from February 24, 2008 to February 27, 2008 (accumulated period
lapsed already 416 days). When another waiver was executed on
February 27, 2008, the prescriptive period for collection was once again
suspended up to February 28, 2009. Accordingly, the BIR’s remaining
1,409 days to collect started to run again on March 1, 2009 based on the
last waiver. Hence, when the BIR started enforcing collection remedies on
February 16, 2011, the remaining prescriptive period for collection has
not yet lapsed.

Moreover, the Rules of Court grant a five-year period from the time of
entry of judgment within which to enforce favorable judgments.

7. Group the AR/DA according to their respective ages and the total amount due per
docket.

8. Prepare a report on Aging of Accounts Receivable/Delinquent Account Cases

(Annex 300-1.6). The number of cases per classification and groupings shall be
reflected in the said report.

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B. Handling of Collectible DA Cases/Uncollectible AR/DA

Enforcement of Collection of Collectible ARs/DAs

The enforcement of collection of collectible ARs/DAs through summary remedies shall

be undertaken by the RDOs, LTCED and LTDOs. The revenue officer/seizure agent
assigned to the case shall immediately cause the issuance and service of the Preliminary
Collection Letter to the delinquent taxpayer. If the taxpayer still fails to pay, the revenue
officer shall ten (10) days thereafter; a Final Notice Before Seizure shall be issued to the
taxpayer (Refer to CM 305-Collection Summary Remedies).

Safekeeping/Activation of Uncollectible DA- Suspense cases

The Records Division of the National Office, for cases in the National Office, and the
Administrative Division, for Regional cases, shall be responsible for the safekeeping of
the AR case dockets classified and approved as uncollectible DA-Suspense files. The
dockets shall remain thereat until there is a need to activate/write-off the same.

Procedures in Handling Uncollectible DA-Suspense Cases

1. The Revenue Officer/Seizure Agent shall:

1.1. Secure relevant documents and attach the same to the report
recommending for the classification of the account as uncollectible
AR/DA-Suspense file:

a. Death Certificate issued by the National Statistics Office (NSO) or

Office of the Local Civil Registrar, if taxpayer is deceased;

b. Certification from the Barangay of the taxpayer’s last known

residence, that his/her/its whereabouts is unknown;
c. Certification from the Bureau of Immigration and Deportation (BID)
that the concerned taxpayer has left the country and that there was no
record that he/she has returned to the country, if taxpayer is abroad or
a foreigner;

d. Certification from the Bureau of Jail Management and Penology,

together with a copy of the court decision, that the concerned taxpayer
is still serving a sentence of life imprisonment;

e. Medical Certificate issued by a Government Physician that the

concerned taxpayer is incapable of earning a living due to a lingering
disease/illness;
f. Copy of the Court Decision rendering the taxpayer as insolvent;

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 g. Proof that the taxpayer has no leviable or distrainable assets (e.g.,
Certificate of No Property Holdings issued by Register of Deeds
and/or the Municipal/City Assessor’s Office, Certification from
Philippine Deposits Insurance Corporation (PDIC) that the taxpayer is
not included in the list of depositors with insured deposits;

h. Certification from the Securities and Exchange Commission (SEC)

that the taxpayer’s registration is revoked/dissolved/ceased operation,
provided that the said taxpayer’s subscribed capital stocks is fully
paid-up;

i. Latest Audited Financial Statements filed with government regulatory

offices or other private companies/institutions; and

j. Other applicable documents to support/justify its classification as

uncollectible AR-Suspense files.

1.2. Perform all appropriate tasks related to the pertinent questions in the
Fieldman’s Affidavit of Uncollectible Taxes for Individual or Corporation
(Annexes 300-1.7/1.8);

1.3. Prepare the report recommending that the docket of the AR/DA case be
forwarded for safekeeping by the appropriate office until such time that
the need to activate/write-off the case arise. Secure approval of the report
by the following authorized officials:

a. ACIR/HREA-LTS, for AR/DA handled by LTCED and LTDO;

b. ACIR-Collection Service, for AR/DA handled by CED;

c. Regional Director, for DA handled by RDOs, after review by the

Collection Division.

1.4. Transmit the dockets classified as uncollectible DA-Suspense, with duly

approved report recommending the safekeeping of these DAs to the
Records/Administrative Division, within ten (10) days after the end of the
month when such case was classified as uncollectible DA-Suspense.

2. The Records/Regional Administrative Division, upon receipt of the docket/s, shall

immediately furnish the CED/Regional Collection Division with a copy of the list
of transmitted uncollectible DA-Suspense dockets, for monitoring purposes.

3. The concerned BIR office shall activate the uncollectible DA-Suspense file in any
of the following instances:
a. The whereabouts of the taxpayer have been determined later;

15
 b. The taxpayer’s properties have been uncovered later;

c. The individual taxpayer has recovered from the reported illness and has
become financially capable of paying the delinquent tax liabilities;

d. The taxpayer has received a presidential pardon or commutation of his life-

imprisonment sentence; and

e. Other circumstances which would warrant capability of the taxpayer to pay

the delinquency taxes and penalties.

Write-Off of Uncollectible AR/DA Cases

Cases classified as “Uncollectible AR/DA-Write Off” shall be written-off in the GCL

upon approval by the authorized officials of the report bearing the recommendation for
the write-off of the uncollectible AR/DA, pursuant to existing policies and guidelines for
such write-off.

Procedures in the Write-Off of Uncollectible AR cases

The Revenue Officer/Seizure Agent shall:

1. Perform all appropriate tasks related to the pertinent questions in the Fieldman’s
Affidavit of Uncollectible Taxes for individual or corporation; and

2. Prepare a memorandum report recommending the write-off of uncollectible

ARs/DAs and an Authority to Cancel Assessment (ATCA), together with the duly
accomplished Fieldman’s Affidavit of Uncollectible Taxes which shall form part of
the AR/DA docket.

The preparation, review and approval of this report shall be done by the following
authorized officials:

Action DA Handled by DA Handled by DA Handled by

CED LTCED/LTDOs RDOs
Preparation of Case Officer Case Officer Case Officer
Memorandum Report
Review of Report Chief, CED Chief, LTCED/LTDO RDO and Chief,
Collection Division
Recommendation for ACIR, Collection ACIR/HREA, Large Regional Director
Approval of Report Service Taxpayers Service
Approval: CIR CIR CIR
Php5,000.00 - below
Approval: NEB NEB NEB
Over Php5,000.00

C. Issuance of Authority to Cancel Assessment (ATCA)

16
In order to facilitate the closure of the account that was recommended for write off, an
ATCA shall be issued to cover each and every Final Assessment Notice (FAN) after the
approval of the memorandum report by the Commissioner of Internal Revenue, the NEB,
the ACIR-LTS, Regional Director, as the case maybe, and pursuant to the existing rules
and regulations applicable thereto. It shall be prepared in quadruplicate copies,
distributed as follows:

Original : Docket of the case

Duplicate : Issuing Office

Triplicate : CED of Collection Service

Quadruplicate: Regional Collection Division/ LTCED

The ATCA shall be prepared by the Office handling the AR/DA case and recommending
for the cancellation of the assessment or write-off of the accounts. It shall be approved
by the concerned Regional Director, ACIR-Large Taxpayer Service or ACIR-Collection
Service. In the case of prescribed case/s, the approval of the same shall be made by the
ACIR-Legal Service (LS).4

Once an ATCA is approved, the AR/DA docket shall be returned to the RDO (for
Regional Office cases), CED (for national office cases), LTDO/LTCED (for large
taxpayers) within ten (10) days from the approval of the ATCA for necessary
cancellation of the AR/DA in the GCL and in the List of Outstanding Accounts
Receivable.

Procedure in the Issuance of ATCA for the Cancellation/Reduction of Assessment

The Revenue Officer/Seizure Agent shall:

1. Receive the docket with approved recommendation to cancel or reduce the

assessment;

2. In cases of cancellation of assessment, fill-up the ATCA (BIR Form No. 0402)
(Annex 300-1.9) to reflect the amount of assessment cancelled; and enter the
cancellation of the assessment in the GCL;

3. In case of reduction of assessment,

3.1. Fill-up the ATCA (BIR Form No. 0402) to reflect the total amount of

assessment and enter the same in the GCL; and

4
Revenue Delegation Authority Order (RDAO) No. 6-2001.

17
 3.2. Issue a new FAN corresponding to the reduced assessment for collection
and enter the pertinent information in the GCL as a newly created account.

4. Forward the docket to the Administrative Division (for Regional Office cases) or
Records Division (for national office and large taxpayers’ cases) for safekeeping
and future reference.

The Regional Director/ACIR-LTS/CS/LS shall:

1. Receive and review the duly-filled -up ATCA; and

2. Affix signature on the ATCA and return the same to the concerned office for
posting of the same to the GCL.

The concerned Office shall prepare the reports on Inventory List of Accounts
Receivables/Delinquent Accounts Written-Off (Annex 300-1.10) and the Monthly List
of Accounts Receivable/Delinquent Accounts Cancelled by ATCA, BIR Form No. 1247
(Annex 300-1.11) [Refer to CM 306- Monitoring of ARs/DAs].

CM 303 HANDLING OF TAXPAYER’S PROTEST ON THE ASSESSMENT

[Refer to FC 303]

A taxpayer who was issued a Final Assessment Notice (FAN) by a Regional

Office/LTS/NID may file a written administrative protest requesting for reconsideration
or reinvestigation as to legal and factual basis of the assessment within thirty (30) days
from receipt thereof.5 The request for reconsideration or reinvestigation shall be
accompanied by a Waiver of Statute of Limitation issued by the taxpayer and approved
by an authorized internal revenue officer.6

All letters of protest involving questions of facts and requests for

re-investigation/reconsideration shall be referred to the Assessment Division of the
Regional Office/Enforcement Service (ES)/LTS, for proper recording and appropriate
action on the protest. If the protest involves a question of law, it shall be referred to the
Legal Division of the Regional Office/Legal Service for appropriate resolution. It is the
responsibility of the concerned division/office that resolved the protest to inform the
taxpayer on the results thereof.

Upon receipt of any letter from the taxpayer (e.g. protest, request for compromise,
abatement or any other communications and documents), the concerned Revenue
Officer/Legal Officer at the Administrative Division (AD)/Enforcement Service
(ES)/LTS/Regional Legal Division/Legal Service is required to take prompt action
5
Section 228 of the NIRC of 1997, as amended, provides: “Such assessment may be protested administratively by
filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such
form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of
the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become
final.” See also Revenue Regulations (RR) No. 12-85
6
RDAO No. 4-2007.

18
thereon within fifteen (15) days from receipt of the communication. 7 The Revenue
Officer shall send at least a letter to the taxpayer acknowledging the receipt of its/his/her
letter.

Requests for reinvestigation or reconsideration for tax assessments that have already
become final and executory due to the failure of the taxpayer to file a protest within the
prescribed reglamentary period shall no longer be entertained by any concerned office.
Accordingly, any office that has jurisdiction over such requests for
reinvestigation/reconsideration shall immediately advise the taxpayers in writing that the
said requests could no longer be granted; that the tax assessments are already considered
final, executory and demandable; and that collection enforcement proceedings shall be
instituted by the Bureau.8

The taxpayer’s request for reinvestigation or reconsideration must state the facts, the
applicable laws, rules and regulations, or jurisprudence on which his protest is based;
otherwise, his protest is considered void and without force and effect. If there are
several issues involved in the disputed assessment and the taxpayer fails to state the facts,
the applicable laws, rules and regulations, or jurisprudence in support of his protest
against some of the several issues on which the assessment is made, the same shall be
considered undisputed issue or issues, in which case, the taxpayer shall be required to pay
the corresponding deficiency tax or taxes attributable thereto. 9

Procedures in Handling Letter of Protest:

A. Receipt and Initial Evaluation of the Protest

Regional Assessment Division/Enforcement Service/Large Taxpayers Service

1. The receiving officer shall stamp "Received” on the letter of protest and attach the
same to the case docket. The name of the receiving personnel as well as the date
of receipt of the request for reinvestigation/ reconsideration should be clearly
indicated on the face of the protest letter.

2. The AD/ES/LTS Chief shall assign the letter of protest, together with the case
docket, to a Revenue Officer.

3. The Revenue Officer shall:

3.1. Analyze the issues being protested by the taxpayer and submit the
appropriate recommendation thereon.

7
Republic Act No. 6713, otherwise known as the “Code of Conduct and Ethical Standards for Public Officials and
Employees”.
8
Memorandum of CIR Joel Tan-Torres dated 4 May 2010 reiterating the prohibition from conducting
reinvestigation/reconsideration of DA cases where the assessment has already become final, executory and
demandable.
9
Section 3.1.5. RR No.12-99.

19
 3.1.1. Check the date of filing of the request for re-investigation/
reconsideration to determine if the protest was filed within the
prescribed 30-day period; and

3.1.2. Evaluate the contents of and attachments to the protest letter

making particular attention to the following:

a. There must be an itemized statement of the findings to

which the taxpayer agrees as a basis for computing the tax
due, which amount should be paid immediately upon the
filing of the protest. The protest shall not be deemed validly
filed unless payment of the agreed portion of the tax is paid
first.

b. There must be itemized schedule of the adjustments with

which the taxpayer does not agree;

c. There must be a statement of facts and or law in support of

the protest; and

d. The request for reconsideration/reinvestigation of an

assessment shall be accompanied by a duly notarized
Waiver of Statute of Limitations of the National Internal
Revenue Code (Annex 300-1.12) signed by the taxpayer
himself in favor of the Government. The said waiver must
have a validity period of at least six (6) months.

A representative may also accomplish and sign the same

document, provided that he/she has a duly notarized letter
of authorization from the taxpayer. In order to be
valid/binding, the waiver shall be mutually agreed upon
and signed by the taxpayer and the concerned RDO/Chiefs
of LTDO/LT Regular Audit Division (LTRAD)/LT -Excise
Audit Division (LTEAD) and other investigating offices.
The taxpayer must be furnished with a copy of the
approved waiver and the taxpayer’s date of receipt of the
same must likewise be clearly indicated on the original
copy of the duly signed waiver.

3.1.3. Analyze and evaluate case docket to determine the basis for the
approval/denial of the request for re-investigation;

3.2. Prepare a memorandum (Annex 300-1.13) addressed to the

RDO/LTDO/LTRAD/LTEAD/NID/other investigating offices Chiefs, for
signature of the Regional Director/ACIR-LTS/ES, informing the former
that the taxpayer’s request for reinvestigation/ reconsideration has been

20
 granted/denied;

3.3. Prepare a letter addressed to the taxpayer with information that his/her/its
request for reinvestigation/reconsideration has been granted/denied and
citing therein the reasons or bases for such decision, for signature of the
Regional Director/ACIR-LTS/ACIR-ES/ACIR-Legal Service (LS)
[Annexes 300-1.14/15];

3.4. Forward the docket to the concerned office for the conduct of necessary
reinvestigation/reconsideration or enforcement of collection, whichever
is applicable; and

3.5. Release the notice of approval/denial to the taxpayer relative to its request
for reinvestigation/reconsideration.

B. Conduct of Reinvestigation/Reconsideration of the Tax Case

1. Revenue District Office/LTRAD/LTEAD/LTDO/National Investigation

Division/Other Investigating Office

1.1 The RDO/LTRAD/LTEAD/LTDO/NID/other Investigating Office Chief

shall assign the case for re-investigation to a Revenue Officer pursuant to
existing rules, policies, and guidelines.10

1.2 The Revenue Officer shall:

1.2.1. Receive the Memorandum of Assignment for re-investigation of

the case docket from the RDO/Chief, LTDO/Chief, LTCED;

1.2.2. Require the taxpayer to submit additional documentary

requirements, if needed;

1.2.3. Evaluate/Verify the additional documents submitted by the

taxpayer to determine the factual and/or legal basis of the protest;
and

1.2.4. Prepare a memorandum report on the results of the evaluation

made, for approval of the RDO/LTDO Chief/LTCED Chief.

1.3 The RDO/LTRAD/LTEAD/LTDO/NID/other Investigating office Chief

shall:

1.3.1. Review and evaluate the results of re-investigation made by the

Revenue Officer on the factual and/or legal basis of the taxpayer’s
protest; and
10
RMO No. 62-2010 on Policies on Re-Investigation of Assessments.

21
 1.3.2. Transmit the memorandum/indorsement (Annex 300-1.16) and the
entire docket of the case to the Regional Director/ACIR
LTS/ACIR-ES, through the Regional Assessment
Division/LTCED/LTDO/NID, if the protest involves question of
facts, and/or to the Regional Director/ACIR-Legal Service through
the Regional Legal Division/Law Division, whenever deemed
appropriate, if the protest involves question of law, for further
review, evaluation, or approval, as the case may be.

2. The Regional Director/Concerned ACIR-LTS/ES/LS shall:

2.1. Receive the docket bearing on the results of the reinvestigation/

reconsideration of the case from the investigating/evaluating office; and

2.2 Evaluate the recommendations made on the case by the investigating/

evaluating office:

2.2.1. In case of favorable recommendation, approve the report and

return the docket to the RDO/LTDO/LTCED for appropriate
action.

In case the recommendation is for the cancellation or reduction of

the assessment, the same shall require the issuance of Authority to
Cancel Assessment (ATCA) for the original assessment and the
issuance of the revised Final Assessment Notice (FAN) for the
reduced deficiency tax assessment (Refer to CM 302.
Management/Handling of AR/DA- Issuance of ATCA).

2.2.2. In case the recommendation is for the reiteration of the assessment,

approve the report and return the docket to the
RDO/LTDO/LTCED for enforcement of collection. (Refer to CM
305.1-WDL).

2.2.3. Inform the taxpayer in writing of the result of the reinvestigation

conducted.

C. Cancellation/Revision of the Original Assessment

In case the reinvestigation or reconsideration of the tax case resulted to

cancellation of the entire assessment, an ATCA must be issued for purposes of
closing the accounts receivable in the General Control Ledger (GCL) and the
Updates of Delinquent Accounts Report. However, in case the said
reinvestigation or reconsideration only resulted to reduction of the original
assessment, a revised Final Assessment Notice (FAN) on the reduced amount of
assessment must be issued and the ATCA must likewise be issued for the

22
 assessment covered by the original FAN, pursuant to the existing rules and
policies. This is required to be undertaken in order to close the previously
recorded receivable (Refer to CM 302 -Management/Handling of AR/DA-
Issuance of ATCA) and create a new receivable for the revised assessment in the
GCL and the Updates of Delinquent Accounts Report. (Refer to CM 301-
Assignment of Dockets for Collection Enforcement)

As a general rule and unless authorized by the Regional/LTS Evaluation Board

(REB/LTSEB) and the National Evaluation Board, under meritorious
circumstances, cases that have already undergone reinvestigation/ reconsideration
shall no longer be subject matter of any application for compromise settlement on
the ground of doubtful validity of assessment when a protested case has been
resolved, except for reasons of financial incapacity. 11 However, the taxpayer can
still avail of the benefits of abatement of penalties. 12 (Refer to CM 304.3
Payments by Compromise Settlement/CM 304.4 Abatement of Penalties)

CM 304 TAXPAYER (TP) OPTIONS IN SETTLING TAX LIABILITY

The delinquent taxpayer has the following options that may be availed of in settling his
delinquent tax liability:

1. Payment of the tax liability in full, refer to CM 304.1;

2. Payment of the tax liability on installment basis, refer to CM 304.2;

3. Payment of the tax liability through compromise settlement, refer to CM 304.3;

and

4. Payment of the tax liability with abatement of penalties, refer to CM 304.4.

CM 304.1 TP OPTION - TAXPAYER INTENDS TO PAY THE TAX

LIABILITY IN FULL [Refer to FC 304.1]

If the taxpayer is willing to pay his outstanding tax liability in full, the Revenue Officer
shall:

1. Compute the additional increments incident to delinquency from the date the
assessment was issued up to the date of the payment of the tax liability, as
follows:

Computation of the Applicable Surcharge and Interest 13 -Refer to Interest Rate

Table (Annex 300-1.17)

11
Section 2 of RR No. 30-2002.
12
RR No. 13-2001.
13
Sections 248 and 249 of the NIRC of 1997, as amended.

23
Scenario 1. Late filing of the tax return and late payment of the tax due
thereon.

Illustration: Income tax return for the calendar year 2008 was due for filing on
April 15, 2009 but the taxpayer voluntarily filed his tax return, without notice
from the BIR, only on June 30, 2009. The tax due per return amounts to
P100,000.00. In this case, the taxpayer shall be liable for delinquency penalties
consisting of 25% surcharge, plus 20% interest per annum, computed from the
due date of the tax until date of actual payment, computed as follows:

Income tax due per return P100,000.00

Add: 25% surcharge for late filing
and late payment
(P100,000.00 x 25%) P25,000.00
20% interest per annum
from 4/15/09 to 6/30/09
(P100,000.00 x .0415524) 4,155.24 29,155.24
Total amount due (excluding suggested
compromise for late filing and late
payment of the tax) P129,155.24

Only one 25% surcharge shall be imposed for late filing of the return and late
payment of the tax.

Scenario 2. 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).

Illustration: The taxpayer’s 2008 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.

Income tax due per return P100,000.00

Add: 25% surcharge for filing the return
at wrong venue 25,000.00

Total amount due P125,000.00

Less: Amount paid 100,000.00
Amount still due P 25,000.00

24
Scenario 3. Late filing of the return and late payment of the tax due to
taxpayer’s willful neglect.
Illustration: The taxpayer did not file his income tax return for the calendar
year 2007 which was due for filing on April 15, 2008. 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 30,2009. The tax due per return is
P100, 000.00.

Income tax due per return P100,000.00

Add: 50% surcharge for willful neglect
to file the return and late payment
of the tax due (P100,000.00 x 50%) P50,000.00
20% interest per annum
from 4/15/08 to 6/30/09
(P100,000.00 x 0.2415524) 24,155.24 74,155.24
Total amount due (excluding suggested
compromise penalty for late filing of the return
and late payment of the tax due) P174,155. 24

Scenario 4. 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.

Illustration: XYZ CORPORATION filed its final adjustment income tax return
for calendar year 2007 with a net taxable income of P500,000.00. At the
applicable income tax rate of 35% for the year 2007, its income tax amounted to
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 payment per
return filed, the deficiency, excluding penalties, amounted to P175,000.00. It 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, 2009 calling for payment
of the deficiency income tax on or before June 30, 2009, as shown below:

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%) P87,500.00
20% interest per annum
from 4-15-08 to 6-30-09

25
 (P175,000.00 x .2415524) 42,271.67

129.771.67
Total amount due P304,771.67

Assuming that the aforementioned deficiency income tax assessment against XYZ
CORPORATION, in the amount of P304,771.67, is not paid by June 30, 2009, 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 July 31, 2009, the delinquency
penalties for late payment shall be computed as follows:

Total deficiency income tax assessed on May 31, 2009 P304,771.67

Add: 25% surcharge for late payment
(304,771.67 x 25%) P76,192.92
20% interest per annum
from 7-1-09 to 7-31-09
(P304,771.67 x .0166667) 5,079.54 81,272.46
Total amount due (excluding suggested
compromise penalty for late payment) P386,044.13

2. Prepare BIR Payment Form No.0605 to be signed by the authorized signatory;

3. Give the signed BIR Payment Form No. 0605 to the taxpayer and demand that the
payment thereof be made to any AAB within the RDO where it/he/she is
registered. In case there is no AAB in that District or Regional Office, the
taxpayer can pay directly to the Revenue Collection Officer (RCO) who shall
issue a Revenue Official Receipt (ROR).

In case of large taxpayers and other taxpayers paying through the Electronic
Filing and Payment System (eFPS), provide the taxpayer with the updated
computation of delinquency taxes and/or penalties with instruction that the same
should be paid immediately through the eFPS facility;

4. Instruct the taxpayer to submit a copy of the bank-validated BIR Payment Form
No. 0605 and attach the same together with the photocopy of the AAB
Confirmation Receipt or the ROR issued by the duly authorized Revenue
Collection Officer (RCO) to the case docket;

5. Validate the payments made by the taxpayer as posted in the taxpayer’s ledger in
the Collection and Bank Reconciliation System (CBR) and the Taxpayer Account
System (TAS) of the Integrated Tax System (ITS);

6. Prepare a closing memorandum report (Annex 300-1.18) to be approved by the

RDO/LTDO/LTCED through the Chief of the Collection Section. Furnish the

26
 Collection Division of the Regional Office/LTS with photocopies of the
Assessment Notice, Confirmation Receipts, validated BIR Payment Form No.
0605/ROR and the closing memorandum report;

7. Record the case in the General Control Ledger as a closed case;

8. Forward the docket to the Administrative Division of the Regional Office/Records

Division in the National Office (NO) for file/future reference; and

9. Prepare and submit monthly GCL and Monthly Updates of Delinquent Accounts
(Annex 300-1.19) on the 10th day of the following month to the CED, copy
furnished the Collection Division of the Regional Office/LTS (Refer to CM 306
Monitoring of ARs/DAs).

CM 304.2 TP OPTION - PAYMENT ON INSTALLMENT BASIS [Refer to FC

304.2]

There may be circumstances when taxpayers with outstanding tax liabilities, while
recognizing such liabilities and willing to pay the same, may not be able to settle their
unpaid accounts in full due to problems in cash flow. On a case to case basis, some
considerations can be accorded by the Bureau to these taxpayers by allowing them to pay
unpaid taxes on installment basis.14 However, extreme care should be exercised by the
concerned office in handling these cases to ensure that approvals of taxpayers’ requests
for installment payments are never abused.

In evaluating any request for installment payment of unpaid tax liabilities, the concerned
office must closely take into consideration relevant factors such as the amount of the
outstanding liability; the current financial position of the taxpayer; the requested number
and frequency of offered installment payments (the same should neither be
unrealistically low, in terms of amount, nor long, in terms of installment period); the
taxpayers’ track records in settling their tax liabilities; etc.

In case the taxpayer’s request for settlement of the tax liabilities on installment basis has
been granted, the interest on the deficiency tax and/or on the delinquency tax liability
shall be imposed from the due date of the tax until the full payment of the last installment
thereof. The interest shall be computed based on the diminishing balance of the tax,
inclusive of interests.

If the taxpayer requests payment on an installment basis, the Revenue Officer shall:

1. Stamp the word "Received" and indicate the date of receipt on the taxpayer's
letter-request to pay on installment basis. The letter shall state the requested
terms of payment and the reasons for such request;

14
Section 249 (D) of the NIRC of 1997, as amended.

27
 2. Attach the letter-request to the docket of the accounts receivable/delinquent
account case;

3. Evaluate the merits of the taxpayer’s request for installment payment; and

4. Prepare a memorandum report bearing the recommendation on the taxpayer's

request, together with the terms and schedule of payments for the approval of the
Regional Director/ACIR-LTS, through the RDO/LTDO/LTCED. The
delinquency penalties thereon shall be adjusted/computed up to the last
installment based on the approved installment schedule.

Computation of the Applicable Delinquency Penalties in case of Authorized

Installment Payments

The 25% surcharge on extended payment shall not be imposed, provided,

however, that the taxpayer’s request for extension of the period within
which to pay the tax is made on or before the deadline for the payment of
the tax due. Conversely, if such request is made after the deadline for
payment, the taxpayer shall already be treated as late in the payment of the
tax. In this case, the 25 % surcharge shall be imposed, even if the payment
of the delinquency tax is allowed to be made on installment basis.

Scenario No. 1: In case the application for installment payment was

made on or before the due date for the payment of
the tax.
Illustration: XYZ Corporation, due to financial incapacity, requested to
pay in four (4) monthly installments, starting June 30, 2009, its deficiency
income tax liability for the year 2007 in the amount of P304,771.67 per
Final Assessment Notice issued on May 31, 2009, with due date on June
30, 2009. Its request for installment payment has been duly approved.15

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 20% per annum shall be imposed, computed based
on the “unpaid amount”,16 The computation of the interest shall be based
on the diminishing balance or unpaid amount of the tax, inclusive of the
deficiency interests and surcharge.

Total deficiency income tax assessed on May 31, 2009 P304,771.67

Less: 1st installment on 6/30/09 76,192.92

Balance as of 6/30/09 P228,578.75

Add: 20% interest per annum
15
Pursuant to Section 53 of the NIRC of 1997, as amended.
16
Pursuant to the provisions of Section 249 (D) of the NIRC of 1997, as amended. This is also consistent with the
provisions of Article 1253 of the Civil Code which provides: “If the debt produces interest, payment of the principal
shall not be deemed to have been made until the interest has been covered.”

28
 from 6/30/09 to 7/31/09
(P228,578.75 x .0166667) 3,809.66
Amount due on 7/31/09 P232,388.41

Less: 2nd installment on 7/31/09

(P76,192.92 + P3, 809.66 interest) 80,002.58
Balance as of 7/31/09 P152,385.83
Add: 20% interest per annum
from 7/31/09 to 8/31/09
(P152,385.83 x .0166667) 2,539.77
Amount due on 8/31/09 P154,925.60
Less: 3rd installment on 8/31/09
(P76,192.92 + P2,539.77 interest) 78,732.69
Balance as of 8/31/09 P76,192.91

Add: 20% interest per annum

from 8/31/09 to 9/30/09
(P76,192.91 x .0166667) 1,269.89
4th and final installment on 9/30/09 P77,462.80

Below is the computation of the installment payment of the above cases in table format:

Date of Equal Surcharge Delinquency Amount Balance

Installment Monthly Interest 17 Payable
Installment
Amount P304,771.67
assessed
6/30/2009 P 76,192.92 0.00 P 0.00 P 76,192.92 228,578.75
7/31/2009 76,192.92 0.00 3,809.66 80,002.58 152,385.83
8/31/2009 76,192.92 0.00 2,539.77 78,732.69 76,192.91
9/302009 76,192.92 0.00 1,269.89 77,462.80 0
P 304,771.67 - P 7,619.32 P312,390.99

Scenario No. 2: In case the application for installment payment was

made on July 31, 2009 after the due date for the
payment of the tax, June 30, 2009.
Total deficiency income tax assessed on May 31, 2009 P304,771.67
Add: 25% surcharge
(P304,771.67 x 25%=P76,192.92/4) 19,048.23
20% interest per annum
from 6/30/09 to 7/31/09
(P304,771.67 x .0166667) 5,079.54
Amount due on 7/31/09 P328,899.44
Less: Amount payable on 7/31/09
17
Refer to Interest Rate Table in Annex 300-1.17.

29
 1st installment (P304,771.67/4) P76,192.92

Surcharge (P76,192.92/4) 19,048.23

Interest 5,079.54 100,320.69
Balance as of 7/31/09 P228,578.75
Add: 25% surcharge
(P304,771.67 x 25% = P76,192.92/4) 19.048.23
20% interest per annum from 7/31/09 to 8/31/09
(P228,578.75 x .0166667) 3,809.66
Amount due on 8/31/09 P251,436.64

Less: Amount payable on 8/31/09

2nd installment (P304,771.67/4) P76,192.92
Surcharge (P76,192.92/4) 19,048.23
Interest 3,809.66
99,050.81
Balance as of 8/31/09 P152,385.83
Add: 25% surcharge (P304,771.67 x 25%
= P76,192.92/4) 19,048.23
20% interest per annum. from 8/31/09 to 9/30/09
(P152,385.83 x .0166667) 2,539.77
Amount due on 9/30/09 P173,973.83
Less: Amount payable on 9/30/09
3rd installment (P304,771.67/4) P76,192.92
Surcharge (P76,192.92/4) 19,048.23
Interest 2,539.77
97,780.92
Balance as of 9/30/09 P 76,192.91
Add: 25% surcharge
(P304,771.67 x 25% = P76,192.92/4) 19,048.23
20% interest per annum from 9/30/09 to 10/31/09
(P76,192.91 x .0166667) 1,269.89
th
4 and final installment on 10/31/09 P96,511.03

Below is the computation of installment payment on the above case in table format:

Date of Equal Surcharge Delinquency Amount Balance

Installmen Monthly Interest 18 Payable
t Installment
Amount P304,771.67
Assessed
7/31/2009 P76,192.92 P19,048.23 P5,079.54 P100,320.69 228,578.75
8/31/2009 76,192.92 19,048.23 3,809.66 99,050.81 152,385.83

18
Refer to Interest Rate Table in Annex 300-1.17.

30
 9/30/2009 76,192.92 19,048.23 2,539.77 97,780.92 76,192.91
10/312009 76,192.92 19,048.23 1,269.89 96,511.03 0
P304,771.67 P76,192.9 P12,698.86 P393,663.45
2

5. Prepare a letter (Annex 300-1.20) to the taxpayer for signature of the Regional
Director/ACIR-LTS informing him/her/it of the approval of the request for
installment payments and the schedule of payments;

6. Send the duly signed letter to the taxpayer and attach a copy of the letter to the
docket of the case;

7. In case of default on the payment of the tax liability on installment basis:

7.1 Inform the taxpayer in writing that his/her/its failure to pay the remaining
amount due on the agreed schedule of installment plan has nullified the
installment agreement;

7.2 Enforce immediately the collection of the remaining balance (original tax
liabilities less amount already paid) together with the applicable
delinquency penalties;

7.3 If the taxpayer responds to the letter and is willing to pay the tax liability
in full, refer to CM 304.1-TP Option-Taxpayer Intends to Pay Tax
Liability in Full; and

7.4 If the taxpayer is not willing to pay the tax liability, refer to CM 305.1-
WDL.

8. In case the request for installment payment is denied:

8.1. Prepare and send a letter signed by the Regional Director/ACIR-LTS

informing the taxpayer of the reasons for the denial of the request. Attach
a copy of the signed notification letter to the docket; and

8.2. If the taxpayer responds to the letter and is:

8.2.1. Willing to pay the tax liability by compromise settlement, refer to

CM 304.3-Payment by Compromise; or

8.2.2. Willing to pay the tax liability with abatement of the penalties,
refer to CM 304.4-Abatement of Penalties.

The Regional Director/ACIR-LTS shall:

1. Receive the memorandum of the RDO/LTDO/LTCED bearing on its

31
 recommendation on the taxpayer’s request for installment payment;

2. Evaluate and approve/disapprove the request; and

3. Return the docket to the RDO/LTDO/LTCED for the preparation of the letter to the
taxpayer informing him/her/it of the approval/disapproval of the request.

CM 304.3 TP OPTION - PAYMENT BY COMPROMISE SETTLEMENT [Refer

to FC 304.3]

The authority to compromise the collection of any internal revenue tax is given to the
Commissioner of Internal Revenue, in accordance with the provisions of the NIRC of
1997, as amended and various judicial rulings as follows:19

1. The authority of the Commissioner to compromise includes the civil and criminal
aspects of the case.

1.1. Compromise in the civil case is allowed:

- Where there is reasonable doubt as to the validity of the claim

against the taxpayer, or;

- Where the financial capacity of the taxpayer demonstrates a clear

inability to pay the tax.

The compromise settlement of any tax liability shall be subject to the

following minimum amounts:

- For cases of financial incapacity:

a. If taxpayer is an individual whose only 10%

source of income is from employment and
whose monthly salary, if single, is P
10,500.00 or less, if married, whose salary
together with his spouse is P 21,000.00 per
month, or less, and it appears that the
taxpayer possesses no other
leviable/distrainable assets, other than his
family home
b If taxpayer is an individual without any 10%
. source of income
c. Where the taxpayer is under any of the
following conditions:

- Zero networth 10%

19
Section 204 (A) of the NIRC of 1997, as amended.

32
 - Negative networth 10%

- Dissolved corporations 20%

- Already non-operating companies for

a period of: 10%

(a) three (3) years or more as of the

date of application for
compromise settlement 20%

(b) less than three (3) years 40%

- Surplus or earnings deficit resulting to

impairment in the original capital by at
least 50% 20%

- Declared insolvent or bankrupt, unless

taxpayer falls squarely under any
situation as enumerated above, thus
resulting to the application of the
appropriate rate

- For cases of doubtful validity of assessment:

a. Minimum compromise rate, in general. 40%

b Special rate lower than 40%, on a case to Open
. case basis, provided that the request shall be rate
accompanied by sufficient justifications
stating the reasons, legal and/or factual, why
he should be entitled to a lower rate.
However, the same shall be subject to the
prior approval by the National Evaluation
Board (NEB).

The above prescribed minimum percentages shall likewise apply in

compromise settlement of assessments consisting solely of increments
(i.e., surcharge, interest, etc.), based on the total amount assessed.20

1.2. The criminal aspects of a tax case may be compromised only before the
20
RR No. 30-2002.

33
 institution of the criminal action in court.

2. Subject to the taxpayer’s compliance to the requisites on the basis for the
acceptance of the offer to compromise a delinquent account or disputed
assessment, the following cases may be the subject matter of compromise
settlement:

- Delinquent accounts;

- Cases under administrative protest after issuance of the Final

Assessment Notice to the taxpayer which are still pending in the
Regional Offices, Revenue District Offices, Legal Service, Large
Taxpayer Service (LTS), Collection Service, Enforcement Service
and other offices in the National Office;

- Civil tax cases being disputed before the courts;

- Collection cases filed in courts; and

- Criminal violations, other than those already filed in court or those

involving criminal tax fraud.

However, the following cases could not be compromised:

- Withholding tax cases, tax cases, unless the applicant-taxpayer

invokes provisions of law that cast doubt on the taxpayer’s
obligation to withhold;

- Criminal tax fraud cases confirmed as such by the Commissioner

of Internal Revenue or his duly authorized representative;

- Criminal violations already filed in court;

- Delinquent accounts with duly approved schedule of installment

payments;

- Cases where final reports of reinvestigation or reconsideration

have been issued resulting to reduction in the original assessment
and the taxpayer is agreeable to such decision by signing the
required agreement form for the purpose. On the other hand, other
protested cases shall be handled by the Regional Evaluation Board
(REB) or the NEB on a case to case basis;

- Cases which become final and executory after final judgment of

the court, where compromise is requested on the ground of
doubtful validity of the assessment; and

34
 - Estate tax cases where compromise is requested on the ground of
financial incapacity of the taxpayer.

3. The power of the Commissioner to compromise cases is discretionary and no

court can compel him/her to exercise such discretion; and such power shall be
exercised based on the merits of the case.

4. A case that has already been finally decided by the Supreme Court is no longer
open for any compromise settlement on account of doubtful validity of the
assessment.

5. Any offer for compromise settlement on the ground of financial incapacity shall
not be considered if the taxpayer has outstanding Tax Credit Certificate (TCC)
issued under the NIRC of 1997, as amended or Executive Order No. 226, on hand
or in transit, or with any pending claim for tax refund or credit with the BIR,
Department of Finance One-Stop-Shop Tax Credit and Duty Drawback Center
(Tax Revenue Group or Investment Incentive Group) and/or the courts, or with
existing finalized agreement or prospect of future agreement with any party that
resulted or could result to an increase in the equity of the taxpayer at the time of
the offer for compromise or at a definite future time.

Moreover, no offer for compromise shall be entertained unless and until the
taxpayer waives in writing his privilege of the secrecy of bank deposits under
Republic Act No.1405 or under other general or special laws, and such waiver
shall constitute as the authority of the BIR to inquire into the bank deposits of the
taxpayer.

Presence of any circumstance that would place the taxpayer’s liability to pay in
serious doubt can be a ground to deny the application for compromise based on
financial incapacity to pay the tax.

6. In case the taxpayer has an unpaid and undisputed tax liability, the full settlement
thereof shall first be made by the taxpayer before any action by the BIR on the
offer for compromise settlement for other tax liabilities shall commence.

7. Any unpaid self-assessed tax or dishonored check shall not be allowed to be

settled thru compromise agreement. Furthermore, any withholding tax liability of
the taxpayer shall not also be a subject matter of compromise settlement, unless
the taxpayer invokes provisions of law that cast doubt on the taxpayer’s obligation
to withhold.

8. If the taxpayer refuses to abide by the terms of the approved compromise

settlement, the BIR may demand the collection of accounts receivables based on
the original assessment/demand notice, including all the applicable delinquency
increments.

35
 9. The compromise offer may be paid before or after the approval of the offer of
compromise by the NEB or REB, at the option of the taxpayer. In case of
disapproval of compromise offer previously paid, the said payment shall be
considered as partial payment of the total tax liabilities of the taxpayer, including
delinquency increments (Refer to CM 304.1 TP Intends to Pay Tax Liability in
Full/CM 304.2 TP Option- Payment on Installment/CM 304.4 TP Option-
Abatement of Penalties).

10. The TCC shall not be allowed or accepted as full or partial payment of offer of
compromise settlement.

11. All approved offers for compromise settlement shall be paid in full immediately
upon receipt by the taxpayer of the Notice of Approval. In case the taxpayer fails
to comply with the immediate payment thereof within the set deadline, the
approved offer for compromise settlement shall be automatically revoked, and the
amount due from the taxpayer shall be reverted to the original assessment plus
delinquency increments. On the other hand and on a case to case basis, the
taxpayer with approved offer for compromise on the ground of financial
incapacity may be allowed to pay the approved offer on installment basis, subject
to the approval of the NEB.

12. Compromise settlement of a tax liability may be set aside by reasons of fraud,
mistake, violence or coercion.

13. A compromise agreement between the taxpayer and the BIR that was properly
entered into is binding and enforceable.

14. The evaluation of the offer due to doubtful validity of the assessment shall be
made on a per tax type basis. On the other hand, evaluation of offer for
compromise on the ground of financial incapacity need not be made on a per tax
type basis, considering that the evaluation thereof is limited to the determination
of the financial capacity of the taxpayer in paying the tax liabilities.

15. The offers for compromise settlement of assessed taxes involving basic deficiency
tax of P500,000.00 or less and for minor criminal violations shall be approved by
the Regional/LTS Evaluation Board. All other offers outside the jurisdiction of
the Regional/LTS Evaluation Board shall be approved by the majority of all the
members of the NEB composed of the Commissioner and the four (4) Deputy
Commissioners. All decisions of the NEB granting the request of the taxpayer
or favorable to the taxpayer shall have the concurrence of the Commissioner.21

16. All offers for compromise settlement requiring approval by the NEB shall
undergo preliminary processing and evaluation by the concerned REBs/LTSEB
prior to the endorsement to the NEB Secretariat for final review and evaluation.
21
RR No. 30-2002.

36
 17. The REB shall be comprised of the following Officers of the Regional Office:

Chairman - Regional Director

Members - Assistant Regional Director

- Chief, Legal Division

- Chief, Assessment Division

- Chief, Collection Division

- Revenue District Officer having jurisdiction over

the taxpayer-applicant

The LTSEB shall be comprised of the following Officers of the Large Taxpayers
Service:

Chairman - Assistant Commissioner, LTS

Vice-Chairman - Concerned Head Revenue Executive Assistant

having jurisdiction over the taxpayer-applicant

Members - Concerned Chief, Large Taxpayers District Office

having jurisdiction over the taxpayer-applicant

- Chief, LT Collection and Enforcement Division

- Concerned Chief, LT Regular Audit Division

having jurisdiction over the taxpayer-applicant

- Concerned LT Excise Audit Division having

jurisdiction over the taxpayer-applicant

- Chief, LT Assistance Division

- Chief, LT Excise Regulatory Division

- Chief, LT Field Operations Division

Documentary Requirements in Filing an Application for Compromise Settlement

1. The taxpayer shall attach the following documentary requirements to the letter-
application for compromise settlement, in case of financial incapacity:

37
 1.1. For salaried employees:

- Duly filled-up Application for Compromise Settlement (BIR Form

No. 2107)

- Latest Income Tax Return filed

- Certificate of current gross compensation from present

employer/s

- Certificate of Property Holdings from the Municipal, Provincial

and City Assessor or the Register of Deeds

- Waiver of the secrecy of bank deposits (Annex 300-1.21) pursuant

to the provisions of R.A No. 1405, otherwise known as the Bank
Secrecy Act, in case of financial incapacity to pay the tax liabilities

and increments22

- Proof of payment, if the taxpayer has already paid the offered

amount of compromise

- Waiver of the Defense of the Statute of Limitation for the

collection of the accounts receivable (Annex 300-1.22)

1.2. For unemployed individuals and/or individuals without any business

income

- Duly filled-up Application for Compromise Settlement (BIR Form

No. 2107)

- Sworn statement that he derives no income from any source

whatsoever

- Certificate of Property Holdings from the Municipal, Provincial

and City Assessor or the Register of Deeds

- Waiver of the secrecy of bank deposits pursuant to the provisions

of R.A No. 1405, otherwise known as the Bank Secrecy Act, in
case of financial incapacity to pay the tax liabilities and
increments23

- Proof of payment, if the taxpayer has already paid the offered

22
Republic Act No. 1405 An Act Prohibiting Disclosure or Inquiry into Deposits with any Banking Institution and
Providing Penalty therefor.
23
Ibid.

38
 amount of compromise

- Waiver of the Defense of the Statute of Limitation for the

collection of the accounts receivable

1.3. For corporations, partnerships or individual taxpayers whose income is

derived from business:

- Duly filled-up Application for Compromise Settlement (BIR Form No.

2107)

- Latest Income Tax Return filed together with the latest audited
Financial Statements for the last three (3) years

- Certificate of Property Holdings from the Municipal, Provincial and

City Assessor or the Register of Deeds

- Certification from the barangay and city or municipal licensing office

on the status of the taxpayer’s business (closed, ceased operations,
retired, active/ inactive)

- Waiver of Secrecy of Bank Deposits pursuant to the provisions of the

Bank Secrecy Act under RA No. 1405, in case of financial
incapacity to pay the tax liabilities and increments

- Sworn Statement or Affidavit of no unutilized Tax Credit Certificate

on-hand or pending claim or application for tax credit/refund

- Waiver of the Defense of the Statute of Limitation for the

collection of the accounts receivable

2. In case of “doubtful validity” of the assessment, the taxpayer shall apply in

writing for a compromise settlement of not lower than forty percent (40%) of
the basic tax due. However, the taxpayer may also apply in writing for a
compromise rate lower or higher than the minimum rate of forty per cent (40%)
stating therein the reasons, legal and/or factual, why he should be entitled to
such rate.

Procedures in Processing Applications for Compromise Settlement

The letter-application for compromise settlement shall be filed with the Commissioner,
through the Regional Director/ACIR-LTS or Revenue District Officer/LTDO/LTCED
having jurisdiction over the taxpayer. The said letter must state the reason/s for such a
request and the amount he is willing to pay. It shall likewise be accompanied by all the
necessary documentary requirements in support of the request for compromise
settlement. The filing of application for compromise settlement notwithstanding, the

39
Revenue Officer shall continue with the verification of the property holdings of the
concerned taxpayer and such other further enforcement actions on the delinquent
account(s) in order to ensure that the collection of the accounts receivable from the
taxpayer has been safeguarded once the compromise offer has been denied by the
Commissioner or his/her duly authorized representative.

The Revenue Officer/Seizure Agent shall:

1. Stamp the word “Received” on the taxpayer’s application for compromise

settlement and attachments, as well as the proof of payment, if the taxpayer opted
to pay the tax liability prior to filing application for compromise;

2. Check the completeness of the documentary requirements and evaluate the merits
of the application for compromise settlement;

3. Prepare and send letter to the taxpayer requesting to submit the required
documents, if the documentary requirements are incomplete; and

4. Prepare recommendation on the application and forward the case docket to the
Technical Working Group of the Regional Evaluation Board (TWG-REB)/ Large
Taxpayers Service Evaluation Board (LTSEB) for evaluation and processing.

The TWG-LTSEB/REB shall:

1. Receive and process request of taxpayer for compromise settlement of tax

liability;

2. Evaluate the request for compromise settlement and make appropriate

recommendation; and

3. Forward the entire docket of the case to the LTSEB/REB for appropriate action.

The LTSEB/REB shall:

1. Evaluate the TWG-LTSEB/REB recommendation on the processed application

for compromise settlement;

2. Act appropriately on the request:24

2.1. Approve/disapprove the request if the basic deficiency tax is Five Hundred
Thousand Pesos (Php500,000.00) or less;25 and if the offer is equal or
more than the prescribed minimum rate;

2.2. Forward the evaluated request with basic deficiency tax exceeding Five
24
RR No. 30-2002.
25
Section 7(c) of the NIRC of 1997, as amended.

40
 Hundred Thousand Pesos (Php500,000.00) but not more than One Million
Pesos (Php1,000,000.00) to the Commissioner of Internal Revenue (CIR)26,
through the Regional Director and the TWG-NEB; and

2.3. Forward the evaluated request with basic deficiency tax exceeding One
Million Pesos (Php1,000,000) to the NEB;27 or if the offered amount is
less than the prescribed minimum rate, through the Regional Director and
the TWG-NEB.

3. Return the entire docket and all attachments to the district office of origin for
collection of the compromise offer, if the request is approved as well as for the
issuance of the corresponding Authority to Cancel Assessment (ATCA) for the
unpaid portion of the tax liability;

4. Notify the taxpayer in writing that the offer of compromise was denied, stating
therein reasons for denial and return the entire docket to the originating district
office for the immediate collection enforcement proceedings (Refer to CM
305.1-WDL);

5. Prepare and submit to the TWG-NEB on or before the 20 th day of the following
month a Consolidated Monthly Status Report of Application for
Compromise Settlement Received and Acted Upon (Annex 300-1.23), for
monitoring purposes; and

6. Submit a monthly report on all approved request for compromise cases with basic
tax of Php500,000.00 and below to the TWG-NEB for purposes of preparing a
consolidated report to the Congressional Oversight Committee.

The TWG-NEB shall:

1. Receive the docket bearing on the request for compromise settlement with the
appropriate recommendation from the REB, thru the Regional Director, and
LTSEB, thru the ACIR-LTS;

2. Check the completeness of the documentary requirement. If found incomplete,

return the docket to the originating Office for appropriate action;

3. Assign the docket to the evaluator for appropriate action;

4. Evaluate the request and prepare appropriate recommendation, for routing and
signature of the members of the TWG-NEB;

5. Receive the routed case docket that was approved/disapproved by the

Commissioner;
26
RR No. 30-2002.
27
Section 204 (A) of the NIRC of 1997, as amended.

41
 6. Return the entire docket to the originating district office, for collection of the
compromise offer, if the request is approved;

7. Notify the taxpayer in writing that the offer of compromise was denied stating
therein the reasons for denial, if the request is disapproved, and return entire
docket to the originating district office for collection enforcement action;

8. Prepare and submit to the Commissioner on or before the 25th day of the following
month a Consolidated Monthly Status Report of Application for Compromise
Settlement Received and Acted Upon (Annex 300-1.24), for monitoring
purposes; and

9. Submit a report on the exercise of the power of the Commissioner and the
NEB/REB to compromise the tax liabilities of taxpayers to the Congressional
Oversight Committee, through the Chairmen of the Committee on Ways and
Means of both the Senate and House of Representatives, every six (6) months of
each calendar year.

The NEB shall:

1. Evaluate the case docket bearing the recommendation of the TWG-NEB and
approve/disapprove the request; and

2. Return the docket of the case to the TWG-NEB Secretariat, for appropriate action.

The CIR shall:

1. Evaluate the request for compromise settlement and the recommendation thereon
by the TWG-NEB and the concerned Deputy Commissioners;

2. Approve/Deny the application for compromise settlement; and

3. Return the docket of the case to the TWG-NEB Secretariat, for appropriate action.

The RDO/LTDO/LTCED shall:

1. Determine if the taxpayer has already paid the required amount prior to the filing
of the request for compromise upon receipt of the entire docket and the approved
request for payment thereof;

2. Advise the taxpayer to pay the offered compromise payment, if the taxpayer did
not pay before filing of the request (Refer to CM 304.1 TP Option-Taxpayer
Intends to Pay Tax Liability in Full);

3. Prepare the corresponding Authority to Cancel Assessment (ATCA), if

42
 applicable;

4. Prepare the Closing Memorandum on the approved application for compromise

settlement;

5. Record the case as closed and transmit the entire docket to the Regional
Administrative Division/NO-Records Division for safekeeping, if the application
for compromise settlement was approved by the Commissioner/NEB/Regional
Director;

6. Prepare and submit to the Collection Enforcement Division (CED) copy furnished
Regional Collection Division/LTS the Monthly GCL and Updates of Delinquent
Accounts on the 10th day of the following month (Refer to CM 306-Monitoring
of ARs/DAs);

7. Prepare and submit to the CED on or before the 20th day of the following month a
Monthly Status Report of Application for Compromise Settlement Received and
Acted Upon (Annex 300-1.25), for monitoring purposes; and

8. Enforce the collection of the unpaid tax liability, in case the request is denied
(Refer to CM 305.1-WDL).

CM 304.4 TP OPTION –ABATEMENT OF PENALTIES [Refer to FC 304.4]

Pursuant to the existing rules and regulations, the BIR processes applications for the
abatement of only the surcharge, interests and compromise penalties. Any application
for the abatement of the basic tax assessed or any portion thereof, if any, are not covered
by any existing regulations, and, therefore, shall not be processed.28

Under the NIRC of 1997, as amended, and various judicial rulings, the Commissioner of
Internal Revenue is authorized to abate or cancel a tax liability when any of the following
conditions is present:

1. The tax or any portion thereof appears to be unjustly or excessively assessed:

- When the filing of the return/payment of the tax is made at wrong

venue; 29

- When the taxpayer’s mistake in payment of his tax is due to erroneous

written official advise of a revenue officer;

- When taxpayer fails to file the return and pay the tax due on time due
to substantial losses from prolonged labor dispute, force majeure,
legitimate business reverses such as the following instances, provided
28
RR No. 13-2001 and RMO No. 20-2007.
29
RR No. 13-2001.

43
 that the abatement shall only cover the surcharge and the compromise
penalty and not the imposed interest:

i. Labor strike for more than six (6) months which has
caused the temporary shutdown of the business;

ii. Public turmoil;

iii. Natural calamity such as lightning, earthquake, storm, flood

and the like;

iv. Armed conflicts such as war or insurgency;

v. Substantial losses due to fire, robbery, theft, embezzlement;

vi. Continued losses incurred by the taxpayer for the last two
(2) years;

vii. Liquidity problem of the taxpayer for the last three (3)
years; or

viii. Such other circumstances which the taxpayer may deem

analogous to the enumeration above.

- When the assessment is brought about or the result of taxpayer’s non-

compliance with the law due to a difficult interpretation of the said
law;

- When taxpayer fails to file the return and pay the correct tax on time
due to circumstances beyond his control, provided that the abatement
shall only cover the surcharge and compromise penalty and not
interest;

- Late payment of the tax under the following meritorious

circumstances:

i. One day late filing and remittance due to failure to beat

bank cut-off time;

ii. Use of wrong tax form but correct amount of tax was
remitted;

iii. Filing an amended return under meritorious circumstances,

provided that the abatement shall only cover the penalties
and not the interest;

44
 iv. Surcharge erroneously imposed;

v. Late filing of return due to unresolved issue on

classification/valuation of the property (for capital gains
tax, etc.);

vi. Offsetting of taxes of the same kind (i.e. overpayment in

one quarter/month is offset against underpayment in
another quarter/month);

vii. Automatic offsetting of overpayment of one kind of

withholding tax against the underpayment of another kind;

viii. Late remittance of withholding tax on compensation of

expatriates for services rendered in the Philippines pending
the issuance of the Securities and Exchange Commission of
the license to the Philippine branch office or subsidiary,
provided that the abatement shall only cover surcharge and
compromise penalty and not interest;

ix. Wrong use of the Tax Credit Certificate (TCC) where the
Tax Debit Memo (TDM) was not properly applied for; and

x. Such other instances which the Commissioner may deem

analogous to the above enumeration.

2. The administration and collection costs involved, including the costs of litigation,
are much more than the amount that may be collected from the taxpayer:

- Abatement of penalties on assessment confirmed by the lower court

but appealed by the taxpayer to a higher court, provided "that the
taxpayer signified in writing his willingness to pay the basic tax and
interest or the basic tax only, whichever is applicable under the
prevailing circumstances";

- Abatement of penalties on withholding tax assessment under

meritorious circumstances;

- Abatement of penalties on delayed installment payment under

meritorious circumstances;

- Abatement of penalties on assessment reduced after reinvestigation but

taxpayer is still contesting the reduced assessment, provided that the
taxpayer signified in writing his willingness to pay the basic tax and
interest or the basic tax only, whichever is applicable under the
prevailing circumstances;

45
 - Such other instances which the Commissioner may deem analogous to
the above enumeration

3. Taxpayer is already dead, leaving no distrainable/leviable property.

4. Taxpayer is abroad and there are indications that he/she is not returning to the
country, leaving no forwarding address and with no distrainable and leviable
property.

5. In case of a corporation which is already dissolved and all subscribed shares of

stock have been fully paid, without prejudice from the filing of any criminal
charges against the responsible officials of the corporation for non-payment of the
tax.

6. The tax case has already prescribed, without prejudice to the filing of
administrative case against the responsible Revenue Officer(s).

The abatement of surcharge, interests and penalties on any unpaid tax liability by a
taxpayer is an exclusive power of the Commissioner; hence, could not be delegated to
any subordinate official.30 Accordingly, all applications for abatement of penalties shall
be subject to final evaluation and approval by the Commissioner.

The authority by the Commissioner to abate penalties is generally applicable to surcharge

and interest. However, the Commissioner can exercise the power to abate the imposed
interest provided that such cases are coursed thru the following:

1. The Technical Working Committee constituted by the Deputy Commissioner-

Operations Group for the review and evaluation of regional cases;

2. The Technical Working Committee constituted by the ACIR-LTS for large

taxpayer cases; and

3. The Deputy Commissioner-Legal and Inspection Group for the evaluation of the
legal issues involved in the case.

Documentary Requirements in Applying for Abatement of Penalties

The Application for Abatement or Cancellation of Tax, Penalties and/or Interest (BIR
Form No. 2110) must be filed with the concerned BIR office that has jurisdiction over the
case. The said written application should clearly state the reasons and causes for such
request; and the documentary proofs or evidences for such underlying reasons and causes
must be appended to the said application.

In cases of application based on financial incapacity, the request for abatement shall
30
Section 7 (c) of the NIRC of 1997, as amended.

46
include the following documents:

1. Duly authenticated tax return and/or amended return with copy of previous tax
return filed as basis for comparison;

2. Proof of payment of the first installment of the tax due, in case of unpaid second
installment income tax due for individual taxpayer;

3. Latest audited financial statements, in case of corporations and individual

taxpayers with business income;

4. Waiver of the Secrecy of Bank Deposit under the Bank Secrecy Act;

5. Waiver of the Defense of the Statute of Limitation Waiver of the Defense of the
Statute of Limitation for the collection of the accounts receivable (Annex 300-
1.22); and

6. Sworn Statement stating that the taxpayer has no Tax Credit Certificate (TCC) on
hand or in transit or claim for tax refund or TCC under the NIRC of 1997, as
amended, and the Omnibus Investments Code of 1987 31 which is pending in any
office.

Additional requirements for the availment of abatement of penalties that may be

prescribed in a separate Revenue Memorandum Order shall likewise be complied
with.

Procedures in Processing the Requests for Abatement of Penalties

1. The taxpayer shall file a letter-request for abatement, together with the
documentary requirements addressed to the Commissioner, through the RDO that
as jurisdiction on the tax case, stating the reasons for the abatement application.

2. The Revenue Officer handling the case shall:

2.1. Stamp “Received” the letter-request and application for abatement

including the supporting documents appended to the application;

NOTE: No application for abatement shall be processed without the

payment of one hundred percent (100%) of the basic tax.32

2.2. Check the completeness of the requirements;

2.3. Evaluate the request for abatement of penalties; and

31
Executive Order No. 226.
32
RMO No. 20-2007.

47
 2.4. Prepare the appropriate report for the signature of the RDO/Chief,
LTDO/LTCED containing the recommendation therefore and submit the
same to the concerned REB/LTSEB for review and evaluation within five
(5) days from receipt of the application for abatement.

3. The REB/LTSEB shall:

3.1. Receive the report containing the recommendation on the application for
abatement by the concerned RDO/Chief, LTDO/LTCED;

3.2. Review, evaluate and affix their signature on the recommendation whether
for approval or disapproval by a majority of the members; and

3.3. Forward the recommendation to the Regional Director/ACIR-LTS for

final review, evaluation prior to the transmission of the case docket to the
TWC, within five (5) days from receipt of the application for abatement.

4. The TWC shall:

4.1. Receive the report containing the recommendation on the application for
abatement by the REB/LTSEB;

4.2. Review and evaluate the recommendation of the REB/LTSEB;

4.3. Submit the TWC recommendation to the CIR on the application for
abatement within thirty (30) days from receipt of the docket;

4.4. Prepare and submit to the Commissioner on or before the 25 th day of the
following month a Consolidated Monthly Report of Application for
Abatement Received and Acted Upon (Annex 300-1.26), for monitoring
purposes; and

4.5. Submit a report on the exercise of the power of the Commissioner and the
NEB/REB to abate the tax liabilities of the taxpayers to the Congressional
Oversight Committee through the Chairmen of the Committee on Ways
and Means of both the Senate and House of Representatives, every six (6)
months of each calendar year.
.
5. The CIR shall evaluate the TWC recommendation and upon approval/disapproval
of the request for abatement, return the entire docket and the attachment, to the
originating office (RDO/LTDO/LTCED), through the TWC, for implementation
of the final decision on the request for abatement of penalties.

6. The RDO/LTDO/LTCED shall:

6.1. Advise the taxpayer to pay the offered amount upon receipt of the

48
 application for abatement or the docket of the case bearing on the
decision of the Commissioner, in case certain portions of the penalties
requested to be abated have been denied (Refer to CM 304.1 TP Option -
Taxpayer Intends to Pay Tax Liability in Full);

6.2. Prepare the Authority to Cancel Assessment (ATCA), if applicable;

6.3. Prepare the Closing Memorandum on the approved application for

abatement of penalties;

6.4. Record the case as closed and submit the entire docket to the Regional
Administrative Division/NO-Records Division for safekeeping, in case the
application for abatement of penalties has been approved by the
Commissioner;

6.5. Prepare and submit to the Collection Enforcement Division (CED), copy
furnished the Regional Collection Division/LTS, the Monthly Summary of
General Control Ledger (GCL) and Updates of Delinquent Accounts on
the 10th day of the following month (Refer to CM 306-Monitoring of
ARs/DAs); and

6.6. Enforce the collection of the unpaid tax liability, if the request for
abatement is denied (Refer to CM 305.1-WDL).

CM 305 COLLECTION SUMMARY 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 Bureau can exercise its vast coercive
power to ensure that the said unpaid tax liabilities are duly and timely collected, in the
discharge of its primary mandate to collect the correct taxes for the government.

The authority of the Commissioner of Internal Revenue 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, as amended all of which provide for the
imposition of civil and judicial remedies in the collection of delinquent taxes;

2. Section 218 (Injunction Not Available to Restrain Collection of Tax) of the

NIRC, which provides that no court shall have the authority to grant an injunction
to restrain the collection of any internal revenue tax, fee or charge imposed under
the NIRC; and

49
 3. Section 11 of Republic Act (RA) No. 1125 (An Act Creating the Court of Tax
Appeals (CTA) from a decision of the Commissioner on a disputed assessment
shall suspend the payment, levy, distraint, and /or sale of any property of the
concerned taxpayer to satisfy the tax liability, unless the CTA itself should
suspend the collection of the tax under certain conditions.

DEFINITION OF TERMS

For purposes of this Manual and in order to provide clarity and better understanding of
the policies and procedures in the implementation thereof, the words and phrases herein
provided are defined as follows:

1. Warrant of Distraint and /or Levy - 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.

2. Distraint - refers to the seizure of personal property (tangible and intangible) by

the government to enforce the payment of a tax liability. Distraint is of two (2)
kinds:

a. Actual Seizure - refers to the act of enforcing/executing the Warrant of

Distraint, and/or Levy (WDL) through the actual confiscation of the personal
property/ies of a delinquent taxpayer. It is done simultaneously or after the
service of the WDL upon the taxpayer or any of his/her household with
sufficient discretion. It should be done with an assessment, either in the form
of final assessment notice, self-assessed but unpaid taxes, and also in the case
of a dishonored check;

b. Constructive Seizure/Distraint - refers to the act of listing down the personal

properties of the taxpayer in the Constructive Seizure of Personal Properties
Seized Under Authority of the NIRC (CSPP) or the filing of the
Memorandum Receipt/Notice of Constructive Distraint of Personal Property
(CDPP) requiring the taxpayer or any person having possession or control of
such property/ies not to dispose the properties distrained without the express
authority of the Commissioner of Internal Revenue or his duly authorized
representative. This is done when the taxpayer or person in custody of the
property distrained refuses to sign the memorandum receipt of the distrainable
properties. The distraining officer shall leave a copy thereof in the premises
where the property distrained is located in the presence of two (2) credible
witnesses, preferably BIR officers. This summary remedy could be enforced
for any unpaid tax liabilities, with or without an assessment, pursuant to
existing rules and regulations.

3. Levy - refers to the seizure of real properties and interest in or right to such
properties of a delinquent taxpayer by the government in order to enforce the

50
 collection of unpaid tax liabilities.

4. Garnishment - 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 Bureau of Internal Revenue (BIR).

5. Notice of Tax Lien - 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.

6. Notice of Levy - a written notice of the seizure of a real property by the

Commissioner of Internal Revenue, or his/her duly authorized representative,
addressed to the City/Municipality Assessor in the case of untitled real properties.
It is addressed to the Register of Deeds of the city or province where it is situated
in case of titled real properties, for annotation of the same at the back of the Tax
Declaration (TD) or at the back of the Title, in order to enforce the collection of
delinquent taxes due from a taxpayer.

7. Original Certificate of Title (OCT) - a legal document certifying private

ownership of land issued under the Torrens title system of the Philippines. The
OCT may be issued either judicially or administratively by the Land Registration
Authority (LRA) and recorded in the archives of the Government by the Register
of Deeds.

8. Transfer Certificate of Title (TCT) - a legal document certifying private

ownership of land upon subsequent transfer of certificate of title derived from the
OCT. Such transfer may be through sale or donation by the previous owner to the
buyer or donee. The TCT may be issued also either judicially or administratively
by the LRA and recorded by the Register of Deeds.

9. Condominium Certificate of Title (CCT) - a legal document certifying private

ownership of a condominium unit issued by the LRA and recorded by the
Register of Deeds.

10. Tax Declaration (TD) - a legal document issued by the City/Municipal

Provincial Assessor’s office which serves as basis for real property tax purposes.
The Tax Declaration contains information on the owner of the property and the
kind of property assessed including classification, actual use, area and market
value and assessed value thereof.

11. Notice of Encumbrance – a written notice issued by the Commissioner of

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

51
Implementing Offices and Instruments to Implement Summary Remedies

The RDO/Regional Collection Divisions of the Regional Offices and the LTCED/LTDOs
of the LTS shall fully utilize the summary remedies provided for by Section 207 of the
NIRC of 1997, as amended, by issuing the Preliminary Collection Letter (PCL), Final
Notice Before Seizure (FNBS), Warrant of Distraint and/or Levy (WDL), Constructive
Seizure of Personal Property Seized Under the Authority of the NIRC (CSPP), Notice of
Actual Seizure of Personal Property (NASPP), Constructive Distraint of Personal
Property (CDPP), Notice of Encumbrance (NOE), Notice of Tax Lien (NTL), Notice of
Levy (NOL), Notice of Sale (NOS) and Warrant of Garnishment (WG) on all accounts
receivables/delinquent accounts (ARs/DAs) that are pending with their respective Offices
to be signed and approved by the concerned BIR Official.33

The Revenue Officers in charge of collection functions shall immediately proceed in

identifying the properties and specific accounts owned by and in the name of the taxpayer
which shall be levied, forfeited, seized or garnished in favor of the Government.
Consequently, the PCL, FNBS, WDL, NASPP, CSPP, CDPP, NOE, NTL, NOL, NOS
and WG shall be sent out to place such identified properties under
seizure/forfeiture/garnishment as a consequence of the failure on the part of the taxpayer
to pay the delinquency taxes. All Revenue Officers in charge of this function must ensure
that proper annotations regarding the encumbrance, tax lien, levy and garnishment have
been made unto the document evidencing the ownership of the taxpayer over such
properties/accounts.

Guidelines in Implementing Summary Remedies

Any internal revenue tax which has been assessed within the period of limitation as
prescribed in Section 203 and Section 222 (a) of the NIRC of 1997, as amended, may be
collected by distraint or levy, or by a proceeding in court within five (5) years following
the assessment of the tax, as provided under Sections 222 (c) and 222 (d) of the NIRC of
1997, as amended.

The implementation of summary remedies must be made immediately upon recognition

of a receivable account, even if such an account is not yet considered as delinquent. The
issuance of PCL, FNBS, WDL, NASPP, CSPP, CDPP, NOE, NTL, NOL, NOS and WG
shall be available as summary remedies, in accordance with Section 207 of the NIRC of
1997, as amended, in the following cases:

1. When the Final Assessment Notice (FAN) has been issued, whether or not the
same is already final, executory and demandable, or a valid administrative protest
(i.e., request for reinvestigation or reconsideration) against the FAN was filed by
the taxpayer within the reglamentary period. The enforcement of the summary
remedies on protested cases can be pursued by the Commissioner in order to
safeguard the government’s interest. However, the Bureau cannot yet sell or
dispose any distrained or levied property unless a final decision on the protested
33
RDAO No. 1-2001.

52
 case was already made and such assessment has already become final,
executory and demandable.

2. When a receivable was automatically considered as a delinquent account without

the need for the issuance of an assessment notice such as unpaid self-assessed tax,
dishonored check, etc.

3. When the taxpayer defaulted in the payment of an approved installment plan for
the payment of its tax liabilities.

4. Upon issuance by the Commissioner/Regional Director/ACIR-LTS/ACIR-

Enforcement Service, of the Final Decision on the Disputed Assessment (FDDA)
against the taxpayer or upon issuance by the CTA in Division or En Banc of its
decision upholding the assessment, the PCL, FNBS, WDL, CSPP NASPP, CDPP,
NOE, NTL, NOL, and WG shall be immediately issued and served.34

The implementation of the summary remedies shall not be suspended or held in

abeyance, notwithstanding:

1. The execution of Waiver for the running of the Statute of Limitations for the
collection of taxes; or

2. The filing of an application for compromise settlement or abatement of penalties,

where such application is still being processed by the concerned BIR offices.

Prioritization in the Execution of Summary Remedies

Due to resource limitations, prioritization in the execution of summary remedies is

necessary in order to obtain the optimum collection benefits from these receivable
accounts. In this light, the following sequence of priorities shall be observed in the
implementation of summary remedies for ARs/DAs:

1. Cases wherein the period to collect is about to prescribe within one (1) year;

2. Cases under the “Run After Tax Evaders” (RATE) Program or cases with findings
of fraud or clear intent to evade the payment of the tax due and where the fifty
percent (50%) surcharge has been imposed;

3. Cases where a taxpayer, with an outstanding tax liability, cannot pay but retains a
number of properties in his possession;

4. Cases where the taxpayer has no intention to pay his outstanding tax liabilities
due to any of the following:

4.1. Retirement from any business subject to tax;

34
RMO No. 39-2007 and RMO No. 42-2010.

53
 4.2. Intention to leave the Philippines;

4.3. Removal of his properties from the Philippines;

4.4. Hiding or concealment of his properties; and

4.5. Performance of any act that tends to obstruct the collection of the tax due;

5. Cases automatically considered as delinquent accounts, even without the issuance

of Assessment Notices (e.g. payment of taxes through dishonored checks; non-
payment of the second installment of income taxes; non-payment of the tax due,
as indicated in the tax returns filed, etc.);

6. Delinquent accounts with lapsed schedules of installment payments;

7. Receivable accounts where the assessments have become final, executory, and
demandable either because of the taxpayer’s failure to file a protest before the
BIR within the prescribed period, or are covered by final judgment of the
concerned courts in favor of the BIR;

8. Cases involving assessments decided by the Courts in favor of the BIR, but were
subsequently appealed by the taxpayer before a higher Court;

9. Cases involving assessments decided by the Courts in favor of the concerned

taxpayer, but were subsequently appealed by the BIR before a higher Court;

10. Protested cases where the Final Decision on Disputed Assessment (FDDA) has
already been issued by the BIR; and

11. All other accounts receivable cases.

Notwithstanding the foregoing sequence of priorities, all implementing BIR Offices are
not precluded from giving precedence to certain cases over the aforesaid sequence due to
compelling and justifiable reasons (e.g. receipt of information that a taxpayer is already
disposing of his assets that will be subject to enforcement actions; or setting up of
accounts receivable thresholds such that “big-ticket items” are handled ahead of other
cases even if these accounts are not yet about to prescribe, etc.), provided that all
necessary enforcement actions have been carried out prior to the lapse of the prescriptive
period for the collection of these receivable accounts.

Any BIR Official who fails to issue and/or execute the WDL within thirty (30) days
after the expiration of the time prescribed in Section 207 of the NIRC of 1997, as
amended, or who is found guilty of abusing the exercise thereof by competent authority
shall be automatically dismissed from the service after due notice and hearing.35
35
Section 273 of the NIRC of 1997, as amended.

54
Lifting/Cancellation of the Collection Summary Remedies

Collection summary remedies shall only be lifted/cancelled under either of the following
conditions:

1. When the delinquent account has been fully settled by the concerned taxpayer, as
evidenced by the appropriate proof of payment;

2. When the offer of compromise/abatement has been duly approved and paid by the
taxpayer, pursuant to existing rules and regulations;

3. When the original amount of assessment was fully or partially cancelled as a

result of reinvestigation or reconsideration of the assessment, and the revised
assessment, if any, was already fully paid by the taxpayer and the corresponding
ATCA on the cancelled assessment has been issued by the concerned
reinvestigating office;

4. When 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, including the
increments incident to delinquency,, or has filed a surety bond with an accredited
surety company for an amount not less than double the amount of his/her/its
outstanding tax liability;36

5. When the competent court has issued a final and executory order for the lifting
thereof;

6. Under other meritorious cases, provided the interest of the government is not
jeopardized and upon prior approval by the Commissioner; and

7. When the Bureau’s right to assess and/or collect the unpaid tax liability within the
prescribed period under the Statute of Limitations has already prescribed.

Delegation of Authority to Approve/Sign Documents on Collection Summary Remedies

To effectively manage the collection of accounts receivables/delinquent accounts, the

BIR delineates the authority and responsibility of revenue officials who shall sign,
approve, serve, execute and lift warrants and notices as follows: 37

1. Delegation of Authority to Sign and Approve Documents - The authority to

sign/approve and serve/execute the documents below shall be delegated to the
following Revenue Officials for the proper enforcement of collection under the
jurisdiction of their respective Offices:

36
Section 11 of RA No. 1125, as amended by RA No. 4134, applied to this case by analogy.
37
RDAO No. 1-2001.

55
 - Warrant of Distraint and/or Levy and lifting thereof;

- Warrant of Garnishment and lifting thereof;

- Notice of Tax Lien and lifting thereof;

- Notice of Encumbrance and lifting thereof;

- Notice of Levy on Real Property and lifting thereof;

- Notice of Actual Seizure of Personal Property and lifting thereof;

- Constructive Seizure of Personal Property and lifting thereof;

- Constructive Distraint of Personal Property and lifting thereof.

Case Description Signing/Approving Officer

National Office Cases other than LT Regional Director who has jurisdiction
Cases over the concerned taxpayer38
Large Taxpayers (LT) Cases ACIR- Large Taxpayers Service
Large Taxpayers District Office Chief-LTDO
(LTDO) Cases
Regional Office (RO) Cases Revenue District Officer (RDO)

2. Delegation of Authority to Serve and Execute - The following Offices are hereby
designated to cause the service and execution of the duly approved administrative
summary remedies enumerated above:

Case Description Designated Office

National Office Cases other than LT Revenue District Office who has
Cases jurisdiction over the concerned
taxpayer39
Large Taxpayers (LT) Cases Large Taxpayers-Collection
Enforcement Division (LTCED)
Large Taxpayers District Office LTDO
(LTDO) Cases
Regional Office Cases Revenue District Offices (RDO)

3. Assistance in the Service and Execution of Warrants/Notices - In undermanned

RDOs/ LTDOs, the request to provide Deputized/Auxiliary Revenue Officers to
aid in the service and execution of the warrants/notices and other processes must
be sought from the concerned Regional/LTS Offices.

38
Memorandum of Deputy Commissioner Nelson M. Aspe dated 25 July 2007 transferring the responsibility of
enforcing collection summary remedies for national office cases, other than LTS cases, from Collection Service to
the concerned regional offices having jurisdiction over the taxpayer.
39
Ibid.

56
 4. Lifting - The lifting of the WDL, CSPP, NASPP, CDPP, NOE, NTL, NOL and
WG shall be signed/approved by the same person who executed the said warrants.
In case the said person has already retired/resigned/transferred to other offices, the
incumbent official of the concerned office shall be the signatory thereof.

CM 305.1 WARRANT OF DISTRAINT AND LEVY (WDL) [Refer to FC 305.1]

The enforcement of summary remedies for the collection of taxes from the delinquent
taxpayer is done through the issuance of the WDL and the service thereof to the taxpayer.
The WDL serves as the basic instrument authorizing the BIR to implement summary
remedies by distraint and/or levy of personal and real properties, respectively, of the
delinquent taxpayer.

Procedures in the Preparation of the Warrant of Distraint and Levy (WDL)

In the preparation of the Warrant of Distraint and/or Levy (WDL), the Revenue Officer/
Seizure Agent shall:

1. Accomplish WDL-BIR Form No. 1301 or ITS BIR Form No. 0700, whichever is
applicable, in quadruplicate (Annex 300-1.27);

Accurately fill-up the form, more particularly on the name and address of the
taxpayer, the amount of tax due, the date of assessment, the applicable tax type,
taxable period, and the assessment number.

The amount to be reflected in the warrant shall be the total amount of

delinquency tax assessed for each type of tax including surcharge and interest,
except compromise penalty, against a particular taxpayer as a result of
investigation or audit, surveillance, etc. or for self-assessed taxes (i.e., returns
filed with no payment or underpayment, dishonored checks, second installment
etc.);

2. Forward the accomplished form, together with the docket of the case, to the duly
authorized official for affixture of his/her signature thereon; and

3. Indicate the WDL number and post all relevant information in the Warrant
Register maintained in the Office of the RDO/LTDO/LTCED in the manner
prescribed in RR No. 3-69 and RDAO No. 1-2001.

The RD/RDO/LTDO Chief/ACIR-LTS or their authorized representative shall:

1. Review and sign the accomplished WDL; and

2. Return the signed WDL to the Revenue Officer/Seizure Agent for recording of the
same in the Warrant Register and service thereof to the taxpayer.

57
Procedures in the Actual Service of the WDL

The actual service of a WDL occurs when the taxpayer or his/her/its duly authorized
representative acknowledges the receipt of the warrant by voluntarily signing his/her
name on the receipt portion of the warrant.

The Revenue Officer/Seizure Agent shall serve the WDL to the taxpayer within ten (10)
days from receipt of the signed WDL.

If the taxpayer is located and is willing to acknowledge the receipt of the WDL:

a. For the individual taxpayer, the Revenue Officer/Seizure Agent shall:

1. Require the taxpayer/authorized representative, or a member of his household,

of legal age and with sufficient discretion to sign on the acknowledgment
receipt portion of all the copies of the warrant;

2. Ascertain the identification of the receiving party through the presentation of

valid identification (ID) [e.g. those issued by government agencies such as the
driver’s license by the Land Transportation Office (LTO), the Social Security
System (SSS) ID and the Government Security and Insurance System
(GSIS)]. Reflect the particulars of the ID presented by the authorized
representative in the WDL;

3. Indicate the actual date and time of the service of the warrant;

4. Sign over the printed name as the service officer/seizure agent of the warrant
and indicate the office address and the telephone number where he/she can
be contacted by the taxpayer or his/her duly authorized representative;

5. Give the duplicate copy of the warrant to the taxpayer or his duly authorized
representative;

6. Attach the original copy of the warrant received by the taxpayer and the other
copies thereof to the docket;

7. Prepare and submit a progress report (Annex 300-1.28) to the RDO/LTDO/

LTCED Chief not later than the following day of the actual service of the
warrant and attach the same to the docket (Refer to CM 305.2.1-Notice of
Tax Lien (NTL)/CM 305.3-Distraint of Personal Property/CM 307-
Monitoring Warrant Enforcement).

b. If the taxpayer is a corporation, the Revenue Officer/Seizure Agent shall:

1. Serve the WDL to the President, Vice-President, Manager, Treasurer or

Comptroller or to any responsible person of the corporation; and

58
 2. Perform all the procedures as in the case of an individual taxpayer described
above.

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:

1. Indicate the date and time of the service of the warrant on the acknowledgement
receipt portion;

2. Have two (2) credible witnesses, preferably two officers of the BIR, sign in the
spaces provided for the witnesses;

3. Sign over printed name as the service officer/seizure agent and indicate taxpayer’s
residential/office address, contact number (e.g. telephone/cellular phone/mobile
phone/e-mail) where the taxpayer could be reached;

4. Leave the duplicate copy of the warrant at the premises of the taxpayer;

5. Retain the original copy and other copies of the warrant to be attached to the
docket; and

6. Prepare and submit a progress report (Annex 300-1.28) to the RDO/LTDO/

LTCED Chief not later than the following day of the constructive service of the
warrant (Refer to CM 305.2.1-NTL/CM 305.3-Distraint of Personal
Property/CM 307-Monitoring Warrant Enforcement).

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:

1. 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.;

2. Make a progress report (Annex 300-1.28) 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;

3. Exercise diligence in searching/locating for property/ies of the taxpayer,

whether real or personal, tangible or intangible, that can be levied/distrained
upon to satisfy the full payment of its/his/her unpaid tax liability; and

59
 4. Prepare a Notice of Tax Lien (NTL), refer to CM 305.2.1 - NTL.

b. If the taxpayer is a corporation, the Revenue Officer/Seizure Agent shall:

1. Check with the Securities and Exchange Commission (SEC) the current status
of the corporation if it has dissolved or has ceased operations);

2. Secure a copy of the Articles of Incorporation and the latest General

Information Sheet (GIS) from the SEC;

3. 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;

4. Undertake the following procedures if the corporation has been verified to

have been dissolved as certified by the SEC and as determined by the revenue
officer/seizure agent:

4.1. Verify if the company’s stockholders have unpaid subscriptions to the

corporations authorized capital stock:

4.1.1. If there is no unpaid subscription:

4.1.1.1. Check the names and addresses of the key officers

of the dissolved corporation; and

4.1.1.2. Prepare indorsement to the concerned Legal Office

for institution of judicial action against these
company officials.

4.1.2. If there are unpaid subscriptions:

4.1.2.1. Check the names and addresses of the stockholders

with unpaid subscriptions;

4.1.2.2. Check the whereabouts of the stockholders from

possible government offices where the necessary
information may be obtained [e.g., the BID,
National Bureau of Investigation (NBI), Philippine
Postal Office, Commission on Elections
(COMELEC), Department of Foreign Affairs
(DFA), Land Transportation Office (LTO), etc.];

4.2. Compute the aliquot shares in the delinquent tax liability of each
stockholder with unpaid subscription, as follows:

60
 Unpaid subscribed capital stocks of stockholder Delinquent
Aliquot shares = Total unpaid subscriptions of all stockholders X Tax Liability
of the corporation

Note that the aliquot shares of each stockholder shall not exceed
his/her unpaid subscription without prejudiced to the filing of criminal
case against the responsible official/s of the corporation.

4.3 Send a letter to the stockholders (Annex 300-1.29) with unpaid

subscriptions, informing them of the company’s outstanding tax
liability and their respective aliquot shares simultaneous with the
service of the WDL to them;

4.3.1. If there is no response from the stockholder, prepare a Notice

of Tax Lien (NTL) if there is leviable property. (Refer to CM
305.2.1-NTL).

4.3.2. If the stockholder responds to the letter and is willing to pay

in full, record immediately collect the tax liabilities and record
the case as closed in the GCL (Refer to CM 304.1- Taxpayer
Intends to Pay Tax Liability in Full/CM 306- Monitoring
of ARs/DAs/CM 307- Monitoring Warrant Enforcement).

4.3.3. If the amount paid by the stockholder is not sufficient to

satisfy the corporation’s tax liability, and the stockholder is a
responsible officer of the corporation, serve the WDL to the
said stockholder and demand the immediate payment of the
same; and

4.3.4. If the stockholder refuses to pay, prepare a Notice of Tax Lien

(NTL) and refer the case to the Regional Legal Division/Legal
Service for appropriate action. (Refer to CM 305.2.1-NTL).

5. Prepare and submit a progress report (Annex 300-1.28) not later than the
following day after the service of the WDL to the stockholder.

CM 305.2 NOTICE OF TAX LIEN (NTL)

Upon issuance of the WDL, the Revenue Officer/Seizure Agent shall immediately
proceed in identifying the specific properties and deposit accounts/assets owned by and in
the name of the taxpayer which shall be levied, forfeited, seized or garnished in favor of
the government.

61
The amount of the unpaid tax, after the demand has been made, shall be a lien in favor of
the Government of the Philippines from the time when the assessment was made until the

same is paid, with delinquency increments and all the costs that may accrue in addition
thereto upon all properties and rights to properties belonging to the taxpayer. In order to
validate the legal claim or charge by the government on the property of the taxpayer, as
security for the payment of his tax liability, a Notice of Tax Lien (NTL) shall be filed by
the BIR with the Register of Deeds of the city/municipality or province, Municipal/City
or the Provincial Assessor’s Office, in case of untitled properties, where the property is
located.40

CM 305.2.1 PREPARATION AND FILING OF THE NTL [Refer to FC 305.2.1]

Procedures in the Preparation and Filing of the NTL

The Revenue Officer/Seizure Agent shall:

1. 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;

2. Receive the formal reply from the Register of Deeds and/or the Assessor’s Office

2.1. If the taxpayer has real property:

2.1.1. Secure a certified copy of the Original Certificate of Title

(OCT)/Transfer Certificate of Title (TCT)/Condominium
Certificate of Title (CCT)/Tax Declaration (TD) for untitled
properties, for the purpose of issuance and filing of the appropriate
Notice of Tax Lien (NTL);

2.1.2. Accomplish the NTL form (Annex 300-1.30), correctly specifying

the OCT/TCT/CCT/TD number and other pertinent descriptions of
the property as appearing on the title or tax declaration, in case of
untitled property;

2.1.3. Forward the duly accomplished NTL to the authorized officer for
signature;

2.1.4. File the signed NTL with the Register of Deeds/Assessor’s Office
of the municipality, city or province where the property of the
taxpayer is located in order to validate/establish the legal claim or
40
Section 219 of the NIRC of 1997, as amended.

62
 charge of the government on the said property of the taxpayer
against any mortgagee, purchaser, or judgment creditor. Make
sure that the receiving officer of the Office where the NTL was
filed will indicate the date and time of receipt thereof on all copies
of the said NTL;
2.1.5. Have the lien annotated on the OCT/TCT/CCT/TD in favor of the
government;

2.1.6. Secure a certified true copy of the annotated OCT/TCT/CCT/TD

and attach the same to the docket of the case;

2.1.7. Provide the taxpayer with a copy of the NTL and a photocopy of
the duly annotated OCT/TCT/CCT/TD. This will serve as
information to the taxpayer that the NTL has been registered in the
Registry Book of the Register of Deeds/Assessor’s Office where
the property of the taxpayer is located, and that the same was
likewise annotated at the back of the original copy of their
OCT/TCT/CCT/TD;

2.1.8. If the taxpayer fails to pay the outstanding tax liabilities after
receiving the filed NTL, refer to CM 305.8 Levy on Real
Property. The Notice of Levy shall be filed with the same Register
of Deeds/Assessor’s Office simultaneously or immediately after
the filing and registration of the NTL; and

2.1.9. Attach the remaining copy of the NTL to the docket of the case for
records purposes.

2.2. If the taxpayer has no real property:

2.2.1. Secure a certification of “No Property Holdings” from the

Municipal City/Provincial Assessor and Municipal/City/Provincial
Register of Deeds and attach the same to the case docket;

2.2.2 Prepare a memorandum to the Regional Legal Division/

Prosecution Division for the signature of the Regional
Director/ACIR-LTS recommending the appropriate legal action
for taxpayers that can be located but with no property holding/s,
for their appropriate action;

2.2.3. Recommend, through a memorandum to the Revenue District

Officer/ LTDO/ LTCED the write-off/cancellation or suspension,
of the case in view of the following reasons:

- Taxpayer is already dead without distrainable and leviable

property;

63
 - Taxpayer has ceased its business operations;

- Taxpayer is over 65 years old , is jobless, not earning any

passive income, and without any pending claim on any
property or asset such as undivided shares in inheritance,
uncollected receivables from whatever source, etc.;

Taxpayer is serving life imprisonment without distrainable

or leviable property and deriving no income from whatever
source;

- Taxpayer is declared insolvent by the court or is found to

be incapable of earning a living upon verification, without
distrainable or leviable property.

- Taxpayer is suffering from lingering illness and not capable

of earning a living, without distrainable or leviable
property.

- Taxpayer is an individual and his/her whereabouts is

unknown, without distrainable or leviable property.

- Taxpayer is abroad and there are indications that he/she is

not returning to the country, leaving no forwarding address
and with no distrainable and leviable property.

- In case of a corporation which is already dissolved and all

subscribed shares of stock have been fully paid, without
prejudice from the filing of any criminal charges against
the responsible officials of the corporation for non-payment
of the tax.

2.2.4. Fill-up the Fieldman’s Affidavit of Uncollected Taxes (Annexes

300-1.7/1.8) for every case that is recommended for
write-off/cancellation or suspension;41

2.2.5. Attach the affidavit to the case docket together with the analysis
sheet and prepare the memorandum bearing the appropriate
recommendation on the uncollected receivables stating therein the
reasons why the same should be written-off/cancelled or
suspended; and

2.2.6. Submit the case docket together with the recommendation to the
Regional Director/ACIR, LTS, CIR, as the case may be, for
41
RMO No. 40-87.

64
 review, evaluation, and approval/disapproval.

The Regional Director/ACIR-LTS shall:

1. Evaluate the recommendation submitted by the Revenue Officer/Seizure Agent,

thru the RDO/LTDO/LTCED, on the institution of legal action against the
taxpayer and/or the write-off/cancellation/suspension of the uncollectible
accounts;

2. Approve/Disapprove the recommendations made by the RDO/LTDO/LTCED;

3. Transmit the docket of the case to the Regional Legal Division/Prosecution

Division recommending legal action for taxpayers that can be located but with
no property holding/s; and

4. Forward the case docket bearing on the write-off/cancellation/suspension of the

accounts to the appropriate office:

4.1. If approved for inclusion in suspense file, forward to the Regional

Collection Division for safekeeping;

4.2. If approved for write-off/cancellation, forward to the Office of the

Commissioner, for review and approval; and

4.3. If disapproved, return to the RDO/LTDO/LTCED for continuance of

collection enforcement.

The Commissioner shall:

1. Evaluate the recommendation for write-off/cancellation of the taxpayer’s tax

liabilities;

2. Affix signature on the memorandum bearing on the recommendation for write-

off/cancellation of the case:

2.1. If approved, return the case docket to the RDO/LTDO/LTCED for

Issuance of ATCA; and

2.2. If disapproved, return the docket of the case to the RDO/LTDO/LTCED

for continuance of collection enforcement.

CM 305.2.2 LIFTING OF NTL /NOTICE OF LEVY (NOL) [Refer to FC 305.2.2]

The tax lien may be extinguished under any of the following instances:

1. Full payment by the taxpayer of the unpaid tax liabilities, including all the

65
 applicable delinquency penalties due thereon;

2. Approval and full payment of the taxpayer’s offer for compromise settlement or
abatement of penalties;

3. Full or partial cancellation of the original assessment as a result of reinvestigation

or reconsideration of the assessment; and the revised assessment, if any, was
already paid in full by the taxpayer, and the corresponding ATCA on the
cancelled assessment has been issued by the concerned reinvestigating office;

4. Prescription of the Bureau’s right to assess and/or collect the unpaid tax liabilities
under the Statute of Limitations;

5. 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, including the
increments incident to delinquency, or has filed a surety bond with an accredited
surety company for an amount not less than double the amount of his/her/its
outstanding tax liability;42

6. Full destruction of the property subject to the lien;

7. The competent court has issued a final and executory order for the lifting thereof;
and

8. Under other meritorious cases, provided the interest of the government is not
jeopardized and upon prior approval by the Commissioner.

However, a tax lien on real property could not be extinguished if the destruction was
limited to improvements (buildings, etc.) thereon, and there is still real market value for
the land itself. A thorough determination must first be made as to the extent of the
destruction and the resulting value that was placed on the property before considering the
lifting of the lien.

To effect the lifting the NTL or the NOL, the Bureau shall issue a lifting order to the
concerned office where the NTL or NTL was previously served indicating therein the
reason for the lifting thereof, and requesting the Register of Deeds/Assessor’s Office to
cancel the annotation of the NTL/NOL on the pertinent title/tax declaration.

Procedures in Lifting the NTL/NOL

The Revenue Officer shall:

1. Check compliance with the conditions for the lifting of the NTL/NOL:

1.1. Check with ITS CBR/TAS to confirm the tax payment or request
42
Section 11 of RA No. 1125, as amended by RA No. 4134, applied to this case by analogy.

66
 certification of payment from the Regional Finance Division, if the
payment is made through the Revenue Official Receipt (ROR), in case the
unpaid tax liability has been fully settled by the taxpayer;

1.2. Require the taxpayer to pay the approved amount of compromise

settlement or the unabated balance of the imposed penalties.
Check/confirm actual payment in accordance with the immediately
preceding paragraph;

1.3. Verify if the outstanding tax liabilities of the taxpayer covered by a

protested case has already been fully settled. Confirm the closure and
payment of the case, in case the same was favorably acted upon by the
reinvestigating office and the corresponding report thereon has been
finally approved by the duly authorized official;

1.4. Check the validity/sufficiency of escrow deposits or coverage of surety

bond with the bank or bonding company, respectively, in case the taxpayer
has made an escrow deposit in favor of the BIR corresponding to the
amount of his/her/its tax liability, including the increments incident to
delinquency, or filed a surety bond with an accredited surety company for
not less than double the amount of his/her/its outstanding tax liability;

1.5 Secure copy of the ATCA issued by the Legal Service cancelling the
unpaid tax liabilities of the taxpayer on account of prescription of the
BIR’s right to assess and/or collect;43

1.6. Secure copy of the approved report of re-investigation/reconsideration,

copy of issued ATCA and proof of full payment of the revised assessment,
in case the tax liability arose from a tax case that was subjected to re-
investigation/ reconsideration. The validation of the submitted proof of
payment shall be made with the BIR ITS, in accordance with the
procedure under Item 1.1.1 above; and

1.7. Require the taxpayer to submit an updated appraisal of the property by the
Assessor’s Office to determine if the resulting value placed on the
property on account of the destruction will no longer satisfy the tax
liabilities of the taxpayer, in case of physical destruction of the property
subject of the tax lien.

2. Prepare letter on the Lifting of the Notice of Tax Lien/NOL (Annex 300-1.31)
and have it signed by the duly authorized signatory:

2.1. Address the form letter to the Register of Deeds, or the Assessor’s Office
in case the real property is untitled and is only covered by a Tax
Declaration, where the Notice of Tax Lien/NOL has been served;
43
RDAO No. 6-2001.

67
 2.2. Indicate the date of the Notice of Tax Lien/NOL to be lifted, the title
number (OCT/TCT/CCT No.) of the property/ies, the name and address
of the taxpayer, the total amount of tax liability, kind of tax, period
covered, and the Assessment/Demand Number in the lifting order;

2.3. Inform the Register of Deeds or the Assessor’s Office, as the case may be,
of the reasons why the lifting of the Notice of Tax Lien/NOL has been
requested; and

2.4. Request the Register of Deeds/Assessor’s Office to cancel the annotation

of the NTL/NOL on the pertinent title/tax declaration.

3. 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

4. Prepare and send a letter to the taxpayer with the information that the Notice of
Tax Lien/Levy has already been lifted.

The Register of Deeds and/or the Municipal/City/Provincial Assessor shall, upon receipt
of the letter for the lifting of the NTL/NOL from the Commissioner or his duly
authorized representative, enter/indicate the date of the lifting order as well as the date
and time when the said lifting order was received in the appropriate space provided for in
their respective books of original NTL/NOL entry maintained for the purpose.

CM 305.3 DISTRAINT OF PERSONAL PROPERTY [Refer to FC 305.3]

Distraint of personal property is effected as a remedy to enforce tax collection when a

person owing any delinquent tax fails to pay the same at the time required. The remedy of
distraint shall be exercised by persons authorized under Section 207(A) of the NIRC of
1997, as amended, as follows:

1. The Commissioner of Internal Revenue or his duly authorized representative in

cases where the amount involved is in excess of One Million Pesos
(Php1,000,000); and

2. Revenue District Officer if the amount involved is One Million Pesos

(Php1,000,000) or less.

The aforementioned revenue officers/seizure agents shall seize and distrain any goods,
chattels or personal effects, personal property, including stocks and other securities,
debts, credits, bank accounts, and interests in and rights to personal property of the
delinquent taxpayer in sufficient quantity to satisfy the tax or charge, together with any
increments thereto incident to delinquency, and the expenses of the distraint and the cost
of the subsequent sale;

68
Any currency deposit, shares of stock, rentals, income, salaries of the taxpayer, trade or
non-trade receivables, etc., may be garnished. However, accrued salaries of a
government employee cannot be garnished because it still forms part of the public fund
if it is still in the hands of the disbursing officer.

A Revenue Officer/Seizure Agent cannot legally break and enter the personal dwelling of
a delinquent taxpayer for the purpose of seizing personal property, except when there is a
lawful order from competent and appropriate court and similar instrumentalities of the
government. The Revenue Officer may however forcibly enter other buildings of the
subject taxpayer, such as stores, warehouses, etc. to enforce the WDL.

Stocks and other securities shall be distrained by serving a copy of the Warrant of
Distraint and Levy (WDL):

- Upon the taxpayer;

- Upon the president, manager, treasurer or other responsible officer of the

corporation, company or association, that issued the said shares of stocks;

- Upon the bank and other financial institutions issuing bonds, securities
and other commercial papers or instruments.

Other personal properties shall be distrained by serving a copy of the Warrant of Distraint
and Levy (WDL) to the appropriate Registry Office [e.g. LTO, Maritime Industry
Authority (MARINA)/Civil Aeronautics Authority of the Philippines (CAAP),
Intellectual Property Office (IPO), banks and post offices that are in physical
possession/custody of personal properties via their safety deposit box facilities, etc.].

Debts and credits shall be distrained by leaving a copy of the WDL with the person
owing the debts or having in his possession or under his control any credit belonging to
the taxpayer. The WDL shall be accompanied by a letter signed by the Revenue District
Officer instructing the addressee to seize, distrain, and turn- over to the Bureau the debts
or credits belonging to the delinquent taxpayer sufficient to satisfy his tax liability and its
increments.

Any taxpayer who sells, transfers, encumbers, or in any way disposes of his properties
placed under constructive distraint shall, upon conviction be:

- Fined in a sum of not less than twice the value of the property sold,
encumbered, or disposed of, but not less than Five Thousand Pesos
(Php 5,000.00); or

- Imprisoned for not less than two (2) years and one (1) day but not more

69
 than four (4) years, or both.44

A report on the distraint or garnishment shall be submitted to the following Revenue

Officials by the Seizure Agent/Revenue Officer within ten (10) days from the date of
receipt of the assigned warrant for service:

- Revenue District Officer and to the Regional Director, thru the Chief,
Collection Division, for regional cases;

- Chief, Large Taxpayers District Office (LTDO) and Assistant

Commissioner of Internal Revenue (ACIR) - Large Taxpayers Service,
thru the Chief, Large Taxpayers Collection and Enforcement Division
(LTCED), for LTDO and LT cases.

A consolidated report of distraint personal property shall be submitted to the

Commissioner by the Regional Director and the ACIR, Large Taxpayers Service, thru the
ACIR, Collection Service.

Procedures in the Actual Seizure of Personal Property

The Revenue Officer /Seizure Agent shall:

1. Fill-up the Notice of Actual Seizure Personal Property (NASPP) - BIR Form
2802- (Annex 300-1.32) for signature by the authorized signatory;

2. Make arrangements with a reputable hauling/handling company for the

hauling/transportation of the seized personal properties;

3. 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;

4. 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. If the taxpayer or person having possession or control of
such taxpayer’s property fails or refuses to receive and acknowledge the same,
request at least two (2) credible witnesses preferably BIR officers, to sign in the
NASPP, as witnesses to the service and actual seizure;

5. Recite to the taxpayer or person having possession or control of such taxpayer’s

property his obligations under the NIRC of 1997, as amended, and inform him/her
that the seized/distrained properties will be sold to the highest bidder at a public
auction, at a time/date and place of which he/she will be notified accordingly, in
order to satisfy the tax liabilities;

44
Section 276 of the NIRC of 1997, as amended.

70
 Subject to prior approval of the Secretary of Finance, upon recommendation by
the Commissioner pursuant to existing rules and regulations, the Regional
Director may exercise his discretion to dispose of the low-value distrained
properties thru negotiated sale in lieu of public auction, if the expected cost of
sale thereof will be substantially more than the proceeds therefrom.

6. Instruct the hauling/handling company to load the personal properties seized into
the truck/vehicle and deliver the same to the Office of the RDO for safekeeping.
However, in case of space limitations or where the storage of the seized
properties at the office of the RDO is deemed impracticable, necessary
arrangements for delivery an storage to a designated warehouse/facility can be
made, subject to prior written approval by the Regional Director/ACIR-LTS;

7. Exercise due diligence in safeguarding, preserving and maintaining the

seized/distrained personal properties in good condition to avoid their loss,
pilferage, deterioration, etc;

8. 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

9. If the taxpayer 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 (Refer to CM 305.5 Sale of Distrained Property and Disposition of
Proceeds/ CM 307–Monitoring Warrant Enforcement).

CM 305.3.1 CONSTRUCTIVE DISTRAINT/SEIZURE OF PROPERTY45

The remedy of constructive distraint of personal property can be pursued by the BIR
under any of the following grounds or instances: 46

1. The taxpayer intends to retire from any business subject to tax.

Example.- When a taxpayer who applies for retirement from business has a
substantial amount of assessment pending with the BIR. An assessment may be
considered substantial if the amount thereof is equal to or higher than the net
worth or equity of the taxpayer during the current taxable year.

2. The taxpayer intends to leave the Philippines

Example. - When a taxpayer who is under tax investigation has a record of

leaving the Philippines of at least twice over a twelve (12)-month period, unless
45
Section 206 of the NIRC of 1997, as amended.
46
Section 206 of the NIRC of 1997, as amended; Section 2 of RMC No. 5-2001 and RMO No. 42- 2010.

71
 such trips are justified and/or connected with his business, profession or
employment.

3. The taxpayer intends to remove his property from the Philippines

Example. - When a taxpayer, other than a banking institution, who is under tax
investigation has a record of transferring his bank deposits and other valuable
personal property/ies from the Philippines to any foreign country.

4. The taxpayer intends to hide or conceal his property under the following instances
or scenarios:

4.1. When the taxpayer who is under tax investigation tries to hide or conceal
his personal property to prevent discovery thereof by tax authorities;

4.2. When the taxpayer uses aliases in bank accounts, other than the name for
which he is legally and/or popularly known;

4.3. When the taxpayer keeps bank deposits and owns other property/ies under
the name or in the possession or control of other persons, whether or not
related to him, and the same are not under any lawful agency, fiduciary or
trust capacity;

4.4. When a taxpayer's undeclared income is known to the public or to the BIR
by credible means and there is a strong reason to believe that the taxpayer,
in the natural course of events, will have a great tendency to hide or
conceal his property/ies. For this purpose, the term "undeclared income"
means an amount exceeding by at least thirty percent (30%) of the gross
sales, gross receipts, or gross revenue declared per return; and

4.5. When the BIR receives information or complaint pertaining to undeclared

income in an amount exceeding by at least thirty percent (30%) of gross
sales, gross receipts or gross revenue declared per return of a particular
taxpayer and there is enough reason to believe that the said information is
correct as when the complaint or information is supported by substantial
and credible evidence.

5. The taxpayer intends to perform any act tending to obstruct the proceedings for
collecting the tax due or which may be due from him.

6. Such other situations analogous to the foregoing enumeration.

Authority to Effect Constructive Distraint

The Commissioner may place under constructive distraint the property of the following:

72
 1. Delinquent taxpayer; or

2. Any taxpayer who, in his opinion, would tend to do any of the acts enumerated in
item 4 above.

It should be noted that constructive distraint is only a safeguard for and not a
means of collection of the tax. Unlike in actual distraint, there is no definite tax
due in constructive distraint.

The power to exercise constructive distraint may be delegated by the Commissioner

pursuant to Section 7 of the NIRC of 1997, as amended, to any subordinate official with
the rank equivalent to a Division Chief or higher.47

The mere service of a Notice of Constructive Distraint is sufficient if the subject of the
constructive distraint is bank deposit, shares of stocks, accounts receivables, etc.48

The taxpayer or any person having possession or control of such taxpayer’s property is
obligated not to dispose of the property and to preserve the same intact and unaltered.
The aforementioned obligations shall be continuously complied with, unless the contrary
is permitted through express authority of the Commissioner.

Procedures in the Constructive Distraint /Seizure of Personal Property

The Revenue Officer/Seizure Agent shall:

1. Fill up BIR Form No. 2901- Constructive Seizure of Personal Property Seized

Under the Authority of the NIRC-CSPP (Annex 300-1.33)/Constructive Distraint

of Personal Property-CDPP (Annex 300-1.34) for signature by the authorized
signatory;

2. 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;

3. 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. If the taxpayer or person having possession or control of such
property fails or refuses to receive and acknowledge the same, request at least two
(2) credible witnesses preferably BIR officers to sign in the CSPP as witnesses
to the service of the CSPP. The said property shall, thereafter, be deemed to have
been placed under constructive seizure;

47
RDAO No. 1-2001.
48
Section 4 of RMC No. 5-2001.

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 4. Recite to the taxpayer or person having possession or control of such taxpayer’s
property his obligations under the NIRC of 1997, as amended, and inform him/her
to preserve the said properties, placed under constructive seizure, intact and
unaltered and not to dispose of the same in any manner whatever, without the
prior consent or authority of the Commissioner of Internal Revenue or his duly
authorized representative; and

5. If the taxpayer fails to pay the tax liability, including the increments incident to
delinquency, and the cost of preservation and transportation of 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 (Refer to CM 305.3 - Distraint of Personal Property).

CM 305.4 WARRANT OF GARNISHMENT (WG) [Refer to FC 305.4]

The WG is issued together with the WDL to distrain personal properties in the possession
and control of a third party. The following personal properties of the taxpayer may be
garnished:

1. Salaries from the employer of the taxpayer;

2. Deposits with a bank;

3. 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);

4. Rental income of the taxpayer from the lessee/tenant; and

5. Trade and other receivables form customers and other debtors.

Salaries of government employees, however, could not be garnished. The funds in the
hands of public officers, although they may be due to government employees, are not
liable to the creditors of such employees and still form part and retain their character of
public funds which cannot be seized by the process of attachment, garnishment or
execution. Furthermore, moneys sought to be garnished, as long as they remain in the
hands of the disbursing officer of the government belong to the latter, although the
government may be entitled to specific portion thereof.49

Failure or refusal of a third party having possession or control of the garnished property
to comply with the specific requirements of the WG shall be subject to the following
penalties:50

49
Supreme Court Decision promulgated on November 28, 1964 in the case of Jose and Marta Avendano vs. Hon.
Federico C. Alikpala, et al docketed as GR No. L-21189.
50
Section 277 of the NIRC of 1997, as amended.

74
 1. Payment to the government of an amount equal to the value of the property or
rights not so surrendered but not exceeding the amount of tax and its increments,
together with the cost and interest, if any, from the date of the warrant until
actually paid; and

2. Fine of not more than Five Thousand Pesos (Php 5,000.00) or suffer
imprisonment of not less than six (6) months and one (1) day but not more than
two (2) years, or both.

Procedures in the Issuance and Service of the WG

The Revenue Officer/Seizure Agent shall:

1. Identify the third person having possession or control over the distrainable
property;

2. Determine all the possible distrainable tangible/intangible properties in the

possession or control of a third person;

3. Fill-up BIR Form No. 1302, Warrant of Garnishment (WG) (Annex 300-1.35), in
quadruplicate, to be distributed as follows: original and duplicate copy to the
corresponding bank or financial institution, triplicate copy to be attached to the
docket of the case, and the quadruplicate copy to the issuing office for file;

4. Submit the duly accomplished WG to the duly authorized signatory for review,
approval and signature;

5. Serve the signed WG to the third party in possession or control of the distrained
property within ten (10) days of receipt thereof;

5.1. If the WG is received:

5.1.1. Request the authorized officer of the third party to acknowledge

receipt of the WG by signing over his printed name and indicate
the date of receipt in the acknowledgment portion;

5.1.2. Indicate the date and time of the service of the warrant and sign
over his printed name as the serving officer; and

5.1.3. Leave the original and duplicate copies of the WG with the third
party and the remaining copies duly acknowledged to be attached
to the docket.

5.2 If the WG is not received:

5.2.1. Request two (2) credible witnesses, preferably BIR officers to sign

75
 the BIR Form No.1302; and

5.2.2. Leave the original and duplicate copies of the WG at the premises
of the third party.

6. Refer the case to the Regional Legal Division/Prosecution Division for

appropriate action, if the third party does not respond to the WG;

7. Locate other distrainable property, if the third party responds but the concerned
taxpayer does not have distrainable property in possession or control of such third
party; and

8. Conduct the following activities, if the taxpayer has distrainable properties:

8.1. Bank deposits/rentals/salaries/receivables

8.1.1. Prepare and send letter to the bank to be signed by the RDO/Chief,
LTDO/ACIR-LTS/ACIR-CS requiring the bank to remit to the
BIR the bank deposits of the taxpayer in payment of his tax
liabilities;

8.1.2. Prepare and send letter to the tenant/employer/debtor to be signed

by the RDO/Chief, LTDO/ACIR-LTS/ACIR-CS notifying that the
taxpayer has outstanding tax liability and requiring the said party
to release the rentals/salaries/receivables, etc. to the BIR in
payment of said unpaid tax liability;

8.1.3. Issue the corresponding BIR payment Form 0605 in the name of
the taxpayer upon remittance of deposits/rentals/salaries/
receivables, etc. to the BIR; and

8.1.4. Record the case as closed in the GCL, in case the tax liability has
been settled in full (Refer to CM 306- Monitoring of ARs/DAs
and CM 307-Monitoring Warrant Enforcement).

8.2. Stocks/bonds/securities

8.2.1. Prepare and send a letter to the issuer of the security to be signed
by the RDO/Chief, LTDO/ACIR-LTS/ACIR-CS requesting for the
transfer of the shares of stock in the name of the BIR;

8.2.2. Sell/Dispose of the shares of stocks immediately (Refer to CM

305.5- Sale of Distrained Property and Disposition of
Proceeds/ CM 307 -Monitoring Warrant Enforcement); and

8.2.3. In case of government bonds/securities, the issuer shall be

76
 requested to pre-terminate the bonds/securities and remit proceeds
thereof to the BTr in the account of the BIR (Refer to CM 109.1
Payment through BTr Direct Crediting - Remittance,
Chapter I - Tax Payment System of this Manual).

8.3. Jewelry and other pawned items

8.3.1. Prepare and send letter to be signed by the RDO/Chief,

LTDO/ACIR-LTS/ACIR-CS to the pawnshop notifying that the
taxpayer has an outstanding tax liability and the BIR has a claim
to such properties; and

8.3.2. Sell/Dispose of the jewelry and other pawned items immediately

(Refer to CM 305.5 Sale of Distrained Property and
Disposition of Proceeds/CM 307 Monitoring of Warrant
Enforcement).

8.4. Motor vehicle/other registrable personal property

8.4.1. Prepare and send Notice of Encumbrance (Annex 300-1.36) to be

signed by the RDO/Chief, LTDO/ACIR-LTSACIR-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; and

8.4.2. Sell/Dispose of the motor vehicle and other registrable personal

property immediately (Refer to CM 304.5 Sale of Distrained
Property and Disposition of Proceeds/ CM 306 Monitoring of
Warrant Enforcement).

CM 305.4.1 LIFTING OF THE WARRANT OF GARNISHMENT [Refer to FC

305.4.1]

The Warrant of Garnishment (WG), as a summary remedy, may likewise be cancelled or

lifted once the conditions therefor are complied with by the taxpayer. These conditions,
such as the full settlement of the tax liability by the delinquent taxpayer and the
sufficiency of the distrainable property/ies, are spelled out in an earlier discussion of CM
305 -Collection Summary Remedies of this Chapter.

Procedures in Lifting the WG

The Revenue Officer/Seizure Agent shall:

1. Receive the request from taxpayer to lift the WG upon full payment of tax

77
 liability or sufficiency of distrainable property or compliance with the conditions
for the lifting the said summary remedy;

2. Evaluate the request for the lifting of the WG (Refer to CM 305.2.2-Lifting of

the NTL/NOL – regarding verification of the compliance of the delinquent
taxpayer with the conditions for the lifting of the WG);

3. Prepare letter to the taxpayer informing him/her of the denial of his/her request
and the reasons thereof, if the request is denied;

4. Prepare letter (Annex 300-1.37) for signature of authorized signatory to lift the
WG addressed to the President, Manager, Treasurer and/or cashier of the
concerned third party. Inform the third party concerned of the reasons for the
lifting of the WG;

5. Serve the original copy of the notice of the lifting of the WG to the third party
concerned and attach one (1) copy thereof to the case docket (Refer to CM 307-
Monitoring Warrant Enforcement); and

6. Send letter to the taxpayer with the information that the WG has already been
lifted.

CM 305.5 SALE OF DISTRAINED PERSONAL PROPERTY AND

DISPOSITION OF PROCEEDS [Refer to FC 305.5]

The seized and distrained personal property/ies of the taxpayer shall be sold at a public
auction in order to satisfy the delinquent tax, together with any increments thereto
incident to delinquency, and the expenses of the distrained personal property/ies and the
possible cost of the sale.

Notice of Sale and Advertisement of Sale

A notification or Notice of Sale (NOS) shall be exhibited in not less than two (2) public
places in the municipality or city where the distraint is made. One place for the posting of
such notice shall be at the Office of the Mayor of the city or municipality in which the
property is distrained.

The NOS may be advertised in a newspaper of general circulation. However, such

newspaper publication may be dispensed with if the amount to be realized in the auction
sale of the distrained personal property will not justify the cost of publication. In lieu
thereof, the NOS may be posted in the BIR website.

The NOS shall contain the following:

78
 1. The amount of tax and penalty due, such as basic tax, interest and surcharges,
including the delinquency increments. Any compromise penalty that is imposed
shall be indicated as a footnote;

2. The date, time and place of the sale. In determining the date of sale to be specified
in the notice, the twenty (20) days notice to the owner or possessor of the property
shall be taken into consideration;

3. The name of the taxpayer against whom the taxes were levied;

4. The exact location and short description of the property to be sold;

5. The terms of payment to include cash or manager’s check which must be

indicated in the lower portion of the Notice of Sale; and

6. A statement that reads “The BIR may reject any or all bids”.

Public auction sale of the distrained personal properties shall be done on a per item basis
on an “AS IS WHERE IS BASIS”.

Determination of the Minimum Bid of Personal Property

The minimum bid in the auction sale of personal property shall be the total amount due
from the taxpayer including delinquency increments, costs of seizure, preservation and
sale the said property or the actual market value/appraised value of the articles offered
for sale, whichever is higher.51

Conduct of Auction Sale

The auction sale of goods, chattels, effects, or other personal properties, including stocks
or other securities shall be at the time and place specified in the NOS, not less than
twenty (20) days after notice to the taxpayer or to the person having control or possession
of the taxpayer’s personal property, and the posting of such notice. With the approval of
the Commissioner, the sale of shares of stocks or other securities may be made through
duly licensed commodity or stock exchanges.52

At any time before the day fixed for the sale, the distraining officer may discontinue all
proceedings when the taxpayer pays the unpaid taxes, delinquency increments, costs of
seizure, preservation and all other expenses incurred prior to the auction sale. Otherwise,
the sale shall proceed as indicated in the NOS.

All BIR employees and their relatives up to the third degree of consanguinity or affinity
are not allowed to bid on the property.

51
Based on the Handbook on Administrative Summary Remedies of Seizure Agents.
52
Section 209 of the NIRC of 1997, as amended.

79
The BIR shall issue a Certificate of Sale of Personal Property to the winning bidder upon
full payment of the bid amount or a Bill of Sale if the properties sold are stocks or other
securities.

Whenever possible, immediate payment at the time of sale shall be considered. If it is

determined that this option cannot be used, consideration shall be given to other payment
options. However, all payments shall be made in cash or in Manager’s Check payable
to the Commissioner of Internal Revenue.

Any residue over and above of what is required to pay the entire tax liability, including
the increments incident to delinquency, and the expenses incurred on the seizure,
maintenance/preservation, and the sale of the property shall be returned to the taxpayer.
No charge shall be imposed by the Bureau for the services rendered by any of its
employees.53 If the taxpayer refuses to accept the same, it shall be deposited to the court
(MTC if the amount is not more than Php300,000.00 in rural areas or Php400,000.00
in Metro Manila, and the RTC, if the amount is more than Php300,000.00 in rural
areas or Php400,000.00 in Metro Manila - taking into consideration the observance of
the proper venue), or to the bank where the taxpayer has a bank deposit or any bank
within the vicinity of the taxpayer’s business.54

The sale of personal properties is absolute and such property is not subject to redemption
by the taxpayer.55

The Commissioner, or his duly authorized representative, may purchase the articles
offered for sale in the name of the National Government when the amount of bids for the
property under distraint are not equal to the amount of tax, including the increments
incident to delinquency, and the expenses of the seizure and sale, is very much less than
the actual market value/appraised value of the articles for sale.

Personal property so purchased/acquired by the government may be resold by the

Commissioner, or his duly authorized representative, subject to the rules and regulations
prescribed by the Secretary of Finance.

The net proceeds from the sale of purchased/acquired personal property shall be remitted
immediately to the BTr in accordance with the existing rules and policies; and the same
shall be accounted for as internal revenue collection.

Procedures in the Preparation of Notice of Sale and Advertisement of Sale of Personal

Property

The Revenue Officer/Seizure Agent shall:

1. Prepare the Notice of Sale (NOS) BIR Form No. 2803-(Annex 300-1.38) and
53
Ibid.
54
BP Blg.129, as amended by R.A. No. 7691- Judiciary Reorganization Act of 1980.
55
RR No. 3-69.

80
 have it signed by the duly authorized signatory;

2, Post the approved NOS in not less than two (2) public places, one at the Office of
the Mayor of the City or Municipality in which the property distraint is located
and the other, at any place in the same city or municipality;

3. Notify the taxpayer of the sale to be made;

4. Post NOS in the BIR website and/or select a newspaper of general circulation for
publication of advertisement, in accordance with existing procurement rules and
regulations, if the advertisement of sale of seized property is necessary and/or
appropriate;

5. Prepare a memorandum (Annex 300-1.39) to the Regional Director/ACIR-LTS

requesting for authority to advertise sale of distrained property and for funding
of expenses related to the sale;

6. Make the arrangements with the newspaper- publisher of the advertisement;

7. Secure certificate of availability of funds from the Regional Finance Division/

Financial Service; and

8. Proceed with the publication of the advertisement.

Procedures in the Preparation for the Auction Sale of Personal Property

The Revenue Officer/Seizure Agent shall:

1. Determine the appraised/market value of property to be sold at the auction sale;

2. Prepare the necessary documents/forms for use during the auction sale such as
the Guidelines on the Auction Sale, Application for Bid forms, Abstract of
Canvass;

3. Request at least two (2) revenue officers to assist in the conduct of the auction
sale;

4. Invite a representative from the Commission on Audit (COA) to attend and

witness the conduct of the auction sale; and

5. Secure cash advance from the Regional Finance Division/Financial Service in an

amount sufficient to defray expenses in the conduct of auction sale. The cash
advance, however, shall be liquidated in accordance with the existing rules and
regulations.

Procedures in the Conduct of Auction Sale of Personal Property

81
The RDO/LTDO/LTCED shall:

1. Start the auction sale by reading the Notice of Sale aloud for everyone present to
hear and set the minimum bid of the government;

2. Call all the participants or bidders. The name of the taxpayer or his/her
representative shall also be called whether present or not;

3. Record the names and addresses of the bidders present as well as the witnesses of
the bidding process;

4. Distribute the Guidelines for the Auction Sale (Annex 300-1.40) and the
Application for Bid Forms (Annex 300-1.41). The Bid Form shall contain the
description of the property, name of the taxpayer and the terms of payment.
Spaces shall also be provided for the name and address of the bidder, the amount
of bid and the mode of payment;

5. Gather all the Bid Forms from all the participating bidders;

6. Post the quoted prices of the bidders in the Abstract of Canvass (Annex 300-
1.42);

7. Determine the highest bidder:

7.1. Pronounce the highest bidder as the winner, if the highest bid is higher
than the minimum bid of the government, and

7.2. Announce that the property is purchased by the government at sale, if all
the bids are lower than the minimum bid of the government, or, if there is
no interested bidder (Refer to CM 305.6.- Purchase by Government at
Sale);

8. Accept the payment, in cash or in Manager’s Check payable to the Commissioner

of Internal Revenue, from the winning bidder; prepare BIR Form No. 0605 for
full payment of tax due; issue ROR corresponding to the amount due;

9. Issue a Certificate of Sale of Personal Property (Annex 300-1.43) to the winning

bidder upon full payment of the bid amount, execute a Bill of Sale (Annex 300-
1.44) if the properties sold are stocks or other securities, and deliver to the buyer.
The Bill of Sale shall be presented to the corporation, company or association
who shall make the corresponding entry in its books, transfer the stocks, or other
securities sold in the name of the buyer, and issue, if required to do so, the
corresponding certificates of stocks or other securities;

82
 10. Return to the taxpayer any residue of the proceeds of the sale, after deducting the
expenses of the seizure and sale, over and above what is required to be paid for
the entire claim for taxes, surcharges and interest including expenses;

11. Deposit the residue of the proceeds of the sale to the appropriate court, or to the
bank under the taxpayer’s name, if the taxpayer refuses to accept the same; notify
the taxpayer of such deposit;

12. Prepare Minutes/Report of a Tax Sale (Annex 300-1.45) to RDO/LTDO/LTCED

within two (2) days after the sale and attach copy of the report to the docket as
official record; the report shall recite the actual proceedings of the sale, how it
was conducted and all pertinent matters regarding the same;

13. Record the case as closed and transmit docket to the Regional Administrative
Division/NO-Records Division for future reference;

14. Prepare a Report of Seized Properties Sold Thru Public Auction Sale and submit
the same not later than the 10th day of the following month to the Regional
Director thru the Regional Collection Division/LTS thru the LTCED (Annex 300-
1.46) for consolidation and submission to the Collection Service thru the
Collection Enforcement Division (CED) not later than the fifteenth (15 th) day of
the following month (Annex 300-1.47) (Refer to CM 307 Monitoring Warrant
Enforcement); and

15. Prepare and submit Monthly GCL and Monthly Update of Delinquent Accounts
on the 10th day of the following month to CED copy furnished Regional
Collection Division and the Large Taxpayers Service (Refer to CM 306-
Monitoring of ARs/DAs/ CM 307 Monitoring Warrant Enforcement).

CM 305. 6 PURCHASE BY GOVERNMENT AT SALE OR TAX SALE

[Refer to FC 305.6]

When the amount of bid for the property under distraint is not equal to the amount of the
tax, or it is very much less than the actual market value of the articles offered for sale, the
Commissioner or his authorized representative may purchase the same in behalf of the
National Government for the amount of taxes, penalties and cost due thereon.56

The property so acquired by actual possession/dominion by the government may also be

further sold by public/negotiated sale subject to prior approval of the Commissioner of
Internal Revenue.

Procedures in the Purchase of Personal Property by the Government at Auction Sale

The RDO/LTDO/LTCED shall:

56
Section 212 of the NIRC of 1997, as amended.

83
 1. Make announcement on the failure of bid and that the government has taken
actual possession/dominion over the distrained property;

2. Record the same in the inventory of seized personal property (Refer to CM 307-
Monitoring Warrant Enforcement and proceed to CM 401 of Chapter IV-
Management of Absolutely Forfeited Assets); and

3. Prepare a Report of Properties Purchased and/or Forfeited by the Government

(Annexes 300-1.48) and submit the same not later than the tenth (10 th) day of the
following month to the Regional Director thru the Regional Collection
Division/LTS thru the LTCED for consolidation and submission to the
Collection Service thru the CED not later than the 15th day of the following
month (Annex 300-1.49) [Refer to CM 307- Monitoring Warrant
Enforcement].

CM 305. 7 RELEASE OF DISTRAINED PROPERTY TO THE TAXPAYER

UPON PAYMENT PRIOR TO SALE [Refer to FC 305.7]

In the event that the taxpayer pays his tax liability prior to the sale of the distrained
property, it is the duty of the Revenue Officer to release the property to the taxpayer. The
distrained goods, chattels, effects, etc. shall be returned to the taxpayer if the entire tax
liability, including the increments incident to delinquency, the expenses in the
transportation and preservation of the seized/distrained properties and the expenses of the
sale are paid by the taxpayer or anyone in his behalf any time prior to the consummation
of the sale. If the taxpayer settles his tax liability after the Notice of Sale has already
been published in the newspaper of general circulation, the cost of the publication shall
be refunded by the taxpayer to the BIR.

The expenses chargeable upon each seizure and sale shall embrace only the actual
expenses of seizure, preservation of the property pending the sale and the cost of sale. No
charge shall be imposed for the services of any internal revenue officer.

Procedures in the Release of Distrained Property to the Taxpayer

The Revenue Officer/Seizure Agent shall:

1. Receive copy of the proof of payment (validated BIR Form No.

0605/Confirmation receipt/ROR) made by the taxpayer prior to the sale and
confirm validity of such payment in the ITS-CBR;

2. Require the taxpayer to reimburse all expenses attendant to seizure/preservation

and maintenance of distrained property as well as other expenses incurred prior
to the sale thereof;

84
 3. Prepare A Memorandum of Release of Distrained Property (Annex 300-1.50)
containing the list of the seized items and forward the same to the authorized
signatory for signature;

4. Require the taxpayer to acknowledge receipt of the Memorandum returning his

property by affixing his/her signature in both copies of the Memorandum;

5. Require the taxpayer to physically remove/retrieve the distrained properties from

BIR custody and/or turn-over immediately to the taxpayer the stock certificates,
bonds and other readily movable items;

6. Attach the original copy of the Memorandum to the docket of the case;

7. Prepare a memorandum to the RDO/LTDO Chief, copy furnished the Regional

Collection Division/Chief, LTCED, for the cancellation of the case in the General
Control Ledger (GCL);

8. Transmit the docket to the Regional Administrative Division/NO-Records

Division for safekeeping and future reference; and

9. Prepare and submit Monthly GCL and Monthly Updates of Delinquent Accounts
on the 10th day of the following month to CED, copy furnished the Regional
Collection Division/LTCED (Refer to CM 306-Monitoring of ARs/DAs/ CM
306-Monitoring Warrant Enforcement).

CM 305.8 LEVY ON REAL PROPERTY [Refer to FC 305.8]

The levy on the delinquent taxpayer’s real property may be effected before,
simultaneously or after the distraint of any personal property belonging to him.57

In case the warrant of levy is not issued before or simultaneously with the warrant of
distraint on personal property and the distrained personal property is insufficient to
satisfy the liability, the Commissioner or his duly authorized representative shall proceed
with the levy on the delinquent taxpayer’s real property within thirty (30) days after the
execution of the distraint on personal property, or vice-versa.

The Notice of Levy (NOL)-(BIR Form No. 2802-A), a duly authenticated certificate
showing the name of the delinquent taxpayer; the amounts of the tax and penalties due;
and the description of the property upon which the levy is made, shall be prepared by the
Commissioner or his duly authorized representative.

The NOL shall be served personally upon the Register of Deeds of the province, city or
municipality where the real property is located so that the same can operate with the force
of legal execution throughout the Philippines. A copy of the duly served NOL shall also
provided the delinquent taxpayer for his/her/its information and guidance, and in the
57
Section 207(B) of the NIRC of 1997, as amended.

85
spirit of due process. In case the property to be levied is untitled and the only evidence of
ownership is the tax declaration, the NOL shall be served upon the Assessor’s Office of
the province, city or municipality where the real property is located. If the delinquent
taxpayer is absent from the Philippines, a copy of the NOL shall be sent through
registered mail or served to his agent or the manager of the business in respect to which
the liability arose. Should there be no such person present, the NOL shall be sent through
registered mail or served to the occupant of the real property that is the subject of levy.

In case the offices of the Register of Deeds or Assessor’s offices having jurisdiction over
the real property to be levied are located in distant places, the concerned levying office
may coordinate with the RDO having physical jurisdiction over the location of such
property for the actual service of the NOL. The original duplicate, triplicate and
quadruplicate copies of the duly served NOL shall be returned to the levying office
immediately upon service thereof. The duplicate NOL copy shall be attached to the case
docket, the triplicate copy to the concerned delinquent taxpayer, for information purposes
and the quadruplicate copy for file by the levying office.

The NOL should be completely and accurately accomplished. Any mistake or error in
the NOL with respect to the description of the real property, (i.e. title number, area, exact
location, registry volume and page number), the name of the owner-taxpayer against
whom the tax is levied, amount of taxpayer’s liabilities and details of the issued FAN will
render the auction sale as null and void.

Real properties under custodia legis or property held in trust shall not be subject of any
levy. However, the BIR may file a third party claim on these real properties.58

A report on the service of the levy shall be prepared and submitted to the following
revenue officials by the Seizure Agent/Revenue Officer within ten (10) days from his/her
receipt of the warrant:59

- Revenue District Officer and to the Regional Director, thru the Chief,
Collection Division, for regional cases;

- Chief, LTDO and to the ACIR, Large Taxpayers Service, thru the Chief,
LTCED, for LTDO and LT cases; and

A monthly consolidated regional report on the issuance and service of the NOL shall be
prepared and submitted by the Regional Director, and the ACIR, Large Taxpayers
Service to the ACIR-Collection Service, thru the CED on or before the 15 th day of the
following month Thereafter, a monthly consolidated national report on the issuance and
service of the NOL shall be prepared and submitted to the Commissioner by the CED,
thru the ACIR-CS, not later than the 20th day of the following month.

58
Springer vs. Odlin, 3 Phil.344;23 C.J. p.357,Sec. 107- "It is a well-established doctrine in practically every
jurisdiction that money deposited with a clerk of court is exempt from attachment and not subject to execution."
59
Section 207 (B) of the NIRC of 1997, as amended.

86
Procedures in the Preparation of the Notice of Levy

The RDO/LTDO/LTCED shall:

1. Fill up the NOL - (BIR Form 2802 A) (Annex 300-1.51) for the signature of the
authorized signatory, which shall have the following information:

1.1. Name and address of the Register of Deeds /City or Municipal Assessor’s
Office to whom the NOL will be served;

1.2. Name and address of the delinquent taxpayer, location of the property, and
OCT/TCT/CCT/TD number/s;

1.3. The kind and amount of the tax and the penalties due from the taxpayer;
and

1.4. Request for annotation of the Notice of Levy at the back of the
OCT/TCT/CCT/TD, with instruction that no transfer or any kind of
disposition of such real property(ies) shall be made without the prior
consent or authority of the Commissioner of Internal Revenue or his duly
authorized representative.

2. Upon receipt of the signed Notice of Levy, file the NOL personally with the
Register of Deeds or Assessor’s Office, as the case may be, of the province or city
where the property is located;

3. Require the receiving officer of the Register of Deeds/Assessor’s Office to

acknowledge receipt on all the copies of the NOL and leave the original copy for
annotation of the same in the OCT/TCT/CCT/TD; and

4. Attach the remaining copies of the NOL, duly acknowledged by the Register of
Deeds or Assessor’s Office, to the docket of the case for records purposes.

Service of Notice of Levy

The Revenue Officer/Seizure Agent shall:

1. Serve by registered mail to the delinquent taxpayer the duplicate copy of the
Notice of Levy duly acknowledged by the Register of Deeds or the Local
Assessor’s office, as the case may be;

2. Personally serve the NOL to the individual/corporate taxpayers, in case the NOL
is not received by the taxpayer through mail, as follows:

2.1. If the taxpayer is an Individual:

87
 2.1.1. If the individual taxpayer can be located, physically serve the
NOL. If the taxpayer refuses to accept the NOL, ask two (2)
credible witnesses, preferably BIR officers to sign the NOL and
leave the copy of the NOL at the premises where the real property
is located or at the taxpayer’s residence; and

2.1.2. If the individual taxpayer is abroad, locate taxpayer’s

agent/representative and serve the NOL to the agent/representative.
If the agent is not located, serve the NOL to the occupant of the
property covered by the NOL. Post the facts of the NOL on the
property levied upon and publish in a newspaper of general
circulation.

2.2. If the taxpayer is a Corporation or Partnership:

2.2.1. If the taxpayer can be located, serve the NOL to the

President/Vice-President/Manager/Treasurer or Comptroller or to
any responsible officer of the corporation/partnership;

2.2.2. If the officer refuses to acknowledge the receipt of the NOL, ask
two (2) credible witnesses, preferably BIR officers, to sign the
NOL and leave a copy at the premises where the real property is
located; and

2.2.3. If the corporation can not be located, serve the NOL to the
occupant of the property covered by the NOL. Post the facts of the
NOL to the property levied upon, and publish in a newspaper of
general circulation.

3. Prepare and submit a report to the RDO/Chief, LTDO/Chief, LTCED on the levy
of real property and record the details thereof in the Registry of Forfeited
properties maintained in the district//LTS offices for the purpose CM 307-
Monitoring Warrant Enforcement); and

4. Proceed with the advertisement of the sale within twenty (20) days after the
service of the Notice of Levy (Refer to CM 305.9 Advertisement and Sale of
Seized Real Property).

CM 305. 9 ADVERTISEMENT AND SALE OF SEIZED REAL PROPERTY

[Refer to FC 305.9]

Advertisement of Sale of Seized Real Property

88
Within twenty (20) days after levy, the real property subject of the levy, or a usable
portion thereof, as may be necessary, shall be advertised for auction sale to satisfy the tax
liability of the delinquent taxpayer and the cost of sale, through a Notice of Sale.60

The NOS shall be issued by the Commissioner or his authorized representative and shall
contain the following:

- The amount of tax and penalty due, such as basic tax, interest and surcharges
(Assessment Notice No. and date). Any compromise penalty that is imposed shall be
indicated as a footnote;

- The date, time and place of the sale. In determining the date of sale to be specified in
the notice, the thirty (30) day period within which to advertise the sale shall be taken
into consideration;

- The name of the taxpayer against whom the taxes were levied;

- Description of the property to be sold (i.e. TCT/OCT/CCT/TD number,

classification, location and area);

- The terms of payment to include cash or manager’s check which must be indicated in
the lower portion of the Notice of Sale; and

- A statement that reads “The BIR may reject any or all bids”.

The advertisement shall cover a period of at least thirty (30) days. It shall be effectuated
by posting the Notice of Sale together with the guidelines of the auction sale at the main
entrance of the municipal building or city hall and in a public and conspicuous place in
the barangay or district in which the real estate is physically located as well as the
concerned Revenue District Office and by publication once a week for three (3) weeks in
a newspaper of general circulation. The NOS may likewise be posted in the BIR website.

Determination of the Minimum Bid of Seized Real Property

In determining the minimum bid in the auction sale of real property, the following shall
be considered:

1. The total tax due, including the interest and penalties, plus the expenses of the
seizure and sale shall be the minimum bid for the property being sold. However, if
the market value of the land is less than the tax due, including increments and
expenses of the seizure and sale, the minimum bid should be the fair market value
or zonal value of such property, whichever is higher;

2. If the lot is small, but the fair market value of which is much higher than the tax
liability and expenses of the seizure and sale, and the lot is no longer capable of
further sub-division (e.g., in a 100 sq. meter lot), it shall be sold at fair market

60
Section 213 of the NIRC of 1997, as amended.

89
 value or zonal value of such property, whichever is higher, and the excess of the
proceeds of the sale(selling price less the tax liability and expenses of the sale)
shall be turned over to the delinquent taxpayer, properly receipted; and

3. In cases where the real estate’s fair market value is much higher than the total
liability, including the increments incident to delinquency and the expenses of the
seizure and sale, and the property is capable of further subdivision, prior
arrangement shall be made with the delinquent taxpayer to delineate which
portion of his land shall be taken for sale. The delineation has to be mentioned in
the Notice of Sale as to which portion of the lot is to be sold by auction sale. The
Revenue District Officer is not precluded from choosing the portion of the land
which can easily be sold.

The Minimum Bid/Floor Price for real properties pursuant to the provisions of
Section 6(E) of the National Internal Revenue Code of 1997, as amended, shall be
the highest among the following:

a. The latest FMV as determined by the Commissioner based on the

prevailing Department Order bearing on the published Schedules of Zonal
Values of Real Properties;

b. The FMV shown in the latest tax declaration issued by the provincial, city
or municipal assessor;

c. The purchase price offered/proposed by the former owner or any

interested party by way of negotiated sale of the acquired real property;
and

d. The corresponding or proportionate amount of deficiency internal revenue

taxes, including the delinquency penalties, that were given up by the
government as a result of the forfeiture proceedings, including the costs of
forfeiture and maintenance of the subject property.

However, the Commissioner or his duly authorized representative, thru the

Technical Committee on Real Property Valuation (TCRPV) and under existing
rules and regulations, may authorize the reduction of the minimum/ floor price,
after taking into consideration the current status/condition of property (i.e. the
property is located in area that is always flooded, the property is occupied by
resistant informal settlers/squatters, etc).

Conduct of Auction Sale of Seized Real Property

The auction sale shall be conducted on the date, time and place specified in the Notice of
Sale.

Public auction sale of the real property shall be done on a lot for lot basis on an “AS IS

90
WHERE IS BASIS”.

All BIR employees and their relatives up to the third degree of consanguinity or affinity
are not allowed to bid.

A COA representative shall be invited to attend and witness the auction sale. However, in
case the COA representative fails to attend, the auction sale may proceed and shall be
considered valid.

The auction sale proceedings may be discontinued when the taxpayer pays the
outstanding tax liability, including the increments incident to delinquency, the expenses
in the maintenance and preservation of the levied property, and the cost of publication, on

or before the day and time fixed for the sale. If the taxpayer settles his tax liability after
the Notice of Sale has already been published in the newspaper of general circulation, the
cost of the publication shall be refunded by the taxpayer to the BIR. With the settlement
of the tax liability, the BIR shall effect the lifting of the NTL/NOL (Refer to CM
305.2.2. Lifting of the NTL/NOL).

If the highest bid is lower than the minimum bid of the government or there is no bidder,
the Bids and Awards Committee/Revenue Officer conducting the sale shall declare the
property forfeited in favor of the government (Refer to CM 305.10 Forfeiture of Real
Property in Favor of Government).

In case there is a winning bidder, a Provisional Certificate of Sale of Real Property shall
be issued after the full payment of the bid price has been made by the winning bidder to
the BIR.

Whenever possible, immediate payment at the time of sale shall be considered. If it is

determined that this option is impracticable under the circumstances (minimum bid
amount is too large), other payment options shall be considered subject to prior approval
by the Commissioner. However, all payments shall be made in Cash or in Manager’s
Check payable to the Commissioner of Internal Revenue.

In case the proceeds from the auction sale exceeds the entire claim for taxes including
surcharges and interests plus expenses, the difference or residue shall be returned to the
taxpayer. If the taxpayer refuses to accept the same, it shall be deposited to the court
(MTC if the amount is not more than Php300,000.00 in rural areas or Php400,000.00 in
Metro Manila, and the RTC, if the amount is more than Php300,000.00 in rural areas or
Php400,000.00 in Metro Manila - taking into consideration the observance of the proper
venue), 61 or to the bank where the taxpayer has a bank deposit or any bank within the
vicinity of the taxpayer’s business. The taxpayer shall be notified of this action.

61
BP Blg.129, as amended by RA No. 7691.

91
The remedy by distraint of personal property and levy on real property may be repeated if
necessary until the full amount of the tax due, including the penalties incident to
delinquency that has accrued thereto, and all the expenses of the sale are collected.

In the sale of real property, a one-year redemption period is provided for the taxpayer
from the date the Provisional Certificate of Sale of Real Property or the Declaration of
Forfeiture of Real Property is registered in the Register of Deeds/Assessor’s Office where
the real property is located/registered (Refer to CM 305.11 Redemption/Final Deed to
Purchaser).

All acquired/forfeited real properties transferred in the name of the Republic of the
Philippines, having passed the one-year redemption period from the date of acquisition or
forfeiture may be sold thru public or private/negotiated sale. (Refer to Chapter IV-
Management of Absolutely Forfeited Assets of the Collection Manual).

Procedures in the Preparation of Notice of Sale and Advertisement of Sale

The Revenue Officer/Seizure Agent shall:

1. Prepare a Notice of Sale (NOS) (BIR Form 2803) (Annex 300-1.38) and have it
signed by the authorized signatory;

2. Notify the taxpayer of the auction sale;

3. Canvass at least three (3) publishers of newspaper of general circulation for

publication of advertisement of sale, in accordance with existing procurement
rules and regulations;

4. Prepare a memorandum (Annex 300-1.39) to the Commissioner of Internal

Revenue, for national offices case and large taxpayer’s cases, and the Regional
Director, for regional office cases, requesting for authority to advertise the sale of
the real property and for funding to cover the cost of the advertisement and the
estimated expenses of the auction sale. The memorandum shall include the name
of the taxpayer, amount of the tax liability, date of auction sale, and the name of
the newspaper that will carry the advertisement;

5. Secure certificate of availability of funds from the Regional Finance

Division/Financial Service;

6. Make the necessary arrangements for the advertisement/publication of the NOS

once a week for three (3) weeks in a newspaper of general circulation in the
province, municipality or city where the property is located, at least thirty (30)
days prior to the auction sale;

7. Prepare a letter addressed to the city mayor or city administrator informing them
of the auction sale together with the notice of sale and guidelines; and

92
 8. Post the NOS at the entrance of the provincial/municipal/city hall and in a public
and conspicuous place in the barangay or district and the concerned Revenue
District Office where the property is located at least thirty (30) days prior to the
auction sale.

Preparation for the Auction Sale of Seized Real Property

The Revenue Officer/Seizure Agent shall:

1. Determine the minimum bid price based on fair market value as shown in the
schedule of values of the Provincial/City/Municipal Assessor and/or BIR zonal
value of the property to be sold, whichever is higher;

2. Prepare the applicable documents for use in the auction sales such as the
Guidelines for the Auction Sale, Application for Bid forms, Abstract of Canvass;

3. Request at least two (2) revenue officers to assist in the conduct of the public
auction sale;

4. Invite a representative from the Commission on Audit (COA) to attend to and

witness the conduct of the auction sale; and

5. Secure cash advance from the Regional Finance Division/Financial Service in an

amount sufficient to defray expenses in the conduct of sale. The cash advance,
however, shall be liquidated in accordance with the existing rules and regulations.

Procedures in the Conduct of the Auction Sale of the Seized Real Property

The RDO/LTDO/LTCED shall:

1. Start the auction sale by reading the Notice of Sale aloud for everyone present to
hear and set the minimum bid of the government;

2. Call all the participants or bidders. Call the name of the taxpayer or his/her
representative, whether present or not;

3. Record the names and addresses of the bidders present as well as the witnesses of
the bidding process;

4. Distribute the Guidelines for the Auction Sale (Annex 300-1.40) and the
Application for Bid Forms (Annex 300-1.41). The Bid Form shall contain the
description of the property, name of the taxpayer and the terms of payment.
Spaces shall also be provided for the name and address of the bidder, the amount
of bid and the mode of payment;

93
5. Gather all the bid forms from the participating bidders;

6. Post the quoted prices in the Abstract of Canvass (Annex 300-1.42);

7. Determine the highest bidder:

7.1. Forfeit the sale in favor of the government, if the highest bid is lower than
the minimum bid of the government or there is no interested bidder; and

7.2. Pronounce the highest bidder as the winner, if the highest bid is higher
than the minimum bid of the government;

8. Accept the payment, in Cash or in Manager’s Check payable to the

Commissioner of Internal Revenue, from the winning bidder; prepare BIR Form
No. 0605 for full payment of tax due; issue ROR corresponding to the amount
due;

9. Issue a Provisional Certificate of Sale of Real Property (Annex 300-1.52) after

payment to the BIR has been made by the winning bidder. Upon failure of the
taxpayer to exercise his right to redemption, an Absolute Deed of Sale shall be
given to the winning bidder for him to submit to the Register of Deeds for the
transfer of ownership;

10. Return to the taxpayer the residue of the proceeds of the sale after deducting the
payment for the tax liability, including the increments incident to delinquency,
and the expenses for seizure and sale. If the taxpayer refuses to accept the same, it
shall be deposited to the court or to the bank under the taxpayer’s name;

11. Require winning bidder to present Certificate of Sale to the Register of Deeds for
annotation;

12. Furnish delinquent taxpayer with copy of the Certificate of Sale;

13. Prepare Minutes/Report of a Tax Sale to RDO/LTDO/LTS within two (2) days
after the sale (Annex 300-1.45) and attach copy of the report to the docket as
official record. The report shall recite the actual proceedings of the sale, how it
was conducted and all pertinent matters regarding the same;

14. Record the delinquent case as closed and transmit docket to the regional
Administrative Division/NO-Records Division for future reference;

15. Prepare a Report of Seized Properties Sold Thru Public Auction Sale (Annex 300-
1.46) and submit the same not later than the tenth (10th) day of the following
month to the Regional Director thru the Regional Collection Division/LTS thru
the LTCED for consolidation and submission to the Collection Service thru the
Collection Enforcement Division not later than the fifteenth (15 th) day of the

94
 following month (Annex 300-1.47); and

16. Prepare and submit Monthly GCL and Monthly Update of Delinquent Accounts
on the 10th day of the following month to CED copy furnished regional Collection
Division; in case of delinquent accounts of large taxpayers, submit to the Large
Taxpayers Service (Refer to CM 306 - Monitoring of ARs/DAs/CM 307
Monitoring Warrant Enforcement).

CM 305.10 FORFEITURE OF REAL PROPERTY IN FAVOR OF THE

GOVERNMENT [Refer to FC 305.10]

The property is declared forfeited if the highest bid is lower than the bid of the
government, or if there is no bidder present during the conduct of the auction sale. A
Declaration of Forfeiture of Real Property shall be filed in the Register of Deeds where
the property is located/registered within two (2) days after the auction sale.

Until the expiration of the time allowed for the redemption of the sold forfeited property
(i.e. within one year after the auction sale), the owner shall not be deprived of the
possession of the said property and shall be entitled to the rents and other income
therefrom. However, if the winning bid is not sufficient to pay the taxpayer's liability, the
Revenue Officer has the option to garnish any income which can be derived from the
property.

The property forfeited by the Government may be sold by negotiated or private sale,
subject to prior approval of the Secretary of Finance (Refer to CM 404.1 Negotiated
Sale of Acquired Real Property of Chapter IV of the Collection Manual).

The Revenue Officer/Seizure Agent shall:

1. Prepare a Declaration of Forfeiture of Real Property - BIR Form No.1306 (Annex

300-1.53) for signature by the duly authorized signatory;

2. File the Declaration of Forfeiture with the Register of Deeds/Local Assessor who
has jurisdiction over the property that is the subject of sale within two (2) days
after the sale;

3. Secure copy of the annotated OCT/TCT/CCT/TD and record in the Warrant

Register and Inventory of Seized Personal Property and Forfeited Real Property.
Attach the copy of the annotated OCT/TCT/CCT/TD, together with the
Declaration of Forfeiture, the Minutes/Report of sale and the Notice of Sale to the
docket of the tax case, for record purposes;

4. Provide taxpayer/occupant of the property with the duplicate copy of the

Declaration of Forfeiture of Real Property duly acknowledged by the Register of
Deeds/Local Assessor (Refer to CM 305.11 Redemption/Final Deed to
Purchaser and CM 307-Monitoring of Warrant Enforcement); and

95
 5. Prepare a Report of Properties Purchased and/or Forfeited by the Government
(Annex 300-1.48) and submit the same not later than the tenth (10 th) day of the
following month to the Regional Director thru the Regional Collection
Division/LTS thru the LTCED for consolidation and submission to the Collection
Service thru the Collection Enforcement Division not later than the fifteenth (15 th)
day of the following month (Annex 300-1.49).

CM 305.11 REDEMPTION/FINAL DEED TO PURCHASER/TRANSFER TO

THE GOVERNMENT [Refer to FC 305.11]

Redemption of Property

A one-year redemption period is provided for the taxpayer from the date the Provisional
Certificate of Sale of Real Property or the Declaration of Forfeiture of Real Property is
registered in the Register of Deeds/Assessor’s Office where the real property is
located/registered.62 This one-year redemption rule, however, is not applicable if the
forfeited assets are personal properties.

During the redemption period, the taxpayer shall not be deprived of the possession of the
said property and shall be entitled to the rents and other income therefrom until the
expiration of the time allowed for its redemption.63

The delinquent taxpayer may redeem the property within the one-year redemption period,
subject to the following conditions:

1. In case of property sold to a winning bidder, the delinquent taxpayer or his legal
representative may redeem the property by paying the outstanding tax liabilities,
penalties and interest thereon from the date of delinquency to the date of sale, the
maintenance and preservation of the levied property, and the expenses of sale,
together with the interest on the purchase price at the rate of fifteen percent (15%)
per annum from the date of sale to the date of redemption, within one (1) year
from the date of sale.

2. In case of property declared forfeited by the government, the delinquent taxpayer

or his legal representative may redeem the property by paying the outstanding tax
liabilities, penalties and interest thereon from the date of delinquency to the date
of sale, the maintenance and preservation of the levied property, and the expenses
of sale, within one (1) year from the date the declaration of forfeiture was
registered with the Register of Deeds/Assessor’s Office who has jurisdiction over
the property.

A. Procedures in the Redemption of Real Property Sold to a Winning Bidder at Auction

Sale
62
Section 214 of the NIRC of 1997, as amended.
63
Ibid.

96
The RDO/LTDO/LTCED shall:

1. Determine the amount to be paid by the taxpayer which is equivalent to the

delinquent tax, surcharges, interests, and costs of seizure and sale plus 15 percent
per annum as forbearance of the amount paid at auction, as follows:

Computation of Amount Payable by the Taxpayer in Redeeming a Property

Subject of an Auction Sale in Satisfaction of Tax Liabilities

Illustration : XYZ CORPORATION filed its final adjustment income tax return
for calendar year 2007 with a net taxable income of P500,000.00. At the
applicable income tax rate of 35% for the year 2007, its income tax amounted to
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 payment per
return filed, the deficiency, excluding penalties, amounted to P175,000.00. The
taxpayer was duly informed of this finding through a Preliminary Assessment
Notice. Due to failure to protest on time against the preliminary assessment
notice, a formal letter of demand and assessment notice was issued on May 31,
2009 demanding for the payment of the deficiency income tax on or before June
30, 2009, as shown below:

Calendar Year 2007 Deficiency Income Tax Assessment

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 x 50%) P87,500.00
20% interest per annum
from 4-15-08 to 6-30-09
(P175,000.00 x .2415524) 42,271.67 129,771.67
Total amount due P304,771.67

Scenario 1: Computation of the total amount to be paid by the taxpayer to

redeem the property if the purchase price (winning bid) is more than the tax
liability including the delinquency penalties

Assuming that the aforementioned deficiency income tax assessment against

XYZ CORPORATION, in the amount of P304, 771.67, is not paid by June 30,
2009, 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), thus, the assessment has already become final and executory.
A Warrant of Distraint and/or Levy (WDL) was issued and served upon the

97
taxpayer. In spite of the service of the WDL, the taxpayer still failed to pay its
deficiency income tax liability. A Notice of Tax Lien was filed with the Register
of Deeds (NTL) and the corresponding Notice of Levy (NOL). The NTL and
NOL were annotated on the title of a parcel of land with an area of 200 square
meters (sqm) belonging to the taxpayer. The copies of the filed NTL and NOL
were furnished the taxpayer; however, the taxpayer still failed to pay its tax
liabilities. The property was advertised for auction sale on June 30, 2010. The
minimum bid was set at the zonal value of P3,000.00 per sqm. (200 sqm. x
P3,000.00 = P600,000.00). The property was sold to the bidder with the highest
bid of P650,000.00. The BIR incurred expenses on the sale (publication, DST,
miscellaneous expenses, etc.) amounting to P42,000.00. The taxpayer was given
the right to redeem the property within one (1) year from the date of the auction
sale plus 15% of the winning bid amount.

Below is the computation on how much the taxpayer will pay to redeem its
property.

Total deficiency income tax assessed on May 31, 2009 P304, 771.67
Add: 25% surcharge for late payment
(P304,771.67 x 25%) P76,192.92
20% interest per annum
from 6-30-09 to 6-30-10
(P304, 771.67 x .20) 60,800.00 136, 992.92
Total amount due (excluding suggested
Compromise penalty for late payment)
during the auction sale P441,764.59
Add: Expenses of the sale (publication,
maintenance of the property, DST,
miscellaneous expenses, etc) 42,000.00

Total Amount to be Deducted from the Purchase Price P483,764.59

Purchase price (winning bid amount) P650,000.00

Less: Tax due + delinquency penalties
+ expenses of sale 483,764.59
Amount to be Returned to the Taxpayer P166, 235.41

Computation of the Redemption Amount:

Purchase price (winning bid amount) P650,000.00

Add: 15% of the purchase price (P650, 000.00 x 15%) 97,500.00
Gross Redemption Amount Payable by the taxpayer P757,500.00
Less: Amount to be returned to the taxpayer 166,235.41
Net Redemption Amount Payable by the Taxpayer P591,264.59

Scenario 2: Computation of the total amount to be paid by the taxpayer to

98
redeem the property if the purchase price (winning bid) is less than the tax
liability including the delinquency penalties:

Assuming that the aforementioned deficiency income tax assessment against XYZ
CORPORATION, in the amount of P304,771.67, is not paid by June 30, 2009, 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, thus, the assessment has already become final and executory. A Warrant
of Distraint and/or Levy (WDL) was issued and served upon the taxpayer. In spite
of the service of the WDL, the taxpayer still failed to pay its deficiency income
tax liability. A Notice of Tax Lien was filed with the Register of Deeds (NTL)
and the corresponding Notice of Levy (NOL). The NTL and NOL were annotated
on the title of a parcel of land with an area of 200 square meter (sqm) belonging
to the taxpayer. The copies of the filed NTL and NOL were furnished the
taxpayer; however, it still failed to pay its tax liabilities. The property was
advertised for auction sale on June 30, 2010. The minimum bid was set at the
zonal value of P1,000.00 per sqm (200 sqm x P1,000.00 = P200,000.00). The
property was sold to the bidder with the highest bid of P250,000.00. The BIR
incurred expenses on the sale (publication, DST, miscellaneous expenses, etc.)
amounting to P42,000.00.The taxpayer was given the right to redeem the property
within one (1) year from the date of the auction sale plus 15% of the winning bid
amount.

Below is the computation on how much the taxpayer will pay to redeem its
property.

Total deficiency income tax assessed on May 31, 2009 P304,771.67

Add: 25% surcharge for late payment
(P304,771.67 x 25%) P76,192.92
20% interest per annum
from 6-30-09 to 6-30-10
(P304,771.67 x .20) 60,800.00 136,992.92
Total amount due (excluding suggested
compromise penalty for late payment)
during the auction sale P441,764.59
Less: Amount to be applied to the tax liability
Purchase Price (winning bid amount) P250,000.00
Less: Expenses of sale (publication,
DST, miscellaneous expenses, etc.) 42,000.00 208,000.00

Balance of tax liability P233,764.59

Computation of the Redemption Amount:

Balance of tax due after the auction sale P233,764.59

99
 Add: 20% interest per annum
from 6/30/2010 to 6/30/2011
(P233,764.59 x .20) 46,752.92
Total amount due P280,517.51
Purchase price (winning bid amount) P250,000.00
Add: 15% of the purchase price
(P250, 000.00 x 15%) 37,500.00 287,500.00
Amount Payable by the Taxpayer P568,017.51

Computation of the Amount to be Returned to the Winning Bidder:

Purchase price (winning bid amount) P250,000.00

Add: 15% of the purchase price
P250,000.00 x 15%) 37,500.00

Amount to be Returned to the Winning Bidder P287,500.00

2. Receive payment from taxpayer and/or return payment to the winning bidder, as
the case may be;

3. Prepare a Certificate of Redemption (Annex 300-1.54) for the signature of the

duly authorized signatory and issue the same to the taxpayer;

4. Record the case as closed and transmit docket to the Regional Administrative
Division/NO-Records Division for safekeeping and future reference;

5. Prepare a Report of Properties Redeemed within the Redemption Period and

submit the same not later than the tenth (10 th) day of the following month to the
Regional Director thru the Regional Collection Division/LTS thru the LTCED
for consolidation and submission to the Collection Service thru the Collection
Enforcement Division not later than the fifteenth (15 th) day of the following
month (Annexes 300-1.55/56); and

6. Prepare and submit Monthly GCL and Monthly Updates of Delinquent Accounts
on the-10th day of the following month to CED copy furnished the Regional
Collection Division/LTS (Refer to CM 306-Monitoring of ARs/DAs/CM 307-
Monitoring Warrant Enforcement).

B. Procedures in the Redemption of Real Properties Declared Forfeited by the

Government

The RDO/LTDO/LTCED shall:

1. Determine the amount to be paid by the taxpayer which is equivalent to the

delinquent tax, surcharges, interests and cost of seizure and sale as follows:

100
Computation of Amount Payable by the Taxpayer in Redeeming the Real
Property Forfeited by the Government

Illustration : XYZ CORPORATION filed its final adjustment income tax return
for calendar year 2007 with a net taxable income of P500,000.00. At the
applicable income tax rate of 35% for the year 2007, its income tax liability
amounted to 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 P 500,000.00. On its net income of P1,000,000.00
per investigation, the income tax due is P350,000.00. After deducting its income
tax payment per return filed, the deficiency tax, excluding penalties, amounted to
P175,000.00. The taxpayer was duly informed of this finding through a
Preliminary Assessment Notice. After failure to protest on time against the
preliminary assessment notice, a formal letter of demand and assessment notice
was issued on May 31, 2009 demanding for the payment of the deficiency income
tax on or before June 30, 2009, as shown below:

Calendar Year 2007 Deficiency Assessment

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 x 50%) P87, 500.00
20% interest per annum
from 4-15-08 to 6-30-09
(P175,000.00 x .2415524) 42,271.67 129,771.67
Total amount due P304,771.67

Scenario 1- Computation of the total amount to be paid by the

taxpayer to redeem the property, with a value of more than the tax
liability, if there is no winning bidder and the property was forfeited
in favor of the government:
Assuming that the deficiency income tax assessment against XYZ
CORPORATION in the amount of P304,771.67 is not paid by June 30,
2009, 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, thus, the assessment has already become
final and executory. A Warrant of Distraint and/or Levy (WDL) was
issued and served upon the taxpayer. In spite of the service of the WDL,
the taxpayer still failed to pay its deficiency tax liability. A Notice of Tax
Lien (NTL) was filed with the Register of Deeds and the corresponding
Notice of Levy (NOL). The NTL and NOL were annotated on the title of
a parcel of land with an area of 200 square meter (sqm) belonging to the
taxpayer. The copies of the filed NTL and NOL were furnished the

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taxpayer but it still failed to pay its tax liabilities. The property was
advertised for auction sale on June 30, 2010. The BIR incurred expenses
on the sale (publication, DST, miscellaneous expenses, etc.) amounting to
P42,000.00. The minimum bid was set at the zonal value of P3,000.00 per
sqm (200 sqm x P3,000.00 = P600,000.00). The property was declared
forfeited in favor of the government as there was a failure of bidding
because all the bids are below the set minimum bid. In order to effect the
forfeiture, a Declaration of Forfeiture was issued and filed with the
Register of Deeds on July 2, 2010. The taxpayer was given the right to
redeem the property within one (1) year from the date of forfeiture.

Computation of the amount to be paid by the taxpayer to redeem his

property. - As a result of the failure of bidding, the property was declared
forfeited by the government in full satisfaction of the government’s claim
(amount of tax due per FAN plus the delinquency penalties at the time of
the auction sale). Thus, the amount to be paid by the taxpayer in order to
redeem his property is the computed amount of tax due at the time of the
auction sale, inclusive of the delinquency penalties, plus the expenses of
sale.

Below is the computation on how much the taxpayer will pay to redeem
its property:

Total deficiency income tax assessed on May 31, 2009 P304,771.67

Add: 25% surcharge for late payment
(P304,771.67 x 25%) P76,192.92
20% interest per annum
from 6-30-09 to 6-30-10
(P304,771.67 x .20) 60,800.00
Expenses of sale (publication,
DST, miscellaneous expenses,
etc.) 42,000.00
Total increments 178,992.92
Total amount due (excluding suggested
compromise penalty for late payment)
during the auction sale P483,764.59

If the taxpayer failed to redeem the property within the prescribed period,
the entire property shall be absolutely forfeited in favor of the government
in satisfaction of the taxpayer’s tax liability.

Scenario 2: Computation of the total amount to be paid by the

taxpayer to redeem the property, with a value of less than the tax
liability, if there is no winning bidder and the property was forfeited
in favor of the government:
Assuming that the aforementioned deficiency income tax assessment

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against XYZ CORPORATION in the amount of P304,771.67 is not paid
by June 30, 2009, 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); thus, the assessment has
already become final and executory. A Warrant of Distraint and/or Levy
(WDL) was issued and served upon the taxpayer. Inspite of the service of
the WDL, the taxpayer still failed to pay its deficiency tax liability. A
Notice of Tax Lien was filed with the Register of Deeds (NTL) and the
corresponding Notice of Levy (NOL). The NTL and NOL were annotated
on the title of a parcel of land with an area of 200 square meter (sqm)
belonging to the taxpayer. The copies of the filed NTL and NOL were
furnished the taxpayer, however, it still failed to pay its tax liabilities. The
property was advertised for auction sale on June 30, 2010. The BIR
incurred expenses on the sale (publication, DST, miscellaneous expenses,
etc.) amounting to P42,000.00. The minimum bid was set at the zonal
value of P1,000.00 per sqm (200 sqm x P1,000.00 = P200,000.00). The

property was declared forfeited in favor of the government due to failure

of bidding since all the bids are below the set minimum bid. To effect the
forfeiture, a Declaration of Forfeiture was issued and filed at the Register
of Deeds on July 2, 2010. The taxpayer was given the right to redeem the
property within one (1) year from the date of forfeiture.

Computation of the amount to be paid by the taxpayer to redeem his

property. - As a result of the failure of bidding, the property was declared
forfeited by the government in partial satisfaction of the government’s
claim (amount of tax due per FAN plus the delinquency penalties at the
time of the auction sale).

Below is the computation on how much the taxpayer will pay to redeem
its property:

Computation of the Redemption Amount:

Total deficiency income tax assessed on May 31, 2009 304,771.67

Add: 25% surcharge for late payment
(P304,771.67 x 25%) P76,192.92
20% interest per annum
from 6-30-09 to 6-30-10
(P304,771.67 x .20) 60,800.00 136,992.92
Total amount due (excluding suggested
compromise penalty for late payment) P441,764.59
Less: Value of the property credited to the
tax liability
Zonal value of the property P200,000.00
Less: Expenses of sale (publication,

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 DST, miscellaneous expenses,
etc.) 42,000.00 158,000.00
Balance of the Tax Liability P283,764.59
Balance of tax due after the auction sale P283,764.59
Add: 20% interest per annum
from 6/30/2010 to 6/30/2011
(P283,764.59 x .20) 56,752.92
Total amount still due P340,517.51
Add: Value of the property credited to the
tax liability P158,000.00
Expenses of sale (publication, DST,
miscellaneous expenses, etc.) 42,000.00 200,000.00
Amount Payable by the Taxpayer P540,517.51

2. Accept the payment from the taxpayer;

3. Prepare BIR Form No. 0605 for full payment of tax due and issue Certificate of
Redemption (Annex 300-1.54) to the taxpayer;

4. Prepare letter to the Register of Deeds/Local Assessor’s Office lifting the

Declaration of Forfeiture to be signed by the authorized signatory and attach copy
thereof to the docket of the case;

5. Record the case as closed and transmit docket to the Regional Administrative
Division/NO-Records Division for safekeeping and future reference;

6. Prepare a Report of Properties Redeemed within the Redemption Period (Annex

300-1.55) and submit the same not later than the tenth (10th) day of the following
month to the Regional Director thru the Regional Collection Division/LTS thru
the LTCED for consolidation and submission to the Collection Service thru the
Collection Enforcement Division not later than the fifteenth (15 th) day of the
following month (Annex 300-1.56); and

7. Prepare and submit Monthly GCL and Monthly Updates of Delinquent Accounts
on the-10th day of the following month to CED copy furnished the Regional
Collection Division/LTS (Refer to CM 306-Monitoring of ARs/DAs/ CM 307-
Monitoring Warrant Enforcement).

The Register of Deeds shall:

1. Receive Certificate of Redemption from the taxpayer, in case the taxpayer

redeems his property;

2. Receive the letter from the BIR lifting the Declaration of Forfeiture on the
property, in case the taxpayer redeems the property;

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 3. Check whether the information reflected on the Certificate of Redemption
received from the taxpayer tallies with the information on the lifting notice
received from the BIR;

4. Inform the taxpayer and/or the BIR, in case of discrepancies in the documents
received so that proper corrections can be made on the documents; and

5. Annotate the Certificate of Redemption on the property title.

Final Deed to Purchaser/Transfer in the Name of the Government

If the taxpayer does not redeem his property within the prescribed period, the transfer of
ownership to the winning bidder or to the government shall be undertaken as follows:

1. After the lapse of the one-year redemption period from the date of registration of
the Provisional Certificate of Sale of Real Property, a Final Deed of Conveyance
conveying to the purchaser so much of the property as has been sold, free from all
BIR liens and encumbrances, shall be executed and to be filed with the concerned
Register of Deeds for the transfer of ownership to the winning bidder.

2. After the lapse of the one-year redemption period from the date of registration of
the Declaration of Forfeiture of Real Property, an Affidavit of Consolidation of
Title of Absolutely Forfeited Real Properties in favor of the Republic of the
Philippines shall be executed and to be filed with the concerned Register of
Deeds/Assessor’s Office for the transfer of ownership to the government (Refer
to Chapter IV – Management of Absolutely Forfeited Assets of the Collection
Manual).

Procedures in the Issuance of the Final Deed to the Purchaser/Transfer in the Name
of the Government After the Lapse of the One-Year Redemption Period

A. Issuance of the Final Deed to the Purchaser

The RDO/LTDO/LTCED shall:

1. Execute a Final Deed of Conveyance (Annex 300-1.57) for the signature of the
duly authorized signatory, conveying to the purchaser so much of the property as
has been sold, free from all BIR liens of any kind, in case the delinquent
taxpayer fails to redeem the property within the one (1) year redemption period;

2. Issue the signed Final Deed of Conveyance to the purchaser (winning bidder);
and

3. Attach a copy of the Final Deed of Conveyance to the docket of the case for
records purposes and future reference.

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The Register of Deeds shall:

1. Receive Final Deed of Conveyance from the purchaser; and

2. Transfer the title in the name of the purchaser.

B. Transfer in the Name of the Government

1. The RDO/LTDO/LTCED shall initiate the transfer of the property in the name of
the Government (Refer to CM 402.1 Consolidation of Acquired Real Property
of Chapter IV of the Collection Manual).

CM 306 MONITORING OF ACCOUNTS RECEIVABLES (ARs)

DELINQUENT ACCOUNTS (DAs) [Refer to FC 306]

The handling of accounts receivables/delinquent accounts is being monitored through the

submission of the pertinent reports reflecting the creation up to the closure of cases,
including the collection enforcement actions undertaken on the cases, and/or the
determination of the status of the accounts receivables/delinquent accounts.

The handling and management of all AR/DA cases in the regional offices shall be
monitored by their respective Regional Collection Divisions while AR/DA cases for
Large Taxpayers shall be monitored by LTCED. For this purpose, all transfers of AR/DA
case dockets to/from other offices of regional and LTS shall always be coursed thru the
Regional Collection Division and the LTCED, respectively.The Collection Service, thru
the Collection Enforcement Division, shall be responsible for the nationwide monitoring
of all the AR/DA cases of the Bureau. It shall, at all times, maintain an Updated
Masterlist of all AR/DA cases.

All concerned Offices handling AR/DA cases shall prepare the following reports in soft
and hard copies to the ACIR, Collection Service, and Attention: The Chief, Collection
Enforcement Division, thru the Regional Collection Divisions/LTS:

CM Reference Reports Frequency

CM 302- Management/Handling of 1. Inventory List of Quarterly
AR/DA Delinquent Accounts
(Annex 300-1.5)

CM 302- Management/Handling 2. Aging of Accounts Quarterly

of AR/DA Receivables/Delinquent
Accounts Cases (Annex
300-1.6)

CM 301- Assignment of Dockets for 3. General Control Ledger Monthly

Collection Enforcement Report and attachments

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CM 304.TP Options- TP Intends to Pay (Annex 300-1.2)
Tax Liability in Full/Compromise
Payment/Abatement of Penalties
CM 305. Collection Summary
Remedies

CM 304.TP Options- TP Intends to Pay 4. Updates of Delinquent Monthly

Tax Liability in Full/Compromise Accounts (Annex 300-
Payment/Abatement of Penalties 1.19)
CM 305. Collection Summary
Remedies

CM 302- Management/Handling 5. Inventory list of A/R Monthly

of AR/DA Written-off (Annex 300-
1.10)

CM 302- Management/Handling 6. Monthly List of Accounts Monthly

of AR/DA Cancelled by ATCA (Annex
300-1.11)
The RDO/LTDO/LTCED shall:

1. Prepare and submit the following monthly reports in soft and hard copies to the
ACIR, Collection Service, Attention: The Chief, Collection Enforcement Division
thru the Regional Collection Division/LTS on the 15th day of the month:

- General Control Ledger Report BIR Form No.1253 and attachments

(Annex 300-1.2):
BIR Form 1245 - Monthly List of Transfer-In Accounts
BIR Form No.1246 - Monthly List of Transfer-Out Accounts
BIR Form No.1248- Monthly List of Accounts Paid

- Updates of Delinquent Accounts (Annex 300-1.19)

- Inventory list of A/R Written-off (Annex 300-1.10)

- Monthly List of Accounts Cancelled by ATCA (Annex 300-1.11); and

2. Prepare and submit the following quarterly reports in soft and hard copies to the
ACIR, Collection Service, Attn: The Chief, Collection Enforcement Division thru
the Regional Collection Division/LTS every 25 th day of the following month after
the quarter:

- Inventory List of Delinquent Accounts (Annex 300-1.5)

- Aging of Accounts Receivables/Delinquent Accounts Cases (Annex 300-

1.6)

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The Regional Collection Division/ACIR-LTS shall:

1. Receive the monthly/quarterly reports on the 10 th day of the month/15th day or

every quarter from the district offices within their jurisdiction;

2. Validate the accuracy of the reports submitted by RDOs/LTDOs/LTCED with

the records of the Regional Collection Division/LTS;

3. Require the concerned RDOs/LTCED/LTDOs to amend the previously submitted

reports, in case of noted errors/discrepancies;

4. Consolidate the reports submitted by the RDOs/LTDOs/LTCED within its

jurisdiction;

5. Route the consolidated reports to the Regional Director, for approval (for regional
cases only); and

6. Submit the approved consolidated monthly/quarterly reports to the CED on the

15th day of the month/25th day of every quarter.

The CED shall:

1. Receive the consolidated monthly reports from the Regional Collection

Divisions/LTS on the 15th day of the month/25th day of every quarter;

2. Validate the reports received and notify the concerned office, in case of existence
of any discrepancies, for necessary amendment of submitted reports;

3. Encode the Monthly Updates of Delinquent Accounts on the CED database of

delinquent accounts (Refer to CM 308- Issuance of Tax Clearance/CM 308.1
Issuance of Delinquency Verification); and

4. Prepare the consolidated monthly/quarterly reports and submit the same to the
Collection Service on or before the 20 th day of the month/the 30th day of every
quarter.

CM 307 MONITORING OF WARRANT ENFORCEMENT [Refer to FC 307]

Warrant enforcement is being monitored also through the submission of pertinent reports
by the responsible officers/offices. The system of reporting tracks the actions taken on
delinquent accounts, more specifically on the execution of collection summary remedies.
The concerned revenue officers prepare series of reports on warrant enforcement
activities to the RDOs/LTDOs/LTCED. These reports are validated and consolidated by
the RDOs and submitted to their respective Regional Collection Divisions, for regional
cases, and by the LTDOs/LTCED to the LTS, for large taxpayer cases. The reports are
then validated and consolidated by the Regional Collection Divisions/LTS and submitted

108
to the CED. Such reports are further validated, consolidated by the CED and submitted to
the Collection Service for management information and policy directions, if needed.

The Revenue Officer shall:

1. Prepare the following Fieldman's Warrant Enforcement Reports:

a. Fieldman's Warrant of Distraint and or Levy (WDL) Status Report –

Annex 300-1.58

b. Fieldman's Report on ARs/DAs Paid Prior to Issuance of WDLs – Annex

300-1.58.1

c. Fieldman's Report of ARs/DAs Referred to Other Offices Prior to

Issuance of WDLs -Annex 300-1.58.2

d. Fieldman's Report of WDLs Served – Annex 300-1.58.3

e. Fieldman's Report of WDLs Executed – Annex 300-1.58.4

f. Fieldman's Report of Cases with WDLs Referred to Other Offices –

Annex 300-1.58.5

g. Fieldman's Report of Cases with Unserved and or Unexecuted WDLs –

Annex 300-1.58.6

h. Fieldman's Report of Cases with WDLs Closed thru Actual Payment –

Annex 300-1.58.7

i. Fieldman's Report of Cases with WDLs Allowed to Pay on Installment –

Annex 300-1.58.8

j. Fieldman's Report of Cases with WDLs Closed thru Approved

Compromise Settlement – Annex 300-1.58.9

k. Fieldman's Report of Cases with WDLs Closed thru Approved Abatement

– Annex 300-1.58.10

l. Fieldman's Report of Cases with WDLs Closed thru

Forfeiture/Garnishment – Annex 300-1. 58.11; and

2. Submit the above reports, through the Collection Section Chiefs, to the
RDO/LTDO/LTCED Chiefs on or before the 10th day of the following month.

The RDO/Chief, LTDO/Chief, LTCED shall:

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1. Receive from the respective Collection Section Chief the Fieldman's Warrant
Enforcement Reports;

2. Review the reports submitted and prepare the following report for submission to
CED thru the Regional Collection Division/LTS not later than the 15 th day of the
following month:

a. Consolidated Warrant of Distraint and or Levy (WDL) Status Report –

Annex 300.1.59

b. Consolidated Report of ARs/DAs Paid Prior to Issuance of WDLs- Annex

300-1.59.1

c. Consolidated Report of ARs/DAs Referred to Other Offices Prior to

Issuance of WDLs – Annex 300-1.59.2

d. Consolidated Report of WDLs Issued (Approved and Signed) – Annex

300-1.59.3

e. Consolidate Report of WDLs Served – Annex 300-1.59.4

f. Consolidated Report of WDLs Executed – Annex 300-1.59.5

g. Consolidated Warrant of Distraint/Garnishment/and or Levy Handled for

Service and Execution – Annex 300-1.59.6

h. Consolidated Report of Cases with WDLs Referred to Other Offices-

Annex 300-1.59.7

i. Consolidated Report of Cases with Unserved and or Unexecuted WDLs –

Annex 300-1.59.8

j. Consolidated Report of Cases with WDLs Closed thru Actual Payment-

Annex 300-1.59.9

k. Consolidated Report of Cases with WDLs Allowed to Pay on Installment

– Annex 300-1.59.10

l. Consolidated Report of Cases with WDLs Closed thru Approved

Compromise Settlement – Annex 300-1.59.11

m. Consolidated Report of Cases with WDLs Closed thru Approved

Abatement- Annex 300-1.59-12

n. Report of AR Cases with WDL and Approved Authority to Cancel

Assessment (ATCA) – Annex 300-1.59.13

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 o. Consolidated Report of Cases with WDL Closed thru
Forfeiture/Garnishment – Annex 300-1.59.14;

3. Prepare and submit the following reports to the Regional Collection Division/LTS
not later than the 10th day of the following month:

a. Report of Seized Properties Sold Thru Public Auction – Annex 300-1.46

b. Report of Properties Purchased and/ or Forfeited in Favor of the

Government – Annex 300-1.48

c. Report on Properties Redeemed within the Redemption Period – Annex

300-1.55; and

4. Submit the consolidated warrant enforcement reports as well as the other reports
to the CED thru the Regional Collection Division/LTS on or before the 15 th day
of the following month.
The Regional Collection Division/LTS shall:

1. Receive the RDO’s/LTDO’s/LTCED’s Consolidated Warrant Enforcement

Reports and other reports; and

2. Monitor the submission of these to the CED.

The CED shall:

1. Receive the summary reports from the Regional Collection Divisions/LTS on the
Warrant and/or Levy (WDL) Status Report, the consolidated warrant enforcement
reports and other reports from the RDOs/LTDOs/LTCED within their
respective jurisdiction;

2. Monitor, analyze and prepare the consolidated summary of the reports on

Warrant and/or Levy (WDL) Status Report, the consolidated warrant enforcement
reports and other reports; and

3. Submit the reports to the Collection Service, for management information and
policy directions, if needed.

CM 308 ISSUANCE OF TAX CLEARANCE (TCL) [Refer to FC 308]

Executive Order (EO) No. 398 dated 12 January 2005 requires the presentation of a Tax
Clearance Certificate (TCL) issued by the Bureau of Internal Revenue before a private
party can participate in a bidding process with any government institution. This is in line
with the government's commitment for good governance such that contracts with

111
government for the procurement of goods and services must be awarded only to tax-
compliant taxpayers.

Accordingly, and as a pre-condition for any person entering into contracts with any
agency of government thru public bidding or negotiated contracts, the taxpayer-bidder
secures a tax clearance from the BIR attesting that it/he/she has no outstanding
delinquency or unpaid tax liabilities with the BIR. In some instances, where the applicant
has a delinquent account but has pending valid request for
re-investigation/reconsideration, abatement of penalties or compromise payment, a
provisional tax clearance may be issued upon approval of the ACIR-CS, subject to
existing rules, policies and procedures.

Pursuant to RR No. 3-2005, the filing and processing of all applications for tax clearance
for bidding purposes with the government are centrally done in the BIR-National Office,
thru the Collection Enforcement Division. The regular tax clearance for applicants with
no listed tax liabilities in the GCL is approved and issued by the Chief, CED. However,
provisional tax clearance for applicants with listed tax liabilities, subject to taxpayer's
compliance with certain conditions, is approved and issued by the ACIR-Collection
Service. However, once the necessary technical infrastructure is already put in place, the
acceptance and processing of these types of tax clearances will be eventually devolved to
the LTS and the concerned regional offices having jurisdiction over the taxpayer-
applicants. The devolution thereof is envisioned considering that these offices have more
updated information on the existence and status of ARs/DAs from taxpayers under their
respective jurisdictions. This direction shall also provide the taxpayers-applicants
convenient access to the concerned tax clearance-issuing offices considering that the they
are closer to the physical locations of the taxpayers' respective businesses.

Guidelines in Processing Applications for Tax Clearance

1. The applications for TCL shall be filed by the taxpayers-applicants with the
Collection Enforcement Division (CED) under the Collection Service.64

2. The application for TCL shall be filed by the taxpayer not later than seven (7)
days prior to the conduct of the government bidding where it will be used to
provide the CED sufficient time within which to process and appropriately act on
the application. On the other hand, the application for TCL shall be processed and
evaluated by the CED within five (5) days from receipt of the complete
documents in support thereof from the taxpayer-applicant.

3. In order to ensure that the application for tax clearance can be issued within the
abovementioned 5-day period, the CED shall receive the application for TCL only
upon the submission of complete documentary requirements, as follows:

a. Written request for tax clearance addressed to the CED with the following
64
Under the existing centralized processing mode, all TCL applications shall be filed with the CED. The processing
of tax clearances will, however, be eventually devolved to the LTS and the concerned regional offices having
jurisdiction over the taxpayer-applicants in line with the envisioned devolution of functions.

112
 information:

- Name of the taxpayer requesting the tax clearance;

- Address and contact number (i.e. telephone/fax number);

- Taxpayer Identification Number (TIN);

- Revenue District Office having jurisdiction over the taxpayer;

- Name of the Procuring Government Agency;

- Name of the responsible procurement officer and his contact number (i.e.
telephone/fax number)

b. Duly filled-up and notarized Application Form for Tax Clearance duly affixed
with the prescribed documentary stamp;

c. Delinquency Verification Form duly issued by the Revenue District Office

(RDO)/LTDO/LTCED having jurisdiction over the taxpayer-applicant;

d. Certified true copy of Certificate of Registration (BIR Form No. 2303);

e. Proof of enrollment to the BIR's Electronic Filing and Payment System

(eFPS) facility pursuant to Revenue Regulations (RR) No. 3-2005, activation
of the eFPS account, and actual utilization of the filing and payment facility;

f. Photocopy of previous Tax Clearance Certificate issued, if any;

g. Authorization letter, if filed by a representative;

h. Photocopy of the Registration Certificate issued by the Department of Trade

and Industry (DTI) or Securities and Exchange Commission (SEC), whichever
is applicable; and

i. Other documents as may be required by the concerned processing/approving

office.

4. In case a taxpayer-applicant has outstanding ARs/DAs but the continued existence

of such unpaid tax liabilities is not necessarily due to the taxpayer's advertent
refusal to pay the same, a Provisional Tax Clearance Certificate for bidding
purposes may be issued to such taxpayer under any of the following situations:

a. The tax liability emanates from any assessment which became final and
executory and where compromise settlement thereof is requested by the
taxpayer on the ground of doubtful validity of the assessment or financial

113
 incapacity under Section 204 of the Tax Code, as amended, as implemented
by RR No. 30-2002;

b. The tax liability arises from any assessment which became final and executory
and where administrative abatement thereof is requested by the taxpayer on
the ground that the tax or any portion thereof appears to be unjustly or
excessively assessed and/or the administration and collection costs involved
do not justify the collection of the amount due under the provisions of Section
204 of the Tax Code, as amended, as implemented by RR No. 13-2001;

c. The tax liability has become final and executory after the final judgment
and/or decision of the Court and where compromise is requested by the
taxpayer on the ground of financial incapacity under the provision of Section
204 of the Tax Code, as amended, and its implementing rules and regulations;

d. The taxpayer’s tax liability is a subject of criminal prosecution and/or civil

litigation that is still pending judgment/resolution by the competent Court;

e. The taxpayer has validly availed of the benefits under the Tax Amnesty
Program (TAP) of the government pursuant to Republic Act (RA) No. 9480
wherein the corresponding Authority to Cancel the Assessment (ATCA)
relative to the outstanding tax liability has not yet been issued by the duly
authorized BIR office;

f. The taxpayer’s tax liability arose from a tax assessment that has been validly
protested within the prescribed 30-day reglamentary period, and the same is
still pending review and evaluation by the concerned BIR office; and

g. The taxpayer has an approved installment agreement with the duly authorized
representative of the Commissioner for the staggered settlement of the
outstanding tax liabilities, in accordance with the existing policies and
guidelines, and the taxpayer has not been remiss in making any of the agreed
installment payment.

5. The application for Provisional Tax clearance by any taxpayer with outstanding
tax liabilities shall be received by the CED only upon the submission of complete
applicable documentary requirements, as follows:

a. Written request addressed to the TCL processing office with the following
information:

- Name of the taxpayer requesting the tax clearance;

- Address and contact number (i.e. telephone/fax number);

- Taxpayer Identification Number (TIN);

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 - RDO having jurisdiction over the taxpayer;

- Name of the procuring government agency/office;

- Full description of the project to be bidded out by the

procuring government agency/office;

- Name of the responsible procurement officer and his

contact number (i.e. telephone/fax number)

b. Duly filled-up and notarized Application Form for Tax Clearance properly
affixed with the prescribed documentary stamp;

c. Delinquency Verification Form duly issued by the Revenue District Office

(RDO) having jurisdiction over the taxpayer-applicant;

d. Certified true copy of Certificate of Registration (BIR Form No. 2303);

e. Proof of enrollment to the BIR's Electronic Filing and Payment System

(eFPS) facility pursuant to Revenue Regulations (RR) No. 3-2005, activation
of the eFPS account, and actual utilization of the filing and payment facility;

f. Photocopy of previous Tax Clearance issued, if any;

g. Authorization letter, if filed by a representative;

h. Photocopy of the Registration Certificate issued by the DTI or the SEC,

whichever is applicable;

i. Copy of the Final Assessment Notice (FAN) and/or Final Decision on

Disputed Assessment (FDDA) issued by the Commissioner or his duly
designated representative;

j. Duly filed Notice of Availment of Tax Amnesty, Tax Amnesty Return (BIR
Form No. 2116) and the corresponding Payment Form (BIR Form No. 0617)
as proof of payment thereof, in case of availment of the Tax Amnesty
Program;

k. Copy of the formal letter request and photocopy of Application for

Compromise Settlement or Application for Abatement or Cancellation of Tax,
Penalties and/or Interest Under Revenue Regulations Nos. 13-2001 or 15-
2006 (BIR Form No. 2110) duly received by the concerned Revenue District
Office (RDO), if applicable;

115
 l. Copy of duly validated Payment Form (BIR Form 0608), Official Receipt
issued by Authorized Agent Bank (AAB) or Revenue Official Receipt (BIR
Form No. 2524) issued by Revenue Collection Officer, whichever is
applicable, representing payment of Compromise/Abatement Offer, if
applicable;

m. Copy of the Letter of Protest, Request for Reconsideration and/or

Reinvestigation duly filed by the taxpayer with the concerned BIR office, if
applicable;

n. In case of installment payment, a copy of the approved letter-request for

installment payment, if applicable; and

o. Other documents as may be required by the concerned processing/approving

office.

6. In order to ensure that no tax clearance for bidding purposes is issued to taxpayers
with outstanding ARs/DAs, the entries to the General Control Ledgers of the
RDOs, LTDOs, Regional Collection Divisions, LTCED, CED and other
concerned offices shall always be updated. New ARs/DAs created, transfers in
and out of case dockets, cases closed due to payments of tax(es) due by way of
full payment of the tax liabilities, approved applications for compromise
settlement or abatement of penalties, issuance of ATCAs, etc. must be timely
reported to all concerned offices pursuant to existing revenue issuances.

7. While the Tax Delinquency Verification Form from the concerned RDOs/LTDOs/
LTCED is already included in the list of documents to be submitted by the
taxpayer-applicant to the CED, actual confirmation on the authenticity thereof
must be made by the latter with the offices that issued the said certifications. This
is necessary in order to preclude the possibility of receiving spurious and/or
tampered certifications for the purpose of securing tax clearance considering that
the CED may not yet have any information on the taxpayer's existing ARs/DAs.
The said request for confirmation can be done via faxed or emailed messages
immediately upon the receipt of the application for tax clearance. The
RDOs/LTDOs/LTCED shall issue the desired confirmation on the authenticity of
the TDVFs issued and transmit the same to the CED within the day of receipt
of the request so that immediate action on the taxpayer's application for tax
clearance can be made by the CED.

8. The Tax Delinquency Verification Form to be accomplished by the

RDO/LTDO/LTCED shall contain, among others, the following information:

a. Name of taxpayer-applicant;

b. TIN of the taxpayer-applicant;

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 c. Complete address of taxpayer-applicant;

d. Name of the offices that were used as the sources of information on

existence of ARs/DAs;

e. Complete details of the outstanding ARs/DAs as of the date of receipt of

the application for tax clearance, if any; and

f. Complete details of the information relative to the existence of cases under

4. above, including the current status thereof.

9. The Tax Delinquency Verification Form issued by the concerned home district
office of the taxpayer-applicant should be issued not earlier than fifteen (15) days
when the application for tax clearance was filed with the CED.

10. The application for TCL or PTCL shall only be processed and issued upon
payment of the required certification fee and the purchase of loose documentary
stamp for affixture on the appropriate face of the TCL/PTCL to be issued
pursuant to Section 183 of the Tax Code, as amended.

11. For cases enumerated under Item 4.a, b, c, e and f above, the PTCL shall only be
issued to the taxpayer-applicant within a period of three (3) months from the date
of the initial issuance thereof. Once the CED has determined the existence of the
taxpayer's outstanding tax liabilities under the applicable circumstance(s),
immediate written notification to the concerned offices should be made to fast-
track the resolution of the tax case under abatement, compromise, reconsideration
and/or reinvestigation.

12. In cases where the taxpayer-applicant applying for PTCL has a pending request
for compromise settlement/abatement of penalties, the evaluation of the aforesaid
offer for compromise/ abatement shall be given preference or priority by the
concerned Regional Evaluation Board (REB)/National Evaluation Board
(NEB)/Technical Working Group (TWG)/Technical Working Committee (TWC)
constituted for the purpose under the existing issuances. The speedy disposition of
the pending request for compromise settlement/abatement of penalties is
necessary in order to provide convenience to taxpayers for purposes of securing
regular tax clearance once it/he/she is already cleared of the outstanding tax
liabilities, and/or facilitate the collection of the unpaid ARs/DAs thru enforcement
of collection summary remedies and/or voluntary settlement of the unpaid
accounts by the taxpayer.

13. Only taxpayers that are duly enrolled with the Bureau’s Electronic Payment and
Filing System (eFPS) shall be issued TCL and PTCL pursuant to the provisions of
Revenue Regulations (RR) No. 3-2005 and circularized under Revenue
Memorandum Circular (RMC) No. 69-2009. For this purpose, mere enrollment to
the eFPS shall not be the considered as sufficient compliance with the

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 aforementioned requirement. The taxpayer-applicant must show documentary
proofs that the eFPS account was already activated and it/he/she has been actively
utilizing the said filing and payment facility in filing the applicable tax returns
and payment of the taxes due thereon.

14. The TCL and PTCL (BIR Form No. 17.14B) shall be approved and signed by the
Chief, CED and ACIR-Collection Service, respectively.

15. The duly approved TCL/PTCL shall contain the following information:

a. Name of Taxpayer;

b. Address of Taxpayer;

c. Taxpayer Identification Number (TIN);

d. Purpose for issuance of TCL / PTCL;

e. Name of the government agency to whom the PTCL shall be presented;

f. Basis and/or ground for the issuance of PTCL;

g. Deficiency/delinquency tax type, year covered, and amount due, if any;

h. Updated status of the taxpayer’s tax liability, if any;

i. Date of Issuance;

j. Validity period; and

k. Issuing Office TCL/PTCL Control Number.

16. To ensure proper accounting and delineate the responsibilities for all issued TCLs
and PTCLs, a separate control number that is unique for each and every certificate
issued must be assigned to all issued TCLs/PTCLs.

17. The TCL/PTCL shall be accomplished in triplicate (3) copies to be distributed as

follows:

Original copy - Taxpayer-Applicant

Duplicate copy - Issuing Office File (Attached to the

docket)

Triplicate - Issuing Office - Records File

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18. The CED shall always ensure that tax clearances issued are duly affixed with the
prescribed documentary stamps.

19. In the event that the application for TCL could not be issued for whatever
reason(s) or the PTCL could not be given due course because of absence of legal
and factual bases, the taxpayer-applicant shall be duly notified in writing of such
denial clearly stating therein the reasons therefor within the seven (7) days from
receipt of the application for TCL by the CED.

20. The Regular TCL shall be valid for a period of six (6) months from date of issue
and the said TCL can be presented by the taxpayer-applicant to any concerned
government office as a pre-requisite for participation in the government bidding.
The six-month TCL validity period is herein prescribed to obviate the possibility
of issuing a clean tax clearance by the CED in favor of a taxpayer-applicant where
new ARs/DAs may have been created within the next six-month period.

21. On the other hand, the PTCL shall be valid for a period of only thirty (30) days
from date of issue and shall be applied to only one (1) particular bidding.
Accordingly, if the applicant intends to participate in several government
biddings, a separate PTCL for each bidding to be participated in must be applied,
whether or not the government procuring office is one and the same.

22. The issuance of PTCL shall not be construed as tantamount to the cancellation,
extinguishment, or termination/closure of the taxpayer’s outstanding tax
liability(ies).

23. The List of Issued Regular and Provisional Tax Clearance Certificates shall be
prepared by the CED and submitted to the BIR- Contact Center copy furnished
ACIR-CS on a daily basis on or before the end of the working hours on the date
of TCL/PTCL issuance, for purposes of monitoring and control, inter-agency
verification of the authenticity thereof, and as deterrent in the use and/or
presentation of spurious/fake TCL and PTCL.

In case there are no TCLs/PTCLs issued during the day, the said daily report shall
nevertheless be submitted to the BIR-Contact Center within the prescribed period
with a notation "NO TAX CLEARANCE CERTIFICATE ISSUED DURING
THE DAY" or 'NO PROVISIONAL TAX CLEARANCE ISSUED DURING
THE DAY".

These reports should be submitted in soft copies to the BIR Contact Center at
contact_us@cctr.bir.gov.ph.

24. The BIR Contact Center shall maintain a data file in EXCEL format of all Issued
TCLs and PTCLs issued by the CED, for easy reference when interested parties
are requesting verification of the existence and authenticity of TCLs and PTCLs
issued.

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 25. In the event that incidences of spurious/fictitious/tampered TCL/PTCL have been
discovered, the same shall be reported immediately to the ACIR, Collection
Service, thru the Chief, Collection Enforcement Division. The CED, in turn, shall
immediately notify the concerned government office on the occurrence of the
same so that necessary action thereon can be undertaken by that government
office in evaluating the qualification of the concerned taxpayer that participated in
the bidding process. Likewise, the concerned taxpayer must also be notified of
such discovery and consider the imposition of appropriate sanctions against the
said erring taxpayer. For this purpose and, depending on the circumstances and
the gravity of the offense made, this act of causing the issuance of any
spurious/fictitious/tampered TCL/PTCL may be considered as a ground for the
denial of any future request(s) for tax clearance certificates for bidding purposes.

26. The ACIR-CS shall closely monitor the activities of the CED with respect to the
issuance of TCL/PTCL, in order to ensure that all the guidelines and policies
prescribed under the existing rules and regulations are duly complied with; and
that only qualified taxpayers-applicants are issued the requested tax clearance
certificates for bidding purposes.

Procedures in the Issuance of the TCL

The CED shall:

1. Verify the completeness of the documents attached to the application for tax
clearance submitted by the applicant-taxpayer;

2. Receive the duly notarized Application for Tax Clearance with complete
documentary requirements. If any of the required documents is lacking, the
application must be returned immediately to the applicant with a notation on the
missing documents;

3. Record the duly received application to the Logbook maintained for the purpose
and assign a Tax Clearance Control Number to the application and indicate the
same on the face of the application form. In the assignment of the control
number, the same shall be made sequentially as the applications are received
based on the series appearing in the logbook;

4. Accomplish the TCL Claim Stub indicating the name of the taxpayer, the TCL
Control Number, the date of receipt of the application and the date when the
TCL/Notice of Denial can be claimed from the CED by the taxpayer-applicant;

5. Assign the Application for Tax Clearance to a Revenue Officer (Case Evaluator)
and forward all the pertinent documents to the case evaluator for the conduct of
necessary evaluation and processing;

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6. Validate the accuracy of the information provided by the taxpayer in the
application and all the submitted attachments as follows:

6.1. Verify accuracy of the taxpayer’s TIN and the registration of the business
from the Registration System of the BIR Integrated Tax System (ITS);

6.2. Determine the existence of tax liability(ies) of the taxpayer-applicant from

the Accounts Receivable/Delinquent Accounts (AR/DA) database of the
CED and the updated Tax Delinquency Verification Form (TDVF)
accomplished by the RDO/LTDO/LTCED submitted by the taxpayer-
applicant as part of the documents attached to the application for tax
clearance;

6.3. Validate/Confirm the authenticity of the submitted delinquency

verification forms directly from the concerned issuing offices either
through fax or email medium, upon the receipt of the application for tax
clearance;

6.4. Verify if the issue date of the Tax Delinquency Verification Form
accomplished by the concerned RDO/LTDO/LTCED is within the 15-day
limit. If not, require the taxpayer-applicant to secure updated TDVFs
from the aforesaid office;

6.5. Verify whether or not the taxpayer-applicant is duly enrolled with the
BIR’s eFPS, that the said account was already activated, and whether or
not the taxpayer is actually utilizing the said facility in the filing of returns
and payment of taxes;

6.6. Verify the existence of any pending application for compromise

settlement/abatement of penalties under the Compromise/Abatement
Program with the Regional Evaluation Board (REB) and the Secretariat-
TWG of the National Evaluation Board (NEB) and/or Secretariat- TWC of
the Abatement Evaluation Group;

6.7. Verify the validity of the taxpayer’s availment of the Tax Amnesty
Program, if applicable, with the Office of the Deputy Commissioner for
Operations (ODCIR-OG);

6.8. Validate the payment(s) made by the taxpayer under the Tax Amnesty,
Compromise and/or Abatement Programs or Installment Plan, whichever
is applicable, from the collection data that was/were posted in the
taxpayer’s ledger in the Collection and Bank Reconciliation (CBR)
System;

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 6.9. Verify the current status of the administratively and judicially protested
cases, if any, from the concerned national or other regional offices;

6.10. Verify authenticity of the previously issued TCL and/or PTCL that was
attached to the filed application for new tax clearance. Any discovery of
spurious/falsified/tampered TCL/PTCL shall be reported immediately to
the Prosecution Division, National Office, for large taxpayer, or the
Regional Legal Division, for regional taxpayer. Any incidence of
forged/tampered TDVF should be considered as a ground for the denial of
the request for tax clearance for bidding purposes;

6.11. Receive the results of request for confirmation of tax liability/Tax

Verification from the concerned RDO/LTDO/LTCED. Any incidence of
forged/tampered TDVF should also be considered as a ground for the
denial of the request for tax clearance for bidding purposes;

6.12. Validate accuracy/authenticity of other documents that may be prescribed

from the taxpayer in the process of evaluating the application for tax
clearance;

6.13. Verify whether the new application for PTCL was already covered by
previously issued PTCLs and if the same is already covered by the
limitation for the issuance thereof only within a period of three (3) months
from the date of the initial issuance thereof; and

6.14. Prepare the written communication to the concerned national and/or

regional office on the existence of request for PTCL from a taxpayer with
outstanding tax liability(ies).

7. Notify the taxpayer-applicant in writing in case additional documents are

necessary to process/evaluate the application for tax clearance, with complete and
clear explanation of the reason(s) why such documents are required;

8. Prepare the appropriate Certificate to be issued to the taxpayer-applicant (i.e.

TCL, PTCL or Notice of Denial), depending on the circumstances prevailing as a
result of the evaluation/verifications made on the application;

9. Approve, sign and release the original copy of the Regular TCL to the
taxpayer-applicant or its/his/her duly authorized representative;

10. Forward the PTCL together with the reasons for acceptance/denial to the ACIR-
CS for approval; release the approved PTCL/Notice of Denial to the taxpayer
upon the receipt of the recommendation of the ACIR-CS;

11. Prepare and submit the daily "List of Regular and Provisional Tax Clearance
Certificates Issued” to the BIR- Contact Center copy furnished the ACIR-CS. In

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 case there are no TCLs/PTCLs issued during the day, submit the said daily report
with a notation "NO TAX CLEARANCE CERTIFICATE ISSUED DURING
THE DAY" or "NO PROVISIONAL TAX CLEARANCE ISSUED DURING
THE DAY";

12. Receive the report on existence/incidence of spurious/falsified/tampered

TCL/PTCL from the BIR Contact Center or any concerned internal or external
office;

13. Conduct immediate verification/validation of the accuracy of the reported

incidents, in coordination with all the concerned offices involved in the issuance
of the TCL/PTCL and TDVFs; and

14. Prepare and submit immediately to the ACIR-CS the necessary recommendation
on the reported incidences of spurious/falsified/tampered TCLs/ PTCLs in the
ACIR, Legal Service for the necessary administrative and/or legal action.

The RDOs/LTDOs/LTCED shall:

1. Receive the request for confirmation on the authenticity of the TDVFs issued to the
taxpayer; and

2. Validate and issue the desired confirmation on the authenticity of the certificates
issued and transmit the same to the CED within the day of receipt of the
request.

The ACIR-Collection Service shall:

1. Receive from CED the proposed PTCL for approval thereof;

2. Evaluate and approve/disapprove the proposed PTCL and return to the CED for
appropriate action; and

3. Receive the following reports/communications/recommendations from the CED:

a. Daily List of TCLs/PTCLs/Notices of Denial issued by the CED;

b. Recommendation on the reported incidences/existence of spurious/

falsified/tampered TCLs/PTCLs;

4. Receive from the BIR Contact Center the Discrepancy Report on Issued TCLs/
PTCLs discovered by and/or reported to the Center;

5. Evaluate the propriety of and act immediately on the recommendations made by

CED on the discrepancies discovered relative to the issuance of
TCLs/PTCLs/Notices of Denial, etc; and

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 6. Indorse the cases on alleged spurious/falsified/tampered TCLs /PTCLs to the
Prosecution Division (for National Office cases) or the Regional Legal Division
(for regional office cases) for proper legal action, if warranted.

The BIR Contact Center shall:

1. Receive from the CED the daily Summary List Issued of TCLs/PTCLs/Notices of
Denial, in excel format;

2. Save all the information received in the data base of Issued TCLs/PTCLs/Notices
of Denial by the CED and in sequential order based on the TCL/PTCL/Notice of
Denial Control Number;

3. Update and maintain the data base of all issued TCLs/PTCLs/Denial Notices for
ready-reference in answering inquiries relative to the authenticity of the issued
certificates/notices;

4. Receive and accommodate verification inquiries from interested parties thru the
internet or telephone calls on the existence and authenticity of any of the
TCL/PTCL/Notice of Denial issued by the BIR;

5. Access the TCL/PTCL/Notice of Denial data base for purposes of validating/

verifying the authenticity of any certificate/notice requested by interested parties;

6. Respond immediately on any inquiry relative to the validity and/or authenticity of

any TCL/PTCL/Notice of Denial issued by the CED;

7. Require/Request the interested party to transmit a copy of the alleged TCL/PTCL

in its/his/her possession, in case of discrepancy in any information in the BIR data
base and/or non-existence in the data base of TCL/PTCL being inquired upon;
and

8. Prepare immediately a report on any discrepancy noted and transmit the same to
the Chief, CED, thru the ACIR-CS, for appropriate action.

The Prosecution Division, National Office/Regional Legal Division shall:

1. Receive from the ACIR-CS the recommendation for the filing of necessary legal
action relative to the reported existence/ issuance of spurious/falsified/tampered
TCLs /PTCLs;

2. Review and evaluate the information on the existence/issuance of

spurious/falsified/tampered TCLs /PTCLs;

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 3. Prepare the necessary “Complaint” for criminal prosecution of any concerned
party, if warranted; and

4. Inform, on a regular and timely basis, all concerned offices on the status of the
cases referred to it to serve as bases in making subsequent action.

CM 308.1 ISSUANCE OF TAX DELINQUENCY VERIFICATION (TDV)

[Refer to FC 308.1]

Delinquency Verification is being undertaken by various offices in the BIR in the course
of the discharge of their respective functions on matters that require determination of the
extent of the level of tax compliance by any taxpayer with respect to the timely and
correct payment of their tax liabilities.

The concerned RDO/LTS offices conduct delinquency verification in order to ensure that
all the Bureau’s accounts receivables across the different offices at a certain point in time
are duly accounted for, considering that there may be a lag time when the receivables are
actually created at the RDO and Regional Assessment Divisions levels, and when the
monthly updates of these accounts receivables/delinquent accounts are received by the
LTCED/Regional Collection Divisions for posting in their respective AR/DA databases,
and the CED for posting in the national database.

Delinquency verification is being requested by BIR-registered taxpayers, as well as non-

resident foreign corporations and aliens not registered in the Philippines, who intend to
join public bidding conducted by various government agencies.

Delinquency verification is also required by the TDM issuing offices 65 in the utilization
and/or revalidation of Tax Credit Certificates. In this regard, these TDM-issuing offices
request for verification of existence of outstanding tax liabilities of taxpayers applying for
the issuance of Tax Debit Memos (TDMs), conversion of TCCs into cash refunds, and
revalidation of TCCs66, based on the AR/DA database maintained by the CED and the
records of ARs/DAs of the concerned LTS/Regional Offices/RDOs where these
taxpayers-applicants are registered. 67

Other government agencies also request for verification of the tax compliance status of
their clients. Among others, delinquency verification is required by the Commission of
Appointments in the confirmation of the appointments of certain officials of the
government, by the National Bureau of Investigation (NBI) for certain persons with
derogatory information, and by the Philippine National Police (PNP) as a pre-condition in
the grant/ renewal of the license to operate a private security agency.
65
The TDM-issuing offices identified under RMC No. 01-2004 are:
- The RDOs of RR No.08-Makati-for their respective taxpayers
- The LTDOs of Makati and Cebu- for their respective taxpayers
- The LTCED-for LTAID I and LTAID II; and
- The Collection Programs Division-for all other RDOs and Regional Offices.
66
RR No.5-2000.
67
RMO No. 37-2011.

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Procedures in the Issuance of TDV

The RDO/LTDO/LTCED shall:

1. Conduct verification of any outstanding tax liability of the taxpayer-applicant based

on existing records in the RDO/LTDO/LTCED;

2. Refer the application and its recommendation to the Regional Collection

Division/LTS, for further verification within their area of jurisdiction; and

3. Issue the delinquency verification certificate/notice of denial to the taxpayer, upon

approval/disapproval thereof by the Regional Collection Division/LTS.

The Regional Collection Division/LTS shall:

1. Receive the TDV application and the RDO/LTDO/LTCED recommendation

thereon;

2. Verify the existence of any outstanding tax liability of the taxpayer-applicant within
their area of jurisdiction following the procedures indicated in CM 308 in the
issuance of tax clearance;

3. Route the application to the concerned regional offices for further verification of
the existence of any AR/DA;

4. Forward to CED, for further verification, all applications that are made for bidding
purposes/utilization of Tax Credit Certificates for issuance of TDM; and

5. Return the applications, whether approved or disapproved to the concerned

RDO/LTDO/LTCED for issuance of the TDVF/Notice of Denial.

The CED shall follow the same procedures required in the processing of applications for
tax clearance specified in CM 308 issuing TDVF for purposes of clearance for the
utilization of Tax Credit Certificates.

CM 309 PUBLICATION/DISSEMINATION OF LIST OF DELINQUENT

TAXPAYERS [Refer to FC 309]

Publication of the List of Delinquent Taxpayers

The Commissioner, may authorize, when deemed necessary and upon prior approval of the
Secretary of Finance, the publication of the list of taxpayers with delinquent accounts in
the BIR website or in a newspaper of general circulation, except in any of the following
cases:

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 a. The account is covered by an offer of compromise settlement or abatement of
penalties under Sections 204 (A) and 204 (B) of the NIRC of 1997, as amended; or

b. The tax assessment is still pending resolution in the appropriate court; or

c. Taxpayer is religiously paying under an approved installment plan.

The aforementioned list shall contain the following information:

a. Name of the taxpayer;

b. Trade or business name of the taxpayer;

c. Taxpayer Identification Number (TIN);

d. Registered address of the taxpayer;

e. Business address; and

f. Taxable year

Any person who has information on the whereabouts and/or existence of assets, real or
personal of the taxpayer/s in the published list may either notify any nearest BIR office,
call the BIR Call center hotline 981-8888 or email the information at bircc@bir.gov.ph .
All reported information shall be referred to the CED within three (3) working days from
receipt thereof for proper dissemination to the concerned collecting offices. The CED shall
be responsible in the monitoring of the validation and utilization of the reported
information.

List of Delinquent Taxpayers to be Provided to Other Agencies

The following BIR offices, thru the CED, shall furnish the National Bureau of
Investigation (NBI) with the list of delinquent taxpayers for inclusion in their
WATCHLIST:

1. The Regional Collection Division, in coordination with the concerned RDOs, for
the list of delinquent taxpayers.

2. The Regional Legal Division/Prosecution Division for the list of delinquent

individual taxpayers, as well as key responsible officials of delinquent corporate
taxpayers, that were criminally charged with the competent court.

The said list shall reflect the name of the delinquent individual taxpayers, their known
address(es) and the amount of their delinquent tax liabilities. For delinquent corporate
taxpayers, the list shall show the information the key responsible officials, their known
address(es), and the amount of the corporation's delinquent tax liabilities. These lists,

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including that of delinquent taxpayers, may also be furnished by the BIR to other
government agencies, pursuant to an existing Memorandum of Agreement, for collection
enforcement purposes.

Procedures in the Posting/Publication of AR/DA Cases and Handling of Received

Information

The CED shall:

1. Prepare a quarterly list, based on the CED database, of taxpayers with delinquent
accounts, except in the following cases: (1) with offer of compromise settlement or
abatement of penalties; or (2) still pending resolution in court; or (3) where the
taxpayer is religiously paying under an approved installment plan. Indicate
accurately the following information:

a. Name of the taxpayer;

b. Trade or business name of the taxpayer;

c. Taxpayer Identification Number (TIN);

d. Registered address of the taxpayer;

e. Business address; and

f. Taxable year

2. Coordinate with the LTS and the Regional Collection Divisions to confirm the
accuracy of the list, to ensure that latest updates on the status of delinquencies of
the listed delinquent taxpayers in their respective areas of jurisdiction are
considered;

3. Submit the validated list, upon receipt thereof, to the CIR, thru the ACIR-
Collection Service for approval;

4. Coordinate with the Corporate Communications Division for the posting of the list
in the BIR website;

5. Cause the publication of the approved list in a newspaper of general circulation, in

coordination with the Financial Service and in accordance with existing
procurement rules and regulations;

6. Receive from the BIR Contact Center/various BIR offices the reported
reactions/information relative to the published list of taxpayers; and

7. Validate the reported information and refer the same to concerned BIR offices for

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 appropriate action.

The Corporate Communications Office shall:

1. Receive the approved quarterly list of taxpayers with delinquent accounts from the
CED; and

2. Post the list promptly in the BIR website.

The Regional Collection Division/LTS shall:

1. Receive from the CED the quarterly list of delinquent taxpayers with respect to the
taxpayers within their area of jurisdiction;

2. Coordinate with the concerned RDOs/LTDOs/LTCED to validate the list; and

3. Submit the validated quarterly list with revisions, if any, to the CED.

The RDOs/LTDOs/LTCED shall:

1. Receive the quarterly list of delinquent taxpayers from the Regional Collection
Division/LTS; and

2. Validate the accuracy of the list with regards to the taxpayers within their area of
jurisdiction taking into account latest updates on the status of delinquencies of each
and every taxpayer included in the list.

Procedures in Providing Information on Delinquent Taxpayers to Other Government

Agencies

The RDOs/LTDOs/LTCED shall:

1. Prepare a quarterly list of delinquent taxpayers reflecting the names of the

delinquent individual taxpayers, their known addresses and the amounts of their
delinquent tax liabilities. For delinquent corporate taxpayers, the list shall show the
information on the key responsible officials, their known addresses, and the amount
of the corporation's delinquent tax liabilities; and

2. Forward the list and information therein to the Regional Director thru the Regional
Collection Divisions/the LTS for approval thereof.

The Regional Collection Division-Regional Director/LTS shall:

1. Receive, review and approve the list of delinquent taxpayers and the information
contained therein; and

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 2. Submit the validated list with information therein to the CED, for appropriate
action.

The Regional Legal Division/Prosecution Division shall:

1. Prepare the list of delinquent individual taxpayers, as well as key responsible

officials of delinquent corporate taxpayers that were criminally charged with the
competent court;

2. Forward the list to the Regional Director/ACIR-Legal Service for approval; and

3. Submit the approved list to the CED, for appropriate action.

The CED shall:

1. Receive, review the list from the concerned Regional Offices/LTS /Prosecution
Division and ensure that there are no inconsistencies with the list of delinquent
taxpayers for publication;

2. Submit the validated list to the CIR, thru the ACIR-Collection Service, for
approval; and

3. Furnish the approved list of delinquent taxpayers to the NBI and other government
agencies, pursuant to an existing Memorandum of Agreement.

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