Tax Remedies Notes

Lucman, Yasser S.
Taxation 1 – Notes
F. TAXREMEDIES UNDER THE NIRC
General Concepts
Requisites of valid assessment:
Q: What is a tax assessment?
ANS: R IS an official action of an administrative officer in determining the amount of tax due
from a taxpayer, or it may be a notice io the 'effect that the amount therein stated s due irom a
taxpayer as a tax, with a demand for payment of the tax or any deficiency stated therein (ABAN,
Law of Basic Taxation, supro at 175). It also refers to the notice to the effect that the amount
therein stated is due from a taxpayer as a tax with a demand for payment of the same within a
stated period of time (Commissioner of Inlema Revenue vs. Pascor Realty & Development
Corporation. G.R. No. 128315, June 29 1999).
Q: What are the requisites for a valid tax assessment?
ANS: The requisites for a valid tax assessment are as follows:
1. 1he Final Assessment Notice (FAN) (BIR Form 17.08) contains Ihe name. address, and TIN
of the taxpayer: The kind of tax. period covered. basic tax and penalties; signed by the authorized
BIR official, and the date of payment of the tax. The demand letter (DL) contains the
computation of the deficiency lax, including penalties, if any. the factual and legal bases of the
assessment, and the demand lor payment of the tax. Thus, the FAN and DL must always go
together (RR 18-2013, Sec. 3.1.3).
2. The FAN/ DL must be issued on account of or covered by a validly issued letter of authority
(RMG No. 75-2018)
3. The FANI DL must state the factual and legal bases of the assessment and jurisprudence o
which it is based; otherwise, the assessment is void (RR 182013, Seclion 3.1.3)
4. The FAN DL must be signed by the Commissioner of his duly authorized representative (RR
18-2013, Section 3.1.3%
5. The FANI DL must be issued within the original prescriptive period as validly agreed between
the BIR and the taxpayer, and served by personal delivery by registered mail (RR 18-2013,
Section 3.1.6); and The FANI DL must be addressed and served to corect person in his/ its
registered or duly notified address (RR18-2013 Section 3.1.6).
Q What are the kinds of assessment?
ANS: Assessments may be classified as follows:

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1. Self-Assessment- The tax is assessed by the taxpayer himself, reflected inthe return filed by
him, and paid on the day of fiting of the relurn (pay-as-you- system) (ABAN, Law of Basic
Taxation, supra at 176)
2. Deficiency Assessment-Made by tha assessor himself whereby the correct amount of the lax is
determined after an examination or investigation conducted. This assessment is made for the
following reasons:
a. The amount ascertained excess that which is shown as the tax by the taxpayer in his return;
b. No amount of tax is shown in the return; or
C.The taxpayer did not ile any return at all (NIRC, Sec. 56 (b):
3. egal and Void Assessments-An assessment wheren the tax assessor as no power to act at al
Victorias iling Co., im. v. Cout of Tax Apzoals, G.R. No. L-24213, March 13, 1968); and
Erroneous Assessment One wherein the assessor has the power to assess but errs in the exercise
of such power (ABAN, Law of Basic Taxation Supra at 176).
Q:What are the important principles governing tax assessinents?
ANS: he principles govemig tax assessments are
1. Assessments are prima facie presumed correct and made in good faith. Thee taxpayer has the
duty of proving otherwise. All presumptions are in favor of tax assessments (Interprovincial
AutcbuS Co., Inc, v. Collector o Intemal revenue, G.R. No. L-6/41, January 3, 1956).
2. Assessments should not be based on presumptions but on actual facts;
3. Assessment is discretionary on the part of the Commissioner. Mandamus will not lie lo
compel him to assess tax it after investigation, he finds no ground to assess (MERALCO
Securities Co., V. $avellano, G.R. Nos. L-36181& L- 36747, October 23, 1992).
Exception: The Commissioner of Internal Revenue may be compelled to assess by mandamus if

in the exercise of his discretion, there is evidence of arbitrariness and grave abuse of discretion
as lo go beyond statutory authority (Maceda v. Macaraig, Jr., G.R. No. °8291, June e, 1993).
4. The authority vested in the Commissioner to assess taxes may be delegated. However, the
power to make final assessments cannot be delegated based on the principle of Delegates Non
Potest Delegari (City Lumber, Inc. v. Doming0, G.R. No. L-18611, January 30, 1964); and
5. Assessments must be directed to the right party (Repubiic v. De la Rama. G.R. No. L-21108,
November 29. 1966).
Q: What are the means employed by the Commissioner in the assessment of taxes?
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ANS: The commissioner or his duly authorized representatives are authorized to use the
following powers to make assessments and prescribe additional requirements in tax
administration:
1. Examination of returns and determination of the tax due (NIRC, Sec. 6 (a).
2. Assess the proper tax based on the best evidence obtainable (NIRG, Sec. 6
3. Conduct inventory-taking. surveillance and prescribe presumptive gross sales and receipts
(NIRC, Sec. 6 (c)):
4. Issue jeopardy assessments and terminate the taxable period (NIRC, Sec. 6
5. Prescribe real property values (NIRC, Seu. 6 (e)):
6. Inquire into bank deposit accounts of
a. a decedent to determine his gross estate
b. any taxpayer who has fled an application lor compromise of his tax liability under Sec.
204(AN2) by reason of financial inability lo pay his tax liability (NIRC, Sec. 6 ()); and
c. A specific taxpayer or taxpayers subject of a request for the supply of tax information iroma
foreign tax authority pursuant to an international convention or agreement on tax matters to
which he Philippines is signatory or a partly of: provided, that the information obtained from he
banks and other financial institutions may be used by the Bureau o Internal Revenue for Lax
assessment, verification, audit and enforcement, purposes (R.A. No. 10021, Sec. 3).
7.Accredit and register tax agents (NIRC,Sec 640}W- Prescribe additional procedural or
documentary requirements (NIRC, Sec. 6(h)).
Tax deficiency versus tax delinquency
a: What is the difference between a tax deficiency and a tax delinquenty?
ANS: Tax Deflciency is the amount by which the tax due exceeds the sums of tax Shown in
the .taxpayers retyrn, plus amounts previously assessed or collecled as deficiency. less payments,
credits or refunds due to the taxpayer ((NIRG, Sec. s6 (O) On the other hand, Tax Delinquercy
refers to thu state ol a person upon whom ihe personal obligalicn to pay the tax has been fixed by
lawul assessment and who therearter 1ails lo pay the tax within the liine limited by law (U.S. V,
Abejo, G.R. No. L- 12362, August 29, 1917)
a:What is a jeopardy assessment and when is it issued?
ANS:A Jeopardy assessment is one issued by the Cemmissioner if he belleves that the
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collection of taxes is in jeopardy due to delay or other causes. It may be issued when the
laxpayer is:
1. Retiring from business subject to lax;
2. Intending to:
a. Leave the Philippines;
b. Remove his oroperty therefrom; or
C. Hide or conceal his property.
3. Perfoming any act tending to obstruct the proceedings for the collection of the
tax for the past or current quarter or year or to render the same iieffective NIRC, Sec. 5 ().
Note: The same grounds are applicable in the exercise of the Commissioner's power to terminate
a taxable period (NIRC, Sec. 6 (d)) Prescriptive Periodfor Assessment
Q: What is the prescriptive period for the assessment of taxes?
ANS: As a General Rule, the period for assessment prescribes within three (3) years:
1.AfTer the last day prescnbed by law for the fling of the return; or
2. After the day the return was filed, if the return was fied beyond the period
prescribed by law, whichever is later (NIRC, Sec. 203).
Exceptions:
1. False, fraudulent return with intent to evade taxes: within 10 years from date of
2. discovery of the falsity or fraud; and
Failure to file a return, at any time within ten (10) years ater the discovery of
the omission of the return (NIRC, Sec. 222 (a).
Note:
1. A return filed before the last day prescribed by law for the fling thereof shall be cons.dered as
filed on such last dey (NIRC, Sec. 203).
2. Before the expiration of the 3-year prescriptive period, both the Commissioner and the
taxpayer may agree in writing to extend the period of assessment. The period so agreed upon
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may be furher exlended by subsequent written agreement made before the expiration of the
feriod previously agreed upon (NIRC, Sec. 222 (b)).
3. For the 10-year prescriptive period to apply based on fraud, such must be proved as a fact by
BIR (ABAN, Law of Basic Taxation, supra at 274
False Returns vs. Fraudulent Returns vs Non-Fling ofRetums
Q: Distinguish False returns from Fraudulent returns.
ANS: A false return cortains wrong information whether due to mistake, carelessness Or
ignorance. On the other hand,. a fraudulent return implies intentional or deceitful entry with
intent to evade the taxes due (Aznar v, Commissioner cf Intemal Revenue G.R. No. L-20569,
August 23, 1974).
Q: Give examples of instances considered as failure to file.retun aside from the non-filing
itself.
ANS: The following instances were considered by the Supreme Court as consitutingfaiure to file
relurn which warrant the 10-year prescniptive period:
1. A deficient retun which prevented tie CIR from computing taxes due. Suchdefeclive
return is the same as if no retun is fied at a (Commissioner ofIntarnal Revenue v.
Gonzales, G.R. No. L-19495, November 24, 1966):
2. Failure to report income in the returns which were not clearly exempled fromtax. The Court
did not treat this as a simple omission as the same involved substantial sums (Standard Chartered
Bank v. Commissioner of Internal Revenue, CTA EB Case No. 731, September 13, 2012): and
3. Undeclared VAT-able sales more than 30% of that declared in the VAT returns Commissioner
of tntemal Revenue v. Asalus Corporation, G.R. No. 22159, February 22. 2017).
Note: False returns, fraudulent returns, non-filing, and failure to file returns have corresponding
penalttes such as interests and surcharges under the NIRC. See section on civil penalties for a
detailed discussion.
Suspension of the Running of Statute of Limitations
Q: What is the rationale behind the statute of limitations in the collection of taxesand how
is it construed?
ANS: Our tax law provides a stalutc of limitations in the collection of taxes to safeguard
taxpayers fron any unreasonable examination, investigation or assessment. Thus, it should be
liberally construed in order to afford protection to the taxpayers (INGLES, Reviewer, supra at
345). As a corollary, the exceptions to the law on prescription should perforce be strictly
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construed (Commissioner of Internal Revenue v. BF Goodrich PHL Inc., G.R. No, 104171.,
February 24, 1999).
Q: What are the rules to consider in the prescription of the period to assess?
ANS: The rules are:
1. The fact that the assessment notice was mailed before prescription period sets in must be
proved with substantial evidenue by the CIR. n determining if prescription to assess has
indeed set in, the important date to remember is the dale when the demand letter or notice
is released, mailed or sent by the Collector of Internal Reverue to the taxpayer, and it is
not required that the notice be received by the taxpayer (Basian Estates, Inc. v.
Commissionerof inlemal Revenue, G.R. No. L-22492; September 25, 1967)
2. the laxpayer makes a direct denial of receipt of a mailed demand letter, such denial shifts
the burder to the Government to prove that such letter was indeed received by the
taxpayer (Republic t Court ol Appeals, G.R. No. L- 38549, Apnil 30, 1987)
3.the date on which assessment is due to prescribe falls on a Saturday. The following day being a
Sunday, it is understood that the Government has until the nex! succeeding business day or
Monday within which to assess the tax serve as te starting pont of the period or making an
assessment, the return must be as substantially complete as to inciuce the needed details on
which the full assessment may be made (Republic.v. Marsman Devt. Co., G.R. No. L-18956,
Apnii 27, 1972):
5. If the taxpayer files an amended return which is substantially cifferent from the original return,
the period of prescription of the righi to issue the deficiency assessment should be counted from
the filing of the amended return. and not the oniginal return (Commissiorer of Internal Revenue v.
Phoenix Assurance Co, Ltd, GR No. Li19727. May 20, 1965); .
6. the taxpayer files a wrcag retum, it is as though hé filed no return at al. In Siluations Hke this,
the.10-year prescriptive period will apply (Butuan Sawmil, Inc. v. Court of Appeals. G.R. No. L-
20601, February 28, 1966): and
7. t is incumbent upon the taxpayer who wants to avail of the defense of prescriplion to prove
that he indeed submitted a return. If he fais to do so. The conclusion should be that no Such
return .was fied, in which case the Government has 10 years within hich to make the
corresponding assessments (Taligaman Lumber Co., In. v. Commissioner of Intemal Revenue,
G.R. No. L-15716, March 31, 1962).
What are the grounds for the suspension of running of the statute of limitations in case of
assessments?
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ANS: The running of the statute of limitations on the making of assessment and the begining of
distraint or fevy or a proceeding in court for collection, in respect of any deficiency, shall be
suspended: (PRC-DO)
1. For the Period during which the Commissioner is prohibited froni making the assessment or
beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter
2. When the taxpayer requests for Reinvestigation which is granted by the Commissioner
3. When the taxpayer Cannot be located in the address given by him in the relurn filed upon
which a tax is being assessed or collected; except if the taxpayer informs the Commissioner of
any change in address; When the warrant of Distraint or levy is duly served upon the taxpayer,
his authorized representative, or a member or his household with sufficient discretion, and no
property could be located; and
5. When the taxpayer is Qut of the Philippines (NIRC, Sec. 223).
Note: Revenue Memorandum Order (R.M.O) No. 14-2016 issued on April 18, 2016 revises the
Guidelines for the Execution of Waivers from the Defense of Prescription pursuant to Seclion
222 of the NIRC of 1997.
The waiver may be, but not necessarily, in the fom prescribed by R.M.O. No. 20-90 or Revenue
Delegation Authority Order (R.D.A.O.) No. 05-01. The taxpayer's failure to follow the aforesaid
forms does not invalidate the executed waiver for as long as the following are complied with:
1. The Waiver of the Statute of Limitations under Section 222 (b) and (d) shall be exccuted
beľore the expiration of the period to assess or to collect taxes. The
date of execiution shall be specifically indicated in the waiver
2. The waiver shaii be signed by the axpayer himself or his duly authorized representative. In the
case of a corporalion, the waiver must be signed by any of its responsible officials;
3. The expiry date of the period agreed upon to assess/collect the tax after the regular three-year
period of prescription should be indicatod (R.M.O. No. 14- 2016).
The two (2) material dates that need to be present on the waiver are:
1. The date of execution of the waiver by the taxpayer or its authorized representative, and
2. The expiry date of the period the taxpayer waives the statute of limitations (R.M.O. No. 14-
2016. Before the expiration of the period set on the previously executed waiver, the period
earlier set may be extended by subsequent written waiver made in accordance with this Order
(R.M.0. No. 14-2016).
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Q: What are the requirements of the valld walver of the statule of linmitations?
ANS: The BIR issued R.M.O. No. 20-90 and R.DA.O. No. 05-01, outining the procedures for the
proper execution of a valid waiver, viz.
1. The waiver must be in the proper fom prescribed by R.M.O. No. 20- 90. The phrase but not
after. 19/201" which indicates the expiry date of the period agreed upon to assessleolect the tax
ater the regular three-year period of prescription, should be filed up.
2. The waiver must be signed by the taxpayer himself or his duly authorized representative. For
corporation, Ihe waiver must be signed by any of its responsible officials. In case the authority is
delegated by the laxpayer to a representative, such delegation should be in writing and duly
notarized.
3. The waiver should be duly notarized.
4. The CiR or the revenue official authorized by him must sign the waiver indicating that the BIR
has accepted and agreed to the waiver. The date of such acceptance by the BIR shouid be
indicated. However, before signing the waiver, the CIR or the revenue official authorized by him
must make sure that the waiver is in the prescribed form. duly notarized. and executed by the
taxpayer or his duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be
before the expiration of the pericd of prescription or taforee the lapse of the period agreed upon
in case a subsequent agreement is executed.
The waiver must be executed in three copies, the original copy to be attached to the docket of the
case, the second copy for the taxpayer and the third copy for the office accepting the waiver. The
fact of receipt by the taxpayer of his/her file copy must be indicated in the original copy to show
that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement.
a. What is the effect of failure of the waiver to strictly conform to the requirements of a
waiver of the statute of limitations under R.M.O. No. 20-90?
ANS: The requirements are mandatory and must strictly be followed. Defective and invalid
waivers of Statute of Limilations do not extend the CIR's period to issue assessments. Thus, the
right of the government to assess or collect the alleged deficiensy taxes is already barred by
prescriplion. Assessments issued by the BR beyond he hree-year prescriptive, are considered
void and of no legal effect (Commissioner of internal Revenue v. Systerms Technology Institute,
GR. No. 220835, July 26, 2017).
Civil Penalties
a:Is the Commissioner of Internal Revenue authorized to prescribe penalties?

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ANS: No. The CIR has no power to prescribe penalties since it is the Secretary of Finance who
issues rules and regulations (NIRC, Secs. 7 and 244).
Qa:What is the purpose behind the imposition of penalties?
ANS: To discourage delay in the payment of taxes due to the government and in this Sense ine
penalky-ardHAlerest-are-netpenatbutcomperrsatory fur tne toncomitant use of the funds by the
taxpayer beyond the dale when he is supposed to have paid them to the Government (Phiippines
Réfining Co. v. Court of Appeals, G.R. No. 118794, May 8, 1996).
Delinquency interest and Deficiency interest
Q:What are the classes of interest and when are they imposed?.
ANS: Ihterest in general is computed based on any unpaid amount of tax at the rale of double the
legal interest rate for loàns or forbearance of any muney in the absence of an express supulalion
as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount
is fully paid. Per BSP Circular No. 799. Ser. of 2013, the interest rate is 6%.Therefore, the rate of
general interest is 12% {NIRC, as amended by TRAIN law, Sec. 249 (A)). The classes cf interest
are as follows:
1. Defciency Interest: Imposed on any deficiency in the lax dve. Any deficiency in the tax due
shall be subject to the interest rale above, which interesst shall be assessed and coiiecied from the
dale prescribed for ts paymeni until the tul payment thereof. or upon issuance of a notice ard
demand by the Commissioner of Intemal Revenue, whichever comes earlier (NIRG as amended
by TRAIN aw, Sec. 249 (B).
Delinquency interest: Imposed in case of failure to pay:
a. he amount ot tax due on any return required to be filed;
b. The amount of tax due for which no return is required to be filed; or A deiciency tax or any
surcharge or interes on the. issue date appearing in ihe nolice and demand (NIRC as amended by
TRAIN law, Sec. 249 (C)):
3. Interest or Extended Payment: Imposed when the taxpayer has opted to pay by instalment but
fails to pay the tax or any installment on the date prescribed for payment and also in Cases where
the Commissioner has authorized the extension of the time fcr the paymen: of the '3x (NIRC as
mended by TRAIN law. Sec. 249 (D).
Note: In no case shall the deficiency and delinquency interest be simultaneously imposed (IRC
as amended by TRAIN law, Sec. 249 (A).
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Surcharge
a: What are the additions or increments to the basic tax?
ANS: The following are lhe additions to the basic tax imposed b.8/52 taxpayer's refusal to
comply with the legal requirements or due to refua . railu pay taxes on tire, or for violations of
the tax laws:
Civil penalty or surcharge:
1. 25% (NIRC, Sec. 248 (a)
a. Failure to file eny return and pay the tax due Ihereon as required by the NIRC or the rules
b. Filing9 a return vith an internal revenue officer other than those with whom the return is
required to be friled;
C. Failure to pay the deficiency tax within the time prescribed for the payment of the same in the
notice of assessment;
d. Failure lo pay the ful or part of the amount of tax shown on any return, or the ful amount of
the tax due for which no return is required to be filed, on or befora the prescribed date for its
payment.
2. 50%.(NIRG SeG 248(0)E
a. Wilfd neglect to file tha return within the period prescribed by the NIRC Or the rules;
b. willlul filing of a false or fraudulent return.
Note: Substantial under-declaration of. taxable sales or income or substantia
overstatement of deductions shall constitute prima facie evidence of a false or
fraudulent return. Failure to report sales. receipis or income in an amount exceeding
30% of that declared per return and a claim of deductions in an amount exceeding 30%
of the actual deductions shall render the taxpayer liable for subslantial under-declaration
of sales, receipts or income or for overstatement of the deductions (NIRC, Sec. 248 (b).
Q:ls the payment and collection of surcharge mandatory?
ANS: Yes. The payment of surcharge is mandalory and the Commissioner is not vesled
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with any authority to waive or dispense with the collection of the same, however, such rule is not
absolute and is subject to exceptions (ABAN, Law of Basic Taxation, supra at 208).
Q: What are the exceptions to the rule that payment of surcharge and interest is
mandatory?
ANS: Surcharge and Interest may be deleled in the following instances:
1. When there is good faith and honest belief that one is nol subject to lax on the basis of
previous interpretation of government agencies (Michel J. Lhuilier Pawnshop. Inc. v.
Commissioner of Intemal Revenue, G.R. No. 166786, September 11, 2006); or
2. When the imposition of a tax statule was controversial (Cagayan Electric Power& Light Co.,
Inc., v. Commissioner of Internal Revenue, G.R. No. L- 60126, September 25, 1985).
Compromise Penalty
Q: What is a Compromise Penalty?
ANS: These are amounts collacted by the BIR in lieu of criminal prosecution for violations
committed by taxpayers. the payment of which is based on the compromise agreement between
the taxpayer and the BIR.
a: What is the effect of the taxpayer's failure to comply with the compromise agreement?
ANS: IT the taxpayer reneges to pay the suggested compromise, the CIR may NOT collect the
compromise penaly through a court action or by distraintlevy. This is because a compromise
penalty is neither a tax nor an administrative penallty for tax delinquency. The remedy of the
CIR is to file a criminai action against the tayer the tax violalion (R.M.O No. 19-2007, N (5):
Commissioner of Intemi 9/32 Philippine Daily Inquirer, Inc., C. T.A. E.B. Case No. 905,
November 4, 201
Assessment Process and reglementary Periods
Q: Discuss the assessment process of internal revenue taxes.
ANS: The steps in the assessment procesS of internal revenue taxes are:
1. Letter of Authority
a. A Letter of Authority (LOA) must be served within thirty (30) days from he date of issuance,
otherwise. it shall bucome null and void. The LOA shall be issued to a Revenue Officer (RO) by
the: Cominissioner or his authorized representative arterareturn- TBS Deen ied: o Sntalive after a
retun Revenue Regional Director for a'l auuit cases within his regional jurisdiction except in
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1. Cases involving civil or criminąl tax fraud falling under the jurisdiction of the Tax Fraud
Division of the Enforcement service, or
2.Policy cases under audit by Special Teams in the National Office (R.M.O. No. 36-99).
b. A Revenue Ofticer (RO) shall conduct his audit Within one hundred twenty (120) days rom
the date of issuance and service of the LOA, RO shall conduct his audit and submit his report of
investigation; If the final report is not completed within the i20-day period, a progress report
must be submited to the head of the audit office
ii. If the RO finds:
1. No deficiency, audit ends;
2. Any deliciency, he will inform the taxpayer and writes in his report whether the taxpayer is
amenable with his findings. if the taxpayer is
a. Amenable with his findings. the taxpayer pays the tax
b. Not amenable with his findings, the RO shall state in his audit report that the taxpayer does not
agree with his findings. Such report is submitted of the Reveue District Officer or the Special
Investigation Division (in case of Revenue Regional Office) or to the Chiel of Divisicn (in case
of the BIR National Office) for review (R.M.O. No. 36-99).
Note: A LOA is the ority given to the appropriate revenue officer to examine the books of
account and other accounting records of the taxpayer in order to determine the taxpayer's coirect
internal revenue liabilities and for the purpose ot coilecting the correct amount of tax
(Commissioner of Inlernal Revenue v. De La Salle Universitly, Inc. G.R. Nos. 196596, 198841
& 198941, November 9, 2016).
Issuance of Notice of Informal conference
a. The Revenua Oficer who audited the taxpayer's records shall state in his report whether or not
the taxpayer agrees with his findings that the taxpayer is liable for deficiency tax or taxes (R.R.
No. 7-2018).
b. If the taxpayer is not amenable, based on the said Officers submitted report of investigation,
the taxpayer shall be informed, in writing. by the Revenue District Office or by the Special
Investigation Dvision, as the case may be (in the case of Revenue Regional Offices) or by the
Chief of Division concerned (in the case of the BIR National ofice) of the discrepancy or
discrepancies in the taxpayer's payment of his internal revenue taxes, for the purpose of Informal
Conference, in order to afford the taxpayer with an opportunity to present his side of the case
(R.R. No. 7-2018).
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3. Informal Conference
The Informal Conference shall in no case extend beyond thirty (30) days from receipt of the
notice for informal conference. f it is found that the taxpayer is still iable for deficiency tax or
taxes after presenting his side, and the laxpayer IS not amenabe. the RevenUe District Officer or
the Chief of the Special Investigation Division of the Revenue Regional Office, or the Chief of
Divisionir. the ationa! Ofice, as the case may be, shal!l endors the case within seven (7) days
from the concusion of the Informal Conference tc the Assessment Division of the Revenue
Regional Officc or to the, Commissioner or his duly authorized representative for issuance of a
deficiency tax assessment (R.R.No. 7-2018).
4. Issuance of Preliminary Assessment Notice (PAN)
a.When the Commissioner or his duly authorized representative finds that Druper taxes sinouid
be assessed, a PAN shall be issued, except in t2 following instances: (MeW-CET)
b. When the finding 1or any deficiency tax is the result of Mathematical Error in tne computaton
of the' tax as appearing on the face of the return or ** when a discrepancy has been determined
belween the tax Wthheld and tha amount aciualy remitted by the withholding agent; or
When a laxpayer: who opted to claim a refund or tax Credit of excess creditable withholding tax
for a taxable period was determined to have carried over and automaticaly applied the same
amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the
succeeding taxable year: or
c. When the Excise tax due on excisable articles has not been paid; o When the article locally
purchased or imported by an exempt person has been sold, traded or Iransferred to non-exempt
persons (R.R. No. 18-2013).
Note: In the above-cited cases, a FLDIFAN shall be issued outright (R.R. No. 18-2013, Secs.
3.1.1 and 3.1.2):
D. The PAN shall be issued by the Commissioner of Internal Revenue or his duly authorized
representative. The term "duly authorized representative" relers to Revenue Regional Directors,
Assistant Commissioner-Large Taxpayers Service, and Assistant Commissioner Enforcement
and Advocacy Service (R.R. No. 18-2013, Sec. 3.1.1; R.M.C. No. 11-2014, February 19, 2014)
The PAN shall show in delait the facts and the law. nules and regulations, or jurisprudence on
which the proposed assessment is based (Sec. 3.1.1, R.R. No. 18-2013).
5. Reply to PAN by the taxpayer within fifteen (15) days from the date of receipt with thhe duly
authorized representative of the Commissioner who signed the PAN (R.R. No. 18-2013, Sec.
3.1.1; R.M.C. No. 39-2013, May 7, 2013: R.M.C. No. 11-2014, Februay 19, 2014)
Lucman, Yasser S.
Issuance of a Formal Letter of Demand and Final Assessment Notice (FLDIFAN)
a. Alter the issuance of PAN, FLDIFAN shall be issued in any of the following instances: the
laxpayer fails tu respond to the PAN within the said 15-day period in which case he shall be
considered in default (R.R. No. 18-2013, Sec. 3.1.1)% the taxpayer responds within the said
period but helt cisagrees wth the findings of deficiency taxes in which case the FLDIFAN shall
be issued within fiteen (15) days irom filing/submission of the taxpayers response or even
beyond fifteen (15) days providęd that it is issued within the period of limitalion to assess'
internal revenue taxes (R.R. No. 18-2013, Sec 3.1.1RM.CNo 11:2014Febauan-19,20140r il.
Before the lapse of period to flę reply to PAN and the taxpayer has noi yel ied his/ils response
(akwood Management Seryices v. Commiss/oner of Intornal Revenue C.TA. Case No. 989,
August 8, 2013);
Note: Except in METER, the sending of a PAN to taxpayer is pan of the due process requirement
in the issuance of. a deficiency tax assessmenl ãs préscribed in RR. No. 12-99, the absence of
which renders nugalory any assessment made by the tax authorities (CommissionPr of Internal
Revenue v. Metro Superama, Inc., S.R. No. 185371, December 8, 2010).
b. the LDIFAN shall be issued by thee Commissioner or his duly authorized representalive as in
the case of PAN (R.R. No. 78-2013, Sec. 3.1.3.
C. it must also state the facts, law, rules and regulations or jurisprudence upon whicht is based:
otherwise, the assessment shall be VOID (R.R. No. 18-2013, Sec. 3.1.3).
7. Protest against the.FLDIFAN within thirty (30) days from receipt thereof (RR. No. 18-2013,
Sec. 3.1.4):
Note: Failure to file a reply to the PAN Will not bar the taxpayer from proiesting the FAN of the
BIR because the PAN is not the final assessment contemplated by the NIRC which can be
protested. The onty effect of failure to respond to the PAN iS that the Commissioner or his duly
authorized representalive shal ISEue an assessment (which is final that car: be the subject of
protest) based on his findings (NIRG, Sec. 228 (e)
8. lssuance of Final Decision on a Disputed Assessment (FDDA) he decision of the

Commissioner or his duly authorized representative on the protest. which shal be appealable to
the CTA shall:
a. State the facts. ihe applicable law. rules and regulations, or jurisprudence on which such
decision is based, othervise. the decision shall be vOid, and
b. State that the same is his final decision (NIRC, Sec. 228; R.R. No. 13-2013, Sec. 3.1.4)
Q: What is a Disputed Assessment?

Lucman, Yasser S.
ANS: II IS when the laxpayer indicates its protest against the delinquent assessment of the
Revenue oficer tor reconsideration, through a letter. After the request is led and receied by the
BIR. the assessment becomes a disputed assessment (CIR Isabcla Cutural Corp., G.R. No.
135210, July 11, 2001).
Q: What is the effect of issuance of Final Assessıment Notice (FAN) without prior Issuance
of a Preliminary Assessment Notice (PAN)?
ANS: As a general rule, the absence of a PAN is fatal in the assessment of a taxpayer. A PAN is
a due process requirement in the issuance of a deficiency tax assessment and cannot be dispensed
with (Commissioner of Internal Revenue v. Metro Star Superama, G.R. No. 185371, December 8,
2010)
Exceptions: Instances (MeW-CET) when a PAN is not required as provided in R.R. No. 18-2013,
Secs. 3.1.1 and 3.1.2.
Q: What is the due process requirement for FLDIFAN?
ANS: Under Section 228 of the NIRC, a taxpayer shall be informed in writing of the law and the
facts on which the assessment is made, othervise, the assessment shall be vOId. The requirement
of providing the taxpayer with written nolice of the factual and legal bases applies both to the
FLDIFAN and the FDDA. Section 228 of the NIRC should not be ead restrictively as to limit the
written notice only to the assessment itself. As -implerrented-by-R:R-No-t2-99, the writtem
notice requirement (or both the FLD and the FAN IS In oDservance of due processto afford the
taxpayer adequale opportunity to file a protest on the assessent and thereafter fie an appeal in
case of an adverse decision (ommissioner of Internal Revenye v. Liquugaz Philippines
Corporatinn, G.R. Nos 215534 and 215557, Apri 18, 2016).
Q: Is the assessment valid if it covers a pericd outside the scope of the LOA?
ANS: No. the taxable year covered by an assessment outside of the period specified in the LOA
Is void (Commissione of Internal Revenue v. Lancaster Philippines, Inc. G.R. No. 183408, July
17, 2017). Under Sec. 6 (A) of the IRC, there must be a grant of outhority before ny revenue
officer can conduct examination or assessment. Equally important is that the revenue officer so
authorized must not go beyond the authority given. In the absence ol such authornty, the
assessment or examination is a nullity Commissioner of Intemal Revenue v. Sony PHL. Inc.,
G.R. No. 178697, November 17, 2010).
Q:What is the rule on the Best Evidence Obtainable?
ANS: Best Evidence Obtainable refers to any data, record, papers. documents. or any other
evidence gathered by the internal revenue offcers from the government offices, corporations,
clients, lessees, employers, patients, tenants, vendees, and ali sources. with whom the taxpayer
Lucman, Yasser S.
had previous transactions or from whom he received income. The law authorizes the
Commissioner to assess taxes on the basis of the best evidence obtainable in the following cases
1. Ha person fails to file a return or G..er document at the time prescribed by law
2. He wilfutly or otherwise fles a false or fraudulent return or other document (ABAN, Law of
Basic Taxation, supra 181).
Note: The best evidence obtainable does no include mere photocopies of records/documenls. The
BIR. in making a preliminary and finat tax deficierncy assessment against a taxpayer. cannot
anchor the assessment on mere machine copies of records/ducuments (Commissioner of lnternal
Revenue Hantex Trading. G.R. No. 136975. March 31, 2005).
Q: ls the issuance ofa subpoena duces tecum a condition sine qua non before resorting to
best evidence obtainable?
ANS: No. The issuance of subpoena duces tecum is not a condition before resorting to the best
evidence obtainable. Said issuance is merely one of the powers that the CIR may exercise in
asceriaining the proper tax based on the best evidence oblainable. In he absence of a subpoena.
the CIR may stili exercise the power prescribed by the NIRC to determine the taxpayer's liability
(Mendez v. People, C. T.A. E.B. Crimn. No. 014, December 11, 2012).
a: When is the Commissioner authorized to Conduct Inventory-taking and uveillance?
ANS: The Commisstoner may. at any tme, during the taxable year, order imventory-taking or
goods of any taxpayer as a basis tor determining his internal revenue tax kabities, or may place
the business operations under observation or sUvelance I there is reason lo believe that such
pe:son is not declaring his correct income, saies or receipts for internal revenue tax purpOses
(VIRC, Sec. 6c))
Q: When is the Commissioner authorized to prescribe presumptive gross sales and receipts
as a basis for determining tax liabilities?
ANS: The Commissioner after taking into account the sales. receipts. income or other laxabie
Dase oi other persons engaged in simitar businesses under similar situations, or after considering
other relevant information, may prescribe a minimum amount of siucn gross receipts, sales and
taxable base i:
1. tis found that a person has failed to issue receipts and invoices in vinolation.o Sectons tT3 and
z57 of the code, or
2. there is reason to believe that the books of eccounts or other records do nnt correctly reflect
the declarations made or to be made in the return required to be filed uhder the Code (NIRC, Sec.
6(C).
Lucman, Yasser S.
Collection
Q: When collection of taxes is allowed?
ANS: Collection is only allowed when there is atready a final assessment made ior the
delermination of the tax due (R.R. No. 18-13).
Q: When Assessmonts are deemed final?
ANS: It is deemed final when:
1. The taxpayer fails to file a prolest 30 days from receipt of the assessment
2. After the 180-day period and the CIR has not yet acted on the protest, the taxpayer fails to file
appeal i, and
3. After 30 days from the receipt of the decision of the CiR the taxpayer fails to appeal (R.R. No.
18-13.
Requisites:
Q: What are the requisites for the collection of taxes?
ANS: The requisites are:
1. For Delinquency Tax - can be immediately collected administratively through issuance of

warrant ot distraint or levy andlor through judicial action (NIRC, Sec. 205) nd
2. For Deficiency Tax can be collected also through administrative andlor jandicial remedies but
has to go through tha process of filing the protest by the taxpayer against the assessment and the
denial of such prolest by the BIR (R.R. No. 18-2013).
Prescriptive Periods
Q: Discuss the rules on the prescriptive period for the collection of taxes.
ANS: AS a general ruie, where an assessment was made. the prescrpuve periog to coliect the
taxes due is five (5) years from the dale of assessment.
The following are the exceptions:
1. False or fraudulent return with intent to evade taxes: within ten (10) years from the discovery
without need tor prior assessment;
2. Failure or omission to file a return: within ten (10) years from the discovery Without need for
assessment; and
Lucman, Yasser S.
3. Walver in writing executed before the five (5) year period expires: within the period agreed
upon (INGLES, Reviewer, supra at 392).
Note: When it comes to self-assess taxes where a return is filed by the taxpayer. The taxpayer is
the one lo assess himself and such assessment is deemed to be adopted by the government. Thus,
the filing of the return would also be ihe date of assessment.
Taxes are generalily sell-assessed. They are initially computed and voiuntarily paid by the
taxpayer. The government does not have to demand it. If the tax payments are correct, the BIR
need not make an assessment (SMI-ED Phil. Technology. Inc. v. Commissioner of internal
Revenue, G.R. No. 175410, November 12, 2014).
Q: What are the grounds for the suspension of the running of statute of limitations?
ANS: The running of the statute of limitations shal be suspended in the following instances:
(PRA-PO)
1. Commissioner is Prohibited from making the assessment or beginning distraint Or levy or a

proceeding in coun and for sixty days thereafter
2. When the taxpayer Reayests (or a reinvestigation_which-is-granted-by the- Commissioner,
Note: A request for a reinvestigation alone will not suspend the stalute of limitations. Two things
must concur to stop the running of the period: (1) there must be a request for reinvestigation; and
(2) the CIR must have granted it (China Banking Corporation v. Commissioner of Internal
Revenue, G.R. No. 172509, February 4, 2015).
3. When the taxpayer Cannot be located in the Address given by him in the return filed upon
which the tax is being assessed or collected:
4. Warrant of distraint or levy is duly served upon the taxpayer, his authorized representative or a
member of his househald with sufficient discretion and nc Property could t located; and
5. When the taxpayer is Qut of the Philippines (IRC. Sec. 223).
G. TAXPAYER'S KEMEDIES
Protesting on Assessment
Q: What is protesting an assessment?
ANS: The act by the. taxpayer of questioning the validity of the imposition of the corresponding
delinquancy increments for internal revenue taxes as shown in the notice of assessment and letter
of demand (CEBALLOS, Reviewer, supra at 37).
Lucman, Yasser S.
Q: Give the procedure to be followed in protesting an assessment.
ANS: The procedure shall be as follows:
1. BIR ISsues assessment notice;
2. The taxpayer files an administrative protest against the assessment. Such protest may either be
a request for reconsideralion or for reinvestigalion. The protest must be fled within thirty (30)
days from receipt of assessment.
3. Alt relevant documents must be submitted within 60 days ::om fing of protest only if taxpayer
request tor reinvestigation uness a waiver ot prescnptive period is executed otherwise. the
assessment shal becona final and unappealable;
4. In case Ihe CIR decides adversely or if no decision yet at the lapse of one hundred eighty (180)
days, the taxpayer may appeai to the CTA Division, thirty (30) days from the receipt of the
decision or from the lapse of the one hundred eighty (180) days otherwise the decision shall
become final, executony and demandable (RCBC v. Cornmissioner of Intemal Revenue. G.R. No.
168498, April. 24, 2007):
5. 1t the decision is adverse to the taxpayer, he may file a motion for reconsiderauon or new trial
belore the same DivISion ol the CIA WItnin titeen (15) days from notice thereof
6. In case the resolution of a Division of the CTA on a motion for reconsideration Or new trial is
adverse to the taxpayer, ha may file a petition for review with the CTA en banc; and The ruling
or decision of the CTA en banc may be appealed with the Supreme Court, through a verified
petition for review on certiorari pursuent to Rule 45 of the 1997 Rules of Civil Procedure (R.R.
No. 18-2013, Sec. 3.1.4).
Q:What are the forms of protest that a taxpayer may file? 15/32
ANS: The protest may be a
1. Request for Reconsideration which is a plea of re-evaluation of ar asocssnien on the basis of

existing records without necd of additiont! evidence. t may nvolve a qestion of fact or of law or
both; or
2. Request for Reinvestigation which is a plea of re-evaluation of the assessment on the basSIs of
newly discovered or additional evidence thal a laxpayer intends to present in the
reinvestigaliou.Jtmay alsa.involye.a.quesion-ol-faci-or-ofHaw or both (R.R. NO. 18-2013, Sec.
3.1.4).
Q: What are the contents of a valid protest?
ANS: The taxpayer shall stale in his protest

Lucman, Yasser S.
1. The nature of protest whether reonsideration or reinvestigat.on, specifying newly discovered
or additional evidence he intends to present if it is a request for reinvestigaticn,
2. Dale of the assessment notice; and
3. The applicable lew; rules and regulations, or jurisprudence on which his prr'est is based.
Otherwise, his protest shall be considered void and without force and effect (R.R. No. 18-2013,
Soc. 3.1.4).
Period to File Protest
Q: When should a taxpayer fite a prolest with the Commissioner?
ANS: The taxpayer or its authorized representative or tax agent may protest administratively
against the issuance of a FLDIFAN by the Commissioner or his duly authorized representative
within thirty (30) days from date of receipt thereof (R.R. No 18-2013, Sec. 3.1.4). Submission of
Supporting Documents
Q: What are suppoiting documents which are required to be submitted
ANS: The term "relevant supporting documents shouid be understood as those documents
necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer.
The BIR ran only inform the taxpayer to submit addithonal documents. The BIR cannot demand
what type of supporting documents should De Submitted. Oherwise, a taxpayer will be al the
mercy of the BlR, which may require the production or documents thai a laxpayer cannot submit
(ommissioner of Intema Revenue v. First Express Pavnshop Company. Inc. G.R. Nos. 172045-46,
June 16 2009).
a: When should the taxpayer submit the relevant supporting documents after the filing of protest?
ANS: The taxpayer should submit such documents as foliows:
1. the protest is a request fcr reinvestigation, the taxpayer shall submit all relevant supporting
documents n support of his protest within sixty (60) days from the date of filing of nis letter of
prutest;
2. the protest is a request for reconsideralion, the 60-day period shall not apply (R.R. No. 18
2013, Sec. 3.1.4)
Q: What is the effect of failure to submit the relevant supporting documents
within the prescriptive period?
aNS: Th assassnant shal! become "inet by operation of law and the taxpayer shal! be barred from
disputing the correctness of the issued assessment by int-oduction of newly discovered or
aditionał evidence because heit is deemed to have lost hisits chance to present this evidence. The
Lucman, Yasser S.
BIR shall then deny the request for reinvestigation through the issuance of FDDA (R.R. No. 18-
2013, Sec. 3.1.4; R.M.C. No. 11-2014, Fobruary 19, 2014).
Effect of failure to File Protest
Q: What is the effect of failure to file a protest against FLD/FAN?
ANS: The assessment shall become final, executory and demandable and no request for
reconsideration or reinvestigation shal be granted (RR No. 18-2013, Sec. 3.1.4)
Decision of the Commisioner on the Protest Filed
Q: What is the period for the Commissioner or his duiy authorized representative
to act upon a valid protest against the FLD/FAN?
ANS: The Commissioner s duly authorized representative must act upon a vaid protest within
one hundred eighty (180) days counted from the date of filing of the protest in case of a request
lor reconsideration, or from date of submission by the taxpayer of the required documents within
sixty (60) days from the date of fing of the protest in case of a request for reinvestigation (R.R.
No. 18-2013, Sec. 3.1.4).
Q: How may the Commissioner decide on the protest adversely against the taxpayer?
ANS: The Commissioner may
1. Deny the protest; or
2. Not act upon it (R.R. 18-2013, Sec. 3.1.4).
Q: What is the remedy of the taxpayer if the protest is denied?
ANS: Under Sec. 3.1.4 of R.R. No. 18-2013, the taxpayer may:
1. f the protest is denied, in whole or in part, by the Commissioner's duly authorized

representative:
a. Appeal to the CTA ithin thity (30) days from date of receipt of the said decision; otherwise,
the assessment will become final and executory, or
b. File an administrative appeal to the Commissioner through request for reconsideration within
thirty (30) days rom dute of receipt of the decision but only issues raised in the decision of the
duly authorized representative shall be entertained (Commissioner of Internal Revenue
Lucman, Yasser S.
c. Irternational Pharmaceuticals, Iac.. CTA E. No. 608, October 25, 2011). However, if the
taxpayer eievates his protest to the CIR, such decision will noi be final and execulory
(CEBALLOS. Supra at 38).
2. f the administrative appeal is denied by the Commissioner
a. Fle a motion for reconsideraion with the Cemmissioner, or
b. Appea! to the CTA within thirty (30) days from date of receipt of the said decision (R.R. No.
18-2013, Sec. 3. 1.4)
3. If the protest is denied, in whole or in part, by the Commissioner:
a. Appeal to the CTA within thirty (30) days from date of receipt of the said decision or
b. File a motion for reconsideration of the denial of the administrative protest with the
Conmissioner (Fishwealth Canning Corp. v. Commissioner of Intemal Revenue, G.R No. 179343,
January 21, 2010).
Note: A mation for reconsideration of the Commissioner's denial of the protest or of the
Commissioner's denial of the administrative appeal shall not toll the 30-day period to appeal to
the CTA (RR. No. 18-2013, Sec. 3.1.4: Fishwealth Canning Corp. v. Commissioner of Intemal
Revenue, supra). Cn the other hand, a motion for reconsideration filed with the Commissioner
against the decision of his duly aulhcrized representative did toll the period for the filing of a
judicial appeal (Commissioner of Intemal Revenue v. Intemational Pharmaceulicals, Inc., supra).
Q: What actions of the Commissioner are equivalent to denial of the protest of a taxpayer?
ANS: These include:
1. Filing of crimunal action against the taxpayer
2. Issuance of warrant of distraint and: levy to enforce collection of deficiency assessment

without subsequent filing of civil action for collectionHiado Gommissiomer or
intamarTRBVenve, CTA Case No: 1256, February 25. 1964; Commissioner of intemal Revene v.
Intemational Pharmaceuticals, Inc.. Supra):
Note: The Court held that the collection of tax through summary emedies during the pendency of
the protest did not constitute a decision for lack of finality and that the, appealable decision was
the subsequent actlion taken by the BIR when it filed a civil action for collection (Commissioner
of internal Revenie v. Union Shipping Corp, G.R. No. 66160, Moy 21, 1990)
3. Civil collection (Yabes v. Flojo. G.R. Mo. 46954, Jay 20-1982: Commissioner or ntemel
Revenue. v. UnionShipping Corp, supra; Adverising Associates, Inc. v. Court of Appeals, G.R.
No: 59758, December 26, 1984), and
Lucman, Yasser S.
4 Referral-by the CIR of request for reinvestigation to the Solicior General (Republic v. Lim
Tian Teng Sons, G.R. No. L-21731. March 31, 1966).
Q: What is the remedy of the taxpayer in case of inaction of the protest or administrative
appeat within the 180-day period from submission of documents/filing of protest, as the
case may be?
ANS: Under Sec. 3.1.4 of RR. No. 18-2013, the taxpayer may either
1. Fle a petition tor review with the CTA within 30 days frorm the lapse of the 180. day perioo,
of
2. Await the final decision of the Commissioner or his duly, authorized representative on the
disputed assessments and appeal such final decision lo the CTA within 30 days after receipt of a
copy of such decision Riza Commercial Banking Corp. v. Commissioner of Internal Revenue,
G.R. No. 168498, April 24, 2007).
Note: The alorementioned remedies are mutually exclusive (R.R. No 18-2013. Sec 3.1.1). The
failure of the taxpayer to appeal the inaction on the disputed assessment by the Cornmissioner or
his representativa within 3u days after the lapse of 180 days from SubmisSion of supporung doC
menls wll result in the finality of the FAN (AM No. 05-11-07-CTA, Rule 4, Sec. 3 (A(2); Rizal
Cummercial Banking Corp. v. CIR, Supra)
Q: What is tho effect of a failure of a taxpayer to appeal a decision of the Commissloner

with regard to a protest?
ANS: The final assessment notice shall become final and executory (R.R. No. 18-2013. Sec.
3.1.4).
Compremise ond Abatementof Toxes
Q: What is a compromise?
ANS: Compromise is a contract whereby the parties, by making reciprocal concessions, avoid
litigation or put an end to one already commenced (CIVIL cODE, Art. 2028).
Q: What is a tax compromise?
ANS: A tax compromise involves the reduction of the taxpayer's liability (ABAN, Law of Basic
Taxation, supra at 235).
Note: A tax compromise is possible at any slage cf the itigation, even during appea, although
legal propriely demands that prior leave of court should be obtained (Pampanga Sugar Devt Corp.
v. Court of Industrial Relations, G.R. No. L-13178, March 25, 1961). But a compromise can
never be entered into after final judgment, because by virlue of such final judgment, the
Lucman, Yasser S.
Government had already acquired a vested nght (Roviro v. Amparo, G.R. No. L-5482, May 5,
1982).
Q: What are the requisites for the compromise of taxes?
ANS: The requisites are
1. he taxpayer has a tax liabilty
2. There must be an offer (by the taxpayer or Commissioner) of an amoun! to be paid by the
taxpayer,
3. A reasonable doubt as to the validity of the claim against the taxpayer exists: or, the financial
position of the taxpayer demonstrates a clear inability lo pay the assessed tax; and
4. There must be acceptance (by the taxpayer or Commissioner, as the case may be) of the offer
in settlement of the original claim (NIRC, Sec. 204).
Q: Who may compromise tax liability?
ANS: The Commissioner is the only official vested with power and discretion to compromise
civil and criminal cases arising from violations of the NIRC (NIRC, Sec. 204). Courts have no
power to compel him to exercise such discretion one way or the other. However, the Regional
Evaluation Board may enter into a compromise on:
1. Assessments isSiied by the regional offices involving basic deficiency taxes of P500,000 or
less; and
2. Minor criminal violations, discoverad by regional and district oficials (NIRC, Sec. 7(C)
Q: When may the Ccmmissioner enter into a compromise of taxes?
ANS: The Commissioner may compromise any national internal revenue tax when:
1. A reasonable doubt as to the validity of the claim against the taxpayer exists (minimum
compromise rate: 40% of the basic tax assessed) or
2. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax
(minimum compromise rate: 10%. 20% or 40% of the basiC tax assessed, depending upon thhe
condition of the taxpayer) (RR. Nos. 30-2002 and 8-2004).
Note: The Compromise must be approved by the Evaluation Board when:
1. The basic tax involved exceeds P1 million. or
2. The settlement offered is less than tne prescribed minimum rates (NIRC, Sec.204).
Lucman, Yasser S.
Q: What are the cases which may be compromised?
ANS: The following cases may be compromised:
1. Delinquent accounts;
2. Cases under administralive protest after issuance of FAN to which are stl pending in the
Regional Offices. Revene District Service, Large Taxpayer Service (LTS), Collection Service,
Enforcement Service, and other offices in the Nationar Otice;
3. Civil tax cases being disputed before the courts
4. Colileclion cases fied in courts
5. Criminal violations. other Ihan those already filed in court or those involving criminal tax
frauds; and
6. Cases covered by pre-assessment notices but taxpayer is not aggreable to the findings of the
audit office as confirmed by the review office (DIMAAMPAO. Taxatio), supra at 190-91).
Q:What are the cases that cannot be the subject of a tax compromise?
ANS: The following cannot be the subject of a compromise:
1. Withholding tax cases, unless the applicant taxpayer invokes provisions of law that cast doubt
on the taxpayer's obligatio.n to withhold Criminal tax fraud cases confirmed as such by the
Commissioner or his duly authorized reprasenlalive Criminal violations already frled in court:
Delinguent accounts with duly.approved.scbedula.of installment paynenis;
5. Cases where final reports of reinvestigation or reconsideration have been issued resulting to
reduction in the original assessment and he taxpayar is agreeable
6. Cases which become final and executory after final judgment of a court, where compromise is
requestad on the ground of doubtful validity of the assessment; and
7. Estate tax cases where compromise is requested on the ground of financial incapacity of the
taxpayer (R.R. No. 30-2002, Sec. 2)
Q: May criminal violations be compromised?
ANS: Yes, except
1. Those already filed in court; and
2. Those involving criminal tax frauds (R.R. No. 30-2002, Sec. 2)

Lucman, Yasser S.
Q: What is a compromise penalty?7
ANS: A COmpromise penaily is a certain amount oi money which the iaxpayer pays in lieu of
criminal prosecution (2 DIMAAMPAO, Taxation, supra at 180).
Note: As a compromise, it implies an agreement. One party cannot impose it upon the other. an
offer of compromise is rejected by the taxpayer, the Commissioner of Inlernal Revenue should
thle a criminal action if he believes that the taxpayer is criminaly able for violation of the tax law
as the only way to enforce a penalty(Commissioner of Internal Revenue v. Abad, G.R. No. L
19627, Junie 27 1968).
Q:What is tax abatement?
ANS: Tax abatement is the cancellation of the entire tax liability of the taxpayer (ABAN, Law of
Basic Taxation, supra at 235).
Q:When may the Commissioner abate or cancel tax liability?
ANS: The Commissioner has tha authorty to abate or cancel internal revenue taxes. penaltes
and/or interest pursuant to Sec. 204{B) in relation to Sec. 7(c) of the NIRC in the tollowing cases:
1. The tax Or any portion thereof appears to be unjustly or excessively assessed: or
2. The administration and collection costs involved do not justify the collection uf the amount
due. Recoveryof Tox Erroneoustror llegally Collected
Q:What is a tax refund?
ANS: A tax refund refers to actual reimbursement of the tax. A "refund" is a written claim for the
payment of cash lor taxes erroneously or iegally paid by the taxpayer to the government (ABAN,
Law of Basic Taxalion, supra at 325).
Q:What is the statutory basis for a tax refund under the NIRC?
ANS: The slatutory bases are
1. Tne Commissioner has the authority to credit or refund taxes eroneously or ilegally received
or penalties imposed without authority. refund the value of internal revenue stamps when they
are returned in good condition by the purchaser, and, in his discretion, redeem or change unused
stamps that have been rendered unfi! for use and refund their value upon proof of destruction
(NIRC, Sec. 204(0) and
2. Any national internal revenue tax alleged to have been erroneously or illegally assessed or
collecled, or of any penalty claimed to have been collecled without authorty. of any"sum alleged
to have been excessively or in any manner wrongfully cołlected without authority, or of any sum
Lucman, Yasser S.
alleged to have been excassively or in any manner wrorigfuliy colected may be filed as a laim for
relund or credit with the Commissioner (NIRG, Sec. 229).
Q: Why is proof for a claim of refund necessary?
ANS: Tax refund is in the nature of a tax exemplion and must. therefore. be constriued strictly
against the taxpayer (Commissioner of Internal Revenue v. Fortune Tobacco Corporation, 6.R.
Nos. 167274-76, September 11, 2013). Hence, before recovery s allowed, it must be cstablished
that there was an actual collection and receipt by the Government of the tax sought to be
recovered and this requires fartual proof (Collector of Intemal Revenue v. Li Yao, G.R. Nlo. L-
11861, December 27, 1903).
Q: Who has the burden of proof for a claim of refunds?.
ANS: The Court recognizes, as il always has, Ihat the burden of proof to establish entitlement to
refund is on the claimant taxpayer. Being in the nature of a claim tor exemption, refund is
construed in strictissimi juris açainst the entity claiming the refund and in favor of the taxing
power. This is the reason why a claimant must postively show compliance with the statutory
requirements provided under the NIRC in order to Successtuly pursue ones cdaim
(Winebrenner& higo Insurance Brokers, Inc. v. Commissioner of Internal Revenue, G.R.
No.206526, January 28, 2015).
Q: In a claim for refund of excess income tax payments resulting from unutlized creditable
withholding taxes, is the taxpayer required to present in evidence its quarterly income tax
return of the subsequent year to prove that excess income tax payment was indeed not
carried over to the succeeding year?
ANS. No. According to the Supreme Court. subsequent quarterly income tax relurns are not
indispensable. vWhat Sec. 76 of the Tax Code requires is to prove the prima tacie entitlement to
a clai, including the fact of not having carried over the excess credits to the suhseçuent quarlers
or taxable year. It does not say that to prove such a fact, SUCceeding quarierly TRs are
absolutely needed. This Simply underscores th hat any document, other than quarlerly ITRs may
be used to establish that inde carry over clause has been complied with, provided that such is
competent. part of the records (Winebrenner & Irigo Insurance Brokers, inc. v. Com internal
Reveniue, supra).
Q: Discuss the nature of an erroneously paid or illegally assessed or coilected tax.
ANS: There is a mistake of fact when a taxpayer erroneously pays a tax, as for instance in a case
where he is not aware of an existing exemption in his favor at the time the payment was made
(51 Am. Jur. 1023. Cited in UsT Cooperative Store v. Ciy of Manila, G.R. No. L-17133,
December 31, 1965).
Lucman, Yasser S.
Q: Distinguish tax refund from tax credit.
ANS: in tax refund, there is actual reimbursement of the tax while in tax credit, the amount is
applied against the sum that may be due or collectible from the taxpayer (DIMAAMPAO, supra
at 227). On the practical side, the taxpayer to whom the tax is refunded would have the option,
among others, to invest for profit the relurned sum, ar option not proximately available if the
taxpaver chooses instead to receivea tax credi(Comimissioner of Customs v. Philippine
Phosphate Fertilizer Corp., G.R. No. 144440, September 1, 2004).
Note: the gpions ofax reíundor lax credit-are alternetive-arnd-the-thoice ofone prectudes the
oiner. Howeyer, talure.to indicate a chorce by the taxpayer will not bar a valid request for a
refund, should this option be chosen later on. The indication of the chosen-option is onty for the
purpose.of tax administration (Phlam ASset Management Inc. V. Commissioner of, lhternal
Revenue, G.R. Nos. 156637 & 162004, December 14, 2005)
2. rrevocability RuleSec. 76) is not applicable to the. taxpayer who originally opted for a refund
or TCC to shit to the carry-over:of the excess ctédtable Taxes to the taxable quaters of the
succeeding taxąble years The irrevocability rule is inmited only to the option of carry-qver,
hence6, if the taxpayer decides toshift its option to cany verr may nogee original.choice
Credit Certificate
Q: When may a taxpayer file a claim for tax refund or tax credit?
ANS: A claim for tax refund or tax credit may be made when: (EPS)
1. Tax is colected Erroneously or illegally:
2. Penalty is collected without authority; or
3. Sum collected is excessive or in any manner wrongfully collected (NIRC, Sec.
229).
Q: What are the requisites for a claim of a tax refund or tax credit?
ANS: The requisites are: (ErCla-Cat-2-Proof)
1. There is a tax collected Erroneously or illegally. penalty is collected without authority. or a

sum collected is excessive or in any manner wrongfully collected (NIRC. Sec. 229)
2. There must be a written Claim for refund filed by the taxpayer to the Commissioner (Vda. de
Aguinaldo v. Commissioner of Internal Revenue, G.R. No.L-19927. February 26. 1965):
Note: The following are exceptions to the filing of a written claim for refund
Lucman, Yasser S.
a. A return filed showing an overpayment shall be considered as a written claim for credit or
refund {NIRC, Sec. 204 (C):
b. The Commissioner may. even without the written claim therefore, refund or credit any tax
where on the face of the return upon which the payment was made, such payment appears clearly
to have becn erroneously paid (NIRC, Sec. 229).
3. The claim for refund must be a Categorical demand for reimbursement. The dea probably, is
first, to afford the cllector an opportunity to correct the action of Subordinate oficers: and second,
to notily the Government that such taxes have been questioned, and the nolice should then be
borne in mind in estimating the revenue available for expenditure (Bermejo v. Colector of
Internal Revenue, G.R. No. L-3029, July 25, 1950):
4. The claim for refund must be filed within two (2) years trorm the date of payment of the tax or
penaity regardless of any supenvening cause (NIRC, Sec. 22s); and
Note:
a. A claimant for refund must first fle an administrative claim for refund before the CiR, prior to
filing a judicial claim before the CTA. Both the administrative and judicial claims for refund
should be filed within the wo (2)-year prescriptive period indicated therein, is allowed to file the
latter even without waiting for the resolution of the former in order to prevent the forfeiture of its
claim through prescription.
b. It should be pointed out further that while the prescriptive period of two (2) years counmences
to run from the time that the refund is ascertained, the propriety thereof is determined by law (in
this case, from the date of payment of tax), and not upon the discovery by the taxpayer of the
erroneous or excessive payment of taxes. The issuance by the BIR of the Ruling : declaring the
tax-exemgt status, if at al, is merely confirmatory in nature, hence, no basis that the subject
exemption was provided and ascertained cnly through BIR Ruling
5. The taxpayer must show proof of payment of the tax. There must be actual collection and
receipt by the Government of the tax sought to be recovered and this requires factual proof
Q:What are the essential basic conditions In order for a taxpayer to be entitled too?
A refund claim or issuance of a tax credit certificate representing any excess or unutilized
creditable withholding income tax?
ANS: The conditions are:
1. The claim is filed with the Commissioner of lnternal Revenue within the two- year period
from the date of payment of the tax:
Lucman, Yasser S.
2. It is shown on the return of the recinent that the income payment recerved was declared as part
of the gross income; and
3. The fact of withholding is established by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of the tax withheld thereirom.
Q: When will the prescriptive period for refund of final withholding taxes commencer.
ANS: The claim for refund must be filed within two (2) years from the date of páyment of the
tax or penalty regardless of any supervening cause (NIRC. Sec. 229).
Note:
1. In case of corporate income tax, in which he corporate taxpayer is required to file and pay
income tax on a quarterly basis. Quarterly income lax payments are treated as mere "advance
payments" of the annual corporate income tax,there may arise certain situaions where such
advance payments would cover more than said corporate taxpayer's entire income ta Hability for
a specitic taxable year, Thus, t is only logical to reckon the two i2Pyear prescriptive period from
the time the Final Adjustment Return or the Annual Income Tax Retun was filed, since it is only
at that time that it would be pOSSle t eterrmine whether the corporate taxpayer had paid an
amount exceeding its annual income tax liability.
2. For Final withholding taxes are considered as ful and final payment of the come tax due, and
thuS, are not subject to any adjusiments. Thus, the two (2-year prescriptive periud commences to
run from the time the refund is ascerained, 1.e, the dale such tax was paid, and not upon the
discovery by the laxpayer of the erroneous or excessive payment of taxes (Metropolitan Bank &
Trust Co. v. Commissioner of Internal Revenue, supra).
3. he payment of the S and the filing of the DST Declaration Return upon loading/reloading of
the Ds melerig machine must not be considered as the dale of paymenr" when the prescriptive
period to file a daim for a relundcredit myst commence.since.itis.merely-aa.advance payment-
for-future- application. The lablily for the payment of thee DST falls due only upon the
OcCurrence of a taxable transaciion, hence. lhe comnmcncemen oi 2-yeui pertod (Phuppine 8ank
Communications v. Commissioner of Internal Revenue. G.R. No. 194065. June 20, 2016).
4. In case of a claim for refund of Input VAT altributable to zero-rated sales under Sec.112 (A)
of the NIRC, the two-year prescriptive period should be reckoned from the cose of the taxable
quarter when the relevant sales or transactions Were maue, not from the date of payment of the
tax or penalty
Proper Party to File Claim for Refund or Tax Credit
Q:Who may claim a tax refund or tax credit?

Lucman, Yasser S.
ANS: he proper party lo question, or seek a refund of, an indirect tax is the statutory taxpayer,
the person on whom thee tax is imposed by law and who paid the same even if he shifts the
burden hereof to another (Silkair (Singapore) Pte. Ltd. v. Commissioner of Internal Revenue.
supra).
Q: May a withholding agent claim or apply for tax refund or tax credit?
ANS: Yes. The withhoiding agent has a legal right to file a claim for refund because
He is considered a "taxpayer under the NIRC as he is personally liable for the withholding taxes
should it be found to be less than the amount that should have been withheld under the law, and
As an agent of the laxpayer. his authority to file the necessary income tax return and to remit the
tax withheld invpliedly includes the authoriy to le a claim for refund and to biing an aclion for
recovery of such claim. whiie the withholding agent has the right to recover the taxes
erroneously cr illegally coliected, he nevertheless has the obligation to remit the same to the
prinapa taxpayer.
Q: ls payment under protest necessary in order to obtain refund to internai revenue taxes?
ANS: No. Payment under protest is naot necessary in order to obtain refund to internal revenue
taxes (NIRC, Sec. 229).
Q: Is partial payment of a tax sufficient basis for a tax refund?
ANS: No. The partial payment of a tax cannot be the basis for a tax refund (Collector of intemal
Revenue v. Prieto, G.R. No. L-11976, August 29, 1961).
H. GOVERNMENT REMEDIES
Kinds
Q: What are the remedies of tho Government?
ANS: The Government has the following remedies
1. Administrative remedies:
a. Tax lien (NIRO, Sec. 219)
b. Disaint and levy (NIRC, Sec. 205);
C. Forteiture of real property (NIRC, Sec. 224):
d. Further Cistraint and levy (NIRC, Sec. 217)
e. Suspension of business operations (NIRG, Sec. 115); and

Lucman, Yasser S.
f. Non-availability of injunction to restrain collection of tax (NIRC, Sec. 218).
Judicial Remidies
a. Civi and (NIRC, Sec. 205)
b. Criminal. {NIRC Sec. 205)
Administrative Remedies
Tax lien
Q: What is the nature and extent of a tax lien?
ANS: Tax lien is a legal dlaim or charge on property, real or personal, established by law as
security in default of the payment of iaxes (Hongkong and Shanghai Banking Corp. v. Rafferty,
G.R. No. L-13188, November 15, 1916).
Q: Discuss the nature of a tax lien.
ANS: When a tavpayer neglects or refuses to pay his intermal revenue tax liability after demand
(issuance of FAN). the amount so demanded shall be a lien in favor of the government from the
time the assessment was made by the Com.missioner untii paid with interest, penalties, and cOsts
that may accrue in addition therelo upon all property and righis to property belonging to laxpayer
(NIRG, Sec. 219).
Q: When does the lien in favor of the Government arisee?
ANS: Tax iien attaches:
1. With respect to personal property - from the time the tax became due and demandable; or
2. With respect to real property- from the time of registration ith Registerof Deeds
(Commissioner of internal Revenue v. National Labor Relations Commission G.R. No. 74965,
November 9, 1994).
Note: The lien shall not be valid against any mortgagee purchaser or judgment redtor until notice
of such lien shall be filed by the Commissioner in the Office of the Register of Deeds of the
province or city where the property of the taxpayer 13 situaled or iocated (NIRC, SeC. 219).
a: Which is superior- a tax lien or a claim based on a judgment?
ANS: t is settled that the claim of the government predicated on a tax lien is superior to the claim
of a private litigant predicated on a judgment. Execution sales alfect the rights of the judgment
debtor only, and ihe purchaser in an auclion sale acquires only such rights as the judgment debtor
has at the time of sale. It is also well-setted that the sheriff is not authorized to attach or tevy on
Lucman, Yasser S.
property not belonging to the judgment deblor (Commissioner of intermal Revenue v. National
Labor Relalions Commission, Supra).
Distraint and Levy
Q: What is distraint?
ANS: Distraint is the seizure by the government of personal property, tangible or intangible, to
enforce the payment of taxes, to be followed by its public sale, if the taxes are not voluntarily
paid (1 DE LEON, NIRC Annolaled, supra at 475).
a: What is garnishment?
ANS: Gamishment is the taking of personal properties, usually cash or sums of money, Owned
by a delinquent taxpayer which is in te possession of a third party.
Note: Bank accounts may be distrained notwithstanding the Bank Secrecy Act (R.A. No. 1405)
which prohibils inquiry into bank accoints, since in the case of distraint, no inquiry IS made. The
BIR simply seizes so much of the deposit as is suificient to discharge the obligation Vithout
having to know how much the deposits are, or where the money or any part of it came from (1
DE LEON, NIRC Annotated, supra at 481, citing Op. of Sec. of Justice, No. 54, s. 19561.
Discuss the procedure for distraint of personal property?
ANS:The-procedure isas follower
1. Distraint proceedings shall be commenced by:
a. The Ccmmissioner.or his duly authorized representative where the amount involved is in
excess of P milion; or
b. The Revenue District Offirer (RDO) where,the amount involved is P1million or less;
2. A Warrant.of Distraint shall be served where the persónal property of the taxpayer Is
physicaly taken by the distraining officer,
3. The distraining officer shall submit to the RDO and to the Revenue Regional Director a report
on the distraint within ten (10) days from receipt of the Warrant. provided that the Commissloner
or his duly authonized representative shall have the power to lift the order of distraint and that a
consolidated report by the Revenue Regional.Director may be required by the Commissioner as
often as necessary
4. The Notice of Sale of Distrained Property shall be posted in not less than hwo (2) public
places in the city or municipality where the distraint is made. The time of sale shall not be less
than twenty (20) days after notice to the owner or possessor of property and publication or
posting of such notice and
Lucman, Yasser S.
5. At the time and place fixed in the notice., the revenue officer shall sell the goods subject of the
distraint at puolic auction, to the highest bidder tor cash, or with the approval of the
Commissioner, through duly lioensed commodity or stock exchanges (NIRC, Secs. 207-209).
Note: Any residue over and above what is required to pay the entire claim, inchuding expenses,
shall be returned to the owner of the property sold (NIRC, Sec. 209).
Moreover, if at any time prior to the consummation of the sale, all proper charges are paid to the
officer conducting the sale, all distrained properties shall be restorad toowner (Right of Pre-
emption) (NIRC. Sec. 210).
Q: When may the Government purchase the goods subject of the distraint?
ANS: The Commissioer or his deputies, in behaf of the National Governmernt, may purchase the
goods subject of the distraint when the amount bid for the distrained property is not equal to the
amount of tax or very much less than ihe aclual market Vvalue of the property (NERC, Sec. 212).
Note: Property so purchased may be resold by the Commissioner or his deputy, subject to the
rules and regulations prescribed by the Secretary of Finance. the net proceeds therefrom shall be
remitted to the National Treasury and accounted for as internal revenue (NIRC, Sec. 212).
a: What is the duty of the distraining officer with respect to the sale?
ANS: The Olicer making the sale shal make a Written report of the proceeding of the sale to the
Commissioner within two (2) days after the sale (NIRC, Sec. 211).
Q: When can there be constructive distraint?
ANS: prolect the interest of the GOvernment. the Commissioner may place under constructive
distraint the property of a delinquent taxpayer or any taxpayer. who in hisopinion is: (RLR-HO)
1. Retiing from any business subject to tax;
2. Is intending to Leave the Philippines
3. Is intending to Remove his properties therefrom,
4. Is intending to Hide or conceal his property; or
5. Is inlending to perform any act tending to Obstruct the proceedings for collecting the tax due
or which may be due from him (NIRC, Sec. 206).
Q:What is levy?
ANS: It refers to the seizure of real properies and interest in or rights to such properties for-the
satisfectionof taxes due fromtre delinquent taxpayer (2 DIMAAMPAO, Taxalion, Supra at 158).
Lucman, Yasser S.
a: When may levy be effected?
ANS: Levy can be made
Before. simultaneausly. or after distraint of personal property: or
2. In case the warrant of levy is:
a. not issued before or simultaneously with the wartant of distraint. and
b. the personal property of the taxpayer is not suficient to satisfy his tax delinquency, the
CCmmissioner or his authonzed.representative shal, within 30 days after the execution of the
distraint, proceed with the ievy on taxpayer's real property (NIRC, Sec: 207 (8))
Q: Discuss the procedure for levy on real property.
ANS: The procedure is as follows:
1. A duly authenticated certificale (Warrant of Levy) shall be prepared hy the Conumissioner or

his duly authorizad representatrve.
Note: The certificate shall contain a: (DNA)
a. Description of the property levied;
b. Name of the taxpayer, and
C. Amount of tax and penalty due from him.
The certificate shall operate with the force of a legal execution throughout the
Philippines.
2. Levy shall be effected by writing upon the cerlificate a description of the property upon which
levy is made. At the same time, written notice of the levy shall be mailed to or served upon a The
Register of Deeds of the province or city where the property is tocated: and
b. The delinquent texpayer. or if he is absent from the Philippines. to his agent or the manager of
the business i respect to which the liability arose, or if there be none, io the oCCupanl or the
property in question.
3. Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by the
levying officer to the Ccmmissioner or his duly authorized representative, provIded that a
consolidaled report by the Kevenue Regional Director may be required by the Commissioner and
that the Commissioner or his duly authorized representative shall have the authority to lift
warrants ofevy issued
Lucman, Yasser S.
Q: What is the duty of the distraining officer with respect to the sale?
ANS: The Officer making the sale shall make a wntten report or the procBeding o the
sale to the Commissioner within two (2) days after the sale (NIRC, Sec. 211).
Q: When can there be constructive distraint?
ANS: To prolect the interest of the Government. the Commissioner may place under
constructive distraint the property of a delinquent taxpayer or any taxpayer. who in his
opinion is: (RLR-HO)
1. Retiring from any business subject to lax;
2. s intending to Leave the Philippines;
3. Is intending to Rermove his properties therefrom,
4. Is intending to Hide or conceal his property, or
5. Is intending to perform any act tending to Qbstruct the proceedings for
collecting the tax due or which may be due from him (NIRC, Sec. 206).
2. Real property placed under levy may be sold at public auction for less than its market value
Q: What is the period of redemption of sale of real property on levy?
ANS: The real property may be redeemed by the delinquent taxpayer or anyone or hi within one
year irom the date ül the sale, by paying to the Revenue District Officer the amount aof:
1. Public Taxes;
2. Penalties,
3. Interests thereon from the time of the delinquency to the date of sale, and
4 Interest on purchase price al 15% per annum from the date of purchase to the date of
redemption (NIRC. Sec. 214).
Note: In cese of natural persons, for purposes of reckoning the one-year period on the foreciosed
asset of natural persons and the period within which to pay Capital Gans Tax or Creditable
Withholding Tax and Documentary Stamp Tax on the foreclosure of Real Estate Mortgage. the
perind shal be reckoned from the date of registralion of the sale in the Office of the Register of
Lucman, Yasser S.
Deeds. For juridical persons in an extrajudicial foreclosure, Section 47 of The General Banking
Law of 2000 (R.A. No. 8791) provides that is nght of redemption shall be unti, but not after, tne
registration of the certificate of oreclosure sale with the applicable Register of deeds, which in no
case shall be more than three months after toreclosure. whichever is earlier. The right of
redemplion shal be reckoned from the date of approval by the executive judge (R.M.C. No. 55-
2011)
Q: When is a Final Deed of Sale issued to the purchaser?
ANS: It shall be given to the purchaser only after the failure of the taxpayer to redeem the
property after the expiration of redemption pericd (NIRC, Sec. 202).
Q: What is the remedy of the Government when there is stil tax delingquency after
initial distraint or levy?
ANS: distraint and ley may be repeated if necessary until the full amount of the tax delinquency
due, including all expenses, Is collected from the taxpayer (NIRG, SeC. 217). Further distraint
and levy Is necessary because a clever taxpayer may able lo conceal most uf the valuable part of
his property from the revenue officers lo escape payment of his tax liability by sacrificing an
insignificant portion of his holdirigs (
Forfeiture of Real Property
Q: May the real property subject of a levy be forfeited to the Government?
ANS: Yes. The inlernal Revenue Oficer conducting the sale shall declare the property forfeited
to the Government in satislaction of the claim foi taxes in casehere is no bidde:
1. for real propety exposed for sale; or
2. The highest bid is for an amount insuficient to pay the laxes. penalties and costs (NIRC, Sec.
215)
Note: Wthin one (1) year from the date of such forfeiture, the. taxpayer.or any one for him may
redeem said property by paying :o the Commissioner or the latters Revenue Collection oficer the
full amount of the taxes and penalties, together with the interest nereon and the costs of sale. but
if the property be not thus redeemed, the fortaiture shall become absolute (NIRC, Seu. 215).
Q: How is the remedy of forfeiture by the Government enforced?
ANS: forfeiture and Personal Property
1. in case of personal property - by seizure and sale, or destruction of specific forfeited properly,
and
Lucman, Yasser S.
2. Ir case of real property by judgmant of condermnation and sale in a legal action or proceeding.
civl or criminal, as the case may require (NIRC, Sec.224).
Q: When is the period to contest the forfeiture of chattel?
ANS: The owner desiring to contest the validity of forfeiture may
1. At any time before the sale or destruction of the property. bring an action against the person
seizing the property or having possession thereof to recover the same. and upon giving proper
bond, may enjoin the sale: or
2. After the sale and within six months, he may bring an action to recover the net proceeds
realized at thee sale (NIRC, Sec. 231).
Q: What are the modes of resale of real estate taken for taxes?
ANS: The Commissioner may
1. Sell and dispose of the same at a public auction upon giving of not less than twenty (20) days
of notice or
2. Dispose the same at a orivate sale with the approval of the Secretary of Finance
Note: In either case. the proceeds of the sale shall be deposited with the National Treasury, and
ar accounting of the same shall be rendered to the Chairman of the Commission on Audit (NIRC,
Sec 216).
Q: How are the forfeited goods or articles disposed of?
ANS: The goods or aricles are
1. Sold- in case of forfeited chattels and removable fixtures, so lar as practicable. in the same
manner and under the same conditions as the public notice and the time and manner of sale as are
prescribed for sales of personal property distrained for non-payment of taxes;
2. Destroyedin case of distilled spirits, liquors, cigarettes, other manufactured producis of

tobacco and all apparatus used in or about the illicit production of Such arlicles, by the order of
Commissioner, when the sale of the same for consumption or Use woula be injurious to public
health or prejudicial to the entorcement of law Sold or destroyed in cases of all other articles
subject to excise tax, which have been manufactured or removed ir. violation of the NIRC, dies
for printing or making ot nlernal revanue stamps and labels which are in imitation of or PurDOT
O be lawul stamps. or labels, in the discretion of Ihe Commissicner (NIRC, Sec. 225).
Note: Forfeited property shall not be destroyed until at least 20 days af'er seizure. (NIRC, Sec.
225).
Lucman, Yasser S.
Q: How are funds recovered in legal proceedings or obtained from forfeitures
disposed?
ANS: All judgments and monies recovered and received for taxes, coste,. forfeitures, fines and
penalties shall be paid to the Commissioner or his autnorized deputies as the taxes themselves
are required io be paid, and excepl as specifically provided, shall be accounted tor and dealt
within the same way.
Q: Discuss the power of the Coimmissioner to suspend the business operations of a

taxpayer?
ANS: The Commissioner or his authorized representative may suspend the business operalions
and temporarily close the business establishment of any person for the any of the following
violations:
1. In the case of a VAT:registered person
a. Failure to issue recêipts or in oices;
b. Failure to file VAT relurn and pay lax due;,.
C.Understatement of taxable sales or reçeipls by 30% or more of his correct taxable sales or
receipts for the taxable quarter, or
2.Faliure of Value-Added Tax Subject person to register (R.M.0. No. 3-2009).
Note: The temporary closure of the establishment shall be for the duration of not less than tive (5)
days and shall be ifted only upon complance of whalever requiremenis prescribed by the
Commissioner in the closure order (NIRC, Sec. 115). The 5-0ay VCN shall likewise state the
particuiar provision(s) of the NiIRC that was/ were violated by he taxpayer, and for which
recbfication must be done, including payment of the required deficiency taxes and penalties due
therefore (R.M.O. No. 3-2009, Sec. 3.3.2).
Non-Availability.of injunction to Restraln Collectionef Tax
Q:Is injunction available as a remedy to restrain the collection of taxes?
ANS: No, as a general rule. Section 218 of the NIRC provides that "no court shall have the
authority to grani an injunction to restrain the collection of any national internal revenue tax, fee
or charge. However, wthen in the opinion of the CTA the collection oine tax may jeopardize the
interest of ine Government and/or the taxpayer. the CTA at any stage of the proceeding may
suspend the said collection and require the taxpayer either lo deposit the amount cla.ned or to file
a surely bond for not more than double the amount vrith the CTA (R.A. No. 1125. Sec. 11, as
amended).
Lucman, Yasser S.
JUDICIAL REMEDIES
Q: What are the kinds of Judicial Remedies?
ANS: The judicial remedies include:
1. Ordinary civil action
2. Criminal action
Note: No civil or criminal action for the recovery of taxes or the enforcement or any fine penally
or torleiture under the NIRC shall be iled in court without the approval of the Commissiorer of
Internal Revenue (NIRC, Sec. 220).
Q: What is the form and mode of the judicial proccedings for the collection of taxes?
ANS: Civil and criminal actions and proceedings instituted in behalf of the Government shall:
1. Be broughl in the name of the Goveriment of the Philippines; and
2. Be conducted by legal officers of the Bureau of Internal Revenue (NIRC, Sec. 220).
Note: Section 7 of the NIRC authorizes the Commissioner to delegate the powers subject lo
certain exceptions, vested in him by the NIRC to any subordinale officials with the rank
equivalent to a division chiet or higher. None of the exceptions relate to the Commissioner's
power to approve the filing of tax collection cases.
CIVIL ACTION
Q: When civil action, as a tax remedy, is resorted to?
ANS: A civil action is resorted to when a tax liablity becomes coiectibie, thal is. The assessment
becomes final and unappealable, or. the. decislon of commissioner has become final, executory
and demandable (DIMAAMPAO, supra at 183).
Q: How is a civil action for the collection of taxes instituted?
ANS: There are two ways to enlorce civil liability through ciyil aclions
1. By filing a civil case for collection of a suns of money with proper reguar court (NIRC, Secs.
203.and 222): or
2. By fling an answer to the petition for review filed ttaxpayer with CTA Femandez Hermanos,
inc. v. Commissioner of IntemalRevenue, G.R. No. L- 21551, September 30, 1969).
Q: Can the BIR file a civil action for collection pending decision of the administrative
protest?
Lucman, Yasser S.
ANS: Yes. It was held that the request for reinvestigation and reconsideration was in effect
considered denied by Commissioner when the latter fled a civil suit for collection of deficiency
income (Commissioner of Internal Revenue v. Un on Shipping, G.R. No. L- 66160, May 21,
1990).
CRIMINAL ACTION
Q: When criminal action is resorted to?
ANS: The remedy of criminal action is resorted not only for collection of taxes but also for
enforcerment of statutory penalties of all sorts (NIRC, Sec 221). The judgment in the criminal
case shall not only inpose the penalty but shall also order the payment of the taxes subject of the
ciminal case as finally decided by the Commissioner (NIRC. Sec. 205).
Q: What are the crimes punishable under the NIRC?
ANS: Two common crimes punishable under the NIRC are:
1. Attempt to evade or defeat tax (NIRG, Sec. 254), and
2. Failure to file return, supply correct and accurate information, pay tax, withhold and remit tax
and refund excess taxes withheld on compensation (NIRC, Sec. 255).
Note: The judgment in the criminal case shall not only impose the penalty but shall also order the
payment of taxes subject of the criminał case as finaly decided by the Commissioner įNIRC, Sec.
205).
Q: Does the acquittal of the taxpayer from the criminal action affect his liability topay the
tax
ANS: No. The acquittal of the taxpayer trom the criminal action does NOT necessarily result in
the exoneration of said taxpayer from his civil liability to pay taxes. The duty to pay tax is
imposed by slatule prior lo and independent of any attempt on the part of the taxpayer to evade
payment. I1 is neither a mere consequence of the felonious acts charged nor is it a mere civil
iability derived from a crime.
Q. Is the civl action filed by to question the Final Decision on Disputed Assessment is
deemed instituted with the criminal case for tax evasion?
ANS. No. Rule 111, Section 1 (a) (44) of the Rules of Court provides that whet is deemed
instituted with the criminal action is only the action to recover civil liabikty arising from the
crime. Civil liability arising froma ciferent source of obligation, such as when the obligation is
created by law, such civil liablity is not deemed insttuted with the criminal action,
Lucman, Yasser S.
Note: It is well-settled that the laxpayer's obligation to pay the tax is an obligation that is created
by luw and does not arise from the offense of tax evasion, as such, the same is not deemed
instituted in the criminal case (MMacafo Lim Gaw, JF.v. Commisioner of Internal Revenue, G.R,
No. 222837, Juiy 23. 2018).
Q: Is a previous assessment necessary before a criminal action may be filed against a

taxpayer?
ANS: No. Under Sections 254 and 255 of the NIRC. the government can fle a criminal case for
tax evasicn against any laxpayer who wilfully attempts in any manner to evade or defeal any tax
imposed in the tax code or the payment thereof The crime tax evasion is committed by the mere
fact tha: the taxpayer knowingly and willfully filed a fraudulent return with intent to evade and
defeat a part or all of the tax. It is thcrefore not required that a tax defciency assessment must
first pe issúed for a criminal prosecution for tax evasion to prosper.
Note: For criminal prosecution to proceed before assessment, there must be prima tace showing
of a wilful attempt to evade taxes.
Q:ls the filing of a criminal action an implied assessment by the Commissioner?
ANS: No. The filing of a criminal action is not an implied assessment by the Commissioner. An
assessment contains not only a computation of tax liabilities, but also a demand for payment
within a prescribed period. It also signals the time when penalties and interests begin to accrue
against the taxpayer. To enable the taxpayer to determine his remedies thereon. due process
requires that it must be served on and received by the taxpayer. Accordingily, an afidavit, which
was executed by revenue officers stating the tax liabilities of a taxpayer and attached to a
criminal complaint for tax evasion, cannot be deemed an assessment that can be questioned
before the Court of Tax appeals (Commissioner of Internal Revenue v. Pascor Realty, G.R. No.
128315, June 29, 1999).
Q: What is the effect of satisfaction of thhe civil liability to criminal liability in tax cases?
ANS: The subsequent satisfaction of civil liability by payment or prescripion DOES NOT
extinguish the taxpayer's criminal liability (People v. Tiera, G.R. No. L-17177-80. December 29,
1959).
Q: Can subsidiary imprisonment be imposed on the tax which the taxpayer is sentenced to
pay?
ANS: No. In case of insolvency on the part of the taxpayer, subsidiary imprisonment cannot be
imposed as regards the tax which he is sentenced to pay. However, it may be imposed in cases of
failure to pay the fine imposed (NIRC, Sec. 230).
Lucman, Yasser S.
III. LOCAL TAXATION
[LOCAL COVERNMENT CODE OF 1991, AS AMENDED]
A. LOCAL GOVERNMENT TAXATION
Q: Define local government taxation.
ANS: It is the power of the Local Government Units (LGU) to impose and collect taxes on their
constituents in order to raise revenues to enable them to perform the functions for which they
have been organized.
Fundamental Principles
a: What are the fundamental principles of local government taxation?
ANS: The following fundamental principles shall govern the exercise of the taxing and other
reveriue-raising powers of local government units:
1. Taxation shall be uniform in each local government unit,
2. Taxes, lees, charges and other impositions shall
a. Be equtable and based as far as practicable on the taxpayer's ability to pay
b. be levied and collected only for public purposes not, excessive, oppressive and confiscatony
d. not to be contrary to law, public policy, national economic policy, or in restraint of trade:
3 The collection of taxes, fees, charges, and other impositions stial in no case be let to private
person
4. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit
of, and be subject to the disposition by. the LGU levying the tax, fee, charge or other imposition
unless otherwise specifically provided therein; and
5. Each LGU shall, as far as practicable, evolve a progressive system of taxation (LGC, Sec.
130).
Q: Discuss the nature of local taxing povr of the LGUs.
ANS: The nature of the local taxing power may be described are as folows:
1. Direct- the power of the LGU to impose taxes although not an inherent power is granted by a
direct mandate from the Constitution
Lucman, Yasser S.
Note: The authority to tax of LGUs within the Autonomous Regions (ARMM and CAR) is
delegated by the Organic Act creating them which provides that the Regional Government shal
have the power to create its own sources of revenues and to levy taxes. fees. and charges, subject
to the provisions of the Constitution and the Organic Act (R.A. No. 6766, Organic Act for the
Cordillera Autonomous Region, October 23, 1989: RA. No. 9054. Organic Act for the
Autonomous Region of Muslim Mindanao, March 31, 2001). Limited although directly
expressed by the Constitution, the power is subject to such limitations and guidelines as the
legislature may deem necessary to impose
3. Legislative in nature the power to impose iaxes is vestcd solely in the legislative body in each
respective LGU;

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Lucman, Yasser S.

F. TAXREMEDIES UNDER THE NIRC

Requisites of valid assessment:

Q: What is a tax assessment?

Q: What are the requisites for a valid tax assessment?

ANS: The requisites for a valid tax assessment are as follows:

Q What are the kinds of assessment?

ANS: Assessments may be classified as follows:

b. No amount of tax is shown in the return; or

Q:What are the important principles governing tax assessinents?

ANS: he principles govemig tax assessments are

2. Assessments should not be based on presumptions but on actual facts;

Exception: The Commissioner of Internal Revenue may be compelled to assess by mandamus if

5. Prescribe real property values (NIRC, Seu. 6 (e)):

6. Inquire into bank deposit accounts of

a. a decedent to determine his gross estate

Tax deficiency versus tax delinquency

a: What is the difference between a tax deficiency and a tax delinquenty?

a:What is a jeopardy assessment and when is it issued?

1. Retiring from business subject to lax;

a. Leave the Philippines;

b. Remove his oroperty therefrom; or

C. Hide or conceal his property.

Q: What is the prescriptive period for the assessment of taxes?

prescribed by law, whichever is later (NIRC, Sec. 203).

2. discovery of the falsity or fraud; and

the omission of the return (NIRC, Sec. 222 (a).

False Returns vs. Fraudulent Returns vs Non-Fling ofRetums

Q: Distinguish False returns from Fraudulent returns.

Suspension of the Running of Statute of Limitations

ANS: The rules are:

5. When the taxpayer is Qut of the Philippines (NIRC, Sec. 223).

date of execiution shall be specifically indicated in the waiver

3. The waiver should be duly notarized.

a:Is the Commissioner of Internal Revenue authorized to prescribe penalties?

Qa:What is the purpose behind the imposition of penalties?

Delinquency interest and Deficiency interest

Delinquency interest: Imposed in case of failure to pay:

a. he amount ot tax due on any return required to be filed;

a: What are the additions or increments to the basic tax?

Civil penalty or surcharge:

1. 25% (NIRC, Sec. 248 (a)

2. 50%.(NIRG SeG 248(0)E

b. willlul filing of a false or fraudulent return.

Note: Substantial under-declaration of. taxable sales or income or substantia

overstatement of deductions shall constitute prima facie evidence of a false or

fraudulent return. Failure to report sales. receipis or income in an amount exceeding

Q:ls the payment and collection of surcharge mandatory?

ANS: Surcharge and Interest may be deleled in the following instances:

Q: What is a Compromise Penalty?

Assessment Process and reglementary Periods

Q: Discuss the assessment process of internal revenue taxes.

ii. If the RO finds:

1. No deficiency, audit ends;

a. Amenable with his findings. the taxpayer pays the tax

Issuance of Notice of Informal conference

4. Issuance of Preliminary Assessment Notice (PAN)

8. lssuance of Final Decision on a Disputed Assessment (FDDA) he decision of the