REMEDIES OF THE GOVERNMENT

DISTRAINT

A remedy available to the government whereby the collection of the tax is enforced
on the goods, chattels or effects of the taxpayer including other personal property of
whatever character as well as stocks and other securities, debts, credits, bank accounts, and
interest in and rights to personal property. The property may be offered in a public sale, if
taxes are not voluntarily paid. Distraint may be actual or constructive.

CONSTRUCTIVE DISTRAINT

The Commissioner of Internal Revenue, to safeguard the interest of the government,

may place under constructive distraint the property of a delinquent taxpayer or any taxpayer
who, in his opinion is:

1. Retiring from business subject to the tax

2. Intending to leave the Philippines or to remove his property therefrom or to hide or

conceal his property

3. Intending to perform any act tending to obstruct the proceedings for collecting the
tax due or which may be due from him.

Shall be effected by requiring the taxpayer or any person having possession or

control of such property to sign a receipt covering the property distrained and obligate
himself to preserve the same intact and unaltered and not to dispose of the same in any
manner whatever without the express authority of the Commissioner.

ACTUAL DISTRAINT

Actual distraint is resorted to upon the failure of the person owing any delinquent
tax or delinquent revenue to pay the same at the time required. It consists of the seizure of
the personal property and interest in or rights to such property in sufficient quantity to
satisfy the tax, or charge, together with any increment thereto incident to delinquency, and
the expenses of the distraint and the cost of the subsequent sale.

Procedures for Distraint:

1. Stocks and other securities shall be distrained by serving a copy of the warrant of
distraint upon the taxpayer and upon the president, manager, treasurer or other
responsible officer of the corporation, company or association which issued the
stocks.
2. Debts and credits shall be distrained by leaving with the person owing the debts or
having in his possession or under his control such credits, or with his agent, a copy
of the warrant of distraint.
3. Bank accounts shall be garnished by serving a warrant of garnishment upon the
taxpayer and upon the president, manager, treasurer or other responsible officer of
the bank.

LEVY

Levy refers to the seizure of real properties and interest in or rights to such properties
for the satisfaction of taxes due from the delinquent taxpayer. The property may be offered
in a public sale if after the seizure, the taxes are not voluntarily paid. It can be made before,
simultaneously or after the distraint of personal property.

Levy is effected by writing upon a certificate prepared by the Commissioner or his

duly authorized representative showing the name of the taxpayer and the amounts of the
tax and penalty due from him, a description of the property upon which the levy is made
and giving notice to the Register of Deeds of the city or province where the property is
located and upon the taxpayer.
 Distraint and Levy are summary in nature and either may be pursued at the
discretion of the authorities charged with the collection of tax independently or
simultaneously with civil and criminal action once the assessment becomes final and
demandable.

FORFEITURE

Forfeiture is the divestiture of property without compensation, in consequence of a

default or offense. The forfeiture of chattels and removal of fixtures of any sort shall be
enforced by the seizure and sale or destruction of the specific forfeited property. The
forfeiture of real property shall be enforced by a judgment of condemnation and sale in a
legal action or proceeding, civil or criminal, as the case may be.

Enforcement of Tax Lien

A tax lien is a legal claim or charge on property, whether real or Personal,

established by law as a source of security for the payment of tax obligations. It is more
extensive in scope and is superior to all other claims or preferences.

In seizure for the enforcement of tax lien, the residue, after deducting the tax liability
and expenses, will go to the taxpayer. In forfeiture, all the proceeds of the sale will go to
the coffers of the government.

Compromise (Rev. Reg. No. 7-2001 as amended by Rev. Reg. No. 302002)

Cases Which May Be Compromise:

1. Delinquent accounts
 2. Cases under administrative protest after issuance of the final assessment notice to
the taxpayer which are still pending in the Regional Offices, Revenue District
Offices, Legal Service, Large Taxpayer Service, Collection Service, Enforcement
Service and other offices in the National Office
3. Civil tax cases being disputed before the courts (MTC, RTC, CTA, CA, SC)
4. Collection cases filed in courts 5. Criminal violations other than those already filed
in court or those involving criminal tax fraud cases covered by pre-assessment
notices but taxpayer is not agreeable to the findings of the audit office as confirmed
by the review office.

The Commissioner may compromise any internal revenue tax when:

 A “reasonable doubt as to the validity” of the claim against the taxpayer exists; or
 2. The financial position of the taxpayer demonstrates a "clear inability to pay" the
assessed tax.

The following shall be considered in a tax compromise agreement:

 The taxpayer must have a tax taxpayer without his liability.

 There must be an offer by the taxpayer or Commissioner of an amount to be paid by
the taxpayer
 There must be acceptance by the Commissioner or taxpayer as the case may be, of
the offer in settlement of the original claim.

Cases Which Cannot Be Compromise

1. Withholding tax cases, unless the applicant taxpayer invokes provisions of law that cast
doubt on the taxpayer's obligation to withhold;
2. Criminal tax fraud cases confirmed as such by the Commissioner of Internal Revenue or
his duly authorized representative;

3. Criminal violation already filed in court;

4. Delinquent accounts with duly approved schedule of installment payments;

5. Cases where final reports of reinvestigation or reconsiderations have been issued

resulting to reduction in the original assessment and the taxpayer is agreeable to such
decision by signing the required agreement form for the purpose;

6. Cases which become final and executory after final judgment of a court, where
compromise is requested 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.

Minimum amounts for Compromise Settlement

 For cases of financial incapacity, a minimum compromise rate of 10% of the basic
assessed tax;
 For other cases, a minimum compromise rate equivalent to 40% of the basic
assessed tax.

Compromise versus Abatement

A compromise is a contract whereby the parties, by reciprocal concessions, avoid a

litigation or to put an end to one already commenced. It involves reduction of a taxpayer's
liability. On the other hand, abatement is authorized when the tax appears to be unjust or
excessive.
CIVIL ACTION

After the assessment made by the Commissioner of Internal Revenue has become
final and executory for failure of the taxpayer to dispute the same and appeal the disputed
assessment to the Court of Tax Appeals, the government may institute civil actions to
collect internal revenue taxes in the Regional Trial Court and the Metropolitan Trial Court,
City and municipal courts.

It is resorted to when:

1. A tax is assessed and the taxpayer fails to file an administrative protest by filing a
request for reconsideration or reinvestigation within 30 days from receipt of the
assessment;
2. A protest against the assessment is filed by the taxpayer but the Commissioner's
decision denying in whole or in part the said protest, was not appealed to the Court
of Tax Appeals within 30 days from receipt of such decision.

CRIMINAL ACTION

Criminal action is resorted to, not only for collection of taxes but also for
enforcement of statutory penalties of all sorts. The judgment in the criminal case shall not
only impose the penalty but shall also order the payment of the taxes subject of the criminal
case. The criminal liability arises upon failure of the debtor to satisfy his civil obligation
to pay tax. Hence, the subsequent satisfaction of a tax liability will not operate to extinguish
the criminal liability.

It can maybe pursued by the authorities for the collection of delinquent taxes. An
assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion. The crime
is complete when the violator has knowingly and willfully filed a fraudulent return or neglected to
file a return with intent to evade the tax. If the taxpayer is acquitted, the government may still
collect the tax in a civil action, because the payment of a tax is an obligation imposed by statute
and does not arise from a criminal act.

The criminal complaint may proceed even without prior assessment or computation
of the tax. It must be stressed that a criminal complaint is instituted not to demand payment
but to penalize the taxpayer for violation of the Tax Code.

No Injunction to Restrain Tax Collection

No court shall have the authority to grant an injunction to restrain the collection of
any internal revenue tax, fee or charged imposed by the NIRC, except when the decision
of the Commissioner is pending appeal before the Court of Tax Appeals, the said court
may enjoin the collection of taxes if such collection will jeopardize the interest of the
government and/or the taxpayer.

TAX CREDIT CERTIFICATE (TCC)

1. May be applied against any internal revenue tax except withholding taxes
2. Original copy is surrendered to the revenue office,
3. No tax refund shall be given resulting from availment of incentives granted by law
where no actual payment was made.

Forfeiture of tax refund/tax credit

1. Forfeiture of refund in favor of the government when a refund check or warrant

remains unclaimed or uncashed within 5 years from date of mailing or delivery.
2. Forfeiture of tax credit - a tax credit certificate which remains unutilized after 5
years from date of issue, shall be invalid unless revalidated, and shall not be allowed
 as payment for internal revenue taxes liabilities of the taxpayer, and the amount
covered by the certificate shall revert to the general fund.

Revalidation period of TCCS

 A TCC may be revalidated prior to the expiration of its validity period.

 The revalidated TCC shall be valid for a period of 5 years from the date of issue.

Prescriptive period for collection

Where an assessment was made, the period for collection by judicial action or by
distraint or levy is within 3 years after the date of assessment. Where no assessment was
made and a return was filed, and the same is not false or fraudulent, the period for collection
by a proceeding in court is within 3 years after the return was due or filed whichever is
later, except:

Where a return required to be filed was not filed, or even if filed the same is false
or fraudulent, and made with the intent to evade the tax, the period is ten years after
discovery of the omission to file the return or from the discovery of the falsity or fraud.
The other exception relative to the prescriptive periods for assessment are also applicable.

Where the government makes another assessment on the basis of a re investigation

requested by the taxpayer, or a revised assessment because of an amended return or as a
result of a re investigation asked for by the taxpayer, the period is counted from the last
assessment or the last revised assessment.
 Where the action is brought to enforce a compromise agreement into between the
commissioner and the taxpayer, the prescriptive period is ten years from the time the cause
of action accrues as fixed in the civil code.

The running of the statute of limitation on the making of an assessment, the

beginning of distraint or levy or any proceeding in court for collection is suspended:

1. For the period during which the Commissioner of Internal Revenue is prohibited
from making tax assessment or beginning the distraint or levy or any proceeding in
court and for sixty days thereafter;

2. When the taxpayer requests for a re investigation which is granted by the

commissioner;

3. When the taxpayer cannot be located in the address given by him in the return filed
upon which a tax is being assessed or collected, unless the taxpayer informs the
Commissioner of any change in address;

4. When the warrant of distraint and levy is duly served upon the taxpayer, his
authorized representative, or with a member of his household with sufficient
discretion and no property could be located; and

5. When the taxpayer is out of the Philippines.