TAX REMEDIES

REX B. BANGGAWAN, CPA, MBA

REMEDIES OF THE GOVERNMENT

1. Assessment of tax
Assessment – the official action of an officer authorized by law in ascertaining the amount
due and giving notice to the taxpayer requiring payment within a specified time of the tax due from
him, including penalties and interests

Period of Limitation upon Assessment and Collection

Internal revenue tax shall be assessed within 3 ye4ars from the making of the return. If no
assessment is made, no proceedings in court shall be begun after such 3 years. The 3-year period
shall run from the actual date of filing of the return or from the last day required for filing whichever
is later.

Exception to the 3-year Rule:

1. False or fraudulent return with intent to evade the tax was filed – within 10 years after the
discovery of the falsity or fraud
2. Failure or omission to file return – within 10 years after the discovery of the failure or omission
to file return
3. Written agreement between the CIR and the taxpayer before the expiration of the 3-year period
for the assessment of taxes

Note: The CIR have the authority to compromise the payment of internal revenue tax, cancel or
abate tax liability or credit or refund taxes.
2. Imposition of surcharges and other penalties
3. Civil remedies for the collection of delinquent taxes
A. Summary remedies
a. Distraint of personal property – seizure by the government of real property of the
taxpayer

Constructive distraint may be effected when, in the opinion of the Commissioner,

the taxpayer is:
i. retiring from business subject to tax.
ii. intending to leave the Philippines.
iii. intending to remove his property from the Philippines, hide or conceal
his property or tending to obstruct the proceedings for collecting the tax
due or which may be due.

Who shall implement distraint:

i. Commissioner or his duly authorized representative – if amount involved
is more than P1,000,000
ii. Revenue District Officer – if amount involved is P1,000,000 or less
b. Levy of real property – seizure of real property of taxpayer by the government
B. Judicial action – this may be brought within 3 years after the last day required for filing
the return or from the actual date of filing whichever is later
a. Ordinary civil action
b. Criminal action

Prescriptive Period for Collection:

a. Within 5 years from the assessment of the tax
b. Within the period agreed upon in writing before the expiration of the 5-year period

REMEDIES OF THE TAXPAYER

1. Administrative remedies
A. Before payment of the tax
 a. Filing a petition for reconsideration or investigation
b. Entering into compromise

Compromise is applicable only when:

i. Reasonable doubt as to the validity of claims against the taxpayer exists
ii. Financial position of the taxpayer demonstrates clear inability to pay the
assessed tax

Minimum compromise settlements:

i. Cases of financial incapacity – 10% of the basic assessed tax
ii. Other cases – 40% of the basic assessed tax

If the basic tax exceeds P1 million, or where the settlement offered is less than
the minimum rates, the approval of the Commissioner of the Internal Revenue
and the four deputy commissioners are required (the Evaluation Board).

Limitation of compromise:
All criminal violations may be compromised except:
i. those already filed in court, or
ii. those involving fraud
B. After payment
a. Filing a claim for tax refund
b. Filing a claim for tax credit

Refund or credit of taxes is applicable when:

i. Tax is erroneously or illegally received
ii. Penalty is imposed without authority
iii. Internal revenue stamp is returned in good condition by the purchaser
iv. Unused internal revenue stamp is rendered unfit for use or are proven
destroyed

A return filed showing an overpayment shall be considered as written claim for

credit or refund of taxes.

Limitation of refund:
The taxpayer must file in writing with the Commissioner a claim for credit or
refund within two years after the payment of the tax or penalty.

Abatement or cancellation of tax liability

Abatement or cancellation is applicable only when:
i. The tax or any portion thereof appears to be unjustly or excessively
assessed; or
ii. The administration or collection costs involved do not justify the
collection of the amount due.
2. Judicial remedies
A. Civil action
a. Appeal to the Court of Tax Appeals
b. Action to contest forfeiture of chattels
c. Action for damages
B. Criminal action – filing of criminal complaint against erring BIR officials and employees

THE COURT OF TAX APPEALS

Basis/Intent of Creation:
1. To have a centralized body well-versed in tax matters, a regular court forming part of the judicial
system, which would exclusively hear and determine tax cases
 2. To prevent delay in their disposition in view of backlog of civil and criminal cases in the dockets of
the Court of First Instance

Composition of CTA:
One presiding judge and two associate judges to be appointed by the President

Quorum in the CTA:

Any two judges constitute a quorum and the concurrence of two judges shall be necessary to promulgate
any decision of the court.

Jurisdiction of the CTA:

Exclusive jurisdiction to review by appeal:
1. Decisions of the Commissioner of Internal Revenue in:
a. Cases involving disputed assessment, refunds of internal revenue taxes, fees or other
charges and penalties imposed in relation thereto
b. Other matters arising under the NIRC or other law or part of law administered by the BIR
2. Decisions of the Commissioner of Customs in:
a. Cases involving liability for customs duties, fees or other money charges; seizures,
detention or releases of property affected, fines, forfeiture or other penalties imposed in
relation thereto
b. Other matters arising from the Customs Law or other law or part of law administered by
the BOC
3. Decisions of Provincial or City Boards of Assessment Appeals in:
a. Cases involving the assessment and taxation of real property
b. Other cases arising under the Local Government Code including rules and regulations
relative thereto

Points to Remember with CTA:

1. The CTA has no criminal jurisdiction.
2. The CTA has the power to punish for contempt.
3. The CTA may take cognizance of a claim for damages by a taxpayer arising from the levy made
on his property.
4. Any person, association or corporation adversely affected by a decision or ruling of the
Commissioner of Internal Revenue, Commissioner of Customs or any provincial or city Board of
Assessment Appeals may file an appeal in the Court of Tax Appeals within 30 days after the receipt
of such decision or ruling.
5. The CTA has the power to suspend the collection of tax cases pending appeal when:
a. In the opinion of the court, the collection pending appeal may jeopardize the interest of the
government and/or the taxpayer.
b. The taxpayer is willing to deposit the amount claimed or to file a surety bond for not more
than double of the amount of the tax with the court when required
c. The taxpayer shows that the appeal is not frivolous nor for the purpose of merely to delay
the collection of tax.
6. The CTA may grant injunction without requiring the taxpayer to deposit the amount claimed or to
file a bond when the action of the Commissioner of Internal Revenue is found to be contrary to law.

DUE PROCESS OF TAXPAYER’S REMEDIES

1. Protesting an Assessment
A. Notice of Informal Conference – attend the informal conference which will be held within
30 days upon receipt of the notice
B. Pre-Assessment Notice – notification of the taxpayer of the findings of the BIR
• The taxpayer must respond within 15 days.
C. Issuance of Assessment – the assessment shall inform the taxpayer in writing the law
and the facts on which the assessment is made otherwise it is void
D. Protest or Dispose the Assessment – file a request for reconsideration or reinvestigation
• This must be done within 30 days from the receipt of the decision
 E. Submit Supporting Documents – the taxpayer must submit all relevant supporting
documents
• This must be done within 60 days from the filing of the protest

Note: Decision of the BIR shall state the facts, the law, rules and regulations, or jurisprudence
on which the decision is based, otherwise it is void.

Assuming the protest is finally denied:

a. By a duly authorized representative of the CIR
• The taxpayer may elevate the protest to the CIR within 30 days from the receipt
of the final decision of the authorized representative
• Note: The decision of the representative is not considered final, executory or
demandable.
b. By the Commissioner
• Appeal to the Court of Tax Appeals
F. Appeal to the Court of Tax Appeals – this must be made within 30 days from the receipt
of the final decision.

In addition, the taxpayer can appeal to the Court of Tax Appeals if the motion for
reconsideration is not acted upon by the BIR within 180 days from the filing of the
supporting documentations.

This appeal must be made within 30 days from the lapse of such 180 days.
G. Appeal to the Supreme Court – this is done when final unfavorable judgment is rendered
by the Court of Tax Appeals
• This must be done within 15 days from the receipt of such decision.
2. Recovery of Tax Erroneously or Illegally Paid
A. File a claim for tax refund
• This must be done within 2 years from the date of such illegal or erroneous
payment.
B. Appeal to the Court of Tax Appeals – if denied by the BIR
• This must be done within 30 days from the receipt of the adverse decision on
the claim for refund; AND
• The appeal must be within the same 2-year period.
C. Appeal to the Supreme Court – this is made upon receipt of adverse decision from the
CTA or even without CTA decision if the 2-year period is about to lapse
• This must be done within 15 days from the receipt of the decision of the Court
of Tax Appeals.