For tomorrow's activity/assignment due on 17 February 2015:

(1) In legal sized bondpaper,

(a) Describe separately the procedures on the legal remedies under the Tax Code
available to an aggrieved taxpayer both at the administrative and judicial levels.
(b) Prepare a process and decisional flowchart based on the National Internal Revenue Code
which shall start from the issuance of Letter of Authority (LOA) by the BIR Commissioner /
Regional Director up to the Appeal to the Supreme Court. Indicate the material dates.
2. Prepare for (graded) Oral Exam on Tuesday, 17 February 2015.

REMEDIES OF THE TAXPAYER

1. Administrative

Before payment of taxes:

a. Disputed Assessment/Protest
i. Request for reconsideration - a plea for the re-evaluation of an assessment
on the basis of existing records without need of additional evidence.
It may involve a question of fact or law or both.
ii.Request for reinvestigation - a plea for reinvestigation of an assessment on
the basis of newly-discovered or additional evidence that a taxpayer intends
to present in the reinvestigation. It may also involve question of fact or law
or both.
- Protest is the act by the taxpayer of questioning the validity of the imposition
of the corresponding delinquency increments for internal revenue taxes as
shown in the notice of assessment and letter of demand.
- After BIR issues assessment notice but before payment of tax due, the
taxpayer may file for an administrative protest which may be a petition or
request for reconsideration or reinvestigation of the assessment made by BIR.
The protest must be filed within 30 days from receipt of assessment.
- All relevant documents must be submitted within 60 days from filing of
protest; otherwise, the assessment shall become final and unappealable.
- If the taxpayer fails to respond within fifteen (15) days from the date of
receipt of the Preliminary Assessment Notice, he shall be considered in
default, in which case, a formal letter of demand and assessment notice shall
be caused to be issued, calling for payment of the taxpayers tax liability,
inclusive of the applicable penalties (3.1.2. Revenue Regulations No. 12-99
dated Sept. 6, 1999).
- Issuance of a Formal Letter of Demand and Assessment Notice issued by the
Commissioner or his duly authorized representative shall state the facts, the
laws, rules and regulations, or jurisprudence on which the assessment is
based, otherwise, the formal letter of demand and assessment notice shall be
void. Notice shall be sent to the taxpayer only by registered mail or personal
delivery. If sent by personal delivery, the taxpayer or his duly authorized
representative shall acknowledge receipt thereof in the duplicate copy of the
letter of demand showing the following: (a) his name; (b) signature; (c)
designation and (d) authority to act for and in behalf of the taxpayer; if
acknowledged or received by a person other than the taxpayer himself; and
(d) date of receipt thereof. (3.1.4. Revenue Regulations No. 12-99 dated Sept.
6, 1999).
- If the protest is denied in whole or part, or is not acted upon within one
hundred eighty (180) days from submission of documents, the taxpayer
adversely affected by the decision or inaction
may appeal to the CTA within 30 days from receipt of the said decision, or
from lapse of the one hundred (180)-day period: otherwise, the decision shall
become final and executory and demandable.
- if the decision is adverse to the taxpayer, he may file a motion for
reconsideration or new trial before the same Division of the CTA within 15
days from notice thereof. In case the resolution of a Division of the CTA on a
motion for reconsideration or new trial is adverse to the taxpayer, he may file
a petition for review with the CTA en banc.
- The ruling or decision of the CTA en banc may be appealed with the Supreme
Court through a verified petition for review on certiorari pursuant to Rule 45 of
the 1997 Rules of Civil Procedure.

b. Compromise or Abate
- Once a deficiency tax assessment by the Bureau of Internal Revenue (BIR)
has been rendered final for failure to appeal the disputed assessment or for
some other reasons, the Tax Code provides for two possible remedies:
compromise or abatement.
- The two terms can be confused easily with each other, but compromise and
abatement are different remedies that are applicable to different scenarios. To
help taxpayers distinguish one remedy from the other, Section 204 of the Tax
Code provides that paying any internal revenue tax may be compromised
when there is reasonable doubt in the validity of the claim against the
taxpayer, or the financial incapacity of the taxpayer demonstrates a clear
inability to pay the assessed tax.
- Compromise is an agreement between two or more persons who, amicably
settle their differences on such term and conditions as they may agree on to
avoid any lawsuit between them. It implies the mutual agreement by the
parties in regard to the thing or subject matter which is to be compromised.
Under the New Civil Code, a compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already
commenced.
- In this regard, the Bureau of Internal Revenue (BIR) recently issued Revenue
Memorandum Circular No. 34-2014, dated April 1, providing clarification on
the requirement of doubtful validity of assessment. The BIR emphasized
that an assessment based on the Best Evidence Obtainable Rule shall not be
automatically considered as a doubtful assessment, and that the surrounding
circumstances resulting in the issuance of the assessment must also be
considered.
- Section 204 also sets the minimum compromise rates. For inability to pay
the assessed tax, the minimum compromise rate is equivalent to 10% of the
basic tax assessed, while for other cases, it is 40% of the basic tax assessed.
- On the other hand, the same provision states that abatement or
cancelation of tax liability may be made when the tax or any portion
thereof appears to be unjustly or excessively assessed or the administration
and collection costs involved do not justify the collection of the amount due.
- It is clear from the Tax Code provisions that compromise will involve the
payment of an amount prescribed by law and regulations; while abatement
means there will be no payment involved, as it ultimately cancels out any
liability.
- While the Tax Code provides only for two grounds to compromise a tax
liability, Revenue Regulations No. 30-2002, as amended provide for specific
instances when it can be said that there is doubtful validity in the tax
assessment or financial incapacity on the part of the taxpayer. These
instances, while numerous, are rather specific in nature and must be clearly
proven by the taxpayer. Furthermore, it is now required that the taxpayer first
pay the compromise offer upon the filing of the application, and no application
for compromise shall be processed without the full settlement of the offered
amount.
- As a rule, only the Commissioner of Internal Revenue has the power to
compromise or abate taxes. However, compromise offers involving basic taxes
of P500,000 or less are subject to the approval of the BIR Regional Evaluation
Board. Where the basic tax involved exceeds P1 million, or where the
settlement is less than the prescribed minimum rates, approval shall be made
by the National Evaluation Board. Where the compromise offer is not approved
by the Commissioner of Internal Revenue, it is imperative that the officers who
accepted and approved the compromise offers are only those who are
expressly authorized to do so. In the absence of proof that the compromise
offer was approved and accepted by officers who are authorized by the
Commissioner, the same can be disregarded [Security Bank Corp. vs.
Commissioner of Internal Revenue (G.R. No. 130838, promulgated Aug. 22,
2006)].
- The same, however, is not the case for abatement of a tax liability. Revenue
Regulations No. 13-2001 expressly provide that the Commissioner of Internal
Revenue has the sole authority to abate taxes, penalties, or interest. Unlike
compromise offers, such authority has not been delegated by pertinent
regulations. This authority is generally applicable to surcharge and
compromise penalties only. However, in meritorious instances, the
Commissioner may likewise abate the interest as well as basic tax assessed.

After payment of taxes:

c. Claim for Tax Refund or Tax Credit
- A claim for tax refund or issuance of a Tax Credit Certificate (TCC) partakes of
the nature of a tax exemption. It is elementary that a statute granting tax
exemption is strictly construed against the entity claiming such exemption.
Under the Tax Code, the rules for claims for refunds or TCCs (claims) differ in
the procedural aspect based on the type of tax to be refunded, which can
either be excess unutilized input value-added tax (VAT) or other taxes
erroneously or illegally received by the Bureau of Internal Revenue (BIR).
- The BIR issued Revenue Memorandum Circular (RMC) No. 54-2014 last June
11, 2014. Aside from mentioning the requirement of filing a claim within a
two-year period, as stated in Section 112 of the Tax Code, the circular
provides more of the substantial and procedural requirements for filing claims,
based on the decisions of the Supreme Court in the cases of Commissioner of
Internal Revenue vs. San Roque Power Corp. (G.R. No. 187475, 196113, and
197156 dated 12 Feb. 12, 2013) and Mindanao II Geothermal Partnership vs.
Commissioner of Internal Revenue (G.R. No. 193301 and 194637 dated March
11, 2013).
- On the issue of substance, the taxpayer is now required to submit the
complete set of supporting documents as provided under RMC No. 54-2014,
along with the taxpayers statement under oath attesting to the completeness
of the documents submitted, and that the said documents are the only
documents which the taxpayer shall present to support his claim. For juridical
persons, a sworn statement that the officer signing the affidavit has been
authorized by the Board of Directors of the company is needed. Evidently, in
case the documents submitted by the taxpayer are incomplete, the claim shall
be denied outright.
- For the procedural aspect, the commissioner of Internal Revenue (CIR) has
120 days from the date of filing of the complete documents to decide whether
or not to grant the claim. If the claim is not acted upon by the CIR within the
120-day period as required by law, such inaction shall be deemed a denial.
And in case of full or partial denial of the claim or the inaction within the
prescribed period, the taxpayer may, within 30 days from receipt of the
decision denying the claim or after the expiration of the 120-day period,
appeal the decision or unacted claim to the Court of Tax Appeals (CTA). As
such, the taxpayer is required to observe the 120 + 30-day rule before filing a
judicial claim with the CTA.
- Thus, the taxpayer has the option to either: (1) file the judicial claim within
30 days after the CIR denies the claim within the 120-day period, or (2) file
the judicial claim within 30 days from the expiration of the 120-day period if
the CIR does not act within the said period.
- In case the taxpayer fails to file a judicial claim with the CTA within the 30day period, either from the end of the 120-day period or from the receipt of
the decision of the CIR, the taxpayer loses his right to pursue the claim at the
judicial level. Note further that after the lapse of the 120-day period in the
case of inaction on the part of the CIR, the CIR is no longer obliged to continue
to process the claim. This appears to be one of the major differences between
claims involving the VAT and those involving other taxes.
- On the other hand, in cases involving erroneous or illegally received
payments of taxes, separate refund rules apply.
- The rules on recovery of tax erroneously or illegally collected can be found
under Section 229 of the Tax Code which provides that in case of recovery of
any national internal revenue tax alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected
without authority, or of any sum alleged to have been excessively or in any
manner wrongfully collected, the taxpayer must file a claim with the CIR
within two years from the date of the payment of the tax or penalty regardless
of any supervening cause.
- For a claim based on erroneous payment of tax, various cases decided by
the Supreme Court provides for the requirements as follows: (1) there must be
a written claim filled by the taxpayer with the CIR; (2) the claim must also
categorically demand for reimbursement; and (3) the taxpayer must show
proof of payment of the tax.
- Incidentally, the Supreme Court has also laid down several rules to
determine the commencement of the two-year period as prescribed under

Section 229 of the Tax Code. First, when the tax sought to be refunded is
illegally or erroneously collected, it commences from the date the tax was
paid (Commissioner of Internal Revenue vs. Victorias Milling, G.R. No. L-24108,
Jan. 31, 1968). Second, when the tax is paid only in installments or only in
part, it commences from the date the last or final installment of payment was
made, because for tax purposes, there is no payment until the whole or entire
tax liability is fully paid (Collector of Internal Revenue vs. Prieto, G.R. No. L11976, 29 Aug. 29, 1961). Third, in case the taxpayer merely made a deposit,
it is counted from the conversion of the deposit to payment (Union Garment
vs. Collector of Internal Revenue, CTA Case No. 416, 17 Nov. 17, 1958). And
lastly, in the instance that tax has been withheld from source, it is counted
from the date the withholding tax falls due at the end of the taxable year
(Gibbs vs. Commissioner of Internal Revenue, G.R. No. L-17406, Nov. 29,
1965).
- The claim under Section 229 of the Tax Code refers to: (1) the administrative
claim which the taxpayer must file within two years with the BIR; and (2) the
judicial claim, which must commence with the CTA within the two-year period,
in case the BIR fails to act on the action for refund.
- Based on the rules on claims presented above, what is clear is that in a claim
for unutilized input VAT, the RMC provides for the 120-day period for the CIR
to act on the claim, while in case of a claims for other taxes, the CIR
effectively has the whole two-year period to evaluate the same assuming the
taxpayer immediately files the said claim. Also, based on the RMC, within 30
days from receipt of the CIRs denial of the claim within the 120-day period, or
within 30 days from the lapse of the 120-day period if the CIR does not act on
the claim, the taxpayer must file his judicial claim with the CTA; while for other
taxes, the taxpayer has until the end of the two-year period stated in Section
229 of the Tax Code within which to file a judicial claim. Of course, if the CIR
actually denies the claim within the two-year period, the taxpayer should file a
judicial claim as well with the CTA, likewise within 30 days from the receipt of
the denial. Under both instances, should the taxpayer fail to file their
respective judicial claims within the periods prescribed under the RMC and
Section 229, the taxpayer loses the right to appeal to the CTA.
2. Judicial
a. Civil