NIRC REMEDIES

GOVERNMENT

ADMIN

TAX LIEN
DISTRAINT
LEVY
COMPROMISE &
ABATEMENT
FORFEITURE
SUSPENSION OF
BUSINESS
OPERATIONS
PENALTIES & FINES

REMEDIES

PROTEST
COMPROMISE &
ABATEMENT
TAX REFUND OR
CREDIT

TAXPAYER

JUDICIAL

ASSESSMENT and COLLECTION

Preliminaries

ASSESSMENT
The term assessment may refer to:
The official action of an administrative officer in
determining the amount of tax due from a taxpayer
A notice to the effect that the amount therein stated
is due from the taxpayer as a tax with a demand for
payment of the tax or deficiency stated therein.
Discretionary (MERALCO SECURITIES CORP V. SAVELLANO [ OCTOBER 23, 1982])

ASSESSMENT
Self Assessment (Sec. 56[a])
No intervention from BIR

Deficiency Assessment (Sec. 56[b])

Audit/investigation;
Under declaration of income or non filing of ITR

Jeopardy Assessment
No Audit/Investigation
Reasonable belief that assessment and collection will be

jeopardized by delay

DELINQUENCY V DEFICIENCY
a. Deficiency - amount still due and collectible from

a taxpayer upon audit or investigation. A deficiency

tax has to go through the process of filing the
protest against the assessment by the by the
taxpayer and denial of such protest by the BIR.
[Mamalateo, 2008]

b. Delinquency - failure of the taxpayer to pay the

tax due on the date fixed by law or indicated in the

assessment notice or letter of demand.

ASSESSMENT
METHODS USED FOR INCOME DETERMINATION
Percentage Method- ratio analysis of percentages
Net worth method theory as to the income increase
Bank deposit method- analysis of bank records
Cash expenditure method- excess over expenditures
Unit and value method- gross receipts computation
Third party information or access to records method
Surveillance and assessment method (RAMO- No. 01-2000, XIII)

ASSESSMENT
Modes of Serving Notices:
Personal service (delivery to known address);
Substituted service (leaving notice with someone at

taxpayers known address);

Service by mail

ASSESSMENT PROCESS

PROTEST

ASSESSMENT PROCESS
LETTER OF AUTHORITY (LA)
Letter request to conduct examination/
verification of books and record
Contains
Name of RO
Tax types and taxable period covered
Audit basis
Notation that taxpayer is requested to
verify the validity of such

PROTEST

Mandatory Issuances of Electronic Letter

of Authority
16 Aug 2010

[CIR v. SONY PHILIPPINES [NOVEMBER

17, 2010].
The Letter of Authority

is the authority given to

the revenue officer to perform assessment
functions. There must be a grant of authority before
any revenue officer can conduct an examination or
assessment and the revenue officer must not go
beyond the authority.

ASSESSMENT PROCESS
AUDIT; failure to Complete
Continues without the need to
revalidated the LA; officer
concerned shall be subject to
admin sanctions

ASSESSMENT PROCES
PRELIMINARY ASSESSMENT NOTICE
(PAN)
Issued to inform taxpayer of the findings
of the audit
Service to taxpayer
Assessment conducted was valid
under a LA
In writing containing facts and law on
which the assessment was made
Issued by the CIR/ RRD and
authorized representatives

ASSESSMENT PROCESS

FLD/FAN
NOA constituting a computation of deficiency taxes and

a demand
It must be issued within the prescriptive period of
assessment
It must protested by the taxpayer

ASSESSMENT
REQUISITES of FLD/FAN
Issued after a valid PAN (except when PAN is not required)
Issued by the CIR / duly authorized representative
Service to taxpayer
Within the prescribed period for making assessments
Failure to comply; void assessment
In writing containing facts and law n which assessment was

based
Assessment was validly conducted under a valid LA

ASSESSMENT
PRESCRIPTIVE PERIOD TO ASSESS
General Rule: The governments right to assess

prescribes in 3 years from the date of the last day of

filing.
However:
If the return is filed after such date, the 3 year period is
reckoned from date of actual filing
If the return is filed before the last day, then
considered as filed on last day.

ASSESSMENT
Exceptions: Section 222, Tax Code

provides for the following

instances

False return
Fraudulent return
Failure to file a return
In such cases, the tax may be assessed or a proceeding in court

for collection may be filed without assessment at any time within

10 years from discovery of the falsity, fraud, or omission

PRESCRIPTIVE PERIOD
ASSESSMENT VS. COLLECTION
Regular Return was made

False, Fraudulent, or
Failure to File a Return

Assessment

3 years

10 years from discovery

Collection

5 years from assessment

5 years from assessment

If govt does not make
assessment 10 years
from discovery

COLLECTION
The actual effort exerted by the government to effect

the extraction of what is due from the tax payer

There must be an assessment first before
collection will commence. (Sec. 203)
EXCEPTIONS:

False of fraudulent return with intent to

evade tax
Failure to file a return (Sec 222[1])

COLLECTION
No court shall have the authority to grant n

injunction to restrain the collection of any national

internal revenue tax, fee or charge imposed (Sec 218)

EXCEPT when in the opinion of the CTA

Collection of the tax would jeopardize the government

and/or the taxpayer

Requirement to the taxpayer to deposit the amount
claimed or to file surety bond for not more than double
the amount with the court (RA 9282, Sec 9)

REMEDIES OF THE
GOVERNMENT

OUTLINE
REMEDIES OF THE GOVERNMENT
TAX LIEN
DISTRAINT
LEVY
FORFEITURE
SUSPENSION OF BUSINESS OPERATIONS
PENALTIES & FINES
ABATEMENT & COMPROMISE

TAX LIEN
DEFINITION
It is a legal claim or charge on property, real or personal,

established by law as security in default of the payment

of tax (HSBC v. Rafferty [39 Phil. 105])
NATURE- Superiority
CLAIMANT
Government

PREDICATION
on a tax lien
versus

Private Individual

on a judgment

TAX LIEN
PERSONAL PROPERTIES
Demandability

REAL PROPERTIES
Registration
With Register of Deeds

DISTRAINT
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 voluntary
paid.

DISTRAINT
ACTUAL
Resorted to when at the time required for payment, a

taxpayer fails to pay his delinquent tax obligation

CONSTRUCTIVE
Preventive remedy resorted by the government to

forestall possible dissipation of the taxpayers assets

when delinquency takes place

DISTRAINT OF INTANGILE PROPETIES

STOCKS AND OTHER SECURITIES
Warrant of distraint; service; taxpayer corporate officer of

the company issuing the said stocks/securities

DEBTS AND CREDITS
Warrant of distraint; service; debtor/taxpayer/ possessor

of credit or his agent

BANK ACCOUNTS
Warrant of garnishment; service; taxpayer and back

officer

GARNISHMENT
The taking of personal properties usually

cash or sums of money owned by the

delinquent taxpayer which is in the
possession of a third party.

CONSTRUCTIVE DISTRAINT
WHEN TO ISSUE CD
1. Delinquent taxpayer
2. Taxpayer is retiring from any business subject to tax
3. Taxpayer is intending to leave the Philippines
4. Taxpayer is intending to remove his property therefrom
5. Taxpayer is intending to hide or conceal his property
6. Taxpayer is intending to perform any act tending to

obstruct the proceedings for collecting the tax due or

which may be due from him

CD; PROCEDURE

OBLIGATIONS

Sign Receipt
of property
description
TAXPAYER/
POSSESSOR

Preserve
No alienation

Taxpayer/
Possessor
REFUSAL/FAILURE
TO SIGN

REVENUE
OFFICER

Prepare list
Leave a copy
2 witnesses

LEVY
A 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.

DISTRAINT

LEVY

AS TO PROPERTIES COVERED

Personal

Real
HOW EFFECTED

Seizure;
goods, chattels or effects

Writing;
authenticated certificate;
description of the property
written notice;
Mailing or Service thereof;
Upon ROD and taxpayer

DISTRAINT

LEVY

NOTICE OF SALE

Notice;
Exhibition -2 public places

Office of the Mayor

20 days after levy

Advertisement for sale -30
days
Publication

Entrance of Mun/City Bldg

Conspicuous places
Once every week; 3 weeks in a
newspaper of general circulation

ACQUISITION BY THE GOVERNMENT

Purchase
Forfeiture
CIR in behalf of Natl Govt
IRO conducting the sale
RIGHT OF REDEMPTION
NONE

YES

END

NEXT

SUSPENSION OF BUSINESS OPS

The CIR or his authorized representative may

suspend the business operation and temporarily

close the business of a VAT-registered person for
understatement of taxable sales or receipts by 30%
or more of his correct taxable sales or receipts for
the taxable quarter.

FORFEITURE ( confiscated articles)

The divestiture if property without compensation, in

consequence of a default or offense

SEIZURE

FORFEITURE

Tax lien

In default/ offense

Excess of proceeds of
sale goes to the taxpayer

All proceeds go to
government coffers

FORFEITURE OF GOODS (Sec 225, Tax Code)

SOLD
Forfeited chattels and removable fixtures- auction (Sec 268[B], Tax Code)
DESTROYED

Distilled spirits, liquors, cigars and other manufactured products of

tobacco and all apparatus used in or about the illicit production of such
articles if sale/consumption of the same is injurious to public health of
prejudicial to the enforcement of the law( Sec 262,TAX CODE)
SOLD/DESTROYED
All other articles subject to excise tax; violation of NIRC; CIR-Discretion
(Sec 268[B], Tax Code)

SURCHARGE
25% SURCHARGE
Failure to file any return and pay the tax due thereon;
Unless otherwise authorized by the CIR, filing a return an
internal revenue officer other than with whom the return is
required to be filed;
Failure to pay the deficiency tax within the time prescribed
for its payment in the notice of assessment; or
Failure to pay the full or part of the amount of tax shown on
any return required to be filed, or the full amount of tax due
for which no return is required to be filed, on or before the
date prescribed for payment (Sec. 248(A), NIRC

SURCHARGE
50% SURCHARGE
In case of willful neglect to file the return within the

period prescribed, or in case a false or fraudulent

return is willfully made, the penalty shall be 50% of
the tax or of the deficiency tax. In case of
substantial underdeclaration of taxable sales,
receipts or income or substantial overdeclaration of
deductions, it shall constitute prima facie evidence
of false or fraudulent return.

REMEDIES OF THE TAXPAYER

OUTLINE
REMEDIES OF THE TAXPAYER
PROTEST
COMPROMISE AND ABATEMENT
REFUND or CREDIT

PROTEST

PROTEST

PROTEST
Request for Reconsideration
refers to a plea for reevaluation of an assessment on the

basis of existing records without need of additional

evidence. It may involve both a question of fact or of law
or both

Request for Reinvestigation

refers to a plea for reevaluation of an assessment on the

basis of newly discovered evidence or additional evidence

that a intends to present in the investigation. It may also
involve a question of fact or law or both (see RR No. 12-85)

REQUIREMENTS FOR A VALID PROTEST

1. Must be in writing and addressed to the CIR
2. Must contain the information required
3. The taxpayer must not only show the errors of

the BIR but also the correct computation

It must be filed within the reglementary period of 30

days from receipt of the notice of assessment

CONTENTS OF PROTEST

a. Name of the taxpayer and address for the immediate past 3

taxable years
b. Nature of the request, specifying the newly discovered evidence
he intends to present
c. Taxable periods covered by the assessment
d. Amount and kind of tax involved and the assessment notice and
number
e. Date of receipt of assessment notice or letter of demand
f. Itemized statement of the finding to which the taxpayer agrees (if
any) as basis for the computation of the tax due, which must be
paid immediately upon filing of protest
g. Itemized schedule of the adjustments to which the taxpayer does
not agree

CIR V. FIRST EXPRESS PAWNSHOP [JUNE

16, 2009]
Relevant supporting documents should be understood

as those documents necessary to support the legal

basis in disputing a tax assessment as determined by
the taxpayer. The BIR can only inform the taxpayer to
submit additional documents. The BIR cannot demand
what type of supporting documents should be
submitted. Otherwise, the taxpayer will be at the mercy
of the BIR, which may require the production of
documents that a taxpayer cannot submit (CIR V. FIRST EXPRESS
PAWNSHOP [JUNE 16, 2009]; CIR VS. LA SUERTE CIGAR AND CIGARETTE FACTORY, TELENGTAN BROTHERS AND SONS, INC.,
CTA EB CASE NO. 820 (CTA CASE NO. 7390) JUNE 11, 2012.

LASCONA LAND CO. V. CIR, G.R. NO.

171251, MARCH 5, 2012
FACTS: Taxpayer filed a letter protest

against the Assessment Notice issued

alleging deficiency income tax for the year
1993. The protest was denied by the
Regional Director of the BIR for the reason
that the case was not elevated to the
Court of Tax Appeals as mandated by the
provisions of the last paragraph of Section
228 of the Tax Code. By virtue thereof, the
said assessment notice has become final,
executor and demandable.

LASCONA LAND CO. V. CIR, G.R. NO.

171251, MARCH 5, 2012
HELD: The Supreme Court held that it is not correct to

say that the assessment became final and executory

by the sole reason that the taxpayer failed to appeal
the inaction of the Commissioner within 30 days after
the 180-day reglementary period because in effect, it
limited the remedy of the taxpayer under Section 228
of the NIRC to just one, that is - to appeal the inaction
of the Commissioner on its protested assessment
after the lapse of the 180-day period.

LASCONA LAND CO. V. CIR, G.R. NO.

171251, MARCH 5, 2012
DOCTRINE: Under Section 228, in case of the

inaction of the CIR on the protested assessment,

the taxpayer has two options, either: (1) file a
petition for review with the CTA within 30 days
after the expiration of the 180-day period; or (2)
await the final decision of the Commissioner on
the disputed assessment and appeal such final
decision to the CTA within 30 days from the
receipt of a copy of such decision.

COMPROMISE AND ABATEMENT

REMEDIES AVAILABLE TO BOTH GOVERNMENT AND TAXPAYER

COMPROMISE
Compromise- to reduce the amount of tax payable
Grounds for a compromise:
Doubtful validity of the assessment
Financial incapacity

CAN BE SUBJECT TO COMPROMISE

Delinquent accounts
Cases under administrative protest after issuance of the

FAN to the taxpayer which are still pending in the RO,

RDO, Legal Service, Large Taxpayer Service, Collection
Service, Enforcement Service and other officers of the
National Office
Civil tax cases being disputed before the courts
Collection cases filed in courts
Criminal violations other than those already filed in court
or those involving criminal tax fraud

CAN NOT BE SUBJECT TO COMPROMISE

Withholding tax cases unless the applicant-

taxpayer invokes provisions of law that cast doubt

on the taxpayers obligation to withhold
Criminal tax fraud cases confirmed as such by the

CIR or his duly-authorized representative

Delinquent accounts with duly approved schedule

of installment payments

CAN NOT BE SUBJECT TO COMPROMISE

Cases where the final reports of reinvestigation or

reconsideration have been issued resulting to reduction in the

original assessment and the taxpayer is agreeable to such
decision by signing the required agreement form for the
purpose. On the other hand, other protested cases shall be
handled by the Regional Evaluation Board or the National
Evaluation Board on a case-to-case basis
Cases which become final and executory after final judgment

of a court where compromise is requested on the ground of

financial incapacity of the taxpayer

COMPROMISE
Limits of the Commissioners power to

compromise:
(1) For cases of financial incapacity: a minimum
compromise rate equivalent to ten percent (10%) of
the basic assessed tax
(2) For other cases: a minimum compromise rate
equivalent to forty percent (40%) of the basic
assessed tax

COMPROMISE
Note: When the basic tax involved exceeds One

Million Pesos (P1,000,000), or where the

settlement offered is less than the prescribed
minimum rates, the compromise must be approved
by the Evaluation Board (composed of the
Commissioner and 4 deputy commissioners)

ABATEMENT
An abatement is a diminution or

decrease in the amount of tax imposed

such that to abate is to nullify or reduce
in value or amount.

ABATEMENT
THE GROUNDS FOR ABATEMENT

If the assessment is excessive or

erroneous
If the administration costs involved do not
justify the collection of the amount due

COMPROMISE V ABATEMENT
A compromise is marked by mutual concessions,

whereas in abatement or cancellation, no mutual

concessions between the taxpayer and the CIR are
made ( PEOPLE V. SANDIGANBAYAN [AUGUST 16, 2005].

TAX REFUND or CREDIT

TAX REFUND or CREDIT

TAX REFUND or CREDIT

TABLE OF COMPARISON OF
REMEDIES

TABLES OF COMPARISON OF REMEDIES