TARIFF AND CUSTOMS LAWS

Substantive Aspect of Tariff and Customs Laws

Meaning and Scope
Section 3514 (TCC)
Provides that Tariff and Customs Laws include not only the provisions of the
code itself and regulations pursuant thereto but all other laws and regulation which
are subject to enforcement by the Bureau of Customs or otherwise within its
jurisdiction. It extend not only to the provisions of the Tariff Customs Code but to all
other laws as well; like Central Bank Circulars, the enforcement of which is
entrusted to the Bureau of Customs.
Nature of Customs Duties and Tarif
1.

Custom duties:
Are duties which are one charged upon commodities on their being imported
into or exported out of a country.

2.

Tariff:
Means a book of rates, a table or catalogue drawn usually in alphabetical
order containing the names of several kinds of merchandise with the duties to
be paid for the same as settled or agreed upon between several states that
holds commerce together.

Concept of Goods for Customs duty purposes:

As to Imported Articles:
All articles when imported from any foreign country into the Philippines shall
be subject to duty upon each importation even thought previously exported from
the Philippines. Except as otherwise specifically provided for in the code or other
laws:
As to Exported Articles
Certain articles like specific types of wood, mineral plant, vegetable and
animal products are subject to tariff and premium duties.
Note: Articles: When used with reference to importation or exportation includes
goods, wares and merchandise and, in general anything that maybe made the
subject of exportation and importation.
Pertinent Case:
4 US dollars, having ceased to be legal tender in the Philippines, fall within
the meaning of the term merchandise (Bastida vs. Acting Commissioner of
Customs, et al, L-24011, Oct. 24, 1970)

Articles / Goods Covered under the Tariff and Customs Code:

1. Articles subject to duty
General Rule: All articles when imported from a foreign country including
those previously exported from the Philippines one subject to duty unless
otherwise specifically provided for in the Tariff and Customs Code or other
laws. (Sec. 100, TCS)
2. Prohibited Importations
Classifications:
A.

Articles which are absolutely prohibited:

1.

weapons of war

2.

gambling devices

3.

narcotics or prohibited drugs

4.

immoral, obscene or insidious articles

5.

those prohibited under special laws

B.

Articles Qualifiedly Prohibited:

Refers to those which maybe imported but subject to, and after
compliance with, certain conditions.
Pertinent Cases:
1.

Where such conditions as to warrant lawful importation neither do

nor exist, the legal effects of the importation of qualifiedly prohibited
articles are the same as those of absolutely prohibited articles.
(Auyong Hian vs CTA, 59 SCRA 110)

2.

Prohibited importations one subject to forfeiture whether the shipper

and the consignee are one and the same person. (UTE PATEROR vs.
Bureau of Customs, 193 S 132)

3.

Conditionally-free importations:
These are articles which are exempt from import duties upon
compliance with the formalities prescribed with regulations
promulgated by the Commission of Customs with the approval of the
Secretary of Finance. (Sec. 105, TCC)
This article includes:
1.

Those prohibited for in Sec. 105 of the Tariff and Customs Code;

2.

Those granted to government agencies, government-owned or

controlled corporations with agreement with foreign countries;

3.

Those given to international institutions, entitled to exemption by

agreement or special laws; and

4.

Those that maybe granted by the President upon NEDAs

recommendation.

Liability for Custom Duties

General Rule: All importations / exportation of articles / goods are subject to
customs duties.
Exceptions:
1. Exempt under the TCC.
2. Exemption granted to government agencies, instrumentalities with existing
contracts, commitment, agreements or obligations with foreign countries.
3. Exempt international organizations pursuant to agreements or special laws;
and
4. Exempt by the President upon recommendation of NEDA.
Liability of Importer for Custom Duties:
1. A personal debt which can be discharged only by payment in full thereof;
2. A lien upon the imported article while they are in custody or subject to the
control of the government.
Valuation of the Goods:
Invoice value of the goods plus:
1.

freight

2.

insurance

3.

cost

4.

expenses, and

5.

other necessary expenses.

Note: Imported goods must be entered into a custom house at their port of entry
otherwise they shall be considered as contraband and the importer is liable for
smuggling.
Import entry
It is a declaration in the Bureau of Customs showing particulars of the
imported article that will enable the customs authorities to determine the correct
duties.
1. When importation does begin?
Importation begins when the carrying vessel or aircraft enters the jurisdiction
of the Philippines with the intention to unlade therein.
2. When is it terminated / ended?

Importation is deemed terminated upon payment of duties, taxes and other

charges due upon the articles pr secured to be paid at a port of entry and the
legal permit for withdrawal shall gave been granted or in case said articles
are free of duties, taxes and other charges, until they have legally left the
jurisdiction of the customs (Sec. 1202, TCC)
Note: All imported articles into the Philippines, whether subject to duty or not, shall
be entered through a customs house at a port of entry.
1.

Port of Entry
Means a domestic open to both foreign and continuous trade including airport
of entry.

2.

Exportation
It is the bringing out of goods from the Philippines territorial jurisdiction.

3.

Under Executive Order # 26, Series of 1986, Export taxes, except on logs,
have been suspended

Kinds of Custom Duties

A. Regular / Ordinary Duties
These are duties imposed on imported articles that enter the country of the
Philippines in avoidance with the schedules and classifications provided under
the Tariff and Customs Code.
Classification:
1.

Advalorem Duty
Duty based on the value of the imported article.

2.

Specific Duty
Duty based on the dutiable weight of goods number or measurement.

B. Special Duties
Imposed in addition to regular or ordinary duties principally in order to
protect local industries against unfair competition from foreign manufacturers
or procedures; consumer against possible deceptions; and national interest.
Classifications:
1.

Dumping Duty
Imposed by the secretary of Finance upon the recommendation of the
Tariff Commission when:
a.

The price of the imported article is deliberately or continually fixed

at less than the fair market value or cost of production; and

b.

Importation would cause or likely cause and injury to local industries

engaged in the manufacture or production of the same or similar
articles or prevent their establishment.
Amount of special duty: extent of the under pricing.

2.

Countervailing duty
Special duty imposed on imported articles which are granted any kind or
form of subsidy by the government in the country or origin or exportation,
the importation of which has caused or threatens to cause material injury
to a domestic industry or has materially relaided the growth or, prevents
the establishment of a domestic industry. (RA #8751)
Requisites:
1.

The levy of an excise tax or inland tax or local goods of the same or
similar class as the article imported or the grant of subsidy to the
foreign exporter by his government; and

2.

The importation is likely to insure materially established local

industries or prevent their establishments.
Amount of special duty: Equal to the bounty or subsidy or subvention.

3.

Marking Duty
Special duty of five percent (5%) advalorem imposed or articles properly
marked, collected by the commissioner, except when such article is
exported or destroyed under the customs supervision and prior to final
liquidation of the corresponding entry.
Purpose: To prevent possible deception of the consumers.

4.

Discriminatory/Retaliatory duty
Imposed on imported goods whenever it is found as a fact that the
country of origin discriminates against the commerce of the Philippines in
such a manner as to place the commerce of the Philippines at a
disadvantage compared with the commerce of any foreign country.

5.

Duties imposed under the Flexible Tariff Clause (Sec. 401, TCC)
Import duties which are modified by the President upon investigation of
the Tariff Commissions and recommendation of the National Economic
Development Authority in the interest of national economy, general
welfare and national security.

The President is given by the Tariff and Customs Code ample powers to adjust tariff
rates Sec. 401 of TCC; empowers the president to:
1.

Increase, reduce, or remove existing protective rates of import duty;

2.

Establish import quota or to ban imports of any commodity;

3.

Impose and additional duty on all imports not exceeding 10% advalorem
whenever necessary.

Limitations imposed regarding the Flexible Tariff Clause:

1. Conduct by the Tariff Commission of an investigation in which a public
hearing shall be hold wherein interested parties shall be afforded reasonable
opportunity to be present, produce evidence and to be heard;
2. The commission shall also hear the views and recommendations of any
government office, agency or instrumentality concerned;
3. The commission shall submit their findings and recommendations to the
NEDA within 30 days after the termination of the public hearings. The NEDA
thereafter, submits its recommendation to the President.

Administrative Aspect of
Tariff and Customs Laws
Agencies directly concerned with Tariff and Customs Administration:
TARIFF COMMISSION
Officials of the Tariff Commission are the chairman and 2 member
Commissioners, all appointed by the President.
Functions:
A. Investigative Powers:
1.

Administration and the fiscal and industrial effect of the Tariff and
Customs laws of this country now in force or when hereafter be enacted;

2.

Relations between the rates of duty on raw materials and the finished or
partly finished products;

3.

Effects of ad valorem and specific duties and of compound, specific and

ad valorem duties;

4.

All questions relative to the arrangement of schedules and classification

of articles in several sections of the tariff law;

5.

Tariff relations between the Philippines and the Foreign countries,

commercial treaties, preferential provisions, economic alliances, the effect
of export bounties and preferential transportation rate;

6.

Volume of importations compared with domestic production and

consumption;

7.

Conditions, causes and effects relating to completion of foreign

industries with those of the Philippines, including dumping and cost of
production;

8.

In general, to investigate the operation of customs and tariff laws,

including their relations to the national revenues, their effect upon the
industries or labor of the country and to submit reports of its
investigation;

9.

Nature and composition and the classification and heading number for
customs revenue and other related purposes.

B. Administrative Assistance to the President and Congress

1.

Ascertain conversion costs and costs of production:

a.

In the principal growing, producing or manufacturing:

1.

Centers in the Philippines whenever possible;

2.

Centers in foreign countries; whenever necessary;

b.
2.

Including effects of tariff modifications or import restriction or prices.

Select and describe representative articles imported to the Philippines

similar to or comparable with those locally produced

3.

Ascertain imposts costs of such representative articles so selected.

4.

Ascertain the growers producers or manufacturers selling prices.

5.

Submit annual reports of these to the President of the Philippines,

copies of which shall be furnished to the NEDA, BSP, Dept. of Finance and
the Bureau of Investments.

BUREAU OF CUSTOMS
Composed of one chief and 2 assistant chiefs known as commissioner of
customs, appointed by the President respectively.
Functions of the Bureau of Customs (CASE)
1. Control smuggling and related frauds.
2. Assessment and collection of Revenues from imported articles and all other
impositions under the tariff and customs laws.
3. Supervision and control over due entrance and clearance of vessels and
aircraft engaged in foreign commerce.
4. Enforcement of Tariff and Custom Code and related laws.
5. Supervision on control over the handling of foreign mails arriving in the
Philippines.
6. Supervise and control all import and export cargos for the protection of the
government revenue.
7. Exclusive original jurisdiction over seizure and forfeiture cases under the tariff
and customs laws.
Other Powers:
1. Supervision of collection districts and ports of entry, coast ruse trade, vessels
an aircrafts used in foreign trade;
2. Ascertainment, collection and recovery of import duty;
3. Warehousing of imported articles; and

4.

Administrative proceedings like search , seizure and arrest, including

forfeitures.

Commissioner of Customs is vested with authority to:

A.

Assess

B.

Collect
1.

All lawful revenues from imported articles;

2.

All other dues, fees, charges, fines and penalties.

Procedural Aspect of
the Tariff and Customs Laws
Nature of Customs Protest; Seizures and Forfeiture cases
There are two kinds of proceedings in the Bureau of Customs, these are:
a. Customs protest cases- deal safely with liability for customs, duties, fees and
other charges.
b. Seizure and forfeiture cases- refer to matters involving smuggling or the act
of any person who fraudulently imports or brings into the Philippines, or
assists in so doing, any article contrary to law, or shall receive, conceal, buy,
sell or in any manner facilitate the importation, concealment, or sale of such
auricles after importation, knowing the same to have been imported contrary
to law smuggling includes the exportation act of articles in a manner contrary
to law. (Sec. 3154, TCC).
Procedure in Custom Protest Cases
These are the steps:
1.

2.

The collector of customs shall cause all the articles entering the jurisdiction
of his district and destined for importation through his port to be entered at
the customs house. He shall appraise and classify such articles, and shall
assess and collect the duties, taxes and other charges thereon. He shall also
hold possession of all imported articles upon which duties, taxes, and other
charges have not been paid of secured to be paid.
The importer / owner makes the payment after the final liquidation.

3.

The importer / owner adversely affected by the collectors ruling may file a
written protest with the Collector of custom at the time of payment or within
15 days thereafter.

4.

The Collector of Customs issues an order for hearing within 15 days from
receipt of the protest and renders his decision within 30 days from the
termination of hearing.

5.

In case an adverse decision is rendered within the 30-day period from the
termination, the importer/owner may appeal to the Commissioner of Customs
within 15 days after notification of decision or lapse of the 30-day period to
decide. The importer/ owner may give written notice to the collector and one
copy furnished to the Commissioner of his desire to have the matter reviewed
by the Commissioner. The Collector shall forthwith transmit all the seconds of
the proceedings to the Commissioner.

6.

In case an adverse decision is rendered, the importer/ owner may appeal to

the Court of Tax Appeals within 30 days from receipt of the decision; and

7.

In case an adverse decision is still rendered, the importer/ owner may

appeal to the Court of Appeals and the Supreme Court.

Automatic Review in Customs Proceedings

Whenever the decision of the Collector is adverse to the Government, said
decision is automatically elevated to the Commissioner for review, and if such
decision is affirmed by the commissioner, the same shall be automatically
elevated to and finally received by the Secretary of Finance.
Rationale: It is intended to protect the interest of the Government in the
collection of taxes and custom duties in seizures and protest cases. Moreover, a
favorable decision will no be appealed by the taxpayer and certainly a collector
will not appeal his own decision (See Yaokasin vs. Commissioner of Customs, et
al. G.R. No. 84111; Dec. 22, 1989.)
Automatic Review Applies to:
1)

Custom Protest Cases

2)

Seizures and Forfeiture Cases

Custom Seizures and Forfeiture Cases

Basic Concepts:
a)

Jurisdiction of Customs in Seizures and Forfeiture

Related Provisions:
The territorial jurisdiction of the Bureau of Customs embraces all seas within
the jurisdiction of the Philippines, and over all coasts, ports, harbors, bays,
rivers and inland waters whether navigable or not from the sea. (Sec. 603,
TCC)
Extra-Territorial jurisdiction
(Right of Hot Pursuit):
Whether a vessel becomes a subject to a seizure by reason of an act done in
the Philippine waters, in violation of the Tariff and Customs Laws, a pursuit of
such vessel, begins with the jurisdictional waters may contain beyond the
maritime zone, and the vessel may be seized in the high seas. (Sec. 603,
TCC).
Imported articles which Maybe the subject to seizures for violation of the
Tariff and Customs laws maybe pursued in their transportation in the
Philippines by land, water or air, and such jurisdiction exerted over them at
9

any place therein as may be necessary for the due enforcement of the law.
(Sec. 603, TCC)
Pertinent Case:
The Supreme Court upheld the seizure and forfeiture as valid despite the fact
that the importation had not yet begun and that the seizure was affected
outside the Philippine waters. The Supreme Court held that the authority of a
nation within its own territory is absolute and exclusive. The power to secure
itself from injury may certainly be exercised beyond the limits of its territory.
(Qiluh Asaali, et al. vs. Commissioner of Customs, L- 24170, Feb. 28, 1969).
b)

Place where Searchers and Seizures may be conducted

1)

Right of the Police \ officers to Enter Enclosure

Any person exercising police power conferred under such code may at
any time enter, pass through, or search any land or enclosure, or any
warehouse, store or other building, not being a dwelling house.
A warehouse, store or other building or enclosure used for the
keeping or storage of article does not become a dwelling house within the
meaning hereof merely by reason of the fact that a person employed as a
watchman lives in the place, nor will the fact that his family stays there
with him alter the case.

2)

Search of Dwelling House

A Dwelling house may be entered and searched only upon warrant
issued by a judged.
Note: Except in the case of the search of a dwelling house, persons
exercising police authority under the customs may effect search and
seizure without a search warrant in the enforcement of custom laws.

3)

Right to search vessels or Aircraft and Persons or Articles

Conveyed therein
It is lawful for any person exercising police authority under the TCC to go
aboard any vessel or aircraft within the limits of any Collection district and
to inspect, search and examine said vessel or aircraft and any other trunk,
package, box as envelope on board, and to search any person on board
the said vessel or aircraft if underway, to use all necessary force to
compel compliance; and if it shall appear that any breach or violation of
the customs and tariff laws of the Philippines has been committed,
whereby or in consequence of which such vessel or aircraft, or the article,
or any part thereof on, on board of or imported by such vessel or aircraft
is liable to forfeiture, to make seizure of the same.
Note: 1) Such power shall extend to the removal of any false bottom,
partition, bulkhead or other obstruction. 2) No proceeding herein shall
give rise to any claim fro the damage caused to the article or vessel or
aircraft.

1)

Right to Search Vehicles, Beast and Persons

It shall also be lawful for a person exercising authority to open and
examine any box, trunk, envelope or other container, wherever found
when he has reasonable cause to suspect the presence of dutiable or
10

prohibited article or article introduced into the Philippines contrary to law

and likewise to stop, search ad examine any vehicle, beast or person
reasonably suspected of holding or conveying such article.
2)

Search of Persons Arriving from Foreign Countries

All persons coming in the Philippines from the foreign countries shall be
liable to detention and search by the Customs Authorities under such
regulations as may be prescribed relative thereto. (Sec. 603, TCC)

Non-necessity of Search Warrant

General Rule: Persons exercising police authority under the customs laws may
effect search and seizures without a search warrant in the enforcement of customs
laws. (See Sec. 2208, TCC)
Exception: In the case of a dwelling house (Pacis etc. vs. Pamaran, March 15,
1974).
Reason: On grounds of practicality.
Pertinent Cases on Searches and Seizures
1)

The legality of a search can be contested only by the party whose rights
have been impaired thereby and that the objection to an unlawful search and
seizure is purely personal and cannot be availed of by third parties. (Nasiad,
et al. vs. CTA, Nov. 29, 1994)

2)

Warrants of seizure and detention issued by the Collector of C covering the

seizure of imported goods are not general warrants issued in violation of
Section 3 (now section 4), rule 126 of the Rules of Court. Upon effecting the
seizure of the goods, the Bureau of Customs acquired exclusive jurisdiction
not only over the case but also over the goods seized for the purpose of
enforcing the tariff and Customs laws. (Chia vs. Acting Collector of Customs,
Sept. 26, 1989)

3)

The proceedings upon search warrants must be absolutely legal, for there
is not a description of process known to the law, the execution of which is
more distressing to the citizen. Perhaps there is none which excites such
intense feeling in the consequence of its humiliating and degrading effect.
The warrants will always be constured strictly without however, going the full
length of requiring technical accuracy. No presumptions of regularity are to be
invoked in aid of process when an officer undertakes to justify under it. (Uy
vs. BIR, Oct. 20, 2000)

Customs Forfeiture Actions

1. What kind of Actions are Customs Forfeiture?
An action for the forfeiture of seized goods in the Bureau of Customs is an
action in rem, or action taken against the Imported goods themselves
independently arising from any criminal action or action in personam that
may result as a consequence of a violation of an existing law. Lack of
knowledge by the owner does not generally render the vessel immune from
forfeiture. However, the forfeiture of a private carrier used in the conveyance
11

of illegally imported or exported articles requires knowledge on the part of the

carrier-owner or his agent of the unlawful act. A prima facie presumption shall
exist against the vessel, vehicle or aircraft under any of the following
circumstances:
1.

If the conveyance has been used for smuggling at least twice before;

2.

If the owner is not in the business for which the conveyance is generally
used; and,

3.

If the owner is not financially in a position to own such conveyance.

Pertinent Cases:
Acting Commissioner of Customs
vs. CTA
The dismissal of the criminal charge in the Fiscals office against respondent
Andrulis does not constitute re judicata in the forfeiture proceedings. Forfeiture
is in rem, whereas a criminal action is in personam. Conviction in the criminal
action is not a bar to forfeiture. Results of a criminal proceeding being
dependent on the evidence therein will not necessarily influence judgment in
the forfeiture proceedings.

Llamado vs. Commissioner of Customs

123 SCRA 118
A Cessna plane carrying persons engaged in the smuggling of untaxed blue
seal cigarettes, landed at an airstrip in Alabat, Quezon Province. The plane
was also used to bring in de gaza kerosene lanterns and kerosene used to
light the airstrip to facilitate the loading of the cigarettes. The plane was
subject to forfeiture pursuant to Sec. 2530 (a) of the Tariff and Customs Code.
It is not necessary that the vessel or aircraft must carry the contraband. It is
not likewise essential that the vessel or aircraft must come from a foreign
country.

Commissioner of Customs vs.

CTA and Jose Pascual
138 SCRA 581
The Supreme Court ruled that the forfeiture of Pascuals vessel used in the
illegal importation of untaxed cigarettes is justified.
Forfeiture, according to the Citing the case of Vierneya vs. Commissioner of
Customs (July 30, 1968), is in the nature of proceedings in rem and is directed
against the res. The fact that the owner of the vessel had no actual
knowledge that the vessel was illegally used does not render the vessel
immune from forfeiture. This is so because the forfeiture action is against the
vessel itself.
Note: The said vessel was duly authorized to engage in coasturse trade but
has no certificate of public convenience.

12

Transglobe International Inc.

vs. Court of Appeals
G.R. No. 126634,
January 25, 1999.
Forfeiture of seized goods in the Bureau of Customs is a proceeding against
the goods and not against the owner. It is the nature of a proceeding in rem,
i.e. directed against the res or imported article and entails a determination of
the legality of their importation. In this proceeding, it is in legal
contemplation the property itself which commits the violation and is treated
as the offender, without reference whatsoever to the character or conduct of
the owner.

2. Forfeiture Cases and the Doctrine Primary Jurisdiction

The Doctrine of primary jurisdiction provides that the Bureau of Customs
acquired exclusive jurisdiction over imported goods for the purpose of the
enforcement of the Customs laws from the moment the goods are actually in
its possession or control even if no warrant of seizure or detention had
previously been issued by the collector of the Customs. Primary jurisdiction is
vested in seizures and forfeiture proceedings in the collector and the
Commissioner or the Customs to the exclusion of the regular courts.
(Commissioner of Customs vs. Navarro, L-33146, May 31, 1977)
Rationale of the doctrine: It is anchored on the policy of placing no
necessary hindrance on the Governments drive not only to prevent
smuggling and other frauds upon Customs but also to render effective the
collection of import and export duties duet to the State. (Jao, et, al. vs. Court
of Appeals, et al. G.R. Nos. 104604 and 111223, Oct. 6, 1995).
Pertinent Cases:
1.

Proceedings for the forfeiture of goods illegally imported are civil and
administrative not criminal in nature since they do not result in the
conviction of the wrongdoer nor in the imposition upon him of a penalty
(Collector vs. Villaluz, L-34038, June 18, 1976; Commissioner vs. Navarro,
supra; Republic vs. Bocar, supra).

2.

Proof beyond reasonable doubt is not required to warrant forfeiture

(Feeder International vs. CA, 197 SCRA 842).

3.

The Collector of Customs, when sitting in forfeiture proceedings,

constitutes a tribunal upon which the law expressly confess jurisdiction to
hear and determine all questions touching on the forfeiture and further
disposition of the illegal imported mechanics (Government of the P.I. vs.
Gale, 24 Phil 95; Auyong Hian vs. CTA, 19 SCRA 10).

4.

Jurisprudence is replete with cases which have held that regional trial
courts are devoid of any competence to pass upon the validity of seizure
and forfeiture proceedings conducted in the Bureau of Customs and to
enjoin, or otherwise interfere with these proceedings. The Collector of
Customs sitting in the seizure and forfeiture proceedings has exclusive
jurisdiction to hear and determine all questions touching on the seizure
and forfeiture proceedings of dutiable goods. The regional trial courts are
preclude from assuming cognizance over such even though petition for
certiorari, prohibition, or mandamus.

13

5.

Even if a Customs seizure is illegal, exclusive jurisdiction still belongs to

the Bureau of Customs (Jao, et. al vs. CA, supra).

6.

To seize or not to seize is discretionary on Customs, so mandamus does

not lie. However, in case of grave abuse by customs, petitioner can file
certiorari proceedings (Provident Tree Farms, Inc. vs. Batario, Jr. etc et. al
G.R. No. 92285, March 28, 1994).

3. Procedure Governing Seizure and Forfeiture Cases

The steps are the following:
1.

The imported articles are seized and a warrant for the detention of the
property is issued by the collector of Customs;

2.

If the owner or importer desires to secure the release of the property for
legitimate, the Collector may surrender it upon the filing of a sufficient
bond; provided that the articles the importation of which is prohibited by
law shall not be released under bond.

3.

The Collector of Customs makes a report of the seizure to the seizure to

the Commissioner on Audits.

4.

The Collector shall give the owner or importer of property or his agent a
written notice of the seizure and shall give him an opportunity to be
heard;

5.

Notice to an unknown owner shall be effected by posting for fifteen

days (15) days in the public corridor of the custom-house of the district in
which the seizures was made, and, in the discretion of the Commissioner
by publication in a newspaper or by other means a he shall consider
desirable;

6.

The Collector of Customs schedules the hearing and renders his

decision after the hearing is conducted;

7.

In case the decision of the Collector of Customs is adverse to the

importer/ owner, within fifteen (15) days after notification in writing by the
collector of his action or decision the importer/ owner may give written
notice to the Collector and one copy furnished to the Commissioner of his
desire to have the matter reviewed by the Commissioner. Thereupon, the
collector shall forthwith transmit all the records of the proceeding to the
Commissioner;

8.

In case the decision of the collector of Customs is affirmed by the

Commissioner of Customs, or in case of inaction on the part of the
Commissioner of Customs, the importer/ owner may appeal to the court of
Appeals within 30 days from notice of the decision; and

9.

In case an adverse decision is still rendered, the importer/ owner may

appeal to the Court of Appeals and the Supreme Court.
14

Note: If the Collector renders a decision adverse to the Government, such

decision shall automatically, be elevated to and reviewed by the
Commissioner; and if the Collectors decision is affirmed by the
Commissioner, such decision shall be automatically elevated to, and be
finally be reviewed by the secretary of Finance.
If within 30 days from receipt of the record of the case by the
Commissioner or by the Secretary of Finance, as the case may be, no
decision is rendered by either of them, the decision under review shall
become final and executory.

Settlement of Seizures
Subject to the approval of the commissioner of the district collector may
while the case is still pending except when there is fraud:
a)

Accept the settlement of any seizure case- provided that the owner,
importer, exporter or consignee or his agent shall offer to pay a fine; or

b)

In case of forfeiture- the owner, importer, exporter, consignee or his

shall offer to pay for the domestic market value of the seized article.
Note: The commissioner may accept the settlement of any seizure case on
appeal in the same manner.
Effect of Settlement: The property shall be forthwith released and all the
liabilities which may or might attack to the property by virtue of the offense
which was the occasion of the seizure and all the liability which might have
been incurred under any cash deposit or bond given by the owner or agent in
respect to such property shall be deemed to be discharged.
Settlement of any seizure case shall not be allowed:
a.

where the importation is absolutely prohibited or,

b.

Where the release of the property could be contrary to the law.

Pertinent Cases:
1)

Redemption of forfeited property is unavailing of three (3) instances:

a)

when there is fraud,

b)

where the importation is absolutely prohibited, or

c)
2)

Where the release of the property would be contrary to law.

(Transglobe International, Inc. vs. C.A, supra)

The fraud contemplated by law must be actual and not constructive. It

must be intentional fraud, consisting of deception willfully and deliberately

15

done or resorted to in order to induce another to give up some right.

(Farolan vs. CTA and Bagong Buhay Trading, 217 SCRA 298)

Remission of Customs, Duties and Compromise

The Collector of customs has the discretion
a)

Remit the assessment and collection of customs duties, taxes and other
charges where the aggregate amount is less than ten (10) pesos; and

b)

He may dispense with the seizure of article of the less than ten ( 10) pesos
in value except:
1)

in cases of prohibited importation; or,

2)

habitual or intentional violation of tariff and customs laws.

Subject to the approval of the Secretary of Finance, the Commissioner of

Customs may compromise cases involving the imposition of fines, surcharges and
forfeitures unless otherwise specified by law.

Administrative Penalties under the Tariff and Customs Code

These include:

a.

a.

Surcharges

b.

Fines

c.

Forfeitures

The code imposes surcharges for:

1.

failure to pay liquidated charges;

2.
3.

unauthorized withdrawal of imported articles from bonded warehouses;

failure to supply the consular or invoice when acquired;

4.

undervaluation, misclassification or misdeclaration; and,

5.

failure or refusal to give evidence or submit documents for examination

b.

A fine may be imposed in the following case:

1.

Any dutiable article is found in the baggage of an arriving passenger

which is not included in the baggage declaration;

2.

breach of bond;

3.

unlawful boarding as leaving of vessel or aircraft;

4.

unloading of cargo before arrival at ports of destination, or at improper

time or place after arrival; and

16

5.

failure to supply the requisite manifest.

c. The penalty of forfeiture is imposed in the cases enumerated in

Section 2530 of the Tariff and Customs Code.
The requisite for forfeiture are:
1. The wrongful making by the owner, importer, ex-porter or consignee
of
any declaration or affidavit or the wrongful making as delivery by
the same persons of any invoice, letter or paper touching on the
importation or exportation of merchandise; and
2. That such declaration, affidavit, invoice, letter or paper I false.

Remedies under the

Tariff and Customs Code
A.

Government Remedies:
a.

Extrajudicial
1.

Enforcement or tax lien

A tax lien attaches on the goods, regardless of the ownership while still
in the custody or control of the government
Proceeds of sale are applied to the tax due. Any deficiency or excess is
for the account or credit, respectively of the taxpayer
This is availed of when the importation is neither nor improperly made

2.

Seizures
Generally applied when the penalty is fine or forfeiture which is
imposed when the importation is unlawful and it may be exercised
even where the articles are not or no longer in Customs Custody,
unless the importation is merely attempted.
In the case of attempted importation, administrative fine or
forfeiture may be affected only;
a.
b.

3.

while the goods are still within the customs jurisdiction, or

in the hands or under the control of the importer or person who is
aware thereof.

Sale of Property
Property in the customs custody shall be subject to sale under the
following conditions;
a.

abandoned articles;
17

b.

articles entered under warehousing entry not

withdrawn nor
the duties and taxes paid thereon within the period provided under
Section 1908, TCC;

c.

seized property, other than contraband, after liability to sale shall

have been established by proper administrative or judicial
proceedings in conformity with the provision of this code: and

d.

Any articles subject to a valid lien for customs duties, taxes or

other charges collectible by the Bureau of Customs, after the
expiration of the period allowed for the satisfaction of the same.

Note: Goods in the collectors possession or of Customs authorities

pending payment of customs duties are beyond the reach of attachment.
b.

Judicial Action
The tax liability of the importer constitutes a personal debt to the
government, enforceable by action (Sec. 1204, TCC)
This is availed of when the tax lien is lost by the release of the goods.

B.

Taxpayers Remedies
Administrative Recourse
Claim for refunda written claim for refund may be
importer:
1.

submitted by the

In abatement uses such as:

a.
b.

on missing packages;
deficiencies in the contents of packages or shortage before arrival of
the goods in the Philippines;

c.

articles lost or destroyed after such arrival,

d.

articles lost or destroyed

e.

dead or injured animals; and

f.

for manifest classical errors; (see section 1701-1708, TCC)

2.

Judicial relief
In drawback cases where the goods are re-exported
a.

Protest
see the earlier discussions on Customs Protest Cases

b.

In seizure cases
see earlier discussion on the subject

18

c.Settlement of case by the payment of fine or redemption of forfeited

property
see earlier discussions on the subject
Note: The owner or importer may abandon either expressly or By
importation in favor of the Government thus relieving himself of the tax
liability but not from the possible criminal liability.
The taxpayer may appeal to the Court of Appeals which has exclusive
jurisdiction to review decisions of the Commissioner of Custom in cases
involving:
a)
b)

liability for customs duties, fees or other money charges;

seizures, detention or release of property affected;

c)

fines forfeitures or other penalties imposed in relation thereto; and

d)

other matters arising under the customs Law or other laws

administered by the Revenue of Customs.

Remedies of the Government

Enumeration of the Remedies
Administrative
1.

Distraint of Personal Property

2.

Levy of Real Property

3.

Tax Lien

4.

Compromise

5.

Forfeiture

6.

Other Administrative Remedies

Judicial
7.

Civil Action

8.

Criminal Action

Distraint of Personal Property

Distraint- Seizure by the government of personal property, tangible or
intangible, to enforce the payment of faces, to be followed by its public sale, if the
taxes are not voluntarily paid.
a.

Actual There is taking of possession of personal property out of the

taxpayer into that of the government. In case of intangible property. Taxpayer
is also diverted of the power of control over the property;

b.

Constructive The owner is merely prohibited from disposing of his

personal
property.

19

Actual Distraint.
Made on the property only of a
delinquent taxpayer.
There is actual taking or possession of
the property.
Effected by having a list of the distraint
property or by service or warrant of
distraint or garnishment.
An immediate step for collection of taxes
where amount due is definite.

Constructive Distraint
May be made on the property of any
taxpayer whether delinquent or not
Taxpayer is merely prohibited from
disposing of his property.
Effected by requiring the taxpayer to
sign a receipt of the property or by
leaving a list of same
Such immediate step is not necessary;
tax due may not be definite or it is
being questioned.

Requisites:
1. Taxpayer is delinquent in the payment of tax.
2. Subsequent demand for its payment.
3. Taxpayer must fail to pay delinquent tax at time required.
4. Period with in to assess or collect has not yet prescribed. In case of
constructive distraint, requisite no. 1 is not essential (see Sec. 206 TC)
When remedy not available:
Where amount involved does not exceed P100 (Sec. 205 TC). In keeping
with the provision on the abatement of the collection of tax as the cost of same
might even be more than P100.
Procedure:
1. Service of warrant of distraint upon taxpayer or upon person in possession of
taxpayers personal property.
2. Posting of notice is not less than two places in the municipality or city and
notice to the taxpayer specifying time and place of sale and the articles
distrained.
3. Sale at public auction to highest bidder
4. Disposition of proceeds of the sale.
Who may effect distraint
1. commissioner
or
his
due
representative

authorized

Amount Involved
In
excess
of
P1,000,000.00
P1,000,000.00 or less

2. RDO
How Actual Distraint Effected
1. In case of Tangible Property:
a. Copy of an account of the property distrained, signed by the officer,
left either with the owner or person from whom property was taken, at
20

the dwelling or place of business and with someone of suitable age and
discretion
b. Statement of the sum demanded.
c. Time and place of sale.
2. In case of intangible property:
a. Stocks and other securities
Serving a copy of the warrant upon taxpayer and upon president,
manager, treasurer or other responsible officer of the issuing
corporation, company or association.
b. Debts and credits
1.

Leaving a copy of the warrant with the person owing the debts or
having in his possession such credits or his agent.

2.

Warrant shall be sufficient authority for such person to pay CIR

his credits or debts.

c. Bank Accounts garnishment

1.

Serve warrant upon taxpayer and president, manager, treasurer

or responsible officer of the bank.

2.

Bank shall turn over to CIR so much of the bank accounts as may
be sufficient.

How constructive Distraint Effected

1. Require taxpayer or person in possession to
a.

Sign a receipt covering property distrained

b.

Obligate him to preserve the same properties.

c.

Prohibit him from disposing the property from disposing the property in
any manner, with out the authority of the CIR.

2. Where Taxpayer or person in possession refuses to sign:

a.
b.

Officer shall prepare list of the property distrained.

In the presence of two witnesses of sufficient age and discretion, leave
a copy in the premises where property is located.

Grounds of Constructive Distraint

1. Taxpayer is retiring from any business subject to tax.
2. Taxpayer is intending to leave the Philippines; or
3. To remove his property there from.
4. Taxpayer hides or conceals his property.
5. Taxpayer acts tending to obstruct collection proceedings.

21

Note:
1. Bank accounts may be distrained with out violating the confidential nature of
bank accounts for no inquiry is made. BIR simply seizes so much of the
deposit with out having to know how much the deposits are or where the
money or any part of it came from.
2. If at any time prior to the consummation of the sale, all proper charges are
paid to the officer conducting the same, the goods distrained shall be
restored to the owner.
3. When the amount of the bid for the property under distraint is not equal to
the amount of the tax or is very much less than the actual market value of
articles, the CIR or his deputy may purchase the distrained property on behalf
of the national government.
Levy of Real Property
Levy Act of seizure of real property in order to enforce the payment of
taxes. The property may be sold at public sale, if after seizure; the taxes are not
voluntarily paid. The requisites are the same as that of distraint.
Procedure:
1. International Revenue officer shall prepare a duly authenticated certificate
showing
a. Name of taxpayer
b. Amount of tax and
c. Penalty due.
-

enforceable through out the Philippines

2. Officer shall write upon the certificate a description of the property upon
which levy is made.
3. Service of written notice to:
a.

The taxpayer, and

b.

RD where property is located.

4. Advertisement of the time and place of sale.

5. Sale at public auction to highest bidder.
6. Disposition of proceeds of sale.
The excess shall be turned over to owner.

Redemption of property sold or forfeited

a. Person entitled: Taxpayer or anyone for him

22

b. Time to redeem: one year from date of sale or forfeiture

-

Begins from registration of the deed of sale or declaration of forfeiture.

Cannot be extended by the courts.

c. Possession pending redemption owner not deprived of possession

d. Price: Amount of taxes, penalties and interest thereon from date of
delinquency to the date of sale together with interest on said purchase price
at 15% per annum from date of purchase to date of redemption.

Distraint and Levy compared

1. Both are summary remedies for collection of taxes.
2. Both cannot be availed of where amount involved is not more than P100.
3. Distraint personal property
Levy real property
4. Distraint forfeiture by government, not provided
Levy forfeiture by government authorized where there is no bidder or the
highest bid is not sufficient to pay the taxes, penalties and costs.
5. Distraint Taxpayer no given the right of redemption
Levy Taxpayer can redeem properties levied upon and sold/forfeited to the
government.
Note:
1. It is the duty of the Register of Deeds concerned upon registration of the
declaration of forfeiture, to transfer the title to the property with out of an
order from a competent court
2. The remedy of distraint or levy may be repeated if necessary until the full
amount, including all expenses, is collected.

Enforcement of Tax Lien

Tax Liena legal claim or charge on property, either real or personal,
established by law as a security in default of the payment of taxes.
1. Nature:
A lien in favor of the government of the Philippines when a person liable to
pay a tax neglects or fails to do so upon demand.\
2. Duration:
Exists from time assessment is made by the CIR until paid, with interests,
penalties and costs.

23

3. Extent:
Upon all property and rights to property belonging to the taxpayer.
4. Effectivity against third persons:
Only when notice of such lien is filed by the CIR in the Register of Deeds
concerned.
Extinguishment of Tax Lien
1. Payment or remission of the tax
2. Prescription of the right of the government to assess or collect.
3. Failure to file notice of such lien in the office of register of Deeds, purchases
or judgment creditor.
4. Destruction of the property subject to the lien.
In case Nos. 1 and 2, there is no more tax liability. Under nos. 3 and 4, the
taxpayer is still liable.
Enforcement of Tax Lien vs. Distraint
A tax lien is distinguished from disttraint in that, in distraint the property
seized must be that of the taxpayer, although it need not be the property in respect
to the tax is assessed. Tax lien is directed to the property subject to the tax,
regardless of its owner.
Note:
1. This is superior to judgment claim of private individuals or parties
2. Attaches not only from time the warrant was served but from the time the tax
was due and demandable.
Compromise
Compromisea contract whereby the parties, by reciprocal concessions,
avoid litigation or put an end to one already commenced.
Requisites:
1. Taxpayer must have a tax liability.
2. There must be an offer by taxpayer or CIR, of an amount to be paid by
taxpayer.
3. There must be acceptance of the offer in settlement of the original claim.
When taxes may be compromised:
1. A reasonable doubt as to the validity if the claim against the taxpayer exists;
2. The financial position of the taxpayer demonstrates a clear inability to pay
the assessed tax.
3. Criminal violations, except:
24

a.

Those already filed in court

b.

Those involving fraud.

Limitations:
1. Minimum compromise rate:
a. 10% of the basic tax assessed in case of financial incapacity.
b. 40% of basic tax assessed other cases.
2. Subject to approval of Evaluation Board
a.

When basic tax involved exceeds P1,000,000.00 or

b.

Where settlement offered is less than the prescribed minimum rates.

Delegation of Power to Compromise

General Rule: The power to compromise or abate shall not be delegated by
the commissioner.
Exception: The Regional Evaluation Board may compromise the assessment
issued by the regional offices involving basic taxes of P 500 K or less.
Remedy in case of failure to comply:
The CIR may either:
1. enforce the compromise, or
2. Regard it as rescinded and insists upon the original demand.
Compromise Penalty
1. It is a certain amount of money which the taxpayer pays to compromise a tax
violation.
2. It is pain in lieu of a criminal prosecution.
3. Since it is voluntary in character, the same may be collected only if the
taxpayer is willing to pay them.

Enforcement of forfeiture
Forfeitureimplies a divestiture of property with out compensation, in
consequence of a default or offense. It includes the idea of not only losing but also
having the property transferred to another with out the consent of the owner and
wrongdoer.
1. Effect: Transfer the title to the specific thing from the owner to the
government.
2. When available:
25

a. No bidder for the real property exposed for sale.

b. If highest bid is for an amount insufficient to pay the taxes, penalties
and costs.
-

With in two days thereafter, a return of the proceeding is duly made.

3. How enforced:
a.

In case of personal property by seizure and sale or destruction of

the specific forfeited property.

b.

In case of real property by a judgment of condemnation and sale in

a legal action or proceeding, civil or criminal, as the case may require.

4. When forfeited property to be destroyed or sold:

a.

To be destroyed by order of the CIR when the sale for consumption

or use of the following would be injurious to the public health or
prejudicial to the enforcement of the law: (at least 20 days after
seizure)
1.

distilled spirits

2.

liquors

3.

cigars

4.

cigarettes, and other manufactured products of tobacco

5.

playing cards

6.

b.

All apparatus used in or about the illicit production of such

articles.
To be sold or destroyed depends upon the discretion of CIR

1.

All other articles subject to exercise tax, (wine, automobile,

mineral products, manufactured oils, miscellaneous products, nonessential items a petroleum products) manufactured or removed in
violation of the Tax Code.
2.
Dies for printing or making IR stamps, labels and tags, in
imitation of or purport to be lawful stamps, labels or tags.
5. Where to be sold:
a.
b.

Public sale: provided, there is notice of not less than 20 days.

Private sale: provided, it is with the approval of the Secretary of
Finance.

6. Right of Redemption:
a.

Personal entitled taxpayer or anyone for him

b.

Time to redeem with in one (1) year from forfeiture

26

c.

Amount to be paid full amount of the taxes and penalties, plus

interest and cost of the sale

d.

To whom paid Commissioner or the Revenue Collection Officer

e.

Effect of failure to redeem forfeiture shall become absolute.

Note: The Register of Deeds is duty bound to transfer the title of property forfeited
to the government with our necessity of an order from a competent court.
Other Administrative Remedies
1.

Requiring filing of bonds in the following instances:

a.

Estate and donors tax

b.

Excise taxes

c.

Exporters bond

d.

Manufacturers and importers bond

2.

Requiring proof of filing income tax returns

Before a license to engage in trade, business or occupation or to practice a
profession can be issued.

3.

Giving reward to informers Sum equivalent to 10% of revenues,

surcharges or fees recovered and/or fine or penalty imposed and collected or
P1, 000,000.00 per case, whichever is lower.

4.

Imposition of surcharge and interest.

5.

Making arrest, search and seizure

Limited to violations of any penal law or regulation administered by the BIR,
committed with in the view of the Internal Revenue Officer or EE.

6.

Deportation in case of aliens on the following grounds

a.
b.

7.

Knowingly and fraudulently evades payment of IR taxes.

Willfully refuses to pay such tax and its accessory penalties, after
decision on his tax liability shall have become final and executory.
Inspection of books

Books of accounts and other accounting records of taxpayer must be

preserved, generally within three years after date the tax return was due or
was filed whichever is later.
8.

Use of National Tax Register

9.

Obtaining information on tax liability of any person

10.

Inventory Taking of stock-in-trade and making surveillance.

11.

Prescribing presumptive gross sales or receipt:

27

a.
b.

Person failed to issue receipts and invoices

Reason to believe that records do not correctly reflect declaration in
return.\

12.

Prescribing real property values

13.

Inquiring into bank deposit accounts of

a.
b.

14.

A deceased person to determine gross estate

Any taxpayer who filed application for compromise by reasons of
financial incapacity his tax liability.
Registration of Taxpayers.

Judicial Remedies
Civil and Criminal Actions:
1.

Brought in the name of the Government of the Philippines.

2.

Conducted by Legal Officer of BIR

3.

Must be with the approval of the CIR, in case of action, for recovery of
taxes, or enforcement of a fine, penalty or forfeiture.

A. Civil Action
Actions instituted by the government to collect internal revenue taxes in
regular courts (RTC or MTCs, depending on the amount involved)
When assessment made has become final and executory for failure or
taxpayer to:
a.

Dispute same by filing protest with CIR

b.

Appeal adverse decision of CIR to CTA

B. Criminal Action
A direct mode of collection of taxes, the judgment of which shall not only
impose the penalty but also order payment of taxes.
An assessment of a tax deficiency is not necessary to a criminal prosecution
for tax evasion, provided there is a prima facie showing of willful attempt to
evade.

Effect of Acquittal on Tax Liability:

Does not exonerate taxpayer his civil liability to pay the tax due. Thus,
the government may still collect the tax in the same action.
Reason: Tax is an obligation, does not arise from a criminal act.

28

Effect of Satisfaction of Tax Liability on Criminal Liability

Will not operate to extinguish taxpayers criminal liability since the duty
to pay the tax is imposed by statute, independent of any attempt on past of
taxpayers to evade payment.
This is true in case the criminal action is based on the act to taxpayer of filing
a false and fraudulent tax return and failure to pay the tax.
Note: The satisfaction of civil liability is not one of the grounds for the extinction of
criminal action.

Prescriptive Periods /
Statute Of Limitation
Purpose:
For purposes of Taxation, statue of limitation is primarily designed to protect
the rights of the taxpayers against unreasonable investigation of the taxing
authority with respect to assessment and collection of Internal Revenue Taxes.
Prescription of Governments Right to Assess Taxes:
General Rule: Internal Revenue Taxes shall be assessed within three (3) years after
the last day prescribed by law for the filing of the return or from the day the return
was filed, in case it is filed beyond the period prescribed thereof. (Section 203 of
the Tax Code)
Note:
1.

A return filed before the last day prescribed by law for the filing thereof
shall be considered as filed on such last day.

2.

In case a return is substantially amended, the government right to assess

the tax shall commence from the filing of the amended return (CIR vs.
Phoenix, May 20, 1965; Kei & Co. vs. Collector, 4 SCRA 872)

3.

In computing the prescriptive period for assessment, the latter is deemed

made when notice to this effect is released, mailed or sent by the
Commissioner to the correct address of the taxpayer. However, the law does
not require that the demand/notice be received within the prescriptive
period. (Basilan Estates, Inc. vs. Commissioner 21, SCRA 17; Republic vs. CA
April 30, 1987)

4.

An affidavit executed by a revenue office indicating the tax liabilities of a

taxpayer and attached to a criminal complaint for tax evasion, cannot be
deemed an assessment. ( CIR vs. Pascoi Realty Corp. June 29, 1999)

5.

A transcript sheets are not returns, because they do not contain

information necessary and required to permit the computation and
assessment of taxes (Sinforo Alca vs. Commissioner, Dec. 29, 1964)

29

Exceptions: (Sec. 222 ic)

1. Where no return was filed - within ten (10) years after the date of discovery of
the omission.
2. Where a return was filed but the same was false or fraudulent within ten
(10) years from the discovery of falsity or fraud.
Nature of Fraud:
a.

Fraud is never presumed and the circumstances consisting it must be

alleged and proved to exist by clear & convincing evidence (Republic vs.
Keir, Sept. 30, 1966)

b.

The fraud contemplated by law is actual and not constructive. It must

amount to intentional wrongdoing with the sole object of avoiding the tax.
A mere mistake is not a fraudulent intent. (Aznar case, Aug. 23, 1974)

c.

A fraud assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal action
for the collection thereof. (Sec. 222 paragraph (a))

Fraud may be established by the following : (Badges of Fraud)

a.

Intentional and substantial understatement of tax liability of the

taxpayer.

b.

Intentional and substantial overstatement of deductions of exemption

c.

Recurrence of the foregoing circumstances.

Instances/Circumstances negating fraud:

a.

When the Commissioner

notice/demand for payment.

fails

impute

fraud

in

the

assessment

b.

When the Commissioner failed to allege in his answer to the taxpayers

petition for review when the case is appealed to the CTA.

c.

When the Commissioner raised the question of fraud only for the first
time in his memorandum which was filed the CTA after he had rested his
case.

d.

Where the BIR itself appeared, not sure as to the real amount of the
taxpayers net income.

e.

A mere understatement of income does not prove fraud, unless there is

a sufficient evidence shaving fraudulent intent.

3. Where the commissioner and the taxpayer, before the expiration of the three
(3) year period of limitation have agreed in writing to the extension of said
period.
Note: Limitations:
a.

The agreement extending the period of prescription should be in writing

and duly signed by the taxpayer and the commissioner.
30

b.

The agreement to extend the same should be mode before the

expiration of the period previously agreed upon.

4. Where there is a written waiver or renunciation of the original 3-year

limitation signed by the taxpayer.
Note: Limitations:
a.
b.
c.

The waiver to be valid must be executed by the parties before the lapse
of the prescriptive period.
A waiver is inefficient I it is executed beyond the original three year.
The commissioner can not valid agree to reduce the prescriptive period
to less than that granted by law.

Imprescriptible Assessments:
1. Where the law does not provide for any particular period of assessment, the
tax sought to be assessed becomes imprescriptible.
2. Where no return is required by law, the tax is imprescriptible.
3. Assessment of unpaid taxes, where the bases of which is not required by law
to be reported in a return such as excise taxes. (Carmen vs. Ayala Securities
Corp., Nov. 21, 1980)
4. Assessment of compensating and documentary stamp tax.

Prescription of Governments
Right to Collect Taxes
A. General Rule:
1.

Where an assessment was made Any internal revenue tax which has
been assessed within the period of limitation may be collected by distraint
or levy or by proceeding in court within 5 years following the date of
assessment.

2.

Where no assessment was made and a return was filed and the same is
not fraudulent or false- the tax should be collected within 3 years after the
return was due or was filed, whichever is later.

B. Exceptions:
1.

Where a fraudulent/false return with intent to evade taxes was filed a

proceeding in court for the collection of the tax may be filed without
assessment, at anytime within ten years after the discovery of the falsity
or fraud.
Note: The 10-year prescriptive period for collector thru action does not
apply if it appears that there was an assessment. In such case, the
31

ordinary 5-year period (now 3 years) would apply (Rep. vs. Ret., March 31,
1962)
2.

When the taxpayer omits to file a return a court proceeding for the
collection of such tax may be filed without assessment, at anytime within
10 years after the discovery of the omission.

3.

Waiver of statute of limitations any internal revenue tax, which has

been assessed within the period agreed upon, may be collected be
distinct or levy of by a proceeding in court within the period agreed upon
in writing before the expiration of 5-year period.

4.

Where the government makes another assessment on the basis of

reinvestigation requested by the taxpayer the prescriptive period for
collection should be counted from the last assessment. (Rep. vs. Lopez,
March 30, 1963)

5.

Where the assessment is revised because of an amended return the

period for collection is counted from the last revised assessment.

6.

Where a tax obligation is secured by a surety bond the government

may proceed thru a court action to forfeit a bond and enforce such
contractual obligation within a period of ten years.

7.

Where the action is brought to enforce a compromise entered into

between the commission and the taxpayer the prescriptive period is ten
years.

C. When tax is deemed collected for purposes of the prescriptive period.

1.

Collection by summary remedies It is effected by summary methods

when the government avail of distraint and levy procedure.

2.

Collection by judicial action The collection begins by filing the

complaint with the proper court. (RTC)

3.

Where assessment of the commissioner is protected & appealed to the

CTA the collection begin when the government file its answer to
taxpayers petition for review.

Rules of Prescription in Criminal Cases

Rule: All violations of any provision of the tax code shall prescribe after five
(5) years.
Note:
When it should commence?
The five (5) year prescriptive period shall begin to run from the:
a.
b.

Day of the commission of the violation, if know.

If not known, from the time of discovery and the institution of judicial
proceeding for its investigation and punishment.
When it is interrupted:

32

a.

When a proceeding is instituted against the guilty person

b.

When the offender is absent from the Philippines.

When it should run again:
When the proceeding is dismissed for reason not Constituting jeopardy.
When does the defense of prescription may be raised:

a.

In civil case If not raised in the lower court, it is bailed permanently; if can
not be raised for the first time on appeal.

b.

In criminal case It can be raised even if the case has been decided by the
lower court but pending decision on appeal.

Interruption of the Prescriptive Period

1.

Where before the expiration of the time prescribed for the assessment of
the tax, both the commissioner and the taxpayer have consented in writing
to its assessment after such time, the tax may be assessed prior to the
expiration of the period agreed upon.

2.

The running of statute of limitations on making an assessment and the

beginning of distraint/levy or a proceeding in court for collection shall be
suspended for the period.
During which the Commissioner is prohibited from making the assessment or
beginning distraint/levy or a proceeding in court and for 60 days thereafter;
e.g.
a.

Filing a petition for review in the CTA from the decision of the
Commissioner. The commissioner is prevented from filing an ordinary
action to collect the tax.

b.

When CTA suspends the collection of tax liability of the taxpayer

pursuant to Section 11 of RA 1125 upon proof that its collection may
jeopardizes the government and /or the taxpayer.
c.

When the taxpayer requests for reinvestigation which is granted by

commissioner.
Note: A mere request for reinvestigation without any action or the part
of the Commissioner does not interrupt the running of the prescriptive
period. The request must not be a mere pro-former. Substantial issues
must be raised.

d.

When the taxpayer cannot be located in the address given by him in

the return.
Note: If the taxpayer informs the Commissioner of any change in
address the statute will not be suspended.

e.

When the warrant of distraint or levy is duly served upon any of the
following person:
1.

taxpayer
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2.
3.
f.
g.

his authorized representative

Member of his household with sufficient discretion and no
property could be located.
When the taxpayer is out of the Philippines.

In criminal cases for violation of tax code the period shall not run
when the offender is absent from the Philippines.

Note: A petition for reconsideration of a tax assessment does not suspend

the criminal action. Reason: No requirement for assessment of the tax
before the criminal action may be instituted.
Nota Bene:
1. The law on prescription remedial measure should be interpreted liberally in
order to protect the taxpayer.
2. The defense of prescription must be raised by the taxpayer on time,
otherwise it is deemed waived.
3. The question of prescription is not jurisdictional, and as defense it must be
raised reasonably otherwise it is deemed waived.
4. The prescriptive provided in the tax code over ride the statute of non-claims
in the settlement of the deceaseds estate.
5. In the event that the collection of the tax has already prescribed, the
government cannot invoke the principle of Equitable recumbent by settingoff the prescribed tax against a tax refused to which the taxpayer is entitled.

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