TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
CABANEIRO) A2011 1
Chapter VII: TAX REMEDIES REMEDIES OF THE
GOVERNMENT
STATUTE OF LIMITATIONS
ASSESSMENT:
PRESCRIPTION OF GOVERNMENTS RIGHT TO ASSESS TAXES
General Rule (Sec 203, NIRC)
Assessment shall be made 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 the return was filed
beyond the period prescribed by law.
A return filed before April 15 shall be considered filed on
such date.
Exceptions (Sec 222, NIRC)
1. Also a proceeding in court for the collection of such tax may
be filed without assessment
2. Assessment may be made within ten (10) years after the
discovery of the falsity, fraud or omission in the following cases:
a. in case of the false or fraudulent return with
intent to evade tax; or
b. failure to file a return
c. by mutual agreement between government and
taxpayer (which must be in writing) before the
lapse.
In case the Commissioner and the taxpayer agree in
writing to a different period before the expiration of the
original prescriptive period. The period so agreed upon
may be extended by subsequent written agreement
before the expiration of the period previously agreed
upon.
WHEN IS A TAX ASSESSMENT DEEMED MADE?
It is not the issue date of the demand and/or notice that is
the reckoning point in prescription but rather it is the date
when the demand letter is released, mailed or sent to the
taxpayer that constitutes an actual assessment. (Republic
vs Limaco)
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Example: If it was received by the taxpayer in a particular
date (Dec. 5, 1997), you should count the prescriptive
period for making an assessment from the date it was
mailed, released or sent by the BIR and not from the receipt
of the notice of assessment by the taxpayer.
RELEASE OF ASSESSMENT NOTICE OR DEMAND BEFORE THE
LAPSE OF THE PRESCRIPTIVE PERIOD
The assessment may be subject to revision by the BIR. If
revised, the prescriptive period will commence to run from
the safe when such revised assessment is mailed, released
or sent. So, it is not from the date the original assessment is
mailed etc. but from the date the revised assessment has
been mailed.
The making of assessment is prescriptible.
The Supreme Court held in case that so long as the release
thereof is effected before prescription sets in, the
assessment is deemed made on time even though the same
is actually received by the taxpayer after the expiration of
the prescription period. [Basilan Estates, Inc. v.
Commissioner, 21 SCRA 17]
The law does not require that the demand or notice be
received within the prescriptive period. (Republic vs Tan)
Where the taxpayer-addressee makes a direct denial of
receipt of a mailed demand letter, such denial shifts the
burden to the government to prove that such letter was
such indeed received by the taxpayer. (Republic vs CA)
IMPORTANT CONSIDERATIONS RE PRESCRIPTION OF
GOVERNMENTS RIGHT TO ASSESS TAXES:
A. DATE OF FILING TAX RETURNS A MATERIAL FACTOR
IN RESOLVING QUESTIONS ON PRESCRIPTION
The date of the filing of tax return is important
for purposes of determining whether or not the
tax was assessed within the prescriptive period.
Since prescription is an affirmative defense, it is
incumbent upon the taxpayer to prove that a return had
been filed by him, otherwise, there is a basis for the BIR
to assess the tax within the 10 year period, on the
 TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF.

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ground that no return was filed by the taxpayer. COLLECTION: 5 years omission, falsity or
(Republic vs Marsman Devt.) from the date of fraud.
assessment.
B. EFFECT OF FILING A AMENDED RETURN
Notes: The rule is if prior assessment has been made, the
The Supreme Court held that where the amended return
BIR can avail of the administrative and judicial remedy. But if
is substantially different from the original return, the
without prior assessment, the BIR can only avail of the judicial
right of the Bureau of Internal Revenue to assess the tax
remedies.
is counted from the filing of the amended return.
[Commissioner v. Phoenix Assurance Co. Ltd. L-19127, Return must be the one prescribed by the BIR. SO, if you file
May 20, 1965]. your Books of Accounts in lieu of that return, that does not
C. EFFECT OF FILING A WRONG RETURN constitute return.
If what was filed was a wrong return, the 10 year period
still applies. This is true even if the information False vs. Fraudulent return
embodied in the wrong return could enable the BIR to False return is a deviation from the truth or fact whether
assess the tax liability of the taxpayer. (Butuan Sawmill intentional or not.
vs CTA) Fraudulent return is intentional and deceitful with the
aim of evading the correct tax due.
D. PRESCRIPTIVE PERIOD FOR MAKING AN ASSESSMENT Distinction must be made between false returns due to
& COLLECTION mistakes, carelessness or ignorance and fraudulent
With prior assessment Without prior returns with intent to evade taxes.
assessment The fraud contemplated by law is actual and not
Return filed is not false or 3 years from the date 3 years from the constructive. It must amount to intentional wrong doing
audulent of actual filing. If it was date of actual filing with the sole object of avoiding the tax. It necessarily
filed earlier than the date or from the last day follows that a mere mistake cannot be considered as
a. Return was file but fraudulent intent. Thus, if both the petitioner and the
fixed by the Tax Code. fixed by law for filing
there exist a deficiency respondent Commissioner committed mistakes in
such return.
b. Return was filed but no making the entries in the returns and the assessment
payment has been respectively under the inventory method of determining
COLLECTION: Within 5
made tax liability, it would be unfair to treat the mistakes of
years from the date of
assessment the petitioner and the respondent, as tainted with fraud
for each year from 1946 to 1951, inclusive. [Aznar v.
. Failure/Falsify/Fraudulent Commissioner, Aug. 23, 1974]
a. Intentional failure to file 10 years from the Taxes may be collected
a return discovery of such even without prior Fraud
b. False return omission of failure, falsity assessment and Fraud is a question of fact and the circumstances
c. Fraudulent return or fraud prescriptive period is constituting fraud must be alleged and proved.
years from the
discovery of failure or

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF.

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Fraud must be a product of a deliberate intent to evade
taxes. Hence, mere under-declaration does not
necessarily imply fraud.
Fraud must be actual and not constructive. It must
amount to intentional wrong doing with the sole purpose
of avoiding the tax. A mere mistake cannot be
considered as fraudulent intent.
General Rule
Collection may be instituted within 5 years following the
assessment of the tax [Sec. 222C]
Exception
A proceeding in court for collection, without assessment,
may be instituted within ten years after the discovery of
falsity, fraud, or omission in the case of a false or fraudulent
return with intent to evade tax or failure to file a return [Sec.
222A]

PRINCIPLES GOVERNING THE FILING OF AN ACTION FOR

COLLECTION BY THE BIR
Collection is proper under the following situations:
a. BIR assessment is considered final and executory, if no
protest or dispute has been made by the taxpayer. IF
protested by the taxpayer but he did not appeal, the BIR
decision on such protest, the effect is that the BIR decision
ASSESSMENT PROCEDURE
shall be considered final and executory.
1. File tax return
b. IF he appeal the decision of the BIR of the Commissioner to
2. Letter of authority to examine
the CTA but he did not appeal the decision of the CTA to CA,
If satisfied, collection.
the decision of the CTA shall be final and executory.
3. Notice of Informal Conference
c. If he appeal to the CA but the CA decision affirming that
If satisfied with explanation, collection.
decision of the BIR was not appealed to the SC, CA decision
4. Pre-assessment notice
shall be final and executory.
5. Response 15 days
d. If appealed to SC but SC affirm the decision of the CA, SC
6. Notice of assessment and letter of demand
decision is final and executory.
7. Administrative protest Reconsideration or
If the decision of the BIR is final and executory, the
reinvestigation
Submission of all relevant supporting documents assessment made cannot be questioned. The issue
within 60 days from protest of prescription can no longer be raised except if the
8. Denial or non-action of the Commissioner 180 days BIR submitted the particular issue for the resolution
9. Appeal to the CTA within 30 days from decision or the of the Court, that is considered as waiver on the part
lapse of 180 days of the BIR and such issue of prescription may be
10. Appeal to the CA within 15 days from notice subject to resolution.
CA decides within 12 months There is no provision in the TAX Code that prohibits
11. Petition for review on certiorari to the Supreme Court the BIR from filing an action for collection even if the
resolution on the motion for reconsideration on the
COLLECTION assessment made is still pending.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
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When the case is pending before the CTA, collection
may also be made by filing of an answer to the
petition for review with the CTA. This is tantamount
to a filing of collection of tax. This will also stop the
running of the prescriptive period for collection of
taxes.
Collection of taxes is prescriptible.
When does the five year prescriptive period start to run?
The period of limitation to collect is counted from the
assessment of the tax.
Assessment is deemed made at the time the demand or
assessment notice has been sent, released or mailed to the
taxpayer.
The actual sending or release to the taxpayer of the
assessment notice or demand is, therefore, necessary in
order to determine the actual date when the tax being
collected was assessed.
When is the tax deemed collected for purposes of the
prescriptive period
Collection through summary remedies is effectuated by
summary methods when the government avails of the
distraint and levy procedure.
If collection is to be effected through judicial remedies, the
collection of the tax is begun by the filing of the complaint
with the proper court.
However, if the decision of the Commissioner on a protested
assessment is appealed to the CTA, the collection of the tax
is considered begun when the government files its answer
to the taxpayers petition for review.
May there be a judicial action to collect a tax liability even
if there is no previous assessment?
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Yes. A proceeding in court for collection-without-assessment
may be instituted within ten years after the discovery of
falsity, fraud, or omission in the case of a false or fraudulent
return.
Two possibilities that could arise:
1. Taxpayer files a false or fraudulent return with intent to
evade taxes.
2. Tax payer does not file any return at al.
Tax obligation secured by bond
Where the tax obligation is secured by a bond, the
prescriptive period for the action for the forfeiture of the
bond is governed by the Civil Code: 10 years to enforce a
written contractual obligation.
Waiver of the Statute of Limitations
Sec. 222B of the NIRC allows the taxpayer and the
government to extend by mutual agreement the
prescriptive periods for the assessment and collection of
taxes. Such an agreement must be in writing.
The waiver must be signed by the parties before the
lapse of the three-year prescriptive period. A waiver is
ineffectual if it is executed beyond the original
prescriptive period.
The extended period may again be extended provided
the new period be agreed upon before the lapse of the
extended period.
Procedure for waiver of prescription period under Rev. M.O.
20-90
1. Waiver must be in accordance with the prescribed form;
2. Waiver must be signed by the taxpayer himself or his
authorized representative;
3. The Commissioner of his duly authorized agent must
sign the waiver indicating the BIRs acceptance of the
waiver.
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Prescription of the governments right to recover an
erroneously refunded tax ([Guagua Electric Co., Inc. v.
Commissioner 19 SCRA 790]
Same as the three-year prescriptive period for making
assessments.
Equitable recoupment and prescription
The rule in this jurisdiction is not to allow the setting off the
prescribed tax against a tax refund; for if that were so, this
would only encourage negligence on the part of our
collecting officers who would feel despite prescription in the
thought that they could always collect the prescribed tax
through the expedient of set-off (CIR vs UST)
Suspension of the running of the Statute of limitations
The running of the Statute of Limitations provided in Sec.
203 and 222 on the making of assessment and the
beginning of distraint or levy or a proceeding in court for
collection, in respect of any deficiency, shall be suspended
under any of the following circumstances:
1. When the Commissioner is prohibited from making
the assessment or beginning the distraint, levy, or
proceeding in court and for sixty days thereafter;
2. When the taxpayer requests for a reinvestigation
which is granted by the Commissioner;
3. When the taxpayer cannot be located in the address
given by him in the return filed upon which tax is
being assessed or collected, unless the taxpayer has
informed the Commissioner of any change in
address;
4. When the warrant of distraint or levy is duly served
upon the taxpayer, his authorized representative, or
a member of his household with sufficient discretion,
and no property could be located; and
5. When the taxpayer is out of the Philippines.
Examples when the Commissioner is prohibited from
assessing or collecting the tax
1. The filing of a petition for review in the Court of Tax Appeals
from the decision of the Commissioner on a protested
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assessment interrupts the running of the prescriptive period
for collection. [Republic v. Ker & Co., Ltd. 18 SCRA 207]
2. When the CTA enjoins the collection of the tax under Sec. 11
of RA 1125.
Request for reinvestigation which should be granted or
acted upon by the Commissioner
It should be emphasized that a mere request for
reinvestigation without any corresponding action on the part
of the Commissioner does not interrupt the running of the
prescriptive period.
Will an extra-judicial demand interrupt the prescription
period?
No. Sec. 22 of the NIRC enumerates the instances when the
prescription is interrupted, and an extra-judicial demand is
not one of them.
GROUNDS FOR THE SUSPENSION OF PRESCRIPTIVE PERIOD
IN THE COLLECTION OF TAXES: (Code: N.A.P.O.C.A.R.
sounds like NAPOCOR. Pag may NAPOCOR may kuryente, pag may
kuryente may ground)
1. No property could be allocated;
2. Agreement between the BIR and the taxpayer to the effect
that the prescriptive period shall be suspended pending the
negotiation;
3. If the BIR is Prohibited from a distraint or levy of real
property;
4. If the taxpayer is Out of the Philippines;
5. If the address of the taxpayer Cannot be located;
6. The filing of an Answer to the petition for review executed
by a taxpayer with the CTA;
7. When a Request for reinvestigation has been granted by the
BIR.
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Rule of prescription in criminal cases (SEC. 281. ,NIRC)
All violations of any provision of this Code shall prescribe
after Five (5) years.
Prescription shall begin to run from the day of the
commission of the violation of the law, and if the same be
not known at the time, from the discovery thereof and the
institution of judicial proceedings for its investigation and
punishment.
The prescription shall be interrupted when proceedings are
instituted against the guilty persons and shall begin to run
again if the proceedings are dismissed for reasons not
constituting jeopardy.
The term of prescription shall not run when the offender is
absent from the Philippines.
When defense of prescription may be raised even on appeal
Criminal Case involving tax violations
The defense of prescription can be raised or invoked
by the accused even if the case had already been
decided by the lower court but pending decision on
appeal.
Civil Action for the collection of Taxes
The defense of prescription, if not raised in the lower
court, is barred permanently.
Reason: Issues or defenses not raised in the
administrative proceeding and/or in the lower court
cannot be raised for the first time on appeal.
Prescriptive Period in Criminal Cases when does it start to
run?
It is important to note that the reckoning point for purposes
of prescription will depend on the nature of the tax
avoidance.
By its nature, the violation could only be committed after
service of notice and demand for payment of the deficiency
taxes upon the taxpayer. This is so because prior to the
finality of the assessment, the taxpayer has not committed
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any violation for nonpayment of the tax. The offense was
committed only after the finality of the assessment coupled
with the taxpayers willful refusal to pay the taxes within the
allotted period. (Lim, Sr. vs CA)
EXERCISES:
Taxpayer: Prescriptive Period: Suspended (2000)
Mr. Reyes, a Filipino citizen engaged in the real estate business,
filed his 1994 income tax return on March 20, 1995. On December
15, 1995, he left the Philippines as an immigrant to join his family
in Canada. After the investigation of said return, the BIR issued a
notice of deficiency income tax assessment on April 15, 1998. Mr.
Reyes returned to the Philippines as a balikbayan on December 8,
1998. Finding his name to be in the list of delinquent taxpayers,
he filed a protest against the assessment on the ground that
he did not receive the notice of assessment and that the
assessment had prescribed. Will the protest prosper? Explain.
SUGGESTED ANSWER:
No. Prescription has not set in because the period of
limitations for the Bureau of Internal Revenue to issue an
assessment was SUSPENDED during the time that Mr. Reyes was
out of the Philippines or from the period December 15, 1995 up to
December 8, 1998.(Sec. 223 in relation to Sec. 203, both of the
NIRC of 1997)
What is the purpose of a waiver of the statute of limitations
to assess and collect internal revenue taxes?
SUGGESTED ANSWER
A waiver of the statute of limitations under the NIRC, to a certain
extent, is a derogation of the taxpayers' right to security against
prolonged and unscrupulous investigations and must therefore
be carefully and strictly construed. The waiver of the statute of
limitations is not a waiver of the right to invoke the defense of
prescription. It is an agreement between the taxpayer and the BIR
that the period to issue an assessment and collect the taxes due is
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
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extended to a date certain. The waiver does not mean that the
taxpayer relinquishes the right to invoke prescription
unequivocally particularly where the language of the document
is equivocal. For the purpose of safeguarding taxpayers from
any unreasonable examination, investigation or assessment, our
tax law provides a statute of limitations in the collection of taxes.
Thus, the law on prescription, being a remedial measure, should be
liberally construed in order to afford such protection. As a
corollary, the exceptions to the law on prescription should
perforce be strictly construed. (Philippine Journalists, Inc. v. CIR,
G.R. No. 162852, December 16, 2004)
A taxpayer requested for reinvestigation of his tax liability.
Did it suspend the period to assess and collect?
SUGGESTED ANSWER:
No. A mere request for reinvestigation does not suspend the
period to assess and collect. Section 223 of the NIRC provides
that the period shall be suspended when the taxpayer requests
for a reinvestigation which is granted by the Commissioner.
Thus, it is not only the request for reinvestigation which will toll the
period. There must be a showing that the same was granted by
the CIR. (BPI v. CIR, GR No. 139736, 17 October 2005)
Collection of Taxes: Prescription (2001)
May the collection of taxes be barred by prescription? Explain
your answer.
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SUGGESTED ANSWER:
Yes. The collection of taxes may be barred by prescription.
The prescriptive periods for collection of taxes are governed by the
tax law imposing the tax. However, if the tax law does not provide
for prescription, the right of the government to collect taxes
becomes imprescriptible.
Imprescriptibility of Tax Laws (1997)
Taxes were generally imprescriptible; statutes, however, may
provide otherwise. State the rules that have been adopted on this
score by The National Internal Revenue Code.
SUGGESTED ANSWER:
The statute of limitation for assessment of tax if a return is filed is
within three (3) years from the last day prescribed by law for the
filing of the return or if filed after the last day, within three years
from date of actual filing. If no return is filed or the return filed is
false or fraudulent, the period to assess is within TEN YEARS from
discovery of the omission, fraud or falsity.
The period to collect the tax is within FIVE YEARS from date of
assessment. In the case, however, of omission to file or if the
return filed is false or fraudulent, the period to collect is within TEN
YEARS from discovery without need of an assessment.