GOVERNMENT’S REMEDIES

There are Two Kinds of Assessment:

1. SELF-ASSESSMENT (Sec 56A): When the taxpayer computes his own liability, files his return, and pays the
tax based on his computation.
2. DEFICIENCY ASSESSMENT (Sec 56B) This occurs upon discovery of the BIR that the self-assessment was
either deficient, or no return was made by the taxpayer.
To be valid, the assessment must be in writing and must inform the taxpayer of the law and the facts on which the
assessment is made. Otherwise, the assessment is void.
Tax assessment by the tax examiners are presumed correct and made in goodfaith. The taxpayer has the duty to
prove otherwise. However, assessments cannot be based on mere presumptions on the part of the government. There
must be a minimum effort on the government before the presumption of correctness sets in.
MANDAMUS does not lie to compel the CIR to impose a tax assessment not found by him to be proper.
The NOTICES (PAN,FLD, FAN, Final decision on a disputed assessment) may be served in the following
modes;
PERSONAL SERVICES; SUBSTITUTED SERVICE ; SERVICE BY MAIL (Service to the agent shall be
deemed service to the taxpayer.
Assessment made beyond the prescriptive period are not binding on the taxpayers.
GR: The right to assess must be done within 3 months from
a. The day the return was actually filed; or
b. From the last day of filing the return (if the return was filed before the last day prescribed by law.
(Whichever is later)
EXCEPTION:
1. False or fraudulent with intent to evade taxes, within 10 years from discovery of the falsity or fraud.
2. Failure or omission to file a return: with 10 years after discovery of failure or omission to file the return.
3. Waiver of statute of limitation in writing, which must be made before the expiration of the 3-yr period of
assessment of taxes: period agreed upon.

CIVIL PENALTIES
Civil Penalties can be divided in two categories –those with a 25% surcharge, and those with a 50% surcharge.
A penalty of 25% on the amount due will be imposed in the following cases;
1. Failure to file any return AND pay the tax due;
2. Filing a return with an internal revenue officer other than those with whom the return is required to be filed;
3. Failure to pay the deficiency tax within the time prescribed by in the notice of assessment;
4. Failure to pay the full or part of the amount of tax stated in the return (or full amount when no return is
required) on or before the date prescribed for its payment.
Note: There is NO 25% SURCHARGE when you file on time, pay the full amount stated in the return
but subsequently find out that the return and the amount paid was erroneous.

A penalty of 50% of deficiency tax will be imposed by the following cases;

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 1
 1. Willful neglect to file a return within the period prescribed by law.
2. False of fraudulent return is willfully made.
DELINQUENCY TAX v. DEFIENCY TAX
Delinquency Tax pops up when the taxpayer fails to;
1. Pay the amount of tax due on any return required to be filed
2. Pay the deficiency tax on the date appearing in the demand of the CIR.
Deficiency Tax is the
1. Amount by which the tax imposed by law as determined by the CIR or his representative exeeds the amount
shown as the tax by the taxpayer in his return, or
2. If no amount is shown by the taxpayer, or if no return is made, then the amount which the tax as determined by
the CIR or his representative exceeds the amounts previously assessed (or collected without assessment) as a
deficiency.
Deficiency taxes must be assessed prior to collection, as the deficiency has to be determined first.
There are four kinds of Interest (Article 249)
GENERAL INTEREST, the interest on unpaid taxes is 20% per annum on any unpaid amount of tax from the date
prescribed for payment until the amount is fully paid.
DEFICIENCY INTEREST, the rate is 20% per annum on any deficiency in the tax from the date prescribed for its
payment until full payment.
DELINQUENCY INTEREST, 20% per annum on the unpaid amount in case of failure to pay:
1. Amount of tax due on any return required to be filed, or
2. Amount of tax due or which no return is required, or
3. Deficiency tax or any surcharge or interest thereon on the due date appearing in the notice and demand of the
CIR.
INTEREST ON EXTENDED PAYMENT the rate is 20% per annum.
1. This is imposed when a taxpayer is qualified and elects to pay the tax on installment, but fails to pay the tax or
any installment thereof, or pays it before the period of payment, or
2. CIR has authorized an extension of time within which to pay tax or any part thereof.
CRIMINAL ACTION AND OTHER PENALTIES
No criminal action for the recovery of taxes shall be filed in court without the approval of the CIR.
The judgment in the criminal case shall not only impose the penalty, but shall also order payment of the taxes subject of
the criminal case as finally decided by the Commissioner.
A criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code.
Acquittal of taxpayer in a criminal case does not exonerate him from tax liability. Computation and assessment of
deficiency taxes is not a pre requisite for criminal prosecution under the NILR.
WILLFUL BLINDNESS DOCTRINE: A taxpayer can no longer raise the defense that the errors on their tax returns are
not their responsibility or that it is the fault of the accountant they hired.

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 2
Intent to defraud need not be shown for a conviction of tax evasion. The ONLY thing that needs to be proven is that the
taxpayer was aware of his obligation to file the tax return but he nevertheless voluntary, knowingly, and intentionally
failed to file the required return.
PRESCRIPTION IN CRIMINAL CASES
The prescriptive period for criminal cases is five years. When it begins to run depends on the nature of the violation of
the taxpayer:
1. If failure or refusal to pay taxses due: from the service of final notice and demand for payment of the deficiency
taxes upon the taxpayer.
2. If filing of false or fraudulent returns: from the discovery and institution of judicial proceedings for its
investigation and punishment.
MODES OF COLLECTION: CIVIL REMEDIES
The government is given TWO WAYS to collect;
1. SUMMARY OR ADMINISTRATIVE REMEDIES, and
2. JUDICIAL REMEDIES (Whether Civil or Criminal)
Collection by distraint and levy (among others) are known as the summary, extrajudicial or administrative enforcement
remedy. They are distinguished from the judicial remedies of collection by civil and criminal actions. However, the
remedies of distraint and levy, as well as collection by civil and criminal action may be pursued singly or independently
of each other or all of them simultaneously.
Remember that no criminal or civil case may be filed in court without the approval of the CIR. (Sec 220, NIRC)
Distraint is enforced on personal property, levy is enforced on real property.

Distraint (2 Kinds)
ACTUAL DISTRAINT, wherein actual delinquency in tax payment is necessary, and
CONSTRUCTIVE DISTRAINT, wherein no actual delinquency is necessary.
CD is resorted to when the CIR believes the taxpayer;
1. Is retiring from any business subject to tax;
2. Intends to leave the Philippines;
3. Intends to remove his property from the Phil;
4. Intends to hide or conceals his property;
5. Performs any act tending to obstruct the proceedings for collecting the tax due.

HOW IS CD EFFECTED?

The taxpayer will be required to sign a receipt covering the property distrained and obligate himself to;
1. Preserve it intact and un altered, and
2. not dispose of it in any manner, without express authority of the CIR.
If the taxpayer refuses, the officer will prepare a list of the properties distrained and will leave a copy thereof in
the premises, in the presence of 2 witnesses.

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 3
 ACTUAL DISTRAINT:
PROCEDURE OF AD;
1. Commencement of distraint proceedings;
2. Service of Warrant of distraint;
3. Notice of Sale of distrained property;
4. Release of distrained property, prior to sale
5. Sale of property distrained
6. Purchase by the Government at sale upon distraint
(Please check your codal see the codal provisions for the distraint process, 207A, 208, 209, 210, 212, )

LEVY OF REAL PROPERTY

The procedure of levy of real property is;
1. Commencement of levy proceedings;
2. Service of warrant of levy
3. Advertisement for sale
4. Public Sale of the Property under levy
5. Redemption of property sold
6. Forfeiture to the Government for want of bidder
7. Resale of real estate taken for taxes
8. Further distraint and levy
Note: Failure of the heirs to receive a copy of notices of levy does not bar its effectivity since the taxpayer is in fact
the estate.
(Please check your codal see the codal provisions for the levy process, 207 (B), 213, 214, 215, 216, 217)

SUSPENSION OF COLLECTION
GR: No court can issue an injunction to restrain collection of internal revenue taxes, or charges imposed by the NIRC.
Exception: ONLY the CTA can issue an injuction and it is only allowed when the following conditions concur:
1. The is an appeal to the CTA, and
2. In the opinion of the court, the collection by the government agencies may jeopardize the interest of the
government and/or the taxpayer, and
3. Tax payer either to deposit the amount claimed or to file a surety bond for not more than double the amount
with the court.
TAX LIEN- is another administrative remedy granted by law to the BIR.
When a taxpayer neglects or refuses to pay his internal revenue tax liability AFTER DEMAND, the amount
shall be a lien in favor of the government from the time the assessment was made by the CIR until paid with interest,
penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to tax payer.
However the lien shall not be valid against any mortgagee, purchaser or judgment creditor until notice of such
lien is registered in the office of the RD.

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 4
 Well settle that the claim of the government predicated on a tax lien is superior to the claim of a private litigant
predicted on judgement.

COMPROMISE AND ABATEMENT

The grounds for compromise are:
1. Doubtful validity of the claim against the taxpayer, or
2. Financial incapacity of the taxpayer.
The cases which may be compromised are;
1. Delinquent accounts;
2. Pending admin cases under admin protest after issuance of final assessment notice to the taxpayer.
3. Civil tax cases being disputed before the courts;
4. Collection cases filed in courts;
5. Criminal Violations (except already filed in court, or involving tax fraud)
The following cases can NOT be compromised
1. Withholding tax cases, unless the applicant taxpayer invokes provision of that law cast doubt on the taxpayer’s
obligation to withhold.
2. Criminal Tax Fraud cases confirmed as such by the CIR or his duly authorized representative.
3. Criminal Violations already filed in court.
4. Delinquent accounts with duly approved schedule of installments
5. Cases where 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.
6. Cases which become final and executory after final judgment of a court, where compromise is requested on the
ground of doubtful validity of the assessment ;
7. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer.

MINIMUM COMPROMISE RATE

Based on Financial Incapacity 10% of the Basic Assessed Tax

Based on doubtful Validity 40% of the Basic Assessed Tax

Note: When the basic Tax involved exceed 1M or where the settlement offered is less than the prescribed
minimum rates, the compromise shall be subject to the approval of the Evaluation Board (Comm + 4 Rep. Comm)

ABATEMENT AND CANCELLATION OF TAX LIABLITY

Abatement of the penalties and/or interest is allowed when;

1. The taxes or any portion thereof appears to be unjustly or excessively assessed, or

2. The administration and collection costs do not justify the collection of the amount due.

INSTANCES WHERE THERE APPEARS TO BE UNJUST OR EXCESSIVE ASSESSMENT

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 5
 1. Filing of return/payment was made at the wrong venue.
2. Taxpayer’s mistake in the payment of tax was due to erroneous written advice of a revenue officer;
3. Taxpayer’s non-compliance is due to a difficult interpretation of said law;
4. Failure to pay on time because of substantial losses from prolonged labor disputes, force majeure,
legitimate business reverses;
5. Failure to pay on time because of circumstances beyond his control. (In 4 and 5, the abatement will only
cover the surcharge and the compromise penalty, not the interest)
6. Late payment of tax under meritorious circumstances.

CRIMINAL VIOLATIONS WHICH CAN BE COMPROMISED

Criminal violations which do not involve tax fraud or which have not been filed in court may be compromised.
A taxpayers criminal liability may be settles extra judicially. A compromise of criminal liability is an extra judicial
settlement of taxpayer’s criminal liability for his violation and is consensual in character, hence may not be imposed
on the taxpayer without his consent.
In most instances, the taxpayer must pay a compromise penalty to settle his criminal liability.

PRESCRIPTION OF GOVERNMENT’S POWER TO COLLECT

General Rule: The prescriptive period to collect the taxes due is FIVE YEARS FROM THE DATE OF
ASSESSMENT
Exception:
1. False or fraudulent return with the intent to evade taxes: WITHIN 10 YEARS from the discovery without need
for prior assessment. The government may file a proceeding in court.
2. Failure or omission to file a return : WITHIN 10 YEARS from the discovery without need for prior assessment.
3. Waiver in writing executed before the five-year period expires.

FOR PRECRIPTIVE PURPOSES, the tax is deemed collected if;

1. If collection is through summary remedies (distraint and levy) when the government avails of a distraint and
levy procedure prescribed under the NIRC. (Distraint and levy proceeding are begun or commenced by the
issuance of the warrant and services thereof on the taxpayer)
2. If collection is through judicial remedies (civil and criminal) when the government files the complaint with the
proper court. (A judicial action for the collection of a tax may be initiated by filing of a complaint with the
proper regular court , or where the assessment is appealed to the CTA, by filing an answer to the taxpayer’s
petition for review wherein payment of the tax is prayed for.)

SUSPENSION OF RUNNING OF STATUTE OF LIMITATIONS (Sec 223)

The running of the prescriptive period for both the power to asses and the power to collect can be suspended in the
following situations;
1. When the CIR is prohibited from making an assessment or beginning distraint and levy or a proceeding in court
and for the 60 days thereafter

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 6
 2. The taxpayer requests for reinvestigation which is granted by the CIR.
A. The collection is suspended (the assessment has already been done at this point, so only the period to
collect is suspended. Note: when a taxpayer protests an assessment, he has to choose for a reconsideration
or a reinvestigation.)
B. There is a difference between a request for reconsideration and a request for reinvestigation.
 Reconsideration refers to a plea for re-evaluation of an assessment on the basis of existing
records WITHOUT need of additional evidence.
 Reinvestigation refers to a plea for re-evaluation on the basis of newly discovered evidence that a
taxpayer intends to present in the re-investigation
A mere request for reinvestigation WITHOUT corresponding action on the part of the CIR will not interrupt the
running of the period. The request must be GRANTED by the CIR.
3. When the taxpayer cannot be located in the address given by him in the return filed, unless he informs the CIR
of the change of address. (Both the periods for assessment and collection are suspended)
4. When the warrant of distraint and levy is dult served upon the taxpayer or authorized representative and not
property could be located. (Only the period for collection is suspended)
5. When the taxpayer is out of the country. (Period for assessment and collection is suspended)
6. Those under the CTA Law.

-o0o-

Prepared by: Mon-em Imam Abangad “I will take my oath next year” pg. 7