Taxation 1 Remedies of the StateABSantos, CPA

REMEDIES OF THE STATE

1. WHAT ARE THE REMEDIES?

The National Internal Revenue Code or Tax Code provide solutions to the problems of
the Government in enforcing tax laws and solutions to the problems of the taxpayer against
unlawful enforcement or collection of tax. These solutions are termed “remedies,” its basic
purpose is to maintain equilibrium between the interest of the state and the taxpayers.

2. WHAT ARE THE DIFFERENT REMEDIES AVAILABLE TO THE STATE AND TAXPAYER?
REMEDIES OF THE COMMON REMEDIES REMEDIES TO THE
STATE AVAILABLE TO BOTH TAXPAYERS

I. ADMINISTRAT
IVE LEVEL
(BIR)
Assessment Compromise Protest

Collection Abatement Refund

II. JUDICIAL
LEVEL
Civil suit/ action Appeal to CTA

Criminal suit/ action TRO/Injunction

Criminal suit against erring

BIR officials

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3. WHAT ARE THE ADMINISTRATIVE POWERS OF THE BIR?

A. Assessment and collection of all national internal revenue taxes, fees, and charges.
B. Execution of all forfeitures, penalties, and fines connected therewith.
C. Execution of judgments in all case decided in its favor by the Court of Tax Appeals
(CTA) and the ordinary courts.
D. Give effect to and administer the supervisory and police powers conferred to it by the
Code or other laws.
4. WHAT IS AN ASSESSMENT?
A finding by the taxing authority that the taxpayer has not paid the correct taxes. It is also
written notice to a taxpayer to the effect that the amount stated therein is due as a tax and
containing a demand for the payment thereof.
5. WHO HAS THE BURDEN OF PROOF IN PRE-ASSESSMENT PROCEEDINGS?
In accordance to the doctrine of presumption of regularity in the conduct of official
functions of government instrumentalities. There is presumption of correctness on the part of
the Commissioner of Internal Revenue (CIR); thus, the onus probandi or burden of proof lies
on the taxpayer.
6. WHEN PRE-ASSESSMENT NOTICE NOT REQUIRED? (COLLECTION
PROCEEDINGS MAY INITIATE WITHOUT ASSESMENT NOTICE)
A. When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or
B. When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
C. When taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities
for the taxable quarter or quarters of the succeeding taxable year; or
D. When the exercise tax due on excisable articles has not been paid;
E. When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold,
traded or transferred to non-exempt persons.

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Taxation 1 Remedies of the StateABSantos, CPA

7. WHAT ARE ADMINISTRATIVE COLLECTION REMEDIES OF THE

GOVERNMENT?
A. Distraint (Actual and Constructive)
B. Levy
C. Tax Lien
D. Forfeiture of Property
E. Suspension of business operations in violation of VAT
F. Enforcement of Administrative Fine

N.B. The remedies of distraint and levy as well as collection by civil and criminal action
may, in the discretion of the Commissioner, be pursued singly or independently of each
other, or all of them simultaneously.

8. WHAT IS DISTRAINT?
It is the seizure by the government of personal property, tangible or intangible, to enforce
the payment of taxes.
9. WHAT IS THE NATURE OF THE WARRANT OF DISTRAINT OR LEVY?
The warrant is summary procedure “forcing” the taxpayers to pay.
10. WHAT ARE THE TWO TYPES OF DISTRAINT?
A. Actual: there is taking of possession of the personal property from the taxpayer by
the government.
B. Constructive: the owner is merely prohibited from disposing of his property.
11. WHAT ARE THE DISTINCTIONS BETWEEN ACTUAL AND CONSTRUCTIVE
DISTRAINT?
ACTUAL DISTRAINT CONSTUCTIVE DISTRAINT
Made only on the property of a delinquent Made on the property of any taxpayer,
taxpayer whether delinquent or not.
There is taking of possession The taxpayer is merely prohibited from
disposing of his property
Effected by leaving a list of distrained Effected by requiring the taxpayer to sign
property or by service of a warrant of a receipt of the property or by the revenue

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Taxation 1 Remedies of the StateABSantos, CPA

distraint or garnishment officer preparing and leaving a list of such

property.

12. WHAT ARE THE REQUISITES FOR THE EXERCISE OF THE REMEDY OF
DISTRAINT OR LEVY?
A. The taxpayer must be delinquent (except in constructive distraint) in the payment of
tax;
B. There must be a subsequent demand for its payment (assessment);
C. The taxpayer must fail to pay the tax at the time required; and
D. The period within which to assess or collect the tax has not yet prescribed.
13. WHO SHALL SEIZE AND DISTRAINT PERSONAL PROPERTY (ACTUAL
DISTRAINT)?
A. Amount of delinquent tax is more than P1,000,000- Commissioner or his duly
authorized representatives.
B. Amount of delinquent tax is P1,000,000 or less- Revenue District Officer.
14. WHAT ARE THE PROCEDURES FOR THE ACTUAL DISTRAINT OR
GARNISHMENT?
A. Commencement of distraint proceedings by CIR or Revenue District Officer.
B. Issuance/Service of the Warrant of Distraint upon the delinquent taxpayer.
C. Posting of Public Auction Sale Notices in (2) conspicuous places in the locality.
D. Public Auction Sale.
15. WHEN MAY A TAXPAYER’S PROPERTY MAY BE PLACED UNDER
CONSTRUCTIVE DISTRAINT?
If the taxpayer:
A. Is retiring from any business subject to tax;
B. Is intending to-
a. Leave the Philippines,
b. Remove his property there from,
c. Hide or conceal his property
C. Is performing any act tending to obstruct the proceeding for collecting the tax or
which may be due from him.

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16. WHAT ARE THE PROCEDURES FOR THE CONSTRUCTIVE DISTRAINT OF

PERSONAL PROPERTY?
A. CIR serves the warrant of constructive distraint to the delinquent taxpayer.
B. Taxpayer must sign the receipt and obligate himself preserve the thing distraint.
C. Upon failure to sign receipt (a) proceed to prepare a list such as property and (b) in
the presence of two (2) witnesses leave a copy thereof in the premises where the
property distrained is located, after which the said property shall be deemed to have
placed under constructive distraint.
17. WHAT IS LEVY?
It refers to the act of seizure of real property in order to enforce the payment of taxes.
18. WHAT ARE THE PROCEDURES FOR LEVY?
A. Prepare a certificate of Levy.
B. Issuance/Serve notice to the taxpayer and Registry of Deeds.
C. Advertisement of the public auction sale.
D. Public auction sale.
19. WHAT ARE THE DISTINCTIONS OF DISTRAINT AND LEVY?
DISTRAINT LEVY
Refers to personal property. Refers to real property
Forfeiture by the government is not provided. Forfeiture is authorized
The taxpayer is not given the right to The right of redemption is granted in case
redemption with respect to distrained of real property levied upon and sold, or
personal property. forfeited to the government.

20. MAY A PROPERTY LEVIED BE REDEEMED?

Within 1 year from the date of sale, the property may be redeemed by the delinquent
taxpayer or anyone form him, upon payment of the taxes, penalties, and interest thereon from
the date of delinquency to the date of sale, together with interest on purchase price of 15%
per annum from the date of sale to the date of redemption.

21. WHAT IS A TAX LIEN?

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It is a legal claim or charge on property, either real or, personal, established by law as a
security in default of the payment of taxes. Generally, it attaches to the property irrespective
of ownership of transfer thereof.
22. WHAT IS THE EXTENT AND NATURE OF LIEN?
The tax, together with interests, penalties, and costs that may accrue in addition thereto is
a lien upon all property and rights to property belonging to the taxpayer.
The lien shall not be valid against any mortgage, purchaser, or judgement creditor until
notice of such lien shall be filed by the Commissioner of Internal Revenue in the Office of
the Register of Deeds of the province or city where the property of the taxpayer is situated or
located.
Lien attaches not only from the service of the warrant of distraint but from the tax
became due and payable.
23. WHAT IS FORFEITURE?
Divestiture of property distrained or levied. If there is no bidder in the public sale or if the
amount of the highest bid is insufficient to pay the taxes, penalties and costs, the real
property shall be forfeited to the Government. The effect is to transfer the title of a specific
thing from the owner to the government.
24. WHAT ARE THE JUDICIAL REMEDIES OF THE STATE?
A. Civil actions
B. Criminal actions
25. WHAT IS CIVIL ACTIONS?
These are the actions instituted by the government to collect internal revenue taxes. It is
normally resorted to:
A. When the tax is assessed but the assessment become final and unappealable because the
taxpayer fails to file an administrative protest with the CIR within 30 days from
receipt; or
B. When the protest against assessment is filed and a decision of the CIR was rendered but
the said decision becomes final, executory, and demandable for failure of the taxpayer
to appeal the decision to the CTA within 30 days from receipt of the decision.
26. WHAT HAS JURISDICTION OVER CIVIL ACTIONS?

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Taxation 1 Remedies of the StateABSantos, CPA

A. Court of Tax Appeals- where the principal amount of taxes and fees, exclusive of
charges and penalties claimed is One million pesos and above. The CTA has a total of
9 magistrate divided into 3 divisions compose of 3 justices per division.
B. Regional Trial Court, Municipal Court, Metropolitan Court- where the principal
amount of taxes and fees, exclusive of charges and penalties claimed is less than One
million pesos.
27. WHAT IS CRIMINAL ACTIONS?
In consonance with Constitutional limitations “No person shall be imprisoned for non-
payment of debt or poll tax”. The CIR may initiate criminal suit against delinquent taxpayer
and may be punished behind bars.
28. WHO HAS JURISDICTION OVER CRIMINAL ACTIONS?
A. COURT OF TAX APPEALS- on criminal offenses arising from violations of the
NIRC and other laws administered by the BIR, where the principal amount of taxes
and fees, exclusive of charges and penalties claimed is One million pesos and above.
B. Regional Trial Court, Municipal Court, Metropolitan Court- on criminal offenses
arising from violation of the NIRC and other laws administered by the BIR, where the
principal amount is claimed less than One million pesos or where there is no specified
amount claimed.
29. MAY CRIMINAL ACTION BE FILED DURING THE PENDENCY OF AN
ADMINISTRATIVE PROTEST IN THE BIR?
Yes. It is not a requirement for the filing of criminal complaint to have a precise
computation and assessment of the tax, since what is involved in the criminal
action is not the collection of tax but a criminal prosecution for the violation of
the NIRC.

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