Chapter 17

MEMBERS

 Refamonte, Ma. Abigail D.

 Baritua, Vaechell Marie
 Abastas, Anne Patricia
 Gallardo, Dufhmae
 Antipuesto, Fe Flor
 Cabusas, Fritzie
 Canete, Khecia Anne
 Alpuerto, Jessa Barbie
 Echavez, Yhen
 Judy Andrea
 Singco, Mauie
A. Remedies of the Government
Internal revenue taxes are self-assessing, no further assessment by the Government is
required to create the tax liability (Vitug, 2006).
Importance of Tax Remedies:
a) to enhance the government’s tax collection efforts
b) to safeguard against arbitrary action
Remedies for collection of delinquent taxes are:
1. Administrative
a. Distraint of personal property
b. Levy of personal property
c. Enforcement of forfeiture of property
d. Enforcement of tax lien

2. Judicial
a. ordinary civil action
b. criminal action
Distraint – personal property
KINDS OF DISTRAINT:
a. Actual - there is taking of possession of the personal property out of the taxpayer into that of the government.
b. Constructive - the owner is merely prohibited from disposing of his property.
Actual and Constructive Distraint Procedure - commencement of distraint proceedings by CIR (P1M+) or RDO (P1M
or less); service of warrant of distraint.
Levy – real property
Forfeiture - a divestiture of property without compensation, in consequence of a default or offense.
Tax Lien - a legal claim or charge on property either real or personal established by law in default of the payment of
taxes
Civil action - the government may institute civil actions to collect internal revenue taxes in the Regional Trial Court.
Criminal action - maybe pursued by the authorities for the collection of delinquent taxes.

Distraint Procedure
- commencement of distraint proceedings by CIR (P1M+) or RDO (P1M or less)
 Garnishment and
constructive distraint.
Garnishment

 A court order directing that money or property of a third party (usually wages
paid by an employer) be seized to satisfy a debt owed by a debtor to a
plaintiff creditor.
Bank account Garnishment

 It is a document issued by the court, once a judgment is entered against an

owner that order the bank to hold/seize all funds in an owners account up to
the amount of the judgment on the day the bank is served with
the garnishment.
Constructive distraint of a property of a
tax payer.
1. The delinquent taxpayer is retiring from any business subject to tax;
2. Intending to leave the Philippines;
3. Intending to hide his property in the Philippines or to hide or conceal his
property;
4. To perform any act tending to obstruct the proceedings for collecting the ta
x due or which may be due from him.

Levy

1. Impose or collect an amount (such as a tax) by compulsion or legal authority.

2. The amount so collected.

3. Appropriation or seizure of a debtor's specific asset or property through a

lawful process, or in satisfaction of a judgment, for the payment of a debt or
claim.
Levy on real property/ estate

 "Sec. 324. Levy on real estate. — After the expiration of the time required to pay the delinquent tax or
delinquent revenue as prescribed by Section three hundred eighteen, real property may be levied upon
before, simultaneously, or after the distraint of personal property belonging to the delinquent. To this end,
any internal revenue officer designated by the Revenue District Officer, or the Revenue Regional Director or
the Commissioner of Internal Revenue, as the case may be, shall prepare a duly authenticated certificate
showing the name of the taxpayer and the amounts of the tax and penalty due from him. Said certificates
shall operate with the force of a legal execution throughout the Philippines. Levy shall be effected by
writing upon said certificate a description of the property upon which levy is made. At the same time,
written notice of the levy shall be mailed to or served upon the Register of Deeds of the province or city
where the property is located and upon the delinquent or, if he be absent from the Philippines, to his agent
or the manager of the business in respect to which the liability arose, or, if there be none, to the occupant
of the property in question.
"In case the levy on real property is not issued before or simultaneously with the warrant or distraint on
personal property, and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency,
the Revenue District Officer, Regional Director or Commissioner, as the case may be, shall within thirty days
after execution of the distraint, proceed with the levy on the taxpayer's real property.
"A report on any levy shall, within ten days after receipt of the warrant, be submitted by the levying officer
to the District Revenue Officer, the Revenue Regional Director, and to the Commissioner of Internal
Revenue.
 Distraint Levy

Personal Property Real Property

Government may purchase the

Government shall forfeit the property
property

Both shall not be availed of where the amount of tax involved is not more
than One Hundred Pesos (P100.00)
 JEOPARDY ASSESSMENT
A special assessment made by the IRS outside of normal procedures
in order to immediately collect on a tax deficiency that is deemed to be in
danger of non-collection. Jeopardy assessments are used sparingly and only
in circumstances where regular assessment procedures increase the risk of
non-collection.
ARBITRARY ASSESSMENT
Is an assessment issued only and primarily to forestall prescription.
Collection of assessed taxes

 A. if assessed within the 3 year period or 10 year period – the

counting of the 5 year period shall start at the date of assesment.
 B. if assesed based on the period agreed upon between the
taxpayer and the Commissioner – the collection shall be made within
the period agreed upon in writing before the expiration of the 5 year
period. The period agreed upon may be extended by a subsequent
written agreement made before the expiration of the period
previously agreed upon.
 Procedure in the
assessment of taxes
a. Notice of Informal Conference (NIC)

is a written notice informing a taxpayer

that the findings of the audit conducted on his
books of accounts and accounting records
indicate that additional taxes or deficiency
assessments have to be paid.
b. Preliminary assessment notice (PAN)

is a communication issued by the Regional

Assessment Division, or any other concerned
BIR office, informing a taxpayer who has
been audited of the findings of the Revenue
Officer, following the review of these
findings.
c. Issuance of assessment

Based on the findings of the BIR and the

response to pre-assessment notice, the
taxpayer shall be informed in writing of the
law and the facts on which the assessment is
made; otherwise, the assessment shall be
void.
Preliminary Notice
not required
a. When the finding for any deficiency
tax is the result of mathematical error in
the computation of the tax appearing on
the face of the tax return filed by the
taxpayer; or
b. When a discrepancy has been
determined between the tax withheld and
the amount actually remitted by the
withholding agent; or
c. When a taxpayer who opted to claim a
refund or tax credit of excess creditable
withholding tax for a 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 excise tax due on excisable
articles has not been paid; or
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.
Letter of Authority (LA)
- is an official document that empowers a
revenue officer to examine and scrutinize a
taxpayer’s books of accounts and other
accounting records, in order to determine the
taxpayer’s correct internal revenue tax
liabilities.
It must be served to the concerned
taxpayer within thirty (30) days from its
date of issuance, otherwise, it shall be
become null and void. The taxpayer shall
then have the right to refuse the service
of this LA, unless the LA is revalidated.
A letter of Authority
is validated through the issuance of a new LA.
However, a Letter of Authority can be revalidated-
1. Only once, for LAs issued in the Revenue
Regional Offices or the Revenue District
Offices; or
2. Twice, in the case of LAs issued by the National
Office.
Suspension of running of statue of
limitations…
a. For the period during which the Commissioner is prohibited from making
the assessment or beginning distraint or levy or a proceeding in court
and sixty (60) days thereafter;
b. When the taxpayer requests for a reinvestigation which is granted by the
Commissioner;
c. When the taxpayer cannot be located in the address given by him in the
return upon which tax is being assessed or collected;

d. 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

e. When the taxpayer is out of the Philippines.

 Purpose…
 A plaintiff with a valid cause of action should pursue it with reasonable
diligence.

 By the time a stale claim is litigated, a defendant might have lost evidence
necessary to disprove the claim.

 Litigation of a long-dormant claim may result in more cruelty than justice.

 Non-suspension of running of Statue of
Limitations

 The running of the Statute of Limitations will not be suspended if the

taxpayer informs the Commissioner of any change in address.
SURCHARGES
 It is not a criminal penalty but a civil administrative sanction provided
primarily as a safeguard for the protection of state revenue

 Is a fee or other charge that is added to the cost of a good or service.

 Is typically added to an existing tax, and may not be included in the stated
price of a good or service.
II. Judicial Remedies
(Inside the court)
INSPECTION OF BOOKS OF ACCOUNTS

JUDICIAL ACTION
1. Civil Action- After the assessment made by the
Commissioner of Internal Revenue has become final and
executory for failure of the taxpayer to dispute the same
and appeal the disputed assessment to the Court of Tax
Appeals, the government may institute civil actions to
collect internal revenue taxes in the Regional Trial Court and
the Metropolitan Trial Court, City and municipal courts.

2. Criminal Action- maybe pursued by the authorities for

the collection of delinquent taxes. An assessment of a tax
deficiency is not necessary to a criminal prosecution for tax
evasion. The crime is complete when the violator has
knowingly and willfully filed a fraudulent return or neglected
to file a return with intent to evade the tax. If the taxpayer
is acquitted, the government may still collect the tax in a
civil action, because the payment of a tax is an obligation
imposed by statute and does not arise from a criminal act.
ORDINARY PERIOD FOR ASSESSMENT

The right of the government to asses and later on to collect the tax is subject to
prescription, upon the lapse of which it can no longer exercise this right.

Section 203, of the tax code provides that internal revenue taxes shall be assessed
within 3 years after the last day prescribed by law for the filing of the return. The
same provision of law lays down the rules as to when the 3 year prescriptive period
for assessment begins:

1. if the return is filed before the last day prescribed by law for the filing thereof, it
shall be considered as filed on the last day;
2. if the return is filed on the last day prescribed by law, then it is considered as
filed on such day;
3. if the return is filed beyond the period prescribed by law, the 3 year period shall
be counted from the day the return is filed.

So it is clear, that the reckoning point for the 3 year prescriptive period is flexible;
if the return is filed on or before the deadline, the reckoning point is the deadline;
if filed beyond the deadline, the reckoning point is the date the return is actually
filed. The 3 year period for assessment begins to run from such a date.
B. Remedies of the
Taxpayer
Taxpayers who can avail of the remedies

 Any person adversely affected by

the action taken by commissioner
 The officers and directors of a
defunct corporation
 A person on whom the tax is
imposed and paid
Where tax has not been paid

 Dispute or protest the assessment

file a request within 30 days from receipt of the
assessment
 Appeal to the court of tax appeals
if denied within 180 days from submission of
documents, the taxpayer affected may appeal to
the Court of Tax Appeals within 30 days from
receipt or from the lapse of the 180-day period.
Where tax has been paid

 Erroneously collected
 Illegally collected
Refund of tax erroneously or illegally
collected
 The taxpayer must file a written claim for refund with the Commissioner of
Internal Revenue within two (2) years after final payment of the tax or penalty.
 Within 30 days from receipt of the decision and within 2 years from the date of
final payment, if adverse to the taxpayer, he can file an appeal to the Court of Tax
Appeals.
 There is no extension of said 2 year period of recovery regardless of any
supervening cause that may arise after payment
 When the two-year period is about to prescribe and the claim for refund with the
Commissioner of Internal Revenue has not been acted upon by him for the
protection of the interest of the taxpayer, he should file a petition for review with
the Court of Tax Appeals within the said 2 year period.
 If the decision of the Commissioner is adverse to the taxpayer and it was made
after the two year he can no longer appeal the same to the Court of Tax Appeals.
Chapter 17 Summary
Remedies of the Government
Importance:
 to enhance the government’s tax collection efforts
 to safeguard against arbitrary action

Remedies for Delinquent Taxes:

1. Administrative
a. Distraint (personal property)
b. Levy (real property)
2. Judicial
a. Civil
b. Criminal
 Bank account Garnishment
It is a document issued by the court, once a judgment is entered against an
owner that order the bank to hold/seize all funds in an owners account up to the
amount of the judgment on the day the bank is served with the garnishment

 Levy on real property

After the expiration of the time required to pay the delinquent taxes
Before or after the distraint of personal property belonging to the delinquent
taxpayer
 Assessment of Taxes
written notice and demand by the BIR on the taxpayer for the settlement of
a due tax liability that is definitely set and fixed

 Letter of Authority
An official document that empowers a revenue officer to examine and scrutinize a
taxpayer’s books of accounts an other accounting records
 Surcharges
It is not a criminal penalty but a civil administrative sanction provided primarily as a
safeguard for the protection of state revenue
Remedies of the Taxpayer

Who can avail of the remedies?

 Any person adversely affected by the action taken by commissioner
 The officers and directors of a defunct corporation
 A person on whom the tax is imposed and paid
Where tax has not been paid
1. Dispute or Protest the assessment
2. Appeal to the CTA

Where tax has been paid

 Claim refund if the tax was
1. Erroneously collected
2. Illegally collected
 Tax Compromise
An offer in compromise (OIC) is an agreement between a taxpayer and the BIR that
settles the taxpayer’s tax liabilities for less than the full amount owed

 Jeopardy Assessment
A delinquency tax assessment which was assessed without the benefit of a complete
or partial audit by an authorized revenue officer who has reason to believe that the
assessment and collection of a deficiency tax will be jeopardized by delay because of
the taxpayer’s failure to comply with the audit and investigation requirements to
present his books of accounts or pertinent records or to substantiate all or any of the
deductions, exemptions or credits claimed in his return
 Arbitrary Assessment
An assessment issued only and primarily to forestall prescription