Modes of Collection: Civil Remedies

The government is given 2 ways to collect:

Summary or Administrative Remedies
o Collection by Distraint (Personal property)
o Collection by Levy (Real property)
Judicial Remedies
o Civil action
o Criminal action
The remedies may be pursued singly or independently of each other OR all of then simultaneously.

Distraint
1. Actual distraint wherein actual delinquency in tax payment is necessary.
- This is resorted to upon the failure of the person owing any delinquent tax or delinquent revenue to pay the same at
the time required.
- The personal property of the person are actually seized by the BIR.
- Procedure for actual distraint:
a. Commencement of distraint proceedings
b. Service of warrant of distraint
c. Notice of sale of distrained property
d. Release of distrained property, prior to sale
e. Sale of property distrained
f. Purchase by Government at sale upon distraint
2. Constructive distraint wherein no actual delinquency is necessary
- This is resorted to when the CIR believes:
a. TP is retiring from any business subject to tax
b. Intends to leave the PH
c. Intends to remove his property from the PH
d. Intends to hide or conceal his property; or
e. Performs any act tending to obstruct the proceedings for collecting the tax due.

o How is constructive distraint effected?

The TP will be required to sign a receipt covering the property distrained and obligate himself to: (1)
preserve it intact and unaltered, and (2) Not dispose of it in any manner without express authority of
the CIR.
If the TP refuses, the officer will prepare a list of properties distrained and will leave a copy thereof
in the premises, in the presence of 2 witnesses.

Levy
Procedure:
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

Failure of the heirs to receive a copy of notice of levy DOES NOT bar its effectivity, since the taxpayer is in fact, the estate.

SUSPENSION OF COLLECTION
GR: No court can issue an injunction to restrain collection of internal revenue taxes, fees, or charges imposed by the NIRC.
EXC: Only the CTA can issue an injunction, and it is only allowed when the following conditions concur:
1. There 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 TP, and
3. TP either to deposit the amount claimed OR to file a surety bond for not more than double the amount with the Court.

Tax lien
When a TP neglects or refuses to pay his internal revenue tax liability after demand, the amount demanded 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 the property and rights to property belonging to the TP.
- HOWEVER: The lien shall NOT be valid against any mortgagee, purchase or judgment creditor.

Compromise and Abatement

The law also allows the tax liability of a taxpayer to be reduced or even cancelled through compromise or abatement. Hence, the two can
be seen as a remedy of BOTH the government and the taxpayer.

Compromise
Grounds:
1. Doubtful validity of the claim against the TP, or
2. Financial incapacity of the TP

Cases which may be compromised:

1. Delinquent accounts
2. Pending admin cases under admin protest after issuance of final assessment notice to the TP
3. Civil tax cases being disputed before the courts;
4. Collection cases filed in courts
5. Criminal violations
EXC: If (1) already filed in court, or (2) involving criminal tax fraud

Examples of Doubtful validity

1. Delinquent account / disputed assessment resulted from a jeopardy assessment
o Jeopardy assessment an assessment without the benefits of 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 because of the TPs failure to comply with audit and investigation requirements.
o These assessments are usually done just before the end of the prescriptive period
o Thus, they are called jeopardy because the tax is in jeopardy of not being collected at all and the officer is in
jeopardy of losing his job.
2. The assessment seems to be (a) arbitrary, (b) based on presumptions, and (c) there is reason to believe that is lacking in
legal / factual basis.
3. There is reason to believe that the assessment is lacking in legal and factual basis and taxpayer failed:
(a) To file an admin protest because of alleged failure to receive notice of assessment, or
(b) To file a request for reinvestigation / reconsideration within 30 days from receipt of final assessment notice, or
(c) To elevate to the CTA an adverse decision of the Commissioner, or his authorized representative, in some cases, within
30 days from receipt thereof.
4. The assessments were issued on or after 1 January 1998, where the demand notice allegedly failed to comply with the
formalities prescribed under Sec. 228, NIRC.
5. Assessments made based on the Best Evidence Obtainable Rule and there is reason to believe that the same can be
disputed by sufficient and competent evidence
6. The assessment was:
(a) Issued within the period extended by the taxpayers execution of the waiver of statute of limitations, and
(b) Waivers authenticity is being questioned, and
(c) There is strong reason to believe and evidence to prove that it is not authentic.

Abatement and Cancellation of Tax Liability

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.

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.
- May be settled extra-judicially.
- In most instances, the taxpayer must pay a compromise penalty to settle his criminal liability.

PRESCRIPTION: Governments power to COLLECT

GR: The prescriptive period to collect the taxes due is 5 YEARS from the date of assessment
EXC:
1. False or fraudulent return with intent to evade taxes: Within 10 years from discovery without need for prior assessment.
2. Failure or omission to file a return: Within 10 years from discovery without need for assessment.

Regular Return was Made False, Fraudulent, or Failure to File a Return

Assessment: 3 Years Assessment: 10 years from discovery

Collection: 5 years from assessment Collection: 5 years from assessment

If government does not make an assessment, they can collect
within 10 years from discovery.

They are, however, limited to purely judicial remedies.

SUSPENSION OF RUNNING OF STATUTE OF LIMITATIONS

 1. When the CIR is prohibited from making an assessment or beginning distraint and levy or a proceeding in court and for 60
days thereafter.
o The filing of a petition for review in the CTA from the decision of the CIR on a protested assessment interrupts
the running of the prescriptive period for collection. The pendency of the TPs appeal in the CTA and in the SC
had the effect of temporarily staying the hands of the CIR from collecting.
2. The TP requests for reinvestigation which is granted by the CIR.
o Reconsideration a plea for re-evaluation of an assessment on the basis of existing records without need of
additional evidence.
o Reinvestigation a plea for re-evaluation of an assessment on the basis of newly-discovered or additional
evidence that a taxpayer intends to present in the reinvestigation.
The suspension of the period only occurs when the TP requests for a reinvestigation and is granted
by the CIR.
o 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.
o In computing whether the collection was done within the period prescribed by law, do this:
(Date of Collection) (Date of Assessment) (Period of Reinvestigation) 5 YEARS
The period starts to run again when the said request is DENIED, i.e. the BIR acted upon the request
but did not find it meritorious afterwards.
3. When the TP cannot be located in the address given by him in the return filed, unless he informs the CIR of the change of
address.
o Both the periods for assessment and collection are suspended
4. When the warrant of distraint and levy is duly served upon the TP or authorized representative, and no property could be
located.
o Only the period for collection is suspended
5. When the TP is out of the Philippines.
o Period for assessment and collection is suspended
6. Those under the CTA law.

TAXPAYERS REMEDIES
A. Protest or dispute the assessment; or
B. Refund or recovery of erroneously or illegally collected taxes

A. Protesting an Assessment (Sec. 228)

Protesting an assessment is the first TP remedy.

1. Issuance of the Preliminary Assessment Notice (PAN)

If there is sufficient bases for an assessment, the BIR will use a pre-assessment notice (PAN) stating the facts, laws, rules,
regulations and jurisprudence on which the proposed assessment is based.
TP has 15 DAYS from receipt of the PAN to respond.
o If he does not: Default, and a Formal Letter of Demand and Final Assessment Notice (FLD / FAN) shall be
issued.
o If he does: FLD / FAN will be issued within 15 DAYS from the filing / submission of the TPs response.
The sending of a PAN to taxpayer to inform him of the assessment made is but part of the due process requirement in the
issuance of a deficiency tax assessment, the absence of which renders nugatory any assessment made by the tax
authorities.

When PAN is not needed:

a. Any deficiency tax is the result of mathematical error in the computation of the tax evident on the face of the
return.
b. Discrepancy between the tax withheld and the amount actually remitted by the withholding agent
c. TP opted to claim a refund or tax credit for excess creditable withholding tax carried it over and automatically
applied the amount claimed against the estimated tax liabilities for the taxable quarter of the succeeding
taxable year.
d. Excise tax due on excisable articles has not been paid
e. When an article locally purchased or imported by an exempt person has been sold, traded, or transferred to a
non-exempt person.

2. Issuance of the formal letter of demand and final assessment notice (FLD / FAN)

3. Protest the FLD / FAN

The TP must file a letter of protest WITHIN 30 DAYS from the date of receipt of the FLD / FAN.
o If the TP fails to do so, then the assessment becomes final, executory, and demandable.
 The protest comes in the form of either a written request for reconsideration or reinvestigation.
The protest must:
o State the nature of the protest (if reconsideration or reinvestigation);
o Date of the FAN; and
o Applicable rules, law, etc.
If the protest lacks any of these, then it shall be considered void and without force & effect.
Note: For requests for reinvestigation, the TP must submit all relevant supporting documents 60 DAYS from the date of the
filing of his letter of protest.

4. Recourse in case of inaction or denial

Once the protest is filed, two things can happen:

o The CIR or his representative DENIES it;
o SITS on it and does nothing it

Denial of Protest
If the protest is DENIED by the CIRs representative, the TP has 2 options:
(1) APPEAL to the CTA division WITHIN 30 DAYS from the date of receipt of decision
Via a Petition for Review under Rule 42 (Judicial Appeal); or
(2) Request for RECONSIDERATION with the CIR WITHIN 30 DAYS from the date of receipt of the decision (Administrative
Appeal)

If the protest or request for reconsideration is still denied by the CIR:

APPEAL to the CTA WITHIN 30 DAYS from date of receipt of said decision.
o A MR of the CIRs denial will NOT toll the 30-day period to appeal to the CTA

If the protest or administrative appeal is not acted upon by the CIR WITHIN 180 DAYS counted from the date of the filing of
the protest, the TP may either:
o APPEAL to the CTA division WITHIN 30 DAYS from the expiration of the 180-day period; or
o WAIT for the final decision of the CIR, and then APPEAL said decision to the CTA WITHIN 30 DAYS after receipt of
said decision.
The appeal or wait options are MUTUALLY EXCLUSIVE.

Inaction
If the CIRs representative DOES NOT act within 180 days counted from:
The date of filing of the protest in case of a request for reconsideration; or
The date of submission of the required relevant supporting documents (WITHIN 60 DAYS from the date of filing of the protest
for a request for reinvestigation)

The taxpayer may either:

(1) APPEAL to the CTA WITHIN 30 DAYS from the expiration of the 180-day period; or
(2) WAIT for the final decision of the CIRs representative
Again, this appeal or wait options in inaction cases are mutually exclusive; resort to one bars the application of the other.

5. Issuance of a Final Decision on a Disputed Assessment (FDDA)

Assuming the CIR or his representative acts on the protest, the FDDA must state:
o The facts, the applicable law, rules and regulations or jurisprudence on which the decision is based (if not, then
it is a void decision); and
o That the decision is the final decision.

B. Claiming a Refund

The following are the instances when a claim for refund may be availed of:
1. Erroneously or illegally assessed or collected internal revenue taxes
2. Penalties imposed without authority; or
3. Any sum alleged to have been excessive or in any manner wrongfully collected

There is a distinction between a TAX REFUND and a TAX CREDIT:

Tax Refund Tax Credit
There is actual reimbursement A tax certificate or tax credit memo is issued to the taxpayer, and
this can be applied against any sum that may be due and
collectible from the taxpayer, except withholding taxes.

Requirements for a Tax Credit

1. Written claim for credit or refund filed with the CIR, WON the tax has been paid under protest; and
 2. Filed WITHIN 2 YEARS after the actual payment of the tax or penalty, regardless of the existence of any supervening cause
after payment.
3. (Substantive basis in law and documents to support or substantiate your claim)

The government is not liable to pay interest on the taxes it refunds to the taxpayer, given that there is no provision in law requiring such.

Two venues of refund:

Administrative BIR
Judicial CTA

On written claim to the BIR: Mandatory requirement

On refunding overpaid creditable withholding taxes: (Requisites)

(1) Filing the same within the TWO-YEAR PERIOD;
(2) Establishing the fact of withholding the copies of the CWT copies; and
(3) Showing that the income received was declared as part of gross income

GR: The two-year prescriptive period runs from the payment of the tax.
For overpaid quarterly corporate income tax: From the time the refund is ascertained (after final adjustment return is
accomplished)
For overpaid withholding taxes: From the end of the taxable year
For creditable withholding taxes: From the filing of the TPs final adjustment tax return
Where tax is paid in installments: From date for payment of the last installment

GR: The two-year prescriptive period is MANDATORY. After the lapse of the 2-year period, there can no longer be proceedings for refund.
EXC:
When the TP and the govt agree to wait for the outcome of a case which is on all fours with the instant case
When the payment of tax was not due because of error or wrongful collection, but because of a patriotic duty to help the
cause of the nation
When the TP was made to believe that the refund was going to be allowed by the government.

On bringing the claim to the CTA:

The TP need not wait for the action of the CIR on the claim for refund before taking his claim to the CTA
Both the claim for refund and the appeal to the CTA must be done within the 2-year period.
o Hence, if the period is about to expire, and the CIR has not acted upon the claim, the TP may file and appeal
with the CTA, without waiting for the CIR.
o The suit or proceeding must be started in the CTA before the end of the 2-year period without awaiting the
decision of the CIR.

On choosing between a refund and a credit FOR CORPORATIONS (Sec. 76)

1. Filing a tax refund; or
2. Availing of a tax credit; or
3. Carry-over the excess credit against the estimated income tax liabilities of the succeeding quarters.
These are alternative in nature.
JURISDICTION OF THE COURT OF TAX APPEALS

Exclusive Appellate Jurisdiction

1. Decisions of the CIR, involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the BIR;
2. Inaction by the CIR, in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relations thereto, or other matters arising under the NIRC or other laws administered by the BIR, where the NIRC
provides a specific period of action, in which case the inaction shall be deemed a denial;
3. Decisions, orders or resolutions of the RTCs in local tax cases originally decided or resolved by them in the exercise of their
original or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges,
seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters
arising under the Customs Law or other laws administered by the Bureau of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the
assessment and taxation of real property originally decided by the provincial or city board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the
Commissioner of Customs which are adverse to the Government under Section 2315 of the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the
Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing
duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic
Act No. 8800, where either party may appeal the decision to impose or not to impose said duties

Jurisdiction over cases involving Criminal Offenses

1. Exclusive Original Jurisdiction
o All criminal offenses arising from violations of NIRC or Customs & Tariff Code and other laws administered by
the BIR or BOC, where the principal amount of tax claimed is worth P 1,000,000 or more.
If less than P 1,000,000 or no specified amount claimed, it exercises exclusive appellate
jurisdiction.
2. Exclusive Appellate Jurisdiction
o Appeals from the RTC in tax cases originally decided by them
o Petitions for review from RTC in the exercise of their appellate jurisdiction over tax cases originally decided by
the MTCs

Jurisdiction over tax collection cases

1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees (exclusive of
charges and penalties), where amount claimed is P 1,000,000 or more.
If less than P 1,000,000 or no specified amount claimed, it exercises exclusive appellate
jurisdiction.
2. Exclusive appellate jurisdiction
o Appeals from the RTC in tax cases originally decided by them
o Petitions for review from RTC in the exercise of their appellate jurisdiction over tax cases originally decided by
the MTCs

The jurisdiction of the CTA is to review by appeal decisions of the CIR on disputed assessments. When a taxpayer does not protest an
assessment, and appeals the assessment itself to the CTA, his appeal is premature.
HOWEVER: When the TP protested the PAN, but not the FLD / FAN which categorically stated that it was the CIRs final
decision and that appeal must be made to the CTA, the CIR is estopped from raising the argument

A final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. Thus, the TP
can file an appeal with the CTA.

The jurisdiction of the CTA has been expanded to include not only decisions or rulings but inaction as well of the CIR.

The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or
refunds. It also covers other cases that arise out of the NIRC or related laws administered by the BIR.
Hence, the CTA has the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if
the Waiver of Statute of Limitations was validly effected.