Reviewer On Tax Administration and Procedures (For Submission)

Reviewer on Tax Administration and Procedures
Taxation Law Review

Atty. Elvie Regala
Tax Enforcement
Bureau of Internal Revenue
Q: Organization of the Bureau of Internal Revenue (BIR)

A: The BIR shall be under the supervision and control of the Department of Finance. It shall have a chief
to be known as Commissioner of Internal Revenue and four (4) assistant chiefs to be known as Deputy
Commissioners. Aside from the Head Office, the BIR shall also be composed of Revenue Regional
Offices headed by Revenue Regional Directors, Internal Revenue District Offices headed by Revenue
District Officers.
Q: What are the powers and duties of the BIR?

A: The BIR shall have the following powers and duties:
1. Assessment and collection of all national internal revenue taxes, fees, and charges;
2. Enforcement of all forfeitures, penalties, and fines connected therewith;
3. Execution of judgments in all cases decided in its favor by the Court of Tax Appeals and ordinary
courts;
4. Giving effect to and administering the supervisory and police powers conferred to it by pertinent laws.
5. Recommending to the Secretary of Finance all needful rules and regulations for the effective
enforcement of the provision of the NIRC.
Q: Is the BIR authorized to collect estate tax deficiencies by the summary remedy of levy upon and sale
of real properties of the decedent without first securing the authority of the court sitting in probate over
the supposed will of the decedent?
A: Yes, the BIR is authorized to collect estate tax deficiency through the summary remedy of levying
upon and sale of real properties of a decedent without the cognition and authority of the court sitting in
probate over the supposed will of the deceased because of the collection of estate tax is executive in
character. As such the estate tax is exempted from the application of the statute of non-claims, and this is
justified by the necessity of government funding, immortalized in the maxim that taxes are the lifeblood
of the government. (Marcos v. CIR, GR 120880, June 5, 1997) (1998 Bar Question)
Q: What are the powers of the Commissioner of Internal Revenue?

A: These are as follows:
1. Exercise police power;
2. Power to examine books;
3. Power to inquire bank deposits;
4. Power to obtain information and to summon/ examine and take testimony of persons;
5. Power to interpret tax laws and decide tax cases;
6. Power to assess; and
7. Power to terminate tax period.
Concept of tax administration
Q: What is tax administration?

A: It refers to the manner and procedure of assessing and collecting or enforcing tax liabilities.
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Q: What are the stages in the imposition of tax?
1. Levy - The act of imposing and collecting a tax or the money so raised. It also refers to the enactment
of a law by Congress, imposing a tax.
2. Assessment - The act of administration and implementation of the tax law by the executive department
through the administrative agencies.
3. Collection – The act or process of getting money by the government from the people and businesses
required to pay tax
Q: Stages and Procedures in BIR audit examination

I. AUDIT STAGE (Issuance of Letter of Authority)
A. Powers of the Commissioner Relative to the Audit Process
1. Examine Returns and Determine Tax Due (Sec. 5) – Authorizing the examination of any
taxpayer and the assessment of the correct amount of tax, WON a return has been filed by
such taxpayer.
Note: Any return filed with the Commissioner shall not be withdrawn, BUT the taxpayer may
MODIFY, CHANGE or AMEND such return within three (3) years from the date of filing,
provided that no notice for audit or investigation of such return has been actually served on the
taxpayer.
2. Conduct Inventory-Taking, Surveillance and to prescribe presumptive gross sales and receipts
(Sec. 6C) –
 Inventory-taking - at any time during the taxable year, for the purpose of determining the
correct tax liabilities.
 Surveillance - done if there is reason to believe that the taxpayer is not declaring his
correct income, sales or receipts for tax purposes.
 Prescribe presumptive gross sales and receipts if:
 It is found that the taxpayer has failed to issue receipts and invoices, or
 When there is reason to believe that the books of accounts or other records do not
correctly reflect the declarations made by the taxpayer
3. Terminate Taxable Period (Sec. 6D) – Terminating taxable period and ordering the immediate
payment of the tax for the terminated period and any remaining tax that is unpaid, when the
taxpayer is:
 retiring from business subject to tax, or
 intending to leave the Philippines or to remove his property therefrom or to hide or conceal
his property
 performing any act tending to obstruct the proceedings for the collection of the tax for the
past or current quarter or year or to render the same totally or partially ineffective unless
such proceedings are begun immediately
4. Prescribe Real Property Values (Sec. 6E) – Dividing the Philippines into different zones or
areas, and determining the FMV of real properties in each zone or area, upon consultation with
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competent appraisers from private and public sectors. For the purpose of computing any
internal revenue tax, the value of the property shall be whichever is higher of:
 The fair market value as determined by the Commissioner, or
 The fair market value as shown in the schedule of values of the provincial and city
assessors
5. Inquire into Bank Deposit Accounts (Sec. 6F) – Notwithstanding any contrary provision of
R.A. 1405 (Bank Secrecy Law) and other general or special laws, the Commissioner is
authorized to inquire into bank deposits of:
 A decedent to determine his gross estate, and
 Any taxpayer who has filed an application for compromise of tax liability by reason of
financial incapacity – the taxpayer must waive in writing his privilege under R.A. 1405
and other relevant laws, before the Commissioner may inquire into his bank accounts
6. Accredit and register Tax Agents (Sec. 6G) – Accrediting and registering tax agents (may be
individuals or general professional partnerships) based on the following criteria:
 Professional competence
 Integrity
 Moral fitness
7. Prescribe additional Procedural or Documentary Requirements (Sec. 6H) – in relation to the

manner of compliance of any requirement in connection with the submission or preparation of
financial statements accompanying the tax returns.
8. Access Letter (Sec. 5B) – Obtaining on a regular basis, from any person OTHER THAN the
person whose tax liability is subject to audit or investigation, or from any office or officer of
the national and local governments, government agencies or instrumentalities, including BSP
and GOCCs, any information such as, but not limited to, costs and volumes of production,
receipts or sales and gross incomes of taxpayers, and the names addresses, and financial
statements of corporations, mutual fund companies, insurance companies etc.
Note: This is known as the Third Party Information Rule.
9. Interpret Tax Laws and to Decide Tax Cases (Sec. 4) – shall be under the exclusive and
original jurisdiction of the Commissioner, subject to review by the Secretary of Finance
B. Letter of Authority
Q: What is a letter of authority?

A: 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.
Q: Who issues the Letter of Authority?

A: a) Commissioner → for those units reporting directly to him
b) Regional Directors → for taxpayers covered by his particular region. If the Commissioner has
already issued an LA to investigate a particular taxpayer, the Regional director shall desist from
issuing another LA for the same taxpayer.
Q: What are the cases which need not be covered by a valid LA?
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A: 1. Cases involving civil/criminal tax fraud which fall under the jurisdiction of the tax fraud
division of the Enforcement Services, and
2. Policy cases under audit by the special teams in national offices
II. PRE-ASSESSMENT STAGE
A. Step 1: Issuance of Notice of Informal Conference
Q: What is a notice of informal conference?

A: 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.
The taxpayer shall then have fifteen (15) days from the date of his receipt of the Notice for
Informal Conference to explain his side.
B. Step 2: Informal Conference
Q: What matters are taken up during the informal conference?

A: 1. Discussion on the merits of the assessment
2. Attempt of taxpayer to convince the examiner to conduct a reinvestigation and/or re-
examination
3. Evaluate if submission of the waiver of the statute of limitations is necessary – because
evaluation may extend beyond three years
4. Taxpayer to advise the examiner if position paper will be submitted
Q: What is a jeopardy assessment?

A: A tax assessment made by an authorized Revenue Officer without the benefit of complete or
partial audit, in light of the RO’s belief that the assessment and collection of the deficiency tax
will be jeopardized by delay caused by the taxpayer’s failure to:
i. Comply with audit and investigation requirements to present his books of accounts and/or
pertinent records
ii. Substantiate all or any of the deductions, exemptions or credits claimed in his return.
It is usually issued when statutory prescriptive periods for the assessment or collection of taxes
are about to lapse due principally to the taxpayer’s fault.
C. Step 3: Issuance of Pre-Assessment Notice
Q: What is a pre-assessment notice (PAN)?

A: 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.
The assessment shall be:
 in writing, and
 should inform the taxpayer of the law and the facts on which the assessment is made;
 otherwise, the assessment shall be void. (Sec. 228, NIRC)
If the taxpayer disagrees with the findings in the PAN, he has fifteen (15) days from his receipt of
the PAN to file a written reply contesting the proposed assessment.
PAN no longer required when:
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(a) 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) A DISCREPANCY has been determined between the TAX WITHHELD and the amount
ACTUALLY REMITTED by the withholding agent; or
(c) 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) The EXCISE TAX due on excisable articles has not been paid; or
(e) 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 a nonexempt person. (Sec. 228, NIRC)
III. FORMAL ASSESSMENT STAGE
Q: What is a Notice of Assessment (Final Assessment Notice “FAN” or Formal Letter of Demand)?
A: A declaration of deficiency taxes issued to a taxpayer who fails to respond to a pre-assessment
notice within the prescribed period of time, or whose reply to the PAN was found to be without
merit. This is commonly known as the Final Assessment Notice (FAN).
An assessment contains not only a computation of tax liabilities, but also a demand for payment
within a prescribed period. The ultimate purpose of assessment is to ascertain the amount that each
taxpayer is to pay. An assessment is a notice to the effect that the amount therein stated is due as tax
and a demand for payment thereof. (Tupaz v. Ulep, 1999)
The formal letter of demand shall be issued by the Commissioner or his duly authorized
representative. The letter of demand calling for the payment of the taxpayer’s deficiency taxes shall
state the FACTS, the LAW, RULES and REGULATIONS or JURISPRUDENCE on which the
assessment is based, OTHERWISE, the formal letter of demand or assessment notice shall be VOID.
(RR 12-99)
Note:
 A follow-up letter/demand letter for payment of taxes is considered a notice of assessment.
[REPUBLIC vs. CA and NIELSON & CO. (April 30, 1987)]
 Where the taxpayer is appealing on the ground that the assessment is erroneous, it is incumbent
upon him to prove as to what is the correct and just liability by a full and fair disclosure of all
pertinent data. [Bonifacio Sy Po v. CTA]
Q: Within what time may the Commissioner issue a notice of assessment?

A: a) If the taxpayer filed a return → internal revenue taxes shall be assessed within three years
after
the last day prescribed by law for the filing of the return. If a return is filed beyond the period
prescribed by law, the three-year period shall be counted from the day the return was filed. A
return filed before the last day prescribed by law for filing shall be considered as filed on the
last day. (Sec. 203, NIRC) è NOTE: In short, the period for assessment is within three years
from the time the return is filed or from the time the return is due, WHICHEVER IS LATER.
b) If the taxpayer DID NOT file a return → internal revenue taxes shall be assessed within ten
years after the discovery of the failure to file the return (Sec. 222a, NIRC)
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c) If the taxpayer filed a false or fraudulent return with intent to evade tax → internal revenue
taxes
shall be assessed within ten years after the discovery of the falsity or fraud (Sec. 222a, NIRC)
o Fraud or falsity on the return with intent to evade payment of tax is a question of fact and the
circumstances constituting fraud must be alleged and proved in the court below. The finding of
the trial court as to its existence and non-existence is final and cannot be reviewed by the
Supreme Court unless clearly shown to be erroneous. [CIR V. Ayala Securities (1976)]
o Q: Are there tax returns which are false but not fraudulent?
A: YES. There must be a distinction between false returns (due to mistakes, carelessness or
ignorance) and fraudulent returns (with intent to evade taxes). The fraud contemplated by law is
actual and not constructive, and must amount to intentional wrongdoing with the sole object of
avoiding the tax. [Aznar v. CTA (1974)]
o WAIVER: The taxpayer and the Commissioner may agree in writing, before the expiration of
the time prescribed in Sec. 203, to extend the period of assessment (Sec. 222b, NIRC)
 The waiver of prescription must be executed properly per RMO 20-90, otherwise, invalid
and results to prescription of the right to assess/collect. [PHIL JOURNALISTS INC. v. CIR
(December 16, 2004)]
 Requirements under RMO 20-90:
1. definite agreed date,
2. date of acceptance indicated, and
3. taxpayer must be furnished with a copy of the waiver.
Q: What is the nature of prescription on the right to assess?

A: The law on prescription, being a remedial measure, should be LIBERALLY CONSTRUED in
order to afford protection. As a corollary, the exceptions to the law on prescription should be clearly
construed. Hence, negligence or oversight on the part of the BIR cannot prejudice taxpayers,
considering that the prescriptive period was precisely intended to give them peace of mind. [CIR v.
Goodrich Philippines (1999)]
Assessment Process and Reglementary Period
Stage Discussion
1. Letter of Authority (LOA) The letter of authority refers to the letter informing a
taxpayer that a certain revenue officer is authorized to
examine the books of accounts and other accounting
records.
It must be served within thirty (30) days from the date

of issuance.
2. Notice of Informal Conference (NIC) The Notice of Informal Conference will be issued if
the taxpayer is not amenable with the submitted report
of investigation of the Revenue Officer concerned. The
Informal Conference shall be in no case extend beyond
thirty (30) days from the receipt of the notice of
informal conference.
On the event that that the taxpayer is still liable for the
deficiency and the taxpayer is not amenable, the case
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will be endorsed within seven (7) days from the
conclusion of the Informal Conference to the
Assessment Division of the Revenue Regional Office
or to the Commissioner or his duly authorized
representative for issuance of a deficiency tax
assessment.
3. Preliminary Assessment Notice (PAN) The PAN will be issued any time prior to expiration of
period to assess. The taxpayer has a non-extendable
period of 15 days from receipt of the PAN. A PAN
shall not be required in the following cases:
i. When the finding is the result of a mathematical
error;
ii. When excise tax due on excisable articles has not
been paid;
iii. When a discrepancy has been determined between
the tax withheld and the amount actually remitted
by the withholding agent;
iv. When an article locally purchased or imported by
exempt person has been sold, traded, or transferred
to non-exempt persons;
v. When a taxpayer who opted to claim for 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
against the estimated tax liabilities for the taxable
quarter/s of the succeeding taxable year.
4. Reply/Position paper against the PAN Within fifteen (15) days from receipt by the taxpayer
of the PAN.
5. Formal Letter of Demand (FLD) and If the taxpayer fails to timely reply to the PAN, the
Final Assessment Notice (FAN) FAN will be issued within a short period after the end
of the 15 day period.
If the taxpayer replies to the PAN (and disagrees with

the findings of the BIR), the FAN will be issued within
15 days after the receipt by the BIR of the taxpayer’s
reply (to the PAN).
6. Protest against the FLD/FAN (includes Within thirty (30) days from receipt of the FLD and
either a request for reconsideration OR a FAN.
request for reinvestigation)
Otherwise the deficiency tax assessments become final
and executory (collectible)
7. Submission by taxpayer of all relevant Within sixty (60) days from the date of actual filing of
supporting documents the protest against the FAN.
The assessment shall become final by operation of law

and the taxpayer shall be barred from disputing the
correctness of the issued assessment by introduction of
newly discovered or additional evidence because the
taxpayer is deemed to have lost the chance to present
this evidence.
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8. Decision by the BIR on the protest to the Within one hundred eighty (180) days from submission
FLD/FAN (final decision on disputed of the last supporting document (reinvestigation) or
assessment or FDDA) from the filing of the protest (reconsideration)
 If the protest to the FAN is denied by the BIR within the 180 day period, the taxpayer has the
mutually exclusive option to either:
a. Appeal (Petition for Review) the denial by the BIR to the Court of Tax Appeals (CTA) within
thirty (30) days from the receipt of the denial by the taxpayer; or
b. Appeal (request for reconsideration) the denial by the BIR to the CIR. No submission of
documents is allowed in filing a request for reconsideration; only a position paper will be
allowed to be filed.
 If the protest is not acted on (no decision) by the BIR by the end of 180 day period, the taxpayer has
the mutually exclusive option to either:
a. Appeal (Petition for Review) the inaction of the BIR to the CTA within 30 days from the expiry
of the 180 day period; or
b. Wait for the decision of the BIR (allowed even beyond the 180 day period).
 If the protest is denied by the BIR after the expiry of the 180 days, the
taxpayer has the same options as provided in numbers 7a above.
9. If a request for reconsideration (request) of the FDDA is filed with the CIR, the following rules
apply:
o If the request of the FDDA is denied by the CIR within 180 days from the date of filing of the
request, the taxpayer should appeal the denial issued by the CIR to the CTA within 30 days from
the receipt of the denial.
o If the request is not acted on (no decision) by the CIR by the end of 180 days, the taxpayer has
the mutually exclusive option to either:
a. Appeal (Petition for Review) the inaction of the CIR to the CTA within 30 days from the
expiry of the 180 day period; or
b. Wait for the decision of the CIR (allowed even beyond the 180 day period).
10. If the request is denied (final) by the CIR even beyond the 180 day period, the taxpayer has 30 days
from the receipt of the denial by the CIR to appeal (Petition for Review) the final decision of the
CIR to the CTA.
Tax Remedies under the NIRC
Assessment of taxes
Q: What is a tax assessment?

A: The term assessment refers to the determination of amounts due from a person obligated to make
payments. In the context of national internal revenue collection, it refers to the determination of the taxes
due from a taxpayer. It is an official action of an administrative officer in determining the amount of tax
due from a taxpayer, or it may be a notice to the effect that the amount therein stated is due from a
taxpayer as a tax, with a demand for payment of the tax or any deficiency stated therein.
Q: When is an assessment deemed made?

A: An assessment is deemed made when the demand letter or notice is RELEASED, MAILED OR SENT
by the BIR to the taxpayer. The law does not require that the taxpayer receive the notice within the three-
year or ten-year period. [CIR vs. BAUTISTA (May 27, 1959)]
Q: What is a notice of assessment?
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A: It is a written notice to a taxpayer to the effect that the amount stated therein is due as tax and
containing a demand for the payment thereof. It is a finding by the taxing agency that the taxpayer has not
paid his correct taxes.
Note: A notice of assessment contains not only a computation of tax liabilities but also a demand for the
payment within a prescribed period. It also signals the time when penalties and interests begin to accrue.
Q: Will there be a valid assessment on the basis of only a letter notice without a letter of authority
(LOA)?
A: No. A letter notice has no basis in the NIRC and it only notifies the taxpayers that a discrepancy has
been found. A LOA must first be secured before proceeding with the examination and assessment of the
taxpayer. (Medicard Phil. vs. CIR, 2017)
Q: What is the importance of a tax assessment?

A:
TO THE GOVERNMENT TO THE TAXPAYER
1. In the proper pursuit of judicial and extrajudicial remedies to 1. To inform the taxpayer of
enforce taxpayer liabilities and certain matters that relate to it, such his liabilities;
as the imposition of surcharges and interests; 2. To determine the period
2. In the application of the Statute of Limitations; within which to protest.
3. In the establishment of tax liens; and 3. To determine prescription
4. In estimating the revenues that may be collected by the of government claim.
government.
Q: What is the nature of an assessment?

A: It is merely a notice to the effect that the amount stated therein is due as tax and containing a demand
for the payment. (Alhambra Cigar Mfg. Co. v. CIR, GR L-23226, Nov. 28, 1967)
Q: Who has the burden of proof in pre-assessment proceedings?

A: The burden of proof is on the taxpayer for there is a presumption of correctness on the part of the CIR.
Otherwise, the finding of the CIR will be conclusive and the CIR will assess the taxpayer. If the taxpayer
does not controvert, such finding is conclusive, even if the CIR is wrong.
Q: What are the principles governing tax assessments?

A: (PAD3)
1. Assessments:
a. Prima facie presumed correct and made in good faith;
b. Should be based on Actual facts; (estimates can also be a basis given that it is not arrived at
arbitrarily or capriciously)
c. Discretionary on the part of the Commissioner;
d. Must be Directed to the right party.
2. The authority vested in the Commissioner to assess taxes may be Delegated
Q: Is the assessment made by the CIR subject to judicial review?

A: No, for such power is discretionary. What may be the subject of a judicial review is the decision of
the CIR on the protest against the assessment, not the assessment itself.
Q: Are taxes self-assessing?

A: GR: Taxes are generally self-assessing and do not require the issuance of an assessment notice in order
to establish the tax liability of a taxpayer.
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XPNs:
1. Improperly Accumulated Earnings Tax (Sec. 29, NIRC)
2. When the taxable period of a taxpayer is terminated (Sec. 6 [D], NIRC) 3
3. In case of deficiency tax liability arising from a tax audit conducted by the BIR (Sec. 56 [B],
NIRC)
4. Tax lien (Sec. 219, NIRC)
5. Dissolving corporation (Sec. 52 [c], NIRC)
Q: What are the different ways of paying taxes?

A:
1. Pay-as-you-file system – Income for individuals and corporation shall be paid by the person subject
thereto at the time the return is filed. (Sec. 56, NIRC)
2. Installment payment – When income tax due is in excess of P2,000.00 and the taxpayer is not a
corporation, he may elect to pay the tax in two equal installments. First installment is when the
return is filed and the second installment is on or before July 15 following the close of the calendar
year. (Sec. 56 A [2], NIRC)
Tax delinquency vis-a-vis Tax deficiency
Q: What is a tax deficiency?

A: It pertains to the amount of tax short of the full tax due that should be paid to the government.
Q: What is a tax delinquency?

A: A tax delinquency arises upon the failure of the taxpayer to pay the tax due as demanded by the CIR in
a formal letter of demand issued after an assessment and audit. It is only upon such failure that a taxpayer
is considered delinquent, and thus, should be liable for delinquency interest.
Q: What is a deficiency tax assessment?

A: It is a deficiency tax liability that is determined after a tax audit and examination.
Q: What are the requisites for a valid assessment?

A: The assessment must:
1. Be in writing and signed by the BIR;
2. Contain the law and the facts on which the assessment is made;
3. Contain a demand for payment within the prescribed period (Sec. 228, NIRC); and
4. Be served on and received by the taxpayer.
Note: The taxpayers shall be informed in writing of the law and the facts on which the assessment is
made; otherwise, the assessment shall be void.
Moreover, the regulations provide that the Formal Letter of Demand and Final Assessment Notice
(FLD/FAN) shall be issued by the Commissioner or his duly authorized representative. The FLD/FAN
calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based; otherwise, the assessment shall be void
(RR 18-13).
o When assessment is not required

General Rule: Taxes are self-assessing and do not require the issuance of an assessment notice in
order to establish the tax liability of a taxpayer
o When assessment is required
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1. Tax period of a taxpayer is terminated
2. Deficiency tax liability arising from a tax audit conducted by a BIR (sec 56b, NIRC)
3. Tax lien (sec. 219 NIRC)
4. Dissolving corporation (sec. 52c, NIRC)
Protesting an assessment
Q: What is a protested assessment?

A: It is an assessment where a taxpayer questions the findings in an assessment and asks the collector to
reconsider or cancel the same because he believes that he is not liable thereof.
Q: Period for the taxpayer to file protest

A: Within thirty (30) days from date of receipt of the Formal Letter of Demand/Final Assessment Notice
Q: Written requests that taxpayer may file in a protest:

A: 1. Request for reconsideration – refers to a plea of re-evaluation of an assessment on the basis of
existing
records without need of additional evidence and it may involve both a question of fact or of law or
both.
2. Request for reinvestigation – refers to a plea of reevaluation of an assessment on the basis of newly
discovered or additional evidence that a taxpayer intends to present in the reinvestigation and it may
also involve a question of fact or of law or both.
Q: Modes of service of an assessment

A: The assessment notice shall be served to the taxpayer either through: (1) personal service; (2) either by
substituted service or by mail in case personal service is not possible.
1. Personal service – the assessment notice shall be served to the taxpayer by personally delivering a
copy of the assessment notice at his registered or known address or wherever he may be found. A
known address shall mean a place other than the registered address where business activities of the
party are conducted or his place of residence.
2. Substituted service – shall be done as follows:
a) The assessment notice may be left at the party’s registered address, with his clerk or with a
person having charge thereof.
b) If the known address is a place where business activities of the party are conducted, the notice
may be left with his clerk or with a person having charge thereof.
c) If the known address is the place of residence, substituted service can be made by leaving the
copy with a person of legal age residing therein.
d) If no person is found in the party’s registered or known address, the Revenue Officers (ROs)
concerned shall bring a barangay official and two (2) disinterested witnesses to the address so
that they may personally observe and attest to such absence. The assessment notice shall be
given to said barangay official. Such facts shall be contained in the bottom portion of the
assessment notice, as well as the names, official positions and signatures of the witnesses.
e) Should the party be found at his registered or known address or any other place but refuses to
receive the assessment notice, the ROs concerned shall bring a barangay official and two (2)
disinterested witnesses in the presence of the party so that they may personally observe and
attest to such act of refusal. The assessment notice shall be given to said barangay official. Such
facts shall be contained in the bottom portion of the assessment notice, as well as the names,
official positions and signatures of the witnesses.
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“Disinterested witnesses” refers to persons of legal age other than employees of the BIR.
1. Service by mail – shall be done by sending a copy of the assessment notice through:
a) Registered mail with an instruction to the Postmaster to return the mail to the sender after ten
(10) days, if undelivered; or
b) Reputable professional courier service; or
c) Ordinary mail, if no registry or reputable courier is available in the locality of the taxpayer.
Q: What are the grounds for an assessment to become final, executory and demandable?
A: An assessment shall become final, executory and demandable due to, among others, the following
grounds:
1. Failure of the taxpayer to file a valid protest within thirty (30) days from receipt of the FLD/FAN;
2. Failure of the taxpayer to submit all relevant documents in support of his protest by way of request
for reinvestigation within sixty (60) days from the date of filing thereof;
3. Failure of the taxpayer to appeal to the CIR or the CTA within thirty (30) days from date of receipt
of the FDDA issued by the CIR's duly authorized representative;
4. Failure of the taxpayer to appeal to the CTA within thirty (30) days from date of receipt of the
FDDA issued by the CIR;
5. Failure of the taxpayer to timely file a motion for reconsideration or new trial before the CTA
Division or failure to appeal to the CTA En Banc and Supreme Court based on existing Rules of
Procedure; or
6. Failure of the taxpayer to receive any assessment notices because it was served in the address
indicated in the BIR's registration database and the taxpayer transferred to a new address or
closed/ceased operations without updating and transferring its BIR registration or cancelling its
BIR registration as the case may be, through the accomplishment and filing of BIR Form No. 1905
— Application for Registration Information Update, as prescribed by pertinent issuance and/or
amendments thereto.
Q: What are the relevant supporting documents that the taxpayer shall submit in case of requests for
reinvestigation and the period of submitting of the said documents?
A: The term "relevant supporting documents" refer to those documents necessary to support the legal and
factual bases in disputing a tax assessment as determined by the taxpayer. The sixty (60)-day period for
the submission of all relevant supporting documents shall not apply to requests for reconsideration. For
requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of his
protest within sixty (60) days from date of filing of his letter of protest, otherwise, the assessment shall
become final.
Q: Effect of failure to file protest

A: If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days from date of
receipt thereof, the assessment shall become final, executory and demandable. No request for
reconsideration or reinvestigation shall be granted on tax assessments that have already become final,
executory and demandable.
Q: What are the different kinds of assessments and what is jeopardy assessment?
A:
1. Pre-Assessment – informs the taxpayer of the findings of the examiner who recommends a
deficiency assessment. The taxpayer is usually given 10 days from notice within which to explain
his side.
2. Self-Assessment – one in which the tax is assessed by the taxpayer himself.
3. Official Assessment – issued by the BIR in case the taxpayer fails to respond to the pre-assessment,
or his explanation is not satisfactory to the CIR.
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4. Illegal and Void Assessment – tax assessor has no power to assess at all.
5. Erroneous Assessment – assessor has power to assess but errs in the exercise thereof.
6. Jeopardy Assessment – a delinquency tax assessment made without the benefit of a complete or
partial investigation by a belief that the assessment and collection of a deficiency tax will be
jeopardized by delay caused by the taxpayer’s failure to:
a. Comply with audit and investigation requirements to present his books of accounts and/or
pertinent records, or
b. Substantiate all or any of the deductions, exemptions or credits claimed in his return.
Note: This is issued when the revenue officer finds himself without enough time to conduct an
appropriate or thorough examination in view of the impending expiration of the prescriptive period
for assessment. To prevent the issuance of a jeopardy assessment, the taxpayer may be required to
execute a waiver of the statute of limitations. A jeopardy assessment is valid.
Q: What are the powers of the Commissioner of Internal Revenue (CIR) in the assessment of taxes?
A: The Commissioner or his duly authorized representatives are authorized to use the following powers to
make assessments and prescribe additional requirements in tax administration:
1. Examination of returns and determination of the tax due;
2. Assess the proper tax based on the best evidence obtainable;
3. Conduct inventory-taking, surveillance and prescribe presumptive gross sales and receipts;
4. Issue jeopardy assessments and terminate the taxable period;
5. Prescribe real property values;
6. Inquire into bank deposit accounts;
7. Accredit and register tax agents;
8. Prescribe additional procedural or documentary requirements.
Q: What is the best evidence obtainable rule?

A: The law authorizes the Commissioner to assess taxes on the basis of the best evidence obtainable in
the following cases: (1) If a person fails to file a return or other document at the time prescribed by law;
or, (2) If taxpayer willfully or otherwise files a false or fraudulent return or other document.
Q: What are the methods to constructively determine a taxpayer’s income?

A: Some of the methods used by the BIR to determine a taxpayer’s income constructively: (1) Net worth
method; (2) Cash expenditure method; (3) Percentage method; (4) Bank deposit method; (5) Unit and
value method; (6) Third party information or access to records method; and, (7) Surveillance and
assessments method.
Q: What are the requisites for a valid tax assessment?

1. Letter of Authority issued to the Revenue Officers authorizing them to conduct an assessment and
audit of taxpayer’s books and other relevant documents;
2. Conduct of Notice for Informal Conference;
3. Issuance of the Preliminary Assessment Notice (PAN) by the authorized Revenue District Officer;
4. Issuance of the Formal Letter of Demand and Final Assessment Notice (FLD/FAN) by the
Commissioner or his duly authorized representative;
5. The Letter of Demand calling for the payment of the deficiency tax. The letter shall state the facts,
law, rules and regulations or jurisprudence on which the assessment is based.
Tax Assessments made by the BIR shall be prima facie presumed correct and made in good faith. The
taxpayer has the burden of proof of showing the incorrectness of such assessment.
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An assessment is deemed made and the period to collect the assessed tax begins to run on the date the
Final Assessment Notice and Formal Letters of Demand (FAN/FLD) had been released, mailed or sent to
the taxpayer.
Collection of taxes
Q: What is the concept of collection?

A: The power to impose taxes is clothed with the implied authority to devise ways and means to
accomplish collection in the most effective manner. Without this implied power, the ends of government
may fail (CIR v. Pineda, G.R. No. L-22734, September 15, 1967).
o The legislature may adopt any reasonable method for the effective enforcement of the collection of
taxes, subject to:
1. The right of the person to notice; and
2. The opportunity to be heard.
o The Government has two ways to collect:

1. Summary or administrative remedies
a. Distraint on personal property
b. Levy on real property
2. Judicial remedies (civil or criminal)
Q: Requisites of collection of taxes

A: Generally, the government can initiate to collect administratively or judicially once the Final
Assessment Notice and Formal Letter of Demand are issued. [Sec. 203, NIRC] In other words, Collection
is only allowed when there is already a final assessment made for the determination of the tax due.
XPN: Judicial action to collect the tax liability is permitted even without an assessment when the
taxpayer:
1. Files a false or fraudulent return with intent to evade the tax, or
2. Fails to file a return.
Administrative remedies
Q: What are these remedies?

1. Distraint of property including garnishment – It is a summary remedy whereby the collection of

tax is enforced on the goods, chattels or effects of the taxpayer (including other personal property,
tangible or intangible, of whatever character as well as stocks and other securities, debts, credits,
bank accounts and interest in or rights to personal property.) The property may be offered in a public
sale, if taxes are not voluntarily paid.
Q: What are the requisites for the exercise of distraint (and levy)?
A: (DD-FP)
1. Taxpayer is Delinquent in payment of tax;
2. There must be subsequent Demand to pay;
3. Taxpayer Failed to pay delinquent tax on time; and
4. Period within which to assess and collect the tax due has not yet prescribed.
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Q: What are the kinds of distraint?
A: The kinds are as follows:
1. Actual – resorted to when there is actual delinquency in tax payment.
2. Constructive – a preventive remedy which aims at forestalling a possible dissipation of the
taxpayer’s assets when delinquency sets in. Hence, no actual delinquency in payment is
necessary.
Q: How is actual distraint of personal property effected?

A: Upon failure to pay the delinquent tax at the time required, the proper officer shall seize and
distraint any goods, chattels, or effects, and the personal property, including stocks and other
securities, debts, credits, bank accounts and interests in and rights to personal property of the
taxpayer in sufficient quantity to satisfy the tax, expenses of distraint and the cost of the subsequent
sale.
Q: Who is authorized to issue the warrant of distraint?

A: They are:
1. CIR or his duly authorized representative – if the amount involved is in excess of P1 million;
or
2. Revenue District Officer – if the amount involved is P1 million or less. (Sec. 207 [A], NIRC)
Q: To whom is the warrant of distraint served?

A:
1. As to tangible goods:
a. The owner or person in possession; or
b. Someone of suitable age and discretion at the dwelling or place of business of such
person.
2. As to stocks and/or securities:
a. Upon the taxpayer; and
b. President, manager, treasurer or other responsible officer of the corporation.
3. As to debts/credits:
a. Upon the person owing the debt; or
b. The person having control over the credit or his agent.
4. As to bank accounts:
a. Upon the taxpayer and
b. The president, manager, treasurer or other responsible officer of the bank.
Note: Distraint of bank accounts is called garnishment.
Q: May the government purchase the property under distraint?

A: Yes, the CIR or his deputies may purchase the property in behalf of the National Government for
the amount of taxes, penalties and cost due thereon when the bid amount for the property under
distraint is:
1. Not equal to the amount of tax; or
2. Very much less than the actual market value of the property offered for sale (Sec. 212, NIRC)
Note: Property so purchased may be resold by the CIR or his deputy. The net proceeds shall be
remitted to the National Treasury and accounted as internal revenue.
Q: What is the remedy of the taxpayer once the CIR or other proper officer issues the warrant of
distraint?
A: The taxpayer may request that the warrant be lifted. The CIR may, in his discretion, allow the
lifting of the order of distraint. He may ask for a bond as a condition for the cancellation of the
warrant. (Sec. 207, NIRC)
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Q: May the taxpayer recover his property prior to consummation of the sale?
A: Yes, if at any time prior to the consummation of the sale all proper charges are paid to the officer
conducting the sale, the goods or effects distrained shall be restored to the owner. (Sec. 210, NIRC
Q: How is constructive distraint effected?

A: It is effected by requiring the taxpayer or any person having possession of the property:
1. To sign a receipt covering the property distrained;
2. To obligate himself to preserve it intact and unaltered; and
3. Not to dispose of it without the express authority of the CIR.
Q: What if a taxpayer or person having possession of property refuses or fails to sign?

A: The officer shall:
2. Prepare a list of such property; and
3. Leave a copy of such list in the premises where the property is located, in the presence of 2
witnesses.
Q: Can property levied upon by the order of a competent court be subsequently distrained?
A: Yes, such property may, with the consent of such court, be subsequently distrained, subject to the
prior lien of the attachment creditor. (CIR v. Floresl, GR L- 9675, Sept. 28, 1957)
Q: What is Garnishment?
A: It is the taking of personal properties, cash or sums of money owned by a delinquent taxpayer
which is in the possession of a third party (i.e. bank accounts.) Bank accounts are garnished by
serving a warrant upon the taxpayer and upon the president, manager, treasurer, or other responsible
officer of the bank.
2. Levy on real property – the seizure of the taxpayer’s real property and the interests or rights therein
for the satisfaction of taxes due from the delinquent taxpayer to enforce the payment thereof. The
property may be offered in a public sale, if after seizure, the taxes are not voluntarily paid.
Q: When may levy on real property be made?

A: It may be made before, simultaneously or after the distraint of personal property of the same
taxpayer.
Q: How is levy on real property effected?

A: It may be effected by serving upon the taxpayer a written notice of levy in the form of a duly
authenticated certificate prepared by Revenue District Officer containing: [DNA]
1. Description of the property upon which levy is made;
2. Name of the taxpayer;
3. Amount of tax and penalty due.
Q: What is the effect of service of warrant of distraint or levy?

A: Its timely service suspends the running of the prescriptive period to collect the tax deficiency in
the sense that the disposition of the attached properties might well take time to accomplish,
extending even after the lapse of the statutory period for collections. In those cases, the BIR did not
file any collection case but merely relied on the summary remedy of distraint and levy to collect the
tax deficiency. Thus, the enforcement of tax collection through summary proceedings may still be
carried out as the service of warrant of distraint or levy suspends the prescriptive period for
collection. (RP v. Hizon, GR 130430, Dec. 13, 1999)
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Q: Suppose an auction sale of land for the collection of delinquent taxes was held, is notice by
publication enough or must there be personal service of notice?
A: Notice by publication is not enough there must be a personal notice to the registered owner of the
property for cases involving an auction sale of land for the collection of delinquent taxes are in
personam. (Talusan v. Tayag, GR 133698, Apr. 4, 2001)
Q: May the BIR forfeit the property subject to levy?

A: Yes, forfeiture is allowed if:
1. there is no bidder; or
2. bid amount is insufficient.
Q: May the taxpayer recover his property prior to consummation of the sale?
A: Yes, at any time before the day fixed for the sale, the taxpayer may discontinue all proceeding by
paying the taxes, penalties and interest. (Sec. 213, NIRC)
Q: May the taxpayer redeem his property after the consummation of the sale?
A: Yes, within 1 year from the date of sale, the taxpayer or anyone for him, may pay to the Revenue
District Officer the total amount of the following:
1. Public taxes;
2. Penalties;
3. Interest from the date of delinquency to the date of sale; and
4. Interest on said purchase price at the rate of 15% per annum from the date of sale to the date of
redemption.
Note: If the property was forfeited in favor of the government, the redemption price shall include
only the taxes, penalties and interest plus costs of sale – no interest on purchase price since the
Government did not “purchase” the property, for it was forfeited. (Sec. 214, NIRC)
Q: Who is entitled to the possession of the property levied?

A: The owner shall not be deprived of the property until the expiration of the redemption period and
shall be entitled to rents and other income until the expiration of the period for redemption. (Sec.
214, NIRC)
Q: What is the effect of the redemption to the property sold?

A: It shall entitle the taxpayer, the delivery of the certificate issued to the purchaser and a certificate
from the Revenue District Officer that he has redeemed the property. The Revenue District Officer
shall pay the purchaser the amount by which such property has been redeemed and said property
shall be free from lien of such taxes and penalties. (Sec. 214, NIRC)
Q: What are the similarities between distraint and levy?

1. Summary in nature
2. Requires notice of sale
3. May not be resorted to if the amount involved is less than P100
Q: What are the distinctions among warrants of distraint, levy and garnishment?
A:
DISTRAINT LEVY GARNISHMENT
Subject matter
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Personal property owned Real property owned and in the Personal property owned by
by and in possession of possession of the taxpayer the taxpayer but in the
the taxpayer possession of the third party
Acquisition by the Government
Personal property Real property subject to levy is Personal property garnished
distrained are purchased forfeited to the Government then sold are purchased by the
by the Government and to meet the deficiency Government and resold to
resold to meet deficiency meet deficiency
Advertisement of Sale
No newspaper The sale of realty subject to levy is No newspaper publication
publication required required to be published once a week required
for 3 consecutive weeks in a
newspaper of general circulation in
the municipality or city where the
property is located
Q: Is the BIR authorized to issue a warrant of garnishment against the bank account of a taxpayer
despite the pendency of taxpayer’s protest against the assessment with the BIR or appeal with the
CTA?
A: Yes, the BIR is authorized to issue a warrant of garnishment against the bank account of a
taxpayer despite the pendency of protest. (Yabes v. Flojo, GR L-46954 July 20, 1982) Nowhere in
the Tax Code is the CIR required to first, rule on the protest before he can institute collection
proceedings on the tax assessed. The legislative policy is to give the CIR much latitude in the speedy
and prompt collection of taxes because it is in taxation that the Government depends to obtain the
means to carry on its operations. (1998 Bar Question)
3. Forfeiture – divestiture of property without compensation, in consequence of a default or offense.
Q: What is done with the forfeited property?

A: Property forfeited is transferred to another without consent of the defaulting taxpayer or
wrongdoer.
Q: How is forfeiture enforced?

A: It is enforced:
1. In case of personal property – By seizure and sale or destruction of property (Secs. 224 and
225, NIRC)
2. In case of real property – By judgment of condemnation and sale in a legal action or
proceeding (Sec. 224, NIRC)
Q: What is the effect of forfeiture?

A: Forfeiture transfers the title to the specific thing from the owner to the government. Also there
would no longer be any further levy for such would be for the total satisfaction of the tax due. (Sec
215, NIRC)
Q: Can there be further distraint?

A: The remedy of distraint and levy may be repeated if necessary until the full amount of the tax
delinquency due including all expenses is collected from the taxpayer. (Sec. 217, NIRC) Otherwise,
a clever taxpayer who is able to conceal most of the valuable part of his property would escape
payment of his tax liability by sacrificing an insignificant portion of his holdings.
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Note: Further distraint and levy does not apply when the real property was forfeited to the
government for it is in satisfaction of the claim in question. (Sec 215, NIRC)
4. Tax lien – 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 or transfer thereof.
Q: Is tax itself a lien?

A: Tax is not a lien even upon the property against which it is assessed, unless expressly made so by
statute.
Q: What is the nature of tax lien?

A: It is enforced as payment of tax, interest, penalties, costs upon the entire property and rights to
property of the taxpayer. However, to be valid against any mortgagee, purchaser or judgment
creditor, notice of such lien has to be filed by CIR with the Registry of Deeds. (Sec. 219, NIRC)
Note: A valid assessment is required to be issued before a tax lien shall be annotated at the proper
registry of property.
Q: When is tax lien applied?

A: It is applied:
1. With respect to personal property – Tax lien attaches when the taxpayer neglects or refuses to
pay tax after demand and not from the time the warrant is served (Sec. 219, NIRC)
2. With respect to real property – from time of registration with the register of deeds.
Q: What happens to the residue?

A: It goes back to the taxpayer or owner of the property.
Q: When is the tax lien extinguished?

A: It is extinguished:
1. By payment or remission of the tax
2. By prescription of the right of government to assess or collect
3. By failure to file notice of such tax lien in the office of Register of Deeds
4. By destruction of property subject to tax lien
5. By replacing it with a bond
Note: A buyer in an execution sale acquires only the rights of the judgment creditor.
5. Compromise – it is an agreement between two or more persons who, amicably settle their differences
on such terms and conditions as they may agree on to avoid any lawsuit between them. It implies the
mutual agreement by the parties in regard to the thing or subject matter which is to be compromised.
A contract whereby the parties, by reciprocal concessions, avoid litigation or put an end to one
already commenced.
Q: When must compromise be made?

A: In:
1. Criminal cases – Compromise must be made prior to the filing of the information in court.
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2. Civil cases – Before litigation or at any stage of the litigation, even during appeal, although
legal propriety demands that prior leave of court should be obtained.
Note: All criminal violations may be compromised except those already filed in court, or those
involving fraud.
Q: What are the requisites for compromise?

A: These are:
1. Tax liability of the taxpayer;
2. An offer of the taxpayer of an amount to be paid by him; and
3. The acceptance (the CIR or the taxpayer) of the offer in the settlement of the claim.
Note: If the offer to compromise was rejected by the taxpayer, the compromise penalty cannot be
enforced thru an action in court, or by distraint or levy. If the CIR wants to enforce a penalty he must
file a criminal action in the courts. (CIR v. Abad GR L-19627, June 27, 1968)
Q: What are the grounds for a compromise?

A: They are:
1. Doubtful validity of assessment; or
2. Financial incapacity
Q: What are the requisites in order that compromise settlement on the ground of financial incapacity
may be allowed?
A: These are:
1. Clear inability to pay the tax; and
2. The taxpayer must waive in writing his privilege of the secrecy of bank deposit under RA
1405 or other general or special laws, which shall constitute as the CIR’s authority to inquire
into said bank deposits (Sec. 6 [F], NIRC)
Q: Define compromise penalty.

A: It is a certain amount of money paid in lieu of criminal prosecution and cannot be imposed in the
absence of a showing that the taxpayer consented thereto.
Q: When must compromise be entered into?

A: It must be entered into prior to the institution of the corresponding criminal action arising out of a
violation of the provisions of the Tax Code. A compromise can never be entered into after final
judgment because by virtue of such final judgment the Government had already acquired a vested
right. (Roviro v. Amparo, G.R. L- 5482, May 5, 1982)
Note: A compromise validly entered into between the CIR and the taxpayer prior to the institution of
the corresponding criminal action arising out of a violation of the provisions of the Tax Code
becomes a bar to such criminal action. (People v. Magdaluyo, GR L16235, Apr. 20, 1965)
Q: Can the court compel the CIR to compromise in cases when such is allowed?
A: No, to assure that no improper compromise is made to the prejudice of the Government.
Q: What are the remedies in case the taxpayer refuses or fails to follow the tax compromise?
A: The remedies are:
1. Enforce the compromise
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a. If it is a judicial compromise, it can be enforced by mere execution. A judicial
compromise is one where a decision based on the compromise agreement is rendered by
the court on request of the parties.
b. Any other compromise is extrajudicial and like any other contract can only be enforced
by court action.
2. Regard it as rescinded and insist upon original demand (Art. 2041, Civil Code)
Q: What is the prescriptive period to enforce compromises?

A: As a rule, the obligation to pay tax is based on law. But when, for instance, a taxpayer enters into
a compromise with the BIR, the obligation of the taxpayer becomes one based on contract.
Compromise is a contract whereby the parties, by reciprocal concessions, avoid litigation or put an
end to one already commenced. (Art. 2028 NCC) Since it is a contract, the prescriptive period to
enforce the same is 10 years based on Art. 1144 NCC reckoned from the time the cause of action
accrued.
Q: What is meant by abatement of tax liability?

A: It is the cancellation of a tax liability.
Q: Differentiate compromise from abatement.

A: Compromise involves a reduction of the taxpayer’s liability, while abatement means that the
entire tax liability of the taxpayer is cancelled.
Q: When is the CIR authorized to abate or cancel a tax liability?

A: When:
1. The tax or any portion thereof appears to be unjustly or excessively assessed; or
2. The administration and collection costs involved do not justify the collection of the amount
due. (Sec. 204[B], NIRC)
Q: May the CIR compromise the payment of withholding tax where the financial position of the
taxpayer demonstrates a clear inability to pay the assessed tax?
A: No, a taxpayer who is constituted as withholding agent who has deducted and withheld at source
the tax on the income payment made by him holds the taxes in trust for the government (Sec. 58 [D],
NIRC) and is obligated to remit them to the BIR. The subsequent inability of the withholding agent
to pay/remit the taxes withheld is not a ground for compromise because the withholding tax is not a
tax upon the withholding agent but it is only a procedure for the collection of a tax. (1998 Bar
Question)
Q: May the tax liability of a taxpayer be compromised during the pendency of an appeal?
A: Yes, as long as any of the grounds for a compromise i.e.; doubtful validity of assessment and
financial incapacity of taxpayer is present. A compromise of a tax liability is possible at any stage of
litigation, even during appeal, although legal propriety demands that prior leave of court should be
obtained. (Pasudeco v. CIR, GR L-39387, June 29, 1982) (1996 Bar Question)
6. Filing of bonds – the Commissioner of Internal Revenue may require taxpayers to file a performance
bond to secure payment of taxes or to assure compliance with certain provisions of tax laws or
regulations.
7. Giving of rewards to informers – persons instrumental in the discovery of violations of the NIRC
and in the discovery and seizure of smuggled goods.
21
Q: To whom is the informer’s reward given?
A: To persons instrumental:
1. In the discovery of violations of the NIRC; and
2. In the discovery and seizure of smuggled goods.
Q: What are the legal requirement/s must be complied with to claim the reward?
A: These are:
1. Voluntarily file a confidential information under oath with the Law Division of the BIR
alleging therein the specific violations constituting fraud;
2. The information must not yet be in the possession of the BIR, or refer to a case already
pending or previously investigated by the BIR;
3. One should not be a government employee or a relative of a government employee within the
sixth degree of consanguinity; and
4. The information must result to collections of revenues and/or fines and penalties (Sec. 282,
NIRC) (2002 Bar Question)
Q: How much is the amount of the reward?

A:
1. For discovery of violations of the NIRC - The amount of reward shall be whichever is lower
between:
a. 10% of the revenues, surcharges or fees recovered and/or fine/penalty imposed; or
b. One Million Pesos (P1, 000,000)
Note: The same amount of reward shall also be given to an informer where the offender
has offered to compromise the violation of law committed by him and his offer has been
accepted by the CIR and collected from the offender.
2. For discovery and seizure of smuggled goods - a cash reward equivalent to whichever is lower
between:
a. 10% of the fair market value of the smuggled and confiscated goods; or
b. One Million Pesos (P1, 000,000)
Note: The informer shall not be entitled to a reward where no revenue, surcharges or fees
be actually recovered or collected.
8. Imposition of surcharges and interest – it is an amount imposed by law as addition to the main tax
in case of delinquency.
Q: What is a surcharge or surtax?

A: It is a civil penalty imposed by law as an addition to the main tax required to be paid. It is a civil
administrative sanction provided as a safeguard for the protection of the State revenue and to
reimburse the government for the expenses of investigation and the loss resulting from the taxpayer’s
fraud. A surcharge added to the main tax is subject to interest.
Q: What are the corresponding rates of surcharges?

A: The rates are as follows:
1. Twenty-five percent (25%) of the amount due, in the following cases: (F-TOP)
a. Failure to file any return and pay the tax due thereon as required under the provisions of the
NIRC or rules and regulations on the date prescribed
b. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment
c. Unless otherwise authorized by the CIR, filing a return with an internal revenue officer
other than those with whom the return is required to be filed
22
d. Failure to pay the full or part of the amount of tax shown on any return required to be filed
under the provisions of the NIRC or rules and regulations, or the full amount of tax due for
which no return is required to be filed, on or before the date prescribed for its payment (Sec
248 [A], NIRC)
2. The penalty shall be fifty percent (50%) of the tax or of the deficiency tax, in the following
cases:
a. Willful neglect to file the return within the period prescribed; or
b. False or fraudulent return is willfully made (Sec. 248 [B], NIRC)
Q: Are there interests to be paid in addition to the tax?

A: Yes, there shall be assessed and collected on any unpaid amount of tax, interest at the rate of 20%
per annum, or such higher rate as may be prescribed by rules and regulations, from the date
prescribed for payment until the amount is fully paid. (Sec. 249, NIRC)
Q: What is deficiency interest?

A: Any deficiency in the tax due, as the term is defined in the NIRC, shall be subject to the interest
prescribed in sub-section A hereof, which interest shall be assessed and collected from the date
prescribed for payment until the amount is fully paid (Sec. 249, NIRC)
Q: What is delinquency interest?

A: In case of failure to pay:
1. The amount of the tax due on any return required to be filed; or
2. The amount of the tax due for which no return is required; or
3. A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice
and demand of the CIR.
There shall be assessed and collected on the unpaid amount, interest at the rate prescribed in
sub-section A hereof until the amount is fully paid, which interest shall form part of the tax.
(Sec. 249, NIRC)
Q: What is interest on extended payment?

A: If any person required to pay the tax is qualified and elects to pay the tax on installment under the
provisions of the NIRC, but fails to pay the tax or any installment hereof, or any part of such amount
or installment on or before the date prescribed for its payment, or where the CIR has authorized an
extension of time within which to pay a tax or a deficiency tax or any part thereof, there shall be
assessed and collected interest at the rate hereinabove prescribed on the tax or deficiency tax or any
part thereof unpaid from the date of notice and demand until it is paid.
9. Making arrest, search and seizures – the Commissioner of Internal Revenue, the Deputy
Commissioner of Internal Revenue, the regional directors, the revenue district officers and the
internal revenue officers, have authority to make arrests and seizures for the violation of any penal
law, rule or regulation administered by the BIR. Any person so arrested is to be forthwith carried
before a court, there to be dealt with according to law.
10. Deportation in case of aliens – any alien who (a) knowingly and fraudulently evades the payment of
any internal revenue tax; or (b) willfully refuses to pay such tax and its accessory penalties after the
decision on his tax liability, rendered by the Commissioner of Internal Revenue or the Court of Tax
Appeals or any competent judicial tribunal shall have become final and executor, is subject to
deportation.
11. Inspection of books – Internal Revenue officers have the authority to examine and inspect books of
accounts and other accounting records of taxpayers which must be preserved by them for a period of
23
taxpayers which must be preserved by them for a period beginning from the last entry in each book
until the last day prescribed by Section 203 within which the Commissioner is authorized to make an
assessment.
12. National tax register – the national tax register is a record of the names of persons residing in each
city or municipality kept and maintained by every revenue regional director of every regional district
with other facts:
a) based upon the data and information given in the statement of assets and income required by the
National Tax Census Law;
b) from the income and sales tax returns;
c) from other statements which taxpayers are required to file with the Bureau of Internal Revenue;
and
d) from other sources.
13. Obtaining information on tax liability of any person – in ascertaining the correctness of any return,
or in making a return when none has been made, or in determining the liability of any person for any
internal revenue tax, or collecting any such liability, or in evaluating tax compliance, the
Commissioner is empowered:
a) to examine any books, papers, records, or other data which may be relevant or material to such
inquiry;
b) to obtain information on a regular basis from any person other than the persons whose internal
revenue tax liability is subject to audit or investigation, or from any office or officer of the
national and local government
c) to summon any person liable for tax or required to file a return or any officer or employee of such
person, or any person having possession or custody, or care of the books of accounts and other
accounting records containing entries relating to the business of the person liable for tax
d) to take such testimony of the person concerned, under oath, as may be relevant or material to such
inquiry; and
e) to cause revenue offices and employees to make a canvass from time to time of any revenue
district or region and inquire with respect to all persons who may be liable to pay tax or having
the care or possession of any taxable object.
14. Inventory taking or making surveillance – the Commissioner of Internal Revenue may, at any time
during the taxable year, order inventory- taking of the stock-in-trade of any taxpayer as a basis for
determining his internal revenue tax liabilities.
15. Prescribing presumptive gross sales or receipts – when it is found that a person has failed to issue
receipts and invoices in violation of the requirements of the Tax Code or when there is reason to
believe that the books of accounts or other records do not correctly reflect the declarations made or
to be made in a return required to be filed under the law. The Commissioner of Internal Revenue,
after taking into account the sales, receipts, income or other taxable base of other persons engaged in
similar businesses under similar situations or circumstances or after considering other relevant
information, may prescribe a minimum amount of such gross receipts, sales and taxable base.
16. Prescribing real property value – The Commissioner of Internal Revenue is authorized by the Tax
Code to divide the Philippines into different zone or areas. He shall, upon consultation with
competent appraisers both from private and public sectors, determine the fair market value of real
properties located in each zone or area.
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17. Inquiry of bank deposits – The Commissioner of Internal Revenue is authorized by the tax Code to
inquire into the bank deposits of (a) a decedent or deceased person to determine his gross estate and
(b) any taxpayer who has filed an application for compromise of his tax liability (under Sec. 204 [A,
2]) by reason of financial incapacity to pay his tax liability.
18. Registration of taxpayers – Under the law, all taxpayers engaged in business, withholding agents,
storage places, and each of the branches, if any are required to register and keep records.
Prescriptive Period
Q: What is the rationale of prescriptive periods?

A: To secure the taxpayers against unreasonable investigation after the lapse of the period prescribed.
They are beneficial to the government because tax officers will be obliged to act promptly in the
assessment and collection of the taxes, for when such period have lapsed their right to assess and collect
would be barred by the statute of limitations.
Q: State the basic rules on prescription.

A: These are:
1. When the tax law itself is silent on prescription, the tax is imprescriptible;
2. When no return is required, tax is imprescriptible and tax may be assessed at any time as the
prescriptive periods provided in Sec. 203 and 222, NIRC are not applicable. Remedy of the
taxpayer is to file a return for the prescriptive period to commence.
Note: Limitation on the right of the government to assess and collect taxes will not be presumed in
the absence of a clear legislation to the contrary.
3. Prescription is a matter of defense, and it must be proved or established by the party (taxpayer)
relying upon it.
4. Defense of prescription is waivable, such defense is not jurisdictional and must be raised
seasonably, otherwise it is deemed waived.
5. The law on prescription, being a remedial measure, should be interpreted liberally in order to
protect the taxpayer.
6. If the last day of the period falls on a Saturday, a Sunday or a legal holiday in the place where the
Court sits, the time shall not run until the next working day. (Sec. 1, Rule 22, Rules of Court)
Note: Assessment and collection by the government of the tax due must be made within the
prescribed period as provided by the Tax Code; otherwise, the right of the government to collect
will be barred.
Q: How should the prescriptive period be computed?

A: It is computed based on the Administrative Code. Sec. 31 of the Administrative Code of 1987 provides
that a “year” shall be understood to be 12 calendar months. Both Article 13 of the Civil Code and Sec. 31
of the Administrative Code of 1987 deal with the same subject matter — the computation of legal
periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year.
Under the Administrative Code of 1987, however, a year is composed of 12 calendar months and the
number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, Sec.
31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law governs the
computation of legal periods. (CIR v. Primetown Property Group, Inc., GR 162155, Aug. 28, 2007)
Q: Compare Secs. 203 and 222 of the NIRC.

A: Sec. 203 covers tax returns which is neither false nor fraudulent whereas, Sec. 222 covers:
1. Fraudulent returns,
25
2. False returns and;
3. Failure to file a return.
Prescription of actions
A. Assessment of tax liability
Q: When shall the prescriptive period for the assessment run?

A: Internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law
for the filing of the return, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period: Provided, that in a case where a return is filed
beyond the period prescribed by law, the three (3) year period shall be counted from the day the
return was filed. For purposes of this Section, a return filed before the last day prescribed by law for
the filing thereof shall be considered as filed on such last day.
Q: Are there exceptions to the 3-year prescriptive period?

A: Yes. Where a false or fraudulent return with intention to evade taxes, the prescriptive period shall
be within ten (10) years from date of discovery of the falsity of the fraud; or, where there is a failure
to file a return, at any time within ten (10) years after the discovery of the omission of the return
Q: When is a return considered filed for purposes of prescription?

A: When the return is valid and appropriate.
1. Valid – When it has complied substantially with the requirements of law.
2. Appropriate – When it is a return for the particular tax required by law.
Q: What is the effect of filing a defective return?

A: If the return was defective, it is as if no return was filed. The corollary prescription will be 10 years
from and after the discovery of the failure or omission and not the 3 year prescriptive period. There is
an omission when the taxpayer failed to file a return for the particular tax required by law. (Butuan
Sawmill v. CTA, GR L-20601, Feb. 28, 1966)
Q: When is a return considered fraudulent?

A: It is fraudulent when there is an intention or deceitful entry with intent to evade the taxes due.
Fraud is never presumed and the circumstances constituting it must be alleged and proved to exist by
clear and convincing evidence. It may be established by the:
1. Intentional and substantial understatement of tax liability by the taxpayer;
2. Intentional and substantial overstatement of deductions of exemptions; and/or
3. Recurrence of the above circumstances.
Q: When is a return considered false?

A: When there is a deviation from the truth, whether intentional or not such as due to mistake,
carelessness or ignorance.
Q: What is non-filing of returns?

A: It pertains to situations where the taxpayer did not file a return which is required to be filed with
the BIR.
Q: Mr. Reyes, a Filipino citizen engaged in the real estate business, filed his 2004 ITR on Mar. 30,
2005. On Dec. 30, 2005, he left the Phil. as an immigrant to join his family in Canada. After
investigation of said return, the BIR issued a notice of deficiency income tax assessment on Apr. 15,
2008. Mr. Reyes returned to the Phil. as a balikbayan on Dec. 8, 2008. Finding his name to be in the
26
list of delinquent taxpayers, he filed a protest against the assessment on the ground that he did not
receive a notice of assessment and the assessment had prescribed. Will the protest prosper?
A: No, the assessment has not yet prescribed since the BIR has a period of 3 years from the last day
prescribed by law for the filing of the return. The return was filed on Mar. 30, 2005 with a due date of
Apr. 15, 2005. The assessment issued on Apr. 15, 2008 is within the 3 year prescriptive period. (2000
Bar Question)
Q: Mr. Sebastian is a Filipino seaman employed by a Norwegian company which is engaged

exclusively in international shipping. He and his wife, who manages their business, filed a joint ITR
for 1997 on Mar. 15, 1998. After an audit of the return, the BIR issued on Apr. 20, 2001 a deficiency
income tax assessment for the sum of P250,000.00 inclusive of interest and penalty. For failure of Mr.
and Mrs. Sebastian to pay the tax within the period stated in the notice of assessment, the BIR issued
on Aug. 19, 2001 warrants of distraint and levy to enforce collection of the tax.
If you are the lawyer of Mr. and Mrs. Sebastian, what possible defenses will you raise in behalf of
your clients against the action of the BIR in enforcing collection of the tax?
A: I will raise the defense of prescription. The right of the BIR to assess prescribes after three years
counted from the last day prescribed by law for the filing of the income tax returns when the said
return is filed on time. (Sec. 203, NIRC) The last day for filing the 1997 income tax return is Apr. 15,
1998. Since the assessment was issued only on Apr. 20, 2001, the BIR's right to assess has already
prescribed. (2002 Bar Question)
Q: What are the grounds for the suspension of running of the statute of limitations in case of
assessment?
A: The running of the statute of limitations on the making of assessment shall be suspended in
following circumstances (LOW-PARA):
1. When taxpayer cannot be Located in the address given by him in the return, unless he informs
the CIR of any change in his address thru a written notice to the BIR;
2. When the taxpayer is Out of the Philippines (Sec. 223, NIRC)
3. When the Warrant of distraint and levy is duly served upon the taxpayer, his authorized
representative or a member of his household with sufficient discretion and no property is located
(proper only for suspension of the period to collect);
4. Where the CIR is prohibited from making the assessment or beginning distraint or levy or a
proceeding in court for 60 days thereafter, such as where there is a Pending petition for review
in the CTA from the decision on the protested assessment (Republic v. Ker & Co., GR L21609);
5. Where CIR and the taxpayer Agreed in writing for the extension of the assessment, the tax may
be assessed within the period so agreed upon (Sec. 222 [b], NIRC);
6. When the taxpayer Requests for reinvestigation which is granted by the Commissioner
(Collector v. Suyoc Consolidated Mining Co., GR L-11527, Nov. 25, 1958);
Note: A request for reconsideration alone does not suspend the period to assess/collect.
7. When there is an Answer filed by the BIR to the petition for review in the CTA (Hermanos v.
CIR, GR. No. L-24972. Sept. 30, 1969) where the court justified this by saying that in the
answer filed by the BIR, it prayed for the collection of taxes.
Q: Can the taxpayer agree to extend the prescriptive period of the assessment?
A: Yes. The taxpayer may, through a Waiver of the Statute of Limitations, filed and executed in
accordance with existing rules and regulations, extend the prescriptive period for the assessment.
Q: What is a waiver of statute of limitations?

A: It is an agreement between the taxpayer and the BIR that a period to issue an assessment and
collect taxes due is extended to a date certain. (Philippine Journalists, Inc. v. CIR, GR 162852, Dec.
16, 2004)
27
Q: What is the nature of such waiver?
A: It is to a certain extent a derogation of the taxpayer’s right to security against prolonged and
unscrupulous investigations and must be carefully and strictly construed.
Q: Requisites of a valid waiver

A: The waiver must comply with the following conditions:
1. The waiver shall be executed before the expiration of the period to assess or to collect taxes.
The date of execution must be specifically indicated in the waiver;
2. The waiver shall be signed by the taxpayer himself or his duly authorized representative. In the
case of a corporation, the waiver must be signed by any of its responsible officials;
3. The expiry date of the period agreed upon to assess/collect the tax after the regular three-year
period of prescription should be indicated.
B. Collection of taxes
Q: What are the prescriptive periods for the collection of tax?

A: GR:
1. Where an assessment was made - period for collection (by distraint or levy or by a proceeding
in court) is within 5 years following the assessment has been released, mailed, or sent. (Ingles,
2015).
2. In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, a
proceeding in court for the collection of such tax may be filed without assessment, at any time
within 10 years after the discovery of the falsity, fraud or omission. (Sec.222 [a], NIRC)
However, once an assessment is made against the taxpayer, the government cannot avail of the
10-year period in Section 222 (A).
XPNs:
1. The same exceptions relative to the prescriptive periods for assessment are also applicable.
2. If the government makes another assessment or the assessment made is revised, the
prescriptive period for collection of such tax should be counted from the date the last or
revised assessment was made.
3. Where an action is brought to enforce a compromise, the prescriptive period is 10 years from
the time the right of action accrues as fixed in the Civil Code. (Art. 1144 [1], NCC)
Note: When it comes to self-assessed taxes where a return is filed by the taxpayer. The taxpayer is
the one to assess himself and such assessment is deemed to be adopted by the government. Thus,
the filing of the return would also be the date of the assessment.
C. Filing of criminal action
Q: What is the prescriptive period for the filing of criminal action against the erring taxpayer?
A: It is within 5 years from the day of the commission of the violation of the law and if the same shall
be not known, from the discovery thereof and the institution of the judicial proceedings for its
investigation and punishment (Lim v. CA 190 SCRA 616).
Taxpayers Remedies
Q: What are the remedies available to the taxpayer?
28
A: The remedies are as follows:
1. Administrative
a. Before payment of assessed taxes:
1) Filing of petition (protest) or
i. Request for reconsideration - refers to a plea of re-evaluation of an assessment on the basis
of existing records without need of additional evidence and it may involve both a question of
fact or of law or both.
ii. Request for reinvestigation - refers to a plea of reevaluation of an assessment on the basis of
newly discovered or additional evidence that a taxpayer intends to present in the
reinvestigation and it may also involve a question of fact or of law or both.
Q: What is the period to file a protest?

A: Within thirty (30) days from receipt of the FLD (Formal Letter of Demand) and FAN
(Final Assessment Notice).
Q: Is protest an exclusive remedy?

A: In all cases subject to protest, the interested party who desires to have the action of the
Collector reviewed, shall make a protest, otherwise the action of the collector shall be final
and conclusive against him.
Q: What should the taxpayer do if his protest is denied or is not acted upon by the
Commissioner?
A:
 Situation 1: If the Commissioner DENIES THE PROTEST filed by the taxpayer →
the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from
receipt of the decision denying the protest (Sec. 228, NIRC)
→ Where there is a request for reconsideration, final demand letter from BIR is
considered a decision on a disputed or protested assessment which is therefore
appealable to the CTA. [CIR v. Isabela Cultural Corp. (July 11, 2001)]
 Situation 2: If the Commissioner did NOT ACT UPON THE PROTEST within one
hundred and eighty (180) days from the time the documents were submitted → the
taxpayer may either:
 Appeal to the CTA within thirty days from the lapse of the 180-day period OR
 Wait until the Commissioner decides before he elevates the case to the CTA
Note: If Situation 1 occurs and the taxpayer does not file a protest within the
prescribed period, the assessment becomes FINAL, EXECUTORY and
DEMANDABLE. But if the Situation 2 occurs and the taxpayer does not file a protest
within the prescribed period, the assessment DOES NOT become FINAL,
EXECUTORY and DEMANDABLE. In cases of inaction by the Commissioner,
Section 228 of the Tax Code merely gave the taxpayer an OPTION: first, he may
appeal to the Court of Tax Appeals within thirty days from the lapse of the 180-day
period, or second, he may wait until the Commissioner decides on his protest before
he elevates his case. [Lascona Land Co vs. CIR (January 4, 2000)]
Q: When does the 30-day period to appeal in Situation 1 commence to run?
29
A: The 30-day period starts when the taxpayer receives the decision of the Commissioner
denying the protest. The decision of the Commissioner must categorically state that his
action on the disputed assessment is final, otherwise period to appeal will not commence to
run. [ADVERTISING ASSOCIATES vs. CA (December 26, 1984)]
Note: A Division of the CTA shall hear the appeal. (Sec. 11, RA 1125 as amended by
RA 9282 [2004])
Q: If the taxpayer is not satisfied with the CTA Division’s ruling, what is his REMEDY?
A:
 FIRST, he may file a motion for reconsideration before the same Division of the CTA
within fifteen (15) days from notice thereof. (Sec. 11, RA 1125 as amended by RA 9282
[2004])
 THEN, a party adversely affected by a resolution of a Division of the CTA on a motion
for reconsideration may file a petition for review with the CTA en banc. (Sec. 18, RA
1125 as amended by RA 9282 [2004])
Q: If the taxpayer is not satisfied with the decision of the CTA en banc, what is his
REMEDY?
A: A party adversely affected by a decision or ruling of the CTA en banc may file with the
Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of the 1997
Rules of Court. (Sec. 19, RA 1125 as amended by RA 9282 [2004])
Q: If the Commissioner grants the refund, within what time must it be claimed?
A: Within five years from the date such warrant or check was mailed or delivered, otherwise
it shall be forfeited in favor of the government and the amount thereof shall revert to the
general fund.
2) Entering into a compromise agreement

A taxpayer may enter into a compromise agreement with the BIR/CIR to amicably settle his/her
tax liabilities to avoid litigation or put an end to one already commenced.
Q: When must compromise be made?

A: In:
1. Criminal cases – Compromise must be made prior to the filing of the information in
court.
2. Civil cases – Before litigation or at any stage of the litigation, even during appeal,
although legal propriety demands that prior leave of court should be obtained.
Q: What are the requisites for compromise?

A: These are:
1. Tax liability of the taxpayer;
2. An offer of the taxpayer of an amount to be paid by him; and
3. The acceptance (the CIR or the taxpayer) of the offer in the settlement of the claim.
Note: If the offer to compromise was rejected by the taxpayer, the compromise penalty
cannot be enforced thru an action in court, or by distraint or levy. If the CIR wants to enforce
a penalty he must file a criminal action in the courts. (CIR v. Abad GR L-19627, June 27,
1968)
30
Q: What are the grounds for a compromise?
A: They are:
1. Doubtful validity of assessment; or
2. Financial incapacity
Q: What are the requisites in order that compromise settlement on the ground of financial
incapacity may be allowed?
A: These are:
1. Clear inability to pay the tax; and
2. The taxpayer must waive in writing his privilege of the secrecy of bank deposit under RA
1405 or other general or special laws, which shall constitute as the CIR’s authority to
inquire into said bank deposits (Sec. 6 [F], NIRC)
Q: What are the cases which may be compromised: [Sec. 2, R.R. 30-2002?]
1. Delinquent accounts;
2. Cases under administrative protest after issuance of the Final Assessment Notice to the
taxpayer which are still pending in the Regional Offices, Revenue District Offices, Legal
Service, Large Taxpayer Service (LTS), Collection Service, Enforcement Service and
other offices in the National Office;
3. Civil tax cases being disputed before the courts;
4. Collection cases filed in courts; and
5. Criminal violations, other than those already filed in court or those involving criminal tax
fraud.
Q: What are the cases which cannot be compromised: [Sec. 2, R.R. 30-2002?]
1. Withholding tax cases, unless the applicant-taxpayer invokes provisions of law that 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 installment payments;
5. Cases where final reports of reinvestigation ore 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. On the other hand, other
protested cases shall be handled by the Regional Evaluation Board (REB) or the National
Evaluation Board (NEB) on a case to case basis;
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; and
7. Estate tax cases where compromise is requested on the ground of financial incapacity of
the taxpayer.
Q: What is the prescriptive period to enforce compromise agreements?

A: As a rule, the obligation to pay tax is based on law. But when, for instance, a taxpayer enters
into a compromise with the BIR, the obligation of the taxpayer becomes one based on contract.
Compromise is a contract whereby the parties, by reciprocal concessions, avoid litigation or put
an end to one already commenced. (Art. 2028 NCC) Since it is a contract, the prescriptive
period to enforce the same is 10 years based on Art. 1144 NCC reckoned from the time the
cause of action accrued.
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b. After payment of taxes:
1) Filing of claim for tax refund
Q: What is a tax refund?
A: It is an actual reimbursement of tax.
Q: When may this be availed of?

A: This is a remedy after the payment of tax liability.
Q: What is the difference between tax refund and tax credit?

A: TAX REFUND takes place when there is actual reimbursement. TAX CREDIT takes place
upon the issuance of a tax certificate or tax credit memo, which can be applied against any sum
that may be due and collected from the taxpayer.
Other Distinctions:
TAX REFUND TAX CREDIT
The taxpayer asks for restitution of the The taxpayer asks that the money paid be
money paid as tax applied to his existing tax liability
2-yr period to file the claim with the CIR 2-yr period starts from the date such credit
starts after the payment of the tax or penalty was allowed – in case credit is wrongly made
Q: What are the requisites for a tax refund or tax credit?

A: The requisites are as follows:
1. There is tax collected erroneously or illegally, or a penalty collected without authority, or
a sum excessively or wrongfully collected (Sec. 229, NIRC).
Note: Payment under protest is not required.
2. There must be a written claim with the CIR, as it would enable the latter to correct the
errors of his subordinate and to notify the government;
XPNs:
a. When on the face of the return upon which payment was made, such payment appears
clearly to have erroneously paid - the CIR may refund or credit the tax even without a
written claim (Sec. 229, NIRC).
b. A return filed showing an overpayment shall be considered as a written claim for
credit or refund (Sec. 204 (C), NIRC).(2002, 2010 Bar)
3. Must be a categorical claim for refund or credit;
Note: It is for the CIR to afford an opportunity to correct the action of subordinate
officers; and to notify the Government that such taxes have been questioned and the
notice should then be borne in mind in estimating the revenue available for expenditure
(Bermejo v. CIR, G.R. No. L-3029, July 25, 1950).
4. Must be filed within 2 years after the payment of the tax or penalty otherwise no refund
or credit could be taken. No suit or proceeding shall be instituted after the expiration of
such period regardless of any supervening cause that may arise after payment; and
5. Taxpayer must present proof of payment of the tax.
Q: What are the grounds for filing a claim for tax refund or tax credits?
A: (EEW)
1. Tax is erroneously or illegally collected.
2. Sum collected is excessive or in any manner wrongfully collected.
3. Penalty is collected without authority.
Q: Distinguish between illegally collected tax and erroneously collected tax?

A:
32
Illegally Collected Tax Erroneously Collected Tax
Definition
There is a violation of certain No violation of the law but there is a mistake in
provisions of tax law or statute. collection.
On the Part of the Taxpayer
The tax was paid by him under duress. The payment was made under a mistake of fact.
On the Part of the Government
The tax was collected in patent The collection was made based on a misapplication
disregard of the law. of the law.
Q: What must a taxpayer do to successfully claim refund for creditable withholding tax?
A: He must do the following:
1. Declare the income payments it received as part of its gross income; and
2. Establish the fact of withholding.
Q: May a taxpayer seek refund after the taxpayer opts to carry-over the excess income tax
against the taxes due for the succeeding taxable years?
A: No, once the taxpayer opts to carry-over the excess income tax against the taxes due for the
succeeding taxable years, such option is irrevocable for the whole amount of the excess income
tax, thus, prohibiting the taxpayer from applying for a refund for that same excess income tax in
the next succeeding taxable years. The unutilized excess tax credits will remain in the taxpayer's
account and will be carried over and applied against the taxpayer's income tax liabilities in the
succeeding taxable years until fully utilized.
Q: Who may claim a tax refund?

A: As a general rule (GR), the taxpayer/withholding agent of non-resident foreign corporation
who paid the same. Note: The withholding agent is directly and independently liable for the
correct amount of tax that should be withheld and for deficiency assessments, surcharges and
penalties.
XPNs:
Case The One Entitled for the Reason
Refund
Where the tax has been The taxpayer (even if the tax The sales tax is imposed directly
shifted was shifted by the taxpayer to on the seller as an occupation
his customers as in sales tax tax. Once recovered, the seller
and even if the tax has been must hold the refunded taxes in
billed as a separate item in the trust for the individual
invoice) (CIR v. American purchasers who advanced
Rubber GR L19667, Nov. 29, payment thereof and whose
1966) name must appear on his record
Where the payer is not Theater goers are not entitled
the taxpayer (i.e. theater to claim the refund of such
owners who paid illegal taxes (Medina v. Baguio, GR
municipal taxes billed L4060, Aug. 29, 1952)
and collected from
theater goers)
Where the payer is the The withholding agent (CIR v. The withholding agent is
withholding agent Procter and Gamble, GR directly and independently liable
L66838, Apr. 15, 1988) for the correct amount of tax
that should be withheld of
33
deficiency assessments
surcharges and penalties.
Where the donor’s tax Donee is the proper party to
was assumed by the claim the refund of the donor’s
donee tax (even if the tax was
advanced by the donor)
Q: How are claims for refund construed?

A: Tax refunds, condonations and amnesties, being in the nature of tax exemptions, must be
strictly construed against the taxpayer and liberally in favor of the government.
Q: Are claims for refund always construed strictly against the taxpayer?
A: No, not all claims for tax refunds are in the nature of tax exemptions. A tax refund may only
be considered as a tax exemption when it is based on a tax-exemption statute or a tax-refund
statute. In such cases, the rule of strict interpretation against the taxpayer is applicable as the
claim for refund partakes of the nature of an exemption. Tax refunds or tax credits are not
founded principally on legislative grace, but on the legal principle of quasi-contracts against a
person’s unjust enrichment at the expense of another. The erroneous payment of tax as a basis
for a claim of refund may be considered as a case of solutio indebiti, which the government is
not exempt from its application and has the duty to refund without any unreasonable delay what
it has erroneously collected. (CIR v. Fortune Tobacco Corp., GR 167274, July 21, 2008)
Q: What is the Irrevocability Rule?

A: The exercise of the option to carry over excess tax credits bars a taxpayer from claiming the
same excess tax credits for refund in the succeeding taxable year. Sec. 76 of the NIRC provides
that once the option to carry over and apply the excess quarterly income tax due for the taxable
quarters of the succeeding taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for cash refund or issuance of tax credit
certificate shall be allowed. These remedies are in the alternative and the choice of one
precludes the other.
The phrase “such option shall be considered irrevocable for that taxable period” in Sec. 76 of
the NIRC means that the option to carry over the excess tax credits of a particular taxable year
can no longer be revoked. (SYSTRA Phil., Inc. v. CIR, GR 176290, Sept. 21, 2007)
2) Filing of tax credit

Q: What is a Tax Credit Certificate?
A: It is validly issued under the provisions of the NIRC and may be applied against any internal
revenue tax, excluding withholding taxes, for which the taxpayer is directly liable. (Sec. 204
[C], NIRC)
Q: Is a deficiency tax assessment a bar to a claim for tax refund or tax credit?
A: Yes, the deficiency tax assessment is a bar to a tax refund or credit. The taxpayer cannot be
entitled to a refund and at the same time liable for a tax deficiency assessment for the same year.
The deficiency assessment creates a doubt as to the truth and accuracy of the Tax Return. Said
Return cannot therefore be the basis of the refund. (CIR v. CA, GR 106611, July 21, 1994)
(2005 Bar Question)
Q: Is the government liable for interests on tax refunds?

A:
34
GR: There can be no interest on refund of tax.
XPNs:
3. If interest is authorized by law.
4. Arbitrariness in the collection of tax.
5. Under Sec. 79 C [2] with respect to income taxes withheld on the wages of the
employees.
Note: An action is not arbitrary when exercised honestly and upon due consideration where
there is room for two opinions, however much it may be believed that an erroneous conclusion
was reached. Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions.
(Philex Mining Corp. v. CIR, GR 120324, Apr. 21, 1999)
Q: What should be done within the 2-year prescriptive period for tax refund?
A: It is necessary that the:
5. Claim for refund in the BIR; and
6. Proceeding in the CTA,
are commenced within the 2-year prescriptive period counted from the date of full payment
of the tax or penalty regardless of any supervening event. (Sec. 229, NIRC)
Note: This 2-year prescriptive period applies only for the recovery of taxes or penalties
erroneously, excessively, illegally or wrongfully collected. Accordingly, an ordinary claim
for tax credit would prescribe in 10 years under Art 1144 NCC.
Q: State the reckoning of the 2-year prescriptive periods for tax refunds.
A:
3. Tax is paid in installments – 2 years should be counted from the date of the final
payment.
4. Payments effected through the withholding tax system – It is from the end of the taxable
year or when the tax liability falls due that the 2 year prescriptive starts to run.
5. In corporate dissolution – The 2-year prescriptive period should be counted from 30 days
after the approval by the SEC of its plan of dissolution.
Q: What are the conditions for the grant of tax refund when the creditable withholding tax is in
excess of the amount of the tax due?
A:
3. The claim is filed with the CIR within the 2-year period from the date of payment of the
tax or from the date of the filing of the Final Adjustment Return;
4. It must be shown in the return of the recipient that the income payment received was
declared as part of the gross income; and
5. The fact of withholding is established by a copy of a statement duly issued by the payor
to the payee showing the amount of the tax withheld therefrom. (Citytrust Finance Corp.
v. CTA and CIR, CA GR. SP No. 28239)
2. Judicial
a. Civil
1) Appeal to CTA (Court of Tax Appeals) in Division
Q: When may the taxpayer file an appeal before the CTA in Division?
A:
35
2. When the Commissioner denies the protest filed by the taxpayer, the taxpayer may appeal
to the CTA within thirty (30) days from receipt of the decision denying the protest,
otherwise, it shall become final, executory, and demandable. (Sec. 228, NIRC)
Note: Where there is a request for reconsideration, final demand letter from BIR is
considered a decision on a disputed or protested assessment which is therefore appealable
to the CTA. [CIR v. Isabela Cultural Corp. (July 11, 2001)]
3. When the Commissioner did NOT ACT UPON THE PROTEST within one hundred and
eighty (180) days from the time the documents were submitted, the taxpayer may either:
 Appeal to the CTA within thirty days from the lapse of the 180-day period OR
 Wait until the Commissioner decides before he elevates the case to the CTA
Note: A motion for reconsideration of the decision of the Commissioner of Internal Revenue
suspends the running of the thirty (30)-day period for perfecting an appeal. The period shall
resume to run again the day following the receipt by the taxpayer of the Commissioner’s
denial of said motion or request for reconsideration.
2) Appeal to the CTA en banc

Q: When may the party/taxpayer appeal to the CTA en banc?
A: When the party adversely affected by the decision of a CTA division, he may file a motion
for reconsideration or new trial within 15 days from receipt of the decision with the CTA
division. If the MR is denied, he may file a petition for review with the CTA en banc.
3) Appeal to the Supreme Court (SC)

Q: When?
A: Within 15 days from the receipt of the decision of the CTA.
4) By way of special civil action – Petition for certiorari, prohibition and mandamus to the SC in
cases of grave abuse of discretion, lack or excess of jurisdiction.
5) Action to contest forfeiture of chattel, at any time before the sale or destruction thereof, to
recover the same, and upon giving proper bond, enjoin the sale; or after the sale and within 6
months, an action to recover the net proceeds realized at the sale (Sec. 231, 1997 NIRC);
6) Action for damages against an Internal Revenue Officer (IRO) by reason of any act done in the
performance of official duty; (Sec. 227, 1997 NIRC)
7) Injunction – when the CTA is in the opinion that the collection by the BIR may jeopardize
taxpayer.
8) Taxpayer’s suit -
 Not every action filed by a taxpayer can qualify to challenge the legality of official acts done
by the government. A taxpayer's suit can prosper only if the governmental acts being
questioned involve disbursement of public funds upon the theory that the expenditure of
public funds by an officer of the state for the purpose of administering an unconstitutional
act constitutes a misapplication of such funds, which may be enjoined at the request of a
taxpayer. [Dean Jose Coya v. PCCG G.R. No. 96541, August 24, 1993]
 A taxpayer’s suit is properly brought only when there is an exercise of the spending or taxing
power of Congress. [Automotive Industry Workers Alliance v. Romulo, G.R. No. 157509.
Jan. 18, 2005]
36
 The right of a citizen and a taxpayer to maintain an action in courts to restrain the unlawful
use of public funds to his injury cannot be denied.
 To constitute a taxpayer's suit, two requisites must be met, namely, that:
(1) Public funds are disbursed by a political subdivision or instrumentality and in doing so,
a law is violated or some irregularity is committed, and
(2) Petitioner is directly affected by the alleged ultra vires act. [Anti-Graft League v. San
Juan, G.R. No. 97787, August 1, 1996]
b. Criminal
 A taxpayer may file a criminal complaint against the erring BIR officials and employees for
violating the Anti-Corruption Law while performing their official duties relative to tax
administration and procedures.
3. Substantive
a. Question validity of tax statute/ regulation
b. Non-retroactivity of rulings
c. Must be informed of the legal and factual bases of assessment
d. Preservation of books of accounts and examination once a year
Q: What is the importance of tax remedies?

A: 1. To the government - For the regular collection of revenue necessary for the existence of the
government.
2. To the taxpayer - They are safeguards of the taxpayer’s rights against arbitrary action.
Q: What are the subjects of tax remedies in internal revenue taxation?

A: They include the action of the BIR where there may be controversy between the taxpayer and the State
such as:
1. Assessment of internal revenue taxes
2. Collection of internal revenue taxes
3. Refund of internal revenue taxes
4. Imposition of administrative or civil fines, penalties, interests or surcharges; promulgation and/or
enforcement of administrative rules and regulations for the effective and efficient enforcement of
internal revenue laws
5. Prosecution of criminal violations of internal revenue laws.
Court of Tax Appeals (CTA)
Creation and organization
Q: What is the role of the judiciary in taxation?

A: The role of courts is limited to the application and interpretation of tax laws. The courts check abuses
and injustices of the legislative and administrative agents of the State in the exercise of the power of
taxation. (1972 Bar Question)
Q: What is the rationale for the creation of the CTA?

A: It was created to prevent delay in the disposition of tax cases by the RTC, in view of the backlog of
civil, criminal and cadastral cases accumulating in the dockets of such courts. In addition, it was created
to have a body with specialized knowledge which ordinary judges of the RTC are not likely to possess,
thus providing for an adequate remedy for a speedy determination of cases.
37
Q: What is the nature and characteristics of the CTA?
A:
1. It is a highly specialized body specifically created for the purpose of reviewing tax cases (CIR v.
General Foods, Inc., G.R. No. 143672, April 24, 2003);
2. Proceedings therein are judicial in nature although it is not bound by technical rules of evidence
(Perez v. CTA, G. R. No. L10507, May 30, 1958);
3. By the very nature of its function, it is dedicated exclusively to the study and consideration of tax
problems (CIR v. CA, G.R. No. 115349, April 18 1997);
4. It is a court of special or limited jurisdiction and as such, it can only take cognizance of such
matters as are clearly within its jurisdiction (Ker & Company, Ltd. vs. CTA, G.R. No. L-12396,
January 31, 1962); and
5. It is the same level with that of the Court of Appeals, possessing all the inherent powers of a court
of justice.
Note: As a court of record, the CTA is bound by the rules on documentary evidence. Under Sec. 8 of
R.A. 1125, the CTA is described as a court of record. As cases filed before it are litigated de novo,
party litigants should prove every minute aspect of their cases (J. Dimaampao, 2011).
Q: What is the composition of the CTA?

A: The CTA consists of a presiding justice and eight (8) associate justices appointed by the President
upon the nomination by the Judicial and Bar Council. (R.A. 9503)
 The CTA may sit en banc or in three (3) Divisions, each Division consisting of three (3) Justices.
 "Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for sessions of
a Division. Provided, That when the required quorum cannot be constituted due to any vacancy,
disqualification, inhibition, disability, or any other lawful cause, the Presiding Justice shall
designate any Justice of other Divisions of the Court to sit temporarily therein.
 "The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse a
decision of a Division but a simple majority of the Justices present necessary to promulgate a
resolution or decision in all other cases or two (2) members of a Division, as the case may be, shall
be necessary for the rendition of a decision or resolution in the Division Level."
Q: What are the powers of the CTA?

A: (ADD PROCESS)
1. To administer oath;
2. To assess damages against the appellant if the appeal to CTA is found to be frivolous and dilatory;
3. To render decision on cases brought before it;
4. To require production of papers or documents by subpoena duces tecum;
5. To prescribe rules and regulations for the conduct of its business;
6. To issue order authorizing distraint of personal property and levy of real property;
7. To punish for contempt for the same causes under the same procedure and with the same penalties
provided for in the rules of court;
8. To receive evidence;
9. To summon witnesses by subpoena; and
10.To suspend collection of tax pending appeal.
Jurisdiction
Q: What is the jurisdiction of the CTA?
38
A: The CTA has jurisdiction over both civil and criminal aspects of a tax case. The concentration of tax
cases in one court will enhance the disposition of these cases since it will take them out of the jurisdiction
of regular courts which, admittedly, do not have expertise in the field of taxation (J. Dimaampao, 2015).
Q: Jurisdiction of the Court of Tax Appeals

A:
a) Exclusive Appellate Jurisdiction over civil tax cases
Court Instance/s Nature of Tax Case
Local tax cases
Collection cases involving claims with a principal

amount of less than Php1Million for taxes and fees,
Decisions of the RTC in the exclusive of charges and other applicable penalties.
exercise of their appellate
jurisdiction Criminal offenses arising from violations of the NIRC
or CMTA or any other laws administered by the BIR
CTA En Banc or the BOC where the principal amount of taxes and
fees, exclusive of charges and other applicable
penalties is less than Php1 Million.
Decisions of the CTA Collection cases involving claims with a principal
division in the exercise of amount of Php1 Million or more for taxes and fees,
its original jurisdiction exclusive of charges and other applicable penalties
Decisions of the Central
Board of Assessment Assessment and taxation of real property as decided by
Appeals in the exercise of the Provincial or City Board of Assessment Appeals
its appellate jurisdiction
Disputed assessments, refunds of internal revenue
Decisions of or Inaction by taxes and penalties in relation thereto.
the Commissioner of
Internal Revenue Also includes other matters arising out of the NIRC
and other laws administered by the BIR. These
necessarily include RRs, RMOs and RMCs.
In cases involving liability for customs duties, fees and
other charges (seizures, detention) and penalties in
Decisions of the relation thereto
Commissioner of Customs
CTA Division Other matters arising out of the CMTA and other laws
that are administered by the BOC
Decisions of the Secretary On customs cases elevated for automatic review when
of Finance position of the COC is adverse to the Government
Decisions of the Secretary On cases involving nonagricultural products or articles
of Trade and Industry
Decisions of the Secretary On cases involving agricultural products or articles
of Agriculture
Decision of the RTC in the
exercise of original On local tax cases
jurisdiction
b) Jurisdiction over criminal tax cases
39
Court Instance/s Nature of Tax Case
Exclusive original
jurisdiction NONE
Decisions, resolutions or orders on motions for

reconsideration or new trial of the CTA division in the
CTA En Banc Exclusive appellate exercise of its exclusive original and appellate
jurisdiction jurisdiction
Decisions, resolutions or orders of the RTC in the

exercise of their appellate jurisdiction
Criminal offenses for violations of the NIRC or CMTA
Exclusive original and other laws as administered by the BIR or BOC
jurisdiction where the principal amount of taxes and fees, exclusive
of charges and penalties claimed is PHP1Million or
more
Appeals from judgments, resolutions or orders of the
RTC in the exercise of their original jurisdiction for
CTA Division violations of the NIRC or CMTA and other laws as
administered by the BIR or BOC where the principal
Exclusive appellate amount of taxes and fees, exclusive of charges and
jurisdiction penalties claimed is less than PHP1 Million or when
there is no specific amount claimed
Criminal offenses over petitions for review of

decisions by the RTC in the exercise of their appellate
jurisdiction over tax cases originally decided by MTCs
or MCTCs.
Criminal offenses for violations of the NIRC or CMTA
Exclusive original and other laws as administered by the BIR or BOC
RTC jurisdiction where the principal amount of taxes and fees, exclusive
of charges and penalties claimed is less than PHP1
Million or when there is no specific amount claimed
Q: What are the cases within the jurisdiction of the CTA en banc?
A: The Court en banc shall exercise exclusive appellate jurisdiction to review by appeal the following:
(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in
the exercise of its exclusive appellate jurisdiction over:
1. (i) Cases arising from administrative agencies – Bureau of Internal Revenue, Bureau of
Customs, Department of Finance, Department of Trade and Industry, Department of
Agriculture;
(ii) Local tax cases decided by the RTC in the exercise of their original jurisdiction; and
(iii) Tax collection cases decided by the RTC in the exercise of their original jurisdiction
involving final and executory assessments for taxes, fees, charges and penalties, where
the
principal amount of taxes and penalties claimed is less than one million pesos;
2. Cases involving criminal offenses arising from violations of the NIRC or the Tariff and
Customs Code and other laws administered by the Bureau of Internal Revenue or Bureau of
Customs
40
(b) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive original jurisdiction over :
1. Tax collection cases
2. Cases involving criminal offenses arising from violations of the NIRC or the Tariff and
Customs Code and other laws administered by the Bureau of Internal Revenue or Bureau of
Customs;
(c) Decisions, resolutions or orders of the RTC in decided or resolved by them in the exercise of their
appellate jurisdiction over:
1. Local tax cases
2. Tax collection cases
3. Criminal offenses arising from violations of the NIRC or the Tariff and Customs Code and
other laws administered by the Bureau of Internal Revenue or Bureau of Customs
(d) Decisions of the Central Board of Assessment Appeals (CBAA) 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; (Sec. 2., Rule 4, A.M. No. 05-11-07-CTA).
Q: What are the cases within the jurisdiction of the CTA in Divisions?
A: The Court in Divisions shall exercise:
(a) Exclusive original or appellate jurisdiction to review by appeal the following:
1. Decisions of the Commissioner of Internal Revenue
2. Inaction by the Commissioner of Internal Revenue
3. Decisions, resolutions or orders of the RTC in local tax cases decided by them in the exercise
of their original jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability arising under the
Customs Law or other laws administered by the Bureau of Customs;
5. Decisions of the Secretary of Finance on customs cases elevated to him automatically for
review from decisions of the Commissioner of Customs adverse to the Government under
Section 2315 of the TCC; and
6. 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 TCC, and safeguard measures under Republic Act No. 8800, where
either party may appeal the decision to impose or not to impose said duties;
(b) Exclusive jurisdiction over cases involving criminal offenses, to wit:

1. Original jurisdiction over all criminal offenses arising from violations of the NIRC or TCC
and other laws administered by the BIR or the Bureau of Customs, where the principal amount
of taxes and fees, exclusive of charges and penalties, claimed is 1 million pesos or more; and
2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the RTC in
their original jurisdiction in criminal offenses arising from violations of the NIRC or TCC and
other laws administered by the BIR or Bureau of Customs, where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is less than 1 million pesos or
where there is no specified amount claimed;
(c) Exclusive jurisdiction over tax collections cases, to wit:
41
1. Original jurisdiction in tax collection cases involving final and executory assessments for
taxes, fees, charges and penalties, where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is 1 million pesos or more; and
2. Appellate jurisdiction over appeals from the judgments, resolutions or orders of the Regional
Trial Courts in tax collection cases originally decided by them within their respective
territorial jurisdiction. (Sec. 3., Rule 4, A.M. No. 0511-07-CTA).
Procedures
Filing of Action for collection of taxes
Q: How does the Government enforce the collection of internal revenue taxes?
A: By initiating either a civil action or a criminal action. For a civil action, suit for collection of a sum of
money is filed with the proper court. For a criminal action, suit for collection can be made in cases of: (1)
attempt to evade or defeat tax; (2) failure to file return, supply correct and accurate information, pay tax,
withhold and remit tax and refund excess taxes withheld on compensation.
For criminal tax cases, judgment not only imposes penalty but shall also order the payment of taxes
subject of the criminal case as finally decided by the Commissioner of Internal Revenue.
Q: How does the Government enforce the collection of local taxes?

A: By initiating a civil action with a court of competent jurisdiction.
Q: Prescriptive period to enforce collection of local taxes

A: Collection shall prescribe within five (5) years from the date of assessment. Assessment of local tax
shall prescribe within five (5) years from the taxes becoming due or ten (10) years from the date of
discovery in case of fraud or intent to evade payment.
Q: Grounds for the suspension of the running of the prescriptive period:

A: (1) the local treasurer is legally prevented from the assessment or collection of tax; (2) taxpayer
requests for reinvestigation and executes a waiver of the statute of limitations; and, (3) taxpayer is out of
the country.
Q: Remedies to enforce collection of delinquent taxes, fees, charges and other revenues:
A: (1) Filing of appropriate court action (MTC, RTC, CTA); (2) Filing of action for declaratory relief; (3)
Filing for injunction with the CTA.
Civil cases
Q: Who may appeal, mode of appeal and effect of appeal with the CTA division?
A: A party adversely affected by a decision, ruling or the inaction of any of the following may file an
appeal: (1) CIR on disputed assessments or claims for refund of internal revenue taxes; (2) COC; (3)
Secretary of Finance; (4) Secretary of Trade and Industry; (5) Secretary of Agriculture; and, (6) RTC in
the exercise of its original jurisdiction.
Appeal may be made by filing a petition for review (Rule 42) within thirty (30) days after receipt of the
decision/ruling or from expiration of the period fixed by law for the CIR to act on the disputed
assessment. In the case of inaction, filing must be made within the two (2) year prescriptive period for
payment or collection of taxes.
42
No appeal shall suspend the payment, levy, distraint, or sale of any property. However, motion to suspend
collection of tax may be filed either together with the petition for review or in a separate motion.
Q: Is the remedy of injunction available to restrain collection?

A: No. Except in the following situations when: (1) collection of tax may prejudice the interest of them
government or the taxpayer; (2) taxpayer is willing to deposit the amount claimed or to file a surety bond
for no more than double the amount to be fixed by the court.
Q: Requisites for collection of tax:

A: When collection may prejudice / jeopardize the interests of the government and the taxpayer or when
taxpayer is willing to deposit the amount claimed or to file a surety bond for no more than double the
amount to be fixed by the court – taxpayer’s motion for suspension must be verified and must state
clearly and distinctly the facts and the grounds relied upon.
When there is an appeal to the CTA division of a CIR decision – appeal must not be frivolous or dilatory.
Q: Prescriptive period for appeal

A: Thirty (30) days. Non-extendible.
Q: Prescriptive period for appeal to the CTA En Banc of the decision of the CTA division
A: Fifteen (15) days from receipt of the CTA decision/ruling on the MR or MNT.
Appeal is to be made by filing a petition for review (Rule 43). In the case of an appeal of a CTA decision,
it must be shown that the taxpayer sought prior reconsideration or new trial of the decision with the
concerned CTA division.
Q: Prescriptive period for appeal to the CTA En Banc of the decision of the CBAA or RTC exercising its
appellate jurisdiction
A: Thirty (30) days from receipt of the decision or ruling of the CBAA or RTC
Q: Prescriptive period for appeal to the SC

A: Fifteen (15) days from receipt of the decision or ruling of the CTA En Banc
Appeal is to be made by filing a petition for review on certiorari (Rule 45). If there is a pending motion
for reconsideration or new trial, the period shall run from the receipt of the denial of the motion.
However, appeal may be made pending the decision on the MR/MNT. Such appeal will effectively
abandon the MR/MNT.
Criminal cases
Q: Institution of criminal action

A: The criminal action and the corresponding civil action is deemed as jointly instituted. The filing of a
criminal action will necessarily carry the filing of the civil action. The filing of a criminal action shall
interrupt the running of the prescriptive period.
No right to reserve the filing of a separate civil action is allowed or recognized.
Q: Appeal and period to appeal

A: Office of the Solicitor General (OSG) shall represent the government in all criminal cases. Legal
officers of the BIR or BOC may be deputized to appear on behalf of the OSG. Provided, however, that
said legal officers shall remain under the direct control and supervision of the OSG at all times.
43
Q: Prescriptive period for appeal to the SC
A: Fifteen (15) days from receipt of the decision or ruling of the CTA En Banc
Appeal is to be made by filing a petition for review on certiorari (Rule 45). If there is a pending motion
for reconsideration or new trial, the period shall run from the receipt of the denial of the motion.
However, appeal may be made pending the decision on the MR/MNT. Such appeal will effectively
abandon the MR/MNT.
Run After Tax Evaders
Q: What are the conditions to qualify under the Run after Tax Evaders (RATE) Program?
A: To qualify under the RATE Program, a case must conform to the following conditions:
 Cases representing violations under any of the following: Sec. 254 (Attempt to evade or defeat tax);
or, Sec. 255 (Failure to file return, supply correct and accurate information, pay tax, withhold and
remit tax and refund excess taxes withheld on compensation); or Sec. 257 (Making false entries,
records report or using falsified or fake accountable forms); or, Sec. 258 (Unlawful pursuit of
business); or any including One-Time Transactions, etc.
 High-profile Taxpayers or taxpayers well-known within the community, industry or sector to which
the taxpayers belong; and
 Estimated basic tax deficiency is at least One Million Pesos (P1,000,000.00) per year and tax type, but
priority should be given to tax cases where the aggregate basic tax deficiencies for all tax types per
year is Fifty Million Pesos (P50,000,000.00) or more.
44

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Reviewer on Tax Administration and Procedures

Taxation Law Review

Bureau of Internal Revenue

Q: Organization of the Bureau of Internal Revenue (BIR)

Q: What are the powers and duties of the BIR?

Q: What are the powers of the Commissioner of Internal Revenue?

Concept of tax administration

Q: What is tax administration?

Q: Stages and Procedures in BIR audit examination

I. AUDIT STAGE (Issuance of Letter of Authority)

A. Powers of the Commissioner Relative to the Audit Process

7. Prescribe additional Procedural or Documentary Requirements (Sec. 6H) – in relation to the

Note: This is known as the Third Party Information Rule.

Q: What is a letter of authority?

Q: Who issues the Letter of Authority?

II. PRE-ASSESSMENT STAGE

A. Step 1: Issuance of Notice of Informal Conference

Q: What is a notice of informal conference?

B. Step 2: Informal Conference

Q: What matters are taken up during the informal conference?

Q: What is a jeopardy assessment?

C. Step 3: Issuance of Pre-Assessment Notice

Q: What is a pre-assessment notice (PAN)?

PAN no longer required when:

III. FORMAL ASSESSMENT STAGE

Q: Within what time may the Commissioner issue a notice of assessment?

Q: What is the nature of prescription on the right to assess?

Assessment Process and Reglementary Period

It must be served within thirty (30) days from the date

If the taxpayer replies to the PAN (and disagrees with

The assessment shall become final by operation of law

Tax Remedies under the NIRC

Q: What is a tax assessment?

Q: When is an assessment deemed made?

Q: What is a notice of assessment?

Q: What is the importance of a tax assessment?

Q: What is the nature of an assessment?

Q: Who has the burden of proof in pre-assessment proceedings?

Q: What are the principles governing tax assessments?

Q: Is the assessment made by the CIR subject to judicial review?

Q: Are taxes self-assessing?

Q: What are the different ways of paying taxes?

Tax delinquency vis-a-vis Tax deficiency

Q: What is a tax deficiency?

Q: What is a tax delinquency?

Q: What is a deficiency tax assessment?

Q: What are the requisites for a valid assessment?

o When assessment is not required

Q: What is a protested assessment?

Q: Period for the taxpayer to file protest

Q: Written requests that taxpayer may file in a protest:

also involve a question of fact or of law or both.

Q: Modes of service of an assessment

Q: Effect of failure to file protest

Q: What is the best evidence obtainable rule?

Q: What are the methods to constructively determine a taxpayer’s income?

Q: What are the requisites for a valid tax assessment?

Q: What is the concept of collection?