BM2215

REMEDIE
S
Tax Remedies Defined (Tabag, 2022)
The definitions of tax remedies are as follows:
1. On the part of the government, these are courses of action provided by or allowed in the law to
implement the tax laws or enforce tax collection; and
2. On the part of the taxpayer, these are legal actions that a taxpayer can avail of to seek relief
from the undue burden or oppressive effect of tax laws or to check possible excesses by revenue
officers in performing their duties.
Assessment Process (Tabag, 2022)

Tax Audit or Investigation

The Bureau of Internal Revenue (BIR) conducts an audit by issuing a Letter of Authority (LOA). A letter
of authority empowers a Revenue Officer to examine and scrutinize a taxpayer's accounts and other
accounting records to determine the taxpayer's correct internal revenue tax liabilities. Without such
an authority, the assessment or examination is a nullity.
The following persons are authorized to issue LOA:
 Commissioner of Internal Revenue (CIR), under the jurisdiction of the National Office.
 Regional Director, under the jurisdiction of the regional offices.
An LOA need not cover the following tax cases:
 Cases involving civil or criminal tax fraud which fall under the jurisdiction of the National
Investigation Division (NID) under the Enforcement and Advocacy Services (EAS) of the BIR;
and
 Policy cases are under audit by the special teams in the National Office.
A tax return, statement, or declaration filed by a taxpayer may be modified, changed, or amended
within three (3) years. However, the amendment shall no longer be allowed when an LOA or
investigation of such tax return, statement, or declaration has been served upon the taxpayer.
Issuance of Notice of Discrepancy (NOD) (RR 22-2020 dated September 16, 2020)
NOD replaces Notice of Informal Conference (NIC). Before NOD, the taxpayer shall be informed, in
writing, by the Revenue District Office or by the Special Investigation Division, as the case may be (in
the case of Revenue Regional Offices) or by the Chief of Division concerned (in the case of BIR
National Office) of the discrepancy or discrepancies in the taxpayer's payment of his internal revenue
taxes for Informal Conference as required under RR 7-2018, to afford the taxpayer with an
opportunity to present the side of the case. NIC was replaced by NOD under RR 22-2022, issued on
September 15, 2020.

Issuance of Preliminary Assessment Notice (PAN)

Suppose after review and evaluation by the Commissioner or his duly authorized representative, as
the case may be, it is determined that there exists sufficient basis to assess the taxpayer for any
deficiency tax or taxes. In that case, the said office shall issue the taxpayer a Preliminary Assessment
Notice (PAN) for the proposed assessment. It shall show the facts and the law, rules, regulations, or
jurisprudence on which the proposed assessment is based.

Issuance of Formal Letter of Demand (FDL) and Final Assessment Notice (FAN)
The FDL/FAN shall be issued by the Commissioner or his duly authorized representative. The FDL/FAN
calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules,
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regulations, or jurisprudence on which the assessment is based; otherwise, the assessment shall be
void (RR 18-2013).

Final Decision on a Disputed Assessment (FDDA)

If the BIR disagrees with the protest, a Final Decision on Disputed Assessment (FDDA) will be issued,
where the taxpayer has the right to elevate the case to the CTA. The decision of the Commissioner or
his duly authorized representative shall state the: (RR 13-2018)
a. Facts, the applicable law, rules, and regulations, or jurisprudence on which such decision is
based; otherwise, the decision shall be void; and
b. That same is his final decision.

Denial of Protest
The following are the ways to deny protest:
a. Direct denial. File an appeal with the Court of Tax Appeals (CTA) Division within 30 days of
receiving the denial letter.
b. Indirect denial. File an appeal with the CTA Division within 30 days from the lapse of the 180
days or await the final decision of the CIR or his duly authorized representative and request such
final decision to the CTA within 30 days after the receipt of a copy of such determination (RR 18-
2013).
Denial of Appeal by the CTA and SC
If the appeal to the CTA Division is denied, file a request to the CTA en banc within 15 days from
receipt of the decision.

If the appeal to the CTA en banc is denied, file an appeal with the Supreme Court (SC) Division within
15 days from receipt of the decision, then, finally, to the SC en banc.

Collection (Tabag, 2022)

The BIR may avail of the remedy of collection when the assessment becomes final, executory, and
demandable. Section 222(a) of the Tax Code states that in the case of a false or fraudulent return with
the intent to evade tax or of failure to file a return, the tax may be assessed, or 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. Provided that in a fraud assessment that has become final
and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for
the collection thereof.

The BIR can collect delinquent internal revenue taxes through the following means:

Distraint
The government seizes personal property, tangible or intangible, to enforce the payment of taxes.
 Actual distraint – personal property is physically seized by the BIR and offered for sale at public
auction. The property is sold to the highest bidder, and the sale proceeds are applied to the
payment of the tax due. Garnishment is the distraint of bank accounts.
 Constructive distraint – the person in possession of the personal property is made to sign a
receipt, undertaking that he will preserve the property and will not dispose of the property
without the express authority of the Bureau of Internal Revenue (BIR). Constructive distraint may
be availed of in the following cases:
o The taxpayer is retiring from any business subject to tax.

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o He intends to leave the Philippines.

o He removes his property from there.
o He performs any act tending to obstruct the proceeding for collecting the tax due or which be
due from him.
A person authorized to commence distraint proceedings:
Amount Involve Person Authorized
More than P1,000,000 Commissioner of Internal Revenue (CIR)
P1,000,000 or less Revenue District Officer
Right to Pre-emption
Suppose at any time before the consummation of the sale, all reasonable charges (taxes, interest,
and penalties) are paid to the sale officer. In that case, the goods or effects distrained shall be
restored to the owner.
Levy
The seizure by the government of real properties and interest in or rights to such properties to enforce
the payment of taxes.

Right of Redemption
The taxpayer may redeem the property for one (1) year from the sale date. During this period, the
taxpayer is not deprived of the possession and fruits of the property. If the taxpayer fails to redeem the
property, a final sale deed is executed in favor of the buyer.

Rights of the owner during the one (1) year redemption period
During the one (1) year period of redemption, the owner shall not be deprived of the possession of the
said property and shall be entitled to the rents and other income thereof until the expiration of the time
allowed for its redemption.
Judicial Proceedings
 Filing of a civil case for collection
 File a criminal lawsuit (Tax Evasion)
Compromise (Tabag, 2022)
The following are the grounds for compromise:
1. A reasonable doubt as to the validity of the claim against the taxpayer exists; or
2. The taxpayer's financial position demonstrates an evident inability to pay the assessed tax.
All criminal violations may be compromised, except:
1. Those already filed in court; or
2. Those involving fraud.
Minimum Amounts
 For cases of financial incapacity, a minimum compromise rate is equivalent to 10% of the basic
assessed tax.
 For other cases, a minimum compromise rate is 40% of the basic assessed tax.
Cases when approval of the evaluation board is required
 Where the basic tax involved exceeds one (1) million pesos; or
 Where the settlement offered is less than the prescribed minimum rates.

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Composition of the evaluation board

 Commissioner of Internal Revenue (CIR)
 Four (4) Deputy Commissioners

The following are

Abatement the grounds forofthe
or Cancellation reduction
Tax or cancellation
Liability (Tabag, 2022)of tax liability:
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.
The prescriptive period for assessment and the beginning of distraint or levy or a proceeding in court for
Suspension of the Running of Statute of Limitations (Tabag, 2022)
collection of any tax deficiency may be suspended under the following situations:
1. The taxpayer's request for reinvestigation was granted;
2. The taxpayer cannot be located at the address given in the return;
3. No property of the taxpayer can be found; or
4. The taxpayer is out of the country.
Note that the suspension shall be for the duration of the situation plus 60 days thereafter.
In addition to the basic tax assessed on the taxpayer, the following civil penalties will also be collected:
Civil Penalties (Tabag, 2022)
Surcharge
A 25% surcharge shall be collected in any of the following cases:
1. Failure to file any return and pay the tax due on time.
2. Filing a return with an internal revenue officer other than those for whom the return is required to
be filed unless authorized by the Commissioner of Internal Revenue.
3. Failure to pay the deficiency tax within the time described for its payment in the notice of
assessment.
4. Failure to pay the full or part of the amount of tax shown on any return or the total amount of tax
due for which no return is required to be filed.
A 50% surcharge shall be collected in any of the following cases:
1. Willful neglect to file the return on time.
2. There is willful neglect if the taxpayer files only after prior notice in writing from the BIR.
There is a simple neglect 25% surcharge if the taxpayer voluntarily files the return after the deadline
without notice from the BIR.
Prima facie evidence of false or fraudulent return:
1. Substantial overstatement (more than 30%) of deductions.
2. Substantial under declaration (more than 30%) of taxable sales, receipts, or income.
Interest
It is an increment on any unpaid amount of tax assessed from the date prescribed for payment until the
amount is fully paid.
 Before TRAIN Law – 20% per annum
 Upon effectivity of the TRAIN Law – 12% per annum

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The following are the different kinds of interest:

1. Deficiency interest – imposed on any deficiency tax due, which interest shall be assessed and
collected from the date prescribed for its payment until (whichever comes first):
a. Full payment thereof;
b. Upon issuance of a notice and demand by the Commissioner or his authorized representative.
2. Delinquency interest – refers to interest imposed on the failure of the taxpayer to pay the following:
a. The amount of tax due on any return required to be filed;
b. The amount of the tax due for which no return is required; or
c. A deficiency tax, or any surcharge or interest on the due date appearing in the notice and
demand of the CIR or his authorized representative until the amount is fully paid, which
interest shall form part of the tax.
Double Imposition of Interest
Upon effectivity of the TRAIN Law, in no case shall the deficiency and delinquency interests be imposed
simultaneously.
Tax Deficiency vs. Tax Delinquency
Tax Deficiency Tax Delinquency
The amount still due and collectible from a Failure of the taxpayer to pay the tax due on the
taxpayer upon audit or investigation. date fixed by law or indicated in the assessment
notice (FAN) or letter of demand.
Refund of Taxes (Tabag, 2022)
The following are the requisites for a refund:
1. The BIR erroneously or illegally collected a tax;
2. The taxpayer should file a written claim for refund or tax credit with the CIR within two (2) years
from the date of payment of the tax or penalty; and
3. If the claim for refund is denied by the CIR, file a petition for a refund with the Court of Tax
Appeals (CTA):
a. Within 30 days from the receipt of the denial; and
b. Within two (2) years from the date of payment of the tax or penalty.

References:
Bureau of Internal Revenue (BIR). (2022). Corporate Recovery and Tax Incentives for Enterprises Act
(CREATE). https://www.bir.gov.ph/index.php/create.html
Bureau of Internal Revenue (BIR). (2022). Tax Reform for Acceleration and Inclusion (TRAIN).
https://www.bir.gov.ph/index.php/train.html
Bureau of Internal Revenue (BIR). (2022). Tax Code. https://www.bir.gov.ph/index.php/tax-
code.html#title2
Tabag, E. (2022). CPA reviewer in taxation. EDT Books Publishing.
Tabag, E. (2022). Income taxation. EDT Books Publishing.

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