MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

DEPARTMENT OF ACCOUNTANCY

ACT184: Business Taxes

Notes in Tax Remedies

LESSON OBJECTIVES
At the end of this module, you will be able to:
1. Know the remedies of the government;
2. Know the remedies of the taxpayers;
3. Know the powers and authority if the Commissioner of Internal Revenue

ABSTRACTION
INTRODUCTION
1. Stages in the Imposition of Tax
a. Levy – it is a legislative act which determines that a tax of a certain amount or of a
certain percentage shall be imposed on the persons, properties or acts.
b. Assessment – it is the official action of an officer authorized by law in ascertaining
the amount of tax due under the law from a taxpayer.
c. Collection – it is the getting by the proper government agency of the taxes
imposed.

Note: Assessment should be made within 3 years from the date of filing of return, or from the
last day required by law filing, if the return was filed before such last day.

Collection should be made within 5 years from the date of assessment, either by summary
proceedings or judicial proceedings.

2. Remedies available to the Government

a. Administrative Remedies
i. Distraint of personal property
ii. Levy of real property
iii. Enforcement or forfeiture
iv. Enforcement of tax lien
v. Entering into compromise of tax cases
vi. Constructive distraint

b. Judicial Remedies
i. Civil actions
ii. Criminal actions

3. Remedies available to the Taxpayers

a. Administrative Remedies
i. Reinvestigation or reconsideration
ii. Compromise
iii. Claim for refund

b. Judicial remedies
i. Appeal to the Court of Tax Appeals
ii. Criminal Actions
iii. Civil Actions

REMEDIES IN GENERAL

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

1. Period of limitation (Statute of Limitation)

Assessment
Assessment should be made within 3 years from the date of filing of return, or from the last day
required by law filing, if the return was filed before such last day.

No proceeding in court without assessment for the collection of such taxes shall be begun after
the expiration of such period.

Exceptions to 3-year Prescriptive Period for Assessment

1. In case of a false or fraudulent return or of failure to file a return, the tax may be
assessed at any time within 10 years after the discovery of the falsity, fraud, or omission.
2. If before the expiration of the 3-year period for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to its assessment after such
time, the tax may be assessed within the period agreed upon. The period so agreed
upon may be extended by subsequent written agreement made before the expiration of
the period by previously agreed upon.

Suspension of the Running of the Statute of Limitations on the Making of Assessment:

1. When the Commissioner is prohibited from making the assessment, or beginning
distraint, or levy or a proceeding in court;
2. When the taxpayer requests for and is granted a reinvestigation by the Commissioner;
3. When the taxpayer could not be located in the address given by him in the return filed
upon which the tax is being assessed or collected;
4. When the warrant or distraint and levy is duly served upon the taxpayer or his authorized
representative, and no property could be located;
5. When the taxpayer is out of the country.

Collection
Collection should be made within 5 years from the date of assessment, either by summary
proceedings or judicial proceedings.

Any internal revenue tax, which has been assessed within the extended period agreed upon
may be collected by distraint or levy or by a proceeding in court within the period agreed upon in
writing before the expiration of the 5-year period. The period so agreed upon may be extended
by subsequent written agreements made before the expiration of the period previously agreed
upon.

Collection without Assessment

Collection should be made within 3 years from the date of filing of return, or from the last day
required by law for filing, if the return was filed before such last day, by judicial proceedings
only.

In case of a false or fraudulent return or of a failure to file a return, collection should be made
within 10 years from the discovery of fraud, falsity or failure to file a return, by judicial
proceedings only.

2. Authority of the Commissioner to Compromise

The Commissioner may –

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

A. Compromise the payment of any internal revenue tax, when:

a. A reasonable doubt as to the validity of the claim against the taxpayer exists;
or
b. The financial position of the taxpayer demonstrates a clear inability to pay
the assessed tax.

The compromise settlement of any tax liability shall be subject to the following minimum
amounts:
a. For cases of financial incapacity, a minimum compromise rate equivalent to ten
percent (10%) of basic assessed tax; and
b. For other cases, a minimum compromise rate equivalent to forty percent (40%) of
the basic assessed tax.

Where the basic tax involved exceeds One million pesos (P1,000,000) or where the
settlement offered is less than the prescribed minimum rates, the compromise shall be
subject to the approval of Evaluation Board which shall be composed of Commissioner
and the four (4) Deputy Commissioners.

Cases which may be Compromised:

1. Delinquent accounts;
2. Cases under administrative protest pending in the regional offices, revenue district
offices, legal services, 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;
5. Criminal violations, other than those already filed in court or those involving criminal tax
fraud; and
6. Cases covered by pre-assessment notices but the taxpayer is not agreeable to the
findings of the audit office as confirmed by the review office.

Cases which Cannot be Compromised:

1. Withholding tax cases;
2. Criminal tax fraud;
3. Criminal violations already filed in court;
4. Delinquent accounts with dule approved schedule of installment payments;
5. Cases where final reports of reinvestigation or reconsideration have been issued
resulting to reduction in the original assessment and the taxpayer is agreeable to such
decision;
6. Cases which become final and executory after final judgement of a court.

The Prescribed Minimum Rates for the Compromise Settlement of Tax Liabilities,
reckoned on a per tax type assessment basis, are:
a. 40% in cases of doubtful validity;
b. 10% in cases of financial incapacity;
c. 50% in cases of delinquent accounts and disputed assessments of taxpayers registered
under the LTS and ETS.

B. Abate or cancel a tax liability, when:

a. The tax or any portion thereof appears to be unjustly or excessively assessed;

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

b. The administration and collection costs involved do not justify the collection of the
amount due.

All criminal violations may be compromised except:

a. Those already filed in court, or
b. Those involving fraud.

C. Credit or refund erroneously or illegally received or penalties imposed without authority

No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing the Commissioner claim for credit or refund within two (2) years after the payment
of the or penalty.

A return filed showing an overpayment shall be considered as a written claim for credit or
refund.

CIVIL REMEDIES FOR COLLECTION OF TAXES

1. Civil remedies for collection of taxes

a. By distraint of personal property or levy on real property
b. By civil or criminal action

2. By distraint of personal property or levy on real property

Distraint is the seizure by the government of personal property, tangible or intangible, to
enforce the payment of taxes, to be followed by its public sale, if the taxes are not
voluntarily paid.

Kinds of Distraint:
a. Actual Distraint – taking of possession of the personal property out of the taxpayer.
b. Constructive distraint – the owner is merely prohibited from disposing of his
property.

Actual Distraint vs Constructive Distraint

o Both are summary remedies for the collection of taxes.
o Both refer only to personal properties.
o Both cannot be availed of where the amount of the tax involved is not more than P100.
o Actual distraint is made on the property only of a delinquent taxpayer, while constructive
distraint may be made on the property of any taxpayer, whether delinquent or not.
o In actual distraint, there is a taking of possession or transfer of control over the property
distrained, while in constructive distraint, the taxpayer is merely prohibited from
disposing of his property.
o Actual distraint is effected by leaving a list of the property distained or by service of a
warrant of distraint or garnishment, while constructive distraint, by requiring the taxpayer
to sign a receipt of the property or by the revenue officer preparing and leaving a list of
such property
o Actual distraint is an immediate step for collection of delinquent taxes, while constructive
distraint is not necessarily so, its purpose being to prevent the taxpayer from disposing
of his property pending final determination of his tax liability.

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

When and by whom distraint may be made?

1. It shall be made not earlier than 3 months nor later than 6 months from receipt of
demand by the taxpayer;
2. The distraint of personal property shall be made by the Commissioner of Internal
Revenue or his duly authorized representative if the amount involved is more than
P1,000,000 or the Revenue District Officer, if the amount involved is P1,000,000 or less.

Levy – refers to act of seizure of real property in order to enforce the payment of taxes, and the
property may be sold at public sale, if after seizure, the taxes are not voluntarily paid.

Distraint vs Levy
o Both are summary remedies for the collection of taxes
o Both cannot be availed of where the amount of the tax involved is not more than P100
o Distraint refers to personal properties, while levy refers to real properties.
o In distraint, forfeiture by the government is not provided, while in the case of levy upon
real estate, forfeiture by the government is authorized where there is no bidder or the
highest bid is not sufficient to pay the taxes, penalties, and interest.
o The taxpayer is not given the right of redemption with respect to distrained personal
property sold, while such right is given in case of real estate levied upon and sold or
forfeited to the government.

Requisites for exercise of remedy of distraint or levy:

1. The taxpayer must be delinquent in the payment of tax
2. There must be subsequent demands for its payments
3. The taxpayer must fail to pay the delinquent tax at the time required
4. The period within which to assess or collect the tax has not yet prescribed.

3. By civil or Criminal Action

The BIR files civil or criminal action before the Municipal Trial Court, Regional Trial Court or the
Court of Tax Appeals with appropriate jurisdiction.

PROTEST OF ASSESSMENT

1. Period of assessment
Assessment if the official action of the BIR in ascertaining the amount of tax due under the
law from a taxpayer. It should be made within 3 years from the date of filing of return, or
from the last day required by law for filing if the return was before such last day.

Jeopardy Assessment
Jeopardy assessment is a tax assessment which was made without the benefit of complete
or partial audit by an authorized revenue officer who has reason to believe that the
assessment and collection of a deficiency tax will be jeopardized by delay because of
taxpayer’s failure to comply with audit and investigation requirements to present his books
of accounts or to substantiate all or any of the deductions, exemptions or credits claimed.

2. Procedures prescribed by law

In case of disputed assessment
1) The BIR notifies the taxpayer through a Pre-Assessment Notice of findings that proper
taxes should be assessed

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

2) a. The taxpayer responds 15 days from receipt of the PAN why no taxes should be
assessed against him
I. if the BIR accepts the taxpayers’ explanations, then the proceedings are
ended.
II. If the BIR rejects, the proceedings are ended, or an assessment issued based
on the findings.

3) The BIR issues the assessment

4) If the taxpayer does not do anything within 30 days from receipt of the notice of
assessment, the assessment becomes final, executory, demandable, and not
appealable to the Court of Tax Appeals, and the BIR could avail of its remedies to
collect the tax.

If the taxpayer administratively protests or disputes the assessment by filing a request

for reconsideration or reinvestigation within 30 days from receipt of the notice of
assessment, within 60 days from filing the protest, all relevant supporting documents
shall be submitted. If the documents are not reasonably submitted, the assessment
shall become final, executory, demandable, and not appealable to the Court of Tax
Appeals.

5) The BIR denies the administrative protest or dispute within 180 days from receipt of the
relevant supporting documents.

The BIR either denies the administrative protest or dispute or does not act on the
administrative protest or dispute.

6) If the taxpayer receives the BIR’s denial of his administrative protest, within 30 days
from the receipt of the denial appeals the decision of the BIR to the Court of Tax
Appeals – Division.

If the taxpayer does not reasonably interpose an appeal, the decision of the BIR
denying his administrative protest or dispute becomes final and executory. The
disputed assessment becomes final, executory, demandable and not anymore
appealable to the CTA – Division.

If the taxpayer learns of the inaction of the BIR on his administrative protest or dispute,
within 30 days from the lapse of 180 days from the taxpayer’s submission of all the
relevant supporting documents, must interpose on appeal to the CTA – Division.

If a protest is filed by a taxpayer be denied by the BIR, the taxpayer may request the
BIR for a reconsideration of such denial and that his tax case be referred to the BIR’s
Appellate Division. The Appellate Division serves as a “Court”, where both parties, i.e.
the Revenue Officer on one hand, and the Taxpayer on the other, can present
testimony and evidence before a Hearing Officer, to support their respective claims.

7) The Court of Tax Appeals (CTA) – Division

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

The decision of the CTA – Division may be appealed to the CTA – en banc within 15
days.

8) The Court of Tax Appeals (CTA) – en banc

The decision of the CTA – en banc may be appealed to the Supreme Court within 15
days.

In Case of Undisputed Assessment:

1. The BIR may file an action with the CTA – Division where the principal amount of taxes
and fees, exclusive of charges and penalties, claimed is P1,000,000 or more.

The BIR may file an action with the Regional Trial Court or the Municipal Trial Court
where the principal amount of taxes and fees, exclusive of charges and penalties,
claimed is less than P1,000,000.

2. The decision of the RTC in the exercise of its original jurisdiction or appellate jurisdiction
is appealable to the CTA – Division.

3. The decision of the CTA – Division is appealable to CTA – en banc. The decision of the
CTA – en banc is appealable to the Supreme Court

-END-

REFERENCES
BIBLIOGRAPHY Tabag, E. D. (2019). Transfer and Business Taxation. Manila: Info Page.
Valencia, E. G. (2017). Transfer and Business Taxation. Baguio City: Valencia Educational Supply.