Tax Remedies Chapter 1 Note

7/25/2019 Tax Remedies Chapter 1 Note

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TITLE VIIITAX REMEDIES

CHAPTER 1 REMEDIES IN GENERALSection 202 to Section 204

Section 202. Final Dee to P!"c#a$e"In the event that the delinquent taxpayer shall not redeem his property that

had been auctioned in order for the BIR to collect the delinquent taxes, the RDOshall execute an Absolute Deed of Sale to the buyer of the property that had beensold, free from all liens of any kind hatsoever, ith a recitation of all theproceedin!s that took place upon hich the validity of the sale ould no depend"

Section 20%. Pe"io o& Li'itation ()on A$$e$$'ent an Collection#xcept as provided in Sec $$$, Internal Revenue %axes shall be assessed

ithin & years after the last day prescribed by la for the 'lin! of the return, andno proceedin! in court ithout assessment for the collection of such taxes shall bebe!un after the expiration of such period(

)rovided, %hat in a case here a return is 'led beyond the period prescribedby la , the &*year period shall be counted from the day the return as 'led"

+or purposes of this Section, a return 'led before the last day prescribed byla for the 'lin! thereof shall be considered as 'led on such last day"

P!")o$e o& t#e Pe"io o& Li'itation ()on A$$e$$'ent an Collection o& Ta*e$

Bene'cial both to the overnment and to its citi-enso overnment . tax o/cers ould be obli!ed to act promptly in the

makin! of assessmento 0iti-ens . after the lapse of the period of prescription, citi-ens ould

have a feelin! of security a!ainst unscrupulous tax a!ents ho illal ays 'nd an excuse to inspect the books of taxpayers

%he la on prescription, bein! a remedial measure, should be liberallyconstrued in order to a1ord protection"

T+o ,in $ o& P"e$c"i)ti-e Pe"io $ &o" t#e A$$e$$'ent an Collection o& Ta*e$

2" 3ormal4Re!ular )rescriptive )eriod . under Section $5& is available to the!overnment if the taxpayer 'led a return and the return 'led is not false orfraudulent"

$" #xceptional )rescriptive )eriod . under Section $$$ is available to the!overnment in the follo in! cases(

a" %he taxpayer failed to 'le a return6b" %he taxpayer 'led a false return ith intent to evade tax6c" %he taxpayer 'led a fraudulent return ith intent to evade tax6d" %he taxpayer and the 0ommissioner a!reed in ritin! to aive the

prescriptive period of assessment of tax"


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No"'al Re/!la" P"e$c"i)ti-e Pe"io)rior to the %ax 0ode of 2778, Batas )ambansa Bl!" 855, shortened the

prescriptive period of assessment and collection of national internal revenue taxesfrom 've 9:; years to three 9&; years"

%he 0ommissioner has three 9&; years from the date of actual 'lin! of the taxreturn to assess a national internal revenue tax or to commence court proceedin!sfor the collection thereof ithout an assessment"


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o %he taxpayer failed to elevate to the 0%A an adverse decision of the0ommissioner, or his authori-ed representative, in some cases,ithin &5 days from receipt thereof and there is reason to believethat the assessment is lackin! in le!al and4or factual basis6

o %he assessments ere issued on or after Eanuary 2, 277F, here

the demand notice alle!edly failed to comply ith the formalitiesprescribed under Section $$F of the 3IR0 of 2778 9)rotestin! anassessment;6

o Assessments made based on the Gbest evidence obtainable ruleHand there is reason to believe that the same can be disputed bysu/cient and competent evidence6

o %he assessment as issued ithin the prescriptive period forassessment as extended by the taxpayerCs execution of imitation the validity or authenticity of hich isbein! questioned or at issue and there is stron! reason to believeand evidence to prove that it is not authentic6

o %he assessment is based on an issue here a court of competent

urisdiction made an adverse decision a!ainst the Bureau, but forhich the Supreme 0ourt has not decided upon ith 'nality"

Financial Inca)acito %he corporation ceased operation or is already dissolved6o %he taxpayer, as re ected in its latest Balance Sheet supposed to

be 'led ith the BIR, is su1erin! from surplus or earnin!s de'citresultin! to impairment in the ori!inal capital by at least :5J6

o %he taxpayer is su1erin! from a net orth de'cit 9total liabilitiesexceeds total assets; computed by deductin! total liabilities 9net of deferred credits and amounts payable to stockholders4o nersre ected as liabilities, except business*related transactions; fromtotal assets 9net of prepaid expenses, deferred char!es, pre*operatin! expenses, as ell as appraisal increases in 'xed assets;,taken from the latest audited 'nancial statements, provided that inthe case of an individual taxpayer, he has no other leviableproperties under the la other than his family home6

o %he taxpayer is a compensation income earner ith no other sourceof income and the familyCs !ross monthly compensation incomedoes not exceed the levels of compensation income provided forunder Section K"2"2 of RR L*$555, as last amended by RR F*$55K,and it appears that the taxpayer possesses no other liable ordistrainable assets, other than his family home6

o %he taxpayer has been declared by any competenttribunal4authority4body4!overnment a!ency as bankrupt orinsolvent"

Ca$e$ +#ic# 'a e co')"o'i$eDelinquent accounts60ases under administrative protest after issuance of the 'nal assessmentnotice to the taxpayer hich are still pendin! in the re!ional O/ces, RDOs,


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>e!al Service, >%S, 0ollection Service, #nforcement Service and other o/cesin the 3ational O/ce60ivil %ax cases bein! disputed before the courts60ollection cases 'led in courts60riminal violations, except 9a; those already 'led in court, or 9b; thoseinvolvin! criminal tax fraud"

E*ce)tion$6


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period of(9a; %hree 9&; years or more as of the date

of application for compromisesettlement6

25J

9b; >ess than & years $5J

* Surplus or earnin!s de'cit resultin! toimpairment in the ori!inal capacity by atleast :5J

K5J

* Declared insolvent or bankrupt, unlesstaxpayer falls under any situation asdiscussed above, thus resultin! to theapplication of the appropriate rate

$5J

II" Fo" ca$e$ o& 7 o! t&!l -ali it 9 . a minimum compromise rateequivalent to K5J of the basic assessed tax"

Doc!'enta" Re:!i"e'ent$ 2" If the application for compromise is premised under Section K"2"2 or RR L*

$555, as amended, the taxpayer*applicant shall submit ith his application(a" 0erti'cation from his employer on his prevailin! monthly salary,

includin! allo ances6b" A s orn statement that he has no other source of income other than

from employment"$" If the application is premised under Section K"2"$ of RR L*$555, as amended,

that taxpayer*applicant shall submit ith his application a s orn statementthat he derives no income from any source hatever6

&" If the application is premised under Section K"2"& of RR L*$555, as amended,

a copy of the applicantCs latest audited 'nancial statements or auditedAccount Information +orm 'led ith the BIR shall be submitted ith theapplication" G3otice of DissolutionH submitted to S#0 should be like isesubmitted"

A))"o-al o& o;e" o& co')"o'i$eAll compromise settlements ithin the urisdiction of the 3ational O/ce 93O;shall be approved by a ma ority of all the members of the 3ational #valuationBoard 93#B; composed of the 0ommissioner and the four Deputy0ommissioners" All decisions of the 3#B !rantin! the request of the taxpayeror favorable to the taxpayer shall have the concurrence of the 0ommissioner"O1ers of compromise of assessments issued by the Re!ional O/ces involvin!

basic de'ciency taxes of ):55,555 or less and for minor criminal violationsdiscovered by the Re!ional and District O/ces shall be sub ect to theapproval by the Re!ional #valuation Board 9R#B;"

0riminal violation, except those already 'led in court or those involvin! fraud, maybe compromised, but the payment of the tax due after apprehension shall notconstitute a valid defense in any prosecution for violation of any provisions of the

%ax 0ode"


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C MMISSI NERate payment of the tax under meritorious circumstances such as(

a" se of ron! tax formb" +ilin! an amended return under meritorious circumstances6c" Surchar!e erroneously imposed6d" >ate 'lin! of return due to unresolved issue on classi'cation4valuation

of real property6e" O1settin! of taxes of the same kind6f" Automatic o1settin! of overpayment of one kind of ithholdin! tax

a!ainst the underpayment in another kind6!" >ate remittance of ithholdin! tax on compensation of expatriate for

services rendered in the )hilippines pendin! the issuance by the S#0 of the license to the )hilippine branch o/ce of subsidiary6


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>#en t#e ta* lia ilitie$3 )enaltie$3 an o" inte"e$t 'a e a ate o"cancelle on t#e /"o!n t#at t#e a 'ini$t"ation an collection co$t a"e'o"e t#an t#e a'o!nt $o!/#t to e collecte

2" Abatement of penalties on assessment con'rmed by lo er court butappealed by the taxpayer to a hi!her court6

$" Abatement of penalties on ithholdin! tax assessment under meritoriouscircumstances6

&" Abatement of penalties on delayed installment payment under meritoriouscircumstance6

K" Abatement of penalties on assessment reduced after reinvesti!ation buttaxpayer is still contestin! reduced assessment6 and

:" Such other instances hich the 0ommissioner may deem analo!ous to theenumeration above"

P"oce$$in/ ti'e ( %he application for abatement or cancellation of tax, penaltiesand4or interest should be acted upon by the processin! o/ce and revie in! o/ceithin : days from receipt by said o/ce" %he BIR 3ational O/ce has &5 days ithinhich to act on the case"

Co''i$$ione"


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April 2, 277L to December &2, 277L" @)0 claims that it paidthese input taxes to the suppliers of capital !oods and servicesfor the construction and development of po er plants" @)0applied for tax credit4refund on the unutili-ed NA% paid oncapital !oods"


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CIR -$. Fo"t!ne To acco Co")o"ation3 G.R. No$. 1 2 4 3 !l 213 200

Fact$6Respondent +%0 is a domestic corporation that

manufactures ci!arettes packed by machine underseveral brands" )rior to Eanuary 2, 2778, Section 2K$ of the 2788 %ax 0ode sub ected said ci!arette brands to advalorem tax" Annex D of R"A" 3o" K$F5 prescribed theci!arette brandsC tax classi'cation rates based on theirnet retail price" On Eanuary 2, 2778, R"A" 3o" F$K5 tooke1ect" Sec" 2K: thereof no sub ects the ci!arette brandsto speci'c tax and also provides that( 92; the excise taxfrom any brand of ci!arettes ithin the next three 9&;years from the e1ectivity of R"A" 3o" F$K5 shall not belo er than the tax, hich is due from each brand onOctober 2, 277L6 9$; the rates of excise tax on ci!arettesenumerated therein shall be increased by 2$J on Eanuary2, $5556 and 9&; the classi'cation of each brand of ci!arettes based on its avera!e retail price as of October2, 277L, as set forth in Annex D shall remain in force untilrevised by 0on!ress"

%he Secretary of +inance issued RR 3o" 28*77 toimplement the provision for the 2$J excise tax increase"RR 3o" 28*77 added the quali'cation that Gthe nespeci'c tax rate xxx shall not be lo er than the excise taxthat is actually bein! paid prior to Eanuary 2, $555"H Ine1ect, it provided that the 2$J tax increase must bebased on the excise tax actually bein! paid prior to

Eanuary 2, $555 and not on their actual net retail price"

+%0 'led $ separate claims for refund or tax credit of itspurportedly overpaid excise taxes for the month of

Eanuary $555 and for the period Eanuary 2*December &2,$55$" It assailed the validity of RR 3o" 28*77 in that itenlar!es Section 2K: by providin! the aforesaidquali'cation" In this petition, petitioner 0IR alle!es thatthe literal interpretation !iven by the 0%A and the 0A of Section 2K: ould lead to a lo er tax imposable on 2

Eanuary $555 than that imposable durin! the transitionperiod, hich is contrary to the le!islative intent to raiserevenue"

I$$!e6Should the 2$J tax increase be based on the net

retail price of the ci!arettes in the market as outlined inSection 2K: of the 2778 %ax 0ode

Hel 6


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?#S" Section 2K: is clear and unequivocal" It statesthat durin! the transition period, i"e", ithin the next &years from the e1ectivity of the 2778 %ax 0ode, the excisetax from any brand of ci!arettes shall not be lo er thanthe tax due from each brand on 2 October 277L" %hisquali'cation, ho ever, is conspicuously absent as re!ardsthe 2$J increase hich is to be applied on ci!ars andci!arettes packed by machine, amon! others, e1ective on2 Eanuary $555"

0learly, Section 2K: mandates a ne rate of excise tax forci!arettes packed by machine due to the 2$J increasee1ective on 2 Eanuary $555 ithout re!ard to hether therevenue collection startin! from this period may turn outto be lo er than that collected prior to this date"

%he quali'cation added by RR 3o" 28*77 imposes a taxhich is the hi!her amount bet een the ad valorem taxbein! paid at the end of the &*year transition period andthe speci'c tax under Section 2K:, as increased by 2$JPa situation not supported by the plain ordin! of Section2K: of the 2778 %ax 0ode" Administrative issuances mustnot override, supplant or modify the la , but must remainconsistent ith the la they intend to carry out"

Revenue !eneration is not the sole purpose of thepassa!e of the 2778 %ax 0ode" %he shift from the advalorem system to the speci'c tax system in the 0ode islike ise meant to promote fair competition amon! theplayers in the industries concerned and to ensure anequitable distribution of the tax burden"

>#en t#e"e i$ )a"it et+een ta* "e&!n an ta* e*e')tionJ %here is parity only hen the tax refund is based either on a tax

exemption statute or a tax refund statute"

%he rule is that tax exemptions must be strictly construed suchthat the exemption ill not be held to be conferred unless the termsunder hich it is !ranted clearly and distinctly sho that such as theintention" 90IR vs" +ortune %obacco 0orp", "R" 3os" 2L8$8K*8:, Euly $2,$55F;

Ta* "e&!n -i$ K -i$ Ta* C"e it

7Ta* "e&!n 9 . refers to the actual reimbursement of the erroneously orille!ally collected taxes"


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7Ta* c"e it9 . refers to the issuance of a %ax 0redit 0erti'cate 9%00; hichmay be utili-ed in the payment of the internal revenue taxes, excludin! ithholdin!taxes"

Con ition$ "e:!i"e t#e Ta* Co e e&o"e a))lication &o" "e&!n o" ta*c"e it ce"ti8cate !e to ta*e$ e""oneo!$l o" ille/all "ecei-e 'a e/"ante t#e CIR.

2" %hat the taxpayer should 'le a ritten claim for refund or tax credit ith theBIR 0ommissioner ithin $ years from the date of payment of tax or penalty6

$" %hat if denied or not acted upon ithin said period, the petition for refund be'led ith the 0%A ithin &5 days from receipt of the denial and ithin said $year period from the date of payment of the tax or penalty re!ardless of anysupervenin! cause6

&" %he claim for refund must be a cate!orical demand for reimbursement6K" %here must be a proof of payment of the erroneously or ille!ally collected

taxes6:" 3o refund shall be !iven resultin! from availment of incentives !ranted

pursuant to special la s"

Con ition$ in o" e" t#at a clai' &o" "e&!n o& c"e ita le +it##ol in/ ta*e$'a e /"ante

2" A ritten claim must be 'led ith the 0ommissioner ithin $ years from thedate of payment of tax6

$" It is sho n on the return of the recipient that the income payment receivedas declared as part of the !ross income6 and

&" %he fact of ithholdin! is established by a copy of a statement duly issued bythe payor to the payee sho in! the amount paid and the amount of the taxithheld therefrom"

>#en t#e Co''i$$ione" 'a al$o /"ant a "e&!n e-en +it#o!t a +"ittenclai' &o" it


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Tax Remedies Chapter 1 Note