Tax 2 Finals (Remedies to Cta)

1 TAXATION 2 FINALS| maru.mhealler | 404

BIR ORGANIZATION, FUNCTIONS AND TAX ADMINISTRATION

(Sections 1 to 21 of the Tax Code, as amended)

XIV. PERIOD OF LIMITATION UPON COLLECTION

A. GENERAL RULE

Five (5) years from assessment or within period for collection agreed upon in writing before expiration of the 5-year period (Sec. 222, 1997 NIRC).

If no assessment has been made, the government has three (3) years to collect reckoned from the last day of filing the return or such date when the return was filed if made after the period prescribed by law. The supposed three-year assessment period is substituted with collection.

B. EXCEPTIONS

1. Ten (10) years – without assessment in case of false or fraudulent return with intent to evade or failure to file return (Sec. 222, 1997 NIRC).

If no return is filed, the government’s right to collect becomes imprescriptible.

2. When there is a waiver of the statute of limitations.

Under RMO No. 20-90, in order for the waiver to be valid, the following should be followed:

The waiver must be in the form identified in RMO 20-90. This form may be reproduced by the Office concerned but there should be no deviation from such form. The phrase “but not after ______, 19__” should be filled up.

Soon after the waiver is signed by the taxpayer, the CIR or the revenue official authorized by him shall sign the waiver indicating that the BIR has accepted and agreed to the waiver. The date of such acceptance by the BIR should be indicated.

The waiver must be executed in 3 copies; the second copy is for the taxpayer.

The date of receipt by the taxpayer must be indicated in the original copy. Without the date, it cannot be determined whether the waiver was accepted by BIR before the expiration of the three-year period.

It is necessary that the waiver be executed by the parties before the lapse of the five-year prescriptive period. The law does not authorize the extension of the prescriptive period once prescription has set in.

Tax waivers are supposed to extend, not reduce, the prescriptive periods provided by law.

3. Revised assessment of the government (prescriptive period for the collection is counted from the last or revised assessment).

When a revised FAN is issued (assuming it has been issued within the original prescriptive period), the government has five (5) years to collect from the date when the latest or revised FAN has been mailed, released or sent.

4. Within 10 years from the time the right of action accrues if the action is brought to enforce a compromise.

Whenever the Government’s action is for the enforcement of a contractual obligation, the applicable prescriptive period is no longer 5 years but ten (10) years under Art. 1144(1) of the Civil Code.

The 10-year prescriptive period will run from the time there is a breach of the compromise agreement.

Grounds for compromise:

A reasonable doubt as to the validity of the claim against the taxpayer exists.

- In which case, the taxpayer may be just held liable to the extent of 40% of the basic assessed tax.

The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

- Taxpayer may pay only to the extent of 10% of the basic assessed tax.

C. GOVERNMENT’S RIGHT TO RECOVER ERRONEOUSLY REFUNDED TAX

When the Government makes an erroneous refund of internal revenue taxes, the prescriptive period that applies is the three (3) year period for making assessments under Sec. 203 of the NIRC.

The prescriptive period for tax assessments should apply because the demand of the Government on the taxpayer to pay the erroneously refunded tax is in effect an assessment. (Guagua Electric Light Plant Co., Inc. v. CIR)


XV. WHEN IS A TAX DEEMED COLLECTED

A. SUMMARY REMEDIES

Distraint of personal property

Levy of real property

Collection through summary remedies is effectuated by summary methods when the Government avails of a distraint and levy procedure prescribed in the Tax Code (Secs. 207 to 214, NIRC)

B. JUDICIAL REMEDIES

The collection of the tax is begun by the filing of a complaint with the proper court. (Sec. 3, Rule 6, Rules of Court)

If the decision of the CIR on a protested assessment is appealed to the CTA, the collection of the tax is considered begun when the Government files its answer to the taxpayer’s petition for review.

Can the taxpayer enjoin the collection of taxes?

GR: NO, otherwise, it will hamper the operations of the government. (lifeblood doctrine)

Sec. 218, NIRC – “(n)o court shall have the authority to grant injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.”

EXCEPTION: Suspension of the collection of the tax liability is allowed when all of the following conditions concur:

1. Issued only by the CTA;

2. Issued by the CTA in its appellate jurisdiction; and

3. Collection may jeopardize the interest of the Government and/or the taxpayer.

Suspension of collection may be granted by the CTA upon this ground but the taxpayer must either deposit the amount of taxes assessed or file a bond amounting to not more than twice the value of the tax being assessed Sec. 11, RA 1125).

XVI. SUSPENSION OF THE RUNNING OF THE STATUTE OF LIMITATIONS FOR MAKING TAX COLLECTIONS

The running of the prescriptive periods for assessment and collection of taxes is suspended under any of the following circumstances:

a. When the CIR is prohibited from making the assessment or beginning distraint and levy or a proceeding in court and for sixty (60) days thereafter;

b. When the taxpayer requests for the reinvestigation which is granted by the CIR;

c. When the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected; provided, that if the taxpayer informs the CIR of any change in address, the running of the Statute of Limitations will not be suspended;

d. 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 could be located; and

e. When the taxpayer is out of the Philippines (Sec. 223, NIRC)

XVII. ADMINISTRATIVE REMEDY AFTER PAYMENT

A. DEFINITION OF TERMS

TAX CREDIT – a claim for the issuance of a tax credit certificate, showing an amount owing from the Government to the taxpayer which the latter is legally authorized to credit or offset against national internal taxes payable by him, except withholding taxes.

- Can only be applied against existing national internal revenue tax liabilities (i.e. income tax, VAT, etc). Cannot be used to pay off local taxes or real property taxes.

- Cannot be applied against a withholding tax. Withholding taxes are not the liability of the withholding agent. (Can only be applied against any internal revenue tax for which the taxpayer is directly liable.

TAX REFUND – a claim for the payment of cash for taxes erroneously or illegally paid by the taxpayer to the Government. (actual reimbursement)

TAX REFUND TAX CREDIT

The taxpayer asks for restitution of the money paid as tax

The taxpayer asks that the money so paid be applied to his existing tax liability

Two-year period to file claim with the CIR starts after the payment of the tax or penalty

Two-year period starts from the date such credit was allowed (in case credit is wrongly made).


CARRY OVER – If the taxpayer has paid excess quarterly income taxes, it may be entitled to a tax credit or refund as shown in its final adjustment return which may be carried over and applied against the estimated quarterly income tax liabilities for the taxable quarter of the succeeding taxable years.

- Once the taxpayer has exercised the option to carry-over and to apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years, such option is irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed.

B. WHEN CLAIMS FOR TAX REFUND OR CREDIT IS ALLOWED

Tax recovery or refunds may encompass the following payments:

a. When the tax has been erroneously or illegally assessed or collected;

b. When any penalty is claimed to have been collected without authority;

c. When any sum is alleged to have been excessively or in any manner wrongfully collected;

d. When internal revenue stamps are returned in good condition by the purchaser, value is refunded; and

e. In the CIR’s discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction.

Before recovery is allowed, two things must be established:

(1) That there was an actual collection and receipt by the Government of the tax sought to be recovered; and

(2) That there is legal basis for granting the refund or credit including verification of compliance with the statutory requirements relative to the filing of claims within the reglementary two-year period.

CIR vs. PNB, GR No. 161997 (2005)

Claim for tax credit not barred by two-year prescriptive period considering special circumstances

The amount of advance income tax voluntarily remitted to the BIR is not, as a consequence of prior tax assessment or computation by the taxpayer, based on business income and should not be treated as similar to those national internal revenue taxes erroneously, illegally or wrongfully paid as to be automatically covered by the two-year limitation under Sec. 230 for the right to its recovery. When the P180 million advance income tax payment was tendered, no tax had been assessed or due, or actually imposed and collected by the BIR. Neither can such payment be considered as illegal having been made in response to a call of patriotic duty to help the National Government.

The tax credit sought is not simply a case of excess payment, but rather for the application of the balance of advance income tax payment for subsequent taxable years after failure or impossibility to make such application or carry over the preceding four-year period when no tax liability was incurred by the petitioner due to losses in its operations. It is truly inequitable to strictly impost the two-year prescriptive period as to legally bar any request for the tax credit considering the special circumstances under which the advance income tax payment was made and the unexpected event (four years of business losses) which prevented such application or carry over.

CIR vs. Alltel Int’l. Resource Mgt., Inc. (CA 2002)

Respondent cannot be entitled to refund and at the same time be liable for a tax deficiency assessment for the same year.

The fact of such deficiency assessment is intimately related to and inextricably intertwined with the right of respondent bank to claim for a tax refund for the same year.

To grant the refund without determination of the proper assessment and the tax due would inevitably result in multiplicity of proceedings or suits. If the deficiency assessment should subsequently be upheld, the Government will be forced to institute anew a proceeding for the recovery of erroneously refunded taxes which recourse must be filed within the prescriptive period of ten years after discovery of the falsity, fraud or omission in the false or fraudulent return involved. This would necessarily require and entail additional efforts and expenses on the part of the Government, impose a burden on and a drain of government funds, and impede or delay the collection of much-needed revenue for government operations. Thus, it is both logically necessary and legally appropriate that the issue of the deficiency tax assessment be resolved jointly with its claim for tax refund, to determine once and for all in a single proceeding the true and correct amount of tax due or refundable.


Exxonmobil vs. CIR, GR No. 180909 (2011)

The proper party to question, or to seek a refund of, an indirect tax, is the statutory taxpayer, or the person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to another.

On the issue of whether Exxon, as the distributor and vendor of petroleum products to international carriers registered in foreign countries which have existing bilateral agreements with the Philippines, is the proper party to claim a tax refund for the excise taxes paid by the manufacturers, Caltex and Petron, and passed on to it as part of the purchase price, the SC answered in the negative

Excise taxes are indirect taxes, the liability for payment of which falls on one person, but the burden of payment may be shifted to another. Here, the sellers of the petroleum products or Jet A-1 fuel subject to excise tax are Petron and Caltex, while Exxon was the buyer to whom the burden of paying excise tax was shifted.

The proper party to seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden to another. Although the burden of an indirect tax can be shifted to the purchaser, the amount added or shifted becomes part of the price. Thus, the purchaser does not really pay the tax per se but only the price of the commodity.

C. PROPER PARTY TO FILE A CLAIM FOR REFUND/CREDIT

GR: Taxpayer who is made personally liable for tax and who has actually made the payment of tax.

EXCEPTIONS:

Silkair Pte. Ltd. vs. CIR, GR No. 184398 (2010)

The proper party to seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.

Claiming exemption from payment of excise taxes pursuant to Section 135 of the Tax Code and Article 4 of the Philippines Singapore Air Agreement, Silkair filed a formal claim for refund with the Commissioner of Internal Revenue (CIR). Silkair alleged that it was the one who actually paid the excise taxes due on the transactions while Petron merely remitted the payment to the BIR, thereby negating the tax exemption expressly granted to it.

Nonetheless, the Supreme Court held that “the proper party to question, or seek a refund of an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.”

Excise tax, “whether classified as specific or ad valorem tax, is basically an indirect tax imposed on the consumption of a specified list of goods or products. The tax is directly levied on the manufacturer upon removal of the table goods from the place of production but in reality, the tax is passed on to the end consumer as part of the selling price of goods sold.”

CIR vs. Procter & Gamble Phils., et. Al., GR No. 66838 (1991)

A withholding agent should be allowed to claim for tax refund because under the law, said agent is the one who is held liable.

Under Sec.53(c) of NIRC, the withholding agent who is "required to deduct and withhold any tax" is made " personally liable for such tax" and indeed is indemnified against any claims and demands which the stockholder might wish to make in questioning the amount of payments effected by the withholding agent in accordance with the provisions of the NIRC.

The withholding agent, P&G-Phil., is directly and independently liable for the correct amount of the tax that should be withheld from the dividend remittances. The withholding agent is, moreover, subject to and liable for deficiency assessments, surcharges and penalties should the amount of the tax withheld be finally found to be less than the amount that should have been withheld under law.

There is nothing to preclude the BIR from requiring P&G-Phil. to show some written or telexed confirmation by P&G-USA of the subsidiary's authority to claim the refund or tax credit and to remit the proceeds of the refund., or to apply the tax credit to some Philippine tax obligation of, P&G-USA, before actual payment of the refund or issuance of a tax credit certificate. A sovereign government should act honorably and fairly at all times, even vis-a-vis taxpayers.

Hence, P&G-Phil. should be properly regarded as a party-in-interest to bring suit for refund f taxes.


D. REQUISITES TO MAKE A CLAIM

The taxpayer must comply with the following procedures in claiming a refund of, or tax credit for, taxes and penalties which he alleges to have been erroneously, illegally or excessively assessed or collected:

1. He should file a written claim for refund with the CIR;

- To afford the CIR an opportunity to correct the action of subordinate officers; and

- To notify the Government that the taxes sought to be refunded are under question and that, therefore, such notice should then be borne in mind in estimating the revenue available for expenditure.

GR: A written claim is a mandatory requirement.

EXCEPTIONS:

Where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously made;

Within 30 days after receipt of the adverse decision or inaction of the CIR, and the taxpayer filed an appeal before the CTA

2. The claim filed must state a categorical demand for reimbursement;

- Must contain facts, basis of contention

3. The claim for refund or tax credit must be filed, or the suit or proceeding therefor must be commenced in court within two (2) years from date of payment of the tax or penalty regardless of any supervening cause.

GR: The period to file a claim for refund or tax credit cannot be suspended notwithstanding any supervening clause:

EXCEPTION: The prescriptive period for filing claims for refund is suspended provided two conditions are present:

a. There is a pending litigation between the two parties – the Government and the taxpayer – as to the proper tax to be paid and of the proper interpretation of the taxpayer’s charter in relation to the disputed tax; and

b. The CIR in the litigated case agreed to abide by the decision of the SC as to the collection

of taxes relative thereto, even if it’s beyond the two-year prescriptive period (Panay Electric v. CIR)

Commencement Of The Two (2) Year Period

a. Tax sought to be refunded is illegally or erroneously collected

- from the date the tax was paid. (Commissioner vs. Victorias Milling, GR No. L-24108, January 31, 1968)

b. Tax is paid only in installments or only in part

- from the date the last or final installment or payment because for tax purposes, there is no payment until the whole or entire tax liability is fully paid.

c. Taxpayer merely made a deposit

- counted from the conversion of the deposit to payment

- Merely making a deposit is not equivalent to payment until the amount is actually applied to the specific purpose for which it was deposited.

d. Tax has been withheld from source (through the withholding tax system)

- counted from the date it falls due at the end of the taxable year

- A taxpayer who contributes to the withholding tax system does not really deposit an amount to the government, but in truth, performs and extinguishes his tax obligation for the year concerned. (Gibbs vs. Commissioner, GR No. L-17406, November 29, 1965)

e. End of taxable year vs. date of the filing of the final adjusted return

- from the date when the final adjusted return was filed.

- the rationale in computing this period is the fact that it is only then the corporation can ascertain whether it made profits or incurred losses in its business operations. (ACCRA Investments vs. Court of Appeals, GR No. 96322, December 20, 1991)


f. Date when quarterly income tax was paid vs. date when final adjusted return was filed

- from the date when final adjusted return was filed

- The filing of the quarterly income tax return (Sec. 68) and payment of quarterly income tax should only be considered mere installments of the annual tax due. (Commissioner vs. TMX Sales, GR No. 83736, January 15, 1992)

g. Date when the final adjustment return was actually filed (ex. Apr. 2) vs. Last day when the adjustment return could still be filed (ex. Apr. 15)

- from the date the final adjustment return was actually filed. (Commissioner vs. Court of Appeals, GR No 117254, January 21, 1999)

h. Tax was not erroneously or illegally paid but the taxpayer became entitled to refund because of supervening circumstances

- from the date the taxpayer becomes entitled to refund and not from the date of payment. (Commissioner vs. Don Pedro Central Azucarera, GR No. L-28467, Feb. 28, 1973)

PAYMENT UNDER PROTEST IS NOT NECESSARY UNDER NIRC

A suit or proceeding for tax refund may be maintained “whether or not such tax, penalty or sum has been paid under protest or duress” (Sec. 229, NIRC).

Note: Similarly, payment under protest is not necessary in refund for local taxes. (See Sec. 196, LGC). However, payment under protest is necessary in claim for refund for real property taxes (Sec. 252, LGC) and for customs duties (Sec. 2308, TCC).

CIR vs. PERF Realty Corp., GR No. 163345 (2008)

Failure to indicate option of tax refund or tax credit is not fatal to a claim for refund.

Section 76 of the 1997 Tax Code offers two options:

(1) filing for tax refund and (2) availing of tax credit.

The two options are alternative and the choice of one precludes the other. However, failure to indicate a choice will not bar a valid request for a refund, should this option be chosen by the taxpayer later on. The reason for requiring that a choice be made in the Final Adjustment Return upon its filing is to ease tax administration, particularly the self-assessment and collection aspects. A taxpayer that makes a choice expresses certainty or preference and thus demonstrates clear diligence. Conversely, a taxpayer that makes no choice expresses uncertainty or lack of preference and hence shows simple negligence or plain oversight.

CIR vs. Arturo V. Parcero vs. Primetown Property Group, GR No. 162155 (2007)

The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted return. But how should the two-year prescriptive period be computed?

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I 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. Needless to state, under the Administrative Code of 1987, 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, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Lex posteriori derogat priori.


E. PROCESS FOR CLAIMING TAX REFUND OR CREDIT

For purposes of tax refund, it is necessary that the claim for refund in the BIR (administrative claim) as well as any action or proceeding for tax refund in the CTA (judicial claim) should be both commenced within two (2) years counted from the date of payment of the tax, regardless of any supervening clause.

Taxpayer pays tax liability

Taxpayer files in writing with the CIR a claim for credit or refund within two (2) years after payment of the tax or penalty

If CIR denies claim for refund OR

If the CIR does not act on the claim within the 2-year period

Appeal to the Court of Tax Appeals (CTA) within 30 days from receipt of final decision of CIR, or before the lapse of the 2-year

period in case of CIR’s inaction. OTHERWISE, taxpayer may no longer file a claim before the CTA.

The Party adversely affected by the CTA Division’s decision may file one motion for reconsideration/new trial within 15 days from

receipt of decision. If the MR is denied file a petition for review with the CTA en banc

Appeal to the Supreme Court within 15 days from receipt of the CTA en banc decision under Rule 45 of the Rules of Court

EXAMPLE:

Filed ITR for year 2007 on April 15, 2008 and paid the tax. Taxpayer has until April 15, 2010 to file a claim for refund. Suppose taxpayer filed a claim for tax refund before the CIR within the 2-year period. However, it took the CIR more than 2 years from the date the tax was paid within which to decide the claim for refund.

The CIR’s decision is one of denial of the claim for refund. If the taxpayer appealed to the CTA within the reglementary 30 day period, taxpayer’s action will still not prosper.

Although the taxpayer filed his claim for refund with the CIR within 2 year period, he did not institute his action for recovery within the same period of 2 years in the CTA.

CIR vs. Far Eat Bank & Trust Company, GR No. 173854 (2010)

A taxpayer claiming for a tax credit or refund of creditable withholding tax must comply with the following requisites:

1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax; 2) It must be shown on the return that the income received was declared as part of the gross income; and 3) The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld.

FEBTC failed to prove that the income derived from rentals and sale of real property were included in the gross income as reflected in its return.

To establish the fact of withholding, the Bank submitted Certificates of Creditable Tax Withheld at Source and Monthly Remittance Returns of Income Taxes Withheld, which pertain to rentals and sales of real property, respectively. However, respondent’s 1994 Annual Income Tax Return shows that the gross income was derived solely from sales of services. In fact, the phrase "NOT APPLICABLE" was printed on the schedules pertaining to rent, sale of real property, and trust income. Thus, based on the entries in the return, the income derived from rentals and sales of real property upon which the creditable taxes were withheld were not included in respondent’s gross income as reflected in its return. Since no income was reported, it follows that no tax was withheld. To reiterate, it is incumbent upon the taxpayer to reflect in his return the income upon which any creditable tax is required to be withheld at the source.

Atlas Consolidated Mining vs. CIR, GR No. 145526 (2007)

It has always been the rule that those seeking tax refunds or credits bear the burden of proving the factual basis of their claims and of showing, by words too plain to be mistaken, that the legislature intended to entitle them to such claims.

First, a judicial claim for refund or tax credit in the CTA is by no means an original action, but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim.

Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not have any reason to deny its claims.

Second, cases filed in the CTA are litigated de novo. Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA.

Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim.


F. INTEREST ON TAX REFUNDS

GR:

Government cannot be required to pay interest on taxes refunded to the taxpayer in the absence of a statutory provision clearly or expressly directing or authorizing such payment. (Commissioner vs. Sweeney, GR No. L-12178, August 29, 1959)

EXCEPTIONS:

a. When the CIR acted with patent arbitrariness. Arbitrariness presupposes inexcusable or obstinate disregard of legal provisions. (Commissioner vs. Victorias Milling, GR No. L-19667, Nov. 29, 1966)

b. Under Sec. 79(C)(2) with respect to income taxes withheld on the wages of the employees. Any excess of the taxes withheld over the tax due from the taxpayer shall be returned or credited within three months from the fifteenth (15

th) day

of April. Refunds or credits made after such time shall earn interest at the rate of 6% per annum, starting from the lapse of the three-month period to the date the refund or credit is made.

G. FORFEITURE OF TAX REFUND AND TAX CREDIT

1. Forfeiture of refund in favor of the government when a refund check or warrant remains unclaimed or uncashed within five (5) years from date of mailing or delivery.

2. Forfeiture of Tax Credit – a tax credit certificate which remains unutilized after five (5) years from date of issue, shall be invalid, unless revalidated (Sec. 230, 1997 NIRC).

XVIII. JUDICIAL REMEDIES

A. CIVIL ACTION

1. Appeal to the Court of Tax Appeals (Sec. 228, 1997 NIRC).

2. 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); and

3. Action for damages against a revenue officer by reason of any act done in the performance of official duty (Sec. 227, 1997 NIRC).

B. CRIMINIAL ACTION

1. Filing of criminal complaint against erring BIR officials and employees.

2. Injunction – when the CTA in its opinion, the collection by the BIR may jeopardize taxpayer.

REMEDIES OF THE GOVERNMENT

XIX. KINDS OF REMEDIES

A. Tax Lien B. Compromise and Abatement C. Civil Action D. Criminal Action E. Distraint F. Levy G. Forfeiture H. Suspension of Business Operation in Violation of VAT

Laws I. Additions to the Tax Due J. Others

XX. TAX LIEN

When a taxpayer neglects or refuses to pay his internal revenue tax liability after demand, the amount so demanded shall be a lien in favour of the Government from the time assessment was made by the Commissioner until paid with interest, penalties and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer (Sec. 219, NIRC).

CIR vs. Aichi Forging Company of Asia, GR No. 184823 (2010)

Section 112 (A) of the National Internal Revenue Code (NIRC) is the applicable provision in determining the start of the two-year period for claiming a refund or credit of unutilized input value-added tax (VAT). Sections 204 (C) and 229 of the NIRC are inapplicable as both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes. Thus, the two-year period should be reckoned from the close of the taxable quarter when the sales were made.

Section 112(D) of the National Internal Revenue Code clearly provides that the Commissioner of Internal Revenue (CIR) has “120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit,” within which to grant or deny the claim. However, if after the 120-days period, the CIR fails to act on the application for tax refund or credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the Court of Tax Appeals (CTA within 30 days. In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Taxpayer did not wait for the decision of the CIR or the lapse of the 120-day period. Therefore, the filing of the judicial claim with the CTA was premature.


A tax lien 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.

A. NATURE AND EXTENT

A tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and demandable.

The lien attaches as soon as FAN is issued which is a categorical demand to pay the amount stipulated and the taxpayer refuses to pay the same.

It extends upon all properties of the taxpayer – real, personal tangible, personal intangible properties.

Regardless of ownership or transfer, lien follows the property

Tax lien is superior and is given preference over any other claim of any other creditor, in respect of any and all properties of the insolvent.

B. EFFECTIVITY AGAINST THIRD PERSONS

The lien shall not be valid against any mortgage, purchaser or judgment creditor until notice of such lien shall be filed by the Commissioner in the Office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located (Sec. 219, NIRC).

LIEN DISTRAINT

Directed against the property subject to the tax

Need not be directed against the property subject to tax

Regardless of the owner of the property

Property seized must be owned by the taxpayer

XXI. COMPROMISE AND ABATEMENT

A. DEFINITION OF TERMS

1. Compromise

- A contract whereby the parties, by reciprocal concessions, avoid litigation or put an end to one already commenced (Art. 2028, New Civil Code).

2. Abatement

- The entire tax liability, interest or surcharge of the taxpayer is cancelled

3. Compromise Penalty

- It is an amount of money that the taxpayer pays to compromise a tax violation. This is paid in lieu of criminal prosecution. A taxpayer cannot be compelled to pay a compromise penalty. If he does not want to pay, the CIR must institute a criminal action.

COMPROMISE

Requisites:

1. The taxpayer must have a tax liability.

2. There must be an offer (by the taxpayer of an amount to be paid by the taxpayer)

3. There must be an acceptance (by the Commissioner or taxpayer as the case may be) of the offer in the settlement of the original claim.

Officers authorized to compromise:

a. The Commissioner of Internal Revenue (CIR) with respect to criminal and civil cases arising from violations of the Tax Code [Secs. 7(C) and 204, 1997 NIRC]. This power of the CIR is discretionary and once exercised by him cannot be reviewed or interfered with by the Courts. (Koppel, Philippines vs. Commissioner, GR No. L-1977, September 21, 1950)

b. By the Regional Evaluation Board composed of:

i. the Regional Director as Chairman,

ii. Assistant Regional Director, the heads of the Legal, Assessment and Collection Divisions, and

iii. the Revenue District Officer having jurisdiction over the taxpayer, as members;

• on assessments issued by the regional offices involving basic taxes of P500,000 or less, and minor criminal violations.

Grounds for Compromise:

1. Reasonable doubt as to validity of the claim against the taxpayer exists


2. Financial position of the taxpayer demonstrates a clear inability to pay assessed tax

Reasonable doubt as to validity of the claim against the taxpayer exists

a. The delinquent account or disputed assessment is one resulting from a jeopardy assessment.

b. The assessment seems to be arbitrary in nature, appearing to be based on presumptions, and there is reason to believe that its is lacking in legal and/or factual basis; or

c. The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of assessment or preliminary assessment and there is reason to believe that its is lacking in legal and/or factual basis; or

d. The taxpayer failed to file a request for reinvestigation/reconsideration within 30 days from receipt of final assessment notice and there is reason to believe that its is lacking in legal and/or factual basis; or

e. The taxpayer failed to elevate to the CTA an adverse decision of the Commissioner, or his authorized representative, in some cases, within 30 days from receipt thereof and there is reason to believe that its is lacking in legal and/or factual basis; or

f. The assessment were issued on or after Jan. 1, 1998, where the demand notice allegedly failed to comply with the formalities prescribed under Sec. 228 of the 1997 NIRC; or

g. Assessments made based on the “Best Evidence Obtainable Rule” and there is reason to believe that the same can be disputed by sufficient and competent evidence.

h. The assessment was issued within the prescriptive period for assessment as extended by the taxpayer's execution of Waiver of the Statute of Limitations the validity or authenticity of which is being questioned or at issue and there is strong reason to believe and evidence to prove that it is not authentic. (RR. 30– 2002)

i. The assessment is based on an issue where a court of competent jurisdiction made an adverse decision against the Bureau, but for which the Supreme Court has not decided upon with finality. (RR. 08-2004).

Financial position of the taxpayer demonstrates a clear inability to pay assessed tax [Sec. 204(A), 1997 NIRC). In such case, the taxpayer should waive the confidentiality privilege on bank deposits under RA No. 1405 [Sec. 6(F)(2), NIRC].

Financial Incapacity. — The offer to compromise based on financial incapacity may be accepted upon showing that:

a. The corporation ceased operation or is already dissolved. Provided, that tax liabilities corresponding to the Subscription Receivable or Assets distributed/distributable to the stockholders representing return of capital at the time of cessation of operation or dissolution of business shall not be considered for compromise;

b. The taxpayer, as reflected in its latest Balance Sheet supposed to be filed with the Bureau of Internal Revenue, is suffering from surplus or earnings deficit resulting to impairment in the original capital by at least 50%;

Assets - Liabilities = NET WORTH

Ex.

100M - 50M = 50M

60M Orig. Capital

(10M) Earnings

Not compromisable. Because the earnings deficit which is (10M) does not result to impairment of original capital 60M to the extent of at least 50%.

But if:

100M - 50M = 50M

100M Orig. Capital

(50M) Earnings

Compromisable. Because this time the earnings deficit which is (50M) results to the impairment of the original capital 100M to the extent of at least 50%

c. The taxpayer is suffering from a networth deficit (total liabilities exceed total assets);

Assets - Liabilities = NET WORTH

For this provision to apply, it must result to a NEGATIVE NET WORTH or INSOLVENCY

Ex.

100M - 200M = (100M) Negative Net Worth

d. The taxpayer is a compensation earner with no other source of income and the family’s gross monthly compensation does not exceed (P10,500/month if single; P21,000/month if married),


and that it appears that the taxpayer possesses no other leviable/ distrainable assets, other than his family home;

e. The taxpayer has been granted by the SEC or by any competent tribunal a moratorium or suspension of payments to creditors, or otherwise declared bankrupt or insolvent. (Sec. 3, RR. 07-2001)

Minimum Compromise Rates (MCR) of any tax liability

a. In case of financial incapacity:

MCR = 10% of the basic assessed tax

b. Other cases:

MCR = 40% of the basic assessed tax [Sec. 204(A), 1997 NIRC]

Approval of the compromise by the Evaluation Board is required when

a. the basic tax involved exceeds P1,000,000.00, or

b. the settlement offered is less than the MCR.

NOTE: The MCR may be less than the prescribed rates of 10% or 40%, as the case may be, provided it is approved by the Evaluation Board (composed of the BIR Commissioner and the four BIR Deputy Commissioners).

Cases which may be compromised:

1. Delinquent accounts

2. Cases under administrative protests

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,

GR: Criminal cases may be compromised

EXCEPTIONS:

Those already filed in court;

Those involving tax fraud (absolute prohibition).

If case is still with the prosecutor, as a rule it cannot be compromised unless the prosecutor approves the compromise

6. Cases covered by pre-assessment notices but taxpayer is not agreeable to the findings of the audit office as confirmed by the review office. (Sec.2, Rev. Reg. 7-2001)

Cases which may NOT be compromised:

1. Withholding tax cases;

- Because taxpayer is merely the tax imposed is not the withholding agent’s tax liability. Rather, it is his obligation to remit.

- EXCEPTION: If withholding agent can invoke provision of law that casts doubt on whether or not he is really liable and he has not withheld the tax, he may offer compromise.

- EXCEPTION TO EXCEPTION: If he has already withheld the tax, no longer compromisable.

2. Criminal tax fraud cases whether or not filed in court;

3. Criminal violations already filed in court;

4. Delinquent accounts with duly approved schedule of installment payments;

- The Government already has bested right as to the scheduled 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.

- By giving his conformity to the revised assessment, the taxpayer admits the validity of the assessment and his capacity to pay the same.

- If a revised FAN has been issued but the taxpayer disagrees thereto, the same is still compromisable.

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 (RR. 30–2002);

- If a judgment has become final and executory but on ground of financial incapacity, insolvency, receivership, suspension of payment, etc. (ground is not reasonable doubt), the case is still compromisable.

7. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer. (RR. 30–2002)


Remedies in case the taxpayer refuses to abide by the compromise:

1. Enforce the compromise

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).

ABATEMENT

Grounds for Abatement:

1. The tax or any portion thereof appears to be unjustly or excessively assessed; [Sec. 204(B), 1997 NIRC].

a. When the filing of the return/payment is made at the wrong venue;

b. When the taxpayer’s mistake in payment of his tax is due to erroneous written official advice of a revenue officer;

c. When the taxpayer fails to file the return and pay the tax on time due to substantial losses from prolonged labor dispute, force majeure, legitimate business reverses, provided, however, the abatement shall only cover the surcharge and the compromise penalty and not the interest imposed under Sec. 249 of the Code;

d. When the assessment is brought about or the result of taxpayer’s non-compliance with the law due to a difficult interpretation of said law.

e. When the taxpayer fails to file the return and pay the correct tax on time due to circumstances beyond his control, provided, however, the abatement shall only cover the surcharge and the compromise penalty and not the interest imposed under Sec. 249 of the Code;

f. Late payment of the tax under meritorious circumstances (ex. Failure to beat bank cut-off time, surcharge erroneously imposed, etc.) (Sec. 2, Rev. Reg. 13-2001)

2. The administration and collection costs involved do not justify the collection of the amount due [Sec. 204(B), 1997 NIRC].

a. Abatement of penalties on assessment confirmed by the lower court but appealed by the taxpayer to a higher court

b. Abatement of penalties on withholding tax assessment under meritorious circumstances

c. Abatement of penalties on delayed installment payment under meritorious circumstances

d. Abatement of penalties on assessment reduced after reinvestigation but taxpayer is still contesting reduced assessment; and

e. Such other circumstances which the Commissioner may deem analogous to the enumeration above. (Sec. 3, Rev. Reg. 13-2001)

3. The Commissioner may also, even without a claim therefor, refund or credit any tax where on the face of the return upon which payment was made such payment appears clearly to have been erroneously paid (Sec. 229, 1997 NIRC)).

Distinction between Compromise and Abatement

COMPROMISE ABATEMENT

involves a reduction of the taxpayer’s liability

the entire tax liability, interest, surcharge or penalty of the taxpayer is cancelled

Grounded on: 1. Reasonable doubt as to validity of the claim against the taxpayer exists 2. Financial position of the taxpayer demonstrates a clear inability to pay assessed tax

Grounded on: 1. The tax or any portion thereof appears to be unjustly or excessively assessed; 2. The administration and collection costs involved do not justify the collection of the amount due. 3. Other meritorious cases.

1.

CIR is authorized to compromise or abate taxes. However the power to compromise can be delegated by the CIR if

PNOC vs. CA, GR No. 109976 & 112800 (2005)

PNOC could not apply for a compromise under E.O. No. 44 because its tax liability was not a delinquent account or a disputed assessment as of 31 December 1985.

PNOC's tax liability could not be considered a delinquent account since (1) it was not self-assessed, because the BIR conducted an investigation and assessment of PNOC and PNB after obtaining information regarding the non-withholding of tax from private respondent Savellano; and (2) the demand letter, issued against it on 08 August 1986, could not have been a deficiency assessment that became final and executory by 31 December 1985. The tax liability of PNB as withholding agent also did not qualify for compromise under E.O. No. 44.

The BIR Commissioner's discretionary authority to enter into a compromise agreement is not absolute and the CTA may inquire into allegations of abuse thereof.


(a) the amount of basic taxes does not exceed P500,000 and (b) minor criminal violations.

COMPROMISE PENALTY

Nature of Compromise Penalty

A compromise penalty is a certain amount of money which the taxpayer pays to compromise a tax violation. This is paid in lieu of a criminal prosecution.

The CIR has no power to impose and collect the so-called compromise penalties in the absence of a compromise agreement validly entered into between the taxpayer and the CIR.

Distinction between Compromise and Compromise Penalty

COMPROMISE COMPROMISE PENALTY

an amount of money paid by the taxpayer to settle his civil liability for tax assessed

an amount of money paid by the taxpayer to compromise a tax violation which may be subject of a criminal prosecution

the basis of the amount paid is the basic tax assessed

based on gross sales or receipts during the year or the tax due

minimum amount is limited to the amount prescribed by the Government

the amount set depends on the nature of the tax violation and the minimum amount is generally note less than P 1,000

XXII. CIVIL ACTION

For tax remedy purposes, these are actions instituted by the government to collect internal revenue taxes. It includes filing by the government with the probate court claims against the deceased taxpayer.

A. FEATURES

1. Actions or proceedings instituted in behalf of the Government under the authority of the Tax Code or other law enforced by the CIR shall be brought in the name of the Government of the Philippines and shall be conducted by the legal officers of the BIR;

2. But no civil action for the recovery of taxes or the enforcement of any fine, penalty or forfeiture shall be filed without the approval of the CIR;

3. The filing of a civil case is tantamount to a denial of the request for reinvestigation (remedy is to file with the CTA).

B. TWO WAYS OF ENFORCING CIVIL TAX LIABILITY

(1) By filing a civil case for the collection of a sum of money with the proper court; and

(2) By filing an answer to the petition for review filed by the taxpayer with the CTA.

C. WHERE TO FILE

1. Court of Tax Appeals – where the principal amount of taxes and fees, exclusive of charges and penalties claimed is 1M and above.

2. Regular Courts – where the principal amount of taxes and fees, exclusive of charges and penalties claimed is less than 1M. (Sec. 7, RA No. 9282)

D. WHEN TO FILE

1. The taxpayer fails to file an administrative protest with the CIR within 30 days from receipt of the FAN; or

2. Failure of the taxpayer to appeal the decision to the CTA within 30 days from receipt of the decision; or

3. When the BIR does not rule on the taxpayer’s protest within 180 days and the taxpayer fails to file an appeal within 30 days from the expiration of the 180-day period.

E. WHEN THE CIR IS NOT REQUIRED TO RULE ON A PENDING PROTEST BEFORE FILING A COLLECTION CASE

Republic vs. Liam Tian Teng Sons, Inc. GR No. L-21731 (1966)

Nowhere in the Tax Code is the CIR required to rule first on a taxpayer's

request for reinvestigation before he can go to court for the purpose of

collecting the tax assessed.

Section 305 of the same Code withholds from all courts, except the CTA

under Section 11 of Republic Act 1125, the authority to restrain the

collection of any national internal-revenue tax, fee or charge, thereby

indicating the legislative policy to allow the CIR much latitude in the

speedy and prompt collection of taxes.

The CIR is authorized to collect delinquent internal revenue taxes either

by distraint and levy or by judicial action or both simultaneously. The only

requisite before he can collect the tax is that he must first assess the

same within the time fixed by law. And in the case of a false or

fraudulent return with intent to evade the tax or of a failure to file a

return, a proceeding in court for the collection of such tax may be begun

without assessment.


XXIII. CRIMINAL ACTION

A. FEATURES

1. Actions or proceedings instituted in behalf of the Government under the authority of the Tax Code or other law enforced by the BIR shall be brought in the name of the Government of the Philippines and shall be conducted by the legal officers of the BIR;

2. But no criminal action for the recovery of taxes or the enforcement of any fine, penalty or forfeiture shall be filed without the approval of the CIR;

3. The acquittal of the taxpayer in a criminal action does not necessarily result in the exoneration of the said taxpayer from his civil liability to pay taxes;

4. Subsidiary imprisonment in cases of non-payment of the fine due to taxpayer’s insolvency BUT not for the failure to pay the tax due.

B. PURPOSE

Although tax laws are civil and not penal in nature, the tax code provides for criminal violations for the following purpose/s:

Primary: To enforce the statutory penalties as found in the tax code.

Secondary: To penalize the taxpayer for his non-compliance with the tax laws; To collect the tax liability.

C. WHERE TO FILE

1. Court of Tax Appeals – in cases of criminal offenses of the Tax Code or other tax laws where the principal amount of taxes and fees, exclusive of other charges and penalties is 1M and above.

2. Regular Courts – if the principal amount is less than 1M.

3. RTC – in cases where the tax liability cannot be measured or there is no pecuniary estimation of the liability.

D. WHEN TO FILE

- All violations of any [penal] provision of the Tax Code shall prescribe after five (5) years.

- Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.

Note: When the civil action arising out of a tax delinquency is extinguished by prescription, considering that under the law, the Government has only five years from date of assessment of tax within which to collect the tax, it is still possible for such tax to be collected by criminal action inasmuch as actions of this kind prescribe only after the lapse of five years counted from the discovery of the crime and the institution of proceedings for its investigation and punishment.

E. CIVIL LIABILITY IN CRIMINAL CASES

- If corporation, partnership or any other entity that is not a natural person, liability shall be imposed on the persons responsible.

- In case the taxpayer is acquitted in a criminal action, it does not necessarily result to the exoneration of the taxpayer from his liability to pay taxes.

Lucas G. Adamson vs. CA GR No. 120935 & 124557 (2009)

When fraudulent tax returns are involved as in the cases at bar, a

proceeding in court after the collection of such tax may be begun

without assessment.

Before an assessment is issued, there is, by practice, a pre-assessment

notice sent to the taxpayer. In contrast, the criminal charge is filed

directly with the DOJ. Thereafter, the taxpayer is notified that a criminal

case had been filed against him, not that the commissioner has issued an

assessment. It must be stressed that a criminal complaint is instituted

not to demand payment, but to penalize the taxpayer for violation of the

Tax Code.

Here, upon investigation of the examiners of the BIR, there was a

preliminary finding of gross discrepancy in the computation of the capital

gains taxes due from the sale of two lots of AAI shares, first to APAC and

then to APAC Philippines, Limited. The examiners also found that the

VAT had not been paid for VAT-liable sale of services for the third and

fourth quarters of 1990. Arguably, the gross disparity in the taxes due

and the amounts actually declared by the private respondents

constitutes badges of fraud.

In Ungab v. Cusi, the SC ruled:

An assessment of a deficiency is not necessary to a criminal

prosecution for willful attempt to defeat and evade the

income tax. A crime is complete when the violator has

knowingly and willfully filed a fraudulent return, with intent

to evade and defeat the tax. The perpetration of the crime is

grounded upon knowledge on the part of the taxpayer that

he has made an inaccurate return, and the government's

failure to discover the error and promptly to assess has no

connections with the commission of the crime.


- The subsequent payment of the civil liability by payment or prescription does not extinguish the taxpayer’s criminal liability.

F. THE JUDGMENT SHALL NOT ONLY IMPOSE THE PENALTY BUT SHALL ALSO ORDER THE PAYMENT OF THE TAXES SUBJECT OF THE CRIMINAL CASE AS FINALLY DECIDED BY THE CIR (Sec. 205, NIRC)

- Two fold purpose of the criminal case.

XXIV. DISTRAINT

A. DEFINITION

Distraint is a remedy whereby the collection of delinquent taxes is enforced on the goods, chattels or effects and other personal property of whatever character of the taxpayer, including stocks and other securities, debts, credits, bank accounts and interests in and rights to personal property (Sec. 205[a], NIRC).

B. FEATURES

1. Summary administrative enforcement remedy enforced on personal property;

2. Amount of tax involved must exceed P100;

3. No forfeiture is allowed to the government;

4. No right of redemption is allowed to the taxpayer;

5. The remedy may be repeated if necessary until the full amount of tax delinquency due and all expenses is/are collected.

C. KINDS OF DISTRAINT (and its requisites)

1. ACTUAL DISTRAINT

- Resorted to when at the time required for payment, a person fails to pay his delinquent tax obligation (Sec. 207[A], NIRC). Distraint consists in the actual seizure and taking possession of personal property of the taxpayer.

- Requisites:

a. There is delinquency, and delinquency can only happen if there is a demand for payment;

b. There is failure to pay the tax on time; and

c. The distraint must be made within five (5) years from FAN.

2. CONSTRUCTIVE DISTRAINT

- Issued where no actual tax delinquency of the taxpayer is necessary before the same is resorted to by the Government.

- The remedy of constructive distraint may be availed of in the following instances:

a. Taxpayer is delinquent

b. The taxpayer is retiring from any business subject to tax;

c. He intends to leave the Philippines;

d. He removes his property therefrom;

e. Taxpayer hides or conceals his property;

f. He performs any act tending to obstruct the proceedings for collecting the tax due or which may be due from him (Sec. 206, NIRC)

ACTUAL DISTRAINT CONSTRUCTIVE DISTRAINT

Made only on the property of a delinquent taxpayer

Made on the property of any taxpayer, whether delinquent or not

There is taking of possession The taxpayer is merely prohibited from disposing of his property

Effected by leaving a list of distrained property or by service of a warrant of distraint or garnishment

Effected by requiring the taxpayer to sign a receipt of the property or by the revenue officer preparing and leaving a list of such property

An immediate step for collection of taxes

Not necessarily so

Both

Are summary remedies for the collection of taxes;

NOTE: Refer only to personal property; and cannot be availed of where the amount of the tax involved is not more than P100

D. PROCEDURE IN EFFECTING DISTRAINT

`

Either by the CIR or his duly authorized representative; or by the Revenue District Officer

Commencement of distraint proceedings


With respect to:

1. Personal property –

1. upon the owner of the goods, chattels, or other personal property; or

2. upon the person from whose possession such properties are taken.

2. Stocks and other securities

(a) upon the taxpayer; and

(b) upon the president, manager, treasurer or other responsible officer of the corporation, company or association which issued the said stock and securities.

3. Bank accounts shall be garnished by serving a warrant of distraint –

(a) upon the taxpayer; and

(b) upon the president, manager, treasurer, or other responsible officer of the bank.

Note: Upon receipt of the warrant of distraint, the bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the government.

4. Debts and credits –

(a) persons owing or having in his possession the debts;

(b) or under his control such credits; or

(c) upon his agent.

Note: The warrant of distraint shall be sufficient authority to the person owing the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of such debts or credits.

Notice specifying the time and place of sale and the articles distrained. The posting shall be made in not less than two (2) public places in the city or municipality where the distraint is made. The time shall not be less than 20 days after notice to the owner or possessor of the property. One place for posting of such notice is at the Office of the Mayor of such city or municipality.

Sale must be made at a public auction to the highest bidder.

Any residue over and above what is required to pay the entire claim, including expenses shall be returned to the owner of the property sold.

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).

The Government shall purchase the property in the amount equal to the tax liability in case:

The amount of bid is not equal to the amount of tax;

The amount of bid is very much less than the FMV of the articles offered for sale; or

There is no bidder.

Note: A warrant of distraint may be issued during the pendency of a protest to a FAN. The issuance is tantamount to a denial of protest in which case the taxpayer may appeal to the CTA within thirty (30) days from receiving the warrant.

PROCEDURE FOR CONSTSTRUCTIVE DISTRAINT

CIR shall require the taxpayer or any person having possession or control of such property to

(a) sign a receipt covering the property distrained and

(b) obligate himself to

1. preserve the same intact and unaltered and

2. not to dispose of the same in any manner whatsoever without the express authority of the Commissioner of Internal Revenue.

Service of Warrant of Distraint (Sec. 208)

Taxpayer must sign receipt

Posting of Notice (Sec. 209, NIRC)

Sale of Property Distrained

Taxpayer’s obligation to preserve


If the taxpayer or person in possession of the property refuses or fails to sign the receipt referred to, the revenue officer effecting the constructive distraint shall (a) proceed to prepare a list of such property and (b) in the presence of two (2) witnesses leave a copy thereof in the premises where the property distrained is located, after which the said property shall be deemed to have been placed under constructive distraint.

XXV. LEVY

A. DEFINITION

Levy refers to the act of seizure of real property in order to enforce the payment of taxes. The property may be offered in a public sale, if after seizure, the taxes are not voluntarily paid.

B. FEATURES

1. Summary administrative enforcement remedy enforced on real property

2. Amount of tax involved must exceed P100

3. Forfeiture is allowed to the Government

4. Right of redemption is allowed to the taxpayer

5. May be made before, simultaneously or after distraint

6. The remedy may be repeated if necessary until the full amount of tax delinquency due and all expenses is/are collected.

C. PROCEDURE IN EFFECTING A LEVY

Preparation of a duly authenticated certificate containing:

i. description of the property levied;

ii. name of the taxpayer, and

iii. the amounts of tax and penalty due from him. This certificate shall operate with the force of a legal execution throughout the Philippines (Sec. 207B, 1997 NIRC).

Service of written notice to:

a. the delinquent taxpayer; or

b. if he is absent from the Philippines, to his agent or manager of the business in respect to which the liability arose; or

c. to the occupant of the property.

d. the proper Register of Deeds shall also be notified of the levy (Sec. 207B, 1997 NIRC).

The advertisement shall contain:

1. the amount of tax and penalties due;

2. name of the taxpayer against whom taxes are levied;

3. short description the property to be sold.

The advertisement shall be made within 20 days after the levy, and the same shall be for a period of at least 30 days. It shall be effectuated by:

a. posting a notice at the main entrance of the municipal building or city hall and in a public and conspicuous place in the barrio or district in which the real property lies; and

b. by publication once a week for 3 weeks in a newspaper of general circulation in the municipality or city where the property is located (Sec. 213, CTRP).

At any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes, penalties and interest.

Prepare Certificate of Levy

Advertisement of the Time and Place of

Sale

Remedy when taxpayer didn’t sign

receipt Service of Notice

Sale


In case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the property.

D. REDEMPTION OF THE PROPERTY SOLD

Within 1 year from the date of sale, the property may be redeemed by the delinquent taxpayer or anyone from him, upon payment of the taxes, penalties and interest thereon from the date of delinquency to the date of sale, together with interest on purchase price at 15% per annum from the date of sale to the date of redemption. (Sec. 214, NIRC).

DISTRAINT VS. LEVY

DISTRAINT LEVY

Refers to personal property

Refers to real property

Forfeiture by the government is not provided

Forfeiture is authorized

The taxpayer is not given the right of redemption with respect to distrained personal property.

The right of redemption is granted in case of real property levied upon and sold, or forfeited to the government.

Both Are summary remedies for the collection of taxes; and

Cannot be availed of where the amount of the tax involved is not more than P100

XXVI. FORFEITURE

A. DEFINITION

Forfeiture is the divestiture of property without compensation, in consequence of a default or offense.

B. PROPERTY SUBJECT OF FORFEITURE

1. Real Property

2. Personal Property

Articles or properties or any production materials used in the unlicensed production of exciseable articles;

Exciseable articles which have been paid of excise taxes and yet still retained in the production or warehouse area;

Those which have not passed for customs the proper procedure before claiming the property or goods imported.

C. MANNER OF ENFORCEMENT

a. In case of personal property – The forfeiture of chattels and removable fixtures of any sort is enforced by seizure and sale or destruction of the specific forfeited property.

b. In case of real property – The forfeiture of real property is enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may require.

c. In case of distilled spirits, liquors, cigars, cigarettes manufactured, products of tobacco and apparatus used for their production – Upon forfeiture, may be destroyed by order of the Commissioner where the sale may be injurious to public health or prejudicial to law enforcement.

d. Other articles subject to excise tax which have been manufactured or removed in violation of the Code, dies for printing or making fake revenue stamps and labels – Upon forfeiture may be sold or destroyed at the discretion of the Commissioner. Forfeited property shall not be destroyed until at least 20 days from seizure.

D. EFFECT OF FORFEITURE

The effect is to transfer the title to the specific thing from the owner to the government. All the proceeds in case of a sale go to the coffers of the government. In seizure for the enforcement of a tax lien, the residue, after deducting the tax liability and expenses

CIR vs. UCPB, GR No. 179063 (2009)

For purposes of reckoning the one-year redemption period in the case of individual mortgagors, or the three-month redemption period for juridical persons/mortgagors, the same shall be reckoned from the date of the confirmation of the auction sale which is the date when the certificate of sale is issued.

The CIR argues that he has the more reasonable position: the redemption period should be reckoned from the date of the auction sale for; otherwise, the taxing authority would be left at the mercy of the executive judge who may unnecessarily delay the approval of the certificate of sale and thus prevent the early payment of taxes. But the Supreme Court had occasion under its resolution in Administrative Matter 99-10-05-0 to rule that the certificate of sale shall issue only upon approval of the executive judge who must, in the interest of fairness, first determine that the requirements for extrajudicial foreclosures have been strictly followed

Here, the executive judge approved the issuance of the certificate of sale to UCPB on March 1, 2002. Consequently, the three-month redemption period ended only on June 1, 2002. Only on this date then did the deadline for payment of CWT and DST on the extrajudicial foreclosure sale become due.


will go to the taxpayer (Bank of the Phil. Island vs. Trinidad, GR No. 16014, October 4, 1941).

XXVII. SUSPENSION OF BUSINESS OPERATIONS IN VIOLATION OF VAT LAWS (Sec. 115, NIRC)

A business may be temporarily suspended for a period of not less than 5 days for any of the following violations:

1. Of a VAT-registered person –

a. Failure to issue receipts or invoices;

b. Failure to file a VAT return;

c. Understatement of taxable sales or receipts by 30% or more of his correct taxable sales or receipts for the taxable quarter.

2. Failure of any person to register as required under the Tax Code

XXVIII. ADDITIONS TO THE TAX DUE (Sec. 247-252, NIRC)

These are increments to the basic tax incident due to the taxpayer’s non-compliance with certain legal requirements.

A. KINDS OF ADDITIONS TO THE TAX

1. CIVIL PENALTY OR SURCHARGE

The payment of the surcharge is mandatory and the CIR is not vested with any authority to waive or dispense with the collection thereof.

25% Civil Penalty or Surcharge

a. Failure to file any return and pay the tax due thereon; or

b. filing a return with an internal revenue officer other than those with whom the return is required to be filed; or

c. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or

d. Failure to pay the full or part of the amount of tax shown on any return 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)

50% Civil Penalty or Surcharge

The 50% surcharge is not a criminal penalty but a civil or administrative sanction provided primarily as a safeguard for the protection of the State revenue and to reimburse the Government for the heavy expense of investigation and the loss resulting from the taxpayer’s fraud (Castro vs. CIR, L-12174, Apr. 26, 1962)

a. In case of willful neglect to file the return within the period prescribed by the Code, or

will not apply in case a taxpayer, without notice from the Commissioner, or his duly authorized representative, voluntarily files the said return (only 25% shall be imposed)

50% surcharge shall be imposed in case the taxpayer files the return only after prior notice in writing from the Commissioner or his duly authorized representative (Sec. 4.2, Rev. Reg. 12-99)

b. in case a false or fraudulent return is willfully made

Prima Facie Evidence

substantial underdeclaration (exceeding 30% of that declared) of taxable sales, receipts or income,

or a substantial overstatement (exceeding 30% of actual deductions) of deductions (Sec. 248)

2. 20% INTEREST (per annum)

The interest shall be computed only on the basic deficiency tax (surcharge is not included in the computation).

a. Deficiency Interest

Any deficiency in the tax due shall be subject to the interest of 20% per annum which shall be assessed and collected from the date prescribed for its payment until the full payment thereof (Sec. 249[B], NIRC).

b. Delinquency Interest – In case of failure to pay:

The amount of the tax due on any return required to be filed; or

The amount of the tax due for which no return is required; or


A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the CIR (Sec. 249[C], NIRC).

c. Interest of Extended Payment – An interest of 20% p.a. shall be assessed and collected in the following cases:

When a taxpayer elects to pay the tax on installment but fails to pay the tax or any instalment thereof on or before the date prescribed for its payment;

Where the CIR has authorized an extension of time within which to pay a tax or a deficiency tax or any part thereof (Sec. 249[D], NIRC).

3. COMPROMISE PENALTY

4. OTHER CIVIL PENALTIES AND ADMINISTRATIVE FINES

The Government can impose administrative fines and penalties for specific and different violations.

Example of violations:

Failure to file certain information returns (Sec. 250, NIRC)

Failure of a Withholding Agent to collect and remit tax (Sec. 251, NIRC).

Failure of a Withholding Agent to refund excess withholding tax (Sec. 252, NIRC).

Failure to register on time.

Failure to file an ITR during an income tax holiday (liable for penalties but not for surcharge or interest because there is no basis for tax liability; taxpayer is on income tax holiday)

In the foregoing examples, the erring taxpayer will be subjected to fines or penalties but the penalties are not increments to the basic tax due.

B. KINDS OF NON-COMPLIANCE WHICH WILL ENTAIL INCREMENTS TO THE BASIC TAX DUE

1. Refusal to pay taxes

2. Failure to pay the full amount of taxes

3. Failure to pay taxes on time

4. Filing a return in the wrong venue

5. Violations of taxing provisions

6. Others

XXIX. OTHER MATTERS

A. CRIMES AND OFFENSES

Should the Government decide to file a criminal case for violation of the tax code, it can be against:

1. The Principal – Any person convicted of a crime penalized by the tax code;

2. Any person who wilfully aids or abets in the commission of a crime penalized in the tax code;

3. Any person who causes the commission of any such offense by another.

B. PRESCRIPTION

Violations of the Code shall prescribe after five (5) years, which shall run from

the commission or violation of the law or if the same is not known at the time from discovery thereof AND

the institution of judicial proceedings for its investigation and punishment.

It is as if it is imprescriptible because:

- The Government may allege the violation as a later discovery by the internal revenue officers; or

- It would depend on the institution as well of the judicial proceedings

EXAMPLE:

The Government denies knowledge of a criminal offense committed by a certain taxpayer. It alleges that it has only recently discovered the crim. So that if the crime was discovered Jan. 2, 2012 but no judicial proceedings have been instituted, the 5 year prescriptive period would not start to run yet.

Note: For the prescriptive period to commence, there must be commission or discovery of that commission AND the institution of judicial proceedings.

C. INFORMER’S REWARD

Requisites:


1. Person is not an internal revenue official or employee, or other public official or employee, or his relative within the 6

th degree of

consanguinity;

- Whether you have a relative who is an IRO but not under the same tax jurisdiction as you (i.e., you’re from Cebu, your relative is an officer in Manila), the law does not distinguish, you are still disqualified to receive the reward.

- All public officials who may have acquired information in the course of duty or service, whether they have retired or are still in service, can be an informant but they are not qualified to receive the reward.

2. Voluntarily gives definite and sworn information:

Not yet in the possession of BIR;

Leading to discovery of fraud;

Resulting in:

- The recovery of revenues, surcharges and fees; and/or

- Conviction of the guilty party

Not refer to a case already pending or previously investigated or examined by the CIR or his agents or the SOF or his agents.

Monetary Award For:

A. For violations of the NIRC, a reward of 10% of the revenues, surcharges, or fees recovered and/or fine or penalty imposed and collected or P 1 M per case, whichever is lower shall be given to:

1. any person who voluntarily gives definite and sworn information not yet in the possession of the BIR leading to the discovery of fraud upon the Internal Revenue Laws and/or any violations thereof

2. an informer where the offender has offered to compromise the violation of law committed by him and his offer has been accepted and collected by the CIR .

B. For the discovery and seizure of smuggled goods

- a reward of 10% of the FMV of the smuggled and confiscated goods or P 1 M per case, whichever is lower, shall be given to persons instrumental in the discovery and seizure of such smuggled goods.

Taxability of the Reward:

The cash rewards of informers shall be subject to income tax, collected as a final withholding tax, at a rate of ten percent (10%).


Flowchart: Procedures for Distraint and Levy-NIRC

START RCO - Revenue Collection Officer RDO - Revenue District officer RRD - Revenue Regional Director LGU- Local Government Unit

Commissioner seizes sufficient personal property to satisfy the tax, charge & expenses of seizure (Sec. 207 (A))

Delinquent tax

more than 1M? Yes Person owing any delinquent tax to fails to pay w/in the time required

RDO seizes sufficient personal property to satisfy the tax, charges & expenses of seizure (Sec. 207 (A))

No Property may be resold and the net proceeds shall be remitted to the National Treasury as internal revenue. (Sec. 212)

RDO posts notice in at least 2 public places in the municipality/city where the distraint is made. One place of posting must be at the mayor’s office. Time of sale shall not be less than 20 days after the notice (Sec. 209)

Distraining Officer accounts for the goods distrained (Sec. 208)

Goods shall be restored to owner, if charges are paid (Sec. 210)

Officer conducts public auction

Bid less than amount of tax/ FMV of goods distrained?

Commissioner may purchase property for the National Government (Sec. 212)

Yes

No, bid just right

Officer sells the goods to the highest bidder for cash or with theCommissioner’s approval, through commodity/ stock exchanges. (Sec. 209)

Excess of proceeds over the entire claim, shall be returned to the owner. No charge shall be imposed for the services of the officer (Sec. 209)

W/in 2 days after the sale, officer shall report to the Commissioner. (Sec. 211)

W/in 5 days after sale, distraining officer shall enter return of proceedings in the records of RCO, RDO and RRD (Sec. 213)

Real property may be levied on before, simultaneously, or after the distraint of personal property (207 (B))

Internalrevenueofficer, designated by the Commissioner, shall prepare a certificate with the force of a nationwide legal execution (Sec. 207 B)

Levy shall be affected by writing upon said certificate a description of the property. Notice of the levy shall be served upon the Register of Deeds of LGU where the property is located and upon the owner (Sec. 207 B)

Sale shall be held at the main entrance of the municipal/city hall, or on the premises of the levied property. (Sec. 213)

W/n 20 days after levy, officer shall post notice at the main entrance of the municipal/city hall & in public place in the barrio/district where the real estate lies for at least 30 days by AND publish it once a week for 3 weeks. Owner may prevent sale by paying all charges (Sec. 213)

W/n 10 days after receipt of the warrant, levying officer shall report to the Commissioner who shall have the authority to lift the warrant of levy (Sec. 207 B)

W/n 1 year from forfeiture, the taxpayer, may redeem said property by paying full amount of the taxes and charges (Sec. 215)

W/n 2 days, he shall make a return of the forfeiture. Register of Deeds, upon registration of forfeiture shall transfer title to the Government w/o court order. (Sec. 215)

Officer conducting the sale shall forfeit the property to the Government (Sec. 215)

Yes No bidder or highest bid insufficient?

No, bid ok

Excess of proceeds of the sale over claim and cost of sale shall be turned over to the owner (Sec. 213)

W/n 5 days after the sale, levying officer shall enter return of the proceedings upon the records of the RCO, RDO and RRD (Sec. 213)

W/n 1 year from sale, the owner may redeem, by paying to the RDO the amount of the taxes, penalties, and interest thereon from the date of delinquency to the date of sale, and 15% per annum interest on purchase price from the date of purchase to the date of redemption. (Sec. 214)

The Commissioner may, after 20 days notice, sell property at public auction or at private sale with approval of the SoF. Proceedsshallbe deposited with the National Treasury (Sec. 216) Owner shall not be

deprivedofthe possession and shall be entitled to the fruits until 1 year expires (Sec. 214)

Levy and distraint may be repeated until the full amount due, and all expenses are collected. (Sec. 217)


COURT OF TAX APPEALS

I. APPLICABLE LAW

A. REPUBLIC ACT NO. 1125

The Law Creating the Court of Tax Appeals

B. REPUBLIC ACT NO. 9282

An Act Expanding the Jurisdiction of the Court of Tax Appeals, Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership

C. REPUBLIC ACT NO. 9503

An Act Enlarging the Organizational Structure of the Court of Tax Appeals

II. REPUBLIC ACT NO. 1125

A. CREATION OF THE CTA

1. To have a centralized body well-versed in tax matters, a regular court forming part of the judicial system which would exclusively hear and determine tax cases;

2. To prevent delay in their disposition in view of the backlog of civil and criminal cases in the dockets of the regular courts.

B. NATURE OF THE CTA

The CTA is a judicial (not merely an administrative) body.

It is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction.

It is not strictly governed by the technical rules of evidence.

III. REPUBLIC ACT NOs. 9282 & 9503

A. THE COURT OF TAX APPEALS AND ITS JUSTICES

1. Same level as the Court of Appeals

With the passage of RA 9282, decisions of the CTA are no longer appealable to the CA.

Under the modified appeal procedure, the decision of the CTA division may be appealed to the CTA en banc.

2. Possess all the inherent powers of a Court of Justice

The CTA shall have jurisdiction over both the civil and criminal aspect of a tax case.

3. Consists of 1 Presiding Justice and 8 Associate Justices who shall hold office during good behaviour until they reach the age of 70 or otherwise become incapacitated to discharge the duties of their office unless sooner removed.

4. Disqualifications

a. No justice or other officer or employee of the CTA shall intervene, directly or indirectly, in the management and control of any private enterprise which in any way may be affected by the functions of the Court.

b. Justices shall be disqualified from sitting in any case on the same grounds under Rule 137, ROC.

c. No person who has once served in the CTA in a permanent capacity shall be qualified to practice as counsel before the court for a period of 1 year from his retirement or resignation.

5. Place of Office: Manila

B. HEARING THE CASES

En Banc

Quorum: 5 justices

Decision or resolution

- Affirmative vote of majority of justices present in case of simple decisions, not involving reversal or modification of previously decided cases.

- Affirmative vote of 5 members for the reversal or modification of an existing decision.

TFS, Inc. vs. CIR, GR No. 166829 (2010)

It is settled that an appeal must be perfected within the reglementary

period provided by law; otherwise, the decision becomes final and

executory. However, as in all cases, there are exceptions to the strict

application of the rules for perfecting an appeal.

The SC continued that while “ x x x petitioner’s excuse of inadvertence or

honest oversight of counsel deserves scant consideration x x x strong

compelling reasons such as serving the ends of justice and preventing a

grave miscarriage may nevertheless warrant the suspension of the rules.”


In 3 Divisions (each consisting 3 justices)

Quorum: 2 justices

Decision or resolution:

- Affirmative votes of 2 members

IV. JURISDICTION OF THE CTA

A. EXCLUSIVE APPELLATE JURISDICTION (to review by appeal)

1. Decisions of the CIR in cases involving

Disputed assessment

Refunds of internal revenue taxes, fees or other charges, penalties in relation thereto

Other matters arising under the Tax Code and other laws administered by the BIR

NCH Philippines vs. CIR, CTA No. 6840 (2007)

This Court has acquired exclusive appellate jurisdiction over the case when petitioner appealed on December 23, 2003 with this Court, respondent's said Decision on Disputed Assessment. Thereafter, respondent lost jurisdiction over the assessed deficiencies covered by said Decision in view of the fact that petitioner has already perfected its appeal. The respondent has no more authority to issue the Amendment to the Formal Letter of Demand on February 16, 2004 covering the same taxable year and the same type of taxes. Hence, said Amendment to the Formal Letter of Demand is null and void and is no longer binding to petitioner, as petitioner has already appealed said Decision on Disputed Assessment of respondent to this Court.

Vda. De San Agustin vs. CIR, GR No. 138485 (2002)

Failure to first file a written claim for refund, not fatal to appeal.

The present action involves a disputed assessment'; because from the time petitioner received the assessment showing deficiency estate taxes, penalties and surcharge, the executor already protested and refused to pay the same, questioning the correctness and legality of such assessments; and that the petitioner paid the disputed assessments under protest before filing his petition for review with the Court a quo. To hold that the taxpayer has now lost the right to appeal from the ruling on, the disputed assessment but must prosecute his appeal under section 306 of the Tax Code, which requires a taxpayer to file a claim for refund of the taxes paid as a condition precedent to his right to appeal, would in effect require of him to go through a useless and needless ceremony that would only delay the disposition of the case, for the CIR would certainly disallow the claim for refund in the same way as he disallowed the protest against the assessment. The law, should not be interpreted as to result in absurdities.

CIR vs. Union Shipping Corp., GR No. 66160 (1990)

The Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment.

There appears to be no dispute that petitioner did not rule on private respondent's motion for reconsideration, private respondent was left in the dark as to which action of the Commissioner is the decision appealable to the Court of Tax Appeals. Had he categorically stated that he denies private respondent's motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided.

Under the circumstances, the Commissioner of Internal Revenue, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when private respondent received the summons on the civil suit for collection of deficiency income on December 28, 1978 that the period to appeal commenced to run.

CIR vs. Isabela Cultural Corp., GR No. 135210 (2000)

The Final Notice Before Seizure cannot but be considered as the commissioner's decision disposing of the request for reconsideration filed by respondent, who received no other response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the CIR's final act regarding the request for reconsideration. The very title expressly indicated that it was a final notice prior to seizure of property. The letter itself clearly stated that respondent was being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be subjected to distraint and levy.

CIR vs. Hambrecht & Quist Phils., GR No. 169225 (2010)

The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or refunds.

The CTA law clearly bestows jurisdiction to the CTA even on “other matters arising under the National Internal Revenue Code”. Thus, the issue of whether the right of the CIR to collect has prescribed, collection being one of the duties of the BIR, is considered covered by the term “other matters”. The fact that assessment has become final for failure to protest only means that the validity or correctness of the assessment may no longer be questioned on appeal. However, this issue is entirely distinct from the issue of whether the right to collect has in fact prescribed.

The Court ruled that the right to collect has indeed prescribed since there was no proof that the request for reinvestigation was in fact granted/acted upon by the CIR. Thus, the period to collect was never suspended.


2. Inaction by the CIR in cases involving

Disputed assessments

- The CIR has 180 days to decide on disputed assessments. The CTA acquires jurisdiction if within the 30 day period after the inaction of the CIR, the case is elevated to it for review.

Refunds of internal revenue taxes, fees or other charges, penalties in relation thereto

- When the 2 year period for the filing for a claim for refund is about to lapse and there is no decision coming from the CIR, the same may be elevated to the CTA for review.

Other matters arising under the Tax Code and other laws administered by the BIR

3. Decisions, orders or resolutions of the RTC in local tax cases originally decided or resolved by them in the exercise of their original jurisdiction

4. Decisions of the Commissioner on Customs in cases involving

Liability for customs duties, fees, or other money charges

Seizure

Detention

Release of property affected

Fines, forfeitures or other penalties in relation thereto

Other matters arising under the Customs Law or other laws administered by the BOC

5. Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals

6. Decisions of the SOF on customs cases elevated to him automatically for review from decisions of the Commissioner on Customs which are adverse to the Government

- Normally, decisions of the COC are elevated directly to the CTA. However, the SOF may intervene in special cases where the COC will decide in favour of the taxpayer, hence, adverse to the

government. In this case, the decisions of the SOF on such matters are thereafter cognizable under the CTA.

7. Decisions of the Secretary of Trade and Industry in the case of non-agricultural product, commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties under the Tariff and Customs Code, and safeguard measures under RA No. 8800, where either party may appeal the decision to impose or not to impose said duties

B. JURISDICTION OVER THE FOLLOWING CRIMINAL CASES (Government may directly file said cases with the CTA covering amounts within its exclusive and original jurisdiction)

1. Exclusive ORIGINAL Jurisdiction over all criminal offenses arising from:

Violations of the Tax Code, Tariff and Customs Code and Other laws administered by the BIR or the BOC, where the principal amount of taxes and fees, exclusive of charges and penalties claimed is 1M and above.

2. Exclusive APPELLATE jurisdiction of:

Violations of the NIRC, Tariff and Customs Code and Other laws administered by the BIR and the BOC originally decided by the regular court where the principal amount of taxes and fees is less than 1M or no specified amount is claimed.

Judgments, resolutions or orders of the RTC in tax cases originally decided by them.

Judgment, resolutions or orders of the RTC in the exercise of their appellate jurisdiction over tax cases originally decided by the MeTC, MTC and MCTC via a petition for review.

C. JURISDICTION OVER THE FOLLOWING TAX COLLECTION CASES

1. Exclusive Original Jurisdiction in tax collection cases involving final and executory assessments where the principal amount of taxes, fees, exclusive of charges and penalties claimed is 1M and above.

2. Exclusive Appellate Jurisdiction in tax collection cases:

Judgments, resolutions or orders of the RTC originally decided by them, via an appeal.


Judgments, resolutions or orders of the RTC in the exercise of its appellate jurisdiction in tax collection cases originally decided by the MeTC, MTC, and MCTC, via a petition for review.

V. INJUNCTION IN TAX COLLECTION

GR:

No court shall have the authority to grant an injunction to restrain the collection of any internal revenue tax, fee or charge imposed by the Tax Code.

EXCEPTION:

The CTA may suspend or restrain the collection of the tax when in its opinion, the collection of the tax may jeopardize the interest of the Government and/or the taxpayer.

VI. APPEAL

A. APPEALABLE DECISION

1. The final action taken by the CIR or his deputies with respect to the taxpayer’s liability;

2. The letter of denial where the CIR no only demanded payment of the amount assessed but wherein he also gave the warning that in the event the taxpayer failed to pay the same, the CIR would be constrained to enforce the collection thereof by means of remedies prescribed by law;

3. The filing of a judicial action for collection during the pendency of an administrative protest, constitutes a denial of the protest;

4. Inaction by the CIR of a protest or claim for refund/credit.

B. WHO MAY APPEAL; PERIOD TO FILE AN APPEAL

Any party (person, association or corporation) adversely affected by a decision, ruling or inaction of the CIR, COC, SOF, Secretary of Trade and Industry, Secretary of Agriculture, CBAA or the RTC may file an appeal with the CTA:

(a) Within thirty (30) days from the receipt of such decision or ruling; OR

(b) After the expiration of the period fixed by law, in which case the inaction shall be deemed a denial

C. MODE OF AN APPEAL

GR:

Appeal may be made by filing a Petition for Review under a procedure analogous to that under Rule 42 of the ROC which shall be heard by the CTA division.

A party adversely affected by the decision, order or resolution of the CTA division may file a motion for reconsideration or new trial before the same division.

EXCEPTION:

Appeal with respect to the decision and rulings of the CBAA and the RTC in the exercise of its appellate jurisdiction, may be made by filing a Petition for Review under a procedure analogous to that under Rule 43 of the ROC which shall be heard by the CTA en banc.

A party adversely affected by a resolution of a CTA division on a motion for reconsideration or new trial may file a petition for review with the CTA en banc.

Note:

A decision of the CBAA is ALWAYS appealable to the CTA en banc.

But a decision of the RTC may be appealed to the CTA division or CTA en banc.

CTA division – if appealed decision of the RTC was made in the exercise of its original jurisdiction.

CTA en banc – if appealed decision of the RTC was made in the exercise of its appellate jurisdiction.

PROCEDURE

Party adversely affected by a decision or inaction of the CIR, COC, SOF, SOTI, SOA,

CBAA or RTC

Appeal to the CTA division (Rule 42 of ROC) or en banc (Rule 43 of ROC) within 30 days from receipt of decision or after

expiration of period fixed by law


VII. ORDER OF THE CTA

A. CTA RULING, ORDER OR DECISION FAVORABLE TO THE NATIONAL GOVERNMENT

The Court shall issue an order authorizing the BIR, through the CIR, to 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.

The Court shall issue an order authorizing the BIR, through the CIR to levy the real property of such persons in sufficient quantity to satisfy the tax or charge together with any increment incident to delinquency.

B. THE REMEDIES OF SEIZURE, DISTRAINT AND LEVY SHALL NOT BE EXCLUSIVE AND SHALL NOT PRECLUDE THE COURT FROM AVAILING OF OTHER MEANS UNDER THE RULES OF COURT

Within 15 days from notice, a party

adversely affected by a ruling, order or

decision of the CTA division may file a

Motion for Reconsideration or New Trial

before the same division

Appeal to the CTA en banc

By a party adversely affected by a resolution of the CTA division on a MFR or New Trial

Direct Appeal to the CTA en banc from decisions and rulings of the CBAA and the RTC in the exercise of its appellate jurisdiction

Appeal to the SC via Petition for Review on Certiorari (Rule 45 of ROC)

(interlocutory orders of the CTA are not appealable)

Documents

Tax 2 Finals (Remedies to Cta)