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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.
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 governments 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 Governments 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. GOVERNMENTS 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)
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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 taxpayers 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).
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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 CIRs 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 t