Tax Assessment - Taxpayer's Remedies

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Presented by:AMEGO & ASSOCIATES LAW OFFICEGround Floor CIT Bldg., Lacson-Luzuriaga Sts.Bacolod City

TAXPAYERS REMEDIESin Tax Assessment

DETERMINING/ ENFORCING TAX LIABILITYAudit Process/Tax AssessmentOplan Kandado suspension or temporary closure of business operations of a VAT- registered/ registrable taxpayer for failure to issue receipts or invoices failure to file a VAT return understatement of taxable sales or receipts by 30% or more of the correct amount thereof or failure to register. Establishment surveillanceRATE program/Criminal Action- to investigate, prosecute and convict tax evaders and other criminal violators of the 1997 NIRC

A. ADMINISTRATIVEBefore Payment Protest tax assessment contestCompromise reduction of tax liabilityAbatement - cancellation of the entire tax liability

After Payment Tax Refund- restitution of the money paid as taxTax Credit- money so paid be applied to existing tax liability

B. JUDICIALCivil ActionAppeal to the Court of Tax Appeals - tax assessment contestTaxpayer RemediesGovt. RemediesVS

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B. COLLECTION OF TAXES

Compromise Abatement Distraint - seizure by the govt. of tangible/ intangible personal property followed by the public sale of such propertyLevy - seizure of real property, and interest in or rights to such propertyTax Lien - the tax, together with interests, penalties, and costs that may accrue in addition thereto is a lien upon all property and rights to property belonging to the taxpayer

Civil action for collection of taxes

B. JUDICIALCivil Action (cont.)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 Action for damages against a revenue officer by reason of any act done in the performance of official duty Criminal Action Filing of criminal complaint against erring BIR officials and employees.Injunction when the CTA in its opinion, the collection by the BIR may jeopardize taxpayer. Taxpayer RemediesGovt. RemediesVS

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Tax Assessment

Pre-Assessment Notice (PAN)Final Assessment Notice (FAN)ProtestAppeal to CTA DivisionMR to CTA DivisionAppeal to CTA En BancPetition for Review to SC

15 days30 days30 days30 days15 days15 daysLetter of Authority

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Letter of Authority/ Letter Notice

A tax investigation starts with the issuance by the BIR of a written authorization which is usually a Letter of Authority for tax audits or Letter Notice for the Relief/SLSP program

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Preliminary Assessment Notice (PAN)Time for taxpayer to reply: 15 days from date of receipt of PANEffect of failure to reply:-Taxpayer shall be considered in default-a formal letter of demand and assessment notice shall be issued calling for the payment of the taxpayers deficiency tax liability, inclusive of all the applicable penalties. Notifies the taxpayer of the findings made by the examiner and the deficiency taxes assessed shows in detail, the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based. Issuance of FAN is sufficient w/o need of Notice of Informal Conference & PAN:Deficiency tax is the result of mathematical error in the tax computation appearing on the face of the tax return filed by the taxpayer; Discrepancy between the tax withheld and the amount actually remitted by the withholding agent;A taxpayer who opted to claim a refund or tax credit also carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter/s of the succeeding taxable year;Excise tax due on excisable articles not paid;Article purchased locally or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries & spare parts, has been sold, traded or transferred to non-exempt persons.

When this 15-day period is not strictly followed by the BIR, i.e. even before the lapse of the 15-day period, the BIR finalizes the PAN and issues the FAN against the taxpayer, this may be raised as a defense by the taxpayer in his reply as a violation due process of law.

Reply Term used under RR 12-99 for purposes of contesting in writing the findings of the revenue officers contained in a PAN, whereas request for reconsideration or request for reinvestigatio refers to the written objection(s) against a FAN issued by the BIR, Time to reply; venue for filing replyRegional Office Cases:The taxpayer shall reply within a period of fifteen (15) days from receipt of the pre-assessment notice. In meritorious cases and upon written request of the taxpayer, an extension may be granted within which to respond, but in no case shall the extension exceed a total of 10 days. The reply of the taxpayer shall be filed with the Office of the Regional Director, Attention: Chief, Assessment Division of the Regional Office, which has jurisdiction over the case.

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SAMPLE PAN

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PAN

Taxpayer submits a reply within 15 days?NO

YESIssuance of FAN &LETTER of DEMAND

Commissioner accepts the explanations.

Commissioner does not accept the explanations.Assessment ends.

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Final Assessment Notice (FAN)

FAN and letter of demand should always go together. The letter of demand explains to the taxpayer how the deficiency assessment was arrived at, including the reasons and legal bases for the assessment.Sent to the taxpayer only by registered mail or by personal delivery.If sent by personal delivery, acknowledge receipt thereof in the duplicate copy of the letter of demand by showing the following: (a) his name; (b) signature; (c) designation and authority to act for and in behalf of the taxpayer, if received by a person other than the taxpayer himself; and (d) date of receipt thereof.

2 Types of Administrative Protest Against the FAN:Request for reconsideration a plea of reevaluation of the assessment on the basis of existing records without need of additional evidence. Request for reinvestigation a plea of reevaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation.The Protest may involve a question of fact or law, or both.

Remedy of the taxpayer against the FAN : File Administrative PROTEST

Time for taxpayer to submit Protest: 30 days from date of receipt of FANEffect of failure to Protest:-Payment by the TP of the amount due

Failure to state the reasons, factual and legal basis shall make the formal letter of demand and assessment notice void.

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SAMPLE FAN

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FAN & LETTER of DEMAND

Taxpayer submits a PROTEST within 30 days?NO

YESAdministrative ProtestMOTION for RECONSIDERATION or MOTION for REINVESTIGATIONAssessment ends.Assessment becomes final, executory, and demandable.The government may exercise it remedies for collection.The case may not be appealed to the CTA.

Complete submission of documentary evidence within 60 days from the filing of the protest

Non-submission of documents

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Complete submission of documentsCommissioners action:Resolution of the assessment based on the documents:- Cancellation of entire assessment/- Issuance of a Revised Assessment

Inaction on the protest w/in 180 days from the time of receipt of the relevant documents

Denial of the administrative protest within 180 days from the receipt of the relevant supporting documents

File a MR to the Commissioner orAppeal to the CTA Division PETITION FOR REVIEW to the SC

Taxpayer FAILS to appeal.ASSESSMENT ENDS.Motion for Recon to the CTA Division Appeal to the CTA EN BANC

Appeal to the CTA Division - w/in 30 days from the denial but in any case within 30 days from the lapse of the 180 days

"Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA Division within thirty (30) days from the receipt of the decision or ruling or within 30 days from the lapse of the 180 days.

A party adversely affected by a ruling, order or decision of a Division of the CTA may file a motion for reconsideration of new trial before the same Division of the CTA within fifteens (15) days from notice thereof:"No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.

SEC. 228. Protesting of Assessment. xxxx

The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.

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Unfavorable Action of the Commissione