TITLE VIII TAX REMEDIES

TITLE VIIITAX REMEDIESChapter 2 Remedies for Collection of TaxesSections 205 to 222Section 205. Remedies for the Collection of Delinquent TaxesWhen Tax is considered delinquent?It is unpaid after the lapse of the last day prescribed by law for its payment.

An assessment for deficiency tax has become final and executor and demandable and the taxpayer has not paid it within the period given in the notice of assessment.

3When the government may avail of the remedy of collection?The government may avail of the remedy of collection when the assessment shall become final, executor and demandable.

Remedies of the BIR to collect delinquent taxesBy distraint refers to the remedy whereby the collection of delinquent taxes is enforced thru seizure on the personal property, 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.

2 kinds of distraint of personal propertyConstructive distraintActual distraintRemediesdelinquent taxesBy Levy Levy is a remedy resorted to by the Government enforced on the real property belonging to the delinquent taxpayer to collect delinquent.

By court actions for tax remedy purposes, these are court actions instituted by the Government to collect internal revenue taxes as follows:By filing a civil action for collection of a sum of money with the proper regular court;By filing a criminal action against the delinquent taxpayer with the proper regular court; orBoth simultaneously

When civil remedies for the collection of delinquent tax resorted to by the Government?When a tax is assessed and the assessment becomes final and unappealable because the taxpayer fails to file an administrative protest with the CIR within 30 days from receipt of the Final Assessment Notice;

When a protest against assessment is filed and a decision of the CIR was rendered but the said decision becomes final, executory, and demandable for failure of the taxpayer to appeal the decision to the CTA within 30 days from receipt of the decision; or

When the protest is not acted upon by the CIR within 180 days from submission of documents and the taxpayer failed to appeal with the CTA within 30 days from the lapse of the 18day period.

Necessity of assessment in case of civil actionsThere should, however, first be an assessment, except in case of false or fraudulent return with intent to evade the tax or of a failure to file a return.

The taxpayers failure to appeal to the CTA in due time makes the assessment final, executory and demandableWhy a criminal action considered as a collection remedy?Impose the penalty;

Order the payment of taxes subject of the criminal case as finally decided by the CIR.BIR is authorized to collect estate tax deficiencies by the summary remedy of levy upon and sale of real properties of the decedent without first securing the authority of the court sitting in probate over the supposed will of the decedent.BIR to defray costs of collectionby means of civil or criminal action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof, as well as of real property and improvements thereonSection 206. Constructive Distraint of the Property of a TaxpayerWhen a property of a taxpayer may be placed under constructive distraint?The taxpayer is retiring from any business subject to tax; orThe taxpayer is intending to leave the Philippines; orThe taxpayer is intending to remove his property from the Philippines; orThe taxpayer is intending to hide or conceal his property; orThe taxpayer is intending to perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him.How to effect constructive distraint?By requiring a taxpayer or any person in possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner;

If the taxpayer or person in possession or control of the property sought to be placed under constructive distraint refused to sign the receipt, the revenue officer shall prepare a list of the property and leave a copy of such list in the premises where the properties are located, in the presence of two (2) witnesses, after which the property shall be deemed to have been placed under constructive distraint.

Section 207. Summary RemediesActual Distraint of Personal PropertyWho shall commence the distraint proceedings?

The Commissioner or his duly authorized representative, if the amount involved is in excess of Php1M; or

The RDO, if the amount involved is Php1M or less.

How actual distraint of personal property effected?Upon failure of the taxpayer to pay the delinquent tax at the time required by law;

Within 10 days from the receipt of the warrant, a report on the distraint shall be submitted by the distraining officer to the RDO and to the Regional Director.Remedy of a taxpayer once the Commissioner or other revenue officer issue a warrant of distraintThe taxpayer may request the Commissioner that the warrant of distraint be lifted.

The Commissioner may allow provided that a bond be posted as a condition for the cancellation of the warrant.

Levy of Real PropertyWhat should the notice of levy contain?

Name of the taxpayer; andAmounts of the tax and penalty due from him.

How is levy effected?by writing upon said certificate the description of the property upon which levy is made.written notice of the levy shall be mailed to or served upon the Register of Deeds of the province or city where the property is located and upon the delinquent taxpayer, or if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability aroseIn case the warrant of levy on real property is not issued before or simultaneously with the warrant of distraint on personal property, and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency, the Commissioner or his duly authorized representative shall, within 30 days after the execution of the distraint.Within 10 days after receipt of the warrant, a report on any levy shall be submitted by the levying officer to the Commissioner or his duly authorized representative.The RD may also be required by the CIR to submit a consolidated report as often as necessary.

Remedy of a taxpayer once the Commissioner or other revenue officer issues the warrant of levyTaxpayer may request the Commissioner that the warrant of levy shall be lifted. The Commissioner or his duly authorized representative may , in his discretion, allow the lifting of the order of levy. He may however ask for a bond as a condition for the cancellation of the warrant.

Rules on the Issuance of Warrants of Distraint or LevyPerson to issue the warrants of distraint/garnishment and/or levy.Upon the issuance of the CIR or its authorized representative of the final decision on the disputed assessment against the taxpayer or upon filing of a Petition for Review before the CTA in Division or En Banc of its decision upholding the assessment, warrants of distraint and garnishment, and/or levy shall forthwith be immediately issued and served pursuant to the provisions of RMO39-2007 (prescribes the issuance of warrants of distraint and garnishment, and/or levy on disputed assessments finally decided by the BIR against the taxpayer upheld by the CTA) and other rules, regulations and issuance of the BIR when applicable.

How a sheriff should effect a levy upon real property?File with the Register of Deeds a copy of the order, description of the property attached and notice of attachment; and

Leave with the occupant of the property copy of the same order, description and notice.

BIR is authorized to issue a warrant of garnishment against the bank account of a taxpayer despite the pendency of the taxpayers protest.Section 208. Procedure for Distraint and GarnishmentProcedure for distraint and garnishment of the different kinds of personal propertiesPersonal Properties the distraining officer shall account the personal property distrained by leaving a copy to the owner, or at the dwelling or place of business of such person and with someone of suitable age and discretion;Stocks and securities these shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the president, manager, treasurer, or other responsible officer of the corporation, company or association which issued the said stocks or securities.Debts and credits these shall be distrained by leaving with the person owing the debts or having in his possession or under his control such credits, or his agent, a copy of the warrant of distraint.Bank accounts these shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manager, treasurer or other responsible officer of the bank

Section 209. Sale of Property Distrained and Disposition of Proceeds.Requirement of noticeNotification to be exhibited in not less than 2 public places in the municipality or city where the distraint is made;Time and place of sale and the articles distrained specifiedThe time of sale shall not be less than 20 days after notice to the owner or possessor of the property and the publication or posting of such notice.

Rules governing sale at public auctionSale shall be made at the time and place fixed in such notice;Sale shall be conducted by the said revenue officer at public auction, to the highest bidder for cash; orIn the case of shares of stock and other securities, sale shall be conducted by a duly licensed commodity or stock exchanges with the approval of the Commissioner.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;The expenses chargeable upon each seizure and preservation of the property pending the sale, and no charge shall be imposed for the services of the revenue officer or his deputy;The officer making the sale shall make a written report of the proceedings to the CIR within 2 days after the sale.

Section 210. Release of Distrained Property Upon Payment Prior to SaleIf 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.

There shall be no right of redemption in the case of sale of personal property, only a right of pre-emption.Section 211. Report of Sale to BIRWithin 2 days after the sale, the officer making the same shall make a report of his proceedings in writing to the Commissioner and shall himself preserve a copy of such report as an official record.Section 212. Purchase by Government at Sale Upon DistraintNot equal to the amount of the tax; or

Very much less than the actual market value of the articles offered for sale;

Property so purchased may be resold by the Commissioner or his deputy, and the net proceeds therefrom shall be remitted to the National Treasury and accounted for as internal revenue.

Section 213. Advertisement and SaleAdvertisement on the sale of property should be made within 20 days after the levy, and the same shall be for a period of at least 30 days.

How the advertisement of sale of property be effectuated?Posting a notice at the main entrance of the municipal building or city hall and in a public and conspicuous place in the barangay or district in which the real estate lies;Publication once a week for three (3) consecutive weeks in a newspaper of general circulation in the municipality or city where the property is locatedWhat the advertisement should contain?The amount of tax and penalties due;Time and place of sale;Name of the taxpayer against whom taxes are levied;Short description of the property to be sold.

**Right of pre-emption at any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes, penalties and interest.

Section 214. Redemption of Property SoldPeriod of RedemptionWithin one year from the date of sale.

They shall have the right of paying to the RDO the amount of the:Public taxes;Penalties;Interest from the date of delinquency to the date of sale; andInterest on said purchase price at the rate of 15% per annum from the date of sale to the date of redemption.

Effects of redemption of property soldSuch payment shall entitle the person paying to the delivery of the certificate of sale issued to the purchaser and a certificate from the said RDO that he has thus redeemed the property; andThe RDO shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed, and said property thereafter shall be free from the lien of such taxes and penalties.Rights of the owner during the one-year period of redemptionDuring the one-year period of redemption, the owner shall not, however be deprived of the possession of the said property and shall be entitled to the rents and other income thereof until the expiration of the time allowed for its redemption.Section 215. Forfeiture to Government for Want of BidderWhen real property may be forfeited in favor of the Government?In case there is no bidder for real property exposed for sale; or

If the highest bid is for an amount insufficient to pay the taxes, penalties and costs.When the Revenue Officer shall make a return of the proceeding of forfeiture?Within 2 days from the date of forfeitureDuty of the Register of Deeds after the forfeiture proceedingsIt shall be the duty of the Register of Deeds concerned, upon registration with his office of any such declaration of forfeiture, to transfer the title of the property forfeited to the Government without the necessity of an order from a competent court.Period of redemptionWithin one year from date of such forfeiture, the taxpayer, or any one for him, may redeem said real property by paying to the Commissioner or latters RCO the following:The full amount of the taxes and penalties;Interest due on the taxes and penalties; andCosts of saleEffect when property is not redeemed by the taxpayerIf the property subject of the forfeiture is not redeemed, the forfeiture shall become absolute. A Declaration of Absolute Forfeiture should be prepared and registered with the Register of Deeds and simultaneously a request be made to transfer the title of the property from the name of the taxpayer to the Republic of the Philippines. It shall be accomplished and duly registered with the Register of Deeds of the place where the property is locatedSection 216. Resale of Real Estate Taken for TaxesAfter the registration of the Deeds of Declaration of Absolute Forfeiture of Real Property or even after securing of title over the same in favor of the Republic of the Philippines, the same property may still be disposed of either at public or at private sale.Procedure for the resale of absolutely forfeited propertiesHaving passed the one-year redemption period shall be converted into cash from the date of acquisition or forfeiture;The sale of acquired/forfeited properties shall be by sealed bids in a public auction;Publication of Notice of Sale once a week for 2 consecutive weeks in a newspaper of general circulation in the Philippines;Minimum Bid Price/Floor Price shall be the latest fair market value as determined by the Commissioner or the FMV shown in the latest Tax Declaration, whichever is higher;Procedure for the resale of absolutely forfeited propertiesAnyone could bid, (except foreign nationals, corporate or otherwise) and those qualified under existing laws, rules and regulations, including employees of the BIR;Bidders shall be required to post a bond in cash or managers check in an amount representing 10% of the minimum bid price at least one day before the scheduled public auction;The winning bidder shall pay the full amount of his bid cash or managers check within 2 days after receipt of notice of award;All taxes and expenses relative to the issuance of title shall be borne by the winning bidder;Procedure for the resale of absolutely forfeited propertiesThe winning bidder shall be responsible at his own expense for the ejectment of squatters and/or occupants, if any, of the auctioned property;Negotiated or private sale shall be resorted to as a consequence of failed public bidding for 2 consecutive times;Negotiated or private sale shall in all cases be approved by the Secretary of Finance;Public auction sale shall be approved by the Commissioner or his authorized representative;The Government reserves the right to reject or cancel any or all bids.

Section 217. Further Distraint or LevyThe remedy by distraint of personal property and levy on realty maybe repeated if necessary until the full amount due, including all expenses, is collected.Section 218. Injunction not Available to Restrain CollectionRationale of Section 218No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.Taxes being the lifeblood of the government should be collected promptly. No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee, or charge imposed by the NIRC. Except:Court of Tax Appeals. CTA shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the TAX CODE.

When:There is an appeal to the CTA from a decision of the CIR;In the opinion of the CTA, the collection may jeopardize the interest of the Government and/or the taxpayer;The taxpayer may be required to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.Section 219. Nature and Extent of Tax LienTax LienTax lien denotes a legal claim or charge on property, whether real or personal, as security for the payment of some debt or obligation.Lien attaches from time of assessment (not only from service of Warrant of Distraint or Lien) until paidLien on real property is not valid against mortgagee, purchaser, or judgment creditor until it is filed with Register of Deeds (Sec. 219, NIRC)

Collection remedies of the Government in a case where the estate had already been distributed to the heirsSue all the heirs and collect from each of them the amount of tax proportionate to the inheritance received;By virtue of the lien created under Section 219, sue only one heir and subject the property he received from the estate to the payment of the estate tax.Section 220. Form and Mode of Proceeding in Actions Arising under this Code.Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines

They shall be conducted by legal officers of the Bureau of Internal Revenue

No civil or criminal action for the recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner.

Who has the obligation to determine the existence of tax fraud for the imposition of criminal penalties?

The determination of the existence of a tax fraud for the imposition of the criminal penalties rests solely upon the Judiciary Branch of the Government where the RTC has exclusive original jurisdiction.Jurisdiction of the CourtsCourtPrincipal Amount of Taxes (exclusive of charges and penalties)Civil Tax CasesCourt of Tax AppealsPhp1M and aboveRTC, MeTC, MTC, as the case may beLess than Php1MCriminal Tax CasesCourt of Tax AppealsPhp1M and aboveRTC, MeTC, MTC, as the case may beLess than Php1M or if no specified amount claimedWhat should be imposed in the judgment in a criminal case?The judgment in the criminal case shall not only impose the penalty but shall also order the payment of taxes subject of the criminal case as finally decided by the CIR.Section 221. Remedy for Enforcement of Statutory Penal Provisions.The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the particular situation may require, subject to the approval of the Commissioner.End of Report