TAX REMEDIES

TAX REMEDIES
On the part of the
On part of the taxpayer government
• courses of legal actions which • the courses of action allowed
the taxpayer can avail of to in the law to enforce tax
seek relief from the collection.
assessment made by revenue
officers.
 Tax Assessment

• is an official action of an officer authorized by

law in ascertaining the amount of tax due under
the law from a taxpayer.
• process of determining the correct amount of
the tax due in accordance with the prevailing
tax laws.
 Tax Mapping

• also known as Tax Compliance Verification Drive

(TCVD), is an enforcement program initiated by
the Bureau of Internal Revenue (BIR) in the
Philippines. It evaluates the tax registration and
compliance of various entities and business
establishments operating in the country.
 TAX MAPPING
• A verification of the taxpayer’s compliance with basic administrative
regulations and does not involve a thorough examination of books of
accounts and other accounting records.
• BIR representatives usually check the following;
1. Certificate of Registration (BIR Form No. 2303) and Payment of
Annual Registration Fee (ARF) thru BIR Form No. 0605
2. Notice to Public/”Ask for Receipt” signage or the new Notice to
Issue Receipt/Invoice (NIRI)
3. Authority to Print (ATP) Invoices and Receipts (BIR Form No. 1906)
4. Registration of manual books of accounts/Approval of loose-leaf
books of accounts
5. Permit To Use (PTU) Cash Register Machines (CRM)/Point of Sale
(POS) Systems and Registration/PTU Computerized Accounting Systems
(CAS)/Computerized Books of Accounts (CBA)
 PENALTIES
• If BIR representatives find out during TCVD that any of the
abovementioned administrative requirements have not been complied
with, the following compromise penalties, as mentioned in RMO No. 07-
2015, might be imposed on the taxpayer:
1. Failure to register with the BIR – P5,000 to P20,000
2. Failure to pay and display ARF (BIR Form No. 0605) – P1,000
3. Failure to display COR (BIR Form No. 2303) – P1,000
4. Failure to display “Ask for Receipt”/NIRI – P1,000
5. Failure to attach or paste authorized sticker authorizing the use of
CRM/POS/CAS – P1,000/unit.
6. Printing of receipts or invoices without authority from the BIR –
P25,000 to P50,000
 PENALTIES

7. Failure to present application form (BIR Form Nos. 1900 and 1905)
to use registered sales books/permit to use loose leaf sales books – P1,000
8. Failure to issue receipts or invoices – P10,000 to P20,000
9. Refusal to issue receipts or invoices – P25,000 to P50,000
10. Using of unregistered receipts or invoices – P20,000 to P50,000
11. Using of unregistered cash registered machines (CRM) and or
components without a permit – P25,000/unit up to P50,000/unit
 TAX AUDIT

• process of examining, going over or scrutinizing the books

and records of the taxpayer to ascertain the correctness of
the tax declared and paid by the taxpayer.
 Letter of Authority (LOA)

• is an official document that empowers a

Revenue Officer to examine, scrutinize a
taxpayer's books of account and other
accounting records in order to determine the
taxpayer's correct internal revenue tax
liabilities. In the absence of such an authority,
the assessment or examination is null and void.
 Pre-Assessment notice (PAN)

• is written notice given to a taxpayer informing him of the

findings of the BIR officer(s) relating to a deficiency in his
tax return, indicating therein the law and the facts on which
the assessment is made and requiring the taxpayer to
respond within a given period, otherwise , the
Commissioner of his dully authorized representative shall
issue an assessment based on his findings.
 Formal Letter of Demand (FLD) and Final
Assessment Notice (FAN)

• is a formal demand or notice sent to the taxpayer requiring

payment within a specified time of the tax due from him
including interest and civil penalties.
• shall be issued by the CIR or his duly authorized
representatives.
 Request for reconsideration

• a plea of re-evaluation of an assessment on the basis of

existing records without need of additional evidence or
supporting documents. It may involve both a question of
fact or law.
 Request for reinvestigation

• a plea of re-evaluation of an assessment on the basis of a

newly discovered or additional evidence or documents that
a taxpayer intends to present in the reinvestigation. It may
also involve both a question of fact or law.
 When is tax assessment made?
When taxpayer filed a
When taxpayer filed an fraudulent return or return
accurate return not filed
• within 3- year prescription period
1. after the due date
• within 10 -year prescription
2. from the day the return was filed, period when the BIR
where a return is filed beyond the due date. Note:
A return filed before the due date shall be
discovers the falsity, fraud
considered as filed on such due date. or omission of the
• before the expiration of the 3-year prescription
taxpayer's tax return.
period, the BIR and the taxpayer may agree on
the period of assessment. (Sec. 22 (b) NIRC)
• Jeopardy Assessment, if the taxpayer:
a) retires from business
b) leaves the country.
• Tax audit or Investigation
1. Examination of the books accounts of the taxpayer by the
revenue officer who has the Letter of Authority (LOA). In the absence of
LOA, the assessment is a null and void.
2. Persons authorized to issue LOA:
If taxpayer is a. under National Office - Commissioner of
Internal Revenue
b. If taxpayer is under regional offices -
Regional Director
3. Tax Cases need not covered by LOA:
a. Cases involving civil or criminal tax fraud
which fall under the National Investigation Division under the
Enforcement and Advocacy Services of the BIR;
b. Policy cases under audit by the special
teams in the National Office.
• Issuance of Preliminary Assessment Notice (PAN)
- Issuance of PAN to the taxpayer
informing him of the findings of revenue officer.
- The PAN shall be in writing and show in
detail the facts and the law, rules and regulations on
which the proposed assessment is based, otherwise
the assessment is void.
- The taxpayer has 15 days to reply
contesting the findings in the PAN. Failure to reply,
the BIR will issued FAN and FLD.
• Issuance of Final Assessment Notice and Final
Letter of Demand
Issued when:
a. The taxpayer failed to respond; or
b. The reply to the PAN was found to be
without merit
 BIR's Denial of Protest

Direct denial of Indirect denial of

protest protest
• Direct denial of protest • if the CIR or his duly authorized
representative fails to act on the
taxpayer's protest within 180
days from the date of
submission, the protest may be
considered denied.
 REMEDIES OF THE TAXPAYER

• Remedies before payment

1. administrative protest
2. request for reconsideration
3. request for reinvestigation
4. judicial protest
• Remedies after payment
1. claim for refund
2. claim for tax credit
 TAX ASSESSMENT PROCESS

1. Notice for Informal conference -

♦ sent by the Revenue Officer to the taxpayer with noted
discrepancy
♦ the taxpayer is given 15 days to respond from date of
receipt of the notice.
♦ failure to respond will warrant endorsement to
Assessment Division of the Revenue Office for appropriate review.
 TAX ASSESSMENT PROCESS

2. Preliminary Assessment Notice (PAN) -

♦ shall be served to the taxpayer or through registered mail -if the
result of the review conducted by the Administrative Division has
established sufficient basis to assess the taxpayer for any deficiency.
♦ the taxpayer is given 15 days from receipt thereof to contest
the amount being assessed.
♦ failure to respond will warrant the issuance of Formal Letter of
Demand of Payment together with the assessment showing the
computation inclusive of the applicable penalties.
 TAX ASSESSMENT PROCESS

3. Formal letter of demand

- to be responded by the taxpayer within 30 days.
a) Protest the Assessment - The taxpayer shall file a request for reconsideration or
reinvestigation with the BIR within 30 days from receipt of the assessment notice.
Failure to file a request for reconsideration or reinvestigation within 30 days , the
assessment shall become final.
Submit all relevant supporting documents to the BIR within 60 days from filling of
protest, (in case of request for reinvestigation) otherwise the assessment shall become
final. Note: There is now a 180 day requirement for the BIR to decide on an
administrative appeal.
 TAX ASSESSMENT PROCESS

b) Appeal to the Court of Tax Appeal

- if the protests is denied in whole or in part by the Commissioner, the taxpayer
may appeal to the Court of Tax Appeal within 30 days from the receipt of letter of denial
or unfavourable decision.
- File an appeal to the CTA within 30 days from the lapse of 180 days period, If CIR
or his duly authorized representative fails to act on the protest
- Failure to appeal to the CTA shall make the BIR's decision final, executor and
demandable
- If the appeal is denied by CTA division, file a Motion for Reconsideration (MR)
before the same CTA division within 15 days from the receipt of the decision.
 TAX ASSESSMENT PROCESS

c) Appeal to the CTA En Banc

- If the MR is denied, file an appeal with the CTA en
banc within 15 days from the receipt of the decision.
- If the appeal is denied by the CTA en banc, file
MR to the CTA en banc within 15 days from the receipt
of the decision.
 TAX ASSESSMENT PROCESS
d. Appeal to the Supreme Court Division
- If the MR is denied by the CTA en banc, file an appeal with the Supreme Court
Division with 15 days from the receipt of CTA en banc decision
- If the appeal is denied by the SC division, file MR to the SC division within 15
days from the receipt of the decision.
e. Appeal to the Supreme Court En Banc
- If the MR is denied by the SC division , file an appeal with the Supreme Court
En Banc with 15 days from the receipt of CTA en banc decision
- If the appeal is denied by the SC en banc, file MR to the SC En banc within 15
days from the receipt of the decision.
- If MR is denied by SC En Banc, there is no more remedy, the assessment shall
become final, executory and demandable.
 Remedy Against an Erroneously or Illegally paid
Tax

a. File a formal Claim for refund

b. Submit all relevant supporting documents to the BIR . - Submit
relevant documents within 60 days from filling of claim for refund.
c) Appeal to the Court of Tax Appeal
File an appeal with CTA, raising questions of facts and/or law within 30 days
( but within the 2-year period required for filing a formal claim for refund)
1. from the receipt of the adverse (unfavourable) decision, or
2. from the lapse of the 180 day period.
 REMEDIES OF THE GOVERNMENT: Collection

• The BIR may avail of the remedy of collection when the assessment becomes final,
executory and Demandable.
• Any internal revenue tax which has been subject to assessment may be collected by
distraint or levy or by a proceeding in court within 5 years:
1. If assessment within 3 years or ten year period -the counting of the 5 year period
shall start from the issuance of FAN;
2. If assessed based on the period agreed upon between the taxpayer and the
Commissioner - the collection shall be made within the period agreed upon in writing before
the expiration of the 5 year period.
The period agreed upon may be extended by a subsequent written agreement made before
the expiration of the period previously agreed upon.
 Methods of Collection

1. Distraint of Personal Property - it is the seizure by the government of

taxpayer's personal property , tangible or intangible to enforce the payment
of taxes.
2. Levy on Real Property -the seizure by the government of real properties
and interest in or rights to such properties in order to enforce payment of
taxes.
3. Judicial Proceedings
a. Filing civil case for collection
b. File for criminal case (Tax evasion)
 COMPROMISE PENALTY

The compromise settlement of any tax liability shall be subject to the following
minimum amounts:
a. For cases of financial incapacity -a minimum compromise rate equivalent of
10% of the basic assessment tax;
b. For other cases -a minimum compromise rate equivalent to 40% of the basic
assessed tax;
*All criminal violations may be compromised, except:
1. those already filed in court;
2. those involving fraud.
 CIVIL PENALTY
In addition to the basic tax assessed on the taxpayer, the following civil
penalties will also be collected:
1. Surcharge
2. Interest
1. Surcharge
a) 25% Surcharge shall be collected in any of the following cases;
1. Failure to file any return and pay the tax due on time
2. Filing a return with an internal revenue officer other than those with whom
the return is required to be filed, unless authorized by the CIR.
3. Failure to pay deficiency tax within the time prescribed for its payment in the
notice of assessment.
4. 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.
 CIVIL PENALTY
b) 50% Surcharge shall be collected in any of the following cases;
1. Willful neglect to file the return on time
2. there is willful neglect if the taxpayer files only after prior notice
in writing from the BIR.
There is a simple neglect ( 25% surcharge) if the taxpayer
voluntarily files the return after the deadline without notice from the
BIR
Prima facie evidence of false or fraudulent return:
1. Substantial overstatement (more than 30%) of deductions
2. Substantial under declaration (more than 30%) of taxable sales,
receipts or income.
 CIVIL PENALTY

b. Interest
Increment of 12% on any unpaid amount of tax ,
assessed from the date prescribed for payment
until the amount fully paid.