TAX REMEDIES1

I. Prescriptive Periods (203; 222; 223) writing to its assessment

1. Regular Prescriptive Period of until the 3-year prescriptive
Assessment and Collection — period, the tax may be
a. The CIR has 3 years from the assessed within the period
date of actual filing of the tax agreed upon. This period may
return to assess a national further be extended by
internal revenue tax or to subsequent written
commence court proceedings agreement made before the
for the collection thereof expiration of the period
without an assessment. previously agreed upon.
b. When the CIR validly issues 4. Counting of the 3-year Prescriptive
an assessment notice within Period
the 3-year period for the a. If the return was filed before
assessment, he has another 3 or on the last day prescribed
years within which to collect by law for filing the return, it
the tax due by distraint, levy, shall be counted from the
or court action, whether civil deadline which is the last
or criminal.1 day for filing the return;
2. Exceptional Prescriptive Period of b. If the return was filed after
Assessment and Collection — the last day prescribed by
a. TP failed to file a return law for filing of return, it
(omission); shall be counted from the day
b. TP filed a false return with the return was filed;
intent to evade tax; c. If the return is amended
c. TP filed a fraudulent return substantially different from
with intent to evade tax; or the original return, it shall
d. TP and the CIR agreed in be counted from the filing of
writing to waive the the amended return. 2
prescriptive period of ***Notes: The law on prescription being a remedial
assessment of tax. measure should be interpreted in a way conducive to
3. Exceptional Prescriptive Period for bringing about the beneficent purpose of affording
protection to the taxpayer within the contemplation
Assessment— of the Commission which recommend the approval of
a. False or fraudulent return the law. 3
with intent to evade or The amendment, change, or modification of
failure to file a return may be returns can only be done within 3 years from the
assessed at any time within date of filing of the return, provided that no notice of
audit or investigation of such return has actually
10 years after the discovery been served upon the taxpayer. [Sec. 6(A), NIRC]
of the FFO; There is substantial amendment when a
b. Proceeding in court for the new return is filed declaring more losses, which can
collection of tax may be filed only be done by reducing gross income, or increasing
the items of deductions claimed. If the amendment is
without assessment at any minimal, the counting of the prescriptive period is
time within 10 years after still the original period.
discovery of the FFO; A false tax return implies deviation from the
c. If before the expiration of the truth or fact, whether intentional or not. It may be
normal 3-year prescriptive due to mistakes, carelessness, or ignorance of the
person preparing the return.4 A false return is not
period, the Commissioner
and the TP have agreed in 2 CIR v. Phoenix Assurance Inc., L-19727, 20 May 1965
3 Talento v. Escalada 556 SCRA 491 (2008)
1 BPI v. CIR, 139736, 17 Oct. 2005 4 Aznar v. CA, L-20569, 23 August 1974
 TAX REMEDIES2

necessarily tainted with fraud because the fraud discovery of FFO provided that in a fraud assessment
contemplated by law is actual and not constructive which has become final and executory, the fact of
and must amount to intentional wrongdoing with the fraud shall be judicially taken cognizance of in the
sole object of evading the tax. civil or criminal action for the collection thereof.
A fraudulent tax return implies intentional The civil and criminal aspects of the case
or deceitful entry with the sole object of evading the may be pursued simultaneously.
tax. A fraudulent return is always an attempt to The criminal charge need only be supported
evade a tax, but a mere false return may not be.5 by a prima facie showing of failure to file a required
return. This fact need not be proven by an
5. Tax Avoidance v. Tax Evasion assessment.8
a. Difference 6. Waiver of Statute of Limitations
Tax Avoidance Tax Evasion a. Being a derogation of the
Tax saving device A scheme used TP’s right to security against
within the means outside of those prolonged and unscrupulous
sanctioned by law. lawful means and investigations, it must be
This is used by the when availed of, it carefully and strictly
TP in GF and at usually subjects construed.9
arm’s length TP to additional b. Requisites:10
civil or criminal i. In writing;
liabilities ii. Agreed upon and
b. Elements of Tax Evasion: signed by the CIR or
i. End to be achieved, his duly authorized
i.e., payment of less representative and by
than that known by the TP before the
the TP to be legally expiration of the time
due or the prescribed to extend
nonpayment of tax the period of
when it is shown that assessment;
a tax is due; iii. Definite date agreed
ii. Accompanying state of upon;
mind which is iv. Date of acceptance
described as being must be indicated;
evil, in BF, willful, or and
deliberate and not v. The TP must be
accidental; and furnished with a copy
iii. Course of action or of the waiver.
failure of action which c. Effect of execution of the
is unlawful.6 waiver – signifies the
***Notes: The crime of tax evasion is complete when acceptance of the BIR and
the TP has knowingly and willfully filed a fraudulent
return with intent to evade and defeat tax.7 the perfection of an
A tax fraud or tax evasion case is a criminal agreement that the making
case. The burden of proof is on the BIR. See Rule 131, of an assessment and the
Sec. 5, ROC. See also 254, NIRC. collection of taxes are
In cases where a false or fraudulent return
suspended during the period
is submitted or in cases of failure to file a return,
proceedings in court may be commenced without an of the said agreement.
assessment at anytime within 10 years after the

5 CIR v. Javier 19 SCRA 824 8 Lucas Adamson v. CA/CIR v. CA, 120935/124557, 21

6 CIR v. Estate of Benigno P. Toda, Jr., 147188, 14 May 2009
September 2004 9 CIR v. FMF Dev. Corp., 556 SCRA 698
7 CIR v. Gonzales 633 SCRA 139 10 See RMC 6-2005 for the format
 TAX REMEDIES3

***Notes: A taxpayer who paid the tax assessment CIR of any change in his
covered by the waivers of the Statute of Limitations address;
is estopped from questioning the validity of the
waivers with respect to the other assessment of c. Warrant of distraint or levy
deficiency onshore tax.11 is duly served upon the TP,
In civil tax cases involving the collection of his authorized
internal revenue taxes, prescription is construed representative, or a member
strictly against the government and liberally in favor
of the TP.
of his household with
In criminal tax cases involving tax offenses sufficient discretion, and no
punishable under the Tax Code, prescription is property could be located;
construed strictly against the TP.12 and
In CIR v. Suyoc Consolidated Mining d. TP is out of the Philippines.
Company, 104 Phil. 819, the doctrine of estoppel
***Notes: Request for Reconsideration refers to a
prevented the TP from raising the defense of
plea of reevaluation of the assessment on the basis of
prescription against the efforts of the government to
existing records without need of additional evidence.
collect the assessed tax. However, it must be stressed
It may involve both question of fact or of law or of
that in the said case, estoppel was applied as an
both. A request for reconsideration does not toll the
exception to the State of Limitations on collection of
running of the prescriptive period for the collection of
taxes and not on the assessment of taxes, as the BIR
an assessed tax.13
was able to make assessment within the prescribed
Request for Reinvestigation refers to a plea
period. More important, there was a finding that the
of reevaluation of the assessment on the basis of
TP made several requests or positive acts to convince
newly discovered evidence that a TP intends to
the government to postpone the collection of taxes.
present in the reinvestigation. It may also involve a
A mere request for reexamination or
question of fact or of law or both. It is granted by the
reinvestigation may not have the effect of suspending
BIR suspends the running of the prescriptive period
the running of the period of limitation for in such
to collect the tax due a TP.14
case there is need of a written agreement to extend
the period between the CIR and the taxpayer, there 8. Rules on Prescriptive Period for the
are cases however where a TP may be prevented Collection of Taxes (Regular
from setting up the defense of prescription even if he Circumstances):
has not previously waived it in writing as when by a. There is prior assessment –
his repeated requests or positive acts the
Government has been, for good reasons, persuaded to
collection is made within 3
postpone collection to make him feel that the demand years from the date of the
was not unreasonable or that no harassment or FAN of the tax due, either or
injustice is meant by the Government. both simultaneously:
Since immunity from audit and i. By distraint of
investigation does not preclude the collection of
revenue generated from audit and enforcement personal property, or
activities, it follows that the BIR is likewise not by levy of real
barred from collecting any tax deficiency discovered property;
as a result of tax fraud investigation. ii. By judicial
proceedings, civil or
7. Suspension of the running of the
criminal;
Statute of Limitation:
b. No prior assessment –
a. TP filed a protest through a
collection shall be begun
request for reinvestigation
within 3 years from the date
which is granted by the CIR;
of filing of the return or from
b. TP cannot be located in the
the last day prescribed for
address given by him in the
filing the return, whichever
return filed upon which a tax
is later:
is being assessed or collected,
unless the TP informs the
13 CIR v. Phil. Global Communications, 167146, 31 october
11 RCBC v. CIR, 170257, 7 September 2011 2006
12 CIR v. Goodrich, Phils., 104171, 24 February 1999 14 BPI v. CIR, 139736, 17 October 2005
 TAX REMEDIES4

i. By judicial involved do
proceedings only. not justify
9. Rules on Prescriptive Period for the the
Collection of Taxes (Exceptional collection of
Circumstances): the amount
a. There is prior assessment – due.
collection is made within 5
years from the date of the 2. Grounds (Compromise):
FAN of the tax due, either or a. Doubtful validity of the
both simultaneously: assessments;
i. By distraint of b. Financial incapacity – the
personal property, or financial position of the
by levy of real taxpayer demonstrates a
property; clear inability to pay the
ii. By judicial assessed tax.
proceedings, civil or ***Notes: Jeopardy Assessment refers to a tax
criminal; assessment which was assessed without the benefit
of complete or partial audit by an authorized revenue
b. No prior assessment – officer, who has reason to believe that the
collection may be filed within assessment and collection of a deficiency tax will be
10 years after discovery of jeopardized by delay because of the TP’s failure to
the falsity, fraud, or failure comply with the audit and investigation
requirements to present his books of accounts and/or
to file a return:
pertinent records, or to substantiate all or any of the
i. By judicial deductions, exemptions, or credits claimed in his
proceedings only. return.
The CIR shall not consider any offer for
II. Compromise and Abatement (203) compromise settlement on the ground of financial
incapacity of a TP with TCC, on hand or in transit, or
1. Distinctions: with pending claim for tax refund or tax credit with
Compromise Abatement the BIR, DOF OSS Tax Credit, and Duty Drawback
Reduction of the Cancellation of the Center and/or the courts, or with existing finalized
TP’s tax liability; TP’s tax liability; agreement or prospect of future agreement with any
party that resulted or could result to an increase in
CIR and NEB & CIR has sole the equity of the TP at the time of the offer for
REB are authority to abate compromise at a definite future time.
authorized to or cancel tax No offer for compromise shall be entertained
enter into a liability of a TP; unless and until the TP waives in writing his
privilege of the secrecy of bank deposits under RA
compromise;
1405 or under other general or special laws, and such
Grounds: Grounds: waiver shall constitute as the authority of the CIR to
a. Reasonable a. Tax or any inquire into the bank deposits of the TP.
doubt as to portion Presence of circumstances that would place
validity of thereof the TP’s inability to pay in serious doubt can be a
ground to deny application for compromise based on
assessment; appears to be financial incapacity of the TP to pay the tax.15
or unjustly or Read RR 6-2000, as amended, for further
b. Financial excessively readings on cases which may be compromised and
incapacity of assessed; or the prescribed minimum percentage of compromise
settlement.
a TP. b. The For financial capacity cases, the minimum
administrat compromise rate is 10% of the basic assessed tax.
ion and For doubtful validity cases, the minimum
collection compromise rate is 40% of the basic assessed tax,
costs
15 RR 6-2000
 TAX REMEDIES5

provided that he shall be required to submit his b. Credit or refund penalties

request in writing stating the reasons, legal and/or imposed without authority;
factual, why he should be entitled to such lower rate;
and that it shall be subjected to the approval of the c. Credit or refund any sum of
NEB. money alleged to have been
The prescribed minimum percentages shall excessively or in any manner
likewise apply in compromise settlement of wrongfully collected;
assessment consisting solely of increments, ie,
surcharge, etc., based on the total amount assessed.
d. Refund the value of internal
Criminal violations, except those already revenue stamps when they are
filed in court or those involving fraud, may be returned in good condition by the
compromised. purchaser; and
3. Abatement: e. In his discretion, redeem or
a. Grounds for Authority of CIR change unused stamps that have
to Abate or Cancel: been rendered unfit for use and
i. The tax or any portion refund their value upon proof of
thereof appears to be destruction.
unjustly or excessively ***Notes: The refund referred to in 204(C) and 229 is
assessed; or not the refund provided for in 112.
ii. The administration and The return of what was erroneously paid is
founded on the principle of solution indebiti, a basic
collection costs involved postulate that no one should unjustly enrich himself
do not justify the at the expense of another. The caveat against unjust
collection of the amount enrichment covers the government. A claim for tax
due. refund proper necessitates only the preponderance-
of-evidence threshold like in any ordinary civil case.18
b. ; Tax exemptions must not rest on vague,
***Notes: The CIR has the sole authority to abate or
uncertain, or indefinite inference, but should be
cancel internal revenue taxes, penalties, and/or
granted only by a clear and unequivocal provision of
interest pursuant to 204(B), in relation to Section
law on the basis of language too plain to be
7(c), NIRC.
mistaken.19
This authority is generally applicable to
surcharge and compromise penalties only, however,
in meritorious instances, the CIR may likewise abate 3. Tax Refund v. Tax Credit
the interest, as well as the basic tax assessed. Refund Credit
Actual Issuance of a TCC
III. Refund [204(C); 229; 230] reimbursement of which may be
1. Nature: the erroneously or utilized in the
a. It is in the nature of a tax illegally collected payment of
exemption which must be taxes internal revenue
construed strictissimi juris taxes, excluding
against the TP. The TP must withholding taxes,
present convincing evidence to for which the
substantiate a claim for refund.16 taxpayer is
b. It is the result of legislative directly liable
grace. It must be based on a
statute granting tax 4. Conditions before issuance of TCC
exemption.17 due to erroneously collected taxes:
2. CIR’s authority to: a. TP files a written claim for
a. Credit or refund taxes refund or tax credit with the
erroneously or illegally received; Commissioner within 2 years

16FEBTC v. CIR, 149589, 15 Sept. 2006

17CIRv. Fortune Tobacco Corporation 559 SCRA 160 18 CIR v. Mirant Pagbilao Corp., 172129, 12 Sept. 2008
(2008) 19 CIR v. Solidbank Corp. 462 SCRA 96 (2003)
 TAX REMEDIES6

from the date of payment of prescriptive period from the occurrence of such event.
the tax or penalty20; Thus, claims for refund must be elevated to the CTA
before the expiration of the 2-year period because the
b. If denied or not acted upon prescriptive period will not be suspended regardless
within said period, the of any supervening event.
petition for refund be filed The 2-year period is prescriptive and not
with the CTA within 30 days jurisdictional.27 The CIR may waive the prescriptive
period or the filing of written claim within said 2-
from receipt of the denial and year period, as by entering into an agreement to
within said 2 year period await the outcome of a test case or taking steps to
from the date of payment of refund the taxes, or he may be precluded from
the tax or penalty regardless insisting on such requirement where he is a party
of any supervening cause21; litigant in a case bearing on the matter.
c. The claim must be a 5. Reckoning of the Commencement of
categorical demand for the 2-year period:
reimbursement22; a. Date the tax was paid;
d. There must be a proof of b. If the tax was paid on
payment of the erroneously installment, the date the last
or illegally collected taxes23; or final installment or
and payment was made;
e. No refund shall be given c. In case of deposit, from the
resulting from availment of conversion of the deposit to
incentives granted pursuant payment;
to special laws for which no d. The tax has been withheld
actual payment was made. from source, from the date it
***Notes: A return filed showing an overpayment falls due at the end of the
shall be considered as a written claim for credit or
refund. taxable year;
The options of claim for refund or tax credit e. The return was adjusted,
are mutually exclusive such that resort to one bars from the date when the final
the application of the other.24 adjustment return was filed;
No suit or proceeding shall be instituted
after the expiration of the said 2 year of period
f. Tax was not erroneously or
regardless of any supervening cause that may arise illegally paid but the
after payment. This requirement is a condition taxpayer became entitled to
precedent. Noncompliance bars recovery.25 refund because of
Request for issuance of TCC is not subject to supervening circumstances,
the 2 year limitation upon basic consideration of
equity and fairness. When it is undisputed that a from the date the TP
taxpayer is entitled to a refund, the State should not becomes entitled to refund
invoke technicalities to keep money not belonging to and not from the date of
it.26 payment;
Theory of supervening cause – regardless of
any event which is beyond the control of the parties
g. In case of dissolution of
that may arise after payment, recovery of corporation, 30 days after the
erroneously or illegally collected taxes cannot be approval by the SEC of the
allowed when it has been made beyond the plan for dissolution which
should be considered as the
20 Vda. De Aguinaldo v. CIR 13 SCRA 269 (1965) date of payment of the taxes
21 Gibbs v. CIR 107 Phil. 232 (1960) withheld on the earned
22 Bermejo v. CIR 87 Phil. 96 (1950)
income.
23 Aguilar v. CIR, CA-GR SP-16432, 30 March 1990
24 RCBC v. CIR, 168498, 24 April 2007
6. GR If the government failed to plead
25 Philippine Acetylene Co. v. CIR 7 November 1965 prescription in a motion to dismiss
26 CIR v. PNB, 161997, 25 October 2005; Philippine

Phosphate Fertilizer Corp. v. CIR, 141973, 28 June 2005 27 Lu Do & Ym Corp. v. Central Bank, 108 Phil. 566
 TAX REMEDIES7

or as a defense in its answer to the whom the tax is imposed by

petition for review. statute is the person entitled
EXC. TP amends his petition for to claim refund.
review alleging therein a new cause b. In case the TP does not file a
of action and the government pleads claim for refund, the
prescription in its answer to the withholding agent may file
amended petition for review. the claim. Although the fact
***Notes: Request for issuance of TCC is not subject that the TP and the
to the 2-year limitation upon basic consideration of withholding agent are
equity and fairness.28 When it is undisputed that a
TP is entitled to a refund, the State should not related parties is a factor
invoke technicalities to keep money not belonging to that increases the latter’s
it.29 legal interest to file a claim
Technicalities and legalisms, however for refund. Nothing in CIR v.
exalted, should not be misused by the government to
keep money not belonging to it, thereby enriching
PG PMC to suggest that such
itself at the expense of its law-abiding citizens. The relationship is required or
government is not exempt from the application of that the lack of such relation
solution indebiti. deprives the withholding
In UST Cooperative Store v. City of Manila, agent of the right to file a
L-17133, 31 December 1965, the Supreme Court
explained that there is erroneous payment of taxes claim for refund. What is
when a TP pays under a mistake of fact as for the clear in the decision is that a
instance in a case where he is not aware of an withholding agent has a legal
existing exemption in his favor at the time the right to file a claim for
payment was made. Such payment is held to be not
voluntary and, therefore, can be recovered or
refund. But while the
refunded. withholding agent has the
7. GR Government cannot be required right to recover the taxes
to pay interest on taxes refunded to erroneously or illegally
the TP in the absence of a statutory collected, he nevertheless has
provision clearly or expressly the obligation to remit the
directing or authorizing such same to the principal TP.32
payment.30 ***Notes: Pursuant to Sections 204(C) and 229, the
person entitled to claim a tax refund is the TP.
EXC.: However, in case the TP does not file a claim for
a. When the CIR acted with refunds, the withholding agent may file the claim.
patent arbitrariness. This rule does not apply to excise taxes. In
Arbitrariness presupposes such a case, the statutory TP is the one whom the tax
is imposed by law and who paid the same even if he
inexcusable or obstinate shifts the burden thereof to another.
disregard of legal
provisions31; 9. Remedies in Case of Denial by the
b. Section 79(C)(2) with respect CIR of the claim for refund:
to income taxes withheld on a. In case the CIR denied the
the wages of the employees. claim for refund, the TP may
8. Person entitled to refund: appeal to the CTA within 30
a. The person statutorily liable days from the receipt of the
to the tax or the person on CIR’s decision and within 2
years from the date of full
and final payment;
28 CIR v. PNB, 161997, 25 October 2005
29 Philippine Phosphate Fertilizer Corp. v. CIR, 141973, 28
June 2005
30 Commissioner v. Sweeney, L-12178, 29 August 1959
31 CIR v. Victorias Milling, L-19667, 29 November 1966 32 CIR v. Smart Communication Inc. 629 SCRA 342
 TAX REMEDIES8

b. In case of inaction by the CIR for the assessment or

and the 2-year period is collection of taxes are about
about to lapse, the said to lapse due principally to
inaction may be taken as a the TP’s fault;
denial of the claim for refund c. Deficiency Assessment –
which is appealable to the rendered by the tax authority
CTA and the TP must file a where the correct amount of
claim to the CTA before the the tax is determined after
2-year period lapses. an examination or
investigation is conducted.
IV. Assessment Process (228) 4. Requisites of a Valid Assessment
1. Letter of Authority – official Notice:33
document that empowers a Revenue a. In writing;
officer to examine and scrutinize a b. Stating the legal and factual
TP’s books of accounts and other bases of the assessment
accounting records, in order to made against him;
determine the TP’s correct internal 5. Service of Assessment:
revenue tax liabilities for a a. Registered mail – date of the
particular period. posting is the date of receipt;
2. Persons authorized to issue LA: b. Personal service – if the TP
a. CIR or his duly authorized refuses, there shall be
representative – audit of TP constructive service by
under the jurisdiction of the leaving a copy of the
NO; and assessment in the premises
b. RD – audit of TPs under the of the TP and this fact is
jurisdiction of the ROs. attested to, witnessed, and
3. Kinds of Assessment: signed by at least 2 ROs
a. Self-Assessment or other than the RO who
Voluntary Assessment – the constructively served the
TP assesses his own tax; same. The RO who served
b. Jeopardy Assessment – the same shall make a
assessment made by an written report of this matter
authorized RO without the which shall form part of the
benefit of complete or partial docket of the case.34
audit in the light of the RO’s ***Notes: an assessment is deemed made only when
belief that the assessment the demand letter or notice of assessment is released,
mailed, or sent by an internal revenue office to the
and collection of the TP. It is not required that the notice be received by
deficiency tax will be the TP within the prescribed period. By the sending
jeopardized by delay caused of the notice must be clearly proven.35
by the TP’s failure to comply It is incumbent upon the BIR to prove by
competent evidence that the Notice of Assessment
with audit and investigation was indeed received by the TP.
requirements to present his While a mailed letter is deemed received by
BOAs and other pertinent the addressee in the course of mail, this is merely a
records or to substantiate all disputable presumption subject to controversion and
or any of the deductions, a direct denial thereof shifts the burden to the party
exemptions, or credits
claimed in his return. It is 33 Sec. 228
usually issued when the 34 Sec. 3.1.7, RR 12-99
statutory prescriptive periods 35 Basilan Estates v. CIR, L-22492, 5 Sept. 1967
 TAX REMEDIES9

favored by the presumption to prove that the mailed EXC. The following conditions may
letter was indeed received by the addressee.36 subject a TP to multiple audits:
The facts to be proved to raise this
presumption are the letter was properly addressed a. CIR determined that fraud,
with postage prepaid and that it was mailed. irregularities, or mistakes
While we have held that an assessment is were committed by the TP;
made when sent within the prescribed period, even if b. TP himself requests a
received by the TP after its expiration, this ruling
makes it more imperative that the release, mailing,
reinvestigation of his BOA;
or sending of the notice be clearly and satisfactorily c. There is a need to verify the
proved.37 TP’s compliance with the
Tax assessments by tax examiners are withholding tax laws and
presumed correct and made in GF, and all regulations;
presumptions are in favor of the correctness of a tax
assessment unless proven otherwise.38 d. TP’s capital gains tax
6. Cases which need not be liabilities must be verified;
revalidated: and
a. Cases involving civil or e. CIR opts to exercise his
criminal tax fraud which fall power to obtain information
under the jurisdiction of NID from other persons relative to
under the Enforcement and the examination of the BOAs
Advocacy Service; and of that third party who is
b. Policy cases under audit by being audited.40
the special teams in the NO. 9. Obligations of a TP who is being
7. G.R. A tax return, statement, or audited:
declaration filed by a TP in any a. Duly acknowledge his receipt
office authorized to receive the same of the LA
shall not be withdrawn, but the b. Present within a reasonable
same may be modified, changed, or time his books of accounts
amended within 3 years from the and other related accounting
date of such filing. records;
EXC.: when an LA or investigation c. Submit the necessary
of such tax return, statement or schedules as may be
declaration has been actualy served requested by the RO within
upon the TP, said return, statement, the prescribed period as
or declaration shall no longer be stated in the LA; and
allowed to be amended.39 d. If, believing that he cannot
8. G.R. A TP’s BOAs and records shall present his BOA and/or other
be subjected to examination and accounting records as
inspection by the internal revenue required, and he intends to
officers, provided that for income tax request for more time to
purposes, such examination and present the said documents
inspection shall be made only once in order to avoid the issuance
in a taxable year. of a jeopardy assessment, the
TP may execute what is
referred to as “Waiver of the
Statute of Limitations.”
36 Republic v. CA, 149 SCRA 351 ***Notes: Without an authority, the assessment or
37 CIR v. Metro Star Suprema Inc., 185371, 8 December examination is a nullity.41
2010
38 Cagayan Robina Sugar Milling v. CA, 122451, 12

October 2000 40 Sec. 235, NIRC

39 Sec. 6(a), NIRC 41 CIR v. Sony Phils. Inc., 635 SCRA 234
 TAX REMEDIES10

LA must be served to the concerned TP within 30 b. If there is no sufficient basis

days from its date of issuance; otherwise, it shall for assessment, the case shall
become null and void. The TP shall then have the
right to refuse the service of LA, unless the same is be dismissed; otherwise, a
revalidated.42 PAN shall be issued.
A revalidated LA can be revalidated only twice. 12. Issuance of a Preliminary
A Letter of Authority should cover a taxable Assessment Notice (PAN)
period not exceeding one taxable year.
a. Communication issued by the
10. Notice of Informal Conference
Regional Assessment
a. It is a written notice
Division or by the CIR or his
informing a TP that the
duly authorized
findings of the audit
representative informing a
conducted on his BOAs and
TP who has been audited of
accounting records indicate
the finding of the RO,
that there is a discrepancy in
following the review and
his tax payments which has
evaluation of these findings;
to be paid.
***Notes: The informal Conference shall in no case
b. The PAN shall be in writing,
extend beyond thirty (30) days from receipt of the and show in detail the facts
notice for informal conference. lf it is found that the and the law, rules and
taxpayer is still liable for deficiency tax or taxes after regulations, or jurisprudence
presenting his side, and the taxpayer is not on which the proposed
amenable, the Revenue District Officer or the Chief
of the Special investigation Division of the Revenue assessment is based;
Regional Office, or the Chief of Division in the c. PAN is issued to the TP at
National Office, as the case may be, shall endorse the least by registered mail;
case within seven (7) days from the conclusion of the d. Instances when PAN is not
informal Conference to the Assessment Division of
the Revenue Regional Office or to the Commissioner
required: WARME (see Sec.
or his dull authorized representative for issuance of a 228, NIRC);
deficiency tax assessment.43 ***Notes: the requirements of due process are not
11. Informal Conference satisfied if only the FAN stating the computation of
tax liabilities and a demand to pay within the
a. It is a discussion on the prescribed period was sent to the TP.
merits of the assessment In Oceanic Wireless Network, Inc. v. CIR,
between the TP and the RO. 148380, 9 December 2005, it was held that the Court
The RO communicates to the has time and again reminded the CIR to indicate, in
a clear and unequivocal language, whether his action
TP concerned during an on a disputed assessment constitutes his final
informal conference the determination thereon in order for the TP concerned
imposition of deficiency to determine when his or her right to appeal to the
assessment, if any. The TP tax court accrues.
may attempt to convince the The BIR cannot use as an excuse to the
delay in the issuance of the assessment notice the
examiner to conduct a failure of the TP to furnish the BIR of the required
reinvestigation or a documents.
reexamination of his tax 13. Reply to a PAN
case. The TP may advise the a. This must be in writing to be
examiner if he will submit filed within 15 days from the
his position paper regarding date of the receipt of the
the issues raised in the PAN;
informal conference. b. L
***Notes: Failure of the TP to reply to a PAN makes
the TP in default and authorizes the revenue officials
to issue the FAN. However, no additional tax liability
42 General Audit Procedures and Documentation
43 RR 7-2018
 TAX REMEDIES11

or deficiency tax arises from such failure to reply a the FAN within 30
PAN.44 days from receipt;
14. Formal Letter of Demand or Final ii. TP failed to appeal to
Assessment Notice (FAN) CTA from the adverse
a. This is a declaration of decision of the CIR or
deficiency taxes issued to a his representative on
TP who fails to respond to the protest within 30
PAN within the prescribed days from receipt
period of time or whose reply thereof, except if the
to the PAN was found to be protest is decided by
without merit; the CIR’s authorized
b. Requisites: representative and TP
i. Contains computation later elevates it to the
of tax liabilities; CIR, in which case, it
ii. Demand for payment is the latter’s decision
within the prescribed that becomes final
period; and executory if not
iii. The facts, law, rules appealed to the CTA;
and regulations, iii. TP failed to appeal to
jurisprudence on the SC from the
which the assessment adverse decision of the
is based; CTA within 15 days.
iv. Signals the time when ***Notes: Failure of the TP to appeal the inaction on
penalties and the disputed assessment by the CIR or his
interests begin to representative within 30 days after the lapse of the
accrue against the TP; 180 days from the submission of supporting
documents will not result in the finality of the FAN.
and In the case of RCBC v. CIR, the SC said that should
v. Served on and the TP opt to await the final decision of the CIR on
received by the TP. the disputed assessments beyond the 180-day period,
c. FAN is issued by the CIR or the TP may appeal such final decision to the Court
under Section 3(a), Rule 8 of the Revised Rules of the
his duly authorized CTA. Thus, the TP is given the option either to:
representatives; 1. Appeal the inaction within 30 days following
***Notes: FAN is sent to the TP only by registered the 180-day period; or
mail or by personal delivery. If sent by personal 2. Await the decision of the CIR even beyond
delivery, the TP or his duly authorized the 180-day period, and appeal such
representative shall acknowledge receipt thereof in decision, if adverse, within 30 days from the
duplicate copy of the letter of demand showing the receipt of the decision.
following: The CIR has the authority to make subsequent
1. His name; assessments or modify or revise the original
2. Signature; assessment to collect additional sums covered by the
3. Designation and authority to act for and in original assessment as long as the modification or
behalf of the TP, if not the TP; and revision is done within the prescriptive period for
4. Date of receipt. making assessments, and even while the appeal of
d. Instances when the FAN the TP from the original assessment is still pending
becomes final, executory, and in the CTA, so as to avoid multiplicity of suits.45
demandable: In St. Stephen’s Chinese Girl’s School v.
Collector of Internal Revenue, 104 Phil. 314, the
i. TP failed to file a counting of the 30 days within which to institute an
valid protest against appeal in the CTA commences from the date of
receipt of the decision of the CIR on the disputed

44 Sec. 3.1.2. RR 12-99 45 Collector v. Batangas Tranportation Co. 102 Phil. 822
 TAX REMEDIES12

assessment, not from the date the assessment was assessment shall have the same force and effect as
issued. that issued by the CIR himself if not elevated to the
The criminal charge is filed directly with the latter.
DOJ. Thereafter, the TP is notified that a criminal b. Forms of Protest:
case had been filed against him, not that the CIR has i. Request for
issued an assessment. It must be stressed that a
criminal complaint is instituted not to demand reconsideration – is a
payment, but to penalize the TP for violation of the plea for a reevaluation
Tax Code.46 of an assessment on
An affidavit, executed by revenue officers the basis of existing
stating the tax liabilities if a TP and attached to a
criminal complaint for tax evasion, cannot be deemed
records without need
an assessment that can be questioned before the of additional evidence
CTA. which may involve a
15. Administrative Remedy – Protest question of fact or law
a. It is an act by the TP of or both. This does not
questioning the validity of toll the running of the
the imposition of the Statute of
deficiency assessment and Limitations; or
increments for internal ii. Request for
revenue taxes as shown in Reinvestigation – plea
the notice of assessment and for the reinvestigation
letter of demand; of the assessment on
***Notes: The administrative remedy of the TP or his the basis of the newly-
duly authorized representative from an issued FAN discovered or
is to protest to the CIR or his authorized
representative against the aforesaid formal letter of additional evidence
demand and assessment notice within 30 days from that a TP intends to
the date of receipt thereof. present in the
If there are several issues involved in the reinvestigation. It
formal letter of demand and assessment notice by the
TP only disputes or protests against the validity of
tolls the running of
some of the issues raised, the TP shall be required to the Statute of
pay the deficiency tax or taxes attributable to the Limitations.
undisputed issued, in which case, a collection letter c. Requisites of a Valid
shall be issued to the TP calling for payment of the Administrative Protest:
said deficiency tax, inclusive of the applicable
surcharge and/or interest. No action shall be taken i. In writing and
on the TP’s disputed issues until the TP has paid the addressed to the CIR;
deficiency tax or taxes attributable to the said ii. Contains all the
undisputed issued. The prescriptive period for information required
assessment or collection of the tax or taxes
attributable to the disputed issues shall be
by the rules, i.e.,
suspended.47 name of the TP,
If the TP’s protest is filed with the CIR’s nature of the request,
duly authorized representative and the protest is taxable period
denied, the TP may elevate the protest to the covered, amount and
Commissioner within 30 days from receipt of the
decision, otherwise, the assessment shall become kind of tax involved,
final, unless appeal to CTA is taken. date of receipt of
The decision of the CIR’s authorized assessment notice,
representative may be directly appealed to the CTA itemized statement of
because the CIR has the authority to delegate his
assessment functions to subordinate officers and the
findings to which the
TP agrees and
disagrees with;
46 CIR v.
47 Sec. 3.1.5, RR 12-99
 TAX REMEDIES13

iii. State the facts, regulations, or jurisprudence

applicable law, rules on which such decision is
and regulations, or based, otherwise, the
jurisprudence on decision shall be void, in
which the protest is which case, the same shall
based; not be considered a decision
iv. Filed within 30 days on a disputed assessment;
from the receipt of and
FAN; b. That the same is his final
v. Within 60 days from decision.
the date of filing of ***Notes: If the protest is denied, in whole or in part,
the protest, all by the CIR or his duly authorized representative, the
TP may appeal to the CTA within 30 days from date
relevant supporting of receipt of the said decision, otherwise, the
documents must be assessment shall become final, executory, and
submitted; demandable.
vi. Accompanied by a If the CIR or his duly authorized
representative fails to act on the TP’s protest within
waiver of the Statute 180 days from date of submission, by the TP, of the
of Limitations. required documents in support of his protest, the TP
***Notes: An assessment that has become final, may appeal to the CTA within 30 days from the lapse
executory, enforceable can no longer be contested by of the said 180-day period, otherwise, the assessment
means of a disguised protest. In the main, Certiorari shall become final, executory, and demandable.
may not be used as a substitute for a lost appeal or The CIR should always indicate to the TP in
remedy. This judicial policy becomes more clear and unequivocal language whenever his action
pronounced in view of the absence of sufficient attack on an assessment questioned by a TP constitutes his
against the actuations of government.48 final determination on the disputed assessment.
d. Payment under protest – GR It is clear that the jurisdiction of the CTA
Prior payment of assessed has been expanded to include not only decisions or
internal revenue tax is not rulings but inaction as well as the CIR. The
decisions, rulings, or inaction of the CIR are
required when protesting or necessary in order to vest the CTA with jurisdiction
disputing an assessment. to entertain the appeal, provided it is filed within 30
EXC. There are several days after the receipt of such decision or ruling, or
issues involved in the FAN within 30 days after the expiration of the 180-day
period fixed by law for the CIR to act on the disputed
but the TP only disputes or assessments. Such period is not merely directory but
protests against the validity mandatory and it is beyond the power of the courts to
of some of the issues raised, extend the same.50
the TP shall be required to 17. Remedies in case of denial:
pay the deficiency tax or a. In case of denial of protest by
taxes attributable to the the CIR:
undisputed issued. No action i. TP adversely affected
shall be taken on the TP’s by the decision may
disputed issues until the TP appeal to the CTA in
has paid the deficiency tax or division within 30
taxes attributable to the days form the receipt
undisputed issues.49 of decision
16. Decision of the CIR categorically stating
a. States the facts, the that the CIR’s action
applicable law, rules and is final;

48 De la Paz v. Panis, 57023, 22 June 1995 50CIR v. First Express Pawnshop Company, Inc. 172045-
49 Sec. 3.1.5, RR 12-99 46, 16 June 2009
 TAX REMEDIES14

b. In case of inaction by the MTC to the RTC, to the CTA

CIR, the TP can either: and finally to the SC;
i. Appeal to the CTA in e. The TP, however, may choose
division within 30 to pay the assessed tax
days from the lapse of within 30 days from receipt
the 180-day period; or of the assessment and then
ii. Await the decision of file a claim for refund or tax
the CIR and appeal credit of these taxes on
such final decision to grounds that they are
the CTA in division erroneously paid within 2
within 30 days after years from date of payment.
receipt of a copy of the If there is a denial of the
decision;51 claim, appeal to the CTA
***Notes: These options are mutually exclusive and shall be made within 30 days
resort to one bars the application of the other. from denial but within 2
See RA 1125 as amended by RA 9282.
In both cases, the TP may apply with the years from the date of
CTA for the issuance of an injunctive writ to enjoin payment;
the BIR from collecting the disputed tax during the f. If the CIR fails to act on the
pendency of the proceedings. claim for refund or tax credit
c. If the TP is not satisfied with and the 2-year period is
the decision of the CTA in about to expire, the TP
Division, he may resort to the should consider the
following remedy: continuous inaction of the
i. File an MR before the CIR as a denial and elevate
same Division of the the case to the CTA before
CTA within 15 days the expiration of the 2-year
from receipt of the period;
decision of the CTA; g. By way of a special civil
ii. If he is adversely action – in cases of grave
affected by a abuse of discretion, lack of
resolution of the jurisdiction or excess of
Division of the CTA jurisdiction, the TP may file
on his MR, he may file a Petition for Certiorari,
a petition for review Prohibition, and Mandamus
within the CTA en to the Supreme Court;
banc. h. By way of action to contest
d. In the case where the BIR forfeiture of chattel – in case
decides to utilize its judicial of the seizure of personal
tax remedies for collecting property under claim of
the taxes by means of an forfeiture, the TP desiring to
ordinary suit filed with the contest the validity of the
regular courts for the forfeiture may, at any time
collection of a sum of money, before the sale or destruction
the TP could oppose the same of the forfeited property,
going up the ladder of bring an action against the
judicial processes from the person seizing the property
or having possession thereof
51Fishwealth Canning Corporation v. CIR, 179343, 21 to recover the same, and
January 2010 upon giving proper bond may
 TAX REMEDIES15

enjoin the sale; or after the will not commence to run;

sale and within 6 months, he and
may bring an action to b. The 30-day period to appeal
recover the net proceeds starts to run when the TP
realized at the sale; receives the decision of the
i. Action for damages against a CIR denying the protest.
revenue officer – the TP may
also file an action for
damages against an internal
RO by reason of any act done
in the performance of an
official duty;
j. Injunction – the TP may also
file an injunction to the CTA
if the collection of the tax
may jeopardize his interest.
18. Failure of TP to Appeal:
a. Decision or assessment
becomes final, executory, and
demandable;
b. The TP is barred in an action
for the collection of the tax by
the government from
reopening the question
already decided;
c. The assessment is considered
correct which may be
enforced by summary
proceedings or judicial
actions;
d. In a proceeding for collection
of tax by judicial action, the
TP’s defenses are similar to
those of the defendant in a
case for the enforcement of a
judgment by judicial action;
and
e. The assessment which has
become final and executory
cannot be superseded
anymore by a new
assessment.
19. 30-day period to appeal commences
to run:
a. The decision of the CIR must
categorically state that his
action on the disputed
assessment is final,
otherwise period to appeal