TAX REMEDIES - PART 1

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TAX REMEDIES PART 1

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Definition of Tax Remedies

  • Tax remedies are legal measures or procedures available to:

    • Taxpayers

    • Tax authorities

  • Purpose:

    • Resolve tax-related disputes/issues

    • Contest/adapt tax liabilities

    • Avoid penalties

    • Ensure fair treatment under tax laws

  • Importance:

    • Protect taxpayers’ rights

    • Ensure due process during disagreements/errors in tax assessments or payments.

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Actions Available

  • Available Actions:

    • For Government/BIR: Enforcing collection of the proper taxes

    • For Taxpayer: Defending against unlawful enforcement of tax laws.

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Remedies of the State - Nature

  • Assessment:

    • When the taxing authority identifies that the taxpayer has not paid the correct taxes.

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Remedies of the State - Nature

Power to Assess

  • Vested in the Commissioner of Internal Revenue.

  • Presumed correct, and:

    • Burden of proof lies with the taxpayer.

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Remedies of the State - Nature

Assessment Notice

  • Notice given to the taxpayer about unpaid taxes.

  • To be valid, the assessment must include:

    • Facts and law supporting conclusions.

    • Computations of tax liabilities.

    • Demand for payment within a specified period.

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Remedies of the State - Timing

Assessment Timing

  • General Rule: Assessment within 3 years:

    • After the last day prescribed by law for filing or from the date of filing, whichever is later.

  • Exceptions:

    • False/fraudulent return to evade tax: assessed within 10 years after fraud discovery.

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Remedies of the State - Timing

Assessment Exceptions

  • Failure or omission to file a return: assessed within 10 years of the discovery.

  • Any agreed period between taxpayer and Commissioner before expiration of the 3-year period of assessment.

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Remedies of the State - Prescriptive Period

With Prior Assessment

  • Five-Year Rule:

    • From issuance of Final Assessment Notice (FAN) without prior assessments (assumptions of truthfulness).

  • Three-Year Rule:

    • Actual filing or there's a deadline for filing from that date.

  • Ten-Year Rule:

    • From discovery for fraudulent returns or no returns filed.

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Remedies of the State - Nature

Collection Methods

  • Methods of Collection:

    • Distraint (seizure of personal property)

    • Levy of real property

    • Court Action (civil or criminal)

  • Note: Multiple methods can be pursued simultaneously.

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Remedies of the State - Timing

Collection Timing

  • General Rule: Within 5 years post-assessment.

  • Or the agreed period between taxpayer and Commissioner before the expiration of the 5-year period.

  • Or within 10 years after fraud, falsity, or omission discovery through court proceedings.

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Tax Lien

  • Accrues when a taxpayer neglects/refuses to pay tax.

  • Valid only when a notice of lien is filed with the Register of Deeds for it to affect properties and property rights.

  • If obligation is unmet, creditors may seize the assets.

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Distraint | Levy | Garnishment

  • Distraint:

    • Seizure and holding of movable property as security for tax payment.

  • Levy:

    • Legal seizure of real property for owed taxes.

  • Garnishment:

    • Direct deduction instruction from a third-party's wage or bank account.

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Comparisons of Distraint, Levy, and Garnishment

Aspect

Distraint

Levy

Garnishment

Subject Matter

Personal property

Real property

Personal property owned by taxpayer in third-party possession.

Disposition

Resold by Government for deficiency

Forfeited and sold by the Government

Resold by Government for deficiency.

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Court Action

Civil Action

  • For tax collection filable within:

    • 5 years post-assessment.

    • Principal taxes only.

  • Court Jurisdictions:

    • P1,000,000 or more: Court of Tax Appeals (CTA)

    • Less than P1,000,000: RTC/MTC.

Criminal Action

  • For enforcement of penal provisions.

  • Also filable within 5 years from assessment.

  • Can file during an ongoing administrative protest within BIR.

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Court Action - Note

  • Deficiency tax assessments of P100 or less (excluding charges and penalties) shall cease to be assessed/collected. Exceptions apply if multiple assessments exceed the P100 threshold in a single investigation.

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Suspension of Running of Statute of Limitations

  • Suspensions apply in the following cases:

    • Prohibition of assessment, distraint, or levy by the Commissioner for a specified period.

    • Upon granted reinvestigation requests by taxpayers.

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Suspension of Running of Statute of Limitations

  • Further suspensions apply if:

    • Taxpayer is unlocatable at the specified address.

    • Change of address isn't communicated to the Commissioner.

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Suspension of Running of Statute of Limitations

  • Additional cases for suspension:

    • Warrant of distraint or levy served, but no property located.

    • When the taxpayer is out of the Philippines.

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Suspension of Running of Statute of Limitations

General Rule

  • No authority is allowed to grant injunctions preventing national revenue tax collections as mandated by the Tax Code.

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Suspension of Running of Statute of Limitations

Exceptions

  • CTA can grant a TRO or Injunction when:

    • Tax collection jeopardizes government or taxpayer interests.

    • Amount claimed is deposited with the court or a surety bond filed.

    • Appeal presented is not frivolous or dilatory.

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END OF PRESENTATION