COLLEGE OF ACCOUNTANCY

C-BAC7 Taxation (Income Taxation)

Second Semester AY 2021-2022

Course : C- BAC7: Taxation (Income Taxation)

Module : Module No. 3: Tax Remedies

Time Frame : 1.5 hours

A. Overview

This learning material discusses the tax remedies and procedures that the government and
taxpayers may apply in order to determine the correct amount of taxes that the taxpayer must pay
to the government.

This is relevant to Business Administration students because this will help them know the
procedures on how to apply for tax refund in case they have excess tax payments or how to make
proper advice to their future employers and clients.

You will be able to achieve the desired learning outcomes by devoting time and effort in studying
this material, listening and participating actively in the online discussion, and accomplishing the
tasks assigned in the Classwork section of the Google Classroom for this course.

B. Desired Learning Outcomes

After studying this module, you should be able to:

1. Identify the tax remedies available to the government in enforcing assessment and collections;
2. Determine the tax remedies available to taxpayers in contesting tax assessment ;
3. Determine the tax remedies available to taxpayers to recover excess tax payments;

C. Values Integration

In studying this module, it is hoped that you will be able to develop and manifest the following UA
Core Value/s:

✓ Servant Leadership
✓ Integrity
✓ Excellence
✓ Service Orientation
✓ Teamwork
✓ Obedience
✓ Open Communication

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

D. Content/Discussion

TAX REMEDIES – procedures that the government and taxpayers may adopt in order to
determine that tax liabilities of taxpayers are properly determined and paid.

In the Philippines, we use the self-assessment method to determine the tax liabilities of
taxpayers. Taxpayers compute their taxes, file the returns and pay the tax due to the
government. This method has inherent risk: under compliance or non-compliance.

Government Remedies – legally mandated procedures to enforce the determination and

collection of taxes.

a. Assessment - act of determining the tax liabilities of a taxpayer in accordance with the
tax law. After the government (BIR) has established the correct amount of tax
liabilities, an assessment notice will be sent to the taxpayer, and inform him to pay the
tax deficiency of the unpaid taxes.
b. Collection – pertains to the procedures of the government to enforce payment of
unpaid taxes from delinquent taxpayers.

PRESCRIPTIVE PERIOD OF ASSESSMENT

General Rule: The law requires that assessment must be made within three years from the
date of the actual filing of the return or the deadline required by law, whichever is later.

If the taxpayer file his return before the due date, the assessment, the prescriptive period is
three years after the due date; and in case of late filing of returns, the prescriptive period is
three after the return was actually filed.

DEADLINES OF VARIOUS TAXES

1. ANNUAL INCOME TAX

a. Individual taxpayers – April 15 of the following year
b. Corporation – on the 15th day of the fourth month following the end of the taxpayer’s
year end

2. Capital Gains tax

a. Capital gains tax on sale of domestic corporation
1. Transactional return – 30 days from the date of sale
2. Annual return – on the 15th day of the fourth month following the end of the
taxpayer’s year end

b. Capital gains tax return on sale of real properties – 30 days from the date of sale

3. Withholding tax returns

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

a. Withholding of final tax and fringe benefits tax – first two months of the quarter – 10
days following the month of withholding; third month of the quarter – end of the
following month.(manual filing)
b. Expanded withholding tax – first two months of the quarter – 10 days following the
month of withholding; third month of the quarter – end of the following month.
( manual filing)
Note: for EFPS taxpayers, they are given 5 days extension to pay the tax due. This is
applicable on the first two months.

c. Withholding tax on compensation income – 10 days following the end of each calendar
month and for December, the due date is January 15 of the following year.

4. Transfer tax returns

a. Donor’s tax return – within 30 days from date of donation
b. Estate tax return – within one year from the date of decedent’s death

5. Business tax returns

a. Non VAT taxpayers – Quarterly Percentage tax Return (BIR Form 2551Q) – within
25 days after the end of the quarter
b. VAT Taxpayers - Monthly VAT Returns for the first two months of the quarter
(2550M) within 20 days after the end of the month; Quarterly VAT Returns (
2550Q) within 25 days after the end of the quarter (manual filing)
Note: for EFPS taxpayers, they are given 5 days extension to pay the tax due. This is
applicable on the first two months.

6. Documentary Stamps Tax Returns (BIR form 2000) – five days from the end of the
month.

TAXPAYERS’ REMEDIES – procedures provided by the law to the taxpayers for disputing
assessments and recovering taxes erroneously paid.

Any return, statement of declaration filed within any office authorized to receive the same may
not be withdrawn. However, the taxpayer has the right to modify, change or amend the returns
within three years from the date of filing as long as there is no notice of audit or investigation of the
return has been served to the taxpayer.

EXCEPTION TO THE 3-YEAR PRESCRIPTION RULE

A. Fraudulent returns – understatement of income or overstatement of income by 30%

B. Willful neglect to file the return – non filing of the return for 3 years
C. Waiver of the statutes of limitation by the taxpayer – when the taxpayer request for re
investigation of his assessment which is granted by the CIR, the CIR and the taxpayer usually
agree for the temporary suspension of the prescriptive period for not less than 6 months to
give way to the reinvestigation

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

Note: in case of fraudulent returns and willful neglect to file the return, the prescriptive period is
10 years from the discovery of the fraud and non-filing of the return.

STAGES OF ASSESSMENT

1. Selection of taxpayer to be audited based on the audit program of the BIR, tax compliance
verification drive (tax mapping), tax information furnished by tax informants, pre audit of
annual tax returns and direct field observation by revenue officers
2. Audit of the taxpayers
3. Assessment of the taxpayers with unpaid or deficiency tax

BIR TAX AUDIT PROCESS

1. Release of Letter of Authority (LA) to the revenue officer, Letter Notice or Tax Verification
Notice – it must be serve to the taxpayer within 30 days from date of issue
2. Conduct of audit investigation - 120 days from date of receipt of LA by the taxpayer
3. Reporting on the results of examination – if there is sufficient evidence/basis to assess the
taxpayer for any deficiency tax or taxes, the revenue officer shall recommend the issuance of
assessment to the taxpayer in his report. This will include:
a. Basic tax due
b. Surcharge – 25 % in case of simple neglect and 50% in case of willful neglect
c. Interest – double of the rate prescribed for forbearance of money; currently at 12%
d. Compromise penalty – a settlement for the government not to enforce criminal prosecution.

ASSESSMENT PROCEDURES

1. Pre-assessment Notice (PAN) – a written communication issued by the Regional Assessment

Division or any other concerned BIR office informing the taxpayer of his obligation for tax
deficiency based on audit findings of a revenue officer.
2. Formal Letter of Demand and Final Assessment Notice (FLD/FAN) – is a final declaration of
deficiency tax issued to a taxpayer who defaulted by failing to respond to the PAN within 15
days of its receipt or whose reply to the PAN is unmeritorious.

DISPUTE OF ASSESSMENT – protest filed by the taxpayer within 30 days upon receipt

thereof TYPES OF TAXPAYERS’ PROTEST

A. Request for reconsideration – a plea for a re-evaluation of an assessment on the basis of

existing records without the need of an additional evidence which may involve a question of
facts or of law or both
B. Request for re investigation – is a plea of re-evaluation of an assessment on the basis of newly
discovered or additional evidence that the taxpayer intends to present in the re investigation
which may also involve a question of fact or of law or both. The taxpayer must submit
additional relevant evidence within 60 days from the day of filing a protest.

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) – it must be communicated to the taxpayer

within 180 days from the filing of his protest.

JUDICIAL APPEAL – protest on FDDA by filing a petition for review with the Court of Tax Appeal.

COLLECTION – procedure enforced by the government once the assessment achieves finality under
the following circumstances

A. When the taxpayer defaulted in his administrative remedies

1. Failure of the taxpayer to reasonably respond to the PAN
2. Failure of the taxpayer to reasonably protest the FLD/FAN
B. Denial of the taxpayer’s protest by the CIR or his authorized representative
C. Whether or not an appeal, when an assessment is upheld by the court

Note: Collection is enforceable once assessment became final and executory. There is non-injunction
of tax collection. In order to prevent the payment of interest, surcharge and other penalties or
charges on assessment, a taxpayer may pay the contested assessment under protest. He can file a
refund later when the disputed assessment is partially or wholly decided in his favor.

Government Remedies to Enforce Collection

1. Imposition of tax lien
2. Seizure of the taxpayer’s properties (distraint or levy)
3. Auction sale or forfeiture of the taxpayer’s properties
4. Filing of civil or criminal action against the taxpayer
5. Imposition of administrative penalties and fines
6. Suspension of business operation
7. Entering into a tax compromise with the taxpayer

STAGES OF COLLECTION

1. Preliminary Collection Letter – signed by RDO who has jurisdiction over the taxpayer
2. Final Notice before Seizure Letter – sent within 10 days from issuance of PCL
3. Warrant of Distraint/Levy or Garnishment – remedies under NIRC: seizure of taxpayer
property (distraint/levy) and civil or criminal action. WDL is served to the taxpayer if he
failed to respond to the Final Notice. Distraint or levy shall not be availed of if the amount of
tax is not more than P100. It shall not be sent earlier than 90 days from the date the
assessment has become due and demandable except if the amount shown on the tax return is
not paid on time or if the individual failed to pay the second install of his income tax due.
4. Research of the taxpayer properties
5. Notice of Tax Lien and/or Notice of Tax Levy – it is used to validate the legal claims or charge
of the government on identified property of the taxpayer either personal or real, as security
for the payment of his tax liabilities.
6. Seizure of properties
7. Auction sale and/or forfeiture of properties – within 20 days from levy, the revenue officer
conducting the proceeding shall advertise the property for auction for at least 30 days. The

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

property shall be awarded to the highest bidder. If the amount raised is not sufficient to cover
the taxpayer’s liability, the government shall forfeit the property. The taxpayer has up to one
year from date of auction sale or forfeiture within which to redeem the property.
8. Filing of civil or criminal action

RATE PROGRAM – RUN AFTER TAX EVADERS - is intended to identify and prosecute high-profile tax
evaders.

PRESCRIPTIVE PERIOD FOR COLLECTION – the government has 5 years from the date of release of
the final assessment to the taxpayer to make collection.

SUSPENSION OF THE STATUTES OF LIMITATION

1. Request for reinvestigation of the taxpayer which is granted by the CIR

2. When the CIR is prohibited from making assessment or from the beginning distraint or levy
or a proceeding in court
3. When the taxpayer cannot be located in the address given by him
4. When the warrant of distraint or levy is served and no properties can be located
5. When the taxpayer is out of the country

SUMMARY OF PRESCRIPTION RULES: COLLECTION

A. WITH A PRIOR ASSESSMENT – 5 years from assessment by summary proceedings or by

judicial action
B. WITHOUT PRIOR ASSESSMENT – 10 years from the discovery of fraud or falsity by judicial
action only

TAX REMEDIES OF THE TAXPAYER

1. DISPUTING AN ASSESSMENT – if the taxpayer has not yet paid the assessment, he must explain
his position within 15 days upon receipt of the pre-assessment notice. Or upon receipt of the
Formal Assessment Notice/Formal letter of Demand (FAN/FLD), the taxpayer must file a formal
protest in 30 days. The taxpayer may file request for reconsideration or request for re-
investigation. He shall wait for the BIR action within 180 days which shall be counted from the
date of submission of documents or receipt of FAN/FLD. If the protest was denied, the taxpayer
may file a petition with the Court of Tax Appeal (Judicial Appeal) within 30 days from the receipt
of the adverse decision or a motion for reconsideration (Administrative Appeal) with the CIR
within 30 days from the receipt of the adverse decision. In case of adverse decision from CTA and
CIR, the taxpayer may file within 15 days a motion for reconsideration or a new trial under the
same division or file a petition for review to the Supreme Court.

Content of Reply to PAN – explanation on the matters questioned by examiner; factual and legal
bases supporting the taxpayer’s position and prayer for full or partial cancellation of the PAN

Requirements for the validity of a protest

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

1. The taxpayer must indicate the nature of protest

2. The taxpayer must state the date of the assessment notice
3. The taxpayer should state the facts, the applicable laws, rules and regulations or
jurisprudence in which the protest is based
4. The protest must be filed by the taxpayer or his authorized representatives, in person or
through registered mail with return card with the concerned Regional Director, Assistant
Commissioner – LTS or Assistant Commissioner – Enforcement Service as the case may be
5. All relevant documents must be submitted within 60 days from the filing of the request
for reinvestigation

Note: The 60 day period applies only on the request for re investigation and upon its approval.

Compromise – the remedy of last resort. If the taxpayer has exhausted all the remedies, he may settle
his tax liability by way of compromise upon compliance of the conditions set by the BIR.

2. RECOVERY OF ERRONEOUSLY PAID TAXES

A. File a Claim for refund or credit within 2 years from the date of payment of the tax
B. If the claim was denied, the taxpayer may file a petition for reconsideration within 30 days
from receipt of the denial and within the two-year prescriptive period from the date of
payment of the tax
C. An adverse final decision of the CIR shall be appealed by filing a petition for review before the
CTA within 30 days from the receipt of the final decision and within the two year prescriptive
period
D. If the BIR did not act on the claim for refund or credit, the taxpayer must file a petition for
review before the CTA before the expiration of the two year prescriptive period
E. An adverse decision of the CTA shall be appealed within 15 days to the Supreme Court.

Refund or credit not allowed – on payment of documentary stamp tax or payment on tax
assessment that became final and executory.

Counting of the 2-year prescriptive period

1. The 2-year period is counted from the date of filing of the Final Adjusted Return, not from the
date of the quarterly income tax return
2. For VAT payments – the 2 year prescriptive period is counted from the date of filing of the
quarterly VAT returns, not from the monthly payments
3. If the tax paid is paid in installment, the 2 year period is counted from the last installment
4. For withholding taxes
a. Final withholding tax – 25th day after the close of each calendar quarter
b. Creditable withholding tax - last day of the month following the close of the quarter
during which the withholding was made

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

FORFEITURE OF REFUND – Refund check issued by the BIR must be claimed or encashed within five
years from the date said warrant or check was mailed or delivered.

FORFEITURE OF TAX CREDIT – tax credit must be utilized within 5 years from the date of issue,
unless revalidated.

AUTHORITY OF THE CIR TO COMPROMISE, ABATE AND REFUND OR CREDIT TAXES

Conditions for compromise – when there is reasonable doubt that exists as to the validity of the
claims against the taxpayer and the financial position of the taxpayer demonstrates a clear inability
to pay the assessed tax

Minimum of compromise settlement

a. 10% of the basic assessed tax – in case of financial incapacity
b. 40% of the basic assessed tax – for other cases

WHO WILL APPROVE THE OFFER OF COMPROMISE BY TAXPAYER?

A. Office of Commissioner of Internal Revenue ( if the amount does not exceed P1M)
B. National Evaluation Board – if the basic tax involved exceeds P1M and the settlement offered
is less than the prescribed minimum rates (CIR and 4 Deputy Commissioner?
C. Regional Evaluation Board – if the assessment issued by the Regional Office involving a basic
deficiency tax of P500,000 or less and minor criminal violations discovered by Regional and
District Office ( Regional Director, Assistant Regional Director, Chief – Legal Division’ Chief –
Assessment Division, Chief – Collection Division’ Revenue District Officer having jurisdiction
over the taxpayer-applicant)

WHAT MAY BE COMPROMISED?

1. Delinquent accounts
2. Pending cases under administrative protest
3. Civil tax cases being disputed before the courts
4. Collection cases filed in court
5. Criminal violations other than those filed in courts and those already involving criminal tax
fraud
6. Cases covered by pre-assessment notices contested by the taxpayer

WHAT CANNOT BE COMPROMISED?

1. Withholding tax cases
2. Criminal tax fraud cases
3. Criminal violations already filed in court
4. Delinquent accounts with duly approved schedule of installments
5. Cases of reduced assessment agreed upon by taxpayer
6. Cases which have become final and executory after final judgment of a court

AUTHORITY OF THE COMMISSIONER TO ABATE TAXES

1. The tax or any portion of it which appears to be unjustly or excessively assessed
2. The administrative or collection costs involved don not justify the collection of the amount due

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 COLLEGE OF ACCOUNTANCY
C-BAC7 Taxation (Income Taxation)
Second Semester AY 2021-2022

3. The taxpayer is dead, leaving no distrainable or leviable property

4. The taxpayer is abroad leaving no distrainable or leviable property
5. The taxpayer is a corporation which was already dissolved and all subscribed shares of stock
have been fully paid
6. The tax case has already prescribed

E. Assessment of Learning

For the self-regulated assessment of what you had learned from this module, please accomplish
the progress check/activity posted in our Google Classroom and submit it on or before due date.

F. References

Banggawan, R. B. (2021). Income Taxation Laws, Principles and Applications. Baguio City: Real
Excellence Publishing.

Ampongan, O. E. (2015). CPA Review in Taxation. Iriga City, Philippines: Ampongan, Omar
Erasmo G.

De Leon, H. S., & De Leon, H. M. (2016). The Fundamentals of Taxation. Manila City,
Philippines: REX Book Store.

De Leon, H. S., & De Leon, H. M. (2016). The Law on Income Taxation (with Illustration,
Problem and Solution. Manila City, Philippines: REX Book Store.

Duncano, D. A. (2017). Easy Guide to Taxation for Entrepreneurs. Mandaluyong City: Anvil
Publishing, Inc.

Duncano, D. A. (2016). National Internal Revenue Code of 1997 As Amended Updated with
Annotations. Mandaluyong City, Philippines: Anvil Publishing, Inc.

Congratulations for having completed this module!

See you in the next module!

Modules prepared by : Ligaya T. David

Reviewed/updated by : Rodelia R. Talavera

Faculty: RODELIA R. TALAVERA Page 9