CHAPTER EIGHT REMEDIES CIVIL REMEDIES What are the civil remedies for the collection of Delinquent Taxes?

The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be: 1. By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and 2. By civil or criminal action. (Section 205 of the NIRC)

Why is criminal action already considered as a civil remedy in collecting taxes? The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner.(Ibid.) When is distraint of personal property available as a remedy? Upon failure of the person owing any delinquent tax or delinquent revenue to pay the same at the time required, the Commissioner or his duly authorized representative, if the amount involved is in excess of One million pesos (P1,000,000), or the Revenue District Officer if the amount involved is One million pesos (P1,000,000) or less, shall seize and distraint any goods, chattels, or effects, and the personal property,

including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property of such person in sufficient quantity to satisfy the tax or charge together with any increment thereto incident to the delinquency, and the expenses of the distraint and the cost of the subsequent sale. (Section 207 of the NIRC) When is levy on property available as a remedy? After the expiration of the time required to pay the delinquent tax or delinquent revenue as prescribed in this Section, real property may be levied upon before, simultaneously or after the distraint of personal property belonging to the delinquent. (Section 207B of the NIRC)

Can injunction be imposed to restrain the collection of tax? No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee, or charge imposed by this Code. (Section 218 of the NIRC)

What is Tax Lien? It is merely a security established by statute of which a tax collector may avail himself in default of taxes. ( Law Dictionary, Second Edition, by Steven H. Gifis) When can Tax Lien be resorted to as a remedy? If any person, corporation, partnership, joint account, association or insurance company liable to pay an internal revenue tax, neglects or

refuses to pay the same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid, with interest, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: (See Section 219 of the NIRC) When is the tax lien not valid against third person? The tax lien shall not be valid against any mortgagee, purchases or judgment creditor until notice of such lien shall be filed by the Commissioner in the office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located. (Section 219)

jSTATUTE OF LIMITATIONS
What is the period of limitation upon Assessment and Collection? Internal Revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after expiration of such period. Provided, That in a case where a return is filed beyond the period prescribed by law, the 3 year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. (Section 203 of the NIRC) The three-year period also applies to collection of taxes.

When will the three-year period of prescription for assessment not be applied? In the case of false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of falsity, fraud, or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in civil or criminal action for the collection thereof. If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent agreement made before the expiration of the period previously agreed upon.(Section 222 of the NIRC) In the case of false and fraudulent return with intent to evade taxes or failure to file a return on which the tax was assessed by the government within the 10 year prescriptive period, what will be the new prescriptive period for the collection of the tax? The tax may be collected by distraint or levy or proceeding in court within five (5) years following the assessment of the tax. Any internal revenue tax, which has been assessed within the period agreed upon in writing between the Commissioner and the taxpayer may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the five (5)-year period. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon. (Ibid.)

When will the running of the prescriptive period of collection and assessment be tolled? The running of the Statute of Limitations on the making of assessments and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period 1. during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court 2. and for sixty (60) days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; 3. when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer informs the Commissioner of any change in address, the running of the Statute of Limitations will not be suspended; 4. when the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located; 5. and when the taxpayer is out of the Philippines. (Section 223 of the NIRC) Is notice of assessment required? Yes. When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: (Section 228 of the NIRC) When will notice of assessment be not required? Provided, however, That a reassessment notice shall not be required in the following cases:

1. When the finding of any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or 2. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or 3. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or 4. When the excise tax due on excisable articles has not been paid; or 5. When an article locally purchased or imported by an exempt person such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons. (Ibid.)

Is there a requirement for the specific form of notice of assessment? The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. (Ibid.)

Outline the procedures in protesting an assessment. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.

Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180) day period; otherwise, the decision shall become final, executory and demandable. (Section 228)

What is the statute of limitation for cash refund or tax credit? A refund check or warrant issued in accordance with the pertinent provisions of this Code, which shall remain unclaimed or uncashed within five (5) years from the date the said warrant or check was mailed or delivered, shall be forfeited in favor of the Government and the amount thereof shall revert to the general fund. A tax credit certificate issued in accordance with the pertinent provisions of this Code, which shall remain unutilized after five (5) years from the date of issue shall, unless revalidated, be considered invalid, and shall not be allowed as payment for internal revenue tax liabilities of the taxpayer, and the amount covered by the certificate shall revert to the general fund. (Section 230)

What is the remedy of a taxpayer in case of forfeiture of personal property? In case of the seizure of personal property under claim of forfeiture, the owner desiring to contest the validity of the forfeiture may, at any time before sale or destruction of the property, bring an action, against the person seizing the property or having possession thereof to recover the same, and upon giving proper bond, may enjoin the sale; or after the sale and within six (6)months, he may bring an action to recover the net proceeds realized at the sale.(Section 231)

When may the Commissioner of Internal Revenue compromise the payment of internal revenue taxes? The Commissioner may compromise the payment of any internal revenue tax when: 1. A reasonable doubt as to the validity of the claim against the taxpayer exists; or 2. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. (Section 204 of The NIRC) When may the Commissioner of Internal Revenue abate or cancel a tax liability? The Commissioner may abate or cancel a tax liability when: 1. The tax or any portion thereof appears to be unjustly or excessively assessed; or 2. The administration and collection costs involved do not justify the collection and amount due. (Section 204 B of the NIRC)

REVIEW QUESTIONS 1. What is distraint? 2. What is levy? . 3. Why is a criminal action considered a civil remedy in the collection of delinquent taxes? 4. What is tax lien? 5. What is the requirement for a tax lien to be valid? 6. Is notice of assessment required? 7. What is the period for assessment and collection? 8. What is the remedy if the taxpayer is not satisfied with the assessment made by the taxing authority? 9. If the decision of the Commissioner is adverse in case of a protest, within what period should the taxpayer appeal to the Court of Tax Appeals? 10. What is the statute of limitation for cash refund?