Notes On Tax Remedies of The Government and Taxpayers
Notes On Tax Remedies of The Government and Taxpayers
Notes On Tax Remedies of The Government and Taxpayers
10:00AM to 12:00NN
NOTES ON TAX
REMEDIES OF THE ATTY. DARYL
MATTHEW A. SALES,
GOVERNMENT AND CPA, MBA
TAXPAYERS ATTORNEY-AT-LAW
3 years
10 years
■ FAILURE to file Return
■ FALSE Return
■ FRAUDULENT Return (with intent to evade tax)
10 years from discovery of falsity,
fraud or omission (Section 222, Tax Code)
Reckoning of 10-year prescriptive
period
A false return was filed on April 15, 1990, and the falsity
was discovered only on March 8, 1991. The assessment
for the 1989 deficiency income tax was issued on
January 9, 1995.
Supreme Court: The assessment was made well within
the 10-year prescriptive period reckoned from March 8,
1991.
(Commissioner of Internal Revenue v. Estate of Benigno
P. Toda, GR 147188, September 14, 2004)
False vs. Fraudulent return
False return - implies deviation from truth,
whether intentional or not.
Fraudulent return with intent to evade tax -
implies intentional or deceitful entry with intent
to evade tax; actual and not constructive
Negligence, whether slight or gross, is not
equivalent to fraud with intent to evade the tax
contemplated by law. It must amount to
intentional wrongdoing with the sole object of
avoiding the tax.
(Aznar vs. Court of Tax Appeals, G.R. No. L-20569, August 23, 1974, 58 SCRA 519; and Estate of
Fidel F. Reyes and Teresita R. Reyes v. CIR, CTA EB Case No. 189, March 31, 2007)
What constitutes "false return"
which warrants the application of
the ten-year prescriptive period?
1. Substantial under declaration revenues or overstatement
of expenses (30%) shall constitute prima facie evidence
of false and fraudulent return [Section 248(B) of the Tax
Code]
- Substantial under-remittance of the withholding tax
returns on compensation (Samar-I Electric Cooperative,
Inc. v. CIR, CTA EB Case No. 462, March 11, 2010)
2. Absence of income in the return (filing of deficient
returns), tantamount to an omission to file returns (UCPB
V. CIR, CTA EB 567 re CTA Case No. 7259, January 12,
2011, and CIR v. Gonzales, No. L-19495, November 24,
1966)
Reckoning of prescriptive period of
assessment:
Where do I begin?
PRESCRIPTIVE PERIOD TO ASSESS
GENERAL RULE EXCEPTION
BIR can only assess
(issue the FAN) within 3
BIR can assess (issue the
years from:
FAN) within 10 years from
discovery in case of:
• deadline for filing the
return (if filed on or
• False return
before the deadline); or
• Fraudulent return
• from actual filing, if filed
• Failure to file return
late; or
• from filing of amended
return
PRESCRIPTIVE PERIOD TO ASSESS
Date of
Returns for Deadline for Last Day to Prescribed
Date of Filing issuance of
2018 filing Assess or not?
FAN
Final ITR (Annual) April 1, 2019 April 15, 2019 April 15,2022 January 26, 2022 No
1st Q VAT Return April 25, 2018 April 25, 2018 April 25, 2021 January 26, 2022 Yes
FWT (4Q) January 9, 2019 January 31, 2019 January 31, 2022 January 26, 2022 No
EWT (4Q) January 9, 2019 January 31, 2019 January 31, 2022 January 26, 2022 No
WTC (December) January 15, 2019 January 15, 2019 January 15, 2022 January 26, 2022 Yes
YES
CRIMINAL ACTION
Investigation/Examination
of TP's books and
accounting records
NOTICE OF DISCREPANCY
ISSUANCE OF PRELIMINARY
ASSESSMENT NOTICE (PAN)
■ Issued by CIR/Authorized representative if there exists sufficient
basis to assess TP for any deficiency tax
■ PAN must show IN DETAIL the following:
– Facts, and
– Law, rules and regulations, or jurisprudence.
■ TP must respond within 15 days from receipt of the PAN.
■ If TP does not respond or continues to disagree with the finding of
deficiency tax(es), a Final Assessment Notice (FAN) shall be issued
within 15 days from filing or submission of TP’s response.
ISSUANCE OF PRELIMINARY
ASSESSMENT NOTICE (PAN)
■ The sending of PAN to a taxpayer to inform him of the assessment
is part of the “due process requirement in the issuance of a
deficiency tax assessment,” the absence of which renders void any
assessment made by the tax authorities (CIR vs Metro Star
Superama, Inc., G.R. No. 185371)
■ Hence if no PAN is given (not covered by the exceptions), the FAN
which follows it is void.
– EXCEPTIONS (if PAN not required in certain instances)– no
violation of due process requirement as provided in the Metro
Star Superama doctrine
SAMPLE
PAN
BIR Audit Process
NOTICE OF DISCREPANCY
TP is given opportunity
to present his side
during the Discussion (in
no case to exceed 30
days).
YES
PRELIMINARY
TP is still found liable for TP is ASSESSMENT NOTICE
deficiency taxes. amenable? (PAN)
NO
WHEN PAN IS NOT
NECESSARY
■ When the deficiency assessment is based on a finding that there was a
mathematical error in the computation of the tax as appearing on the face
of the tax return filed;
■ When a discrepancy has been determined between the tax withheld and
the amount actually remitted by the withholding agent;
■ When a taxpayer who has opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period 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;
■ When the excise tax due on excisable articles has not been paid; and
■ When a tax-exempt person who locally purchased or imported an article,
such as vehicle, capital equipment, machineries and spare parts, has sold,
traded or transferred such article to a non-exempt person.
POLL QUESTION #1
ANSWER
ISSUANCE OF FINAL
ASSESSMENT NOTICE (FAN)/
Formal Letter Demand (FLD)
■ Issued by CIR/Authorized representative calling for payment of
deficiency tax
■ FAN must show IN DETAIL the following:
– Facts, and
– Law, rules and regulations, or jurisprudence.
– Otherwise, assessment is void
■ TP must respond within 30 days from receipt of the FAN.
■ TP must state whether its protest is a request for REINVESTIGATION
or RECONSIDERATION.
■ Supporting documents, if any, must be submitted within 60 days
from filing of the protest.
■ Failure to protest or submit the supporting documents shall render the FAN
final.
ISSUANCE OF FINAL
ASSESSMENT NOTICE (FAN)
AND/OR FORMAL DEMAND
LETTER (FDL)
■ RECONSIDERATION: plea of re-evaluation of an
assessment on the basis of existing records without
need of additional evidence; it may involve both a
question of fact or of law or both.
■ REINVESTIGATION: plea of re-evaluation of an
assessment on the basis of newly discovered or
additional evidence that a taxpayer intends to present in
the reinvestigation; it may also involve a question of fact
or of law or both.
SAMPLE
FAN/FLD
BIR Audit Process
PRELIMINARY
ASSESSMENT NOTICE
(PAN)
NO
NO
BIR Audit Process
FINAL ASSESSMENT
NOTICE (FAN) / FORMAL
LETTER OF DEMAND (FLD)
NO
TP files a NO
Protest to ASSESSMENT
FAN/FLD w/in BECOMES FINAL
30 days?
YES
PROTEST to FAN/FLD
ISSUANCE OF FINAL DECISION
ON DISPUTED ASSESSMENT
(FDDA)
■ FDDA must show IN DETAIL the following:
– Facts, and
– Law, rules and regulations, or jurisprudence.
– Otherwise, the decision is void
■ It is the Commissioner’s final decision.
■ TP has 30 days from receipt to appeal to the Court of
Tax Appeals (CTA).
ISSUANCE OF FINAL DECISION
ON DISPUTED ASSESSMENT
(FDDA)
NOTE:
■ A void FDDA does not invalidate the underlying
assessment. If the FDDA is void, it is as if there was no
decision of the CIR. Hence, tantamount to a denial by
inaction by the CIR, which may be appealed to the CTA.
(CIR vs. Liquigaz Philippines Corporation, G.R. No.
215534, April 18, 2016)
SAMPLE
FDDA
BIR Audit Process
PROTEST to FAN/FLD
TP submits NO
What kind Request for documents ASSESSMENT
of protest? Reinvestigation w/in 60 BECOMES FINAL
days?
YES
FINAL DECISION ON
Request for
Reconsideration
DISPUTED ASSESSMENT
(FDDA)
If there is no response from the BIR within 180 days after the TP filed the
protest (R for Recon) or submitted supporting documents (R for ReinV), the TP
may:
✓ APPEAL to the CTA w/in 30 days; or
✓ AWAIT the FDDA.
Filing an appeal to CTA
upon denial of protest
Failure of a taxpayer to appeal before the CTA the inaction of the CIR
on a protested assessment within 30 days after the 180-day period
does not render an assessment final and executory.
The taxpayer may await the final decision of the CIR and, within 30
days from receipt of the decision, appeal the decision with the CTA.
NO
TP files an NO
appeal to ASSESSMENT
FDDA w/in 30 BECOMES FINAL
days?
YES
TP may choose to protest:
Administratively or
Judicially
POLL QUESTION #2
After the BIR audit, Liam Corporation (LC) was found to have
deficiency income tax for the year 2015. For 2015, LC filed its ITR
on April 15, 2016 since it used calendar period of accounting.
The BIR sent PAN on December 23, 2018, and eventually FAN on
April 11, 2019, which were received by LC on the same dates
they were sent. Upon receipt of FAN, LC filed its protest letter on
June 11, 2019.
Then, without action from CIR, LC filed a petition for review before
CTA, alleging that the assessment has prescribed. For its part,
CIR moved to dismiss the case, pointing out that the assessment
had already become final and executory.
ANSWER
OTHER REMEDIES – REFUND
NIRC SEC 229 – Recovery of Tax
Erroneously or Illegally Collected
■ Both Administrative and Judicial Claim shall be made during the
two (2) year period from payment.
■ With decision - If there is a denial by CIR within the 2-year period,
appeal to CTA div should also be within the 2-year period
■ Inaction of CIR - If there is no decision and the 2-year period is
about to lapse, appeal the claim to CTA div so that the judicial
claim should also be within the 2-year period
■ Appeal to CTA div due to a denial or inaction should be made
within 30 days
Refund under Section 229
File administrative claim
for refund (CIR) within 2
year period from payment
NO
TP files Appeal NO
due to inaction REFUND DENIAL
w/in 2 year pd BECOMES FINAL
w/in 30 days?
NO
TP files Appeal
NO
after expiration of
REFUND DENIAL
120 day period
(inaction) w/in
BECOMES FINAL
30 days?