Chapter 9.

Income Taxation
o Tax Remedies of Government and Taxpayers
o Penalties or Additions to Taxes

Reported by: Diether O. Manalo

Chapter 9. Income Taxation, 2017-02-23 2017

Chapter
Chapter9.9.Income
IncomeTaxation
Taxation

Tax
TaxRemedies
RemediesofofGovernment
Governmentand
andTaxpayers
Taxpayers

Chapter 9. Income Taxation, 2017-02-23 2017 2

Remedies of Government, In General
Section 203
Internal revenue taxes shall be assessed within 3 years after the
last day for tax return filing. After such period is the allowed time to
begin levy

Section 222 (exceptions to above rule)

10-year period, if there is intent to evade tax
If taxpayer and Commissioner agreed upon, in writing, a particular
time of assessment

Section 223

Chapter 9. Income Taxation, 2017-02-23 2017 3

Civil Remedies of Government for Collection of Taxes
1. Summary Remedies by the Government
a) By Distraint of Personal Property
BIR Commissioner or Revenue District Officer can seize personal
property in sufficient quantity to satisfy the tax delinquency
Constructive Distraint - BIR obligates the taxpayer to preserve his
personal property intact and unaltered

b) By Levy Upon Real Property

c) Further Distraint or Levy

Chapter 9. Income Taxation, 2017-02-23 2017 4

Civil Remedies of Government for Collection of Taxes
2. Judicial Remedies by the Government
a) By Civil Action
A case is filed requiring the taxpayer to pay his taxes due

b) By Criminal Action
A case is filed for both collection of taxes and penalties

Note: The remedies of distraint or levy shall not be availed if amount of tax
involved is not more than P100 000.

Chapter 9. Income Taxation, 2017-02-23 2017 5

Taxpayers Remedies of Protesting an Assessment,
Asking for Tax Refunds
I. Protesting of Assessment of Taxes
Pre-Assessment Notice shall be given by the Commissioner to the
taxpayer, except in cases stated in Section 228 such as when the tax
deficiency is due to a computation error in the face of the tax return
Taxpayer shall respond to the PAN. Failure to do so shall entitle the
Commissioner to issue a Final Notice and Demand based on his audit
findings.
Taxpayer may file a request for reinvestigation within 30 days from receipt of
the GAND.
Taxpayer has 60 days to submit all pertinent documents to support his claim;
otherwise, the Commissioners assessment shall be final.
No action 180 days after submission of documents/ Receipt of Denied
decision: Taxpayer may appeal to the Court of Tax Appeal. Otherwise,
decision shall be final, executory, and demandable.
Upon receipt of denied decision from the Court of Tax Appeals, taxpayer may
protest to the Supreme Court. Supreme courts decision is final.

Chapter 9. Income Taxation, 2017-02-23 2017 6

Taxpayers Remedies of Protesting an Assessment,
Asking for Tax Refunds
Flow of Protest

BIR Examiner

PAN

BIR Examiner

FAND

Denied decision Final decision

Denied decision
from BIR from Supreme
from COTA
Commissioner Court

Chapter 9. Income Taxation, 2017-02-23 2017 7

Taxpayers Remedies of Protesting an Assessment,
Asking for Tax Refunds
II. Recovery of Tax Erroneously or Illegally Collected
A claim for refund shall be filed before the expiration of the 2-
year period from the date of the payment of tax or penalty.
BIR Commissioner may refund or credit any tax that appears on
the tax returns as clearly erroneously paid

III. Forfeiture of Tax Refund and of Tax Credit

Forfeiture of Tax Refund: Refund check that remained
unclaimed five years from the date of said check shall be
forfeited in favor of the government
Forfeiture of Tax Credit: Tax Credit Certificate that remained
unutilized after five years from the date of issue shall not be
allowed as payments for tax liability.

Chapter 9. Income Taxation, 2017-02-23 2017 8

Chapter 9. Income Taxation

Penalties or Additions to Taxes

2017
Penalties or Additions to Taxes
There shall be imposed penalties if:
Tax Return not filed
Tax return filed after due date
Amount not paid on or before the date of prescribed payment
Quarterly or final adjustment income tax was underpaid

Chapter 9. Income Taxation, 2017-02-23 2017 10

Penalties or Additions to Taxes
Surcharge of 25%
Failure to file any tax return and pay the tax due thereon as
required on the date prescribed
Unless otherwise authorized by the BIR Commissioner, filing a tax
return with an internal revenue officer other than those with whom
the return is required to be filed
Failure to pay the delinquency of deficiency tax in the notice of
assessment and demand.
Failure to pay the full or part of the amount of tax shown on any
tax return required to be filed, or the full amount of tax due for
which no tax return is required to be filed on or before the date
prescribed for its payment

Chapter 9. Income Taxation, 2017-02-23 2017 11

Penalties or Additions to Taxes
Surcharge of 50%
In case of willful neglect to file tax return within the period
prescribed by law/regulations
In case a false or fraudulent tax return is willfully made
Substantial under-declaration of sales or overstatement of deductions
(the 30% rule)

Chapter 9. Income Taxation, 2017-02-23 2017 12

Penalties or Additions to Taxes
Interest of 20% per annum
Collected on any unpaid amount of tax

Chapter 9. Income Taxation, 2017-02-23 2017 13

Penalties or Additions to Taxes
General Provisions
Amount added to the tax shall be collected in the same time and in
the same manner and as part of tax
If WHT agent is the government, the employee thereof for the
withholding and remittance of income tax shall be personally liable
for the additions to the income tax prescribed herein

Chapter 9. Income Taxation, 2017-02-23 2017 14

Penalties or Additions to Taxes
Determination of Additions to Basic Tax
With delinquency tax but without willful neglect or fraud

Correct tax due per tax return filed P150 000

Less: Payment of tax due per tax return (100 000)
Delinquency Tax P 50 000
Additions to delinquency tax
50 000 x 25% P12 500
50 000 x 20% x 3/12 2 500 15 000
Assessed amount of tax due per BIR notice P 65 000

Chapter 9. Income Taxation, 2017-02-23 2017 15

Penalties or Additions to Taxes
Determination of Additions to Basic Tax
With deficiency tax but without willful neglect or fraud

Correct tax due per audit/assessment P250 000

Less: Payment of tax due per tax return (100 000)
Delinquency Tax P100 000
Additions to delinquency tax
100 000 x 25% P25 000
100 000 x 20% x 9/12 15 000 40000
Assessed amount of tax due per BIR notice P140 000

Chapter 9. Income Taxation, 2017-02-23 2017 16

Chapter 9. Income Taxation
o Tax Remedies of Government and Taxpayers
o Penalties or Additions to Taxes

Reported by: Diether O. Manalo

Chapter 9. Income Taxation, 2017-02-23 2017