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TAXATION - Review > TAX REMEDIES > Flashcards

TAX REMEDIES Flashcards

1
Q

What are tax remedies?

A

Tax remedies:

  1. ON THE PART OF THE GOVERNMENT, are courses of action provided or allowed in the law to implement the tax laws or enforce tax collections.
  2. ON THE PART OF THE TAXPAYER, are legal actions which a taxpayer can avail of to seek relief from the undue burden or oppressive effect of tax laws, or as a means to check possible excesses by revenue officers in the performance of the duties.
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2
Q

What are the stages of the assessment process?

A

Stage 1 - TAX AUDIT OR INVESTIGATION

Stage 2 - ISSUANCE OF PRELIMINARY ASSESSMENT NOTICE (PAN)

Stage 3 - ISSUANCE OF FORMAL LETTER OF DEMAND/FINAL ASSESSMENT NOTICE (FAN)

Stage 4 - DENIAL OF PROTEST

Stage 5 - DENIAL OF APPEAL BY CTA DIVISION

Stage 6 - DENIAL OF APPEAL BY CTA EN BANC

Stage 7 - DENIAL OF APPEAL BY SC DIVISION

Stage 8 - DENIAL OF APPEAL BY SC EN BANC

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3
Q

Explain the 1st stage of the assessment process.

A

IRIS of the BIR selects taxpayers which should be audited based on prescribed law, rules and regulations, filed tax returns and other information available. See RMO 19-2015 and RMO 6-2023 for cases that will be audited.

The BIR then conducts an audit by issuing a Letter of Authority (LOA) to determine the taxpayer’s correct internal revenue tax.

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4
Q

Explain the 2nd stage of the assessment process.

A

A Preliminary Assessment Notice is communicated to the taxpayer, informing such taxpayer the findings of the audit done by the revenue officer.

The taxpayer has FIFTEEN DAYS TO REPLY CONTESTING THE FINDING IN THE PAN.

Should he fail to reply, or when his reply has no merit, he shall be considered IN DEFAULT and the BIR will then issue a Final Assessment Notice.

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5
Q

Explain the 3rd stage of the assessment process.

A

A Final Assessment Notice or a Formal Letter of Demand when:

  1. The taxpayer failed to respond to the PAN or
  2. The taxpayer’s reply has no merit

From here, the taxpayer has the following remedies:
1. File a PROTEST to the CIR or his representative WITHIN 30 DAYS FROM DATE OF RECEIPT OF THE FAN

  1. Submit all supporting documents WITHIN 60 DAYS FROM FILING OF PROTEST IN CASE OF REQUEST FOR REINVESTIGATION.
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6
Q

Who are authorized to issue a Letter of Authority?

A

The person authorized to issue a LOA depends on the type of taxpayer:

  1. If the taxpayer is UNDER THE JURISDICTION OF THE NATIONAL OFFICE - CIR is authorized to issue LOA
  2. If the taxpayer is UNDER THE JURISDICTION OF THE REGIONAL OFFICES - Regional director is authorized to issue LOA.
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7
Q

Who are authorized to issue a Letter of Authority?

A

The person authorized to issue a LOA depends on the type of taxpayer:

  1. If the taxpayer is UNDER THE JURISDICTION OF THE NATIONAL OFFICE - CIR is authorized to issue LOA
  2. If the taxpayer is UNDER THE JURISDICTION OF THE REGIONAL OFFICES - Regional director is authorized to issue LOA.
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8
Q

What are the tax cases wherein an LOA is not needed?

A
  1. Cases involving civil or criminal tax fraud under the jurisdiction of National Investigation Division under Enforcement and Advocacy Services
  2. Policy cases under audit by the special teams in the National Office
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9
Q

What are the tax cases wherein an LOA is not needed?

A
  1. Cases involving civil or criminal tax fraud under the jurisdiction of National Investigation Division under Enforcement and Advocacy Services
  2. Policy cases under audit by the special teams in the National Office
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10
Q

What is the effect of the issuance of a Letter of Authority?

A

A tax return, statement or declaration filed by a taxpayer may be modified, changed or amended within THREE YEARS FROM THE DATE OF FILING.

HOWEVER, WHEN A LOA IS ISSUED or when investigation of such tax return, statement or declaration has been served upon the taxpayer, AMENDMENT SHALL NO LONGER BE ALLOWED.

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11
Q

Upon filing a tax return/statement/declaration, how many years does the taxpayer have to change or amend such statements?

A

Taxpayer has THREE YEARS TO MAKE CHANGES.

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12
Q

Upon filing a tax return/statement/declaration, how many years does the taxpayer have to change or amend such statements?

A

Taxpayer has THREE YEARS TO MAKE CHANGES.

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13
Q

What is a Preliminary Assessment Notice?

A

It is a communication issued by the Regional Assessment Division or by the CIR informing the taxpayer who has been audited of the findings of the revenue officer.

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14
Q

What is the rule on the issuance of PAN, and what are the instances wherein PAN is not required?

A

As a general rule, ISSUANCE OF PAN PRIOR TO FAN is part of the due process, the absence of which renders nugatory any assessment made by tax authorities.

The following are the cases wherein PAN is not required:

  1. Finding for any deficiency tax is the result of mathematical errors in computation of the tax
  2. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent
  3. When a taxpayer who opted to claim a refund or tax credit of excess CWT 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 quarters of the succeeding taxable year
  4. When excise tax due on excisable articles has not been paid
  5. When an article locally purchased or imported by an exempt person has been sold/traded /transferred to a non-exempt person.
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15
Q

What is the rule on the issuance of PAN, and what are the instances wherein PAN is not required?

A

As a general rule, ISSUANCE OF PAN PRIOR TO FAN is part of the due process, the absence of which renders nugatory any assessment made by tax authorities.

The following are the cases wherein PAN is not required:

  1. Finding for any deficiency tax is the result of mathematical errors in computation of the tax
  2. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent
  3. When a taxpayer who opted to claim a refund or tax credit of excess CWT 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 quarters of the succeeding taxable year
  4. When excise tax due on excisable articles has not been paid
  5. When an article locally purchased or imported by an exempt person has been sold/traded /transferred to a non-exempt person.
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16
Q

What are the prescriptive periods for tax returns?

A
  1. If the return filed IS NOT FRAUDULENT -
    THREE YEARS FROM (WHICHEVER IS LATER):
    a. Actual filing
    b. Deadline of filing
  2. If the return filed IS FRADULENT - 10 YEARS FROM DISCOVERY
  3. If no return was filed - 10 YEARS FROM DISCOVERY.
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17
Q

What are the prescriptive periods for tax returns?

A
  1. If the return filed IS NOT FRAUDULENT -
    THREE YEARS FROM (WHICHEVER IS LATER):
    a. Actual filing
    b. Deadline of filing
  2. If the return filed IS FRADULENT - 10 YEARS FROM DISCOVERY
  3. If no return was filed - 10 YEARS FROM DISCOVERY.
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18
Q

What are the types of protest?

A
  1. Request for reconsideration - plea for re-evaluation of an assessment on the basis of existing records without the need of additional evidence.
  2. Request for reinvestigation - plea for re-evaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation.
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19
Q

T or F
The FAN shall state the facts, law, rules and regulations on which the assessment is based, otherwise the assessment shall be void.

A

True.

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20
Q

Explain the 4th stage of the assessment process.

A

In the 4th stage of the assessment process, where the protest of the taxpayer has been denied, the taxpayer has a remedy, depending on whether the denial was:

  1. DIRECT DENIAL- directly denied by the CIR
  2. INDIRECT DENIAL - If the CIR fails to act on the taxpayer’s protest WITHIN 180 DAYS FROM THE DATE OF SUBMISSION, the protest may be considered denied.

The remedy depends on whether the denial was direct or indirect.

  1. DIRECTLY DENIED - taxpayer’s remedy is to file an appeal with the CTA within 30 days from receipt of letter of denial
  2. INDIRECTLY DENIED - taxpayer’s remedy is either:

A. to file an appeal with the CTA WITHIN 30 DAYS
FROM THE LAPSE OF THE 180 DAY PERIOD

B. Await the final decision of the CIR or his
representative and appeal such final decision to the
CTA within 30 days after the receipt of a copy of
such decision

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21
Q

Explain the 5th stage of the assessment process.

A

In the 5th stage, the taxpayer’s appeal is denied by the CTA IN DIVISIONS. The taxpayer’s remedies are to:
1. FIRST, file a motion for reconsideration (MR) before the same CTA division within 15 days from receipt of the decision.

  1. If the MR is still denied, the taxpayer’s remedy is to appeal with the CTA EN BANC within 15 days from receipt of the decision.
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22
Q

Explain the 6th stage of the assessment process.

A

In the 5th stage, the taxpayer’s appeal is denied by the CTA EN BANC. The taxpayer’s remedies are to:
1. FIRST, file a motion for reconsideration (MR) before the same CTA EN BANC within 15 days from receipt of the decision.

  1. If the MR is still denied, the taxpayer’s remedy is to appeal with the SUPREME COURT IN DIVISION within 15 days from receipt of the decision.
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23
Q

Explain the 7th stage of the assessment process.

A

In the 7th stage, the taxpayer’s appeal is denied by the SUPREME COURT IN DIVISION. The taxpayer’s remedies are to:
1. FIRST, file a motion for reconsideration (MR) before the same SUPREME COURT IN DIVISION within 15 days from receipt of the decision.

  1. If the MR is still denied, the taxpayer’s remedy is to appeal with the SUPREME COURT EN BANC within 15 days from receipt of the decision.
24
Q

Explain the 8th stage of the assessment process.

A

In the 8th stage, the taxpayer’s appeal is denied by the SUPREME COURT EN BANC The taxpayer’s LAST REMEDY is to:
File a MR before the SUPREME COURT EN BANC within 15 days from receipt of the decision.

If the MR is denied, the taxpayer has no more remedy. THE ASSESSMENT WILL THEN BECOME FINAL AND EXECUTORY.

25
Q

What happens when the taxpayer misses the deadline to file a motion or appeal, such as when an MR or appeal is filed beyond the 15 day period?

A

The periods granted are MANDATORY, and FAILURE TO FILE ON TIME OR COMPLY SHALL RESULT IN THE ASSESSMENT BEING FINAL/EXECUTORY AND DEMANDABLE.

26
Q

What are the methods of collection available to the BIR?

A
  1. Distraint
  2. Levy
  3. Judicial Proceedings
27
Q

What is Distraint?

A

Distraint is a method of collection. It is the seizure of the government of PERSONAL PROPERTY whether tangible or intangible to enforce the payment of taxes. It has the following types:

  1. ACTUAL DISTRAINT - personal property is physically seized by the BIR and offered for sale at the highest bidder at public auction. The proceeds of the sale are then applied to payment of the tax due.
  2. GARNISHMENT - seizure of bank accounts
  3. CONSTRUCTIVE DISTRAINT - the person in possession of personal property is made to sign a receipt, undertaking that he will preserve the property and will not dispose of such without the express authority of the BIR.
28
Q

What are the instances wherein constructive distraint may be availed of?

A
  1. The taxpayer is retiring from any business subject to tax
  2. Taxpayer intends to leave the PH
  3. Taxpayer removes his property therefrom
  4. Taxpayer performs any act tending to obstruct the proceeding for collecting the tax due or which may be due from him.
29
Q

Who are authorized to commence distraint proceedings?

A

The person authorized to commence distraint proceedings depends on the amount involved. If the amount involved is:

a. MORE THAN 1,000,000 - CIR is authorized
b. 1,000,000 OR LESS - Revenue district officer is authorized

30
Q

Explain the right of pre-emption for distraint.

A

If at any time prior to the consummation of the sale of the property seized under distraint, all proper charges (taxes, interests, and penalties) are paid by the taxpayer to the officer conducting the sale, the goods or effects distrained shall be restored to the owner.

31
Q

What is Levy?

A

Levy is the seizure of the government of REAL PROPERTIES AND INTEREST in or rights to such properties in order to enforce the payment of taxes.

32
Q

Explain the right of redemption for levy.

A

For a period of 1 year from date of sale, the real property MAY BE REDEEMED BY THE TAXPAYER. During this period the taxpayer is not deprived of the possession and fruits from the property. If the taxpayer fails to redeem the property, a final deed of sale is executed in favor of the buyer.

During the 1 year period, the owner of the real property shall not be deprived of possession of the property and will still be entitled to rents/other income until the expiration of the time allowed for redemption.

33
Q

When are Judicial proceedings used to enforce collection of taxes?

A
  1. Civil cases for collection of taxes
  2. Criminal taxes (tax evasion)
34
Q

Explain compromise in the collection of taxes.

A

A compromise may be made when:

  1. there is reasonable doubt as to the validity of the claim against the taxpayer OR
  2. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

MINIMUM COMPROMISE AMOUNTS
A. If the compromise is due to FINANCIAL INCAPACITY, the minimum compromise rate is 10% IF THE BASIC ASSESSED TAX

B. For other cases, the minimum compromise rate is 40% OF THE BASIC ASSESSED TAX.

The compromise HAS TO BE APPROVED BY AN EVALUATION BOARD WHEN:

  1. The basic tax involved EXCEEDS 1,000,000
  2. The settlement offered is LESS THAN THE PRESCRIBED MINIMUM RATES.

The EVALUATION BOARD IS COMPOSED OF:

  1. CIR
  2. 4 Deputy Commissioners
35
Q

What are the cases wherein compromise is not allowed?

A

Generally all cases may be entered into compromise, even criminal cases, EXCEPT:

  1. For those ALREADY FILED IN COURT
  2. Those involving FRAUD
36
Q

What are the cases wherein there is abatement/cancellation of tax liability?

A
  1. The tax or any portion thereof appears to be unjustly or excessively assessed
  2. The administration and collection costs do not justify the collection of the amount due
37
Q

What are the cases wherein the prescriptive period for assessment and the beginning of distraint or levy or a proceeding in court for collection of any deficiencies may be suspended?

A
  1. Taxpayer’s request for reinvestigation was granted
  2. Taxpayer cannot be located in the address given in the return
  3. No property of the taxpayer can be located
  4. The taxpayer is out of the country

The suspension shall be for the duration of the situation PLUS 50 DAYS THEREAFTER.

38
Q

What are the civil penalties imposed in addition to the basic assessed on the taxpayer?

A
  1. Surcharge
  2. Interest
39
Q

What are the instances wherein a 25% SURCHARGE IS COLLECTED?

A
  1. Failure to file any return and pay the tax on time WITHOUT NOTICE from BIR.
  2. Filing a return with an internal revenue officer other than those with whom the return is required to be filed, unless authorized by the CIR.
  3. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment
  4. Failure to pay the full or part of the amount of tax shown on any return or the full amount of tax due for which no return is required to be filed.
40
Q

What are the instances wherein a 50% SURCHARGE IS COLLECTED?

A
  1. Willful neglect to file return on time
  2. There is willful neglect if the taxpayer files ONLY AFTER RECEIVING A NOTICE from the BIR.
  3. When there is prima facie evidence of false/ fraudulent return:
    a. Substantial Overstatement (more than 30% of
    deductions
    b. Substantial understatement (more than 30% of
    taxable sales/receipts/income)
41
Q

What is the rate for interest as a civil penalty in the collection of taxes under TRAIN law?

A

12% for both deficient and delinquent interest.

42
Q

What are the kinds of interest?

A
  1. DEFICIENCY INTEREST - imposed on any AMOUNT OF TAX STILL DUE AND COLLECTIBLE FROM A TAXPAYER which shall be assessed and collected FROM THE DATE PRESCRIBED FOR ITS PAYMENT UNTIL (WHICHEVER COMES FIRST):

a. Full payment thereof
b. Upon issuance of a notice of demand by the CIR

  1. DELINQUENCY INTEREST - refers to the interest imposed on the failure of the taxpayer to pay ON THE DATE FIXED BY LAW OR IN THE NOTICE on the following:
    a. amount of tax due on any return required to be filed
    b. amount of tax due for which no return is required
    c deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the CIR
43
Q

Under TRAIN law, can there be double imposition of both delinquency and deficiency taxes?

A

NO. In no case shall deficiency and delinquency interest be imposed simultaneously.

44
Q

What are the requisites for the refund of taxes?

A
  1. Tax was erroneously or illegally collected by BIR
  2. Taxpayer should FILE A WRITTEN CLAIM for refund or tax credit with the CIR WITHIN TWO YEARS FROM DATE OF PAYMENT OF TAX OR PENALTY.
  3. If the claim for refund is denied by the CIR, file a petition for refund with the CTA:
    WITHIN 30 DAYS FROM RECEIPT OF THE DENIAL WHICH MUST NOT EXCEED 2 YEARS FROM PAYMENT OF INCOME TAX.
45
Q

Explain the prescriptive period for collection of taxes.

A
  1. IF WITH PRIOR ASSESSMENT - Within 5 YEARS FROM THE ISSUANCE OF FAN.
  2. IF WITHOUT PRIOR ASSESSMENT AND:
    A. RETURN FILED IS NOT FALSE OR FRAUDULENT - 3 years from actual date of filing return or deadline for filing whichever is later

B. RETURN FILED IS FRAUDLENT - 10 YEARS FROM DISCOVERY

C. NO RETURN WAS FILED - 10 YEARS FROM DISCOVERY.

46
Q

Abdul filed his 2018 ITR on Apr 10, 2019. On June 20, 2019, he filed an amended return that is substantially different from the original return. When is the last day to release/mail/send an assessment?

A

The last day to send an assessment is 3 years from the deadline for filing or actual filing, whichever comes later. In this case, Abdul made amendments, and so the basis shall be the date when he made the amendment (June 20) versus the deadline for filing (April 15). Therefore, the last day for sending an amendment shall be June 20, 2022, 3 years from amendment.

47
Q

T or F
Prescription starts from the day the law is violated, and if the same is not known, prescription starts from the discovery of violation thereof.

A

True

48
Q

T or F

All violations of any provisions of the Tax Code shall prescribe after 10 years.

A

False.

49
Q

T or F
In cases of request for reconsideration, the taxpayer must submit supporting documents within 60 days since filing protest.

A

False. The submission of supporting documents within 60 days is ONLY FOR REQUESTS FOR REINVESTIGATION, not reconsideration.

50
Q

What is a Final Decision on Disputed Assessment?

A

FDDA is issued to the taxpayer to communicate the decision on the protest of FAN, whether the protest is accepted or denied.

51
Q

T or F
All protests shall be considered a request for reinvestigation, unless said protest clearly indicates that the request is for reconsideration.

A

False.

52
Q

T or F
Keeping of two sets of books is tantamount to fraud.

A

True.

53
Q

Abdul paid his income tax for 300,000 2017 on April 15,2018. He found out on June 30, 2018 that he overpaid by 100,000. When is the last day to file a claim for tax refund?

A

Two years from payment, therefore on April 15, 2020.

54
Q

Abdul paid 100,000 as installment of his income tax of 300,000 for 2017 on April 15,2018. He paid the remaining 200,000 in May 15,2018. He found out on June 30, 2018 that he overpaid by 100,000. When is the last day to file a claim for tax refund?

A

In cases of installment, the last day for the filing of refund SHALL BE TWO YEARS FROM THE DATE OF FINAL PAYMENT, therefore Abdul can file until May 15, 2020.

55
Q

Explain the enhanced VAT refund system under the TRAIN law.

A

The enhanced VAT refund system under TRAIN law provides that:
1. Input VAT refund shall be granted and paid within 90 days from the filing of VAT refund application with BIR.

  1. The 90 day period to process and decide shall start from the filing of the application/claim for refund up to the release of payment of the VAT refund.
  2. The claim/application is considered to have been filed only upon submission of the official receipts or invoices and other documents in support of the application as prescribed under pertinent revenue issuances.

Upon effectivity of the TRAIN law, the BIR has 90 DAYS (120 PRIOR TRAIN) from the submission of the official receipts or invoices and other documents to decide on the administrative claim, and failure to do so shall subject the BIR officer to punishment under Sec 269 of the Tax Code.

56
Q

What is the prescriptive period for filing a judicial claim for refund fore erroneously paid tax?

A

2 years from date of erroneous payment.

TAXATION - Review (23 decks)

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