a. Definition a-1. An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period. It also signals the time when penalties and protests begin to accrue against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be served on and received by the taxpayer. Accordingly, an affidavit, which was executed by revenue officers stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be deemed an assessment that can be questioned before the Court of Tax Appeals [See CIR vs. Pascor Realty and Development Corporation, G.R. No. 128315, dated 29 June 1999]. a-2. It is the formal letter of demand calling for payment of the taxpayers deficiency tax or taxes shall state the fact, the law, rules and regulations or jurisprudence on which the assessment is based, otherwise the formal letter of demand and the notice of assessment shall be void [See CIR vs. Enron Subic Power Corporation, G.R. No. 166387, dated 19 January 2009]. a-3. An assessment is presumed to be valid, and absent proof of any irregularities in the performance of official duties, it will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that the assessment is erroneous [See Marcos II v. Court of Appeals, G.R. No. 120880, dated 5 June 1997]. a-4. Until the assessment becomes final and executory, the government cannot resort to any civil, criminal and administrative remedies for the collection of unpaid taxes
b.
against the taxpayer, except in cases
involving fraudulent returns [See Ungab vs. Cusi, Nos. L-41919-24, dated 30 May 1980]. a-5. Legal Basis: Commission of Internal Revenue has the power to assess deficiency tax under Sections 4-7, 203, 222-223, 228, 232, 235 and 266 of the NIRC [See Fitness by Design, Inc. vs. CIR, G.R. No. 177982, dated 17 October 2008; see also Revenue Regs. No. 12-99, dated 6 September 1999, as amended by Revenue Regs No. 13-2013, dated 28 November 2013]. Period to Assess b-1. General Rule: Internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return. 1. In a case a return is filed beyond the period prescribed by law, the three (3)year period shall be counted from the day the return was filed. 2. A return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day [See Section 203, NIRC]. 3. Counting of Period [See Article 13 of the New Civil Code]. b-2. Exceptions: 1. In the case of a 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 years after the discovery of the falsity, fraud or omission [See Section 248(B), NIRC]. 2. By agreement in writing between the taxpayer and the Commissioner of Internal Revenue, the period to assess may be extended within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon [See Section 222, NIRC; see also RMO 20-90, 4 April 1990 and RDAO 05-01, 2 August 2001]. b-3. Jurisprudence
1.
c.
d.
The prescriptive period on when to assess
taxes benefits both the government and the taxpayer. Exceptions extending the period to assess must be strictly construed. Due to the defects in the Waiver, that is, its non-compliance with the proper procedures, the period to assess taxes was not extended. Hence, the assessments were issued by the BIR beyond the three (3)-year prescriptive period and thus, null and void [See CIR vs. Kudos Metal Corporation, G.R. No. 178087, 5 May 2010]. 2. Estoppel cannot be applied in the assessment of taxes. The taxpayer is not estopped from raising the prescription despite the fact that it was the one which asked for additional time to submit the required documents. Estoppel is applied in the collection, not in the assessment, of taxes [See Collector of Internal Revenue vs. Suyoc Consolidated Mining Company, 104 Phil 819]. 3. Related Cases [See RCBC vs. Commission of Internal Revenue, G.R. No. 170257, dated 7 September 2011; Commission of Internal Revenue vs. Kudos Metal, G.R. No. 178087, dated 5 May 2010] This is the FIRST remedy of the government to collect unpaid taxes due against a taxpayer. c-1. Republic Act 8424 requires that the taxpayer must be INFORMED, not merely NOTIFIED of the results of the assessment [See CIR vs. Azucena Reyes, G.R. No. 159694, dated 27 January 2006 and Azucena Reyes vs. CIR, G.R. No. 163581, dated 27 January 2006] c-2. While the Tax Code authorizes the use of the Best Evidence Obtainable, the assessment must be rest on actual, credible evidence, not merely hearsay evidence [See CIR vs. Hantex Trading Co., Inc., G.R. No. 136975, dated 31 March 2005]. Taxpayer DISPUTES the assessment. d-1. By filing a formal protest within 30 days from receipt of the Assessment [See Commissioner of Internal Revenue vs. First Express Pawnshop, G.R. Nos. 172045-046, dated 16 June 2009]
2.
d-2. By submitting evidence in support of the
protest within 60 days from filing of the Protest [Section 228, Republic Act 8424] d-3. Notes 1. Inaction of the Commissioner is not deemed a denial of the protest [Lascona Land Company, Inc. vs. Commissioner, G.R. No. 171251, dated 5 March 2002]. 2. Under Section 7(a) (2) of Republic Act No. 9282, the jurisdiction of the Court of Tax Appeals includes inactions of the CIR in cases of disputed assessments. The Supreme Court settled these conflicting view when it held that in case the Commissioner failed to act on the disputed assessment within the 180day period from date of submission of documents, a taxpayer can either: (1) File a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) Await the final decision of the CIR on the disputed assessments and appeal such final decision with the CTA within 30 days after receipt of a copy of such decision [See Lascona Land Company, Inc. vs. Commissioner, G.R. No. 171251, dated 5 March 2002]. 3. The filing of a civil case for collection is deemed a denial of the protest [Republic vs. Lim Tian Teng & Sons, Inc., 16 SCRA 584; Dayrit vs. Cruz, L-39910, 26 September] Appealsa. Court of Tax Appeals-Division [See Republic Act 9282 as amended by Republic Act 9503] a-1. Jurisdiction [See Section 7] a-2. Within thirty (30) days from receipt of the decision, judgment or order finally denying the protest [See Section 9] a-3. A party adversely affected by the Decision of the CTA-Division is allowed to file a Motion for Reconsideration or Motion for New Trial [Section 9] b. Court of Tax Appeals-En Banc [See Republic Act 9282 as amended by Republic Act 9503]
3.
b-1. A party adversely affected by the Resolution
or Order of the CTA-Division denying his Motion for Reconsideration or Motion for New Trial may file a Petition for Review with the CTA En Banc b-2. Period: Within 15 days from receipt of the denial of the Motion for Reconsideration or Motion for New Trial c. Supreme Court c-1. Within 15 days from receipt of the Resolution, judgment or final order of the CTA En Banc via a Petition under Rule 45 of the Revised Rules of Court [See Section 11]. c-2. If a motion for reconsideration is filed, the 15day period is reckoned from denial of said motion [See Rule 45, Revised Rules of Court]. Collection of Taxes a. Rules a-1. Assessment precedes the collection of taxes. It is after the assessment became final and executory that the government may enforce the collection of the corresponding tax liabilities. In fact, the NIRC provides that no proceeding in court shall begun without the prior assessment for the collection of taxes [See Section 203, NIRC]. a-2. Any internal revenue tax which has been assessed within the prescribed period shall be collected by the government within the period of five (5) years reckoned from the assessment [See Section 222(c), NIRC]. The collection may be enforced thru judicial or administrative remedies. a-3. The period of prescription of action to collect a taxpayer's deficiency income tax assessment is interrupted when the taxpayer request for a review or reconsideration of said assessment, and starts to run again when said request is denied [See CIR vs. Capitol Subdivision, Inc., G.R. No. L-18993, dated 30 April 1964]. a-4. Judicial remedies may be in the form of a Civil Action for Collection OR a criminal action for non-payment of taxes [See Section 221, NIRC; see also Republic vs. Salud Hizon, G.R. No. 130430, dated 13 December 1997; PNOC vs. Commissioner of Internal Revenue, G.R. No. 109976, dated 26 April 2005]. Judicial action may be instituted in cases of
4.
B.
Fraudulent Returns without an assessment
[See Section 269, NIRC; see also Adamson Management Corporation vs. Court of Appeals, G.R. No. 120935, dated 24 May 2009]. Other REMEDIES a. Compromise [Section 204, NIRC; see also Revenue Regs. 7-2001 and 13-2001; CIR vs. Azucena T. Reyes, G.R. No. 159694, dated 27 January 2006]. b. Abatement [Section 204, NIRC; see also Revenue Regs 7-2001 and 13-2001]. c. Tax Amnesty c-1. Definition It is a general pardon to taxpayers who want to start a clean tax slate. It also gives the government a chance to collect uncollected tax from tax evaders without having to go through the tedious process of a tax case [See Baas, Jr. vs. Court of Appeals, G.R. No. 102967, dated 10 February 2000]. c-2. See Republic Act 9480.
IF TAX HAS ALREADY BEEN PAID
1.
2.
4.
This is understood to be a remedy granted to the
taxpayer. The government is not expected to grant a refund or tax credit for tax erroneously or illegally paid motu proprio. Remedies available a. Claim for refund [See Section 229, NIRC; see also CIR vs. Acesite Philippines, G.R. No. 147295, dated 16 February 2007] b. Claim for tax credit [Section 229, NIRC; see also Revenue Regs. 14-11, dated 29 July 2011] Period to Claim a. Generally, within two (2) years after payment [See CIR vs. PNB, G.R. No. 144653, dated 28 August 2001] b. If paid in installments, the 2-year period is counted from the payment of the last installment or, if paid late, from the date the last return should have been filed c. In case of corporate quarterly returns, the 2-year period is counted from the date of payment of the last quarter tax, or, if paid late, from the date the final return should have been filed [Commissioner of Internal Revenue vs. Philam Life Insurance Company, Inc., G.R. 105208, 29 May 1995] Where to File Claim
a.
b.
c.
d.
With the Commissioner of Internal Revenue to
afford him an opportunity to correct the mistake, if any, committed by him or his subordinate [See P.J. Kiener Co., Ltd. vs. David, 92 Phil. 945] Court of Tax Appeals-Division b-1. Within 30 days from receipt of an adverse decision of the Commissioner; or b-2. Prior to the lapse of the 2 year prescriptive period if no action is taken by the Commissioner [Sections 204 and 229, NIRC] Court of Tax Appeals-En Banc c-1. A party adversely affected by the Resolution or Order of the CTA-Division denying his Motion for Reconsideration or Motion for New Trial may file a Petition for Review with the CTA En Banc [Section 11, Republic Act 9282]. c-2. Within 15 days from receipt of the denial of the Motion for Reconsideration or Motion for New Trial Supreme Court d-1. Within 15 days from receipt of the Resolution, judgment or final order of the CTA En Banc via a Petition under Rule 45 of the Revised Rules of Court [Section 11, Republic Act 9282]. d-2. If a motion for reconsideration is filed, the 15day period is reckoned from denial of said motion [Rule 45, Revised Rules of Court].