TAXPAYERS’ BILL OF

RIGHTS AND REMEDIES

Atty. Vic C. Mamalateo

February 28, 2007
PICPA TAX SEMINAR

BILL OF RIGHTS AND REMEDIES

•ASSESSMENT
–BEFORE TAX AUDIT
–DURING TAX AUDIT
–AFTER TAX AUDIT

•COLLECTION
–WITH ASSESSMENT
–WITHOUT ASSESSMENT

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 BEFORE TAX AUDIT
• POWER TO CONDUCT
– INVENTORY TAKING
– SURVEILLANCE

• POWER TO PRESCRIBE GROSS SALES/

RECEIPTS

• POWER TO OBTAIN INFORMATION

– ACCESS TO RECORDS OF TAXPAYER

DURING TAX AUDIT

• POWER TO EXAMINE BOOKS AND
ACCOUNTING RECORDS

– SERVICE OF AUDIT NOTICE

• COPY OF INCOME TAX RETURN
• CHECKLIST OF REQUIREMENTS

– CONDUCT OF TAX AUDIT

• START OF TAX AUDIT
• TERMINATION OF TAX AUDIT
• EXTENSION OF TAX AUDIT

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 CONDUCT OF AUDIT
• WORKSHEETS, ANALYSIS AND RECONCILIA-TION
STATEMENTS
– BASIC REQUIREMENTS

• BOOKS AND OTHER ACCOUNTING RECORDS

– EXTERNAL AUDITOR
– SUBPOENA DUCES TECUM

• PLACE OF AUDIT: TAXPAYER OR BIR

• SUBMISSION OF DOCUMENTS
– ORIGINAL DOCUMENTS
– ACKNOWLEDGMENT RECEIPT/LOGBOOK
– PRESENCE OF TAXPAYER’S STAFF DURING AUDIT

• WORK PLACE, SNACKS/MEALS

AFTER TAX AUDIT

• INFORMAL CONFERENCE
– AGREEMENT FORM
– CONFIRMATION LETTER
– TERMINATION LETTER
• PRELIMINARY ASSESSMENT NOTICE (PAN)
• REPLY TO PAN
• FINAL ASSESSMENT NOTICE (FAN)
• PROTEST AGAINST FAN
• SUPPLEMENTAL PROTEST

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NO PRE-ASSESSMENT NOTICE REQUIRED

• DEFICIENCY TAX IS THE RESULT OF

MATHEMATICAL ERROR
• DISCREPANCY IS BETWEEN AMOUNT
WITHHELD AND AMOUNT REMITTED
• TAXPAYER WHO OPTED TO CLAIM
REFUND/TAX CREDIT ALSO CARRIED OVER
AND APPLIED SAME AGAINST TAX OF NEXT
TAXABLE QUARTER
• EXCISE TAX DUE HAS NOT BEEN PAID
• CONSTRUCTIVE IMPORTATION (Sec. 228, NIRC)

ASSESSMENT
• WHEN MUST ASSESSMENT BE MADE? (Sec. 203 & 222, NIRC)

– RETURN WAS FILED

• NOT FALSE OR FRAUDULENT – 3 YRS FROM FILING
• FALSE OR FRAUDULENT – 10 YRS FROM DATE OF
DISCOVERY OF FILING OF FALSE OR FRAUDULENT
RETURN
– NO RETURN WAS FILED
• 10 YEARS FROM DATE OF DISCOVERY OF OMISSION
• IF ASSESSMENT DUE DATE FALLS ON SATURDAY,
GOVERNMENT HAS NEXT BUSINESS DAY WITHIN
WHICH TO ASSESS (CIR v. Western Pacific Corp)
• NORMAL YEAR HAS 365 DAYS; LEAP YEAR, 366 DAYS (CIR v.
NAMARCO)

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 ASSESSMENT
• WHEN IS ASSESSMENT DEEMED MADE?

– ISSUE DATE OF ASSESSMENT NOTICE IS NOT

RECKONING POINT FOR PRESCRIPTION
– DATE ASSESSMENT NOTICE AND DEMAND LETTER IS
RELEASED, MAILED OR SENT TO TAXPAYER
CONSTITUTES ACTUAL ASSESSMENT (Republic v. Limaco & de
Guzman)

– PRESUMPTION OF RECEIPT IN REGULAR COURSE

OF MAIL APPLIES, IF IT WAS PROPERLY
ADDRESSED, POSTAGE WAS PREPAID, AND WAS
MAILED. IF ONE ELEMENT IS ABSENT,
PRESUMPTION DOES NOT LIE (Enriquez v. Sunlife of Canada)

ASSESSMENT
• WHEN IS ASSESSMENT DEEMED MADE?
– ISSUE DATE OF ASSESSMENT NOTICE IS NOT
RECKONING POINT FOR PRESCRIPTION
– DATE ASSESSMENT NOTICE AND DEMAND LETTER IS
RELEASED, MAILED OR SENT TO TAXPAYER
CONSTITUTES ACTUAL ASSESSMENT (Republic v. Limaco & de
Guzman)

– PRESUMPTION OF RECEIPT IN REGULAR COURSE

OF MAIL APPLIES, IF IT WAS PROPERLY
ADDRESSED, POSTAGE WAS PREPAID, AND WAS
MAILED. IF ONE ELEMENT IS ABSENT,
PRESUMPTION DOES NOT LIE (Enriquez v. Sunlife of Canada)

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 FORMS OF PROTEST
• REQUEST FOR RECONSIDERATION
– REQUEST FOR ITEMIZED INFO ON DISALLOWED
ITEMS (CIR v. Capital Subdivision)
• REQUEST FOR REINVESTIGATION
– DATE OF RECEIPT OF ASSESSMENT NOTICE
– ITEMS ADMITTED OR PROTESTED BY TAXPAYER
– STATEMENT OF FACTS AND APPLICABLE LAW,
RULES AND JURISPRUDENCE
– SUPPORTING DOCUMENTARY EVIDENCE
• PRO-FORMA PROTEST LETTER
– REQUEST FOR COPY OF COMPUTATION IS NOT A
PROTEST THAT SUSPENDS PRESCRIPTIVE PERIOD
(CIR v. Atlas Consolidated Mining)

EFFECTS OF FAILURE TO FILE TIMELY

VALID PROTEST
• ASSESSMENT BECOMES FINAL AND
UNAPPEALABLE
• ASSESSMENT CANNOT BE DISPUTED IN THE
CIVIL ACTION
• PRESCRIPTION OF RIGHT TO ASSESS CANNOT BE
RAISED IN COURT
• NO INQUIRY CAN BE MADE AS TO THE MERITS OF
THE CASE OR JUSTNESS OF JUDGMENT RELIED
UPON, EXCEPT JURISDICTION, COLLUSION &
FRAUD

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 AFTER TAX AUDIT
• BIR ACTION
– CANCELL ENTIRE ASSESSMENT, OR
– COMPLETELY DENY PROTEST, OR
– ISSUE REVISED ASSESSMENT
• DECREASING ASSESSMENT
• INCREASING ASSESSMENT
– ISSUE BIR FORM 0605 FOR DEFICIENCY TAX
• BIR INACTION
– WAIT FOR FINAL DECISION ON DISPUTED
ASSESSMENT
– FILE AN APPEAL TO CTA

FORMS OF DENIAL OF PROTEST

• DIRECT
– FORMAL DECISION OF DENIAL BY BIR COMMISSIONER
– CIR SHOULD STATE IN DENIAL LETTER THAT IT IS HIS FINAL
DECISION (Union Shipping Corp v. CIR)
• INDIRECT
– FILING OF CIVIL CASE IN RTC WITHOUT RULING FIRST ON
VALID PROTEST TIMELY FILED BY TAXPAYER [Yabes v. Flojo
(1982)]
– ISSUANCE OF WDL OR FINAL NOTICE BEFORE SEIZURE (CIR vs. Isabela
Cultural Corp, 361 SCRA 71)

– REFERRAL OF CASE TO SOL GEN (Republic v. Lim Tian Teng & Sons)
– LETTER REITERATING DEMAND FOR IMMEDIATE PAYMENT OF
TAX (CIR v. Ayala Securities Corp)

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 PRESCRIPTION
• PRESCRIPTION OF GOVERNMENT’S RIGHT

– TO ASSESS
• 3 YEARS FROM DATE OF FILING THE RETURN
– IF RETURN FILED BEFORE DEADLINE, LAW PRESUMES
RETURN FILED ON LAST DAY FOR FILING RETURN
• 10 YEARS FROM DATE OF DISCOVERY OF NON-FILING OR
FILING OF FALSE OR FRAUDULENT RETURN (Sec. 203 &
222, NIRC)
– TO COLLECT
• 5 YEARS FROM DATE OF ASSESSMENT (Sec. 222(c ), NIRC)
• 10 YEARS (COURT ACTION TO FORFEIT BOND) FROM TIME
RIGHT OF ACTION ACCRUES (Republic v. Dorego)

PRESCRIPTION
• TO FILE CRIMINAL ACTION

• 5 YEARS FROM COMMISSION OF VIOLATION OF LAW. IF

VIOLATION IS NOT KNOWN AT THE TIME, FROM
DISCOVERY THEREOF AND INSTITUTION OF JUDICIAL
PROCEEDINGS FOR INVESTIGATION AND PUNISHMENT
(Sec. 281, NIRC)
• PRESCRIPTION IS INTERRUPTED WHEN PROCEEDINGS
ARE INSTITUTED AGAINST GUILTY PERSONS AND BEGINS
TO RUN AGAIN IF PROCEEDINGS ARE DISMISSED FOR
REASONS NOT CONSTITUTING JEOPARDY
• PRESCRIPTION DOES NOT RUN WHEN OFFENDER IS
ABSENT FROM THE PHILIPPINES

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 STATUTE OF LIMITATION IS
EXTENDED
• BEFORE EXPIRATION OF TIME PRESCRIBED FOR
ASSESSMENT, CIR AND TAXPAYER AGREED IN
WRITING
• PERIOD TO ASSESS AGREED UPON MAY BE EXTENDED
BY SUBSEQUENT WRITTEN AGREEMENT MADE
BEFORE EXPIRY DATE
• TAX TIMELY ASSESSED MAY BE COLLECTED WITHIN
PERIOD AGREED UPON IN WRITING BEFORE
EXPIRATION OF FIVE YEAR PERIOD
• COLLECTION PERIOD MAY BE EXTENDED BY
SUBSEQUENT WRITTEN AGREEMENT MADE BEFORE
EXPIRY DATE (Sec. 222, NIRC)

PRESCRIPTION
• WAIVER MUST BE IN WRITING AND SIGNED BY BOTH
CIR AND TAXPAYER

– MERE STATEMENT IN LETTER ABOUT INTENTION OF

WAIVING IS NOT WAIVER
– WAIVER NOT SIGNED BY CIR IS NOT VALID [CIR v.
Carnation (1999)]
– WAIVER SIGNED BY ASST. COMMISSIONER WHERE
AMOUNT INVOLVED IS P16 M IS NOT VALID [PBCom v.
CIR (1999)]
– RDO WHO “ATTTESTED” IN WAIVER DID NOT SIGN FOR
CIR [CIR v. Solano (1958)]

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 PRESCRIPTION
• RMO 20-90, Apr 4, 1990

– WAIVER IS IN FORM PRESCRIBED BY BIR

– PHRASE “BUT NOT LATER THAN ____” SHOULD BE
FILLED UP
– WAIVER IS SIGNED BY TAXPAYER OR HIS DULY
AUTHORIZED REPRESENTATIVE
– WAIVER SHOULD BE NOTARIZED
– WAIVER MUST INDICATE DEFINITE EXPIRATION DATE
AGREED UPON BY CIR AND TAXPAYER
– WAIVER MUST STATE DATE OF ACCEPTANCE BY BIR

PRESCRIPTION
• WAIVER IS NOT UNILATERAL ACT OF TAXPAYER

• FACT OF RECEIPT OF TAXPAYER’S COPY MUST BE

INDICATED IN ORIGINAL COPY

• THERE IS COMPLIANCE OF RMO 20-90 ONLY AFTER

TAXPAYER RECEIVED COPY OF WAIVER ACCEPTED BY
BIR (Phil Journalist vs. CIR, GR 162852, Dec 16, 2004)

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 PRESCRIPTION
• WAIVER IS INEFFECTIVE IF EXECUTED BEYOND THE
PRESCRIPTIVE PERIOD

• LAW DOES NOT AUTHORIZE EXTENSION ONCE PRESCRIPTION

HAS SET IN
– WAIVER THAT HAS NO PERIOD OR THERE IS NO PERIOD FOR
SUBSEQUENT EXTENSION IS INVALID [Central Cement Corp v. CIR, CTA
(1997)]
– FIRST WAIVER, NOT SIGNED BY CIR, IS INEFFECTIVE; SECOND
WAIVER SIGNED BY BOTH PARTIES IS OF NO CONSEQUENCE [Luzon
Packaging Products v. CIR, CTA (1997)]
– FIRST WAIVER THAT DID NOT INDICATE AMOUNT AND KIND OF
TAX ASSESSED, DATE OF ACCEPTANCE BY CIR AND FACT OF
RECEIPT OF COPY BY TAXPAYER IN ACCEPTED WAIVER IS
INEFFECTIVE; SECOND WAIVER HAS NO BASIS [Solid Cement v. CIR, CTA
(1999)]

STATUTE OF LIMITATIONS IS
SUSPENDED
• PERIOD DURING WHICH CIR IS PROHIBITED FROM
MAKING ASSESSMENT OR BEGINNING WDL OR
PROCEEDING IN COURT AND FOR 60 DAYS
THEREAFTER
• TAXPAYER’S REQUEST FOR REINVESTIGATION IS
GRANTED BY CIR
• TAXPAYER CANNOT BE LOCATED IN ADDRESS SHOWN
IN HIS TAX RETURN
• WDL SERVED AND NO PROPERTY CAN BE LOCATED
• TAXPAYER IS OUT OF THE PHILIPPINES (Sec. 223,
NIRC)

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 TAX RETURN
• TRANSCRIPT SHEETS ARE NOT RETURNS INCOMPLETE
INFORMATION FOR BIR TO COMPUTE SPECIFIC TAX DUE)
[Alca v. CIR, CTA (1964)]
• SUBSTANTIALLY DEFECTIVE RETURN FILED IS CONSIDERED
AS NO RETURN AT ALL (CIR v. Gonzales)
• INCOME TAX RETURN FILED CANNOT BE CONSIDERED
RETURN FOR COMPENSATING TAX [Butuan Sawmill v. CIR (1996)]
• THERE IS NO OMISSION TO FILE RETURN WHERE TAXPAYER
FAILED TO INCLUDE CERTAIN ITEMS, NOT DUE TO WILLFUL
OMISSION OR FRAUD
• RETURN MUST BE SUBSTANTIALLY COMPLETE AS TO
DETAILS TO SERVE AS STARTING POINT [Republic v. Marsman Dev
Corp)

AMENDED RETURN
• AMENDED RETURN IS SUBSTANTIALLY DIFFERENT
FROM ORIGINAL RETURN, GOVERNMENT’S RIGHT
TO ASSESS IS COUNTED FROM FILING OF
AMENDED RETURN

• IF ORIGINAL RETURN IS SUFFICIENTLY COMPLETE

TO MAKE AN ASSESSMENT, SUBSEQUENT FILING
OF AMENDED RETURN NEITHER STARTS ANEW
THE RUNNING OF STATUTE OF LIMITATIONS NOR
EXTENDS PRESCRIPTIVE PERIOD [Ammen Transport Co. v. CIR,
CTA (1965)]

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 APPEAL TO CTA

• APPEAL TO CTA

– GROUNDS
• DENIAL BY CIR OF PROTEST, OR
• INACTION OF CIR ON PROTEST WITHIN 180 DAYS AFTER
SUBMISSION OF REQUIRED DOCUMENTS (SUPPLEMENTAL
PROTEST)

– TIME
• WITHIN 30 DAYS FROM DATE OF RECEIPT OF DENIAL OR
AFTER THE LAPSE OF 180 DAYS

COLLECTION
• ADMINISTRATIVE
– WDL
– GARNISHMENT
– COMPROMISE OR ABATEMENT

• JUDICIAL
– CIVIL
– CRIMINAL

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 END OF PRESENTATION

V.C. MAMALATEO & ASSOCIATES

– Atty. Vic C. Mamalateo

– Mobile No.: 0918-9037436
– E-mail: Vic.Mamalateo@vcmlaw.com.ph
– Tel. No.: 3729224 Fax No.: 3729267

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