Tax 2 Prelim outline

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-Revenue Regulation No. 12-20I8
-Estate and Donors Tax ( Section 84 - 104 of the NIRC)

An estate tax is a tax imposed on the privilege of the decedent to

transmit property at death and is based on the entire net estate,
regardless of the number of heirs and relations to the decedent. It
is a tax levied, assessed, collected and paid upon the privilege of
gratuitously transferring the net estate of a decedent to his heirs.

Gross Estate The value of all the property, real or personal, tangible
or intangible, of the decedent wherever situated to the extent of his
interest at the time of his death as well as other items includible in
the gross estate (See Section 85, Tax Code)

Net Estate The value of the gross estate less the ordinary and
special deductions (see Section 86, Tax Code)

Cases:
1. Lorenzo vs. Posadas, 64 Phil 353
The requisites of a valid testamentary trust are:
1) sufficient words to raise a trust,
2) a definite subject,
3) a certain or ascertained object.
There is no doubt that Hanley intended to create a trust since he
ordered in his will that certain of his properties be kept together
undisposed during a fixed period or for a stated purpose.

2. Marcos vs. CA, 273 SCRA 47

The deficiency income tax assessments and estate tax assessment
are already final and unappealable -and-the subsequent levy of real
properties is a tax remedy resorted to by the government,
sanctioned by Section 213 and 218 of the National Internal Revenue
Code. This summary tax remedy is distinct and separate from the
other tax remedies (such as Judicial Civil actions and Criminal
actions), and is not affected or precluded by the pendency of any
other tax remedies instituted by the government.
The approval of the court, sitting in probate, or as a settlement
tribunal over the deceased's estate is not a mandatory requirement
in the collection of estate taxes. On the contrary, under Section 87
of the NIRC, it is the probate or settlement court which is bidden not
to authorize the executor or judicial administrator of the decedent's
estate to deliver any distributive share to any party interested in the
estate, unless it is shown a Certification by the Commissioner of
Internal Revenue that the estate taxes have been paid.

3. Estate of Ruiz vs. CA, 252 SCRA 541

1. No. Be that as it may, grandchildren are not entitled to provisional
support from the funds of the decedent’s estate. The law clearly
limits the allowance to “widow and children” and does not extend it
to the deceased’s grandchildren, regardless of their minority or
incapacity.
2. No. No distribution shall be allowed until the payment of the
obligations above-mentioned has been made or provided for, unless
the distributees, or any of them, give a bond, in a sum to be fixed by
the court, conditioned for the payment of said obligations within
such time as the court directs.

3. No. The right of an executor or administrator to the possession

and management of the real and personal properties of the
deceased is not absolute and can only be exercised “so long as it is
necessary for the payment of the debts and expenses of
administration, He cannot unilaterally assign to himself and
possess all his parents’ properties and the fruits thereof without
first submitting an inventory and appraisal of all real and personal
properties of the deceased, rendering a true account of his
administration, the expenses of administration, the amount of the
obligations and estate tax, all of which are subject to a
determination by the court as to their veracity, propriety and
justness.

4. Dizon vs. CTA , 553 SCRA 111

Yes. The claims existing at the time of death are significant to, and
should be made the basis of, the determination of allowable
deductions. Also, as held in Propstra v. U.S., where a lien claimed
against the estate was certain and enforceable on the date of the
decedent's death, the fact that the claimant subsequently settled for
lesser amount did not preclude the estate from deducting the entire
amount of the claim for estate tax purposes. This is called the
date-of-death valuation rule.

***
ESTATE TAX

Estate tax is a tax on the privilege of the Decedent to transmit property at

the time
of death. As such, it is in the nature of an excise tax.
It is also imposed on “certain transfers of property made by the Decedent
during his lifetime which, are in the nature of testamentary dispositions”.
As mentioned earlier, this is an excise tax, and if you can recall in your
Taxation 1, we learned that there are 3 main classifications of taxes:
1) Personal tax. (cedula)
2) Property tax ( RPT)
3) Excise tax. – tax on the performance of an act
- Enjoyment of a right or privilege
- Engagement in an occupation
Question:
Could it be possible that the Gross Estate would be greater or more than
the total assets left by the Decedent?
YES, because there are “certain transfers of property made by the
Decedent during his lifetime which, are in the nature of testamentary
dispositions”. This will be included in computing his gross estate.

ESTATE- is the taxpayer here

- Not the Heirs receiving the property
Estate tax – accrues at the time of death of Decedent
- Obligation to pay is different. It is one year from date of
death
-
Why would it accrue at the moment of death ?
CIVIL CODE- ART 777
“ The rights to succession are transmitted at the moment of death of the
decedent.”
The heirs succeed immediately, as if the Deed had executed and
delivered to them a deed for the same before his death.

Tax Base:
Real property – FMV at the time of death
When we say FMV, we have to compare whichever is HIGHER between
the
-FMV as determined by the CIR through Zonal valuation
-FMV as determined by the Provincial or City Assessor’s Office.

GROSS ESTATE:
The starting point in determining liability for estate tax is the gross estate.
We have to determine the classification of the Decedent:
CITIZEN or RES ALIEN :
All properties wherever situated
N R A. – only properties real / personal situated in the Phils
-On Intangible personal property - it is not taxable if there is a
Reciprocity clause.
Meaning… if the D at the time of his death was a citizen
and resident of a foreign country which at the time of his
death did not impose a transfer tax of intangible personal
property to Filipinos residing therein;

What are considered intangible personal properties situated WITHIN the

Phils?
1) Franchise exercised in the Phils;
2) Shares of any Domestic Corp;
3) Shares of Foreign Corp , - 85% of its business is located in the Phils;
4) That which acquire business situs in the phil

GROSS ESTATE INCLUDES:

Decedent’s Interest:
It may include income earned but not yet received at the time of
death.
Transfer in contemplation of death
The NIRC does not define the phrase “ transfer in contemplation of
death”
REVOCABLE TRANSFER
Transfer made by D during his lifetime but the use, enjoyment, and
possession thereof is subject to his power to alter, amend, revoke or
terminate at the time of his death.
It is included in the gross estate simply because the disposition is
revocable during his lifetime or before his death, the D is still regarded as
the true owner of the property at the time of his death.
While the law requires that the D should exercise the power to revoke the
transfer during his lifetime or before his death, the revocability of the
transfer is not affected by the failure of the D to exercise such power.
Simply stated, as long as there is reservation that the transfer is
revocable, then it is sufficient that it is part of the gross estate to the
extent of any interest therein.
Example:
A donated a parcel of land to P, but A retained for himself the power
to amend, alter or revoke the said donation at will. P died before A.
The land shall be included in the Gross Estate of A because he has
retained for himself the power to revoke. He remains to be the owner.
More so, even if P has not yet died, even if A has not exercised the
power to revoke, such property upon his death must still be included as
part of his gross estate being a revocable transfer.

PROPERTY PASSING UNDER GENERAL POWER OF APPOINTMENT

As distinguished from a Revocable transfer where the D is the transferor,
Here, the D is the transferee or the recipient of the property.
The property is transferred to the D during his lifetime under a power of
appointment where he can designate ANY person who shall possess or
enjoy the property or the income therefrom and upon his death, it is
included in his gross estate.

Proceeds of Life Insurance

1. Beneficiary is the estate/ exec/ admin , - Forms part of the gross
estate, whether designation is revocable or irrevocable ;
2. Beneficiary is 3rd Person – if revoc - forms part of gross estate
-if irrevoc - excluded from gross estate
II. SPECIAL DEDUCTIONS
Non-resident alien decedents cannot avail of special deductions.

A. FAMILY HOME
The family home must be included in the gross estate and must be the
actual residential home of the decedent and his family at the time of his
death as certified by the barangay captain.
FMV of the family home—
If exclusive property of the decedent: FMV
If conjugal: FMV/2
Land is exclusive; home is conjugal: FMV of land + FMV of home
Land is conjugal; home is exclusive: FMV of Land/2 +FMV of house

B. STANDARD DEDUCTION
The standard deduction shall be P5,000,000 without need of
substantiation.

C. AMOUNTS RECEIVED BY HEIR UNDER RA4917

An Act Providing That Retirement Benefits Of Employees Of Private Firms
Shall Not Be Subject To Attachment, Levy, Execution, Or Any Tax
Whatsoever Amounts or benefits received by heirs from the decedent’s
employer as a consequence of his death. Such benefits must first be
included in the gross estate before the same can be deducted

III. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL

PROPERTIES
Share of the surviving spouse is not subject to estate tax and must
therefore be deducted from the gross estate of the decedent

TRANSFER FOR INSUFFICIENT CONSIDERATION

Means any one of the transfers, eg…. In contemplation of death,
revocable transfer or property passing under the gen power of
appointment is made, but the same is not a bonafide sale for an
adequate or full consideration in money or money’s worth.
The value to be included in the estate shall be the EXCESS of :
F MV – time of death
Less: Consideration received by D
Procedure: Ask yourself - “is the consideration insufficient? If YES,
then:
1. Compare the FMV at the time of transfer and the FMV at time of
death;
2. If the FMV at time of transfer is greater, determine the difference
between the FMV at time of death and the Consideration received;
3. The difference then is the amount to be included in the gross
estate.

Example:
CASE 1 CASE 2 CASE 3
FMV- time of transfer 1,000,000 1,500,000
1,000,000
FMV-time of Death. 500,000 1,000,000 1,500,000
Consideration received 300,000 -0- 1,000,000
Amount to be included 200,000 1,000,000 -0-
In the Gross Estate

TRANSFER FOR INSUFFICIENT CONSIDERATION

Where property, other than real property classified as capital asset
subject to final capital gains tax, is transferred for less than an
adequate and full consideration in money or money’s worth, the
amount by which the fair market value of the property exceeded the
value of the consideration shall, for purposes of donor’s tax, be
deemed a gift.

Note:
Why is real property, classified as capital asset, that is transferred
for less than an adequate and full consideration in money or
money’s worth not deemed a gift subject to donor’s tax?

Well, it is already subject to final capital gains tax, which is 6% of

the gross selling price of fair market value of the property,
whichever is higher. So what the seller avoids in the payment of the
donor’s tax, it pays for in CGT.
***
Donative intent—must be present in a direct gift of property in order that
the donor’s tax can be assessed and collected. Such intent followed by a
donative act is essential to constitute a gift. Donative intent is necessary
only in case of a direct gift. If the gift is indirectly taking place by way of
sale, exchange or other transfer of property as contemplated in cases of
transfers for less than adequate and full consideration (see Section 100,
Tax Code), donative intent is not always essential to constitute a gift.

NIRC SEC. 100. Transfer for Less Than Adequate and Full Consideration. -
Where property, other than real property referred to in Section 24(D), is
transferred for less than an adequate and full consideration in money or
money's worth, then the amount by which the fair market value of the
property exceeded the value of the consideration shall, for the purpose of
the tax imposed by this Chapter, be deemed a gift, and shall be included
in computing the amount of gifts made during the calendar year.

***
In the determination of the gross estate, the regime of property
relations between the spouses is of vital importance. In the
absence of any marriage settlement to the contrary, the property
relations of the H and W are:
1) Marriage before Aug 3, 1988. - CPG
2) Marriage on or after Aug 3, 1988- ACP
***
Mr. X, unmarried, living with his 18 -year old son, died, and left the
following properties:

a) Residential Lot in Hawaii - P2,500,000

b) Bldg in New York - 3,000,000
c) House & lot in Palawan - 2,000,000
d) House & Lot in Davao 8,500,000
e) Shares of Stock – San Miguel Corp 500,000
f) Shares of Stock- QRS Corp - 300,000
g) McDo Franchise in Hongkong 3,500,000
h) Rolls Royce car - 7,500,000
i) Rolex watches - 1,800,000
j) Diamond ring. - 750,000
K) The House & lot in Palawan was mortgaged to BPI-Palawan with an
outstanding
Obligation of 1,000,000 at the time of X’s death.
L) QRS corp is 70% Filipino-owned but was incorporated under the laws
of Singapore.
Records show that 80% of its business however is located in the
Philippines.
m) The Rolls Royce is subject of a chattel mortgage in favor of Eastwest
bank with an
with an unpaid balance of P5,000,000 at the time of X’s death.
n) X also took a life insurance in the amount of P2,00000 designating his
son S, as
an irrevocable beneficiary.
o) Six (6) months before he died, X sold an agricultural land in Cebu to
his close friend BF.
FMV at time of transfer. - P 3,500,000
FMV at time of death. - 4,000,000
Consideration received - 3,700,000

COMPUTE FOR THE GROSS ESTATE and the NET ESTATE OF X

Q1 - Assume that X, is a resident citizen.

Q2 - Assume that X, is a Non-Resident Alien
assume that in Question 2, - X being a Non-resident Alien
(Decedent), the car, rolex watches and diamond ring are in the
Phils

A donor’s tax is an excise tax imposed on the privilege to transfer

property by way of gift inter vivos based on pure act of liberality
without any or less than adequate consideration and without any
legal compulsion to give.

In terms of rates, TRAIN has made the following changes:

● Increased the threshold for exempt gifts during the calendar
year to P250,000
● Flat rate of 6% total gifts in excess of P250,000
● Removed the distinction between strangers and non-strangers

Requisites of a valid donation

1. Capacity of donor
2. Donative intent (intention to donate)
3. Delivery, actual or constructive, of the subject gift
4. Acceptance by the done 5. Form prescribed by law

DONOR’S TAX RETURNS

When should the estate tax return be filed?
Within 30 days from the date the gift was made
When should the estate tax be paid?
At the time the return is filed
Who files?
Any individual who makes any transfer by gift

Contents of Estate Tax Return

1. Each gift made during the calendar year
2. Deductions allowed and taken
3. Any previous net gifts made during the same calendar year
4. Name of donee
5. Such further information as may be required

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EXEMPTIONS FROM GROSS GIFTS
A. Gifts made to or for the use of the national government or any entity
created by any of its agencies which is not conducted for profit, or to any
political subdivision of the said government
B. Gifts in favor of an education, charitable, religious, cultural, social
welfare institutions, accredited NGO and trust, philanthropic
organization, and research institution provided:
i. the non-profit institution is non-stock entity that pays no dividends, is
governed by trustees who do not receive any compensation, and devotes
all of its income to the accomplishment of its purposes
ii. not more than 30% of said gifts will be used by such done for
administrative purposes
iii. the non-profit institution must be accredited by the designated
accrediting government agency and registered with the BIR
C. Campaign contributions in cash or in kind to any candidate which are
duly reported to the COMELEC. However, donations made by corporation
in violation of Section 36(9) of the Corporation Code are subject to
donor’s tax
Are political contributions considered gifts and therefore liable for
donor’s tax?
Under Section 13 of RA 7166, such contributions, be duly reported to the
COMELEC, shall not be subject to the
payment of any gift tax.
In ABELLO V. CIR [February 23, 2005], the Supreme Court ruled that the
contributions made by certain partners of the ACCRA law firm to the
campaign of Senator Edgardo Angara constitute as a donation subject to
donor’s tax. However, this was decided before RA 7166. The Court noted
that subsequent to the donations involved in the case, Congress approved
RA 7166 on November 25, 1991, providing in Section 13 thereof that
political/electoral contributions, duly reported to the Commission on
Elections, are not subject to the payment of donor’s tax. RA 7166
provides no retroactive effect.

OTHER EXEMPTIONS ALLOWED ON GROSS GIFT

A. Encumbrance on the property donated, if assumed by the donee
B. Those specifically provided by the donor as diminution of the property
donated

EXEMPTION UNDER SPECIAL LAWS

A. Gifts and donations to the University of the Philippines
B. Contribution to the National Book Trust Fund
C. Donations to qualified foster care agencies
D. Donations made for the operation of the Dual Training System
E. Donations of cooperatives to duly accredited charitable, research, and
educational institutions and socioeconomic projects within their area of
operations
F. Donations of land certified by LGU to have been donated for socialized
housing purposes
G. Donation to Philippine Red Cross

Not more than 30% must be used for operation and administrative
purposes of the NGO (if more than must be subject to donors tax Section
101)

SEC. 101. Exemption of Certain Gifts. - The following gifts or donations

shall be exempt from the tax
(A)(3) Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited
non-government organization, trust or philanthropic organization or
research institution or organization: Provided, however, That not more
than thirty percent (30%) of said gifts shall be used by such donee for
administration purposes. For the purpose of the exemption, a 'non-profit
educational and/or charitable corporation, institution, accredited
non-government organization, trust or philanthropic organization and/or
research institution or organization' is a school, college or university
and/or charitable corporation, accredited non-government organization,
trust or philanthropic organization and/or research institution or
organization, incorporated as a non-stock entity, paying no dividends,
governed by trustees who receive no compensation, and devoting all its
income, whether students' fees or gifts, donation, subsidies or other
forms of philanthropy, to the accomplishment and promotion of the
purposes enumerated in its Articles of Incorporation.
***
Cases:
1. Lascona Land vs. CIR, ( March 12, 2012
[T]he Court has held that in case the Commissioner failed to act on
the disputed assessment within the 180-day period from date of
submission of documents, a taxpayer can either: (1) file a petition
for review with the Court of Tax Appeals within 30 days after the
expiration of the 180-day period; or (2) await the final decision of
the Commissioner on the disputed assessments and appeal such
final decision to the Court of Tax Appeals within 30 days after
receipt of a copy of such decision. These options are mutually
exclusive and resort to one bars the application of the other.

Therefore, as in Section 228, when the law provided for the remedy
to appeal the inaction of the CIR, it did not intend to limit it to a
single remedy of filing of an appeal after the lapse of the 180-day
prescribed period. Precisely, when a taxpayer protested an
assessment, he naturally expects the CIR to decide either positively
or negatively. A taxpayer cannot be prejudiced if he chooses to wait
for the final decision of the CIR on the protested assessment. More
so, because the law and jurisprudence have always contemplated a
scenario where the CIR will decide on the protested assessment.
2. CIR vs. PL Management (GR No. 160949, April 4, 2011)
SEC. 76. Final Adjustment Return. chanrobles virtual law library -
Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the
preceding calendar or fiscal year.

If the sum of the quarterly tax payments made during the said
taxable year is not equal to the total tax due on the entire taxable
income of that year, the corporation shall either:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the
case may be.

In case the corporation is entitled to a tax credit or refund of the

excess estimated quarterly income taxes paid, the excess amount
shown on its final adjustment return may be carried over and
credited against the estimated quarterly income tax liabilities for
the taxable quarters of the succeeding taxable years.

Once the option to carry-over and apply the excess quarterly

income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be
considered irrevocable for that taxable period and no application
for cash refund or issuance of a tax credit certificate shall be
allowed therefor.

3. CIR vs. Palanca 18 SCRA 496

respondent’s claim has not yet prescribed. Considering that it is the
interest paid on this latter-assessed estate and inheritance tax that
respondent is claiming for refund, then the 30-day period for
prescription under RA 1125 should be computed from the receipt of
the final denial by the BIR of the said claim.
Inasmuch as the said account was paid by him by installment, then
the computation of the two-year prescriptive period, under Section
306 of the National Internal Revenue Code, should be from the date
of the last installment.
Respondent Palanca paid the last installment on his 1955 income
tax account on August 14, 1956. His claim for refund was filed on
August 13, 1958. It was, therefore, still timely instituted.

4. CIR vs. TMX Sales 205 SCRA 184

Sec. 292, par. 2 of the National Internal Revenue Code stated that
“in any case, no such suit or proceeding shall be begun after the
expiration of two years from the date of the payment of the tax or
penalty regardless of any supervening cause that may arise after
payment.” This should be interpreted in relation to the other
provisions of the Tax Code. The most reasonable and logical
application of the law would be to compute the 2-year prescriptive
period at the time of the filing of the Final Adjustment Return or the
Annual Income Tax Return, where it can finally be ascertained if the
tax payer has still to pay additional income tax or if he is entitled to
a refund of overpaid income tax. Since TMX filed the suit on March
14, 1984, it is within the 2-year prescriptive period starting from
April 15, 1982 when they filed their Annual Income Tax Return.

5. CIR vs. Migrant Pagbilao Corp 565 SCRA 154

The claim for refund should be filed within 2 years as prescribed
under Sec. 229, NIRC, (b) the income upon which the taxes were
withheld were included in the return of the recipient, and (c) the fact
of withholding is established by a copy of a statement duly issued
by the payor (withholding agent) to the payee showing the amount
paid and the tax withheld therefrom.
Answer. The unutilized input VAT payments not otherwise used for
any internal revenue tax due the taxpayer must be
claimed within two (2) years reckoned from the close of the taxable
quarter when the relevant sales were made pertaining to
the input VAT regardless of whether said tax was paid or not.
Hence, the reckoning frame would always be the end of the
quarter when the pertinent sales or transactions was made,
regardless of when the input VAT was paid.
NOTE: The “2-year from payment” under Secs. 204(C) and 229 of
the NIRC applies only to instances of invalid payments –
overpayment, illegal payment, erroneous payment or penalties
imposed without authority.

6. Gulf Air Co. vs. CIR (Sept. 19, 2012)

tax refunds partake the nature of tax exemptions which are a
derogation of the power of taxation of the State. Consequently, they
are construed strictly against a taxpayer and liberally in favor of the
State such that he who claims a refund or exemption must justify it
by words too plain to be mistaken and too categorical to be
misinterpreted. Regrettably, the petitioner in the case at bench
failed to unequivocally prove that it is entitled to a refund.

Sec. 118. Percentage Tax on International Carriers.

(A) International air carriers doing business in the Philippines shall
pay a tax of three percent (3%) of their quarterly gross receipts.

7. Tupaz vs. Ulep, 316 SCRA 119

the offense has not prescribed. Petitioner was charged with failure
to pay deficiency income tax after repeated demands by the taxing
authority. In Lim, Sr. v. Court of Appeals,22 we stated that by its
nature the violation could only be committed after service of notice
and demand for payment of the deficiency taxes upon the taxpayer.
Hence, it cannot be said that the offense has been committed as
early as 1980, upon filing of the income tax return. This is so
because prior to the finality of the assessment, the taxpayer has not
committed any violation for nonpayment of the tax. The offense
was committed only after the finality of the assessment coupled
with taxpayers willful refusal to pay the taxes within the allotted
period. In this case, when the notice of assessment was issued on
July 16, 1984, the taxpayer still had thirty (30) days from receipt
thereof to protest or question the assessment. Otherwise, the
assessment would become final and unappealable.23 As he did not
protest, the assessment became final and unappealable on August
16, 1984. Consequently, when the complaint for preliminary
investigation was filed with the Department of Justice on June 8,
1989, the criminal action was instituted within the five (5) year
prescriptive period.

8. Lucas Adamson vs. CIR, GR No. 124557

Section 222 provides:
Exceptions as to period of limitation of assessment and collection
of taxes.-(a) 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 after the collection of such tax may be begun
without assessment, at any time within ten years after the
discovery of the falsity, fraud or omission: Provided, That in a fraud
assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal
action for collection thereof…

The Supreme Court ruled:

The law is clear. When fraudulent tax returns are involved as in the
cases at bar, a proceeding in court after the collection of such tax
may be begun without assessment. Here, the private respondents
had already filed the capital gains tax return and the VAT returns,
and paid the taxes they have declared due therefrom. Upon
investigation of the examiners of the BIR, there was a preliminary
finding of gross discrepancy in the computation of the capital gains
taxes due from the sale of two lots of AAI shares, first to APAC and
then to APAC Philippines, Limited. The examiners also found that
the VAT had not been paid for VAT-liable sale of services for the
third and fourth quarters of 1990. Arguably, the gross disparity in
the taxes due and the amounts actually declared by the private
respondents constitutes badges of fraud.

An assessment of a deficiency is not necessary to a criminal

prosecution for willful attempt to defeat and evade the income tax.
A crime is complete when the violator has knowingly and willfully
filed a fraudulent return, with intent to evade and defeat the tax. The
perpetration of the crime is grounded upon knowledge on the part
of the taxpayer that he has made an inaccurate return, and the
government’s failure to discover the error and promptly to assess
has no connections with the commission of the crime.

9. CIR vs Pascor Realty, 309 SCRA 40

The filing of the criminal complaint with the DOJ cannot be
construed as a formal assessment. Neither the Tax Code nor the
revenue regulations governing the protest assessments provide a
specific definition or form of an assessment.
An assessment must be sent to and received by the taxpayer, and
must demand payment of the taxes described therein within a
specific period. The revenue officer’s affidavit merely contained a
computation of respondent’s tax liability. It did not state a demand
or period for payment. It was addressed to the Secretary of Justice
not to the taxpayer. They joint affidavit was meant to support the
criminal complaint for tax evasion; it was not meant to be a notice
of tax due and a demand to private respondents for the payment
thereof. The fact that the complaint was sent to the DOJ, and not to
private respondent, shows that commissioner intended to file a
criminal complaint for tax evasion, not to issue an assessment.

An assessment is not necessary before criminal charges can be

filed. A criminal charge need not only be supported by a prima facie
showing of failure to file a required return. The CIR had, in such tax
evasion cases, discretion on whether to issue an assessment, or to
file a criminal case against the taxpayer, or to do both.

10. CIR vs. Hantex (GR 136 975, March 31 2005)

11. CIR vs Pilipinas Shell (GR 197945, July 9, 2018)
***
Section 203, period of limitation - 3 years rule, start at april 15, if file
before april 15 still start at april 15, if after april 15 count at the date
of filing
Section 203. Period of Limitation Upon Assessment and Collection.
- Except as provided in Section 222, internal revenue taxes shall be
assessed within three (3) years after the last day prescribed by law
for the filing of the return, and no proceeding in court without
assessment for the collection of such taxes shall be begun after
the expiration of such period: Provided, That in a case where 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.

For purposes of this Section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed
on such last day.

If there is amended return count it at the time of amended return -

look for the case
Section 222 exemption from the period of limitation and
assessment of collection of tax - 10 years.
Section 223
**date of mailing - prescriptive period read cases**

SEC. 222. Exceptions as to Period of Limitation of Assessment and

Collection of Taxes. -

(a) 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 (10) years after the
discovery of the falsity, fraud or omission: Provided, That in a fraud
assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal
action for the collection thereof.

(b) If before the expiration of the time prescribed in Section 203 for
the assessment of the tax, both the Commissioner and the taxpayer
have agreed in writing to its assessment after such time, the tax
may be assessed 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.

(c) Any internal revenue tax which has been assessed within the
period of limitation as prescribed in paragraph (a) hereof may be
collected by distraint or levy or by a proceeding in court within five
(5) years following the assessment of the tax.

(d) Any internal revenue tax, which has been assessed within the
period agreed upon as provided in paragraph (b) hereinabove, may
be collected by distraint or levy or by a proceeding in court within
the period agreed upon in writing before the expiration of the five
(5) -year period.

The period so agreed upon may be extended by subsequent written

agreements made before the expiration of the period previously
agreed upon.

(e) Provided, however, That nothing in the immediately preceding

and paragraph (a) hereof shall be construed to authorize the
examination and investigation or inquiry into any tax return filed in
accordance with the provisions of any tax amnesty law or decree.

SEC. 223. Suspension of Running of Statute of Limitations. - The

running of the Statute of Limitations provided in Sections 203 and
222 on the making of assessment and the beginning of distraint or
levy a proceeding in court for collection, in respect of any
deficiency, shall be suspended for the period during which the
Commissioner is prohibited from making the assessment or
beginning distraint or levy or a proceeding in court and for sixty (60)
days thereafter; when the taxpayer requests for a reinvestigation
which is granted by the Commissioner; when the taxpayer cannot
be located in the address given by him in the return filed upon
which a tax is being assessed or collected: Provided, that, if the
taxpayer informs the Commissioner of any change in address, the
running of the Statute of Limitations will not be suspended; when
the warrant of distraint or levy is duly served upon the taxpayer, his
authorized representative, or a member of his household with
sufficient discretion, and no property could be located; and when
the taxpayer is out of the Philippines.
***
Section 218 read
**CTA may issue an injunction
SEC. 218. Injunction not Available to Restrain Collection of Tax. -
No court shall have the authority to grant an injunction to restrain
the collection of any national internal revenue tax, fee or charge
imposed by this Code.
***

Section 204 and 205 read

SEC. 204. Authority of the Commissioner to Compromise, Abate
and Refund or Credit Taxes. - The Commissioner may -

(A) Compromise the Payment of any Internal Revenue Tax, when:

(1) A reasonable doubt as to the validity of the claim against the
taxpayer exists; or
(2) The financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax.
The compromise settlement of any tax liability shall be subject to
the following minimum amounts:
For cases of financial incapacity, a minimum compromise rate
equivalent to ten percent (10%) of the basic assessed tax; and
For other cases, a minimum compromise rate equivalent to forty
percent (40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos
(P1,000.000) or where the settlement offered is less than the
prescribed minimum rates, the compromise shall be subject to the
approval of the Evaluation Board which shall be composed of the
Commissioner and the four (4) Deputy Commissioners.

(B) Abate or Cancel a Tax Liability, when:

(1) The tax or any portion thereof appears to be unjustly or
excessively assessed; or
(2) The administration and collection costs involved do not justify
the collection of the amount due.
All criminal violations may be compromised except: (a) those
already filed in court, or (b) those involving fraud.
(C) Credit or refund taxes erroneously or illegally received or
penalties imposed without authority, refund the value of internal
revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused stamps
that have been rendered unfit for use and refund their value upon
proof of destruction.
No credit or refund of taxes or penalties shall be allowed unless the
taxpayer files in writing with the Commissioner a claim for credit or
refund within two (2) years after the payment of the tax or penalty:
Provided, however, That a return filed showing an overpayment shall
be considered as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions of this
Code may be applied against any internal revenue tax, excluding
withholding taxes, for which the taxpayer is directly liable.
Any request for conversion into refund of unutilized tax credits may
be allowed, subject to the provisions of Section 230 of this Code:
Provided, That the original copy of the Tax Credit Certificate
showing a creditable balance is surrendered to the appropriate
revenue officer for verification and cancellation: Provided, further,
That in no case shall a tax refund be given resulting from availment
of incentives granted pursuant to special laws for which no actual
payment was made.
The Commissioner shall submit to the Chairmen of the Committee
on Ways and Means of both the Senate and House of
Representatives, every six (6) months, a report on the exercise of
his powers under this Section, stating therein the following facts
and information, among others: names and addresses of taxpayers
whose cases have been the subject of abatement or compromise;
amount involved; amount compromised or abated; and reasons for
the exercise of power: Provided, That the said report shall be
presented to the Oversight Committee in Congress that shall be
constituted to determine that said powers are reasonably exercised
and that the government is not unduly deprived of revenues.

CIVIL REMEDIES FOR COLLECTION OF TAXES

SEC. 205. Remedies for the Collection of Delinquent Taxes. - The
civil remedies for the collection of internal revenue taxes, fees or
charges, and any increment thereto resulting from delinquency shall
be:

(a) By distraint of goods, chattels, or effects, and other personal

property of whatever character, including stocks and other
securities, debts, credits, bank accounts and interest in and rights
to personal property, and by levy upon real property and interest in
rights to real property; and

(b) By civil or criminal action.

Either of these remedies or both simultaneously may be pursued in

the discretion of the authorities charged with the collection of such
taxes: Provided, however, That the remedies of distraint and levy
shall not be availed of where the amount of tax involve is not more
than One hundred pesos (P100).

The judgment in the criminal case shall not only impose the penalty
but shall also order payment of the taxes subject of the criminal
case as finally decided by the Commissioner.

The Bureau of Internal Revenue shall advance the amounts needed

to defray costs of collection by means of civil or criminal action,
including the preservation or transportation of personal property
distrained and the advertisement and sale thereof, as well as of real
property and improvements thereon.
***
***
**Section 228 and 229 read!!!
SEC. 228. Protesting of Assessment. - When the Commissioner or
his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a pre assessment notice shall not be required in the
following cases:

(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on
the face of the return; or(b) When a discrepancy has been
determined between the tax withheld and the amount actually
remitted by the withholding agent; or(c) When a taxpayer who opted
to claim a refund or tax credit of excess creditable withholding tax
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 quarter or quarters of the
succeeding taxable year; or(d) When the excise tax due on
exciseable articles has not been paid; or(e) When the article locally
purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts,
has been sold, traded or transferred to non-exempt persons.

The taxpayers shall be informed in writing of the law and the facts
on which the assessment is made; otherwise, the assessment shall
be void.

Within a period to be prescribed by implementing rules and

regulations, the taxpayer shall be required to respond to said notice.

If the taxpayer fails to respond, the Commissioner or his duly

authorized representative shall issue an assessment based on his
findings. cralaw

Such assessment may be protested administratively by filing a

request for reconsideration or reinvestigation within thirty (30) days
from receipt of the assessment in such form and manner as may
be prescribed by implementing rules and regulations. cralaw

Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the
assessment shall become final. cralaw

If the protest is denied in whole or in part, or is not acted upon

within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of one
hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable.
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no
suit or proceeding shall be maintained in any court for the recovery
of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, of any sum
alleged to have been excessively or in any manner wrongfully
collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for
refund or credit has been duly filed with the Commissioner; but
such suit or proceeding may be maintained, whether or not such
tax, penalty, or sum has been paid under protest or duress. cralaw

In any case, no such suit or proceeding shall be filed after the

expiration of two (2) years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on
the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.

An Outline of the steps in Protest Cases:

1. Tax audit is conducted by the BIR;

2. A Pre-Assessment Notice (PAN) is sent to the taxpayer;
3. The taxpayer is given an opportunity to explain;
4. Final Assessment Notice (FAN) is issued to the taxpayer;
5. Taxpayer may file a written Protest - within 30 days from receipt
of FAN , either:
-request for reconsideration, or
-request for reinvestigation
6. Taxpayer submits all relevant supporting documents within 60
days from the filing of the protest. ( If a request for reinvestigation
is filed.)
7. Commissioner is given 180 days from receipt of said documents
to decide.
8. Within 30 days from receipt of the decision of the Commissioner,
or within 30 days from
lapse of the 180 days period in case of inaction of the
Commissioner, the taxpayer may file
a petition for review with the CTA in Division.
**read cases with FAN was deemed the decision of CTA as can be
protested by taxpayer
9. File motion for reconsideration before the same division within
15 days;
10. File petition for review with the CTA en banc within 15 days;
11. Motion for reconsideration with the CTA en banc within 15 days
12. Petition for review on certiorari with the Supreme Court within
15 days
***

An outline of the steps in a Claim for Tax Refund

1. The tax is erroneously , illegally collected;

2. Taxpayer files a written claim for refund with the Commissioner
within 2 years from date of payment
3. In case of adverse decision, or inaction of the Commissioner, and
the two (2) year prescriptive period is about to expire, taxpayer may
file a petition for review with the CTA in division within 30 days from
receipt from receipt of the adverse decision if the Commissioner
acted on the claim, but in any event , the appeal must be filed within
the 2-year prescriptive period from date of payment
4. File a motion for recon with the CTA in Division within 15 days
5. File a petition for review before the CTA en banc within 15 days
6. File a motion for recon within 15 days
7. File petition for review on certiorari with the Supreme Court
within 15 days from receipt

Doctrine of the Twin Prescriptive period does not apply to a claim

for unutilized input taxes but to a claim for tax refund or credit
under an invalid payment. (Sec. 229, NIRC)

NOTE: The Doctrine of the Twin Prescriptive Period for invalid

payments under RA 1125, DOES NOT APPLY TO AN APPEAL
BEFORE THE CTA INVOLVING CLAIMS FOR UNUTILIZED INPUT
TAXES.
The above rules do not apply to EPZA-REGISTERED ENTITIES
because they are exempt from the enforcement of Customs Laws
and other Rules and Regulations, such as the prescriptive periods
and/or procedural requirements of the Tariff and Customs Code of
the Philippines to a refund claim. (Phil. Associated Smelting &
Refining (PASAR) Corp. vs. Comm. Of Customs and Bureau of
Customs, CTA case No. 8404, February 20, 2014).

The simultaneous claim for tax refund and Petition for Appeal to
the CTA is valid in view of the Doctrine of Twin Prescriptive Period
of RA 1125.

**Doctrine of twin prescription read cases

GIbbs Case
a taxpayer whose income is withheld at the source will be deemed
to have paid his tax liability when the same falls due at the end of
the tax year. It is from this latter date then, or when the tax liability
falls due, that the two-year prescriptive period under Section 306 of
the Revenue Code starts to run with respect to payments effected
through the withholding tax system. It is of no consequence
whatever that a claim for refund or credit against the amount
withheld at the source may have been presented and may have
remained unresolved since, a taxpayer who has paid the tax,
whether under protest or not, and who is claiming a refund of the
same, must comply with the requirement, that is, he must file a
claim for refund with the Collector of Internal Revenue within 2
years from the date of his payment of the tax, as required by
Section 306 of the National Internal Revenue Code, and appeal to
the Court of Tax Appeals within 30 days from receipt of the
Collector's decision or ruling denying his claim for refund, as
required by Section 11 of Republic Act No. 1125. If, however, the
Collector takes time in deciding the claim, and the period of two
years is about to end, the suit or proceeding must be started in the
Court of Tax Appeals before the end of the two-year period without
awaiting the decision of the Collector. This is so because of the
positive requirement of Section 306 and the doctrine that delay of
the Collector in rendering decisions does not extend the preemptory
period fixed by the statute.
***
CASES:
1. Basilan Estates Inc., vs. CIR, Sept 25, 1967
Prescription within 5 year period under sec 331 of tax code
requiring 5year within which to assess deficiency taxes, the
assessment is deemed made when notice to this effect is released,
mailed or sent by collector to the taxpayer and it is not required that
the notice be received by the taxpayer within the aforementioned
5-year period.
2. Mambulao Lumber vs. Repubic, Sept 4, 1984.
The action for collection is not barred by prescription. The basis of
the complaint filed on August 1961 was the demand letter made by
the CIR on August 29, 1958 and not the demand letter of the Bureau
of Forestry on January 1949. So that the reckoning date of the
5-year period should be from the date of the BIR letter and not that
of the Bureau of Forestry. This must be so because forest charges
are internal revenue taxes and the BIR has the sole power and duty
to collect them.

3. CIR vs. Phoenix Assurance Co., May 20, 1965

The Court of Tax Appeals found the right of the Commissioner of
Internal Revenue barred by prescription, the same having been
exercised more than five years from the date the original return was
filed.

Considering that the deficiency assessment was based on the

amended return which, as aforestated, is substantially different
from the original return, the period of limitation of the right to issue
the same should be counted from the filing of the amended income
tax return. From August 30, 1955, when the amended return was
filed, to July 24, 1958, when the deficiency assessment was
issued, less than five years elapsed. The right of the
Commissioner to assess the deficiency tax on such amended
return has not prescribed.

4. Republic vs. Damian Ret, March 31, 1962.

Section 332 of the Tax Code does not apply in the collection of
income taxes by summary proceedings. But when the collection of
income taxes is to be effected by court action, said provision is
controlling.
Under Section 332 (a) of the Tax Code, the Collector is given two
alternatives: (1) to assess the tax within 10 years from the
discovery of the falsity, fraud or omission, or (2) to file an action in
court for the collection of such discovery of the falsity, fraud or
omission. An assessment against the taxpayer takes the case out
of the realms of the provisions of the said section and places it
under the mandate of section 332(c)

"The ‘judicial action ` mentioned in the Tax Code may be resorted to

within five (5) years from the date the return has been filed, if there
has been no assessment, or within five (5) years from the date of
the assessment made within the statutory period, or within the
period agreed upon, in writing, by the Collector of Internal Revenue
and the tax-payer, before the expiration of said five-year period, or
within each extension of said stipulated period as may have been
agreed upon, in writing, made before the expiration of the period
previously stipulated, except that in the case of a false or fraudulent
return with intent to evade tax or for failure to file a return the
judicial action may be begun at any time within ten (10) years after
the discovery of the falsity, fraud or omission (Sections 331 and
332 of the Tax Code)" (Gancayco v. Coll. of Int. Rev. G. R. No.
L-13325, April 20, 1961).

5. CIR vs. Enron Subic Power, Jan 19, 2009

The advice of tax deficiency, given by the CIR to an employee of
Enron, as well as the preliminary five-day letter, were not valid
substitutes for the mandatory notice in writing of the legal and
factual bases of the assessment. These steps were mere
perfunctory discharges of the CIRs duties in correctly assessing a
taxpayer.
-The requirement for issuing a preliminary or final notice, as the
case may be, informing a taxpayer of the existence of a deficiency
tax assessment is markedly different from the requirement of what
such notice must contain. Just because the CIR issued an advice, a
preliminary letter during the pre-assessment stage and a final
notice, in the order required by law, does not necessarily mean that
Enron was informed of the law and facts on which the deficiency
tax assessment was made.
-The law requires that the legal and factual bases of the
assessment be statedin the formal letter of demand and
assessment notice. Thus, such cannot be presumed. Otherwise, the
express provisions of Article 228 of the NIRC and RR No. 12-99
would be rendered nugatory. The alleged factual bases in the
advice, preliminary letter and audit working papers did not suffice.
There was no going around the mandate of the law that the legal
and factual bases of the assessment be stated in writing in the
formal letter of demand accompanying the assessment notice.
-In view of the absence of a fair opportunity for Enron to be
informed of the legal and factual bases of the assessment against
it, the assessment in question was void

6. CIR vs. Metro Star Superama, Dec 8, 2010

Since the Petitioner denied receipt of the Pre-Assessment Notice,
the burden of proving the same shifts to the BIR. To raise the
presumption of receipt, it must be shown that (a) the letter was
properly addressed with postage prepaid and (b) that it was mailed.
If receipt is denied, the BIR must then show actual receipt through
presentation of the registry receipt or, if the same cannot be
located, at least a certification from the Bureau of Posts.

The taxpayers shall be informed in writing of the law and the facts
on which the assessment is made; otherwise, the assessment shall
be void.

Taxpayer shall be informed of not only the law, but also of the facts
on which an assessment would be made. Otherwise, the
assessment itself would be invalid. The regulation then, on the
other hand, simply provided that a notice be sent to the respondent
in the form prescribed, and that no consequence would ensue for
failure to comply with that form.

R.R. No. 12-99 of the BIR

SECTION 3. Due Process Requirement in the Issuance of a
Deficiency Tax Assessment. --
3.1.4 Formal Letter of Demand and Assessment Notice. -- The
formal letter of demand and assessment notice shall be issued by
the Commissioner or his duly authorized representative. The letter
of demand calling for payment of the taxpayer's deficiency tax or
taxes shall state the facts, the law, rules and regulations, or
jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment notice shall be void (see
illustration in ANNEX B hereof).

The same shall be sent to the taxpayer only by registered mail or by

personal delivery.

If sent by personal delivery, the taxpayer or his duly authorized

representative shall acknowledge receipt thereof in the duplicate
copy of the letter of demand, showing the following: (a) His name;
(b) signature; (c) designation and authority to act for and in behalf
of the taxpayer, if acknowledged received by a person other than
the taxpayer himself; and (d) date of receipt thereof.

7. Republic vs. Lim Tian Teng Sons, March 31, 1966

Yes, the CTA has acquired jurisdiction over the case because this
qualifies as an appeal from the CIR’s decision on the disputed
assessment. When the CIR decided to collect the tax assessed
against X without first deciding on the taxpayer’s protest, that is an
implied denial of X’s protest, in which event the taxpayer may file an
appeal with the CTA. (Republic vs. Lim Tian Teng & Sons, Inc., Dayrit
vs. Cruz)

Nowhere in the Tax Code is the Commissioner required to rule first

on the taxpayer’s request for reinvestigation before he can go to
court for the purpose of collecting the tax assessed. According to
the court, the legislative policy is to give the Commissioner much
latitude in the speedy and prompt collection of taxes because it is
on taxation that the government depends to obtain the means to
carry in its operations.

When the commissioner did not reply to the tax payer’s request for
reinvestigation/reconsideration and instead referred the case to the
solicitor general for judicial collection, this was indicative of his
decision against reinvestigation.
8. CIR vs. Western Pacific Corp., May 27, 1965.
9. CIR vs. Primetown Property, august 28, 2007
the Respondents petition is filed (April 14, 2000) on the last day of
24th calendar month from the day the respondent filed its final
adjusted return (April 14, 1998) . The CA’s decision is correct but
the basis is wrong. Article 13 of the Civil Code and Section 31,
Chapter VIII, Book I of the Administrative Code of 1987 deal with
the same subject matter — the computation of legal periods. Under
the Civil Code, a year is equivalent to 365 days whether it be a
regular year or a leap year. Under the Administrative Code of 1987,
however, a year is composed of 12 calendar months.There
obviously exists a manifest incompatibility in the manner of
computing legal periods. For this reason, we hold that Section 31,
Chapter VIII, Book I of the Administrative Code of 1987, being the
more recent law, governs the computation of legal periods.

Respondent’s petition (filed on April 14, 2000) was filed on the last
day of the 24th calendar month from the day respondent filed its
final adjusted return. Hence, it was filed within the reglementary
period.

10. Gibbs vs. C I R., Nov 29, 1965

11. Basa vs. Republic, August 5, 1985
***
Read RA 1125 An ACT Creating the CTA as amended
by Ra 9282 Section 7 and 11

Sec. 7. Jurisdiction. - The CTA shall exercise:

"a. Exclusive appellate jurisdiction to review by appeal, as herein
provided:

"1. Decisions of the Commissioner of Internal Revenue in cases

involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
"2. Inaction by the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relations thereto, or other
matters arising under the National Internal Revenue Code or other
laws administered by the Bureau of Internal Revenue, where the
National Internal Revenue Code provides a specific period of action,
in which case the inaction shall be deemed a denial;

"3. Decisions, orders or resolutions of the Regional Trial Courts in

local tax cases originally decided or resolved by them in the
exercise of their original or appellate jurisdiction;

"4. Decisions of the Commissioner of Customs in cases involving

liability for customs duties, fees or other money charges, seizure,
detention or release of property affected, fines, forfeitures or other
penalties in relation thereto, or other matters arising under the
Customs Law or other laws administered by the Bureau of
Customs;

"5. Decisions of the Central Board of Assessment Appeals in the

exercise of its appellate jurisdiction over cases involving the
assessment and taxation of real property originally decided by the
provincial or city board of assessment appeals;

"6. Decisions of the Secretary of Finance on customs cases

elevated to him automatically for review from decisions of the
Commissioner of Customs which are adverse to the Government
under Section 2315 of the Tariff and Customs Code;

"7. Decisions of the Secretary of Trade and Industry, in the case of

nonagricultural product, commodity or article, and the Secretary of
Agriculture in the case of agricultural product, commodity or article,
involving dumping and countervailing duties under Section 301 and
302, respectively, of the Tariff and Customs Code, and safeguard
measures under Republic Act No. 8800, where either party may
appeal the decision to impose or not to impose said duties.

"b. Jurisdiction over cases involving criminal offenses as herein

provided:
"1. Exclusive original jurisdiction over all criminal offenses arising
from violations of the National Internal Revenue Code or Tariff and
Customs Code and other laws administered by the Bureau of
Internal Revenue or the Bureau of Customs: Provided, however, That
offenses or felonies mentioned in this paragraph where the
principal amount o taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos (P1,000,000.00) or
where there is no specified amount claimed shall be tried by the
regular Courts and the jurisdiction of the CTA shall be appellate.
Any provision of law or the Rules of Court to the contrary
notwithstanding, the criminal action and the corresponding civil
action for the recovery of civil liability for taxes and penalties shall
at all times be simultaneously instituted with, and jointly
determined in the same proceeding by the CTA, the filing of the
criminal action being deemed to necessarily carry with it the filing
of the civil action, and no right to reserve the filling of such civil
action separately from the criminal action will be recognized.

"2. Exclusive appellate jurisdiction in criminal offenses:

"a. Over appeals from the judgments, resolutions or orders of the

Regional Trial Courts in tax cases originally decided by them, in
their respected territorial jurisdiction.

"b. Over petitions for review of the judgments, resolutions or orders

of the Regional Trial Courts in the exercise of their appellate
jurisdiction over tax cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in their respective jurisdiction.

"c. Jurisdiction over tax collection cases as herein provided:

"1. Exclusive original jurisdiction in tax collection cases involving

final and executory assessments for taxes, fees, charges and
penalties: Provided, however, That collection cases where the
principal amount of taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos (P1,000,000.00)
shall be tried by the proper Municipal Trial Court, Metropolitan Trial
Court and Regional Trial Court.

"2. Exclusive appellate jurisdiction in tax collection cases:

"a. Over appeals from the judgments, resolutions or orders of the

Regional Trial Courts in tax collection cases originally decided by
them, in their respective territorial jurisdiction.

"b. Over petitions for review of the judgments, resolutions or orders

of the Regional Trial Courts in the Exercise of their appellate
jurisdiction over tax collection cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts, in their respective jurisdiction."

SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any
party adversely affected by a decision, ruling or inaction of the
Commissioner of Internal Revenue, the Commissioner of Customs,
the Secretary of Finance, the Secretary of Trade and Industry or the
Secretary of Agriculture or the Central Board of Assessment
Appeals or the Regional Trial Courts may file an appeal with the
CTA within thirty (30) days after the receipt of such decision or
ruling or after the expiration of the period fixed by law for action as
referred to in Section 7(a)(2) herein.

"Appeal shall be made by filing a petition for review under a

procedure analogous to that provided for under Rule 42 of the 1997
Rules of Civil Procedure with the CTA within thirty (30) days from
the receipt of the decision or ruling or in the case of inaction as
herein provided, from the expiration of the period fixed by law to act
thereon. A Division of the CTA shall hear the appeal: Provided,
however, That with respect to decisions or rulings of the Central
Board of Assessment Appeals and the Regional Trial Court in the
exercise of its appellate jurisdiction appeal shall be made by filing a
petition for review under a procedure analogous to that provided for
under rule 43 of the 1997 Rules of Civil Procedure with the CTA,
which shall hear the case en banc.
"All other cases involving rulings, orders or decisions filed with the
CTA as provided for in Section 7 shall be raffled to its Divisions. A
party adversely affected by a ruling, order or decision of a Division
of the CTA may file a motion for reconsideration of new trial before
the same Division of the CTA within fifteens (15) days from notice
thereof: Provide, however, That in criminal cases, the general rule
applicable in regular Courts on matters of prosecution and appeal
shall likewise apply.

"No appeal taken to the CTA from the decision of the Commissioner
of Internal Revenue or the Commissioner of Customs or the
Regional Trial Court, provincial, city or municipal treasurer or the
Secretary of Finance, the Secretary of Trade and Industry and
Secretary of Agriculture, as the case may be shall suspend the
payment, levy, distraint, and/or sale of any property of the taxpayer
for the satisfaction of his tax liability as provided by existing law:
Provided, however, That when in the opinion of the Court the
collection by the aforementioned government agencies may
jeopardize the interest of the Government and/or the taxpayer the
Court any stage of the proceeding may suspend the said collection
and require the taxpayer either to deposit the amount claimed or to
file a surety bond for not more than double the amount with the
Court.

"In criminal and collection cases covered respectively by Section

7(b) and (c) of this Act, the Government may directly file the said
cases with the CTA covering amounts within its exclusive and
original jurisdiction."

"SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil

proceeding involving matter arising under the National Internal
Revenue Code, the Tariff and Customs Code or the Local
Government Code shall be maintained, except as herein provided,
until and unless an appeal has been previously filed with the CTA
and disposed of in accordance with the provisions of this Act.

"A party adversely affected by a resolution of a Division of the CTA

on a motion for reconsideration or new trial, may file a petition for
review with the CTA en banc."
"SEC. 19. Review by Certiorari. - A party adversely affected by a
decision or ruling of the CTA en banc may file with the Supreme
Court a verified petition for review on certiorari pursuant to Rule 45
of the 1997 Rules of Civil Procedure."

Cases:
CIR vs.Villa, Jan 2, 1968
The rule is that where a taxpayer questions an assessment and
asks the Collector to reconsider or cancel the same because he
(the taxpayer) believes he is not liable therefor, the assessment
becomes a "disputed assessment" that the Collector must decide,
and the taxpayer can appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the disputed assessment.
Since in the instant case the taxpayer appealed the assessment of
the Commissioner of Internal Revenue without previously
contesting the same, the appeal was premature and the Court of
Tax Appeals had no jurisdiction to entertain said appeal. For, as
stated, the jurisdiction of the Tax Court is to review by appeal
decisions of Internal Revenue on disputed assessments. The Tax
Court is a court of special jurisdiction. As such, it can take
cognizance only of such matters as are clearly within its
jurisdiction.

Allied Banking vs. CIR, Feb 5, 2010

the instant case is an exception to the rule on exhaustion of
administrative remedies, i.e., estoppel on the part of the
administrative agency concerned we find the CIR estopped from
claiming that the filing of the Petition for Review was premature
because petitioner failed to exhaust all administrative remedies.

It appears from the foregoing demand letter that the CIR has
already made a final decision on the matter and that the remedy of
petitioner is to appeal the final decision within 30 days. records
show that petitioner disputed the PAN but not the Formal Letter of
Demand with Assessment Notices.

we cannot blame petitioner for not filing a protest against the

Formal Letter of Demand with Assessment Notices since the
language used and the... tenor of the demand letter indicate that it
is the final decision of the respondent

Viewed in the light of the foregoing, respondent is now estopped

from claiming that he did not intend the Formal Letter of Demand
with AssessmentNotices to be a final decision.

under Section 228 of the NIRC, the terms "protest", "reinvestigation"

and "reconsideration" refer to the... administrative remedies a
taxpayer may take before the CIR, while the term "appeal" refers to
the remedy available to the taxpayer before the CTA.

As we see it then, petitioner in appealing the Formal Letter of

Demand with Assessment Notices to the CTA merely took the cue
from respondent. It is the Formal Letter of Demand and
Assessment Notice that must be administratively protested or
disputed within 30 days, and not the PAN.

the counting of the 30 days within which to institute an appeal in

the CTA commences from the date of receipt of the decision of the
CIR on the disputed assessment, not from the date the assessment
was issued.

CIR vs. Isabela Cultural Corp, July 1, 2001

A final demand letter from the Bureau of Internal Revenue,
reiterating to the taxpayer the immediate payment of a tax
deficiency assessment previously made, is tantamount to a denial
of the taxpayer's request for reconsideration. Such letter amounts
to a... final decision on a disputed assessment and is thus
appealable to the Court of Tax Appeals (CTA).

Final Notice Before Seizure cannot but be considered as the

commissioner's decision disposing of the request for
reconsideration filed by respondent, who received no other
response to its request.

Not only was the Notice the only response... received; its content
and tenor supported the theory that it was the CIR's final act
regarding the request for reconsideration. The very title expressly
indicated that it was a final notice prior to seizure of property. The
letter itself clearly stated that respondent was... being given "this
LAST OPPORTUNITY" to pay; otherwise, its properties would be
subjected to distraint and levy.

jurisprudence dictates that a final demand letter for payment of

delinquent taxes may be considered a decision on a disputed or
protested assessment.

Surigao Electric vs. CIR, June 28, 1974

CIR vs. Hambrecht, Nov 17, 2010
the taxpayer’s failure to file a protest only means that the validity or
correctness of the assessment may no longer be questioned on
appeal. The issue of whether the right of the CIR to collect the
validly assessed tax has prescribed is a separate and distinct issue
well within the jurisdiction of the CTA to decide.

Insofar as the CTA is concerned, the jurisprudence is conflicting. In

the recent CTA Case 8751, November 17, the Bureau of Internal
Revenue (BIR) argued that the CTA has no jurisdiction over the
assessment, considering that the taxpayer belatedly protested the
FLD/FAN, making it final and executory. The taxpayer, on the other
hand, argued that the FLD/FAN is void for being issued beyond the
three-year prescriptive period. The CTA, citing the above-cited case
of Hambrecht and Quist, held that the fact that the assessment has
become final for failure to file a protest within the time allowed only
means that the validity or correctness of the assessment may no
longer be questioned on appeal. However, the validity of the
assessment itself is a separate and distinct from the issue of
prescription. In the said case, the CTA found that the right of the
BIR to assess the taxpayer had already prescribed as the FLD/FAN
was issued beyond the three-year prescriptive period provided by
law.

RCBC vs. CIR, Apr 24, 2007

In case the Commissioner failed to act on the disputed assessment
within the 180-day period from date of submission of documents, a
taxpayer can either: 1) file a petition for review with the Court of Tax
Appeals within 30 days after the expiration of the 180-day period; or
2)await the final decision of the Commissioner on the disputed
assessments and appeal such final decision to the Court of Tax
Appeals within 30 days after receipt of a copy of such decision.
However, these options are mutually exclusive, and resort to one
bars the application of the other.

In the instant case, the Commissioner failed to act on the disputed

assessment within 180 days from the date of submission of
documents. Thus, petitioner opted to file a petition for review
before the Court of Tax Appeals. Unfortunately, the petition for
review was filed out of... time, i.e., it was filed more than 30 days
after the lapse of the 180-day period. Consequently, it was
dismissed by the Court of Tax Appeals for late filing. Petitioner did
not file a motion for reconsideration or make an appeal; hence, the
disputed assessment became final, demandable and executory.

Based on the foregoing, petitioner cannot now claim that the

disputed assessment is not yet final as it remained unacted upon
by the Commissioner; that it can still await the final decision of the
Commissioner and thereafter appeal the same to the Court of Tax
Appeals. After availing the first option, i.e., filing a petition for
review which was however filed out of time, petitioner cannot
successfully resort to the second option, i.e., awaiting the final
decision of the Commissioner and appealing the same to the Court
of Tax Appeals, on the pretext that there is yet no final decision on
the disputed assessment because of the Commissioner's inaction.

Fishwealth Canning vs. CIR, Jan. 21, 2010

In the case at bar, petitioner's administrative protest was denied by
Final Decision on Disputed Assessment dated August 2, 2005
issued by respondent and which petitioner received on August 4,
2005. Under the above-quoted Section 228 of the 1997 Tax Code,
petitioner had 30 days to appeal respondent's denial of its protest
to the CTA.

Since petitioner received the denial of its administrative protest on

August 4, 2005, it had until September 3, 2005 to file a petition for
review before the CTA Division. It filed one, however, on October 20,
2005, hence, it was filed out of time. For a motion for
reconsideration of the denial of the administrative protest does not
toll the 30-day period to appeal to the CTA.