Tax Remedies: Remedies of the Taxpayer

REMEDIES OF THE TAXPAYER

BEFORE PAYMENT

1. administrative protest
2. request for reconsideration
3. request for reinvestigation
4. judicial protest

AFTER PAYMENT

1. claim for tax refund
2. claim for tax credit

1. Administrative Protest (Protest against Assessment)

WHEN: within 30 days from receipt of final assessment notice (FAN)

WHERE: BIR

HOW: written protest, stating facts, applicable law, rules and regulations or jurisprudence o which his protest is based; if only portions of FAN are disputed, must pay the deficiency tax on undisputed portion


PROCEDURE:

1. protest against pre-assessment notice (PAN) within 15 days from receipt
2. protest against FAN within 30 days from receipt
3. submit relevant documents within 60 days from filing of protest
4. CIR has 180 days to decide
5. in case of denial or lapse of 180-day period, taxpayer has 30 days to bring his protest to the CTA en division

WHEN PAN IS NOT REQUIRED:

1. finding for any deficiency tax is the result of mathematical error in computation of tax as appearing on face of return
2. a discrepancy has been determined between the tax withheld and the amount actually remitted
3. taxpayer who opted to claim a refund or credit of excess creditable withholding tax for at taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter/s for the succeeding taxable year/s
4. excise tax due on excisable articles have not been paid
5. article locally purchased or imported by an exempt person

2. Request for Reconsideration – a plea for re-evaluation of an assessment on the basis of EXISTING RECORDS without need of additional evidence (question of law or fact or both)

3. Request for Reinvestigation – a plea for reinvestigation of an assessment on the basis of NEWLY-DISCOVERED EVIDENCE that a taxpayer intends to present in the reinvestigation (question of law or fact or both)

- in either case, the request must be accompanied by a WAIVER of the statute of limitations in favor of the government

4. Judicial Protest

PROCEDURE

1. within 30 days from denial of protest by CIR or from lapse of 180-day period, appeal to CTA division
2. if CTA division denies, motion for reconsideration within 15 days from receipt
3. within 15 days from denial of motion, appeal to CTA en banc
4. appeal to SC within 15 days by petition for review (Rule 45)

5. Refund/Credit
- based on the legal principle of quasi-contract or solutio indebiti
- in the nature of an exemption, which cannot be allowed unless granted in the most explicit and categorical language
- strictly construed against the claimant (proof of claim must be established)
- partial payment of a tax cannot be the basis for a tax refund
- interest on taxes refunded may not be paid by the Government to the taxpayer, UNLESS: (a) the CIR acted with patent arbitrariness (inexcusable or obstinate disregard for legal provision); and (b) in the case of income taxes withheld on the wages of employees, which must be refunded within 3 mos from April 15

Tax Refund vs. Tax Credit

• R: takes place when there is actually a reimbursement of the tax
• C: the Government issues a tax certificate or tax credit memo covering the amount determined to be reimbursable, which can be applied after proper verification against any sum that may be due and collectible from the taxpayer

Requisites for Recovery

1. there was an actual collection and receipt by the Government of the tax sought to be recovered (factual proof)
2. legal basis for the granting of refund or credit, including verification of compliance with the statutory requirements relative to the filing of claims within the reglementary 2-yr period
3. in case of corporations, must signify whether to avail of tax refund or tax credit in the corporate income tax return

Q: Are income tax returns actionable documents which must be specifically denied by the Government, otherwise it would constitute an admission to the allegation that payment has in fact already been made and therefore the taxpayer no longer has to submit proof of claim of refund?
A: Income tax returns are not actionable documents because the action is not based on the income tax returns but on the entitlement of the taxpayer to tax refund. Therefore, his claim for refund must be supported by proof.

NOTA BENE: If proof of claim for refund is established, the BIR should refund without any unreasonable delay

Q: Is tax deficiency assessment a bar to tax refund or credit claim?
A: Yes. The deficiency assessment creates a doubt as to the truth and accuracy of the return. Said return cannot therefore be the basis of refund or credit.

Statutory Requirements for Refund/Credit Claims

1. written claim for refund or tax credit must be filed by the taxpayer with the CIR
2. the claim must be a categorical demand for reimbursement
3. both administrative and judicial claims for refund/credit must be filed within 2 years from date of payment regardless of any supervening cause (in case of corporations, the 2-year period is counted from the date final adjusted return was filed at end of taxable year)

Q: Suppose A filed his claim for tax refund with the BIR within the 2-yr reglementary period but it is only after two years have lapsed before BIR rendered a decision and it is one of denial. A now files an appeal of the BIR’s decision with the CTA within the 30-day period to appeal. Will A’s action prosper?
A: No, A’s action will not prosper. Although A filed his claim for refund with the BIR within the 2-yr prescriptive period, he failed to file the same within the same period with the CTA. The rule is that the taxpayer need wait for the action of CIR on his claim for refund before he can take his claim to the CTA. The 2-yr period must be complied with in both the BIR and CTA, regardless of any supervening cause.

WHEN 2-YR PRESCRIPTIVE PERIOD SUSPENDED

1. there is a pending litigation between the two parties
2. the CIR in that litigated case agreed to abide by the decision of the SC

WHY WRITTEN CLAIM IS NECESSARY:

1. to afford CIR an opportunity to correct action of subordinates
2. to notify Government that taxes sought to be refunded are under question and that, therefore, such notice should be borne in mind in estimating the revenue available for expenditure

GR: Government is not liable for interest on tax refund, UNLESS:

• CIR acted with patent arbitrariness
• int eh case of income taxes withheld on wages of employees, which must be refunded within 3 months from April 15

PRINCIPLE OF EQUITABLE RECOUPMENT – allows a taxpayer whose claim for a refund has been barred due to prescription (lapse of more than 2yrs counted from date of payment) to recover said tax by setting off the prescribed refund against a tax that may be due and collectible from him; NOT ALLOWED in the Philippines because it puts a premium on the taxpayer’s neglect to enforce or assert his rights under the law