TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
CABANEIRO) A2011 1
Chapter 8: TAXPAYERS REMEDIES
In General
Remedies of the taxpayer
1. Remedies before payment of tax: Protest of assessment
a. Protest of pre-assessment notice 15 days upon receipt
b. Protest of Final Assessment 30 days upon receipt
c. Appeal to CTA of the decision of the Commissioner 30
days from receipt of decision of the Commissioner, or from
the lapse of 180 days.
d. Appeal decision of the CTA to the CA 15 days
2. Remedy after payment of tax: Claim for tax refund or credit
2 years from payment of tax.
REMEDIES OF THE TAXPAYER
* BEFORE PAYMENT, the taxpayer may dispute or protest the assessment.
He ma also invoke the power of the BIR Commissioner to compromise tax
liability.
* If you RECEIVED AN ASSESSMENT by the BIR, the remedies are:
a. File a request for reconsideration of the assessment or this is a claim
for re-evaluation of the assessment based on the existing records.
b. File a request for investigation of the assessment --- it is also a claim
for a re-evaluation of the assessment on the basis of newly
discovered evidence, or additional evidence that the taxpayer
intends to present in the reinvestigation.
WHERE TO FILE: BIR Commissioner
WHEN: Within 30 days from receipt the final assessment
WHO MAY FILE: Taxpayer or authorized representative
IF the request for investigation or reconsideration has been denied
by the BIR:
1. File a motion for reconsideration of the decision with the BIR; OR
2. Appeal the decision with the CTA.
JUICY NOTES (PROF.
*** Motion for reconsideration must raise new grounds, meaning grounds
which have not been raised in that request for reconsideration or
reinvestigation. Otherwise, it is just a pro-forma motion, it will not suspend
the period within which to appeal the BIR decision to the CTA which is 30
days from receipt of the BIR decision.
ISSUES that may be raised on appeal with the CTA
1. Questions of law or fact OR both
2. Questions of fact
3. both
If CTA affirms the decision of the BIR:
Appeal the CTA decision to CA.
ISSUES: Questions of law
WHEN: Within 15 days from receipt of the CA decision.
PROTEST OF ASSESSMENT
Procedure
1. Taxpayer may file an administrative protest by filing a request for
reconsideration or reinvestigation within 30 days from the receipt of
the assessment.
2. Within 60 days from the filing of the protest, the taxpayer, shall
submit all relevant supporting documents, otherwise the assessment
becomes final.
3. If protest is denied in whole or in part, or is not acted upon within
180 days from the submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the CTA within 30
days from the receipt of the decision or from the lapse of the 180
day period, otherwise, the decision becomes final, executory, and
demandable [Sec. 228 NIRC]
4. Decision of the CTA may be appealed to the CA through a verified
petition for review within 15 days from the receipt of the decision of
the CTA. This may be extended for another 15 days upon proper
motion and the payment of the full amount of the docket fee before
the expiration of the reglementary period. No further extensions
shall be granted except for the most compelling of reasons and in no
case shall exceed 15 days.
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
Disputed Assessment
This is an assessment which has been protested by the taxpayer.
Only disputed assessments may be made subject of an appeal to the
CTA. A taxpayer who receives an assessment and does not protest
the same, cannot file an appeal to the CTA, since it is the decision of
the Commissioner, and not the assessment itself, which is
reviewable by the CTA.
Decisions of the Regional Director
It should be noted that the Regional Director may also render
decisions on protests.
Revenue Regulations 12-85 authorizes appeals to the CTA from
decisions of the Regional Director on administrative protests within
the same 30 day period. Sec. 7 of RA 1125, however, mentions only
decisions of the Commissioner.
Be that as it may, it is very well within the perimeter of correct
procedure if the taxpayer, instead of going directly to the CTA,
appeals the decision of the Regional Director to the Commissioner,
since it is the Commissioner who has the final authority to decide,
assessment protests.
Two ways of protesting administratively
1. Request for reconsideration: This refers to a plea for re-evaluation of
an assessment on the basis of existing records without the need of
additional evidence. It may involve a question of fact or law or both.
2. Request for reinvestigation: This refers to a plea for re-evaluation of
an assessment on the basis of newly-discovered or additional
evidence. It may also involve a question of fact or law or both.
CLAIMS FOR REFUND AND CREDIT OF TAXES
The taxpayer may, instead of filing a protest, file a written
claim for refund.
By virtue of solutio indebiti principle
REQUISITES FOR FILING REFUND:
1. This must be filed within the two (2) year period from the date of
payment;
2. The fact of withholding must be proven;
3. This must be included in the income tax return of the taxpayer;
JUICY NOTES (PROF. CABANEIRO) A2011 2
4. It must be shown that the payment or the amount stated in the return
was received by the government.
WHO MAY FILE: Taxpayer or withholding agent
WHERE TO FILE REFUND: BIR
ISSUES: Questions of law or fact OR both OR
the taxes are illegally or erroneously collected
ILLEGALLY COLLECTED TAX vs. ERRONEOUSLY COLLECTED TAX:
Illegally collected tax means it violates certain provision of the
law. It may not be authorized by a peculiar Tax Law or statute.
Erroneously collected tax means there may be a law passed but
there was a mistake in the collection.
WHEN TO FILE: Within 2 years from the date of payment
Payment must be proven in contemplation of Tax Law, there is
payment when the tax liability is fully paid. So, if it is payable in
installment, there can only be payment when the final installment
has been paid.
REFUND AND CREDIT
These are remedies of the taxpayer after payment of tax.
Both are modes of recovering taxes which are either erroneously or
illegally paid to the government.
Tax refund is when there is actually a reimbursement of the tax,
improperly collected and paid. In tax credit, the government applies
the amount determined to be improperly collected, after proper
verification, against any sum that may be due and collectible from
the taxpayer.
When may claim for refund or credit be filed?
1. When tax has been erroneously or illegally collected.
2. When any penalty is claimed to have been collected without
authority.
3. When any sum is alleged to have been excessively or in any manner
wrongfully collected, [Sec. 229, NIRC].
4. Commissioner is also given the authority to 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
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
stamps that have been rendered unfit for use and refund their value
upon proof of destruction. [Sec. 204, NIRC]
Requisites for refund or credit
1. A written claim for refund or credit must be filed with the
Commissioner.
2. The claim for refund or credit must be a categorical demand for
reimbursement; and
3. It must be filed within two years from the date of payment of the
tax or penalty regardless of any supervening event that may arise
after the payment.
4. The tax should have been paid in full.
Payment under protest is not required. Sec. 229 of the NIRC
provides that a suit or proceeding for refund or credit may be
maintained whether or not such tax, penalty, or sum has been paid
under protest or duress.
When payment under protest required
1. In real property protest cases
2. Protest in customs cases
Why is a written claim for refund is necessary?
1. To afford the Commissioner an opportunity to correct the action of
subordinate officers.
2. To notify the government that the taxes sought to be refunded are
under question and that, therefore, such notice should be born in
mind in estimating the revenue available for expenditure.
Two things to be established before refund or credit is granted
1. There was an actual collection and receipt by the government of the
tax sought to be recovered. This needs factual proof.
2. There is legal basis for granting the refund or credit.
PROCEDURE FOR REFUND OR CREDIT
1. File claim in writing with the Commissioner. This is a condition
precedent before one can file action with the CTA for refund or
credit.
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2. If claim is denied or is not acted upon by the Commissioner, the
taxpayer must file an appeal to the CTA within 30 days after the
receipt of the decision of the Commissioner.
3. Both the written claim and the appeal to the CTA must be filed
within the two-year prescriptive period.
The two-year prescriptive period for overpaid quarterly corporate
income tax
In case of an overpaid quarterly income tax for corporations, the
prescriptive period of two years within which a claim for refund
should be filed is counted, not from the time the corporation files its
quarterly income tax return and pays the tax thereon, but from the
date the final adjustment return is filed after the end of the taxable
year.
Prescriptive period for taxes withheld
In the case of taxes withheld under the withholding tax system, the
two-year prescriptive period for refunds is counted not from the date
the tax is withheld and remitted to the Bureau of Internal Revenue
but from the end of the taxable year.
Taxes payable in installments
In cases of taxes which are payable in installments, the two-year
prescriptive period is counted from the payment of the last
installment. [Commissioner v. Palanca 18 SCRA 496].
Quarterly income taxes are considered installments, until the final
adjustment return.
Corporate dissolution
The two year prescription period should be counted from 30 days
after the approval of the SEC of its plan for dissolution.
Tax credit granted by law
A tax credit granted by law, is not considered a refund, and
prescribes in 10 years under Art. 1144 of the Civil Code.
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
Suspension of the two-year prescriptive period
The period for claiming claims for refund is suspended provided two
conditions are present:
1. There is pending litigation between the government and the
taxpayer as to the proper tax to be paid and of the proper
interpretation of the taxpayers charter in relation to the disputed
tax; and
2. The Commissioner in that disputed case agreed to abide by the
decision of the Supreme Court as to the collection of the tax relative
thereto. [Panay Electric Co. v. Collector May 28, 1958]
Refund without claim
The Commissioner may, even without a written claim therefore,
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 made.
Forfeiture of refund and tax credit
A refund check or warrant which shall remain unclaimed or
uncashed within 5 years from the date said warrant or check was
mailed or delivered shall be forfeited in favor of the government and
the amount thereof shall revert to the general fund.
A tax credit certificate which shall remain unutilized after 5 years
from the date of issue, shall, unless revalidated, be considered
invalid.
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The Supreme Court ruled that a withholding agent should be allowed
to claim the tax refund because, under the law, it is the one who is
held liable for any violation of the withholding tax law should such a
violation occur. [Commissioner v. Wander Phils. Inc. April 15,
1988]
Interest on tax refunds
The general rule is that the government cannot be required to pay
interest on taxes refunded to taxpayer. [Sweeney v.
Commissioner Aug. 21, 1959]
Exceptions
1. When the Commissioner acted with patent arbitrariness.
Arbitrariness presupposes inexcusable or obstinate disregard
of legal provisions. [Commissioner v. Victorias Milling
Corp. Nov. 29, 1966]
2. In cases of refunds or credits made after three months from
April 15 to employees for any excess of the taxes withheld,
the rate of which is 6 percent per annum [Sec. 79C, NIRC]

EQUITABLE RECOUPMENT
It is a principle which allows a taxpayer whose claim for refund has
been barred due to prescription to recover said tax by setting off the
prescribed refund against a tax that may be due and collectible from
him.
This rule is not applicable in the Philippines.

Legal capacity of withholding agents to claim a tax refund

Corporate withholding agents in the Philippines of non-resident
foreign corporations are entitled to claim the refund of excess
withholding tax paid on income of said corporations in the
Philippines.

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