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Remedies of

Taxpayers
Taxpayers remedies under the
National Internal Revenue

Remedy before payment


1.Administrative remedy
2.Request for Reconsideration
3.Request for Reinvestigation
4.Judicial Protest
Remedy after payment
1.Claim for tax credit
2.Claim for tax refund
SUBSTANTIVE REMEDIES
1. Questioning the constitutionality or validity of
tax statutes or regulations

The provisions of the Constitution on the


exercise of the taxing power are not construed
as grants of such power but are merely
limitations on a power otherwise absolute. Tax
statutes, like other legislation, enjoy the
presumption of validity and constitutionality.
A tax statute may be attacked in the courts not
only by reason of non-observance or violation of
the constitutional limitations on the exercise of
the taxing power, but also on account of violation
or non-observance of the procedure laid down by
the fundamental law on the enactment of
legislation. (Manila Electric Co. Public Commisiion,
73 phil. 128)
Chamber or Real Estate and Builders
Association(CREBA) vs. Exec.
Secretary
Facts:

Minimum Corporate Income Tax (MCIT) is a new concept


devise as a relatively simple and effective revenue
raising instrument and as corrective measure to put a
stop to the practice of corporation, which while having
large turnovers, report minimal or negative net income
resulting to minimal or zero income taxes year-in and
year-out through under-declaration of income or over-
declaration of expenses or otherwise called tax shelters
CREBA assails the imposition of the minimum corporate
income tax (MCIT) as being violative of the due process
clause as it levies income tax even if there is no
realized gain. They also question the creditable
withholding tax (CWT) on sales of real properties
classified as ordinary assets stating that (1) they ignore
the different treatment of ordinary assets and capital
assets; (2) the use of gross selling price or fair market
value as basis for the CWT and the collection of tax on a
per transaction basis (and not on the net income at the
end of the year) are inconsistent with the tax on ordinary
real properties;
(3) the government collects income tax even when the
net income has not yet been determined; and (4) the
CWT is being levied upon real estate enterprises but
not on other enterprises, more particularly those in the
manufacturing sector.
Issue:

Are the impositions of MCIT unconstitutional?

Ruling:

NO. MCIT does not tax capital but only taxes income as
shown by the fact that the MCIT is arrived at by deducting
the capital spent by a corporation in the sale of its goods,
i.e., the cost of goods and other direct expenses from gross
sales. Besides, there are sufficient safeguards that exist for
the MCIT: (1) it is only imposed on the 4th year of
operations; (2) the law allows the carry forward of any
excess MCIT paid over the normal income tax; and (3) the
Secretary of Finance can suspend the imposition of MCIT in
2. Non-retroactivity of rulings.

BIR rulings may be modified, reversed or


revoked by the Commissioner at anytime, but
such modification, reversal, or revocation shall
not be given retroactive application to the
prejudice of taxpayers who relied on the
previous ruling, except: (a) where the taxpayer
deliberately misstates or omits material facts
from his return or any document required of
him by the BIR;
(b) Where the facts subsequently gathered by the
BIR are materially different from the facts on
which the ruling is based; (c) where the taxpayer
acted in bad faith. (Sec. 245, NIRC)
Commisioner vs. Benguet Corporation

FACTS:
Benguet Corporation is a domestic corporation
engaged in the exploration, development and operation
of mineral resources, and the sale or marketing thereof to
various entities. It is a VAT registered enterprise.
The transactions in question occurred during the
period between 1988 and 1991. Under Sec. 99 of NIRC as
amended by E.O. 273 s. 1987 then in effect, any person
who, in the course of trade or business, sells, barters or
exchanges goods, renders services, or engages in similar
transactions and any person who imports goods is liable
for output VAT at rates of either 10% or 0% (zero-rated)
depending on the classification of the transaction under
In January of 1988, Benguet applied for and was granted
by the BIR zero-rated status on its sale of gold to Central
Bank. On 28 August 1988 VAT Ruling No. 3788-88 was
issued which declared that the sale of gold to Central
Bank is considered as export sale subject to zero-rate
pursuant to Section 100 of the Tax Code, as amended by
EO 273.

Relying on its zero-rated status and the above


issuances, Benguet sold gold to the Central Bank during
the period of 1 August 1989 to 31 July 1991 and entered
into transactions that resulted in input VAT incurred in
relation to the subject sales of gold. It then filed
applications for tax refunds/credits
corresponding to input VAT.
However, such request was not granted due to BIR VAT
Ruling No. 008-92 dated 23 January 1992 that was issued
subsequent to the consummation of the subject sales of
gold to the Central Ban`k which provides that sales of
gold to the Central Bank shall not be considered as
export sales and thus, shall be subject to 10% VAT. BIR
VAT Ruling No. 008-92 withdrew, modified, and
superseded all inconsistent BIR issuances.
Both petitioner and Benguet agree that the retroactive
application of VAT Ruling No. 008-92 is valid only if such
application would not be prejudicial to the Benguet
pursuant Sec. 246 of the NIRC.
Issue:

Whether or not Benguets sale of gold to the Central


Bank during the period when such was classified by BIR
issuances as zero rated could be taxed validly at a 10%
rate after the consummation of the transactions
involved
Ruling:
NO. At the time when the subject transactions were
consummated, the prevailing BIR regulations relied
upon by Benguet ordained that gold sales to the
Central Bank were zero-rated. Benguet should not be
faulted for relying on the BIRs interpretation of the said
laws and regulations.

While it is true, as CIR alleges, that government is not


estopped from collecting taxes which remain unpaid on
account of the errors or mistakes of its agents and/or
officials and there could be no vested right arising from
an erroneous interpretation of law, these principles
must give way to
exceptions based on and in keeping with the interest of
3. Failure to inform the taxpayer in writing of legal
and factual bases of assessment makes it void.

The taxpayer shall be informed in writing of


the law and the facts on which the assessment
is made; otherwise, the assessment shall be
void. (Sec. 228, NIRC)
4. Preservation of books and once-a-years
examination

All books of accounts, including the


subsidiary books and other accounting records
of corporation, partnerships, or persons, shall
be preserved by them from the last entry in
each book until the last day prescribed by
Section 203 within which the Commissioner is
authorized to make an assessment.
The said books and records shall be subject to
examination and inspection of internal revenue
officers. For income tax purposes, such
examination and inspection shall be made only
once in a taxable year except in the following
cases:

a. Fraud, irregularity or mistakes, as determined


by the Commissioner;
b. The taxpayer requests reinvestigation;
c. Verification of compliance with withholding tax
laws and regulations;
d. Verification of capital gains tax liabilities; and
e. In the exercise of the Commissioners power to
obtain information from other persons in which
case, another or separate examination and
inspection may be made (Sec. 235, NIRC)
5. Publication of Revenue Memorandum Circular
(RMC) and Revenue Memorandum Order (RMO)

In the absence of publication, RMO No. 15-91


and RMC No. 43-91, imposing the five percent
(5%) lending investors tax on pawnshops, are
not valid. While the rule-making authority of
the Commissioner of Internal Revenue is not
doubted, like any other government agency,
the Commissioner may not disregard legal
requirements or applicable principles in the
exercise of quasi-legislative power
The due observance of the requirements of
notice, hearing and publication should not have
been ignored (Commissioner vs. Michel Lhuillier
Pawnshop, G.R. No. 150947, July 15, 2003)
6. Power of the CIR to distribute or allocate gross
income and deduction does not include the power
to impute theoretical interests to the controlled
taxpayers transactions.

Sec. 43 of the Tax Code authorizes the CIR to


distribute, allocate or apportion gross income
or deductions between or among controlled
corporations in order to prevent evasion of
taxes. Despite the broad parameters, however,
the power of the CIR does not include the
power to impute theoretical interests to the
There must be proof of the actual or at least,
probable receipt or realization by the controlled
taxpayer of the item of gross income sought to be
distributed or allocated by the CIR.

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