taxation ii reviewer

8/13/2019 Taxation II Reviewer

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NIRC REMEDIES:

3. LEVY OF REAL PROPERTYThe same act of seizure as in distraint, but in this case, of real property, an interest in

or rights to such property in order to enforce the payment of taxes. The real property under

levy shall be sold in a public sale, if the taxes involved are not voluntarily paid followingsuch levy.

When may levy of r eal pr operty be effected?

After the expiration of time required to pay the delinquent tax, real property may belevied upon, BEFORE, SIMULTANEOUSLY or AFTER the distraint of personal property

belonging to the delinquent (Sec. 207(B), NIRC)

How is levy of r ealproperty be effected?

A) Issuance of Warrant of Levy:The IR officer designated by the Commissioner or his duly authorized

representative shall prepare a DULY AUTHENTICATED CERTIFICATE

showing the name of the taxpayer, description of the property levied, and the

amounts of tax and penalty due from him.This certificate shall operate with the force of LEGAL EXECUTION

throughout the Philippines.

B) Service of the Warrant:

The certificate shall contain a description of the property upon which levy ismade. at the same time, written notice of the levy shall be mailed to or served

upon the: (1) Register of Deeds of the province or city where the property islocated and (2) Delinquent taxpayer (if he is absent from the Philippines, to his

agent or manager of business in respect to which the liability arose or to the

occupant of the property in question)

C) Advertisement and Sale

(1) Within twenty (20) days after the levy, the officer conducting theproceedings shall proceed to advertise for SALE the property or aportion as may be necessary to satisfy the claim and costs of sale. Such

UNEP COLLEGE OF LAW TAXATION II REVIEWER

NOTE: In case the warrant of levy is NOT issued before or simultaneously

with the warrant of distraint AND the personal property of the delinquenttaxpayer is NOT SUFFICIENT to satisfy his tax delinquency, the CIR or his

authorized representative shall, within 30 days after the execution of the

distraint, PROCEED with the levy on taxpayers real property (Sec. 207(B),

NIRC).

Prepared by: Mona Liza C. Novela, 3RDyear, SY 2013-2014


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advertisement shall cover a period of at least thirty (30) days. The notice

shall be posted at the main entrance of the city or municipal hall AND in a

public and conspicuous place in the barrio or district where the realproperty lies. The notice must also be published in a newspaper of generalcirculation in the place where the property is located, once a week for

three (3) weeks (Sec. 213, NIRC)

CONTENTS of notice: statement of amount of taxes, and penaltiesdue, time and place of sale, name of taxpayer, short description of

property.

(1) If taxpayer does not pay his taxes, penalties and interest before the dayfixed for the sale, the sale shall proceed and shall be held either at the main

entrance of the municipal or city hall or on the premises to be sold, as theofficer conducting the proceedings shall determine and as the notice of saleshall specify. Property will be awarded to the highest bidder. In case the

proceeds of the sale exceeds the claim and costs of sale, the excess shall be

turned over to the owner of the property.

Right of Pre-emptionthe taxpayer may discontinue all proceedingsby paying the taxes, penalties and interest at any time before the day

fixed for the sale (Sec. 213, NIRC).

(2) If there is no bidder for the real property OR if the highest bid is

not sufficient to pay the taxes, penalties and costs, the IR Officerconducting the sale shall declare the property FORFEITED to theGOVERNMENT in satisfaction of the claim. (Sec. 215, NIRC)

D) Redemption of property sold(1) Within one (1) year from the date of sale, the taxpayer or anyone for him,

may pay to the Revenue District Officer the total amount of the following:

- public taxes- penalties

- interest from the date of delinquency to the date of sale

- interest on said purchase price at the rate of fifteen percent (15%)

per annum from the date of sale to the date of redemption.

Note: If the property was forfeited in favor of the government, the redemptionprice shall include only the taxes, penalties and interest plus costs of sale no

interest on purchase price since the Government did not purchase the

property anyway, it was forfeited.




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Effects of Redemption of Property Sold:

I. Such payment shall entitle taxpayer the delivery of the certificate issued to the

purchaser and a certificate from RDO that he has redeemed the property.II. The RDO shall pay the purchaser the amount by which such property has been

redeemed and said property shall be free from lien of such taxes and penalties (Sec.

214, NIRC).

Further Distraint and Levy:

The remedy of distraint and levy may be repeated if necessary until the full amountof tax delinquency due including all expenses is collected from the taxpayer.

Otherwise, a clever taxpayer who is able to conceal most of the valuable part of his

property would escape payment of his tax liability by sacrificing an insignificant

portion of his holdings (Sec. 217, NIRC).

4. FORFEITURE:

It implies a divestiture of property without compensation in consequence of a defaultor offense. The effect of forfeiture is to transfer the title of the specific thing from the owner

to the government. (De Leon, NIRC Annotated, p. 412)

A) Remedy of enforcement of forfeitures

Forfeiture of chattels and removable fixtures: enforced by the seizure, sale

or destruction of the specific forfeited property.

Forfeiture of real property: enforced by a judgment of condemnation andsale in a legal action or proceeding civil or criminal as the case may require

Action to contest forfeiture of chattel

In case of the seizure of personal property under claim of forfeiture, the owner

desiring to contest the validity of the forfeiture may, at any time before sale ordestruction of the property, bring an action against the person seizing the

property or having possession thereof to recover the same, and upon givingproper bond may enjoin the sale; or after the sale and within six months he

may bring an action to recover the net proceeds realized at the sale.

Note: The taxpayer-owner shall not be deprived of possession of the said property

and shall be entitled to rents and other income until the expiration of the period forredemption (Sec. 214, NIRC)

After the period of redemption, a final deed of sale is issued in favor of thepurchaser.

UNEPCOLLEGEOF L IONII REIE ER




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B) Resale of real estate taken for taxes

(RR No. 22-2002) All acquired/forfeited properties transferred in the name of the Republic of

the Philippines, having passed the one-year redemption period, shall be

converted into cash from the date of acquisition or forfeiture.

The sale of acquired/forfeited real properties shall be by sealed bids in apublic auction to be witnessed by a representative of the COA.

The Notice of Sale of the acquired real properties shall be published once a

week for two (2) consecutive weeks in a newspaper of general circulation in

the Philippines which must be completed at least 20 days prior to the date of

such public auction. Unless the Commissioner of Internal Revenue provides otherwise, the

Minimum Bid Price/Floor Price shall be the latest fair market value asdetermined by the Commissioner or the fair market value shown in the latesttax declaration issued by the provincial, city or municipal assessor, whichever

is higher, pursuant to Sec. 6(E) of the Tax Code.

Anyone could bid except foreign nationals, corporate or otherwise, and

those qualified under existing laws, rules and regulations, includingemployees of the Bureau of Internal Revenue.

Bidders shall be required to post a bond in cash or managers check in an

amount representing 10% of the minimum bid price at least one day before the

scheduled public auction.

Unless the Commissioner allows extension of time to pay, in meritoriouscases, the winning bidder shall pay the full amount of his bid cash ormanagers check within two days after receipt of

notice of award.

All taxes and expenses relative to the issuance of title shall be borne by the

winning bidder.

The winning bidder shall be responsible at his own expense for theejectment of squatters and/or occupants, if any, of the auctioned property.

Negotiated or private sale shall be resorted to as a consequence of failed

public bidding for two consecutive times.

Negotiated or private sale shall in all cases be approved by the Secretary of

Finance.

Public auction sale shall be approved by the Commissioner or his authorizedrepresentative.

UNEPCOLLEGEOF L IONII REIE ER




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The Government reserves the right to reject or cancel any or all bids.

C) When property to be sold or destroyed

Forfeited chattels and removable fixtures sold in the same manner andunder the same conditions as the public notice and the time and manner of saleas are prescribed for sales of personal property distrained for the non-payment

of taxes.

Distilled spirits, liquors, cigars, cigarettes, other manufactured products oftobacco and all apparatus used in or about the illicit production of such

articles destroyed by the order of the Commissioner when the sale or use

would be injurious to public health pr prejudicial to the enforcement of the

law. All other articles subject to excise tax manufactured or removed in violation

of the Code, dies for the printing or making of internal revenue stamps and

labelssold or destroyed in the discretion of the Commissioner. Forfeited property shall not be destroyed until at least 20 days after seizure.

(Sec. 225, NIRC)

D) Disposition of funds recovered in legal proceedings or obtained from

forfeiture

All judgments and monies recovered and received for taxes, costs, forfeitures,

fines and penalties shall be paid to the Commissioner or his authorizeddeputies as the taxes themselves are required to be paid, and except as

specially provided, shall be accounted for and dealt within the same way.

(Sec. 226, NIRC)

Ef fect of the for feiture of property:

The effect is to transfer the title to the specific thing from the owner to the government.All the proceeds in case of a sale go to the coffers of the government (U.S. vs. Surla,G.R. No. 6536, September 2, 1911)

In seizure for the enforcement of a tax lien, the residue after deducting the tax liabilityand expenses will go to the taxpayer ( Bank of the Phil. Island vs. Trinidad, G.R. No.16014, October 4, 1941)

5. COMPROMISE AND ABATEMENT

1. Compromise

a contract whereby the parties, by making reciprocal concessions,avoid litigation or put an end to one already commenced.

Courts may reject a compromise or settlement when it is contrary to law, morals,good customs, public order, or public policy.

The CTA may issue an injunction to prevent the Government from collecting




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taxes under a compromise agreement especially when the agreement is prejudicial to

the government.

Grounds for a compromise:

The Commissioner may compromise the payment of any internal revenue tax inthe following cases:

1) A REASONABLE DOUBT as to the validity of the claim against the taxpayer

exists;

2) The financial position of the taxpayer demonstrates a clear inability to pay the

assessed tax. (FINANCIAL INCAPACITY)

What are the limits of the Commissioners power to compromise?

For cases of financial incapacity: a minimum compromise rate equivalent to tenpercent (10%) of the basic assessed tax;

For other cases: a minimum compromise rate equivalent to forty percent (40%) of

the basic assessed tax

Cases that may be Compromised (RR. 30-2002):

1. Delinquent Accounts;

2. Cases under administrative protest after issuance of the final assessment notice to

the taxpayer which are still pending in the Regional Offices, Revenue DistrictOffices, Legal Service, Large Taxpayer Service, Collection Service, Enforcement

Service, and other offices in the National Office;

3. Civil tax cases being disputed before the courts;

4. Collection cases filed in courts;5. Criminal violations

Except:

those already filed in court those involving criminal tax fraud


Note: When the basic tax involved exceeds One Million Pesos (P1,000,000), orwhere the settlement offered is less than the prescribed minimum rates, the

compromise must be approved by the National Evaluation Board (composed of the

Commissioner and 4 Deputy Commissioners).When the basic deficiency taxes are P500,000 or less, and Minor criminal

violations are discovered by the Regional and District Offices, shall be subject to

the approval by the Regional Evaluation Board (REB). All other offers ofcompromise shall be approved by a majority of all the members of the NationalEvaluation Board (NEB).



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2. Abatement (see R.R. No. 15-2006)The entire tax liability of the taxpayer iscancelled.

Authori ty to Abate: The Commissioner has the sole authority to abate or cancel internalrevenue taxes, penalties, and/or interest pursuant to Section 204(B), in relation to Section

7(c), both of the Tax Code.

When may the Commissioner abate or cancel a tax l iabi li ty?

The Commissioner may 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 do not justify the

collection of the amount due. (e.g. when the costs of collection are greaterthan the amount of tax due)

I nstances of Un just and Excessive Tax Assessment:

1. Filing of the return/payment of tax at the wrong venue;2. Taxpayers mistake in payment of tax is due to erroneous written official advice of

a Revenue Officer;

3. Taxpayers failure to file the return and pay the tax on time is due to Substantiallosses from prolonged labor dispute, force majeure, legitimate business reverses

such as labor strike for more than 6 months which has caused temporary shutdown

of business, natural calamity, public turmoil, etc., Provided, that the abatement

shall cover only the surcharge and the compromise penalty and not the interestimposed under Section 249, NIRC;

4. Assessment resulted from taxpayers non-compliance with the law due to a

difficult interpretation of said law;5. Taxpayers failure to file the return and pay the correct tax on time due to

circumstances beyond his control, Provided, that abatement shall cover only the

and the compromise penalty and not the interest;6. Late payment of tax under meritorious circumstances (ex. Failure to beat bank cut-

off time, surcharge erroneously imposed, use of a worng tax form but correct tax

amount);

7. Other similar or analogous cases.

I nstances when the tax l iabil i ties, penal ties, and/or i nterest imposed on the taxpayer

may be abated bn the ground that tax admin istration and collection cost are more than

the amount sought to be collected:

1. Abatement of penalties on assessment confirmed by the lower court but appealed

by the taxpayer to a higher court;




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2. Abatement of penalties on withholding tax assessment under meritorious

circumstances.3. Abatement of penalties on delayed installment payment under meritorious

circumstances;

4. Abatement of penalties on assessment reduced after reinvestigation but the

taxpayer still contesting reduced assessment; and5. Other analogous instances.




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1) Straight-line = cost- salvage valueestimated life

2) Declining = cost depreciation x Rate

Balance estimated life3) Sum of the = nth period x cost salvage yrs

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