Assessment and Collection of Internal Revenue Taxes

Read this article in connection with this one.

The prescriptive period of assessment and collection of internal revenue taxes is 3 years after the last day of the filing of the return. There are actually 2 periods: assessment and collection. The procedure for the counting of the prescriptive period is as follows: 

1.) If the return is filed before the last day of the filing, the return will be considered filed on the last day

2.) If the return is filed after the last day of filing, the 3-year period will begin on the day the return is filed

The statute of limitations (the 3-year period) is considered suspended in the following instances:

1.) When the taxpayer is out of the country

2.) The warrant of distraint/levy is duly served but no property can be found

3.) The taxpayer's request for reinvestigation is granted by the commissioner

4.) The taxpayer can't be found at the address he gave (but if he informed the commissioner, there is no suspension of the period)

5.) For the period during which the commissioner is prohibited from making the assessment or beginning of distraint and levy or a court proceeding for collection and for 60 days afterward

The following are exceptions to the 3-year period:

1.) In case of a false or fraudulent return in order to evade the tax, the tax can be assessed or a proceeding in court can be filed without assessment within 10 years from the discovery of the falsity or fraud

2.) In case of failure to file a return, the tax can be assessed or a collection case can be filed in court without assessment within 10 years from the discovery of the omission

3.) If the commissioner and taxpayer have agreed in writing on the time of assessment, the tax can be assessed within the agreed period and the period can be extended by a later written agreement

4.) Any tax that was assessed within the 10-year period in cases of fraudulent or false returns or failure to file a return, the tax may be collected by distraint, levy or a court case within 5 years after the assessment

5.) Any tax that was assessed within the period agreed on by the taxpayer and commissioner can be collected by a court action, distraint or levy within the agreed period and before the expiration of the 5-year period

Unlike the LGUs, the national government has 4 remedies (in 2 groups) for the collection of internal revenue taxes. It can pursue any or all of these remedies with the exception that distraint or levy can't be resorted to if the amount in question is Php100 or less:

1.) Administrative: distraint of personal property or levy on real property

2.) Judicial: criminal or civil

Distraint can either be actual (by seizure of personal property, including bank accounts) or constructive (by signing a receipt of the distrained property -and refusal to sign will allow the revenue officer to prepare a list of distrained property in the presence of 2 witnesses and a copy will be left at the premises and the property consequently is distrained.)

Levy is done by the issuance of a warrant of levy with notice to the taxpayer and the Register of Deeds. After that, the real property will be sold at public auction to satisfy the taxpayer's tax obligation.