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7, Tax Remedies under the NIRC False or Fraudulent returns and

non-filing of Returns
a. a.1 Assessment
Fraud may be established by the

Under the National Internal a. Intentional and substantial


Revenue Code, an assessment is a written understatement of tax liability by
notice and demand made by the Bureau on the taxpayer;
the taxpayer for the settlement of a due tax b. intentional and substantial
liability that is there definitely set and fixed. overstatement of deductions or
exemptions; and/or
Sec. 228 of NIRC provides that a c. Recurrence of the foregoing
taxpayer shall be informed in writing of the circumstances.
law and the facts on which the assessment
is made; otherwise, the assessment shall be The difference between a false
void. return and a fraudulent return is that the
first merely implies a deviation from the truth
a.1.2 Tax Delinquency vs Tax Deficiency or fact whether intentional or not, whereas
the second is intentional and deceitful with
Tax delinquency is the failure of the the aim of evading the correct tax due.
taxpayer to pay the tax due on the date fixed (Aznar vs Commissioner, L-20569, 23 Aug
by law or indicated in the assessment notice 1974)
or letter of demand while tax deficiency is
the amount still due and collectible from a Suspension of running of statute
taxpayer upon audit or investigation. of limitations. Sec. 223, NIRC.

a.1.3 Jeopardy Assessment The running of the statute of


limitations provided in Sec. 203 and
A Jeopardy Assessment is a tax 222 on the making of an
assessment made by an authorized assessment and the beginning of
Revenue Officer without the benefit of distraint or levy or a proceeding in
complete or partial audit, in light of the ROs court for collection, in respect of any
belief that the assessment and collection of deficiency, shall be suspended for
a deficiency tax will be jeopardized by delay the period
caused by the Taxpayers failure to:
Comply with audit and a. during which the Commissioner
investigation requirement to of Internal Revenue isprohibited
present his books of accounts from making the assessment or
and/or pertinent records, or beginning distraint or levy or a
Substantiate all or any of the proceeding in court, and for 60
deductions, exemptions or days thereafter;
credits claimed in his return.
b. when the taxpayer requests for
a reinvestigation which is
a.1.4 Prescriptive Period for Assessment granted by the Commissioner;

General Rule. Sec. 203, NIRC c. when the taxpayer cannot be


located in the address given by
3 years after the last day prescribed him in the return file upon which
by law for the filing of the return. a tax is being assessed or
collection; if, however, the
i.1 If the return was filed before the taxpayer informs the
last day of filing, the 3 year period will start Commissioner of Internal
after the last day for filing the return. Revenue of any change in
address, the statute will not be
i.2. If the return was filed after the suspended;
mandated period of filing, the 3-year period
of assessment will start from the date of d. when the warrant of distraint or
filing the return. levy is duly served upon the
taxpayer, his authorized
representative, or a member of
his household with sufficient
discretion, and no property coul and a claim of deductions in an amount
be located; and exceeding 30% of actual deductions, shall
render the taxpayer liable for substantial
e. when the taxpayer is out of the underdeclaration of sales, receipts or
Philippines. income or for overstatement of deductions,
as mentioned herein.
a.1.5 Civil Penalties, additions to the tax. Sec. 248,
NIRC provides:

A. There shall be imposed, in addition to the Delinquency Interest and Deficiency Interest
tax required to be paid, a penalty equivalent to 25%
of the amount due, in the following cases: Sec. 249, NIRC

1. Failure to file any return and pay the tax (A) In GeneralThere shall be assessed and
due thereon as required under the collected on any unpaid amount of tax,
provisions of the Code or regulations on interest at the rate of 20% per annum, or
the date prescribed; or such higher rate as may be prescribed b
rules and regulations, from the date
2. Filing a return with an internal revenue prescribed for payment until the amount is
officer other than those with whom the fully paid.
return is required to be filed; or
(B) Deficiency Interest.Any deficiency in the
3. Failure to pay the deficiency tax within tax due shall be subject to the interest
the time prescribed for its payment in prescribed in Subsection (A) hereof, which
the notice of assessment; or interest shall be assessed and collected
from the date prescribed for its payment until
4. Failure to pay the full or part of the the full payment thereof.
amount of tax shown on any return
required to be filed under the provisions (C) Delinquency Interest. --- In case of failure to
of the Code or rules and regulations, or pay:
the full amount of tax due for which no
return is required to be filed, on or 1. the amount of the tax due on any return
before the date prescribed for its to be filed, or
payment.
2. the amount of the tax due for which no
B. In case of willful neglect to file the return return is required, or
or in case a false or fraudulent return is
willfully made, the penalty to be imposed 3. a deficiency tax, or any surcharge or
shall be 50% of the tax or of the deficient interest thereon on the due date
tax, in case any payment has been made on appearing in the notice and demand of
the basis of such return before the discovery the Commissioner, there shall be
of the falsity or fraud. assessed and collected on the unpaid
amount, interest at the rate of 20% per
Provided: that a substantial underdeclaration annum until the amount is fully paid
of taxable sales, receipts or income, r a which interest shall form part of the tax.
substantial overstatement of deductions, as
determined by the Commissioner pursuant Surcharge
to the rules and regulations to be
promulgated by the Secretary of Finance A surcharge of 50% or 25%,
shall constitute prima facie evidence of a respectively, on the tax or deficiency tax is
false or fraudulent return; imposed depending on whether the non-
filing or understatement of the tax liability is
Provided, further, that a failure to report willful or not. The computation of the
sales, receipts or income in an amount surcharge is on the tax proper and it is thus
exceeding 30% of that declared per return, exclusive of other surcharges and interest.

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