Tax Law Statute of Limitations and Remedies

Statute of Limitations

• The BIR (Bureau of Internal Revenue) has three years to assess taxes from the later of:
  • The last day for filing the return
  • The day the return was filed
• For false or fraudulent returns or failure to file a return, the period is extended to ten years from the discovery of the falsity, fraud, or omission.
• The collection of taxes has a five-year prescriptive period.

Remedies for the Collection of Delinquent Taxes

• Civil Remedies:
  • Distraint of goods, chattels, effects, and other personal property, including stocks, securities, debts, credits, bank accounts, and interests in real property.
  • Levy on real property.
  • Civil or criminal action
• Distraint and Levy:
  • Either remedy can be pursued simultaneously at the discretion of the authorities.
  • Distraint and levy are not available for tax amounts below One hundred pesos (P100).
• Criminal Action:
  • The judgment in a criminal case includes ordering payment of the delinquent taxes as determined by the Commissioner.

Summary Remedies

• Levy on Real Property:
  • A description of the property is written on the certificate to execute the levy.
  • The Register of Deeds and the delinquent taxpayer (or their agent/representative) are notified of the levy.
  • If the warrant of levy on real property is not issued with the distraint warrant, and the taxpayer’s personal property is insufficient to cover the delinquency, the Commissioner has 30 days to proceed with the levy on the taxpayer’s real property after the distraint.
  • A report on the levy must be submitted to the Commissioner within ten days of receiving the warrant.
  • The Commissioner can lift levy warrants subject to rules and regulations.

Procedure for Distraint and Garnishment

• Distraint:
  • The distraining officer creates an account of the goods, chattels, effects, or personal property seized, leaving a copy with the owner or the person from whom the property was taken.
  • This list includes the demand amount, the time, and place of sale.
• Stocks and Securities:
  • Distraint occurs by serving a copy of the warrant upon the taxpayer and the corporation’s responsible officer.
• Debts and Credits:
  • Distraint of debts and credits occurs by serving a copy of the warrant on the person holding the debt or credits.
• Bank Accounts:
  • A warrant of garnishment is served upon the bank and the taxpayer.
  • The bank must then transfer sufficient funds from the taxpayer’s account to cover the government's claim.

Sale of Property Distrained and Disposition of the Proceeds

• Sale Notice:
  • The Revenue District Officer (or their authorized representative) gives notice of the time, place, and sale of the distrained property in at least two public places in the municipality or city where the distraint occurred.
  • This notice must be posted at the city or municipality's Mayor's Office.
• Sale:
  • The sale is held at the time and place specified in the notice.
  • The property is sold at public auction to the highest bidder for cash or, with the Commissioner’s approval, through licensed commodity or stock exchanges.
• Stocks and Securities:
  • A bill of sale is executed for the buyer, and a copy is furnished to the company that issued the stocks or securities.
  • The corporation, company, or association makes the necessary entries, transfers the securities into the buyer’s name, and issues new certificates if required.
• Proceeds:
  • Any remaining proceeds after covering the claim and expenses are returned to the owner of the property sold.
  • The expenses are limited to the actual expenses of seizure and preservation of the property and do not include any fees for the local internal revenue officer or their deputy.

Exceptions to the Period of Limitation of Assessment and Collection of Taxes

• False or Fraudulent Return or Failure to File:
  • Tax may be assessed or legal proceedings may be initiated without assessment within ten years of discovering the falsity, fraud, or omission.
• Agreement:
  • When the Commissioner and the taxpayer agree in writing to allow assessment after the prescribed period, the assessment can be made within the agreed-upon time.
  • This agreement can be extended by subsequent written agreements.
• Collection of Taxes:
  • Any assessed tax within the limitation period can be collected by distraint, levy, or legal proceedings within five years of the assessment.
• Agreed Upon Period:
  • Any assessed tax within the agreed-upon period can be collected by distraint, levy, or legal proceedings within the agreed-upon period.
  • Subsequent written agreements can extend the agreed-upon period.