For purposes of establishing accurate and updated AR/DA profile of the Bureau, the timely recognition of each and every AR/DA created as well as the updating of their respective status shall be undertaken on a regular basis. This requires regular updating of the AR’s/DA’s case history sheets and indexing of all cases referred to the concerned office and subsequently referred to the case officer/seizure agent. Likewise and for purposes of readily determining the relative collectability of these Ars/Das, the said timely and regular updating shall cover the proper/current classification and aging of these accounts. This shall also server as basis for the prioritization of the AR/DA cases to be subjected to enforcement action and the determination of appropriate collection enforcement remedies to be applied on each and every case.
Any BIR office in possession of any AR/DA docket shall be responsible in the updating of the prescribed case history sheets and other pertinent files/records, as well as the current classification of the AR/DA case, in case there is any change in the status and classification thereof.
- Conduct of the Inventory, Classification and Aging of AR/DA
The concerned BIR office having physical possession of the AR/DA docket shall:
- Update the Case History Sheet (Annex 300.1.4) or make one if there is none yet;
- Update the index cards/file pertaining to Ars/Das referred to their Office. If there is none yet, accomplish as Index Card to record the name of taxpayer (in case of individual taxpayer, indicate family name before the given name), TIN and address, total amount of AR/DA (indicate amount of basic tax, surcharge, interest and compromise penalty), date of assessment, assessment number, tax type/s, period covered, collection prescription date, originating Revenue District Office number, date of receipt of the docket, and the name of the Revenue Officer to whom the case was assigned/referred to;
- Classify AR/DA cases as to collectible, suspense and uncollectible; and further classify based on the definitions provided below:
3.1. Collectible DA – FAN/FDDA – refer to AR emanating from a Final Assessment Notice (FAN) or Final Decision on Disputed Assessment (FDDA) issued by the Bureau for deficiency internal revenue taxes. In addition, AR/DA covered by approved installment plan shall be included in this classification.
3.2. Collectible DA – Unpaid Self-Assessed Taxes – refers to AR resulting from any of the following:
- Tax due per return filed by taxpayers who failed to pay the same within the time prescribed for its payment; or
- Non-payment of the 2nd installment due from individual taxpayers who availed of installment payments of income tax under Section 56(A)(2) of the Tax Code, as amended.
3.3. Collectible DA – Dishonored Checks – refers to AR resulting from tax payment made thru bank draft or check but was denied by drawee-bank due to drawer-taxpayer’s insufficiency of funds in his/her/its bank accounts, accounts closure, or for other reasons of dishonor as prescribed under the Negotiable Instrument Law.
3.4. Collectible DA – With Application for Compromise – refers to accounts covered by an application for the compromise settlement program of the Bureau or the taxpayers have offered to compromise the deficiency taxes due from them under Section 204(A) of the Tax Code, as amended.
3.5. Collectible DA – With Application for Abatement – refers to accounts wherein taxpayers have applied for abatement under an abatement program offered by the Bureau or have requested for abatement under Section 204(B) of the Tax Code, as amended.
3.6. Uncollectible DA – Suspense – refer to DA where any of the following circumstances are present:
- Taxpayer is deceased leaving no distrainable and leviable assets. However, if the assessment issued is for both spouses and the other spouse is still living, the same should not be considered as uncollectible.
- Taxpayer is serving life imprisonment without distrainable and leviable assets.
- Taxpayer is suffering from lingering illness and not capable of earning a living, without distrainable and leviable assets.
- Taxpayer is declared insolvent by the court or is found to be incapable of earning a living upon verification, and without distrainable and leviable assets.
- Taxpayer is an individual and his/her whereabouts is unknown, without distrainable and leviable assets.
- The taxpayer is a foreign national who came to the Philippines as a consultant, or a foreign corporation who has done business in the Philippines, and left after the completion of the project leaving no distrainable and leviable assets.
- Taxpayer is a domestic corporation, which was verified to have ceased operations or has been officially dissolved, with no distrainable or leviable assets and its subscribed shares of stock have been fully paid; Provided, it has been determined that the whereabouts of its responsible officers could no longer be located.
3.7. Uncollectible DA – Write Off – refers to DA where write off may be effected due to any of the reasons enumerated below, subject to the existing rules and regulations thereon:
- DA case where the Final Assessment Notice was not received by the taxpayer due to change of address, notwithstanding the Bureau’s timely receipt of information on such change of address from the said taxpayer and the period to assess has already prescribed (without prejudice to the institution of applicable administrative sanction against the erring Bureau official/s.
- Period to collect has already prescribed (without prejudice to the institution of applicable administrative sanction against the erring Bureau official/s.
- A decision was already rendered by the Court declaring the account as uncollectible, and such decision has become final and executory.
- The DA is considered uncollectible, as decided by the Bureau’s National Evaluation Board (NEB).
- The administration and collection costs involved do not justify the collection of the total amount due –
e.1 where the total amount due (per case docket) per assessment notice is Five thousand pesos (Php 5,000.00) and below, subject to adjustment to its present value using the Consumer Price Index (CPI), as published by the National Statistics Office (NSO), when deemed necessary; or
e.2 where the total amount due per assessment notice is more than the above amount, subject to final approval by the National Evaluation Board.
However, if the docket involves assessments of more than one (1) tax type, the aggregate amount thereof should be subject to the above threshold.
3.8. AR – Protested – refers to AR where a request for reinvestigation or reconsideration has been filed due to the following reasons:
- A written protest (legal or factual) was timely filed by the taxpayer but still awaiting the final resolution by the assessing office; or
- The taxpayer failed to receive the assessment notice/letter because it was sent to the address reflected in the filed tax return or the address indicated in the BIR’s ITS-Registration System notwithstanding BIR’s receipt of a notice of change of address or a notice of business cessation; or
- The taxpayer failed to receive the assessment notice/letter because it was inadvertently sent to the wrong address.
3.9. Collectible AR – Non-filing/Non-payment – refers to AR originating from failure of a taxpayer to file a return or pay the tax due (e.g. stop-filer cases or automatic system-created receivables).
- Assign the corresponding classification code indicated below and reflect in the upper right portion of the Case History Sheet and Index Card:
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Collectible DA: |
Classification Code |
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Collectible DA-FAN/FDDA |
DAF |
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Collectible DA-Unpaid Self-Assessed Tax |
DAU |
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Collectible DA-Dishonored Checks |
DAD |
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Collectible DA- with Application for Compromise |
DAC |
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a. |
Doubtful Validity |
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Jeopardy Assessment |
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Arbitrary Assessment |
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b. |
Financial Incapacity |
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Net Worth Deficit |
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Impaired Capitalization |
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Ceased Operations |
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Collectible DA- with Application for Abatement |
DAA |
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a. |
The tax or any portion thereof appears to be unjustly or excessively assessed; |
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b. |
The administration and collection cost involved do not justify the collection of the amount due. |
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Uncollectible DA: |
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Uncollectible DA- Suspense |
DAS |
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Uncollectible DA- Write-Off |
DAW |
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Collectible AR: |
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Collectible AR- with Protest |
ARP |
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Collectible AR- Non-filing/Non-payment |
ARN |
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- Prepare a report on Inventory List of Accounts Receivable/Delinquent Account Cases (Annex 300-1.5);
- Age the accounts, in the case of AR/DA, based on the date when the FAN or FDDA becomes final and executory, whichever comes later. The FDDA date is only applicable if the request for reinvestigation has been officially granted before the prescription date, pursuant to existing rules and regulations.
Illustrative Examples
Q1 JMS Enterprises received an assessment notice from BIR on January 5, 2002. JMS Enterprises forgot about the assessment notice and did not file a protest on the same. On February 5, 2007, JMS Enterprises received a Final Notice before seizure from the BIR. Has the period to collect from JMS Enterprises prescribed?
A1 YES. The Bureau has 5 years or 1,825 (365 x 5) days from February 5, 2002 within which to enforce collection, remedies from JMS Enterprises. Thus, the Bureau has only until February 4, 2007 within to enforce collection remedies.
Q2 Same facts above but supposing that February 4, 2007 has been declared a public holiday, can the BIR still enforce collection remedies on February 5, 2007?
A2 NO. There is no pretermission in extinctive prescription. Thus, a holiday or non-working day will not move the prescription date to the next working date.
Q3 JMS Enterprises received an Assessment Notice from the BIR on January 5, 2002, and timely filed a request for reinvestigation on the assessment on February 2, 2002. The BIR came out with a Final Decision on Disputed Assessment (FDDA) on January 3, 2003, reiterating the assessment issued on January 5, 2002. JMS Enterprises received the FDDA on January 10, 2003. What is the last day for the BIR to enforce collection remedies?
A3 January 10, 2003
+ 30 days
February 9, 2003
+ 5 years*
February 8, 2008
*Sections 222 (c) and 222 (d) of the Tax Code expressly provide for the five-year period within which to collect taxes. Accordingly, the number of days in a year, whether or not there are leap years within the said five-year period, has no bearing in the counting of the due date for the enforcement of collection remedies by the BIR.
Q4 JMS Enterprises received an assessment notice from the BIR on January 5, 2002. JMS Enterprises filed a request for reinvestigation on January 25, 2002. The BIR resolved the request for reinvestigation via issuance of a FFDA on February 5, 2007, reiterating the assessment. Accompanying the FDDA is a warrant of distraint and levy. Has the BIR’s right to collect on the assessment prescribed?
A4 YES. The BIR’s right to collect had already prescribed on January 4, 2007. There was no indication that the taxpayer’s request for reinvestigation filed on January 25, 2002 had been granted by the Commissioner. Thus, the prescriptive period for collection was not tolled by the request for reinvestigation filed by JMS Enterprises.
Q5 JMS Enterprises received an assessment notice from the BIR on January 5, 2002. JMS Enterprises filed a request for reinvestigation on January 25, 2002. The BIR replied on February 15, 2002 stating that it is granting reinvestigation and that the matter has been assigned to certain revenue officers for reinvestigation. Several communications between the taxpayer and the BIR ensued in the course of the reinvestigation. On April 15, 2008, a FDDA was issued by the BIR, reiterating the assessment notice protested by the taxpayer. JMS Enterprises received the FDDA on September 1, 2008. It failed to file a petition before the Court of Tax Appeals within 30 days from receipt of the FDDA. Instead, JMS Enterprises filed a request for Compromise Settlement under Section 204 of the National Internal Revenue Code of 1997 under the ground of doubtful validity of the assessment. On February 15, 2014, the National Evaluation Board denied taxpayer’s application for compromise. Taxpayer was appraised of said denial and a warrant of distraint and levy was served on taxpayer on February 16, 2014. Has the period to collect on the assessment prescribed?
A5 NO. The right to collect on the assessment has not prescribed. As enunciated in the case of Commissioner of Internal Revenue (CIR) vs Consolidated Mining Co., L-11527, Nov. 25, 1958:
“x xx There are cases however where a taxpayer may be prevented from setting up the defense of prescription even if he has not previously waived it in writing as when by his repeated requests or positive acts the Government has been, for good reasons, persuaded to postpone collection to make him feel that the demand was not unreasonable or that no harassment or injustice is meant by the government.” (Italics supplied.)
In the case at hand, the filing by the taxpayer of their request for a compromise settlement constituted a positive act for which the Government was persuaded to postpone collection to make him feel that no harassment or injustice is meant by the BIR.
Q6 JMS Enterprises received the FDDA on January 2, 2005. It filed a petition before the Court of Tax Appeals on January 31, 2005. During the pendency of the case, the BIR and JMS Enterprises were advised to explore possibilities of amicable settlement as part of pre-trial proceedings. JMS Enterprises accordingly filed an offer for compromise settlement. Atty. Juan dela Cruz of the BIR Collection Service, knowing the provisions of the law and the pertinent decided cases well, immediately asked JMS Enterprises to execute a waiver of statute of limitations for collection under RMO 2-90. Accordingly, JMS Enterprises executed a waiver of statute of limitations on February 18, 2006 agreeing to suspend the period of collection up to February 23, 2008. On February 24, 2008, Atty. De la Cruz asked the taxpayer to further waive the prescriptive period for collection for another year. Thus, on February 27, 2008, JMS Enterprises executed a waiver under the provisions of RMO 2-90, further extending the prescriptive period for collection until February 28, 2009. Still, nothing happened with the compromise offer of the taxpayer. In March 10, 2010, the CTA Decision came out finding JMS Enterprises liable for the entire assessment. JMS Enterprises appealed the decision before the CTA En Banc, which affirmed the decision of the lower division. The case reached the Supreme Court, and on February 15, 2011, afinal decision of the Supreme Court was received by the BIR finding JMS Enterprises liable for the taxes assessed. Armed with the decision, the BIR immediately enforced collection remedies, which JMS Enterprises vehemently resisted.
The taxpayer is arguing that collection proceedings cannot anymore be enforced. It argues that the collection on the assessment prescribed as early as January 1, 2010
A6 The taxpayer is not correct. While it may be argued that the mere filing of a case in court will not suspend the running of the prescriptive period for collection, the waivers executed by the taxpayer suspended the running of the prescriptive period for collection. As of February 18, 2006, only 412 of the 1,825 days collection period has passed (counted from January 2, 2005). The first waiver froze the period of collection to 412 days, leaving the BIR 1,413 days more to collect on the assessment. Naturally, the suspension of the prescriptive period was lifted when the first waiver expired. Thus, the prescriptive period for collection started to run again from February 24, 2008 to February 27, 2008 (accumulated period lapsed already 416 days). When another waiver was executed on February 27, 2008, the prescriptive period for collection was once again suspended up to February 28, 2009. Accordingly, the BIR’s remaining 1,409 days to collect started to run again on March 1, 2009 based on the last waiver. Hence, when the BIR started enforcing collection remedies on February 16, 2011, the remaining prescriptive period for collection has not yet lapsed.
Moreover, the Rules of Court grant a five-year period from the time of entry of judgement within which to enforce favorable judgements.
- Group the AR/DA according to their respective ages and the total amount due per return docket.
- Prepare a report on Aging of Accounts Receivable/Delinquent Account Cases (Annex 300-1.6). The number of cases per classification and groupings shall be reflected in the said report.
- Handling of Collectible DA Cases/Uncollectible AR/DA
Enforcement of Collection of Collectible Ars/Das
The enforcement of collection of collectible ARs/DAs through summary remedies shall be undertaken by the RDOs, LTCED and LTDOs. The revenue officer/seizure agent assigned to the case shall immediately cause the issuance and service of the Preliminary Collection Letter to the delinquent taxpayer. If the taxpayer still fails to pay, the revenue officer shall ten (10) days thereafter; a Final Notice Before Seizure shall be issued to the taxpayer (Refer to CM 305-Collection Summary Remedies).
Safekeeping/Activation of Uncollectible DA- Suspense cases
The Records Division of the National Office, for cases in the National Office, and the Administrative Division, for Regional cases, shall be responsible for the safekeeping of the AR case dockets classified and approved as uncollectible DA- Suspense files. The dockets shall remain thereat until there is a need to activate/write-off the same.
Procedures in Handling Uncollectible DA- Suspense Cases
- The Revenue Officer/Seizure Agent shall:
1.1. Secure relevant documents and attach the same to the report recommending for the classification of the account as uncollectible AR/DA- Suspense file:
- Death Certificate issued by the National Statistics Office (NSO) or Office of the Local Civil Registrar, if taxpayer is deceased;
- Certification from the Barangay of the taxpayer’s last known residence, that his/her/its whereabouts is unknown
- Certification from the Bureau of Immigration and Deportation (BID) that the concerned taxpayer has left the country and that there was no record that he/she has returned to the country, if taxpayer is abroad or a foreigner;
- Certification from the Bureau of Jail Management and Penology, together with a copy of the court decision, that the concerned taxpayer is still serving a sentence of life imprisonment;
- Medical Certificate issued by a Government Physician that the concerned taxpayer is incapable of earning a living due to a lingering disease/illness;
- Copy of the Court Decision rendering the taxpayer as insolvent;
- Proof that the taxpayer has no leviable or distrainable assets (e.g., Certificate of No Property Holdings issued by Register of Deeds and/or the Municipal/City Assessor’s Office, Certification from Philippine Deposits Insurance Corporation (PDIC) that the taxpayer is not included in the list of depositors with insured deposits;
- Certification from the Securities and Exchange Commission (SEC) that the taxpayer’s registration is revoked/dissolved/ceased operation, provided that the said taxpayer’s subscribed capital stocks is fully paid-up;
- Latest Audited Financial Statements filed with government regulatory offices or other private companies/institutions; and
- Other applicable documents to support/justify its classification as uncollectible AR-Suspense files.
1.2. Perform all appropriate tasks related to the pertinent questions in the Fieldman’s Affidavit of Uncollectible Taxes for Individual or Corporation (Annexes 300-1.7/1.8);
1.3. Prepare the report recommending that the docket of the AR/DA case be forwarded for safekeeping by the appropriate office until such time that the need to activate/write-off the case arise. Secure approval of the report by the following authorized officials:
- ACIR/HREA-LTS, for AR/DA handled by LTCED and LTDO;
- ACIR-Collection Service, for AR/DA handled by CED;
- Regional Director, for DA handled by RDOs, after review by the Collection Division.
1.4. Transmit the dockets classified as uncollectible DA-Suspense, with duly approved report recommending the safekeeping of these DAs to the Records/Administrative Division, within ten (10) days after the end of the month when such case was classified as uncollectible DA-Suspense.
- The Records/Regional Administrative Division, upon receipt of the docket/s, shall immediately furnish the CED/Regional Collection Division with a copy of the list of transmitted uncollectible DA-Suspense dockets, for monitoring purposes.
- The concerned BIR office shall activate the uncollectible DA-Suspense file in any of the following instances:
- The whereabouts of the taxpayer have been determined later;
- The taxpayer’s properties have been uncovered later;
- The individual taxpayer has recovered from the reported illness and has become financially capable of paying the delinquent tax liabilities;
- The taxpayer has received a presidential pardon or communication of his life-imprisonment sentence; and
- Other circumstances which would warrant capability of the taxpayer to pay the delinquency taxes and penalties.
Write-Off of Uncollectible AR/DA Cases
Cases classified as “Uncollectible AR/DA-Write Off” shall be written-off in the GCL upon approval by the authorized officials of the report bearing the recommendation for the write-off the uncollectible AR/DA, pursuant to existing policies and guidelines for such write-off.
Procedures I the Write-Off of Uncollectible AR cases
The Revenue Officer/Seizure Agent shall:
- Perform all appropriate tasks related to the pertinent questions in the Fieldman’s Affidavit of Uncollectible Taxes for individual or corporation; and
- Prepare a memorandum report recommending the write-off of uncollectible Ars/DAs and an Authority to Cancel Assessment (ATCA), together with the duly accomplished Fieldman’s Affidavit of Uncollectible Taxes which shall form part of the AR/DA docket.
The preparation, review and approval of this report shall be done by the following authorized officials:
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Action |
DA Handled by CED |
DA Handled by LTCED/LTDOs |
DA Handled by RDOs |
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Preparation of Memorandum Report |
Case Officer |
Case Officer |
Case Officer |
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Review of Report |
Chief, CED |
Chief, LTCED/LTDO |
RDO and Chief, Collection Division |
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Recommendation for Approval of Report |
ACIR, Collection Service |
ACIR/HREA, Large Taxpayers Service |
Regional Director |
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Approval: Php 5,000.00 - below |
CIR |
CIR |
CIR |
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Approval: Over Php 5,000.00 |
NEB |
NEB |
NEB |
- Issuance of Authority to Cancel Assessment (ATCA)
In order to facilitate the closure of the account that was recommended for write off, an ATCA shall be issued to cover each and every Final Assessment Notice (FAN) after the approval of the memorandum report by the Commissioner of Internal Revenue, the NEB, the ACIR-LTS, Regional Director, as the case maybe, and pursuant to the existing rules and regulations applicable thereto. It shall be prepared in quadruplicate copies, distributed as follows:
Original : Docket of the case
Duplicate : Issuing Office
Triplicate : CED of Collection Service
Quadruplicate : Regional Collection Division/LTCED
The ATCA shall be prepared by the Office handling the AR/DA case and recommending for the cancellation of the assessment on write-off of the accounts. It shall be approved by the concerned Regional Director, ACIR-Large Taxpayer Service or ACIR-Collection Service. In the case of prescribed case/s, the approval of the same shall be made by the ACIR-Legal Services (LS).[1]
Once an ATCA is approved, the AR/DA docket shall be returned to the RDO (for Regional Office cases), CED (for national office cases), LTDO/LTCED (for large taxpayers) within ten (10) days from the approval of the ATCA for necessary cancellation of the AR/DA in the GCL and in the List of Outstanding Accounts Receivable.
Procedure in the Issuance of ATCA for the Cancellation/Reduction of Assessment
The Revenue Officer/Seizure Agent shall:
- Receive the docket with approved recommendation to cancel or reduce the assessment;
- In cases of cancellation of assessment, fill-up the ATCA (BIR Form No. 0402) (Annex 300-1.9) to reflect the amount of assessment cancelled; and enter the cancellation of the assessment in the GCL;
- In case of reduction of assessment,
3.1. Fill-up the ATCA (BIR Form No. 0402) to reflect the total amount of assessment and enter the same in the GCL; and
3.2. Issue a new FAN corresponding to the reduced assessment for collection and enter the pertinent information in the GCL as a newly created account.
- Forward the docket to the Administrative Division (for Regional Office cases) or Records Division (for national office and large taxpayers’ cases) for safekeeping and future reference.
The Regional Director/ACIR-LTS/CS/LS shall:
- Receive and review the duly-filled-up ATCA; and
- Affix signature on the ATCA and return the same to the concerned office for posting of the same to the GCL.
The concerned Office shall prepare the reports on Inventory List of Accounts Receivables/Delinquent Accounts Written-Off (Annex 300-1.10) and the Monthly List of Accounts Receivable/Delinquent Accounts Cancelled by ATCA, BIR Form No. 1247 (Annex 300-1.11) [Refer to CM 306- Monitoring of ARs/DAs]
[1] Revenue Delegation Authority Order (RDAO) No. 6-2001.
