Tax collection without assessment: Valid or void?

By: Atty. Aziza Hannah A. Bacay on October 9,2025

THE National Internal Revenue Code (Tax Code) grants the Commissioner of Internal Revenue (CIR) not just the power to make assessments, but also to enforce collection of taxes. In instances where tax delinquencies are established, the Tax Code allows the Bureau of Internal Revenue (BIR) to enforce administrative remedies against the taxpayer — such as distraint, levy and garnishment, to collect the taxes.

In Commissioner of Internal Revenue v. Stradcom Corp. (GR 255520, April 21, 2025), the Supreme Court highlighted that the administrative remedies for tax collection may be invoked only when taxes have already become delinquent, either by the taxpayer’s own admission or by virtue of a valid formal assessment.

Doctrine of self-assessment In the case, the BIR — after taxpayer Stradcom filed its income tax return, and without the BIR issuing any assessment or going through any assessment process — issued a demand letter against Stradcom to pay deficiency income taxes. The BIR thereafter enforced collection through the issuance of a Warrant of Distraint and/or Levy (WDL) and a Warrant of Garnishment (WOG) against the taxpayer. Stradcom paid the alleged deficiency taxes and thereafter filed a claim for refund of erroneously paid taxes.

The BIR claimed there was no need to go through the assessment procedure since the deficiency tax arose from a self-assessed amount. It cited the case of SMI-Ed Philippines Technology v. CIR (GR 175410, Nov. 12, 2014), in which the Supreme Court held that “taxes are generally self-assessed as they are initially computed and voluntarily paid by the taxpayer. The government does not have to demand it. If the tax payments are correct, the [BIR] need not make an assessment.” The Supreme Court, however, held that the BIR’s reliance on the SMI-Ed case is misplaced. The SMI-Ed case merely states that no assessment is necessary when a taxpayer correctly declares and pays taxes. Conversely, in case of erroneous payments, there must be an assessment before collection efforts may be enforced.

The Supreme Court explained that a self-assessed delinquency presupposes that (a) there is an acknowledgement from the taxpayer of its tax obligation and (b) the taxpayer failed to pay such obligation within the prescribed period. Both criteria are not present in the Stradcom case because the taxpayer’s income tax return indicated no tax liability.

The Supreme Court further emphasized that “if the taxpayer’s return does not indicate any tax due, or if the BIR disputed the accuracy of the return, as it does in this case, then a valid assessment is a legal prerequisite to collection effort through summary administrative remedies.” Thus, the BIR cannot merely rely on the doctrine of self-assessment to justify its immediate resort administrative collection remedies.

Generally, self-assessed tax returns are presumed to be correct, reliable and accurate, because they are prepared under the penalty of perjury. To reinforce this presumption of correctness, tax returns of juridical entities must be based on financial statements audited by independent Certified Public Accountants, such as balance sheets, profit and loss statements, among others. Nonetheless, this presumption is applicable only until it is overcome by a duly issued assessment, which was also not present in the case.

When assessment is final and executory The Supreme Court likewise pointed out that the issuance of the WDL and the WOG can only be made when the assessment has become final and executory — specifically when the CIR or the regional director has issued a final decision on the disputed assessment, or when the Courts have upheld the assessment.

This is consistent with BIR’s own rules, particularly Revenue Memorandum Order 39-07 (Dec. 12, 2007) and Revenue Regulations 4-2019 (April 5, 2019). Thus, in such cases where there is no assessment issued at all, there is nothing to be made final and executory. Consequently, the tax cannot be deemed delinquent, and ultimately, there is no foundation for any collection to stand on.

Aziza Hannah A. Bacay is a Senior Associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com

The article was published at the More to Follow Column at The Manila Times on October 9,2025. Please see this link. https://www.manilatimes.net/2025/10/09/business/top-business/tax-collection-without-assessment-valid-or-void/2197129