Publishing Republic Act No. 5203, Amending Sections 318, 324, 325, and Creating a New Section 324-A of the Tax Code

November 18, 1968 REVENUE MEMORANDUM CIRCULAR NO. 38-68 SUBJECT : Publishing Republic Act No. 5203, Amending Sections 318, 324, 325, and Creating a New Section 324-A of the Tax Code TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there is published below Republic Act No. 5203, viz.: "SECTION 1. Sections Three Hundred and eighteen of the National Internal Revenue Code is hereby amended to read as follows: "SEC. 318. Distraint of personal property . The remedy by distraint shall proceed as follows: Upon the failure of the person owing any delinquent tax or delinquent revenue to pay the same, at the time required, the Revenue District Officer, if the amount involved does not exceed five thousand pesos; the Revenue Regional Director, if the amount is more than five thousand pesos but does not exceed twenty thousand pesos; and the Commissioner of Internal Revenue, if the amount involved exceeds twenty thousand pesos shall seize and distrain not earlier than three months nor later than six months from receipt of demand, any goods, chattels, or effects, and the personal property, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, of such person in sufficient quantity to satisfy the tax, or charge, together with any increment thereto incident to delinquency, and the expenses of the distraint and the cost of the subsequent sale. 'A report on any distraint shall, within ten days from receipt of the warrant, be submitted by the distraining officer to the Revenue District Officer, to the Revenue Regional Director, and to the Commissioner of Internal Revenue.' "SEC. 2. Section Three hundred and twenty-four is hereby amended to read as follows: 'SEC. 324. Levy on real estate . After the expiration of the time required to pay the delinquent tax or delinquent revenue as prescribed in Section three hundred eighteen, real property may be levied upon before, simultaneously, or after the distraint of personal property belonging to the delinquent. To this end, any internal revenue officer designated by the Revenue District Officer, or the Revenue Regional Director or the Commissioner of Internal Revenue, as the case may be, shall prepare a duly authenticated certificate showing the name of the taxpayer and the amounts of the tax and penalty due from him. Said certificates shall operate with the force of a legal execution throughout the Philippines. Levy shall be effected by writing upon said certificate a description of the property upon which levy is made. At the same time, written notice of the levy shall be mailed to or served upon the Register of Deeds of the province or city where the property is located and upon the delinquent or, if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability arose, or, if there be none, to the occupant of the property in question. 'In case the levy on real property is not issued before or simultaneously with the warrant of distraint on personal property; and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency, the Revenue District Officer, Regional Director or Commissioner, as the case may be, shall within thirty days after the execution of the distraint, proceed with the levy on the taxpayer's real property. 'A report on any levy shall, within ten days after receipt of the warrant, be submitted by the levying officer to the Revenue District Officer, the Revenue Regional Director, and to the Commissioner of Internal Revenue.' "SEC. 3. A new section is hereby inserted between sections three hundred twenty-four and three hundred twenty-five of the national Internal Revenue Code to read as follows: 'SEC. 324-A. Penalty for failure to issue and execute warrant . Any official who fails to issue or execute the warrant of distraint or levy within thirty days after the expiration of the time prescribed in Sections three hundred eighteen and three hundred twenty-four or who is found guilty of abusing the exercise thereof by competent authority shall be automatically dismissed from the service after due notice and hearing.' "SEC. 4. Section three hundred and twenty-five is hereby amended to read as follows: 'SEC. 325. Advertisement and Sale . Within twenty days after levy, the officer conducting the proceedings shall proceed to advertise the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period of at least thirty days. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in a public and conspicuous place in the barrio or district in which the real estate lies and by publication once a week for three weeks in newspaper of general circulation in the municipality or city where the property is located. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale, the name of the taxpayer against whom taxes are levied, and a short description of the property to be sold. At any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes, penalties and interest. If he does not do so, the sale shall proceed and shall be held either at the main entrance of the municipal building or city hall, or on the premises to be sold, as the officer conducting the proceedings shall determine and as the notice of the sale shall specify. 'Within five days after the sale, a return by the distraining or levying officer of the proceedings shall be entered upon the records of the collection agent, the Revenue District Officer, the Revenue Regional Director, and the Commissioner of Internal Revenue. The collection agent, in consultation with the provincial or city or municipal treasurer, shall then make out and deliver to the purchaser a certificate from his records, showing the proceedings of the sale, describing the property sold, stating the name of the purchaser and setting out the exact amount of all taxes, penalties and interest" Provided, however , That in case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the property. 'The collection agent, upon approval by the Revenue District Officer may, out of his collections, advance an amount sufficient to defray the cost of collection by means of the summary remedies provided for in this Code, including the preservation or transportation in case of personal property, and the advertisement and subsequent sale, both in cases of personal and real property including improvements found on the latter. In his monthly collection report, such advances shall be reflected and supported by receipt.' "SEC. 5. This Act shall take effect upon its approval. "Approved, June 15, 1968" Features of the Amendment I. DISTRAINT OF PERSONAL PROPERTY 1. Who are authorized to issue warrants of distraint . Under the amendment to Section 318 of the Tax Code, warrants of distraint are now issued by the Revenue District Officer, if the amount involved does not exceed P5,000; the Revenue Regional Director, if the amount involved exceeds P5,000 but does not exceed P20,000; and the Commissioner of internal Revenue, if the amount involved exceeds P20,000. 2. When warrants are to be issued . Under the amendment, the internal revenue officer concerned is under obligation to issue the warrant after the lapse of three months from the date of receipt by the delinquent taxpayer of the demand to pay tax and not later than six months from said date. In no case should the warrant be issued earlier than three months from receipt of demand by the taxpayer. If within the three-month period from receipt of demand, the taxpayer disputes the assessment, the officer concerned should nevertheless issue the warrant after the lapse of three months from receipt of demand and proceed with the execution of the warrant unless the Commissioner, or the Regional Director in cases within his jurisdiction, directs the suspension of the execution thereof. If the taxpayer appeals to the Court of Tax Appeals, the warrant shall nevertheless be issued and executed unless execution of the warrant is enjoined by the said Court or the Commissioner himself directs the suspension of the execution thereof. cdta 3. Execution of warrant . After the issuance of the warrant, the internal revenue officer directed to execute the same should immediately enforce the execution thereof. If execution cannot be accomplished before the lapse of the six-month period, the distraining officer should continue the execution during the entire 5-year period covered by the statute of limitations. 4. Report on proceedings . The distraining officer shall submit a report to the Revenue District Officer, Revenue Regional Director, and to the Commissioner of Internal Revenue, as the case may be, within 10 days from receipt of the warrant and as often as may be necessary thereafter which shall in no case be later than 3 months interval. II. LEVY ON REAL ESTATE 1. Who are authorized to issue warrants of levy . The same officials authorized to issued warrants of distraint in cases involving the same amounts mentioned in Item I(1). 2. When warrants of levy are to be issued . Warrants of levy may be issued before, simultaneously or after the distraint of personal property of the delinquent taxpayer. If the warrant of levy is issued before the distraint of personal property, it must be issued within the period applicable to warrants of distraint. If the warrant of levy is issued after issuance and execution of the warrant of distraint, it need not be issued within the period required for the issuance of warrants of distraint, built it must be issued at the earliest available opportunity after the execution of the warrant of distraint is found unavailing. If it is clearly manifest that the taxpayer has no property that could be distrained, levy should immediately be resorted to. If after the execution of the warrant of distraint, the proceeds of the sale of taxpayer's distrained property are insufficient to satisfy his tax delinquency, levy should be resorted to within thirty (30) days from the date of execution. New forms of warrants of distraint and levy will be printed and distributed. Pending their receipt of the new forms, issuing officers may use the present form of warrant of distraint and levy. However, in executing the warrant, distraint should first be resorted to. If distraint is unavailable or the personal properties of the taxpayer are not sufficient, then the officer concerned should immediately levy upon the real property of the taxpayer. 3. Notice of levy . Written notice of levy should be mailed to or served upon (a) the Register of Deeds of the province or city where the property is located, and (b) upon the delinquent taxpayer, or if he is absent from the Philippines, to his agent or the manager of the business in respect to which the liability arose, or, if there be none, to the occupant of the property in question. cdti Under the amendment, it is now required that written notice of the levy be served upon the Register of Deeds of the province or city where the property is located. Before the amendment, this notice is not required. The notice of levy to the Register of Deeds should state the following: (a) Name and address of the taxpayer; (b) The kind and amount of the tax and the penalties due from the taxpayer (penalties refer to surcharges and interests and not compromise penalties. Compromise penalties are not collected by distraint and levy); (c) The number of the certificate of title or transfer certificate of title of the real property levied upon. If the property is not titled, the number of the Tax Declaration of said property; and (d) The description of the property as appearing in the certificate of title, or if not titled, as appearing in the Tax Declaration of the property. 4. Report of proceedings . The levying officers must submit a report of their proceedings within the time and under the same terms and conditions as are required and applicable to warrants of distraint. III. ADVERTISEMENT AND SALE OF PROPERTY LEVIED . 1. Publication . The same requirements provided for in Section 325 before its amendment are provided for in said section as amended. However, under the amendment, the notice of sale of the property levied may now be published in any newspaper whether or not published in the locality where the property is located. It is now sufficient that the newspaper is circulated in the municipality or city where the property is located. Publication may now, therefore, be effected in any of the metropolitan papers provided the newspaper wherein effected is circulating in the city or municipality where the property is located. 2. Return of the sales proceedings . A return of the sales proceedings is now required to be entered not only upon the records of the Collection Agent but also upon the records of the Revenue District Officer, the Revenue Regional Director and the Commissioner of Internal Revenue, as the case may be. The return shall be rendered by the distraining or levying officers. However, it is the Collection Agent who shall make out and deliver to the purchaser the certificate of sale, showing: (a) The proceedings of the sale; (b) Description of the property sold; and (c) The exact amount of all taxes, penalties (surcharges) and interests due from the delinquent taxpayer. The certificate of sale shall be made by the Collection Agent in consultation with the Provincial or City or Municipal Treasurer from whom he may secure a detailed description of the property and information as to its market value. 3. Disposition of excess process of sale . A proviso has been inserted in Section 325 which states that in case the proceeds of the sale exceed the claim and cost of sale, the excess shall be turned over to the owner of the property. This amendment has been inserted for the sole purpose of emphasis, for even without this amendment, the excess of the proceed over the tax and cost of sale is actually turned over to the taxpayer. IV. EXPENSES OF COLLECTION R.A. No. 5203 added a new paragraph to Section 325 authorizing the Collection Agent upon approval of their respective Revenue District Officers to advance from their collections an amount sufficient to defray the cost of collection by means of the summary remedies provided for in the Tax Code, including the preservation or transportation in case of personal property, and the advertisement and subsequent sale, both in cases of personal and real property, including improvements found on the latter. The Collection Agent must reflect such advances in his monthly collection report, which must be supported by receipts. V. PENALTIES A new Section denominated Section 324-A was inserted between Sections 324 and 325 providing penalties for failure to issue and execute warrants of distraint and levy. For failure of the officers concerned to issue or execute warrants of distraint and levy within the time prescribed or who is found guilty of abusing the exercise thereof by competent authority shall be automatically dismissed from the service after due notice and hearing. Effectivity R.A. No. 5203 took effect on June 15, 1968, the date of its approval by the President of the Philippines. aisadc Enforcement All internal revenue officers and others concerned are hereby enjoined to be guided accordingly and to give this circular as wide a publicity as possible. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue APPROVED: (SGD.) EDUARDO Z. ROMUALDEZ Secretary of Finance