Published 18 September 2025, The Daily Tribune
“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 Bureau of Internal Revenue (BIR) need not make an assessment.”
This is the doctrine of self-assessment laid down by the Supreme Court in
SMI-Ed Philippines Technology, Inc. vs. Commissioner of Internal Revenue
(SMI-Ed case).
The BIR relied on this doctrine to justify
collecting an alleged deficiency tax without first issuing a deficiency
assessment notice. But when may the BIR properly invoke the doctrine of
self-assessment?
In Commissioner of Internal Revenue vs. Stradcom Corporation (Stradcom case),
the BIR issued a Warrant of Distraint and/or Levy (WDL) and a Warrant of
Garnishment (WOG) against Stradcom for taxable year 2011. The BIR claimed that
Stradcom’s income tax liabilities were already due and demandable based on the
doctrine of self-assessment. Even though Stradcom’s 2011 Annual Income Tax
Return (AITR) reflected a taxable loss, the BIR pointed to the “Provision for
Income Tax—Current” in Stradcom’s audited financial statements as basis for a
supposed deficiency income tax liability.
Stradcom sought to cancel the WDL and WOG, arguing that the BIR violated its right to due process by bypassing the prescribed assessment procedure. To lift the warrants, Stradcom paid the disputed amount and then filed a claim for refund with the Court of Tax Appeals (CTA) The CTA granted the refund, ruling that Stradcom was denied due process because the BIR failed to follow the required assessment procedure. The CTA En Banc affirmed, and the BIR elevated the case to the Supreme Court.
The Supreme Court upheld the CTA and clarified that the doctrine of self-assessment presumes a voluntarily declared and unpaid tax obligation—absent in Stradcom’s case.
First, the Tax Code
requires “delinquency” before the BIR may collect through civil remedies.
Delinquency refers to the amount of tax due from a taxpayer who failed to pay
within the time prescribed, arising from either (1) a self-assessed tax,
whether or not a tax return was filed, or (2) a deficiency assessment issued by
the BIR which has become final and executory.
Neither situation existed here. Stradcom’s 2011 AITR showed no tax due. A
self-assessed tax delinquency presupposes that the taxpayer has acknowledged a
tax obligation in its return and failed to pay it on time. When the return
reports no tax liability, the doctrine of self-assessment does not give rise to
an enforceable obligation.
Second, the BIR’s reliance on the SMI-Ed case was misplaced. That ruling merely states that when a taxpayer correctly declares and pays taxes, no further assessment is necessary. The inverse is equally true: when the correctness of the tax payment is in question—as in the Stradcom case—an assessment must be issued before collection can proceed.
In other words, an assessment remains necessary where the taxpayer has not admitted any tax liability in its return, or where the BIR seeks to collect amounts not reflected therein. Conversely, when the taxpayer has declared a tax liability in the return but fails to pay it, the amount becomes immediately demandable and may be collected through administrative remedies without further assessment.
For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.
