Marcos Estate Tax: Can a Demand Letter Extend the BIR's Period to Collect?
The Tax Code does not say that a new demand letter keeps a tax claim alive. It gives the BIR a fixed period to collect an assessed tax by distraint, levy or a court case, and it lists the events that suspend that period.
A demand letter is not on the list. In 1964, the Supreme Court also rejected the argument that the government's demand letters stop the period from running under the Civil Code. In the estate tax case of the late President Marcos, the Court held in 1997 that the BIR's levies were issued on time. Whether any deadline now applies is for the BIR and the courts to decide.
Read the full text: Marcos II v. Court of Appeals, G.R. No. 120880, June 5, 1997 (Second Division)
What is being asked of the BIR?
According to news reports dated November 14, 2026, a group has called on the BIR to serve a new written demand on the heirs before December 2, 2026. As reported, the date is counted as five years from the BIR's last written demand, dated December 2, 2021.
The reports do not name the specific provision relied on. As reported, the call is also conditional: it asks for a new demand if the law requires one.
This post takes no side on the controversy. It explains the law on how long the BIR may collect an assessed tax, which applies to every taxpayer.
What did the Supreme Court decide in the estate tax case?
The facts below are from Marcos II v. Court of Appeals, G.R. No. 120880, June 5, 1997:
The former President died on September 29, 1989. A BIR audit found that no estate tax return had been filed.
On July 26, 1991, the BIR issued a deficiency estate tax assessment of about ₱23.29 billion.
The assessment was not protested within 30 days, so it became final and unappealable.
On February 22, 1993, the BIR issued 22 notices of levy on real property to satisfy the estate tax and deficiency income taxes. More notices of levy followed in May 1993. An auction of 11 parcels on July 5, 1993 drew no bidder, and the lots were declared forfeited in favor of the government.
The Supreme Court denied the petition that questioned the levies and affirmed the Court of Appeals.
The Court made three rulings that matter here. First, the BIR does not need the approval of the probate court before it collects estate tax. Second, because the assessment was final, there was no reason why the BIR could not continue collecting. Third, the notices of levy were issued within the prescriptive period.
The ruling has been reported to have become final in 1999. In 2022 the BIR stated that it sent a written demand to the heirs on December 2, 2021. With interest and penalties, the liability has been reported at about ₱203 billion as of December 2021.
How long does the BIR have to collect an assessed tax?
It depends on the kind of assessment:
No return, or a false or fraudulent return. The BIR may assess within 10 years after it discovers the omission, falsity or fraud. The tax so assessed may then be collected by distraint or levy, or by a proceeding in court, within five years following the assessment (Tax Code, Section 222).
Ordinary assessments. For an assessment issued within the regular three-year period, the Supreme Court has held that the BIR has another three years to collect (Commissioner of Internal Revenue v. Court of Tax Appeals Second Division and QL Development, Inc., G.R. No. 258947, March 29, 2022).
The older Tax Code that the Court applied in the 1997 ruling gave three years following the assessment. For how far back the BIR can assess in the first place, see our guide on the BIR's prescriptive period.
When is collection considered begun?
The period is met when the BIR begins collection on time. The Supreme Court has said:
distraint and levy are begun by the issuance of the warrant and its service on the taxpayer;
a court proceeding is begun by filing a complaint with the proper court, or by an answer that asks for payment when the taxpayer has appealed the assessment to the Court of Tax Appeals; and
the warrant need not be fully executed, as long as the proceedings validly began and were not stopped by the BIR's own voluntary desistance (Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, October 17, 2005).
A warrant of distraint or levy that was served on time may still be enforced after the period has run, because that only continues a remedy begun on time. But a warrant served on time does not allow the BIR to file a new court case after the period (Republic v. Hizon, G.R. No. 130430, December 13, 1999).
Does a demand letter stop or restart the period?
The Tax Code lists the events that suspend the period (Section 223):
while the Commissioner is prohibited from assessing or from beginning distraint, levy or a court proceeding, and for 60 days after;
when the taxpayer asks for a reinvestigation and the Commissioner grants it;
when the taxpayer cannot be located at the address given in the return, unless the taxpayer informed the Commissioner of a change of address;
when a warrant of distraint or levy is duly served and no property can be located; and
when the taxpayer is out of the Philippines.
A demand letter is not among them. In QL Development, the BIR argued that its final decision on the disputed assessment worked as a collection letter. The Court did not accept this. It said that collection efforts are begun by distraint, levy or a court proceeding.
The Tax Code also recognizes a written agreement between the BIR and the taxpayer to extend the period (Section 222). That needs the taxpayer's consent. A demand letter is a one-sided act of the BIR.
What about the Civil Code rule on written demands?
Article 1155 of the Civil Code states the general rule. The prescription of actions is interrupted when the case is filed in court, when the creditor makes a written extrajudicial demand, and when the debtor acknowledges the debt in writing.
Does that rule apply to tax collection? The Supreme Court has dealt with it in two cases:
1962. In Republic v. Limaco & De Guzman Commercial Co., Inc., G.R. No. L-13081, August 31, 1962, the Court cited Article 1155 as an added reason for ruling that a case to collect an unpaid tax was filed on time. There, the taxpayer itself had written to ask that the court case be deferred so it could settle. The Court treated those letters as a written acknowledgment of the debt and counted the period again from them.
1964. In Republic v. Gancayco, G.R. No. L-18307, June 30, 1964, the government argued that its extrajudicial demands stopped the period from running, citing the Civil Code. The Court called the argument untenable. It held that the demands did not suspend or toll the period, "the provisions of the Civil Code notwithstanding," because the tax code is a special law that prevails over a general law.
Both cases were decided under the old tax code. The present Tax Code follows the same design: Section 222 fixes the period to collect, and Section 223 lists what suspends it. Under Gancayco, the government's own demand letter does not stop the period from running. What mattered in Limaco was the taxpayer's own written acts.
So what does December 2, 2026 mean?
Sections 222 and 223 of the Tax Code do not provide that a new demand letter renews the period to collect. In Gancayco, the Supreme Court did not accept the Civil Code as a basis for that result. Under those sections and the rulings above, the questions are when the tax was assessed, whether distraint, levy or a court case was begun on time, and whether any ground for suspension applies.
In the estate tax case, the Supreme Court found that the 1993 notices of levy were issued within the period. Under Hizon, a levy served on time may still be enforced after the period has run.
Whether the BIR must take any further step by December 2, 2026, and what step, depends on facts that are not in the public record, such as which properties the levies cover and which collection proceedings are pending. That is for the BIR, and the courts if the question is raised, to settle.
What does this mean for other taxpayers?
Protest on time. An assessment that is not protested within 30 days becomes final. See how to protest a Final Assessment Notice.
Know the BIR's period to collect: five years in no-return and fraud cases, and three years for ordinary assessments.
Keep every notice, warrant and letter with its date of receipt. A collection letter alone does not begin collection. A served warrant of distraint or levy, or a court case, does.
Remember what suspends or extends the period, such as a reinvestigation that the BIR grants at your request, or a written agreement to extend the period.
Be careful with your own letters. In Limaco, the taxpayer's written request to defer the case was held to interrupt the period.
Raise prescription as a defense when it applies. See why BIR assessments fail in court and our guide to the Court of Tax Appeals.
Frequently asked questions
Did the Supreme Court rule that the estate tax assessment is final?
Yes.
In 1997 it held that the assessment had become final and unappealable because it was not protested, and that the BIR could continue with collection.
Is five years the period to collect every tax?
No.
Five years applies to taxes assessed in no-return and fraud cases under Section 222. For ordinary assessments, the Supreme Court has held that the period is three years.
Does a BIR demand letter count as collection?
Under the rulings above, collection is begun by a served warrant of distraint or levy or by a court case. In QL Development, the Court found no merit in the argument that the BIR's decision letter worked as a collection letter.
Does a written demand interrupt the period under Article 1155 of the Civil Code?
Not under Republic v. Gancayco. There the Supreme Court held that the government's extrajudicial demands did not suspend or toll the period to collect taxes, because the tax code is a special law that prevails over the Civil Code.
Can the BIR still enforce a levy after the period has run?
Yes,
If the warrant was served on time. In Republic v. Hizon, the Supreme Court held that a levy begun on time may still be enforced beyond the period, but that a new court case could no longer be filed.
Can the period to collect be suspended?
Yes,
On the grounds listed in Section 223 of the Tax Code.
Sources
Marcos II v. Court of Appeals, G.R. No. 120880, June 5, 1997 (Second Division)
National Internal Revenue Code of 1997, as amended, Sections 203, 222 and 223
Civil Code of the Philippines, Article 1155
Republic v. Gancayco, G.R. No. L-18307, June 30, 1964 (En Banc)
Republic v. Limaco & De Guzman Commercial Co., Inc., G.R. No. L-13081, August 31, 1962 (En Banc)
Republic v. Hizon, G.R. No. 130430, December 13, 1999 (Second Division)
Commissioner of Internal Revenue v. Court of Tax Appeals Second Division and QL Development, Inc., G.R. No. 258947, March 29, 2022 (First Division)
Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, October 17, 2005 (Second Division)
Facing a BIR audit, assessment or tax dispute?
Aureada CPA Law Firm's CPA-lawyers handle BIR audits, assessment protests, refund claims and Court of Tax Appeals cases from our Makati and Lucena offices. See our tax services.
You can also email info@aureadalaw.com or call (02) 8812-9990.
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This article is general information as of its publication date, not legal advice, and does not create a lawyer-client relationship. For advice on your situation, consult a lawyer.
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