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Protesting BIR Assessments

Following the deadline for the filing of the annual income tax returns last April 15, the
taxpayers shall now expect an examination of their books of accounts by the revenue
officers of the Bureau of Internal Revenue (BIR). With the commitment of the BIR to
aggressively improve its tax collection nowadays, the Letter of Authority (LOA), which
usually initiates the examination of the books of a taxpayer, may now be underway for
issuance.
The LOA issued by the BIR requires the taxpayer to grant the revenue examiners
access to their books of accounts and to submit documents pertinent to the taxable year
under examination. Under the 1997 Tax Code, the BIR is given three (3) years from the
actual date of filing of the returns to assess national internal revenue taxes, unless false
or fraudulent, or no returns at all were filed, in which case, the prescription period shall
be ten (10) years from its discovery.
Considering the prescriptive period to assess, the Final Assessment Notice (FAN)/ Final
Letter of Demand (FLD) should be issued by the BIR Commissioner or his duly
authorized representative within such prescribed period, unless there is a waiver of said
statute of limitations to assess as agreed between the BIR and the taxpayer. The
FAN/FLD, which requires the payment of the assessed deficiency taxes, should state the
facts, the law, rules and regulations, or jurisprudence on which the assessment is based;
otherwise, the formal letter of demand and assessment notice shall be void.
Likewise, service of the FAN/FLD to the taxpayer should be made only by registered
mail or by personal delivery. If sent by personal delivery, the taxpayer or his duly
authorized representative shall acknowledge receipt thereof in the duplicate copy of the
letter of demand, showing the following: (a) His name; (b) signature; (c) designation and
authority to act for and in behalf of the taxpayer, if acknowledged received by a person
other than the taxpayer himself; and (d) date of receipt thereof.

It is therefore imperative on the part of the tax authorities to comply with these
requirements in order to validly assert the right of the Government to assess and collect
the correct taxes from the taxpayers. The necessity of these requirements is recognized
by the Supreme Court in one case, in which it held that the issuance of a valid formal
assessment is a substantive prerequisite to tax collection, for it contains not only a
computation of tax liabilities but also a demand for payment within a prescribed period,
thereby signaling the time when penalties and interests begin to accrue against the
taxpayer and enabling the latter to determine his remedies therefor. Due process
requires that it must be served on and received by the taxpayer.
On the part of the taxpayers, the right to be afforded with opportunity to present its
arguments to the assessments issued by the revenue officers may be done by filing of
an administrative protest within thirty (30) days from receipt of the assessment. The
taxpayer shall also be required to submit the necessary documents in support of the
protest within sixty (60) days from date of filing of his letter of protest. Failure to file a
valid protest within such period shall render the assessment final, executory and
demandable.
Based, therefore, on the prevailing jurisprudence and provisions of the Tax Code, the
taxpayers right to procedural and substantive due process in case of tax investigations
as enshrined in our Constitution is recognized and protected. The taxpayers simply
need to be aware of these rights and remedies in order to validly contest the assessment
issued by the tax authorities.

The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law).
If you have any comments or questions concerning the article, you can e-mail the author
at deo.saludario@bdblaw.com.ph or call 403-2001 local 320.