Taxpayer's Quick Guide in Disputing BIR Tax Assessment: By: Ernesto "Jon" Dayao, Jr. END Tax Notes

Taxpayer’s Quick Guide in Disputing BIR Tax Assessment
By: Ernesto “Jon” Dayao, Jr. END Tax Notes
Contents
A. Stages/Life of a Tax Assessment ..................................................................................... 6
B. Letter of Authority (LOA) & BIR Fieldwork/Walkthrough .................................................... 7
1. What is an assessment? ............................................................................................ 7
2. When does the assessment process starts? .............................................................. 7
3. The BIR is not mandated to make an assessment relative to every return filed with it 8
4. Presumption that tax returns are filed in accordance with the law .............................. 8
5. When does the BIR audit process begin? .................................................................. 8
6. What is a Letter of Authority (LOA)? .......................................................................... 8
7. Differentiate Letter of Authority (LOA) from Letter Notice (LN). .................................. 8
8. Explain the so-called RELIEF System ....................................................................... 9
9. Who are the taxpayers which will be covered by the RELIEF System? .................... 10
10. Can a Letter Notice (LN) replace a Letter of Authority (LOA)/e-LOA? ...................... 10
11. Is it possible to convert an LN into a LOA/e-LOA? ................................................... 10
12. Is the settlement and payment of deficiency tax(es) under LN preclude the BIR from
issuing a LOA/e-LOA? ............................................................................................. 11
13. Who are the BIR personnel who are authorized to sign a LOA/e-LOA? ................... 11
14. What is the effect in case the LOA/e-LOA is not signed by the authorized BIR officials?
................................................................................................................................ 11
15. Who has the authority to serve the LOA/e-LOA? ..................................................... 12
16. Is the issuance of a manually-prepared LOA still valid? ........................................... 12
17. Can the e-LOA contain more than one taxable year? .............................................. 12
18. Can e-LOA cover an audit for “unverified prior years”? ............................................ 13
19. What is the prescribed period in serving the e-LOA? ............................................... 13
20. Procedures in revalidating e-LOA. ........................................................................... 13
21. Is the issuance of a “Revalidation Notice” valid? ...................................................... 13
22. Can the taxpayer amend its/his return after the receipt of the e-LOA? ..................... 13
23. How many days should the tax audit/investigation take place after the issuance of the
e-LOA? .................................................................................................................... 14
24. What is the effect in case the Revenue Officer’s (ROs) audit/examination exceeded
the 120-day period? ................................................................................................. 14
25. How to spot a defective e-LOA ................................................................................ 14
26. Tax assessments are presumed correct and made in good faith ............................. 15
27. Is there an instance where the taxpayer can deny the receipt of the e-LOA? ........... 15
28. Can a taxpayer be audited for 3 consecutive years?................................................ 15
29. What is the period of limitation to assess? ............................................................... 16
30. What are the exceptions to the period of limitation to assess? ................................. 16
C. Waiver of Statute of Limitation ........................................................................................ 23
1. What is a waiver of statute of limitations? ................................................................ 23
Whatever you do, work at it with all your heart, as working for the Lord, not for men.
(Colossians 3:23)
1
2. Ratio of statute of limitation...................................................................................... 23
3. Rules derogating taxpayers' right against prolonged and unscrupulous investigations
are strictly construed against the government .......................................................... 23
4. Is the law prescribing a limitation of actions for the collection of the income tax is
beneficial both to the Government and to its citizens? ............................................. 24
5. The power to assess and collect taxes is limited by Section 203 of the National Internal
Revenue Code......................................................................................................... 24
6. Waiver of statute of limitation is a bilateral agreement between two parties ............. 24
7. Why is there a need to execute a waiver of statute of limitation? ............................. 25
8. Is the execution of the waiver considered as a unilateral act? .................................. 25
9. Who are the authorized representative/s who are mandated to sign the waiver in behalf
of the taxpayer, in case such taxpayer is a juridical entity? ...................................... 25
10. Incontestability of the waiver executed by an authorized representative .................. 26
11. Can the signature of the taxpayer and the Commissioner or it authorized representative
be dispensed with? .................................................................................................. 26
12. Enumerate the BIR personnel authorized to sign and accept the waiver .................. 26
13. What is the effect in case the waiver is signed and accepted by an unauthorized BIR
official? .................................................................................................................... 28
14. What is the principle of Estoppel? ............................................................................ 29
15. How can the principle of estoppel be applied in the execution of waivers? .............. 29
16. When is the proper time to invoke/raise the invalidity of the waiver? ........................ 31
17. Can the taxpayer still invoke the ground of prescription even if he/she/it is considered
as estopped from questioning the validity of the waivers?........................................ 32
18. Explain the doctrine of in pari delicto ....................................................................... 32
19. Exception to the doctrine of in pari delicto................................................................ 32
20. How can the doctrine of in pari delicto be applied in the execution of waivers? ........ 33
21. Comparison of the old and new rules in the proper execution of waivers ................. 34
D. Notice of Informal Conference ........................................................................................ 36
1. What is a Notice of Informal Conference? ................................................................ 36
2. Process of conducting Notice for Informal Conference ............................................ 36
3. Duration of the Notice for Informal Conference ........................................................ 36
4. Procedure in case the taxpayer is not amenable to the assessment ........................ 36
5. Consequences in case of failure, on the part of Revenue Officers, to comply with the
periods..................................................................................................................... 36
E. Issuance of Preliminary Assessment Notice (PAN)......................................................... 37
1. What is a Preliminary Assessment Notice (PAN)? ................................................... 37
2. What is the content of the PAN? .............................................................................. 37
3. Is the taxpayer required to be notified of his deficiency tax liabilities through a PAN?
................................................................................................................................ 37
4. What is the consequence if the BIR fails to issue a PAN and subsequently issues a
Final Assessment Notice (FAN) instead?................................................................. 37
(Colossians 3:23)
2
5. What are the instances where the PAN is not required? .......................................... 38
6. Who has the authority to sign and issue the PAN? .................................................. 38
7. What is the consequence in case the person who signs the PAN has no authority to
sign the same? ........................................................................................................ 38
8. To whom should the taxpayer submit his response to the PAN?.............................. 38
9. Is the taxpayer allowed to make voluntary payments prior to the issuance of PAN? 39
10. Where should the PAN be served? .......................................................................... 39
11. Who has the authority to receive the PAN? ............................................................. 39
12. What is the effect in case the taxpayer fails to respond to the PAN? ....................... 39
13. Can the taxpayer pay the deficiency tax reflected per PAN? .................................... 39
14. How can the taxpayer determine if there is a denial of the response to the PAN? ... 40
F. Issuance of Final Assessment Notice (FAN) ................................................................... 41
1. What is a Final Assessment Notice (FAN)? ............................................................. 41
2. What is the content of the FAN? .............................................................................. 41
3. What is the effect in case the BIR issued the FAN/FLD in advance or before the
issuance of the PAN? .............................................................................................. 41
4. What is the effect in case the FAN was issued prior to the lapse of the 15 day period
to respond to the PAN? ........................................................................................... 41
5. What is the effect in case the FAN was received after the 3-year prescription period?
................................................................................................................................ 42
6. Who has the authority to sign the FAN?................................................................... 42
7. What is the consequence in case the person who signs the PAN has no authority to
sign the same? ........................................................................................................ 42
8. Effect in case the taxpayer denies the receipt of FAN .............................................. 43
9. Best proof in order to prove that the FAN was received by the taxpayer .................. 43
10. What is the remedy of the taxpayer in case he receives a FAN from the BIR? ......... 43
11. What is the effect in case the taxpayer fails to respond to the FAN within 30 days after
receipt of the same? ................................................................................................ 43
12. Can the FLD/FAN be issued beyond the fifteen (15) days from the filing/submission of
the taxpayer’s response to the PAN? ....................................................................... 44
13. In case the taxpayer opts to protest the FAN issued by the BIR, what should be the
contents of the protest letter? .................................................................................. 44
14. What is the effect in case the taxpayer fails to state the foregoing in its protest letter?
................................................................................................................................ 44
15. Can the taxpayer do a partial protest? ..................................................................... 44
16. Differentiate a written request for reconsideration from request for reinvestigation. . 44
17. Procedures in availing request for reconsideration................................................... 46
18. Procedures in availing request for reinvestigation. ................................................... 48
19. Submission of documents (request for reinvestigation vis-à-vis request for
reconsideration) ....................................................................................................... 49
20. Presumption of availment of request for reconsideration. ........................................ 50
(Colossians 3:23)
3
21. To whom should the taxpayer file his letters of protest, requests for
reinvestigation/reconsideration and similar correspondences? ................................ 50
22. What is the consequence if the protest, requests for reinvestigation/reconsideration
and similar correspondences were mistakenly filed at the wrong office?.................. 50
23. Is the request for reconsideration available with regard to protest to PAN or FDDA? 51
24. What are the indicators in determining the finality of the decision of the Commissioner?
................................................................................................................................ 51
25. After the issuance of the FDDA, can the taxpayer accept and settle the assessment
contained therein, whether partially or fully? ............................................................ 52
26. What is the taxpayer’s recourse if he disagrees with the FDDA issued by the
Commissioner’s duly authorized representative? ..................................................... 52
27. Is the appeal to the Commissioner or Court of Tax Appeals, regarding the FDDA,
precludes the taxpayer from voluntarily settling the assessment? ............................ 52
28. Grounds which can make the assessment final, executory, and demandable. ......... 52
29. Are the provisions provided for under Revenue Regulations (RR) No. 18-13
extendible? .............................................................................................................. 53
G. Modes of Serving the PAN/FLD/FAN/FDDA ................................................................... 54
1. Modes of serving the PAN/FLD/FAN/FDDA to the taxpayer. .................................... 54
2. How “Personal Service” should be done. ................................................................. 54
3. Meaning of “Known Address”? ................................................................................. 54
4. In case personal service is not practicable, how should the PAN be served to the
taxpayer? ................................................................................................................. 54
5. Procedures to be taken by the BIR examiner for cases involving substituted service
................................................................................................................................ 54
6. Will revenue officers, other than the revenue officer who constructively served the
PAN/FLD/FAN/FDDA, fall within the purview of “Disinterested witnesses”? ............. 55
7. Is the attestation of the barangay official in the constructive service of
PAN/FLD/FAN/FDDA a dispensable requirement? .................................................. 55
8. Essential documentary evidence which can prove that the PAN/FLD/FAN/FDDA was
duly received by the taxpayer. ................................................................................. 55
9. Consequence if the taxpayer denies ever having received an assessment from the BIR
................................................................................................................................ 56
10. Can the BIR send the PAN/FLD/FAN/FDDA via mail? ............................................. 56
11. Can the BIR send the PAN/FLD/FAN/FDDA to the duly authorized tax
agent/practitioner of the taxpayer? ........................................................................... 56
H. The Court of Tax Appeals (CTA) .................................................................................... 57
1. What is the Court of Tax Appeals? .......................................................................... 57
2. CTA’s organizational structure ................................................................................. 57
3. CTA’s jurisdiction ..................................................................................................... 57
4. Other cases wherein the CTA has jurisdiction.......................................................... 63
5. Instances where the CTA has no jurisdiction ........................................................... 64
6. Neither certiorari nor mandamus, it will be recalled, is available where relief by appeal
is provided ............................................................................................................... 66
(Colossians 3:23)
4
7. Effect in case the CTA does not have jurisdiction over the case .............................. 66
Revenue Regulations (RR) No. 12-99, as amended ........................................................... 68
SECTION 1. Scope. .................................................................................................... 68
SECTION 2. General Principles. ................................................................................. 68
SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment.
68
SECTION 4. Civil Penalties. ........................................................................................ 73
SECTION 5. Mode of Procedures in Computing for the Tax and/or Applicable Surcharge.
74
SECTION 6. Suggested Compromise Penalty in Extra-judicial Settlement of a
Taxpayer's Criminal Violation................................................................................... 80
SECTION 7. Repealing Clause. .................................................................................. 81
SECTION 8. Effectivity. ............................................................................................... 81
Revenue Memorandum Circular (RMC) No. 38-13 .............................................................. 82
Revenue Memorandum Order (RMO) No. 26-16................................................................. 88
Revenue Regulations (RR) No. 07-18 ................................................................................. 91
Revenue Memorandum Order (RMO) No. 14-16................................................................. 93
Republic Act (R.A.) No. 1125, as amended by Republic Act (R.A.) No. 9282 & Republic Act
No. (R.A.) No. 9503 ........................................................................................................ 96
Republic Act (R.A.) No. 9282 ............................................................................................ 103
Republic Act (R.A.) No. 9503 ............................................................................................ 105
(Colossians 3:23)
5
A. Stages/Life of a Tax Assessment
LOA is valid only for 30 days from the

Issuance of Letter of Authority (LOA) date of issue.
BIR fieldwork/walkthrough should be

BIR Fieldwork/Walkthrough done within 120 days after the issuance
of LOA.
Notice of Informal Conference shall be

issued to the taxpayer in order to afford
the taxpayer with an opportunity to
present his side. If the taxpayer is not
Notice of Informal Conference amenable to the findings, a PAN will be
issued after 30 days from receipt of the
Notice of Informal Conference.
Protest to the PAN and supporting

Issuance of Preliminary Assessment documents should be submitted within
Notice (PAN) 15 days after receipt of the same,
otherwise, FAN will automatically be
issued.
Protest to the FAN should be submitted

within 30 days after receipt of the same.
Issuance of Final Assessment Notice Supporting documents, on the other
(FAN) hand, must be submitted within 60 days
from the time of the filing of the protest,
otherwise, the assessment will become
final and executory.
Issuance of Final Decision on Disputed If the protest of the taxpayer is denied in

partial or in full, the Commissioner or his
Assessment (FDDA) duly authorized representative shall
issue a FDDA to the taxpayer.
In case the protest of the taxpayer is

denied in partial or in full or the protest
is not acted upon by the BIR, the
Court Proceedings taxpayer has the option to elevate the
case to the Court of Tax Appeals
Division, CTA En Banc, and finally to
the Supreme Court.
(Colossians 3:23)
6
B. Letter of Authority (LOA) & BIR Fieldwork/Walkthrough
1. What is an assessment?
An assessment "refers to the determination of amounts due from a person obligated

to make payments." "In the context of national internal revenue collection, it refers to
the determination of the taxes due from a taxpayer under the National Internal Revenue
Code of 1997."1
2. When does the assessment process starts?
The assessment process starts with the filing of tax return and payment of tax by the
taxpayer. The initial assessment evidenced by the tax return is a self-assessment of
the taxpayer. The tax is primarily computed and voluntarily paid by the taxpayer without
need of any demand from government. If tax obligations are properly paid, the Bureau
of Internal Revenue may dispense with its own assessment.
After filing a return, the Commissioner or his or her representative may allow the
examination of any taxpayer for assessment of proper tax liability. The failure of a
taxpayer to file his or her return will not hinder the Commissioner from permitting the
taxpayer's examination. The Commissioner can examine records or other data relevant
to his or her inquiry in order to verify the correctness of any return, or to make a return
in case of noncompliance, as well as to determine and collect tax liability. 2
When the BIR makes the assessment, the taxpayer is allowed to dispute that
assessment before the BIR. If the BIR issues a decision that is unfavorable to the
taxpayer or if the BIR fails to act on a dispute brought by the taxpayer, the BIR's
decision or inaction may be brought on appeal to the Court of Tax Appeals. The Court
of Tax Appeals then acquires jurisdiction over the case.
Generally, however, the BIR assesses taxes when it appears, after a return had been
filed, that the taxes paid were:
a. Incorrect,
b. False,
c. Fraudulent; or
d. When taxes are due but no return is filed.
Taxes are generally self-assessed. 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 self-assessing and voluntarily paying taxpayer, however, may later find that he or
she has erroneously paid taxes. Erroneously paid taxes may come in the form of
amounts that should not have been paid. Thus, a taxpayer may find that he or she has
paid more than the amount that should have been paid under the law. Erroneously
paid taxes may also come in the form of tax payments for the wrong category of tax.
1 Commissioner of Internal Revenue v. Fitness by Design, Inc., G.R. No. 215957, November 9, 2016
2 Ibid.
(Colossians 3:23)
7
Thus, a taxpayer may find that he or she has paid a certain kind of tax that he or she
is not subject to.3
3. The BIR is not mandated to make an assessment relative to every return filed with
it
The BIR is not mandated to make an assessment relative to every return filed with it.
Tax returns filed with the BIR enjoy the presumption that these are in accordance with
the law.4
4. Presumption that tax returns are filed in accordance with the law
Tax returns filed with the BIR enjoy the presumption that these are in accordance with
the law. Tax returns are also presumed correct since these are filed under the penalty
of perjury.5
5. When does the BIR audit process begin?
The audit process commences with the issuance of a Letter of Authority (LOA) to a
taxpayer who has been selected for audit.
6. What is a Letter of Authority (LOA)?
A LOA is the authority given to the appropriate revenue officer to examine the books
of account and other accounting records of the taxpayer in order to determine the
taxpayer's correct internal revenue liabilities and for the purpose of collecting the
correct amount of tax, in accordance with Section 5 of the Tax Code, which gives the
CIR the power to obtain information, to summon/examine, and take testimony of
persons. The LOA commences the audit process and informs the taxpayer that it is
under audit for possible deficiency tax assessment.6
There must be a grant of authority before any revenue officer can conduct an
examination or assessment. Equally important is that the revenue officer so authorized
must not go beyond the authority given. In the absence of such an authority, the
assessment or examination is a nullity.
As part of due process, the purpose of the LOA is not only to give the subject taxpayer
notice on the coverage of the tax investigation, but also to prevent the examiner from
claiming blanket authority to conduct the audit and investigation.7
7. Differentiate Letter of Authority (LOA) from Letter Notice (LN).
Letter of Authority (LOA) Letter Notice (LN)

1. LOA addressed to a revenue officer 1. LN is not found in the NIRC and is
is specifically required under the only for the purpose of notifying the
3 SMI-ED Philippines Technology, Inc. v. CIR, G.R. No. 175410, November 12, 2014
4 Ibid.
5 Ibid.
6 Commissioner of Internal Revenue v. De La Salle University, Inc., G.R. Nos. 196596, 198841 &
198941 November 9, 2016.

7 Dakay Construction and Development Corporation v. CIR, CTA Case EB No. 1294, September 20,
2016.
(Colossians 3:23)
8
Letter of Authority (LOA) Letter Notice (LN)
NIRC before an examination of a taxpayer that a discrepancy is found
taxpayer may be conducted. based on the BIR’s RELIEF System.
2. LOA is valid only for 30 days from 2. LN does not contain such limitation.
the date of issue.
3. LOA gives the revenue officer only a 3. LN does not contain such limitation.8
period of 120 days from receipt of
LOA to conduct his examination of
the taxpayer.
8. Explain the so-called RELIEF System
“Preprocessed” RELIEF data refer to historical data on Summary List of Purchases

(SLP)/Summary List of Sales (SLS) that were matched with ITS registration
information.9
Under the RELIEF System, a revenue officer may begin an examination of the taxpayer
even prior to the issuance of LN or even in the absence of an LOA with the aid of a
computerized/manual matching of taxpayers’ documents/records. Accordingly, under
the RELIEF System, the presumption that the tax returns are in accordance with law
and are presumed correct since these are filed under the penalty of perjury are easily
rebutted and the taxpayer becomes instantly burdened to explain a purported
discrepancy.10
The BIR’s RELIEF System usually compares the taxpayers’ Summary List of Sales
(SLS) and Summary List of Purchases (SLP) and base the assessment, if any, on the
discrepancies that were noted.
For example:
Company A bought goods from Company B for P100 (VAT exclusive)11
On the part of Company A, it will record the above-mentioned sales in its SLS.
Company B, on the other hand, will record its purchases in its SLP. Both SLS and SLP
are submitted with the BIR either manually or electronically on a quarterly basis. The
RELIEF system will then compare if there were no discrepancies between the recorded
sales and purchases of Company A and Company B. If the system reveals any
discrepancy, an assessment will be issued accordingly.
Usually the findings under RELIEF System will cover undeclared sales and/or
undeclared purchases.
There is undeclared sales if the total purchases of one party (the buyer) is greater than
the amount declared as sales by the other party (the seller). In this case, possible
deficiency income tax may arise based on the computed difference.
8 Medicard Philippines Inc. v. Commissioner of Internal Revenue, G.R. No. 222743, April 15, 2017
9 Revenue Memorandum Order (RMO) No. 06-17
11 Assuming both Companies are VAT-registered entities
(Colossians 3:23)
9
By using the above-mentioned example, there is undeclared sales in case parties
reflected the following information in their SLS and SLP:
SLS (Company A) = 100

SLP (Company B) = 112
Difference 12 (Will be construed as undeclared sales of Company A)
Undeclared purchases, on the other hand, arise if the total sales of one party (the
seller) is greater than the amount declared as purchases by the other party (the buyer).
In this scenario, the BIR may issue possible deficiency income tax and/or deficiency
expanded withholding tax for the noted difference.
For example:
SLS (Company A) = 112

SLP (Company B) = 100
Difference 12 (Will be construed as undeclared purchases of Company B)
It is easier to dispute undeclared purchases because it can be argued that for income
tax purposes, a taxpayer is free to deduct from its gross income a lesser amount or not
claim any deduction at all. What is prohibited by the income tax law is to claim a
deduction beyond the amount authorized therein.12
Lastly, the generation of LN may also arise from the “Preprocessed” BOC data. The
said data, on the other hand, refers to importation details showing individual
transactions enhanced with registration information matching.
9. Who are the taxpayers which will be covered by the RELIEF System?
Access to “Preprocessed” RELIEF and BOC data shall be limited to taxpayers for
whom Letters of Authority (LAs) have been issued provided that request for access is
covered by a Request Form (RF) duly approved by the concerned Regional Director
(RD), Assistant Commissioner (ACIR) or Deputy Commissioner (DCIR).13
10. Can a Letter Notice (LN) replace a Letter of Authority (LOA)/e-LOA?
No. Simply put, LN is entirely different and serves a different purpose than a LOA. Due
process demands, as recognized under RMO No. 32-2005, that after an LN has serve
its purpose, the revenue officer should have properly secured an LOA before
proceeding with the further examination and assessment of the taxpayer.14
11. Is it possible to convert an LN into a LOA/e-LOA?
Yes. In case the discrepancies remained unresolved at the end of the 120 day period
from the date of the issuance of the LN, the revenue officer (RO) assigned to handle
the LN shall recommend the issuance of LA to replace the LN.15
12 CIR v. Phoenix Assurance Co. Ltd., G.R. No. L-19727, May 20, 1965
(Colossians 3:23)
10
12. Is the settlement and payment of deficiency tax(es) under LN preclude the BIR
from issuing a LOA/e-LOA?
No. The settlement and payment of the deficiency tax(es) under an LN shall not
preclude the Bureau from issuing a Letter of Authority (LOA) covering the
comprehensive audit of a taxpayer's tax liability. However, any payment of deficiency
tax(es) shall be credited against any assessment that may be made by the appropriate
BIR Office pursuant to a notice of investigation or LOA provided the discrepancies
disclosed by said audit are of the same nature as the discrepancies reflected in the
LN.16
13. Who are the BIR personnel who are authorized to sign a LOA/e-LOA?
Back then, only the following BIR officials are authorized to issue and sign Letters of
Authority:
a. Regional Directors;
b. Deputy Commissioners; and
c. Commissioner.
For the exigencies of the service, other officials may be authorized to issue and sign
Letters of Authority but only upon prior authorization by the Commissioner himself.17
Starting 2010, in accordance with the computerization endeavors of the BIR, electronic
LOA (e-LOA) was born. Now the e-LOA shall bear the name, designation and
electronic signature of the approving BIR officials as follows:
Investigating Office Approving Official

Revenue District Office Regional Director
(RDO)
LTS18 and its Division Assistant Commissioner (ACIR) – LTS
ES19 and its Division Deputy Commissioner – Legal and

Inspection Group
Task Forces & Special Team CIR, or any other authorized Bureau
Official.20
14. What is the effect in case the LOA/e-LOA is not signed by the authorized BIR
officials?
Clearly, there must be a grant of authority before any revenue officer can conduct an
examination or assessment. Equally important is that the revenue officer so authorized
16 Ibid.
18 Large Taxpayers Service (LTS)
19 Enforcement Service (ES)
(Colossians 3:23)
11
must not go beyond the authority given. In the absence of such an authority, the
assessment or examination is a nullity.21
15. Who has the authority to serve the LOA/e-LOA?
The e-LOA shall be served by any one of the Revenue Officers whose name appear
on the e-LOA.
The names of the Revenue Officers (ROs) assigned to a particular case shall be
printed on the corresponding electronic LA. The first name on the space provided shall
be the lead RO.22
Hence, the taxpayer may refuse to accept the e-LOA in case the person who is serving
the same is not included therein.
16. Is the issuance of a manually-prepared LOA still valid?
No manually-prepared LA shall be issued after the date of effectivity of the 2010 Audit
Program.23 Therefore, taxable period starting 2011 should be covered by e-LOA.
17. Can the e-LOA contain more than one taxable year?
Yes, provided that the other periods or years must be specifically and expressly
identified.
Section C of RMO No. 43-90 provides that:
“A Letter of Authority [LOA] should cover a taxable period not

exceeding one taxable year. The practice of issuing [LOAs] covering
audit of unverified prior years is hereby prohibited. If the audit of a
taxpayer shall include more than one taxable period, the other periods
or years shall be specifically indicated in the [LOA].”
What this provision clearly prohibits is the practice of issuing LOAs covering audit
of unverified prior years. RMO 43-90 does not say that a LOA which contains
unverified prior years is void. It merely prescribes that if the audit includes more than
one taxable period, the other periods or years must be specified. The provision read
as a whole requires that if a taxpayer is audited for more than one taxable year, the
BIR must specify each taxable year or taxable period on separate LOAs.
Read in this light, the requirement to specify the taxable period covered by the LOA is
simply to inform the taxpayer of the extent of the audit and the scope of the revenue
officer's authority. Without this rule, a revenue officer can unduly burden the taxpayer
by demanding random accounting records from random unverified years, which may
include documents from as far back as ten years in cases of fraud audit.24
21 Commission of Internal Revenue v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010
23 Ibid.
24 Commissioner of Internal Revenue v. De La Salle University, Inc., G.R. Nos. 196596, 198841 &
198941 November 9, 2016.
(Colossians 3:23)
12
18. Can e-LOA cover an audit for “unverified prior years”?
No. the practice of issuing L/As (LOA) covering audit of "unverified prior years" is
prohibited. If the audit of a taxpayer shall include more than one taxable period, the
other periods or years shall be specifically indicated in the L/A (LOA).25
19. What is the prescribed period in serving the e-LOA?
A Letter of Authority must be served or presented to the taxpayer within 30 days from
its date of issue, otherwise, it becomes null and void unless revalidated and the
taxpayer has all the right to refuse its service if presented beyond the 30-day period.26
A perusal of the afore-cited revenue memorandum orders and regulations would show
that the statements use the terms "must", "shall", and "should", thus, applying the
principle in statutory construction, they are couched in terms that impose a duty which
is imperative and mandatory in nature.
Considering that these guidelines for the examination of returns and issuance of letters
of authority to audit are mandatory, a deviation from these obviously renders the result
of the audit and examination defective.
Hence, the LOA no longer has any force or effect having been served on the taxpayer
beyond the prescribed 30-day period. The assessment conducted by the Revenue
Officers was already unauthorized, because there was no valid LOA covering it.27
20. Procedures in revalidating e-LOA.
Expired LOA should have been revalidated by the BIR in accordance with its own
revenue issuances that is by issuing and serving a new LOA with the corresponding
notation thereto, including the previous LOA number and date of issue of said LOA
instead of just proceeding to issue the expired LOA.28
21. Is the issuance of a “Revalidation Notice” valid?
No. The Revalidation Notice stating that the LOA has been revalidated does not cure
the infirmities in the issuance of the LOA and the BIR's conduct of examination prior to
the said revalidation. Hence, the tax audit and examination conducted by the Revenue
Officer pursuant to an invalid LOA as well as the assessment issued as a consequence
thereof are null and void.29 The moral of this case is that a new LOA/e-LOA should be
issued to the taxpayer. The mere issuance of a revalidation notice to such taxpayer will
not suffice.
22. Can the taxpayer amend its/his return after the receipt of the e-LOA?

26 Revenue Audit Memorandum Order (RAMO) No. 02-95
27 Dakay Construction and Development Corporation v. CIR, CTA Case EB No. 1294, September 20,
2016.
28 Ibid.
29 Ibid.
(Colossians 3:23)
13
No. A taxpayer is prohibited to amend its/his return if there is a notice of audit or
investigation regarding such return.30 LOA is a form of notification, hence, it prohibits
the taxpayer in amending his return which is currently being under audit/examination.
Therefore, taxpayer is not prohibited to amend returns which are not covered by the
LOA.
23. How many days should the tax audit/investigation take place after the issuance
of the e-LOA?
A revenue officer shall within one hundred twenty (120) days from the date of the
issuance of Letter of Authority conduct his audit and submit his investigation. While the
case is pending completion a progress report shall be submitted every end of the
month to the head of the audit office, copy furnished the issuing authority. If the final
report is not completed within the 120-day period, the revenue officer shall then return
the Letter of Authority for revalidation. The revalidation shall be limited to one issuance
only and is done by issuing a new Letter of Authority.31
24. What is the effect in case the Revenue Officer’s (ROs) audit/examination
exceeded the 120-day period?
The LOA/e-LOA will not be invalidated in case the audit/examination of the RO

exceeded the 120-day period. In fact, in the case of AFP General Insurance Corp. v.
CIR, the court agreed with the observation made by the Court in Division that there is
nothing in RMO No. 38-88 and RMC No. 40-2006 that indicates that the LOA will be
invalidated if not revalidated within the 120-day period.32 However, the failure of the
RO to complete the audit within the prescribed period shall be subject to the applicable
administrative sanctions.33
25. How to spot a defective e-LOA
The taxpayer should check the following in order to determine whether or not the e-
LOA is valid or not:
a) Determine if the period under audit/examination is specifically and expressly

indicated in the e-LOA.
b) Check the authority of the signatory of the e-LOA.
c) Check if the e-LOA is served to the taxpayer within 30 days from the date of its
issuance.
d) Check if all BIR officers who are currently conducting the examination is duly
indicated in the e-LOA.34
e) Check if the Preliminary Assessment Notice (PAN) and/or Final Assessment Notice
(FAN) arose from an existing valid e-LOA and not from an existing LN.
30 Sec. 6(A) of the NIRC, as amended
31 Sec. 3 of DOF Department Order No. 06-99
32 AFP General Insurance Corp. v. CIR, CTA EB Case No. 1223, January 4, 2016
34 The taxpayer should maintain a log-book and photocopy of the IDs of the ROs in order to prove
whether or not such ROs have the authority to conduct the said audit/investigation.
(Colossians 3:23)
14
If one of the above-mentioned instances are not complied with, the e-LOA issued to
the taxpayer is invalid, hence, any tax assessment related thereto is deemed null and
void.
In case the taxpayer spots any of the above-mentioned instances, it is appropriate to

bring this issue in the reply to Preliminary Assessment Notice (PAN), Final Assessment
Notice (FAN), and/or with the Court of Tax Appeals (CTA) in order to invalidate the e-
LOA that was issued by the BIR. Therefore, taxpayers should attack not only the legal
issues but also the procedural aspects of a tax assessment.
26. Tax assessments are presumed correct and made in good faith
Tax assessments by tax examiners are presumed correct and made in good faith. The
taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities
in the performance of duties, an assessment duly made by a Bureau of Internal
Revenue examiner and approved by his superior officers will not be disturbed. All
presumptions are in favor of the correctness of tax assessments.35
27. Is there an instance where the taxpayer can deny the receipt of the e-LOA?
Yes. The taxpayer may deny/refuse the receipt of LOA/e-LOA in the following cases:
a) In case the person who serves the same has no authority to do so.
Note that the electronic LA shall be served by any one of the ROs whose names
appear on the LA/e-LOA.36 If the RO is not duly indicated in the e-LOA, the taxpayer
has the right to reject the receipt of the same.
For verification purposes, it is advisable for the taxpayer to check and verify the ID
of the examiner who is serving the e-LOA and compare it to the list of names
indicated therein.
b) If the LOA/e-LOA was served beyond the 30-day mandatory period.37
28. Can a taxpayer be audited for 3 consecutive years?
As a general rule, taxpayers should be audited for 2 consecutive years only.

However,38 if the taxpayer has been audited for the last two (2) years and has been
again selected for audit on the current or 3rd year, the RDO/LTD/LTAD shall submit a
written explanation to the Commissioner, copy furnished the DCIR-OG for Regional
cases, as to why such taxpayer shall be subjected to audit for three (3) succeeding
years, unless the RDO/LTD/LTAD has established that such taxpayer has an under
declaration of sales/income or overstatement of expenses/deductions by at least 30%
(prima facie evidence of fraud).39
35 CIR v. Traders Royal Bank, G.R. No. 167134, March 18, 2015
37 Revenue Audit Memorandum Order (RAMO) No. 01-00, as confirmed by the case of AFP General
Insurance Corp. v. CIR, CTA EB Case No. 1223, January 4, 2016.

38 This is the exception to the general rule
(Colossians 3:23)
15
Based on RMO 64-2016, the 3-year consecutive audit of the same taxpayer can be
approved by the regional director or assistant commissioner who heads the
investigating office.
29. What is the period of limitation to assess?
Internal revenue taxes shall be assessed within three (3) years after the last day
prescribed by law for the filing of the return, and no proceeding in court without
assessment for the collection of such taxes shall begun after the expiration of such
period: Provided, that in a case where a return is filed beyond the period prescribed by
law, the return is filed beyond the three (3)-year period shall be counted from the day
the return was filed. A return filed before the last day prescribed by law for the filing
thereof shall be considered as filed on such day.40
In case an amended return is filed, the period of limitation of the right to issue an
assessment should be counted from the filing of the amended return if it is substantially
different from the original return. However, the prescriptive period to assess shall
commence from the filing of the original return if it is sufficiently complete to enable the
BIR to intelligently determine the proper amount to be assessed.
30. What are the exceptions to the period of limitation to assess?
a. In the case of a false or fraudulent return with intent to evade tax or of failure to file
a return, the tax may be assessed, or a proceeding in court for the collection of
such tax may be filed without assessment,, at any time within 10 years after the
discovery of the falsity, fraud or omission: Provided, that in a fraud assessment
which has become final and executory, the fact of fraud shall be judicially taken
cognizance of in the civil or criminal action for the collection thereof.
• The exceptions to the law on prescription should perforce be strictly

construed
For the purpose of safeguarding taxpayers from any unreasonable

examination, investigation or assessment, our tax law provides a statute of
limitations in the collection of taxes. Thus, the law on prescription, being a
remedial measure, should be liberally construed in order to afford such
protection. As a corollary, the exceptions to the law on prescription should
perforce be strictly construed.41
• Section 222(a) of the NIRC of 1997 should be interpreted to mean a

separation of the three different situations
In the case of Pacifichub Corp. v. Commissioner of Internal Revenue,42 the

Court of Tax Appeals (CTA) held that Section 222(a) of the NIRC of 1997
should be interpreted to mean a separation of the three different situations
of:
1. False return,
40 Sec. 203 of the NIRC, as amended

41 Commissioner of Internal Revenue v. B.F. Goodrich Phils., Inc., G.R. No. 104171, February 24, 1999
42 CTA Case No. 8895, August 31, 2017
(Colossians 3:23)
16
2. Fraudulent return with intent to evade tax, and
3. Failure to file a return;
Which is strengthened immeasurably by the last portion of the provision that

segregates the situations into three different classes, namely "falsity," "fraud"
and "omission."43
• The period within which to assess tax is ten years from discovery of
the fraud, falsification or omission
As held in the case of Commissioner of Internal Revenue vs. Arturo Tulio,44

the Court ruled that Section 222 (a) of the NIRC of 1997, as amended,
provides the exceptions to the three-year period to assess, namely:
(1) When a false return is filed,
(2) When a fraudulent return is filed with intent to evade tax or
(3) When there is failure to file a return.
In any of the foregoing instances, the period within which to assess tax is ten
years from discovery of the fraud, falsification or omission.
• Difference between "false return" and "fraudulent return"
That there is a difference between "false return" and "fraudulent return"

cannot be denied.
While the first merely implies deviation from the truth, whether intentional or
not, the second implies intentional or deceitful entry with intent to evade the
taxes due.45
• For the ten-year period under Section 222 (a) to apply, it is not enough
that fraud is alleged in the complaint, it must be established by clear
and convincing evidence
The Court held in the case of Republic v. Lim De Yu46 that in order for the
ten-year period under Section 222 (a) to apply, it is not enough that fraud is
alleged in the complaint, it must be established by clear and convincing
evidence.
• A prescribed return cannot be used as a basis for a tax evasion case
A reading of Section 203 will show that it prohibits two acts after the
expiration of the three-year period. First, an assessment for the collection of
the taxes in the return, and second, initiating a court proceeding on the basis
of such return.
43 Citing the case of Jose B. Aznar vs. Court of Tax Appeals and Collector of Internal Revenue, G.R.
No. L-20569, August 23, 1974
44 G.R. No. 139858, October 25, 2005
45 Pacifichub Corp. v. Commissioner of Internal Revenue, CTA Case No. 8895, August 31, 2017
46 119 Phil. 1013, 1015-1016 (1964)
(Colossians 3:23)
17
Hence, in the case at bar, the State Prosecutor was correct in dismissing the
complaint for tax evasion since it was clear that the prescribed return cannot
be used as basis for the case.47
• There is no probable cause to indict a taxpayer if there was no clear

showing that there was deliberate intent on his/her part to evade
payment of the taxes
In the case of Republic v. GMCC United Development Corporation,48 the

Supreme Court held that there was no probable cause to indict the
respondent officers for the acts charged, the Court of Appeals said there was
no clear showing that there was deliberate intent on the part of the
respondents to evade payment of the taxes. Both the State Prosecutor 37
and the Court of Appeals 38 emphasized that if respondents really intended
to evade payment, they would have omitted the assailed transactions
completely in all their financial statements.
As it stands, while the dacion en pago transactions were missing in the

GMCC 1998 Financial Statement, they had been listed in the GMCC 2000
Financial Statement. Respondents' act of filing and recording said
transactions in their 2000 Financial Statement belie the allegation that they
intended to evade paying their tax liability. Petitioner's contention that the
belated filing is a mere afterthought designed to make it appear that the non-
reporting was not deliberate, does not persuade considering that the filing of
the 2000 Financial Statement was done prior to the issuance of the March
2003 Letter of Authority, which authorized the investigation of GMCC's
books.
As found by the Court of Appeals, there is no clear and deliberate intent to

evade payment of taxes in relation to the dacion en pago transactions 50 or
on the sale transaction with Valencia Wong. The dacion en pago
transactions, though not included in the 1998 Financial Statement, were
properly listed in GMCC's Financial Statement for the year 2000. Regarding
the sale transaction with Valencia Wong, the respondents said that it was not
reflected in the year 1999 because it was an installment sale. Units sold on
installment, they explained, are recognized not in the year they are fully paid,
but in the year when at least 25% of the selling price is paid. In this instance,
the unit and the parking lot were sold prior to 1996, thus, in the Schedule of
Unsold Units filed by GMCC as of December 31, 1996, the said properties
were no longer included.
• Error in reporting the tax liability in the wrong year stemmed from the
wrong application of the law and is not an indication of intent to evade
payment of taxes
In the case of Republic v. GMCC United Development Corporation,49 the

Court held that the respondents may have erred in reporting their tax liability
when they recorded the assailed transactions in the wrong year, but such
error stemmed from the wrong application of the law and is not an indication
47 Republic v. GMCC United Development Corp., G.R. No. 191856, December 7, 2016
48 G.R. No. 191856, December 7, 2016
49 G.R. No. 191856, December 7, 2016
(Colossians 3:23)
18
of their intent to evade payment. If there were really an intent to evade
payment, respondents would not have reported and subsequently paid the
income tax, albeit in the wrong year.
• When fraudulent tax returns are involved, a proceeding in court after

the collection of such tax may be begun without assessment
In the case of Adamson v. Court of Appeals,50 the Court held that an

assessment is a written notice and demand made by the BIR on the taxpayer
for the settlement of a due tax liability that is there definitely set and fixed.
A written communication containing a computation by a revenue officer of

the tax liability of a taxpayer and giving him an opportunity to contest or
disprove the BIR examiner's findings is not an assessment since it is yet
indefinite.
Even a cursory perusal of the said letter would reveal three key points:
4. It was not addressed to the taxpayers.
5. There was no demand made on the taxpayers to pay the tax liability,
nor a period for payment set therein.
6. The letter was never mailed or sent to the taxpayers by the

Commissioner.
In fine, the said recommendation letter served merely as the prima facie
basis for filing criminal informations that the taxpayers had violated Section
45 (a) and (d), and 110, in relation to Section 100, as penalized under Section
255, and for violation of Section 253, in relation to Section 252 9 (b) and (d)
of the Tax Code.
When fraudulent tax returns are involved as in the cases at bar, a proceeding
in court after the collection of such tax may be begun without assessment.
Here, the private respondents had already filed the capital gains tax return
and the VAT returns, and paid the taxes they have declared due therefrom.
Upon investigation of the examiners of the BIR, there was a preliminary
finding of gross discrepancy in the computation of the capital gains taxes due
from the sale of two lots of AAI shares, first to APAC and then to APAC
Philippines, Limited. The examiners also found that the VAT had not been
paid for VAT-liable sale of services for the third and fourth quarters of 1990.
Arguably, the gross disparity in the taxes due and the amounts actually
declared by the private respondents constitutes badges of fraud.
• When the declared and remitted per tax returns were not the same as
the amounts actually due, the same constitutes false returns
50 G.R. Nos. 120935 & 124557, May 21, 2009
(Colossians 3:23)
19
In the CTA case of Pacifichub Corp. v. Commissioner of Internal Revenue,51
the Court held that in the case at bar, all the WTC Returns that petitioner filed
for TYs 2005 to 2006 are false returns. On the other hand, the EWT Returns
that petitioner filed in May, June, July, and August 2005 and in December
2006 are false returns. Clearly, the amounts that petitioner declared and
remitted were not the same as the amounts actually due per its admission in
its letter dated October 16, 2008.
Moreover, petitioner failed to file WTC and EWT Returns for the months of
September, October, November, and December 2005, and for January and
February 2006.
Considering that petitioner filed false returns and failed to file returns for its
WTC and EWT for TYs 2005 to 2006, the ten (10)-year prescriptive period to
assess under Section 222 (a) of the NIRC of 1997, as amended, applies in
its case.
b. If before the expiration of the time prescribed in Section 203 for the assessment of
the tax, both the Commissioner and the taxpayer have agreed in writing to its
assessment after such time, the tax may be assessed within the period agreed
upon. The period so agreed upon may be extended by subsequent written
agreement made before the expiration of the period previously agreed upon.
• The period to assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer executed before
the expiration of the three-year period
In the case of Commissioner of Internal Revenue v. Next Mobile, Inc.,52 the

Court held that Section 222 (b) of the NIRC provides that the period to assess
and collect taxes may only be extended upon a written agreement between
the CIR and the taxpayer executed before the expiration of the three-year
period.
RMO 20-90 issued on April 4, 1990 and RDAO 05-01 5 issued on August 2,
2001 provide the procedure for the proper execution of a waiver.
The Court has consistently held that a waiver of the statute of limitations must
faithfully comply with the provisions of RMO No. 20-90 and RDAO 05-01 in
order to be valid and binding.
Note: Because it has been a rampant practice by the taxpayers to contest

the validity of their own waivers of the statute of limitations after having
availed of its benefits, the Bureau of Internal Revenue (BIR) issued Revenue
Memorandum Order (RMO) No. 14-16 in order to revise the guidelines
relative to the execution of Waiver of the Statute of Limitations under Section
222. The new RMO will be extensively discussed in the subsequent chapter,
under “Waivers of Statute of Limitation.”
51 CTA Case No. 8895, August 31, 2017

52 G.R. No. 212825, December 7, 2015
(Colossians 3:23)
20
c. Any internal revenue tax which has been assessed within the period of limitation
as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a
proceeding in court within five (5) years following the assessment of the tax.
• Interpretation of Section 222 (c) of the NIRC of 1997, as amended
In Jacinto-Henares v. Atlas Consolidated Mining and Development Corp.,53

the CTA En Banc interpreted Section 222 (c) of the NIRC as follows:
Section 222 (c) of the NIRC of 1997, as amended, provides that "[a]ny
internal revenue taxes which has been assessed within the period of
limitation, i.e., within the three-year or ten-year period whichever is
appropriate, may be collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of the tax."
Hence, in the case of Bisazza Pilippines, Inc. v. Commissioner of Internal

Revenue,54 the Court held that the FAN/FLD dated January 7, 2011, was
sent through registered mail on January 10, 2011, and received by petitioner
on January 18, 2011.
Counting five years from January 10, 2011, respondent had until January 10,
2016 within which to collect on the assessment through distraint, levy, or
court proceeding. Clearly, the PCL dated May 4, 2016 was issued beyond
the five (5)-year prescriptive period and therefore null.
d. Any internal revenue tax, which has been assessed within the period agreed upon
as provided in paragraph (b) hereinabove, may be collected by distraint or levy or
by a proceeding in court within the period agreed upon in writing before the
expiration of the five (5)-year period. The period so agreed upon may be extended
by subsequent written agreements made before the expiration of the period
previously agreed upon.
e. Provided, however, That nothing in the immediately preceding Section and

paragraph (a) hereof shall be construed to authorize the examination and
investigation or inquiry into any tax return filed in accordance with the provisions of
any tax amnesty law or decree.55
• What is a tax amnesty?
A tax amnesty is a general pardon or intentional overlooking by the State of

its authority to impose penalties on persons otherwise guilty of evasion or
violation of a revenue or tax law.
It partakes of an absolute forgiveness or waiver by the government of its right

collect what is due it and to give tax evaders who wish to relent a chance to
start with a clean slate.56
53 CTA EB Case No. 1101, August 14, 2015

54 CTA Case No. 9372, March 7, 2018
55 Sec. 222 of the NIRC, as amended
56 Commissioner of Internal Revenue v. Marubeni Corporation, G.R. No. 137377, December 18, 2001
(Colossians 3:23)
21
• A taxpayer desiring to avail of the benefits of a tax amnesty must
conform with the requirements specified under the law
The Court of Tax Appeals (CTA) held in the case of Covanta Energy
Philippine Holdings, Inc. v. Commissioner of Internal Revenue57 that a
taxpayer desiring to avail of the benefits of a tax amnesty must conform with
the requirements specified under the law.
The payment of the amnesty tax and the submission and accomplishment of
the pertinent forms by the taxpayer shall be deemed full compliance.
After a taxpayer qualifies for tax amnesty, he shall be exempt from the
payment of taxes, including civil, criminal or administrative penalties under
the Tax Code.
57 CTA Case Nos. 7338 & 7365, July 27, 2010
(Colossians 3:23)
22
C. Waiver of Statute of Limitation
1. What is a waiver of statute of limitations?
It is an agreement between the taxpayer and the BIR that the period to issue an
assessment and collect the taxes due is extended to a date certain.
The waiver does not mean that the taxpayer relinquishes the right to invoke
prescription unequivocally particularly where the language of the document is
equivocal.58
Pursuant to Section 223 of the Tax Code, internal revenue taxes may be assessed or
collected after the ordinary prescriptive period, if before its expiration, both the
Commissioner and the taxpayer have agreed in writing to its assessment and/or
collection after said period. The period so agreed upon may be extended by
subsequent written agreement made before the expiration of the period previously
agreed upon. This written agreement between the Commissioner and the taxpayer is
the so-called Waiver of the Statute of Limitations.59
2. Ratio of statute of limitation
Accordingly, the government must assess internal revenue taxes on time so as not to
extend indefinitely the period of assessment and deprive the taxpayer of the assurance
that it will no longer be subjected to further investigation for taxes after the expiration
of reasonable period of time.60
Moreover, in Commissioner of Internal Revenue v. BF Goodrich Phils61 the Court held

that the ratio of statute of limitation is:
For the purpose of safeguarding taxpayers from any unreasonable examination,

investigation or assessment, our tax law provides a statute of limitations in the
collection of taxes.
Thus, the law on prescription, being a remedial measure, should be liberally construed
in order to afford such protection. As a corollary, the exceptions to the law on
prescription should perforce be strictly construed[.]
3. Rules derogating taxpayers' right against prolonged and unscrupulous

investigations are strictly construed against the government
Rules derogating taxpayers' right against prolonged and unscrupulous investigations

are strictly construed against the government.62
58 Philippine Journalists, Inc. v. Commissioner of Internal Revenue, G.R. No. 162852, December 16,
2004
60 SMI-ED Philippines Technology, Inc. v. Commissioner of Internal Revenue, G.R. No. 175410,
November 12, 2014 citing Commissioner of Internal Revenue v. FMF Development Corporation, 579
Phil. 174 (2008)
61 363 Phil. 169 (1999)
62 Commissioner of Internal Revenue v. FMF Development Corporation, 579 Phil. 174, 185 (2008) citing
the case of Republic v. Ablaza, 108 Phil. 1105, 1108 (1960)
(Colossians 3:23)
23
[T]he law on prescription should be interpreted in a way conducive to bringing about
the beneficent purpose of affording protection to the taxpayer within the contemplation
of the Commission which recommended the approval of the law. To the Government,
its tax officers are obliged to act promptly in the making of assessment so that
taxpayers, after the lapse of the period of prescription, would have a feeling of security
against unscrupulous tax agents who will always try to find an excuse to inspect the
books of taxpayers, not to determine the latter's real liability, but to take advantage of
a possible opportunity to harass even law-abiding businessmen. Without such legal
defense, taxpayers would be open season to harassment by unscrupulous tax agents.
4. Is the law prescribing a limitation of actions for the collection of the income tax
is beneficial both to the Government and to its citizens?
Yes. In the case of Republic v. Ablaza,63 the Court held that the law prescribing a
limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens.
Benefits:
Government Taxpayer
To the Government because tax officers To citizens because after the lapse of the
would be obliged to act promptly in the period of prescription citizens would
making of assessment. have a feeling of security against
unscrupulous tax agents who will always
find an excuse to inspect the books of
taxpayers, not to determine the latter's
real liability, but to take advantage of
every opportunity to molest peaceful,
law-abiding citizens.
Without such a legal defense taxpayers would furthermore be under obligation to

always keep their books and keep them open for inspection subject to harassment by
unscrupulous tax agents.
The law on prescription being a remedial measure should be interpreted in a way

conducive to bringing about the beneficient purpose of affording protection to the
taxpayer within the contemplation of the Commission which recommend the approval
of the law.
5. The power to assess and collect taxes is limited by Section 203 of the National
Internal Revenue Code
The Court held in the case of Republic v. GMCC United Development Corporation64
that the power of the Commissioner of Internal Revenue to assess and collect taxes,
as provided under Section 2 of the National Internal Revenue Code, is limited by
Section 203 of the National Internal Revenue Code.
6. Waiver of statute of limitation is a bilateral agreement between two parties
63 G.R. No. L-14519, July 26, 1960

64 G.R. No. 191856, December 7, 2016
(Colossians 3:23)
24
The Court ruled in the case of Philippine Journalists, Inc. v. Commissioner of Internal
Revenue65 that the waiver is not a unilateral act by the taxpayer or the BIR, but is a
bilateral agreement between two parties to extend the period to a date certain.
The taxpayer must be furnished with a copy of the waiver because even if knowingly
executed, it is not considered a unilateral act of the taxpayer but is in fact and in law
an agreement between the taxpayer and the BIR.
In the case at bar, when the taxpayer’s comptroller signed the waiver, it was not yet
complete and final because the BIR had not assented. There is compliance with the
provision of RMO No. 20-90 only after the taxpayer received a copy of the waiver
accepted by the BIR. The requirement to furnish the taxpayer with a copy of the waiver
is not only to give notice of the existence of the document but of the acceptance by the
BIR and the perfection of the agreement.
7. Why is there a need to execute a waiver of statute of limitation?
To give the taxpayer more time in order for him/her/it to gather and/or submit pertinent
documents before an assessment is issued by the BIR.
However, before executing a waiver, the taxpayer should be aware of its pros and
cons. It should be noted that by executing the same, it will prolong the tax audit and
the interest penalty related to the tax exposure will continue to run, in case the tax
assessment is found to be valid.
8. Is the execution of the waiver considered as a unilateral act?
No. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral
agreement between two parties to extend the period to a date certain. The conformity
of the BIR must be made by either the Commissioner66 or official/s previously
designated in existing issuances or the concerned revenue district officer or group
supervisor as designated in the Letter of Authority/Memorandum of Assignment.67
9. Who are the authorized representative/s who are mandated to sign the waiver in
behalf of the taxpayer, in case such taxpayer is a juridical entity?
Sec. 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that all
corporate powers are exercised, all business conducted, and all properties controlled
by the board of directors. A corporation has a separate and distinct personality from its
directors and officers and can only exercise its corporate powers through the board of
directors.
Thus, it is clear that an individual corporate officer cannot solely exercise any corporate
power pertaining to the corporation without authority from the board of directors.68
65 G.R. No. 162852, December 16, 2004

66 Philippine Journalists, Inc. v. CIR, G.R. No. 162852, December 16, 2004
68 Cebu Metro Pharmacy, Inc. v. Euro-Med Laboratories, Philippines, Inc., G.R. No. 164757, October
18, 2010 citing the cases of Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,
G.R. No. 151413, February 13, 2008, Skyway Traffic Management and Security Division Workers
Organization v. PNCC Skyway Corporation, G.R. No. 171231, February 17, 2010 and Mid-Pasig Land
Development Corporation v. Tablante, G.R. No. 162924, February 4, 2010
(Colossians 3:23)
25
From the foregoing, it can be deduced that an authorized representative is a person
designated by the board of directors to sign in its behalf by virtue of a board resolution
constituting him/her as such.
10. Incontestability of the waiver executed by an authorized representative
As enunciated in Revenue Memorandum Order (RMO) No. 14-16, the taxpayer is now
charged with the burden of ensuring that the waivers of statute of limitation are validly
executed by its authorized representative. The authority of the taxpayer's
representative who participated in the conduct of audit or investigation shall not be
thereafter contested to invalidate the waiver.
It should be noted that before the passage of RMO 14-16, taxpayers can contest the
validity of the waiver by alleging that the person who signed the same is not
empowered by a board resolution and therefore, does not fall within the purview of an
“authorized representative.”
Since this became a rampant practice by taxpayers, the BIR was urged to revised the
procedures provided for the proper execution of such waivers. Hence, it issued RMO
14-16 in order to amend the rules as provided under RMO No. 20-90 or Revenue
Delegation Authority Orders (RDAO) No. 05-01.
Therefore, starting April 18, 2016,69 authority of the taxpayer's representative who
participated in the conduct of audit or investigation shall no longer be contested in
order to invalidate the waiver executed by such representative.
11. Can the signature of the taxpayer and the Commissioner or it authorized
representative be dispensed with?
No. The Court held in the case of Commissioner of Internal Revenue v. Court of
Appeals70 that neither implied consent can be presumed nor can it be contended that
the waiver required under Sec. 319 of the Tax Code is one which is unilateral nor can
it be said that concurrence to such an agreement is a mere formality because it is the
very signatures of both the Commissioner of Internal Revenue and the taxpayer which
give birth to such a valid agreement.
Hence, it shall be the duty of the taxpayer to submit its duly executed waiver to the
Commissioner of Internal Revenue or official/s previously designated in existing
issuances or the concerned revenue district officer or group supervisor as designated
in the Letter of Authority/Memorandum of Assignment who shall then indicate
acceptance by signing the same. Such waiver shall be executed and duly accepted
prior to the expiration of the period to assess or to collect. The taxpayer shall have the
duty to retain a copy of the accepted waiver.71
12. Enumerate the BIR personnel authorized to sign and accept the waiver
The following revenue officials are authorized to sign and accept the Waiver of the
Defense of Prescription Under the Statute of Limitations:
69 Based on the BIR’s website: https://www.bir.gov.ph/index.php/revenue-issuances/revenue-

memorandum-orders/2016-revenue-memorandum-orders.html
70 G.R. No. 115712, February 25,1999
(Colossians 3:23)
26
72
a. For National Office Cases
Designated Officer Case

Assistant Commissioner (ACIR) For tax fraud and policy cases
Enforcement Service
ACIR, Large Taxpayers Service For large taxpayers cases other than
those cases falling under Large
Taxpayers District Office (LTDO)
ACIR, Legal Service For cases pending verification and

awaiting resolution of certain legal
issues prior to prescription and for
issuance/compliance of Subpoena
Duces Tecum
A CIR, Assessment Service (AS) For cases which are pending in or

subject to review or approval by the
ACIR, AS
A CIR, Collection Service For cases pending action in the

Collection Service
b. For cases in the Large Taxpayers District Office (LTDO)73
The Chief of the LTDO shall sign and accept the waiver for cases pending
investigation/action in his possession.
c. For Regional cases74

Revenue District Officer Cases pending investigation/
verification/reinvestigation in the
Revenue District Offices
Regional Director Cases pending in the Divisions in the

Regional Office, including cases
pending approval by the Regional
Director
Group Supervisor75 As designated in the Letter of

Authority/Memorandum of Assignment
Prior to August 2, 2001, pertinent BIR officials who are authorized to sign and accept
the waiver executed by the taxpayer are the following:
72 Revenue Delegation Authority Order (RDAO) No. 05-01 (effectivity date August 2, 2001)
73 Revenue Delegation Authority Order (RDAO) No. 05-01 (effectivity date August 2, 2001)
74 Ibid.
75 Added by Revenue Memorandum Order (RMO) No. 14-16
(Colossians 3:23)
27
ACIRs for Collection, Special For tax cases involving not more than
Operations, National Assessment, P500,000.00
Excise and Legal on tax cases
pending before their respective
offices.
In the absence of the ACIR, the Head For tax cases involving not more than
Executive Assistant may sign the P500,000.00
waiver.
Deputy Commissioner For tax cases involving more than

P500,000.00 but not more than P1M
Commissioner For tax cases involving more than P1M
Revenue District Officer With respect to tax cases still pending

investigation and the period to assess is
about to prescribe regardless of amount
The Regional Director, the Assistant With respect to cases still pending
Regional Director, the Chief, review and the period to assess/collect
Assessment Branch or the Chief, is about to prescribe, regardless of
Legal Branch amount
The Regional Director, the Assistant With respect to cases still pending
Regional Director, the Chief, collection and the period to
Collection Branch or the Chief, Legal assess/collect is about to prescribe
Branch regardless of amount.76
13. What is the effect in case the waiver is signed and accepted by an unauthorized
BIR official?
The waiver is considered as null and void.
In the case of Commissioner of Internal Revenue v. Court of Appeals,77 the Supreme

Court affirmed the ruling of the Court of Tax Appeals (CTA) in declaring the waivers
executed by Carnation was invalid and without any binding effect for the reason that
the same was not signed by the BIR Commissioner or any of his authorized agents.
Furthermore, the Supreme Court also denied the contention of the petitioner in
contending that the BIR gave its implied consent to such waivers and the same is
considered as a unilateral contract.
In the said case, the Court held that neither implied consent can be presumed nor can
it be contended that the waiver required under Sec. 319 of the Tax Code (now Sec.
222(b) of the NIRC, as amended) is one which is unilateral nor can it be said that
concurrence to such an agreement is a mere formality because it is the very signatures
76 Revenue Memorandum Order (RMO) No. 20-90 (effectivity date April 4, 1990)
77 G.R. No. 115712, February 25, 1999
(Colossians 3:23)
28
of both the Commissioner of Internal Revenue and the taxpayer which give birth to
such a valid agreement.
Also, in the case of Philippine Journalist Inc. v. Commissioner of Internal Revenue,78

the Court held that waiver executed by the petitioner-taxpayer is defective from the
government side because it was signed only by a revenue district officer, not the
Commissioner, as mandated by the NIRC and RMO No. 20-90.
The Court also points out that a waiver is not a unilateral act by the taxpayer or the
BIR, but is a bilateral agreement between two parties to extend the period to a date
certain. The conformity of the BIR must be made by either the Commissioner or the
Revenue District Officer. This case involves taxes amounting to more than One Million
Pesos (P1,000,000.00) and executed almost seven months before the expiration of
the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner
of Internal Revenue to sign for the BIR.
14. What is the principle of Estoppel?
Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule
that "an admission or representation is rendered conclusive upon the person making
it, and cannot be denied or disproved as against the person relying thereon." A party
is precluded from denying his own acts, admissions or representations to the prejudice
of the other party in order to prevent fraud and falsehood.79
15. How can the principle of estoppel be applied in the execution of waivers?
As we have often say, the doctrine of estoppel is predicated on, and has its origin in,
equity which, broadly defined, is justice according to natural law and right. As such,
the doctrine of estoppel cannot give validity to an act that is prohibited by law or one
that is against public policy. It should be resorted to solely as a means of preventing
injustice and should not be permitted to defeat the administration of the law, or to
accomplish a wrong or secure an undue advantage, or to extend beyond them
requirements of the transactions in which they originate. Simply put, the doctrine of
estoppel must be sparingly applied.80
In Collector of Internal Revenue v. Suyoc Consolidated Mining Company,81 the

doctrine of estoppel prevented the taxpayer from raising the defense of prescription
against the efforts of the government to collect the assessed tax.
Apparently, the aforementioned doctrine was not applied in the case of Commissioner
of Internal Revenue v. Kudos Metal Corp.82 on the following grounds:
78 G.R. No. 162852, December 16, 2004

79 Rizal Commercial Banking Corp. v. Commissioner of Internal Revenue, G.R. No. 170257, September
7, 2011 citing Tolentino, Arturo M. Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. 4, p. 660.
80 Commissioner of Internal Revenue v. Kudos Metal Corp, GR No. 178087, May 5, 2010 citing La
Naval Drug Corporation v. Court of Appeals, G.R. No. 103200, August 31, 1994, Ouano v. Court of
Appeals, 446 Phil. 690, 708 (2003), and C & S Fishfarm Corporation v. Court of Appeals, 442 Phil. 279,
290 (2002)
81 104 Phil. 819 (1958)
82 GR No. 178087, May 5, 2010
(Colossians 3:23)
29
In CIR v. Suyoc Consolidated Mining In Commissioner of Internal
Company Revenue v. Kudos Metal Corp
Estoppel was applied as an exception to The assessments were issued beyond
the statute of limitations on collection of the prescribed period.
taxes and not on the assessment of
taxes, as the BIR was able to make an
assessment within the prescribed period.
More important, there was a finding that There is no showing that respondent
the taxpayer made several requests or made any request to persuade the BIR
positive acts to convince the government to postpone the issuance of the
to postpone the collection of taxes. assessments.
The Court said that the doctrine of estoppel cannot be applied in this case as an
exception to the statute of limitations on the assessment of taxes considering that there
is a detailed procedure for the proper execution of the waiver, which the BIR must
strictly follow.
Moreover, the BIR cannot hide behind the doctrine of estoppel to cover its failure to
comply with RMO 20-90 and RDAO 05-01, which the BIR itself issued. As stated
earlier, the BIR failed to verify whether a notarized written authority was given by the
respondent to its accountant, and to indicate the date of acceptance and the receipt
by the respondent of the waivers. Having caused the defects in the waivers, the BIR
must bear the consequence. It cannot shift the blame to the taxpayer. To stress, a
waiver of the statute of limitations, being a derogation of the taxpayer's right to security
against prolonged and unscrupulous investigations, must be carefully and strictly
construed.
But the case of Rizal Commercial Banking Corporation v. Commissioner of Internal

Revenue83 gives us a clearer picture on how the doctrine of estoppel works in the
execution of waivers.
In the said case, RCBC assails the validity of the waivers of the statute of limitations
on the ground that the said waivers were merely attested to by Sixto Esquivias, then
Coordinator for the CIR, and that he failed to indicate acceptance or agreement of the
CIR, as required under Section 223 (b) of the 1977 Tax Code. RCBC further argues
that the principle of estoppel cannot be applied against it because its payment of the
other tax assessments does not signify a clear intention on its part to give up its right
to question the validity of the waivers.
The Supreme Court, on the other hand, disagreed with the contention of RCBC.
The high Court ruled that under Article 1431 of the Civil Code, the doctrine of estoppel
is anchored on the rule that "an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon." A party is precluded from denying his own acts, admissions or
representations to the prejudice of the other party in order to prevent fraud and
falsehood.84
83G.R. No. 170257, September 7, 2011

84Citing Tolentino, Arturo M. Commentaries and Jurisprudence on the Civil Code of the Philippines,
Vol. 4, p. 660.
(Colossians 3:23)
30
Estoppel is clearly applicable to the case at bench. RCBC, through its partial payment
of the revised assessments issued within the extended period as provided for in the
questioned waivers, impliedly admitted the validity of those waivers. Had petitioner
truly believed that the waivers were invalid and that the assessments were issued
beyond the prescriptive period, then it should not have paid the reduced amount of
taxes in the revised assessment. RCBC's subsequent action effectively belies its
insistence that the waivers are invalid. The records show that on December 6, 2000,
upon receipt of the revised assessment, RCBC immediately made payment on the
uncontested taxes. Thus, RCBC is estopped from questioning the validity of the
waivers. To hold otherwise and allow a party to gainsay its own act or deny rights which
it had previously recognized would run counter to the principle of equity which this
institution holds dear.
The RCBC case should be distinguished from the case of Commissioner of Internal
Revenue v. Standard Chartered Bank85 wherein the Supreme Court held that although
respondent (Standard Chartered Bank) paid the deficiency WTC and FWT
assessments, it did not waive the defense of prescription as regards the remaining tax
deficiencies, it being on record that respondent continued to raise the issue of
prescription in its Pre-Trial Brief filed on 15 August 2005, Joint Stipulations of Facts
and Issues filed on 1 September 2005, direct testimonies of its witness, and
Memorandum filed on 24 October 2008. Moreover, it is worthy to note that even
petitioner (BIR) did not consider such payment of respondent as a waiver of the
defense of prescription, but merely raised the issue of estoppel in her Motion for
Reconsideration of the aforesaid decision. From the conduct of both parties, there can
be no estoppel in this case.
However, in the case of Commissioner of Internal Revenue v. Next Mobile, Inc.,86 the
high Court ruled that the principle of estoppel is applicable in the case at bar. It should
be noted that in this case the respondent (Next Mobile) executed five Waivers and
delivered them to petitioner, one after the other. It allowed petitioner to rely on them
and did not raise any objection against their validity until petitioner assessed taxes and
penalties against it. Moreover, the application of estoppel is necessary to prevent the
undue injury that the government would suffer because of the cancellation of
petitioner's assessment of respondent's tax liabilities.
16. When is the proper time to invoke/raise the invalidity of the waiver?
As held in the case of Commissioner of Internal Revenue v. Transitions Optical

Philippines, Inc.,87 the invalidity of the Waivers should be invoked at the earliest
opportunity, either in its Protest to the PAN, Protest to the FAN, or Supplemental
Protest to the FAN.
In the said case, the Court ruled that Transitions Optical impliedly recognized the
waivers’ validity and its representatives' authority to execute them since the
Respondent only raised the issue of these Waivers' validity in its Petition for Review
filed with the Court of Tax Appeals.
In fact, as pointed out by Justice Del Rosario, respondent's Protest to the FAN clearly
recognized the validity of the Waivers, when it stated:
85 G.R. No. 192173, July 29, 2015

86 G.R. No. 212825, December 7, 2015
87 G.R. No. 227544, November 22, 2017
(Colossians 3:23)
31
This has reference to the Final Assessment Notice ("[F]AN") issued by
your office, dated November 28, 2008. The said letter was received by
Transitions Optical Philippines[,] Inc. (TOPI) on December 5, 2008,
five days after the waiver we issued which was valid until November
30, 2008 had prescribed.
Moreover, the respondent does not dispute petitioner's (BIR) assertion that respondent
repeatedly failed to comply with petitioner's notices, directing it to submit its books of
accounts and related records for examination by the Bureau of Internal Revenue.
Respondent also ignored the Bureau of Internal Revenue's request for an Informal
Conference to discuss other "discrepancies" found in the partial documents submitted.
The Waivers were necessary to give respondent time to fully comply with the Bureau
of Internal Revenue notices for audit examination and to respond to its Informal
Conference request to discuss the discrepancies. Thus, having benefitted from the
Waivers executed at its instance, respondent is estopped from claiming that they were
invalid and that prescription had set in.
17. Can the taxpayer still invoke the ground of prescription even if he/she/it is
considered as estopped from questioning the validity of the waivers?
Yes. In the case of Commissioner of Internal Revenue v. Transitions Optical

Philippines, Inc.,88 the Court held that even the respondent is estopped from
questioning the validity of the Waivers, the assessment is nonetheless void because it
was served beyond the supposedly extended period.
The First Division of the Court of Tax Appeals found that "the date indicated in the
envelope/mail matter containing the FAN and the FLD is December 4, 2008, which is
considered as the date of their mailing." Since the validity period of the second Waiver
is only until November 30, 2008, prescription had already set in at the time the FAN
and the FLD were actually mailed on December 4, 2008.
18. Explain the doctrine of in pari delicto
In pari delicto or "in equal fault" connotes that the two parties to a controversy are
equally culpable or guilty and they shall have no action against each other.89
The Court has repeatedly pronounced that parties must come to court with clean
hands. Parties who do not come to court with clean hands cannot be allowed to benefit
from their own wrongdoing.90
19. Exception to the doctrine of in pari delicto
Although the parties are in pari delicto, the Court may interfere and grant relief at the
suit of one of them, where public policy requires its intervention, even though the result
may be that a benefit will be derived by one party who is in equal guilt with the other.91
88 G.R. No. 227544, November 22, 2017

89 Commissioner of Internal Revenue v. Next Mobile, Inc., G.R. No. 212825, December 7, 2015
90 Commissioner of Internal Revenue v. Next Mobile, Inc., G.R. No. 212825, December 7, 2015 citing
Osmeña v. Osmeña, G.R. No. 171911, January 26, 2010 & Department of Public Works and Highways
v. Quiwa, G.R. No. 183444, February 8, 2012
91 Commissioner of Internal Revenue v. Next Mobile, Inc., G.R. No. 212825, December 7, 2015 citing
Enrique T. Yuchengco, Inc. v. Velayo, No. L-50439, July 20, 1982
(Colossians 3:23)
32
20. How can the doctrine of in pari delicto be applied in the execution of waivers?
The Supreme Court held in the case of Commissioner of Internal Revenue v. Next
Mobile, Inc.92 that the doctrine of in pari delicto applies in the case at bar involves a
highly suspicious situation.
In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted
on their invalidity by raising the very same defects it caused. It should be noted that
the respondent (Next Mobile) executed five Waivers and delivered them to petitioner,
one after the other. It allowed petitioner (BIR) to rely on them and did not raise any
objection against their validity until petitioner assessed taxes and penalties against it.
The Court has repeatedly pronounced that parties must come to court with clean
hands.93 Parties who do not come to court with clean hands cannot be allowed to
benefit from their own wrongdoing.94 Following the foregoing principle, respondent
should not be allowed to benefit from the flaws in its own Waivers and successfully
insist on their invalidity in order to evade its responsibility to pay taxes.
On the other hand, the BIR miserably failed to exact from respondent compliance with
its rules. The BIR's negligence in the performance of its duties was so gross that it
amounted to malice and bad faith. Moreover, the BIR was so lax such that it seemed
that it consented to the mistakes in the Waivers. Without doubt, the BIR knew that
waivers should conform strictly to RMO 20-90 and RDAO 05-01 in order to be valid. In
fact, the mandatory nature of the requirements, as ruled by this Court, has been
recognized by the BIR itself in its issuances such as Revenue Memorandum Circular
No. 6-2005, among others. Nevertheless, the BIR allowed respondent to submit, and
it duly received, five defective Waivers when it was its duty to exact compliance with
RMO 20-90 and RDAO 05-01 and follow the procedure dictated therein. It even openly
admitted that it did not require respondent to present any notarized authority to sign
the questioned Waivers. The BIR failed to demand respondent to follow the
requirements for the validity of the Waivers when it had the duty to do so, most
especially because it had the highest interest at stake. If it was serious in collecting
taxes, the BIR should have meticulously complied with the foregoing orders, leaving
no stone unturned.
Such a situation is dangerous and open to abuse by unscrupulous taxpayers who

intend to escape their responsibility to pay taxes by mere expedient of hiding behind
technicalities.
It is true that petitioner was also at fault here because it was careless in complying with
the requirements of RMO No. 20-90 and RDAO 05-01. Nevertheless, petitioner's
negligence may be addressed by enforcing the provisions imposing administrative
liabilities upon the officers responsible for these errors. The BIR's right to assess and
collect taxes should not be jeopardized merely because of the mistakes and lapses of
its officers, especially in cases like this where the taxpayer is obviously in bad faith.
As between the parties, it would be more equitable if petitioner's lapses were allowed
to pass and consequently uphold the Waivers in order to support this principle and
public policy.
92 G.R. No. 212825, December 7, 2015

93 Citing Osmeña v. Osmeña, G.R. No. 171911, January 26, 2010
94 Citing Department of Public Works and Highways v. Quiwa, G.R. No. 183444, February 8, 2012
(Colossians 3:23)
33
21. Comparison of the old and new rules in the proper execution of waivers
Due to the rampant practice by the taxpayers to contest the validity of their own waivers
of the statute of limitations after having availed of its benefits, the BIR effectively
revised its procedures with regard to the proper execution of waivers.
The difference between the old and new rules are presented as follows:
RMO No. 20-90 and RDAO 05-01 RMO 14-16

The provisions of the RMO and RDAO The waiver may be, but not necessarily,
explicitly show their mandatory nature, in the form prescribed by RMO No. 20-90
requiring strict compliance. Hence, or RDAO No. 05-01.
failure to comply with any of the
requisites renders a waiver defective The taxpayer's failure to follow the
and ineffectual.95 aforesaid forms does not invalidate the
executed waiver, for as long as the
following are complied with:
a) The Waiver of the Statute of

Limitations under Section 222
(b) and (d) shall be executed
before the expiration of the
period to assess or to collect
taxes. The date of execution
shall be specifically indicated in
the waiver;
b) The waiver shall be signed by

the taxpayer himself or his duly
authorized representative. In the
case of a corporation, the waiver
must be signed by any of its
responsible officials;
c) The expiry date of the period

agreed upon to assess/collect
the tax after the regular three-
year period of prescription
should be indicated.
Waivers of Statute of Limitations should Except for waiver of collection of taxes

specify the kind and amount of the tax which shall indicate the particular taxes
due.96 assessed, the waiver need not specify
the particular taxes to be assessed nor
Logically, there can be no agreement if the amount thereof, and it may simply
the kind and amount of the taxes to be state "all internal revenue taxes"
assessed or collected were not considering that during the assessment
indicated. Hence, specific information in stage, the Commissioner of Internal
the waiver is necessary for its validity.97 Revenue or her duly authorized
95 Commissioner of Internal Revenue v. Standard Chartered Bank, G.R. No. 192173, July 29, 2015
96 Ibid.
97 Commissioner of Internal Revenue v. Systems Technology Institute, Inc., G.R. No. 220835, July 26,
2017
(Colossians 3:23)
34
RMO No. 20-90 and RDAO 05-01 RMO 14-16
representative is still in the process of
examining and determining the tax
liability of the taxpayer.
The authorized revenue official shall The taxpayer is charged with the burden
ensure that the waiver is duly of ensuring that the waivers of statute of
accomplished and signed by the limitation are validly executed by its
taxpayer or his authorized authorized representative.
representative before affixing his
signature to signify acceptance of the
same.
Under RDAO 05-01 it is the duty of the The authority of the taxpayer's
authorized revenue official to ensure that representative who participated in the
the waiver is duly accomplished and conduct of audit or investigation shall not
signed by the taxpayer or his authorized be thereafter contested to invalidate the
representative before affixing his waiver.
signature to signify acceptance of the
same.98
The "WAIVER" should not be accepted The waiver may be notarized.

by the concerned BIR office and official
unless duly notarized.
The waiver is a bilateral agreement, thus Considering that the waiver is a voluntary
necessitating the very signatures of both act of the taxpayer, the waiver shall take
the Commissioner and the taxpayer to legal effect and be binding on the
give birth to a valid agreement. taxpayer upon its execution thereof.
If the waiver did not contain the date of

acceptance by the Commissioner of
Internal Revenue, a requisite necessary
to determine whether the waiver was
validly accepted before the expiration of
the original three-year period.99
The waiver must be executed in three (3) It shall be the duty of the taxpayer to
copies, the original copy to be attached submit its duly executed waiver to the
to the docket of the case, the second Commissioner of Internal Revenue or
copy for the taxpayer and the third copy official/s previously designated in
for the Office accepting the waiver. existing issuances or the concerned
revenue district officer or group
If it is not proven that the taxpayer was supervisor as designated in the Letter of
furnished a copy of the BIR-accepted Authority/Memorandum of Assignment
waiver, the waiver in question is who shall then indicate acceptance by
defective and will not validly extend the signing the same.
original three-year prescriptive period.100
98 Commissioner of Internal Revenue v. Next Mobile, Inc., G.R. No. 212825, December 7, 2015
99 Commissioner of Internal Revenue v. FMF Development Corp., G.R. No. 167765, June 30, 2008
100 Ibid.
(Colossians 3:23)
35
D. Notice of Informal Conference
1. What is a Notice of Informal Conference?
This is considered as a period wherein the Revenue Officer, who audited the
taxpayer’s records, shall present to the taxpayer his/her findings. The taxpayer, on the
other hand, will determine whether or not he is amenable with such findings.
2. Process of conducting Notice for Informal Conference
The Revenue Officer who audited the taxpayer's records shall, among others, state in
his report whether or not the taxpayer agrees with his findings that the taxpayer is liable
for deficiency tax or taxes.
If the taxpayer is not amenable, based on the said Officer's submitted report of
investigation, the taxpayer shall be informed, in writing, by the Revenue District Office
or by the Special Investigation Division, as the case may be (in the case of Revenue
Regional Offices) or by the Chief of Division concerned (in the case of the BIR National
Office) of the discrepancy or discrepancies in the taxpayer's payment of his internal
revenue taxes, for the purpose of "Informal Conference," in order to afford the taxpayer
with an opportunity to present his side of the case.101
3. Duration of the Notice for Informal Conference
The Informal Conference shall in no case extend beyond thirty (30) days from receipt
of the notice for informal conference.102
4. Procedure in case the taxpayer is not amenable to the assessment
If it is found that the taxpayer is still liable for deficiency tax or taxes after presenting
his side, and the taxpayer is not amenable, the Revenue District Officer or the Chief of
the Special Investigation Division of the Revenue Regional Office, or the Chief of
Division in the National Office, as the case may be, shall endorse the case within seven
(7) days from the conclusion of the Informal Conference to the Assessment Division of
the Revenue Regional Office or to the Commissioner or his duly authorized
representative for issuance of a deficiency tax assessment.103
5. Consequences in case of failure, on the part of Revenue Officers, to comply with

the periods
Failure on the part of Revenue Officers to comply with the periods indicated herein
shall be meted with penalty as provided by existing laws, rules and regulations.104
101 Sec. 2 of Revenue Regulations (RR) No. 07-18

102 Ibid.
103 Ibid.
104 Ibid.
(Colossians 3:23)
36
E. Issuance of Preliminary Assessment Notice (PAN)
1. What is a Preliminary Assessment Notice (PAN)?
If after review and evaluation by the Commissioner or his duly authorized

representative, as the case may be, it is determined that there exists sufficient basis to
assess the taxpayer for any deficiency tax or taxes, the said Office shall issue to the
taxpayer a Preliminary Assessment Notice (PAN) for the proposed assessment.105
The PAN is a communication issued by the Regional Assessment Division, or any other
concerned BIR Office, informing a Taxpayer who has been audited of the findings of
the Revenue Officer, following the review of these findings.
The taxpayer should not be wary in case he received a PAN from the BIR. The taxpayer
should instead prepare a protest letter contesting the BIR’s findings and submit all
relevant documents in order to support his contention.
2. What is the content of the PAN?
It shall show in detail the facts and the law, rules and regulations, or jurisprudence on
which the proposed assessment is based. This is consonant with the provision of the
Tax Code which states that the taxpayer shall be informed in writing of the law and the
facts on which the assessment is made.106
3. Is the taxpayer required to be notified of his deficiency tax liabilities through a

PAN?
Yes. Indeed, Section 228 of the Tax Code clearly requires that the taxpayer must first
be informed that he is liable for deficiency taxes through the sending of a PAN
(Preliminary Assessment Notice). He must be informed of the facts and the law upon
which the assessment is made. The law imposes a substantive, not merely a formal,
requirement. To proceed heedlessly with tax collection without first establishing a valid
assessment is evidently violative of the cardinal principle in administrative
investigations — that taxpayers should be able to present their case and adduce
supporting evidence.107
4. What is the consequence if the BIR fails to issue a PAN and subsequently issues
a Final Assessment Notice (FAN) instead?
The absence of a PAN is fatal to the validity of an assessment.108 It is clear that the
sending of a PAN to taxpayer to inform him of the assessment made is but part of the
due process requirement in the issuance of a deficiency tax assessment, the absence
of which renders nugatory any assessment made by the tax authorities.109
105 Sec. 3.1.1 of Revenue Regulations (RR) No. 12-99, as amended

106 Sec. 228 of the National Internal Revenue Code (NIRC), as amended
107 Commissioner of Internal Revenue vs. Metro Star Superama, Inc., G.R. No. 185371, December 8,
2010
108 Direct Container Line Phils., Inc. v. CIR, CTA Case No. 7616, August 4, 2014.
2010
(Colossians 3:23)
37
5. What are the instances where the PAN is not required?
Pursuant to Section 228 of the Tax Code, as amended, a PAN shall not be required in
any of the following cases:
a. When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax appearing on the face of the tax return filed by the taxpayer;
or
b. When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
c. When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities
for the taxable quarter or quarters of the succeeding taxable year; or
d. When the excise tax due on excisable articles has not been paid; or
e. When an article locally purchased or imported by an exempt person, such as, but
not limited to, vehicles, capital equipment, machineries and spare parts, has been
sold, traded or transferred to non-exempt persons.
In the above-cited cases, a Formal Letter of Demand (FLD)/ Final Assessment Notice
(FAN) shall be issued outright.110
6. Who has the authority to sign and issue the PAN?
The following persons have the authority to sign and issue the PAN:
a. Commissioner of Internal Revenue (CIR);
b. Revenue Regional Directors;
c. Assistant Commissioner-Large Taxpayers Service; or
d. Assistant Commissioner-Enforcement and Advocacy Service.111
7. What is the consequence in case the person who signs the PAN has no authority
to sign the same?
Similar to the rules on e-LOA, in the absence of such an authority, the assessment or
examination is a nullity.112
8. To whom should the taxpayer submit his response to the PAN?

111 Revenue Memorandum Circular (RMC) No. 11-14
(Colossians 3:23)
38
Taxpayers shall submit/file their responses to the PAN with the duly authorized
representative of the Commissioner who signed the PAN.113
9. Is the taxpayer allowed to make voluntary payments prior to the issuance of

PAN?
Yes. Prior to the issuance of the PAN, the taxpayer may be allowed to make voluntary
payments of probable deficiency taxes and penalties.114
10. Where should the PAN be served?
The notice (PAN/FLD/FAN/FDDA) shall first be served to the taxpayer's registered

address before the same may be served to the taxpayer's known address, or in the
alternative, may be served to the taxpayer's registered address and known address
simultaneously.115
11. Who has the authority to receive the PAN?
The taxpayer or his duly authorized representatives.
12. What is the effect in case the taxpayer fails to respond to the PAN?
If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN,
he shall be considered in default, in which case, a Formal Letter of Demand and Final
Assessment Notice (FLD/FAN) shall be issued calling for payment of the taxpayer's
deficiency tax liability, inclusive of the applicable penalties.
If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that
he/it disagrees with the findings of deficiency tax or taxes, an FLD/FAN shall be issued
within fifteen (15) days from filing/submission of the taxpayer's response, calling for
payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.116
From the foregoing, it can be deduced that a FAN will still be issued whether or not the
taxpayer protest the findings of the BIR. In fact, the BIR has issued an order which
states that the protest against Preliminary Assessment Notice (PAN) is optional/not
mandatory.117 But it will benefit the taxpayer if he opts to respond to the PAN so that
the amount that will be reflected per FAN will be at reduced amounts and will only reflect
contested issues.
13. Can the taxpayer pay the deficiency tax reflected per PAN?
Yes, the taxpayer may opt to pay the deficiency tax reflected per PAN if he agrees with
the findings of the BIR. In this case, a FLD/FAN shall be issued to formalize the
assessment, and Payment Form 0605 shall be duly prepared, filed and paid to
acknowledge and provide evidence for the settlement of the assessment or portion of
the assessment paid.118 However, the taxpayer should ensure to get an Authority to

114 Ibid.
118 Ibid.
(Colossians 3:23)
39
Cancel Assessment (ATCA) from the BIR to evidence the cancellation of the
assessment.119
14. How can the taxpayer determine if there is a denial of the response to the PAN?
If there is a Formal Letter of Demand (FLD)/ and Final Assessment Notice (FAN) issued
reiterating the immediate payment of deficiency taxes and penalties previously made in
the PAN is a denial of the response to the PAN.120
119 Ibid.
(Colossians 3:23)
40
F. Issuance of Final Assessment Notice (FAN)
1. What is a Final Assessment Notice (FAN)?
The Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued
by the Commissioner or his duly authorized representative to the taxpayer after 15 days
following the receipt of the PAN.
2. What is the content of the FAN?
The FLD/FAN calling for payment of the taxpayer's deficiency tax or taxes shall state
the facts, the law, rules and regulations, or jurisprudence on which the assessment is
based; otherwise, the assessment shall be void.121
The use of the word "shall" in Section 228 of the NIRC and in RR No. 12-99 indicates
that the requirement of informing the taxpayer of the legal and factual bases of the
assessment and the decision made against him is mandatory. The requirement of
providing the taxpayer with written notice of the factual and legal bases applies both to
the FLD/FAN and the FDDA.122
3. What is the effect in case the BIR issued the FAN/FLD in advance or before the
issuance of the PAN?
It is an elementary rule enshrined in the 1987 Constitution that no person shall be

deprived shall be deprived of property without due process of law. In balancing the
scales between the power of the State to tax and its inherent right to prosecute
perceived transgressors of the law on one side, and the constitutional rights of a citizen
to due process of law and the equal protection of laws on the other, the scales must tilt
in favor of the individual, for a citizen’s right is amply protected by the Bill of Rights
under the Constitution. Thus while taxes are the lifeblood of the government, the power
to tax has its limits, in spite of all its plenitude.123
In the case of Dionisia D. Pacquiao v. Milabao,124 it can be inferred that the BIR had no
intention of giving the taxpayer to be heard on her arguments against the PAN, if any.
Clearly, respondent failed to observe due process when BIR issued the FLD/FAN even
before petitioner supposedly receive the PAN. It is worthy to note that the FLD/FAN
was issued 2 days before the issuance of PAN.
In this case, the CTA upheld the supremacy of the taxpayer’s constitutional right to due
process and declared the assessment void and nugatory.
4. What is the effect in case the FAN was issued prior to the lapse of the 15 day
period to respond to the PAN?
The assessment is still void. It is well settled that the right of the taxpayer to respond to
the PAN is an important part of the due process requirement in the issuance of a

122 Commissioner of Internal Revenue v. Liquigaz Philippines Corp., G.R. Nos. 215534 & 215557, April
18, 2016
2010
124 CTA Case No. 9039, May 30, 2017
(Colossians 3:23)
41
125
deficiency tax assessment. Hence, the BIR should respect the 15-day period to
respond to the PAN before it issues the FAN.
5. What is the effect in case the FAN was received after the 3-year prescription
period?
The assessment is void because it was served beyond the supposedly extended period.
In the case of Commissioner of Internal Revenue v. Transitions Optical Philippines,

Inc.,126 the Supreme Court held that the First Division of the Court of Tax Appeals found
that "the date indicated in the envelope/mail matter containing the FAN and the FLD is
December 4, 2008, which is considered as the date of their mailing."
Since the validity period of the second Waiver is only until November 30, 2008,
prescription had already set in at the time the FAN and the FLD were actually mailed
on December 4, 2008.
For lack of adequate supporting evidence, the Court of Tax Appeals rejected petitioner's
claim that the FAN and the FLD were already delivered to the post office for mailing on
November 28, 2008 but were actually processed by the post office on December 2,
2008, since December 1, 2008 was declared a Special Holiday. The testimony of
petitioner's witness, Dario A. Consignado, Jr., that he brought the mail matter containing
the FAN and the FLD to the post office on November 28, 2008 was considered self-
serving, uncorroborated by any other evidence. Additionally, the Certification presented
by petitioner certifying that the FAN issued to respondent was delivered to its
Administrative Division for mailing on November 28, 2008 was found insufficient to
prove that the actual date of mailing was November 28, 2008.
The Supreme Court finds no clear and convincing reason to overturn these factual
findings of the Court of Tax Appeals.
6. Who has the authority to sign the FAN?
The following persons have the authority to sign and issue the FAN:
a. Commissioner of Internal Revenue (CIR);
b. Revenue Regional Directors;
c. Assistant Commissioner-Large Taxpayers Service; or
d. Assistant Commissioner-Enforcement and Advocacy Service.127
7. What is the consequence in case the person who signs the PAN has no authority
to sign the same?
125 CIR v. Hermano (San) Miguel Febres Cordero Medical Education Foundation, Inc., CTA EB No.
1151, February 17, 2015
126 G.R. No. 227544, November 22, 2017
(Colossians 3:23)
42
Similar to the rules on e-LOA and PAN, in the absence of such an authority, the
assessment or examination is a nullity.128
8. Effect in case the taxpayer denies the receipt of FAN
If the taxpayer denies having received an assessment from the BIR, it then becomes
incumbent upon the latter to prove by competent evidence that such notice was indeed
received by the addressee. Here, the onus probandi has shifted to the BIR to show by
contrary evidence that the taxpayer indeed received the assessment in the due course
of mail.
It has been settled that while a mailed letter is deemed received by the addressee in
the course of mail, this is merely a disputable presumption subject to controversion, the
direct denial of which shifts the burden to the sender to prove that the mailed letter was,
in fact, received by the addressee.
The BIR's failure to prove the taxpayer's receipt of the assessment leads to no other
conclusion but that no assessment was issued.129
9. Best proof in order to prove that the FAN was received by the taxpayer
To prove the fact of mailing, it is essential to present the registry receipt issued by the
Bureau of Posts or the Registry return card which would have been signed by the
taxpayer or its authorized representative. And if said documents could not be located,
the CIR should have, at the very least, submitted to the Court a certification issued by
the Bureau of Posts and any other pertinent document executed with its intervention.
The Court does not put much credence to the self-serving documentations made by the
BIR personnel, especially if they are unsupported by substantial evidence establishing
the fact of mailing.
While it is true that an assessment is made when the notice is sent within the prescribed
period, the release, mailing, or sending of the same must still be clearly and
satisfactorily proved. Mere notations made without the taxpayer's intervention, notice
or control, and without adequate supporting evidence cannot suffice. Otherwise, the
defenseless taxpayer would be unreasonably placed at the mercy of the revenue
offices.130
10. What is the remedy of the taxpayer in case he receives a FAN from the BIR?
The taxpayer or its authorized representative or tax agent may protest administratively
against the aforesaid FLD/FAN within thirty (30) days from date of receipt thereof.131
Also, if the taxpayer agrees with the issues that were raised by the BIR in the FAN, he
has the option to pay the noted deficiency taxes and the penalties related thereto.
11. What is the effect in case the taxpayer fails to respond to the FAN within 30 days
after receipt of the same?
128 Commissioner of Internal Revenue v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010
129 Commissioner of Internal Revenue v. GJM Philippines Manufacturing, Inc., G.R. No. 202695,
February 29, 2016
130 Ibid.
(Colossians 3:23)
43
If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days
from date of receipt thereof, the assessment shall become final, executory and
demandable. No request for reconsideration or reinvestigation shall be granted on tax
assessments that have already become final, executory and demandable.132
12. Can the FLD/FAN be issued beyond the fifteen (15) days from the
filing/submission of the taxpayer’s response to the PAN?
Yes. An FDL/FAN issued beyond fifteen (15) days from filing/submission of the
taxpayer's response to the PAN shall be valid, provided that, it is issued within the
period of limitation to assess internal revenue taxes. The non-observance of the fifteen
(15)-day period, however, shall constitute an administrative infraction and the revenue
officers who caused the delay shall be subject to administrative sanctions as provided
for by law and pertinent revenue issuances.133
13. In case the taxpayer opts to protest the FAN issued by the BIR, what should be
the contents of the protest letter?
Taxpayer shall state in his protest the following details:
a. The nature of protest whether reconsideration or reinvestigation, specifying newly

discovered or additional evidence he intends to present if it is a request for
reinvestigation;
b. Date of the assessment notice; and
c. The applicable law, rules and regulations, or jurisprudence on which his protest is
based.134
14. What is the effect in case the taxpayer fails to state the foregoing in its protest
letter?
The taxpayer’s protest shall be considered void and without force and effect.135
15. Can the taxpayer do a partial protest?
Yes. If there are several issues involved in the FLD/FAN but the taxpayer only disputes
or protests against the validity of some of the issues raised, the assessment attributable
to the undisputed issue or issues shall become final, executory and demandable; and
the taxpayer shall be required to pay the deficiency tax or taxes attributable thereto, in
which case, a collection letter shall be issued to the taxpayer calling for payment of the
said deficiency tax or taxes, inclusive of the applicable surcharge and/or interest.136
16. Differentiate a written request for reconsideration from request for

reinvestigation.
Request for reconsideration Request for reinvestigation

As to Definition:
132 Ibid.
135 Ibid.
136 Ibid.
(Colossians 3:23)
44
Request for reconsideration Request for reinvestigation
Refers to a plea of re-evaluation of an Refers to a plea of re-evaluation of an
assessment on the basis of existing assessment on the basis of newly
records without need of additional discovered or additional evidence that a
evidence. It may involve both a question taxpayer intends to present in the
of fact or of law or both. reinvestigation. It may also involve a
question of fact or of law or both.137
As to the suspension of the 3 year prescription period:

Shall not suspend the prescriptive period Shall suspend the prescriptive period to
to collect. collect.138
As to evidence:
Limited to the evidence already at hand. Entails the reception and evaluation of
Hence, submission of additional additional evidence.139 Failure to submit
documents is not required. supporting documents within 60 days
from the filing of the protest letter will
make the assessment final and
executory.
As to the approval of the Commissioner:

Can be availed so long as the request is BIR Commissioner must first grant the
duly indicated in the protest letter. request for reinvestigation.140
It is advisable to protest under reconsideration if the issue/s involved are purely legal
and industry specific, hence, cannot be solved by mere submission of supporting
documents. As you know there are many grey areas in tax which are currently
unresolved as of this date. For these instances, it is proper leave those matters to the
Court. Also, one of the advantages of this request is that it will not stop the running of
the 3-year prescriptive period to assess. The rationale of the suspension is that a
reinvestigation, which entails the reception and evaluation of additional evidence, will
take more time than a reconsideration of a tax assessment, which will be limited to the
evidence already at hand; this justifies why the former can suspend the running of the
statute of limitations on collection of the assessed tax, while the latter cannot.141 In the
case of BPI v. CIR,142 the Supreme Court held that the assessment for the taxable year
1985 has already prescribed due to the fact that the request for reconsideration was
filed by the taxpayer on June 23, 1989 while the decision of the BIR was issued only on
August 4, 1998, which is way beyond the 3-year prescription to assess.
Request for reinvestigation, on the other hand, should be pleaded in case the BIR
conducts and issue an assessment notice based on the table audit that they have
conducted and the taxpayer has reasonable grounds to refute such findings by
presenting additional supporting documents. Table audit means that the examiner shall
only compare the figures per taxpayer’s books/audited financial statements (AFS)
versus per tax returns filed and assess the taxpayer for the difference that will be noted.

138 Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 139736, October 17,
2005
139 Ibid.
140 Ibid.
141 Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 181836, July 9, 2014
142 Ibid.
(Colossians 3:23)
45
This is very unfair to the taxpayer because the assessment in this case is based on
mere presumptions. Ideally, the BIR should first gather the required facts by going to
the taxpayer’s premises and conduct interviews/inspect supporting documents which
can corroborate with the facts that were gathered. However, due to lack of
personnel/manpower, the BIR usually conducts their audit this way. As a result, majority
of assessments are bloated and devoid of merit.
The BIR will always argue the presumption of regularity on their side. Note that tax
assessments by tax examiners are presumed correct and made in good faith. The
taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities
in the performance of duties, an assessment duly made by a Bureau of Internal
Revenue examiner and approved by his superior officers will not be disturbed. All
presumptions are in favor of the correctness of tax assessments.143
Hence, taxpayers should always be diligent in checking the veracity of the tax
assessment/s since majority of the issues are not based on facts, but on mere
presumptions.
17. Procedures in availing request for reconsideration.144
1st Step:
Indicate the taxpayer’s intention to avail the same in the protest letter. Also, it is required
on the part of the taxpayer to indicate in the date of the assessment, facts, law, rules
and regulations, or jurisprudence on which his protest is based.
2nd Step:
File the protest letter with the BIR within thirty (30) days from the receipt of the FAN.
3rd Step:
In case the protest is denied, in whole or in part, by the Commissioner's duly authorized
representative, the taxpayer may either:
(i) Appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of
receipt of the said decision; or
(ii) Elevate his protest through request for reconsideration to the Commissioner
within thirty (30) days from date of receipt of the said decision.
OR
If the protest is not acted upon by the Commissioner's duly authorized representative
within one hundred eighty (180) days counted from the date of filing of the protest in
case of a request reconsideration, the taxpayer may either:
(i) Appeal to the CTA within thirty (30) days after the expiration of the one hundred
eighty (180)-day period; or
(ii) Await the final decision of the Commissioner's duly authorized representative
on the disputed assessment.
143 Commissioner of Internal Revenue v. Traders Royal Bank, G.R. No. 167134, March 18, 2015 & Sy
Po v. Court of Tax Appeals, 247 Phil. 487 (1988)
(Colossians 3:23)
46
However, the taxpayer should bear in mind that the above-mentioned options are
mutually exclusive and resort to one bars the application of the other.145
From the foregoing, it can be deduced that the assessment may be appealed further to
the Commissioner of Internal Revenue (CIR) in case there is a partial or whole denial
of the assessment made by the Commissioner’s duly authorized representative. Note
that the taxpayer is given an opportunity under the law to elevate the case with the
Commissioner. Hence, the taxpayer should study the cost and benefit of appealing the
contested assessment with the CIR versus the amount that will be incurred in case the
same is elevated to the judicial level. Thereafter, the taxpayer should choose the option
that is more favourable to him.
4th Step (in case the protest is elevated to the Commissioner):
If the protest or administrative appeal, as the case may be, is denied, in whole or in
part, by the Commissioner, the taxpayer may:
(i) Appeal to the CTA within thirty (30) days from date of receipt of the said
decision; or
(ii) File a motion for reconsideration to the Commissioner. However, the filing of the
motion shall not toll the thirty (30)-day period to appeal to the CTA.
OR
If the protest or administrative appeal is not acted upon by the Commissioner within
one hundred eighty (180) days counted from the date of filing of the protest, the
taxpayer may either:
(i) Appeal to the CTA within thirty (30) days from after the expiration of the one
hundred eighty (180)-day period; or
(ii) Await the final decision of the Commissioner on the disputed assessment and
appeal such final decision to the CTA within thirty (30) days after the receipt of
a copy of such decision.
Note: FDDA is not equivalent to a FAN to have the effect of superseding the latter. An
FDDA is a decision of the Commissioner of Internal Revenue on a disputed assessment
and clearly differs from the assessment itself.147
All decisions on protest to the FAN, whether the taxpayer's protest is accepted or denied
partially or wholly, shall be communicated to the taxpayer through the issuance of a
Final Decision on a Disputed Assessment (FDDA).148
145 Lascona Land Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. 171251, March 5, 2012
146 Ibid.
147 CIR v. Liquigaz Philippines Corporation; Liquigaz Philippines Corporation v. CIR, G.R. Nos. 215534
and 215557, April 18, 2016

148 Revenue Memorandum Order No. 26-16
(Colossians 3:23)
47
However, the requirement for the Commissioner to rule on disputed assessments
before bringing an action for collection is applicable only in cases where the
assessment was actually disputed, adducing reasons in support thereto.149
18. Procedures in availing request for reinvestigation.150
1st Step:
Indicate the taxpayer’s intention to avail the same in the protest letter. Also, it is required
on the part of the taxpayer to indicate in the date of the assessment, facts, law, rules
and regulations, or jurisprudence on which his protest is based.
2nd Step:
File the protest letter with the BIR within thirty (30) days from the receipt of the FAN.
3rd Step:
The taxpayer shall submit all relevant supporting documents in support of his protest
within sixty (60) days from date of filing of his letter of protest, otherwise, the
assessment shall become final.
The term "the assessment shall become final" means that the failure of the taxpayer
who requested for a reinvestigation to submit all relevant supporting documents within
the sixty (60)-day period shall render the FLD/FAN "final" by operation of law. He/it shall
be barred from disputing the correctness of the FLD/FAN by the introduction of newly
discovered or additional evidence because he/it is deemed to have lost his/its chance
to present these evidence. The BIR shall then deny the request for reinvestigation
through the issuance of an FDDA.151
The term "relevant supporting documents," on the other hand, refers to those
documents necessary to support the legal and factual bases in disputing a tax
assessment as determined by the taxpayer. Rationale: The BIR cannot demand what
type of supporting documents should be submitted. Otherwise, a taxpayer will be at the
mercy of the BIR, which may require the production of documents that a taxpayer
cannot submit.152
4th Step:
In case the protest is denied, in whole or in part, by the Commissioner's duly authorized
representative, the taxpayer may either:
(i) Appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of
receipt of the said decision; or
(ii) Elevate his protest through request for reconsideration to the Commissioner
within thirty (30) days from date of receipt of the said decision.
OR
149 Dayrit v. Cruz, G.R. No. L-39910, September 26, 1988

152 Commissioner of Internal Revenue v. First Express Pawnshop Company, Inc., G.R. Nos. 172045-
46, June 16, 2009
(Colossians 3:23)
48
case of a request reconsideration, the taxpayer may either:
(i) Appeal to the CTA within thirty (30) days after the expiration of the one hundred
eighty (180)-day period; or
(ii) Await the final decision of the Commissioner's duly authorized representative
on the disputed assessment.
mutually exclusive and resort to one bars the application of the other.
From the foregoing, it can be deduced that the assessment may be appealed further to
the Commissioner of Internal Revenue (CIR) in case there is a partial or whole denial
of the assessment made by the Commissioner’s duly authorized representative. Note
that the taxpayer is given an opportunity under the law to elevate the case with the
Commissioner. Hence, the taxpayer should study the cost and benefit of appealing the
contested assessment with the CIR versus the amount that will be incurred in case the
same is elevated to the judicial level. Thereafter, the taxpayer should choose the option
that is more favourable to him.
5th Step (in case the protest is elevated to the Commissioner):
part, by the Commissioner, the taxpayer may:
(i) Appeal to the CTA within thirty (30) days from date of receipt of the said
decision; or
(ii) File a motion for reconsideration to the Commissioner. However, the filing of
the motion shall not toll the thirty (30)-day period to appeal to the CTA.
OR
taxpayer may either:
(i) Appeal to the CTA within thirty (30) days from after the expiration of the one
hundred eighty (180)-day period; or
(ii) Await the final decision of the Commissioner on the disputed assessment and
appeal such final decision to the CTA within thirty (30) days after the receipt of
a copy of such decision.
19. Submission of documents (request for reinvestigation vis-à-vis request for

reconsideration)
153 Lascona Land Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. 171251, March 5, 2012
(Colossians 3:23)
49
In request for reinvestigation, the taxpayer is required to submit supporting documents
within 60 days after the filing of the protest letter with the BIR. Otherwise, the
assessment will become final and executory.
In request for reconsideration, the taxpayer is not required to submit supporting

documents and the only available remedy is to:
a. Wait for the final decision of the BIR representative,
b. Appeal to the Commissioner of Internal Revenue (CIR), or
c. Appeal to the Court of Tax Appeals within the prescribed period/s.
20. Presumption of availment of request for reconsideration.
An order issued by the BIR states that all protest shall be considered a request for
reconsideration, unless said protest clearly indicates that the request is for
reinvestigation.154
However, this is contrary to the requirement that protest should state whether the
taxpayer is availing request for reconsideration or reinvestigation. Note that failure to
expressly state the same will make the taxpayer’s protest void and without force and
effect.155 Therefore, in my opinion there is no presumption regarding the availment of
request for reconsideration because this is contrary to the prevailing revenue regulation.
Hence, it is much safer for the taxpayer to expressly indicate in the protest whether or
not he is availing request for reconsideration or reinvestigation to prevent possible
disputes in the future.
21. To whom should the taxpayer file his letters of protest, requests for
reinvestigation/reconsideration and similar correspondences?
All letters of protest, requests for reinvestigation/reconsideration and similar

correspondences shall only be filed by the taxpayers or their duly authorized
representatives, in person or through registered mail with return card, with the following
persons who signed the Preliminary Assessment Notices (PANs), FANs and Formal
Letters of Demand:
a. Office of the concerned Regional Director (RD);
b. Office of the Assistant Commissioner-Large Taxpayers Service (ACIR-LTS); or
c. Assistant Commissioner-Enforcement Service (ACIR-ES)156
22. What is the consequence if the protest, requests for

reinvestigation/reconsideration and similar correspondences were mistakenly
filed at the wrong office?

(Colossians 3:23)
50
This is detrimental to the taxpayer because if the aforesaid procedures are not followed,
then the letters of protest, requests for reinvestigation/reconsideration and similar
correspondences shall be considered void and without force and effect.157
23. Is the request for reconsideration available with regard to protest to PAN or
FDDA?
No. A request for Reinvestigation shall be available in a protest to a FAN/FLD only.

After the issuance of a FDDA, a request for Reinvestigation shall no longer be available
as a taxpayer remedy.158
24. What are the indicators in determining the finality of the decision of the
Commissioner?
The following are indicators which determines the finality of the decision of the
Commissioner:
a. Receipt of “Final Decision on Disputed Assessment” (FDDA)
This is the final decision issued by the Commissioner or his duly authorized
representative with regard to protested assessment. All decisions on protest to the
FAN, whether the taxpayer's protest is accepted or denied partially or wholly, shall
be communicated to the taxpayer through the issuance of a Final Decision on a
Disputed Assessment (FDDA).159
b. Receipt of “Final Notice Before Seizure”
“Final Notice Before Seizure” should be considered as a denial of request for

reconsideration of the disputed assessment. The Notice should be deemed as the
taxpayer's last act, since failure to comply with it would lead to the distraint and levy
of the taxpayer's properties. Not only was the Notice the only response received; its
content and tenor supported the theory that it was the CIR's final act regarding the
request for reconsideration. The very title expressly indicated that it was a final
notice prior to seizure of property. The letter itself clearly stated that respondent was
being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be
subjected to distraint and levy.160
c. Receipt of “final demand letter for payment of delinquent taxes”
A letter reiterating the demand of the BIR for the settlement of the assessment
already made and for the immediate payment of a certain sum in spite of the
vehement protest of the taxpayer is tantamount to a denial of the reconsideration or
protest of the assessment. This certainly is a clear indication of the firm stand of the
commissioner against the reconsideration of the disputed assessment, in view of
the continued refusal of the taxpayer to execute the waiver of the period of limitation
upon the assessment in question. This being so, the said letter amounted to a
decision on a disputed or protested assessment.161 So long as the parties are given
157 Ibid.
159 Ibid.
160 Commissioner of Internal Revenue vs. Isabela Cultural Corp., G.R. No. 135210, July 11, 2001
161 Commissioner of Internal Revenue vs. Ayala Securities Corp., et al., G.R. No. L-29485, March 31,
1976
(Colossians 3:23)
51
the opportunity to explain their side, the requirements of due process are
satisfactorily complied with.162
d. The tenor of commissioner's letter
A letter of demand from the commissioner demanding not only the payment of a
certain amount but also giving a warning that in the event the taxpayer fails to pay
he would be constrained to enforce the collection thereof by means of legal
remedies, unquestionable constitutes the final action taken by the commissioner on
the taxpayer's several requests for reconsideration and recomputation. The tenor
of the letter, specifically the statement regarding the resort to legal remedies,
unmistakably indicated the final nature of the determination made by the
commissioner of the taxpayer's deficiency franchise tax liability."163
25. After the issuance of the FDDA, can the taxpayer accept and settle the
assessment contained therein, whether partially or fully?
Yes. After the issuance of the FDDA, the taxpayer may accept and settle the
assessment contained therein, partially or fully. Payment Form 0605 shall be prepared,
filed and paid for the assessment accepted and settled by the taxpayer.164
26. What is the taxpayer’s recourse if he disagrees with the FDDA issued by the
Commissioner’s duly authorized representative?
If the FDDA were issued by the Commissioner's duly authorized representative, the
taxpayer shall within thirty (30) days from receipt of the FDDA file a motion for
reconsideration with the Commissioner of Internal Revenue or appeal to the Court of
Tax Appeals. In appealing the protest to the Court of Tax Appeals, the taxpayer shall
manifest and state that the appeal pertains only to the portion of the FDDA not settled
and paid and attached to their appeal a copy of the duly filed and paid Payment Form
0605.165
27. Is the appeal to the Commissioner or Court of Tax Appeals, regarding the FDDA,
precludes the taxpayer from voluntarily settling the assessment?
No. Appeal to the Commissioner or to the Court of Tax Appeals of the FDDA, shall not
preclude the taxpayer from voluntarily settling the assessment, partially or fully.
Payment Form 0605 shall be duly prepared, filed and paid and the taxpayer shall
manifest before the Court of Tax Appeals the fact of settlement of the assessment,
partially or fully, present the duly filed and paid Payment Form 0605, and file a motion
for dismissal with prejudice as to the assessment or portions thereof that has been
settled and paid on the ground that the appealed disputed assessment has become
moot and academic.166
28. Grounds which can make the assessment final, executory, and demandable.
An assessment shall become final, executory and demandable due to, among others,
the following grounds:

163 Surigao Electric Co., Inc. vs. Court of Tax Appeals, et al., G.R. No. L-25289, June 28, 1974
165 Ibid.
166 Ibid.
(Colossians 3:23)
52
a. Failure of the taxpayer to file a valid protest within thirty (30) days from receipt of
the Formal Letter of Demand and Final Assessment Notice (FLD/FAN);
b. Failure of the taxpayer to submit all relevant documents in support of his protest by
way of request for reinvestigation within sixty (60) days from the date of filing
thereof;
Note: The term "relevant supporting documents" should be understood as those

documents necessary to support the legal basis in disputing a tax assessment as
determined by the taxpayer.
The BIR can only inform the taxpayer to submit additional documents. The BIR
cannot demand what type of supporting documents should be submitted.
Otherwise, a taxpayer will be at the mercy of the BIR, which may require the
production of documents that a taxpayer cannot submit.167
c. Failure of the taxpayer to appeal to the Commissioner of Internal Revenue or the

Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the FDDA
issued by the Commissioner's duly authorized representative;
d. Failure of the taxpayer to appeal to the CTA within thirty (30) days from date of
receipt of the FDDA issued by the Commissioner;
e. Failure of the taxpayer to timely file a motion for reconsideration or new trial before
the CTA Division or failure to appeal to the CTA En Banc and Supreme Court based
on existing Rules of Procedure; or
f. Failure of the taxpayer to receive any assessment notices because it was served in
the address indicated in the BIR's registration database and the taxpayer
transferred to a new address or closed/ceased operations without updating and
transferring its BIR registration or cancelling its BIR registration as the case may
be, through the accomplishment and filing of BIR Form No. 1905 — Application for
Registration Information Update, as prescribed by pertinent issuance and/or
amendments thereto.168
29. Are the provisions provided for under Revenue Regulations (RR) No. 18-13
extendible?
No. All the periods provided for under RR No. 18-2013 is mandatory and non-
extendible.169
167 CIR v. First Express Pawnshop Co., Inc., G.R. Nos. 172045-46, June 16, 2009
169 Ibid
(Colossians 3:23)
53
G. Modes of Serving the PAN/FLD/FAN/FDDA
1. Modes of serving the PAN/FLD/FAN/FDDA to the taxpayer.
a. Personal Service;
b. Substituted Service;
c. Service by Mail; or
d. Service to the tax agent/practitioner who is appointed by the taxpayer.
2. How “Personal Service” should be done.
The notice shall be served through personal service by delivering personally a copy
thereof to the party at his registered or known address or wherever he may be found.170
3. Meaning of “Known Address”?
A known address shall mean a place other than the registered address where business
activities of the party are conducted or his place of residence.171
4. In case personal service is not practicable, how should the PAN be served to the
taxpayer?
In case personal service is not practicable, the notice shall be served by substituted
service or by mail.172
5. Procedures to be taken by the BIR examiner for cases involving substituted

service
Substituted service can be resorted to when the party is not present at the registered
or known address under the following circumstances:
The notice may be left at the party's registered address, with his clerk or with a person
having charge thereof.
If the known address is a place where business activities of the party are conducted,
the notice may be left with his clerk or with a person having charge thereof.
If the known address is the place of residence, substituted service can be made by
leaving the copy with a person of legal age residing therein.
If no person is found in the party's registered or known address, the revenue officers
concerned shall bring a barangay official and two (2) disinterested witnesses to the
address so that they may personally observe and attest to such absence. The notice
shall then be given to said barangay official. Such facts shall be contained in the bottom
portion of the notice, as well as the names, official position and signatures of the
witnesses.
170 Sec. 2 of Revenue Regulations (RR) No. 18-13, as amended

171 Ibid.
172 Ibid.
(Colossians 3:23)
54
Should the party be found at his registered or known address or any other place but
refuse to receive the notice, the revenue officers concerned shall bring a barangay
official and two (2) disinterested witnesses in the presence of the party so that they may
personally observe and attest to such act of refusal. The notice shall then be given to
said barangay official. Such facts shall be contained in the bottom portion of the notice,
as well as the names, official position and signatures of the witnesses.
"Disinterested witnesses" refers to persons of legal age other than employees of the
Bureau of Internal Revenue.173
6. Will revenue officers, other than the revenue officer who constructively served
the PAN/FLD/FAN/FDDA, fall within the purview of “Disinterested witnesses”?
No. "Disinterested witnesses" refers to persons of legal age other than employees of
the Bureau of Internal Revenue.174 Note that the new regulation prevents the collusion
between revenue examiners in relation to the serving of the PAN/FLD/FAN/FDDA.
Back then, revenue examiners, other than the examiner who serves the same, may
testify with regard to constructive receipt. However, it can be deduced that such
attestation constitutes a self-serving evidence because the examiners may collude and
simulate the constructive service of the PAN/FLD/FAN/FDDA.
7. Is the attestation of the barangay official in the constructive service of

PAN/FLD/FAN/FDDA a dispensable requirement?
No, in fact the attestation of the barangay official is an indispensable requirement when
the BIR opted to use substituted service. By the use of the conjunctive "and" will exclude
the efficacy of any one of the alternatives standing alone.175
Therefore, it can be deduced that substituted service should be witnessed by the

following parties:
a. Barangay Official; and
b. Two (2) Disinterested Witnesses.
8. Essential documentary evidence which can prove that the PAN/FLD/FAN/FDDA

was duly received by the taxpayer.
What is essential to prove the fact of mailing is the registry receipt issued by the Bureau
of Posts or the Registry return card which would have been signed by the Petitioner or
its authorized representative. And if said documents cannot be located, Respondent at
the very least, should have submitted to the Court a certification issued by the Bureau
of Posts and any other pertinent document which is executed with the intervention of
the Bureau of Posts.176
173 Sec. 3.1.6(ii) of Revenue Regulations (RR) No. 12-99, as amended

174 Ibid.
175 China Banking Corporation v. Members of the HDMF Board of Trustees, G.R. No. 131787, May 19,
1999
176 Fabtech Export Industries, Inc. v. CIR, CTA Case No. 8435, April 30, 2014.
(Colossians 3:23)
55
9. Consequence if the taxpayer denies ever having received an assessment from

the BIR
Jurisprudence is replete with cases holding that if the taxpayer denies ever having
received an assessment from the BIR, it is incumbent upon the latter to prove by
competent evidence that such notice was indeed received by the addressee. The onus
probandi was shifted to respondent to prove by contrary evidence that the Petitioner
received the assessment in the due course of mail.
The Supreme Court has consistently held that while a mailed letter is deemed received
by the addressee in the course of mail, this is merely a disputable presumption subject
to controversion and a direct denial thereof shifts the burden to the party favored by the
presumption to prove that the mailed letter was indeed received by the addressee.177
10. Can the BIR send the PAN/FLD/FAN/FDDA via mail?
Yes. Service by mail is done by sending a copy of the notice by registered mail to the
registered or known address of the party with instruction to the Postmaster to return the
mail to the sender after ten (10) days, if undelivered. A copy of the notice may also be
sent through reputable professional courier service. If no registry or reputable
professional courier service is available in the locality of the addressee, service may be
done by ordinary mail.
The server shall accomplish the bottom portion of the notice. He shall also make a
written report under oath before a Notary Public or any person authorized to administer
oath under Section 14 of the NIRC, as amended, setting forth the manner, place and
date of service, the name of the person/barangay official/professional courier service
company who received the same and such other relevant information.
The registry receipt issued by the post office or the official receipt issued by the
professional courier company containing sufficiently identifiable details of the
transaction shall constitute sufficient proof of mailing and shall be attached to the case
docket.178
11. Can the BIR send the PAN/FLD/FAN/FDDA to the duly authorized tax
agent/practitioner of the taxpayer?
Yes. Service to the tax agent/practitioner, who is appointed by the taxpayer under
circumstances prescribed in the pertinent regulations on accreditation of tax agents,
shall be deemed service to the taxpayer.179
177 Republic vs. Court of Appeals, 149 SCRA 351

178 Sec. 3.1.6(iii) of Revenue Regulations (RR) No. 12-99, as amended
179 Ibid.
(Colossians 3:23)
56
H. The Court of Tax Appeals (CTA)
1. What is the Court of Tax Appeals?
The explanatory note of House Bill No. 175, that became Republic Act No. 1125, which
created the Court of Tax Appeals, contains the following manifestation:
"Cognizant of the necessity of having an agency which will review tax cases and at the
same time expedite the collection of taxes which is badly needed by our government,
the undersigned proposes the organization by legislation of the Court of Tax
Appeals."180
2. CTA’s organizational structure
The organizational set-up of the CTA is made up of the Office of the Presiding Justice,
Offices of the Associate Justices, Office of the Clerks of Court, the Legal and Technical
Services Office, and the Office of Administrative and Finance Services.
The Presiding Justice is the Head of the Court. He has the same salary grade and
enjoys the same privileges as that of the Presiding Justice of the Court of Appeals. He
exercises managerial and administrative supervision over all the heads of offices and
oversees the Court's operations.
Assisting the Presiding Justice in his adjudicative and administrative functions are eight
(8) Associate Justices, who have the same salary grade and enjoy the same privileges
as those of the Associate Justices of the Court of Appeals.181
3. CTA’s jurisdiction
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue;
Notes:
As regards private entities and the BIR, the power to decide disputed
penalties in relation thereto, or other matters arising under the NIRC or other
laws administered by the BIR is vested in the CIR subject to the exclusive
appellate jurisdiction of the CTA, in accordance with Section 4 of the NIRC.182
Based on Section 7 (a) (1) and Section 7 (a) (2) of Republic Act No. 1125,
the following must be present for the Court of Tax Appeals to have jurisdiction
over a case involving the BIR's decisions or inactions:
a) A case involving any of the following:
180 Acting Collector of Customs v. Court of Tax Appeals, G.R. No. L-8811, October 31, 1957
181 http://cta.judiciary.gov.ph/org_struc
182 Power Sector Asset and Liabilities Management Corp. v. CIR, G.R. No. 198146, August 8, 2017
(Colossians 3:23)
57
i. Disputed assessments;
ii. Refunds of internal revenue taxes, fees, or other charges, penalties in

relation thereto; and
iii. Other matters arising under the National Internal Revenue Code of
1997.
b) Commissioner of Internal Revenue's decision or inaction in a case

submitted to him or her.183
From the foregoing, it can be deduced that the jurisdiction of the CTA is clear
and outright. The real problem lies on what scenarios and/or instances are
within the purview of “other matters arising under the NIRC.”
Nevertheless, the Supreme Court has held that the following scenarios fall
within the purview of “other matters arising under the NIRC”:
1) The issue on whether the revenue officers who had conducted the
examination exceeded their authority pursuant to LOA.184
The CIR may authorize the examination of any taxpayer and

correspondingly make an assessment whenever necessary. Thus, to
give more teeth to such power of the CIR, to make an assessment, the
NIRC authorizes the CIR to examine any book, paper, record, or data of
any person. The powers granted by law to the CIR are intended, among
other things, to determine the liability of any person for any national
internal revenue tax.
It is pursuant to such pertinent provisions of the NIRC conferring the

powers to the CIR that the petitioner (CIR) had, in this case, authorized
its revenue officers to conduct an examination of the books of account
and accounting records of Lancaster, and eventually issue a deficiency
assessment against it.
From the foregoing, the authority to make an examination or assessment,

being a matter provided for by the NIRC, is well within the exclusive and
appellate jurisdiction of the CTA.
2) The issue whether or not the BIR's right to collect taxes had already
prescribed.185
In the case at bar, the issue at hand is whether or not the BIR's right to
collect taxes had already prescribed and that is a subject matter falling
under Section 223 (c) of the 1986 NIRC, the law applicable at the time
the disputed assessment was made.
In connection therewith, Section 3 of the 1986 NIRC states that the

collection of taxes is one of the duties of the BIR.
184 CIR v. Lancaster Philippines, Inc., G.R. No. 183408, July 12, 2017
185 CIR v. Hambrecht & Quist Philippines, Inc., G.R. No. 169225, November 17, 2010
(Colossians 3:23)
58
Thus, from the foregoing, the issue of prescription of the BIR's right to
collect taxes may be considered as covered by the term "other matters"
over which the CTA has appellate jurisdiction.
3) Appeals from the Secretary Finance under Sec. 4 of the NIRC.186
Even though the provision suggests that it only covers rulings of the
Commissioner, the Supreme Court held that it is, nonetheless, sufficient
enough to include appeals from the Secretary's review under Sec. 4 of
the NIRC.
To leave undetermined the mode of appeal from the Secretary of Finance

would be an injustice to taxpayers prejudiced by his adverse rulings. To
remedy this situation, the Court imply from the purpose of RA 1125 and
its amendatory laws that the CTA is the proper forum with which to
institute the appeal.
4) To determine whether or not the warrant of distraint and levy issued by

the BIR is valid.187
The appellate jurisdiction of the CTA is not limited to cases which involve
decisions of the Commissioner of Internal Revenue on matters relating
to assessments or refunds. The second part of the provision covers other
cases that arise out of the NIRC or related laws administered by the
Bureau of Internal Revenue. The wording of the provision is clear and
simple. It gives the CTA the jurisdiction to determine if the warrant of
distraint and levy issued by the BIR is valid and to rule if the Waiver of
Statute of Limitations was validly effected.
5) Petitions for the annulment of distraint orders by the Collector of Internal

Revenue.188
The power of the Court of Tax Appeals to act on petitions for the
annulment of distraint orders by the Collector of Internal Revenue has
been recognized by the Supreme Court in the cases of Collector of
Internal Revenue v. Zulueta, 53 Off. Gaz. 6532 and Blaquera v.
Rodriguez, 54 Off. Gaz. 8632.
6) To rule if the Waiver of Statute of Limitations was validly effected.189
In Commissioner of Internal Revenue v. Court of Appeals,190 the decision

of the CTA declaring several waivers executed by the taxpayer as null
and void, thus invalidating the assessments issued by the BIR, was
upheld by the Supreme Court.191
186 Philippine American Life and General Insurance Co. v. Secretary of Finance, G.R. No. 210987,
November 24, 2014
188 Pantoja v. David, G.R. No. L-10765, February 28, 1961
190 G.R. No. 115712, 25 February 1999
(Colossians 3:23)
59
7) Actions directly challenging the constitutionality or validity of a tax law or
regulation or administrative issuance.192
With respect to administrative issuances (revenue orders, revenue

memorandum circulars, or rulings), these are issued by the
Commissioner under its power to make rulings or opinions in connection
with the implementation of the provisions of internal revenue laws. Tax
rulings, on the other hand, are official positions of the Bureau on inquiries
of taxpayers who request clarification on certain provisions of the
National Internal Revenue Code, other tax laws, or their implementing
regulations.
Hence, the determination of the validity of these issuances clearly falls

within the exclusive appellate jurisdiction of the Court of Tax Appeals
under Section 7 (1) of Republic Act No. 1125, as amended, subject to
prior review by the Secretary of Finance, as required under Republic Act
No. 8424.
Therefore, the Supreme Court reverted to the earlier rulings in

Rodriguez,193 Leal,194 and Asia International Auctioneers, Inc.195 and
abrogated its former view, in the case of Asia International Auctioneers,
British American Tobacco v. Camacho,196 wherein it held that the CTA
has no jurisdiction where the constitutionality of a law or rule is
challenged.
Also, it can be concluded that the case of CIR v. Court of Tax Appeals197
is no longer applicable since it is settled in the case of Banco de Oro v.
Republic198 that the CTA has jurisdiction over actions directly challenging
the validity of a tax law or regulation or administrative issuance. It should
be noted that in the case of CIR v. Court of Tax Appeals, the Court held
that the CTA has no jurisdiction to determine the validity of a ruling issued
by the CIR or the COC in the exercise of their quasi-legislative powers to
interpret tax laws.
8) The question of whether or not to impose a deficiency tax assessment.199
The question of whether or not to impose a deficiency tax assessment

undoubtedly comes within the purview of the words "disputed
assessments" or of "other matters arising under the National Internal
Revenue Code.
9) When the claim for refund of tax is barred by statute/has already

prescribed.200
192 Banco De Oro v. Republic, G.R. No. 198756, August 16, 2016
193 G.R. No. L-13941, September 30, 1960
194 440 Phil. 477 (2002)
195 565 Phil. 255 (2007)
196 584 Phil. 489 (2008)
197 G.R. No. 207843, July 15, 2015
198 G.R. No. 198756, August 16, 2016
199 CIR v. Leal, G.R. No. 113459, November 18, 2002 citing Meralco Securities Corporation v.
Savellano, 117 SCRA 804, 809–810 (1982)

200 Hoa Hin Co., Inc. v. David, G.R. Nos. L-9616 & L-11783, May 25, 1959
(Colossians 3:23)
60
In addition to the foregoing, the CTA is also capable in issuing writs of

prohibition and injunction in aid of its appellate jurisdiction.
But the said writs are merely ancillary to and in furtherance of its appellate
jurisdiction in the cases mentioned in section 7 of the Act.201
However, the CTA has no jurisdiction when:
The disputing parties are all public entities (covers disputes between the BIR
and other government entities) since the case shall be governed by PD
242.202
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

penalties in relations thereto, or other matters arising under the National
Internal Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a specific period
of action, in which case the inaction shall be deemed a denial;
Notes:
Based on Section 7 (a) (1) and Section 7 (a) (2) of Republic Act No. 1125,
the following must be present for the Court of Tax Appeals to have jurisdiction
over a case involving the BIR's decisions or inactions:
a) A case involving any of the following:
i. Disputed assessments;
ii. Refunds of internal revenue taxes, fees, or other charges, penalties in

relation thereto; and
iii. Other matters arising under the National Internal Revenue Code of
1997.
b) Commissioner of Internal Revenue's decision or inaction in a case

submitted to him or her.203
Republic Act No. 1125 also vests the Court of Tax Appeals with jurisdiction
over the BIR's inaction on a taxpayer's refund claim, there may be instances
when the Court of Tax Appeals has to take cognizance of cases that have
nothing to do with the BIR's assessments or decisions. When the BIR fails to
act on a claim for refund of voluntarily but mistakenly paid taxes, for example,
there is no decision or assessment involved.204
201 Collector of Internal Revenue v. Yuseco, G.R. No. L-12518, October 28, 1961
202 Power Sector Asset and Liabilities Management Corp. v. CIR, G.R. No. 198146, August 8, 2017
204 Ibid.
(Colossians 3:23)
61
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or
appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for

customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties in relation thereto, or other
matters arising under the Customs Law or other laws administered by the
Bureau of Customs;
Note: The question of seizure and forfeiture is for the Collector of Customs
to determine in the first instance and then the Commissioner of Customs.
This is a field where the doctrine of primary jurisdiction controls. Thereafter
an appeal may be taken to the Court of Tax Appeals.205
Also, the Court of Tax Appeals has appellate jurisdiction only for those issues
involving disputed assessments or payment of duties and charges subject of
detention or seizure proceedings in the Bureau of Customs.206
5. Decisions of the Central Board of Assessment Appeals in the exercise of its

appellate jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of assessment
appeals;
Note: Special and exclusive appellate jurisdiction over all cases where a real
estate assessment if the disputed is unjust, erroneous and improper, illegal
or void, or excessive or unreasonable, after recourse to the corresponding
board of assessment appeals has failed, and even though the disputed real
estate tax has been paid.207
6. Decisions of the Secretary of Finance on customs cases elevated to him

automatically for review from decisions of the Commissioner of Customs which
are adverse to the Government under Section 2315 of the Tariff and Customs
Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural

product, commodity or article, and the Secretary of Agriculture in the case of
agricultural product, commodity or article, involving dumping and countervailing
duties under Section 301 and 302, respectively, of the Tariff and Customs
Code, and safeguard measures under Republic Act No. 8800, where either
party may appeal the decision to impose or not to impose said duties.
b. Jurisdiction over cases involving criminal offenses as herein provided:
1. Exclusive original jurisdiction over all criminal offenses arising from violations
of the National Internal Revenue Code or Tariff and Customs Code and other
laws administered by the Bureau of Internal Revenue or the Bureau of
205Republic v. Court of First Instance of Manila, G.R. No. 43747, September 2, 1992
206Acting Collector of Customs v. Court of Tax Appeals, G.R. No. L-8811, October 31, 1957
207 Treasurer-Assessor v. University of the Philippines, G.R. No. L-20550, April 30, 1971 citing
Gonzales, et al. v. Province of Iloilo, G.R. No. L-24663, March 31, 1971
(Colossians 3:23)
62
Customs: Provided, however, That offenses or felonies mentioned in this
paragraph where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is less than One million pesos (P1,000,000.00) or where
there is no specified amount claimed shall be tried by the regular Courts and
the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules
of Court to the contrary notwithstanding, the criminal action and the
corresponding civil action for the recovery of civil liability for taxes and penalties
shall at all times be simultaneously instituted with, and jointly determined in the
same proceeding by the CTA, the filing of the criminal action being deemed to
necessarily carry with it the filing of the civil action, and no right to reserve the
filling of such civil action separately from the criminal action will be recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders of the Regional

Trial Courts in tax cases originally decided by them, in their respected
territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the

Regional Trial Courts in the exercise of their appellate jurisdiction over tax
cases originally decided by the Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
1. Exclusive original jurisdiction in tax collection cases involving final and

executory assessments for taxes, fees, charges and penalties:
Provided, however, That collection cases where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is less than
One million pesos (P1,000,000.00) shall be tried by the proper
Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:
a. Over appeals from the judgments, resolutions or orders of the

Regional Trial Courts in tax collection cases originally decided by
them, in their respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of

the Regional Trial Courts in the Exercise of their appellate
jurisdiction over tax collection cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts, in their respective jurisdiction.208
4. Other cases wherein the CTA has jurisdiction
a. Exclusive appellate jurisdiction to review by appeal over:
Decisions of the Commissioner of Customs in cases involving liability for
1) Customs duties, fees or other money charges;
208 Sec. 7 of Republic Act (R.A.) No. 1125, as amended
(Colossians 3:23)
63
2) Seizure, detention or release of property affected;
3) Fines forfeitures or other penalties imposed in relation thereto; or
4) Other matters arising under the Customs Law or other law or part of the law
administered by the Bureau of Customs.
5. Instances where the CTA has no jurisdiction
a. Disputes regarding collection of port charges by the Philippine Ports Authority.209
Note: There is no law or statute which expressly vests jurisdiction upon the Court
of Tax Appeals to review appeals from decisions or rulings of the Philippine Ports
Authority . . . The jurisdiction of a court to take cognizance of a case, we behave,
should be clearly conferred and should not be deemed to exist on mere implication,
specially with respect to the Court of Tax Appeals which is a specialized court of
limited jurisdiction. (Victorias Milling Co., Inc. v. Court of Tax Appeals, G.R. No.
66381, February 29, 1984)
b. The Court of Tax Appeals has no power to make an assessment at the first
instance.210
Note: On matters such as tax collection, tax refund, and others related to the
national internal revenue taxes, the Court of Tax Appeals' jurisdiction is appellate
in nature.
The BIR first has to make an assessment of the taxpayer's liabilities. When the BIR
makes the assessment, the taxpayer is allowed to dispute that assessment before
the BIR. If the BIR issues a decision that is unfavorable to the taxpayer or if the
BIR fails to act on a dispute brought by the taxpayer, the BIR's decision or inaction
may be brought on appeal to the Court of Tax Appeals. The Court of Tax Appeals
then acquires jurisdiction over the case.
When the BIR's unfavorable decision is brought on appeal to the Court of Tax
Appeals, the Court of Tax Appeals reviews the correctness of the BIR's
assessment and decision. In reviewing the BIR's assessment and decision, the
Court of Tax Appeals had to make its own determination of the taxpayer's tax
liabilities. The Court of Tax Appeals may not make such determination before the
BIR makes its assessment and before a dispute involving such assessment is
brought to the Court of Tax Appeals on appeal.
c. Original jurisdiction to issue writs of prohibition and injunction independently.211
Note: These statements made during the proceedings indicate that the intention
of Congress was to vest the Court of Tax Appeals with jurisdiction to issue writs of
prohibition and injunction only in aid of its appellate jurisdiction in cases appealed
to it and not to clothe it with original jurisdiction to issue them. Such intent is
reflected on the second paragraph of section 11, Republic Act No. 1125 quoted
above.
209 Philippine Ports Authority v. Fuentes, G.R. No. 91259, April 16, 1991
211 Collector of Internal Revenue v. Yuseco, G.R. No. L-12518, October 28, 1961
(Colossians 3:23)
64
d. Jurisdiction in seizure and forfeiture cases vested in the Collector of Customs.212
Note: The question of seizure and forfeiture is for the Collector of Customs to
determine in the first instance and then the Commissioner of Customs. This is a
field where the doctrine of primary jurisdiction controls. Thereafter an appeal may
be taken to the Court of Tax Appeals. A court of first instance is thus devoid of
competence to act on the matter.
e. Where the case does not involve disputed assessments or payment of duties and
charges subject of detention or seizure proceedings in the Bureau of Customs.213
In order that the "other matters arising under the Customs Law or other law or part
of law administered by the Bureau of Customs" may come within the jurisdiction of
the Court of Tax Appeals, they should involve also liability for payment of money
to the Government (see Ollada vs. Court of Tax Appeals et al., (99 Phil., 604),
penned by Mr. Justice Felix Bautista Angelo, squarely interpreting the provisions
of the aforequoted Section 7-(2) of Rep. Act No. 1125).
f. Where the disputing parties are all public entities (covers disputes between the BIR
and other government entities), the case shall be governed by PD 242.214
Note: It should be noted that the 1997 NIRC is a general law governing the
imposition of national internal revenue taxes, fees, and charges. On the other hand,
PD 242 is a special law that applies only to disputes involving solely government
offices, agencies, or instrumentalities.
Thus, even if the 1997 NIRC, a general statute, is a later act, PD 242, which is a
special law, will still prevail and is treated as an exception to the terms of the 1997
NIRC with regard solely to intragovernmental disputes.
g. Refund of certain real estate tax assessed and collected by the City treasurer.215
Note: It does not involve the refund of an internal revenue tax or of a matter that
arises under the National Internal Revenue Code. Since the law only allows the
refund of an internal revenue tax, or any other matter arising under the National
Internal Revenue Code in order that it may come under the appellate jurisdiction
of the Court of Tax Appeals, the Court have necessarily to exclude from its
jurisdiction the refund of customs duties or real estate taxes that come under the
Customs Law or Assessment Law under the principle of exclusio unius est exclusio
alterius.
Appeal should be made to the City Board of Assessment Appeals as provided for
in Republic Act 1125.
h. When the Commissioner has not issued an assessment of the tax liability of the
taxpayer.216
212 Republic v. Court of First Instance of Manila, G.R. No. 43747, September 2, 1992
213 Acting Collector of Customs v. Court of Tax Appeals, G.R. No. L-8811, October 31, 1957
214 Power Sector Assets and Liabilities Management Corp. v. CIR, G.R. No. 198146, August 8, 2017
215 City of Cabanatuan v. Gatmaitan, G.R. No. L-19129, February 28, 1963
216 Adamson v. Court of Appeals, G.R. Nos. 120935 & 124557, May 21, 2009
(Colossians 3:23)
65
Note: Various laws have expanded the jurisdiction of the CTA. However, they did
not change the jurisdiction of the CTA to entertain an appeal only from a final
decision or assessment of the Commissioner, or in cases where the Commissioner
has not acted within the period prescribed by the NIRC. In the cases at bar, the
Commissioner has not issued an assessment of the tax liability of private
respondents.
In the context in which it is used in the NIRC, an assessment is a written notice and
demand made by the BIR on the taxpayer for the settlement of a due tax liability
that is there definitely set and fixed. A written communication containing a
computation by a revenue officer of the tax liability of a taxpayer and giving him an
opportunity to contest or disprove the BIR examiner's findings is not an assessment
since it is yet indefinite.
Hence, the Court held that the recommendation letter of the Commissioner cannot
be considered a formal assessment.
Even a cursory perusal of the said letter would reveal three key points:
1. It was not addressed to the taxpayers.
2. There was no demand made on the taxpayers to pay the tax liability, nor a
period for payment set therein.
3. The letter was never mailed or sent to the taxpayers by the Commissioner.
In fine, the said recommendation letter served merely as the prima facie basis for
filing criminal informations that the taxpayers had violated Section 45 (a) and (d),
and 110, in relation to Section 100, as penalized under Section 255, and for
violation of Section 253, in relation to Section 252 9 (b) and (d) of the Tax Code.
6. Neither certiorari nor mandamus, it will be recalled, is available where relief by

appeal is provided
Furthermore, conceding that the complaints were strictly mandamus or certiorari civil
actions, still they were groundless, the petitioners having an adequate remedy by
appeal, as stated, to the Court of Tax Appeals. Neither certiorari nor mandamus, it will
be recalled, is available where relief by appeal is provided. Therefore, the complaints
having no merit, issuance of the preliminary mandatory injunctions was clearly
erroneous, and the challenged writs should be annulled.
Consequently, the respondent judge had no authority to entertain the complaints of

Serree Investments, Lim Hu and Fructuoso Nepomuceno, which, although entitled
Mandamus and Certiorari were in reality petitions to review the actuations of the proper
customs authorities, now exclusively reviewable by the Court of Tax Appeals (R. A.
1125).217
7. Effect in case the CTA does not have jurisdiction over the case
Section 2, Rule 50 of the Rules of Court expressly states: "An appeal erroneously taken
shall not be transferred to the appropriate court but shall be dismissed outright."218
217 Milarez v. Amparo, G.R. No. L-8351, L-8364, & L-8365, June 30, 1955
218 Alcantara v. Republic, G.R. No. 192536, March 15, 2017
(Colossians 3:23)
66
(Colossians 3:23)
67
219
Revenue Regulations (RR) No. 12-99, as amended
SUBJECT: Implementing the Provisions of the National Internal Revenue Code of 1997
Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties
and Interest and the Extra-judicial Settlement of a Taxpayer's Criminal Violation of the
Code Through Payment of a Suggested Compromise Penalty
TO : All Internal Revenue Officers and Others Concerned
SECTION 1. Scope.
Pursuant to the provisions of Section 244 , in relation to Section 245 of the National Internal
Revenue Code of 1997, these Regulations are hereby promulgated to implement the
provisions of Sections 6 , 7 , 204 , 228 , 247 , 248 and 249 on assessment of national internal
revenue taxes, fees and charges and to provide the rules governing the extra-judicial
settlement of a taxpayer's criminal violation of the said Code or any of its implementing
Regulations through payment of a suggested compromise penalty.
SECTION 2. General Principles.
2.1 The surcharge and/or interest herein prescribed shall apply to all taxes, fees and
charges imposed under the Code which shall be collected at the same time, in the
same manner, and as part of the tax.
2.2 In case the tax due from the taxpayer is paid on a partial or installment basis, the
interest on the deficiency tax or on the delinquency tax liability of the taxpayer shall be
imposed from due date of the tax until full payment thereof. The interest shall be
computed based on the diminishing balance of the tax, inclusive of interests.
SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax

Assessment.220
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
2) Notice of Informal Conference.221 – The Revenue Officer who audited the

taxpayer’s records shall, among others, state in his report whether or not the
taxpayer agrees with his findings that the taxpayer is liable for deficiency tax or
taxes. If the taxpayer is not amenable, based on the said Officer’s submitted
report of investigation, the taxpayer shall be informed, in writing, by the Revenue
District Office or by the Special Investigation Division, as the case may be (in the
case of Revenue Regional Offices) or by the Chief of Division concerned (in the
case of the BIR National Office) of the discrepancy or discrepancies in the
taxpayer’s payment of his internal revenue taxes, for the purpose of “Informal
Conference,” in order to afford the taxpayer with an opportunity to present his
side of the case.
The Informal Conference shall in no case extend beyond thirty (30) days from receipt
of the notice for informal conference. If it is found that the taxpayer is still liable for
deficiency tax or taxes after presenting his side, and the taxpayer is not amenable, the
Revenue District Officer or the Chief of the Special Investigation Division of the
219 Amended by Revenue Regulations (RR) No. 18-13

220 Ibid.
221 Revived by Revenue Regulation (RR) No. 07-18
(Colossians 3:23)
68
Revenue Regional Office, or the Chief of the Division in the National Office, as the
case may be, shall endorse the case within seven (7) days from the conclusion of the
Informal Conference to the Assessment Division of the Revenue Regional Office or
the Commissioner or his duly authorized representative for the issuance of a deficiency
tax assessment.
Failure on the part of Revenue Officers to comply with the periods indicated herein
shall be meted with penalty as provided by existing laws, rules and regulations.
3.1.2 Preliminary Assessment Notice (PAN). — If after review and evaluation by the
Commissioner or his duly authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the taxpayer for any deficiency
tax or taxes, the said Office shall issue to the taxpayer a Preliminary Assessment
Notice (PAN) for the proposed assessment. It shall show in detail the facts and the
law, rules and regulations, or jurisprudence on which the proposed assessment is
based (see illustration in ANNEX "A" hereof).
If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN,
he shall be considered in default, in which case, a Formal Letter of Demand and Final
Assessment Notice (FLD/FAN) shall be issued calling for payment of the taxpayer's
deficiency tax liability, inclusive of the applicable penalties.
If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that
he/it disagrees with the findings of deficiency tax or taxes, an FLD/FAN shall be issued
within fifteen (15) days from filing/submission of the taxpayer's response, calling for
payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties.
3.1.3 Exceptions to Prior Notice of the Assessment. — Pursuant to Section 228 of the Tax
Code, as amended, a PAN shall not be required in any of the following cases:
(i) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax appearing on the face of the tax return filed by the
taxpayer; or
(ii) When a discrepancy has been determined between the tax withheld and the
amount actually remitted by the withholding agent; or
(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the succeeding taxable year; or
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person, such as,
but not limited to, vehicles, capital equipment, machineries and spare parts,
has been sold, traded or transferred to non-exempt persons.
In the above-cited cases, a FLD/FAN shall be issued outright.
3.1.4 Formal Letter of Demand and Final Assessment Notice (FLD/FAN). — The Formal
Letter of Demand and Final Assessment Notice (FLD/FAN) shall be issued by the
Commissioner or his duly authorized representative. The FLD/FAN calling for payment
of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and
regulations, or jurisprudence on which the assessment is based; otherwise, the
assessment shall be void (see illustration in ANNEX "B" hereof).
(Colossians 3:23)
69
3.1.5 Disputed Assessment. — The taxpayer or its authorized representative or tax agent
may protest administratively against the aforesaid FLD/FAN within thirty (30) days from
date of receipt thereof. The taxpayer protesting an assessment may file a written
request for reconsideration or reinvestigation defined as follows:
(i) Request for reconsideration — refers to a plea of re-evaluation of an assessment

on the basis of existing records without need of additional evidence. It may involve
both a question of fact or of law or both.
(ii) Request for reinvestigation — refers to a plea of re-evaluation of an assessment
on the basis of newly discovered or additional evidence that a taxpayer intends to
present in the reinvestigation. It may also involve a question of fact or of law or
both.
The taxpayer shall state in his protest (i) the nature of protest whether reconsideration
or reinvestigation, specifying newly discovered or additional evidence he intends to
present if it is a request for reinvestigation, (ii) date of the assessment notice, and (iii)
the applicable law, rules and regulations, or jurisprudence on which his protest is
based, otherwise, his protest shall be considered void and without force and effect.
If there are several issues involved in the FLD/FAN but the taxpayer only disputes or
protests against the validity of some of the issues raised, the assessment attributable
to the undisputed issue or issues shall become final, executory and demandable; and
the taxpayer shall be required to pay the deficiency tax or taxes attributable thereto, in
which case, a collection letter shall be issued to the taxpayer calling for payment of the
said deficiency tax or taxes, inclusive of the applicable surcharge and/or interest.
If there are several issues involved in the disputed assessment and the taxpayer fails
to state the facts, the applicable law, rules and regulations, or jurisprudence in support
of his protest against some of the several issues on which the assessment is based,
the same shall be considered undisputed issue or issues, in which case, the
assessment attributable thereto shall become final, executory and demandable; and
the taxpayer shall be required to pay the deficiency tax or taxes attributable thereto
and a collection letter shall be issued to the taxpayer calling for payment of the said
deficiency tax, inclusive of the applicable surcharge and/or interest.
For requests for reinvestigation, the taxpayer shall submit all relevant supporting
documents in support of his protest within sixty (60) days from date of filing of his letter
of protest, otherwise, the assessment shall become final. The term "relevant
supporting documents" refer to those documents necessary to support the legal and
factual bases in disputing a tax assessment as determined by the taxpayer. The sixty
(60)-day period for the submission of all relevant supporting documents shall not apply
to requests for reconsideration. Furthermore, the term "the assessment shall become
final" shall mean the taxpayer is barred from disputing the correctness of the issued
assessment by introduction of newly discovered or additional evidence, and the FDDA
shall consequently be denied.
If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days
from date of receipt thereof, the assessment shall become final, executory and
demandable. No request for reconsideration or reinvestigation shall be granted on tax
assessments that have already become final, executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner's duly authorized

representative, the taxpayer may either: (i) appeal to the Court of Tax Appeals (CTA)
(Colossians 3:23)
70
within thirty (30) days from date of receipt of the said decision; or (ii) elevate his protest
through request for reconsideration to the Commissioner within thirty (30) days from
date of receipt of the said decision. No request for reinvestigation shall be allowed in
administrative appeal and only issues raised in the decision of the Commissioner's
duly authorized representative shall be entertained by the Commissioner.
case of a request reconsideration; or from date of submission by the taxpayer of the
required documents within sixty (60) days from the date of filing of the protest in case
of a request for reinvestigation, the taxpayer may either: (i) appeal to the CTA within
thirty (30) days after the expiration of the one hundred eighty (180)-day period; or (ii)
await the final decision of the Commissioner's duly authorized representative on the
disputed assessment.
part, by the Commissioner, the taxpayer may appeal to the CTA within thirty (30) days
from date of receipt of the said decision. Otherwise, the assessment shall become
final, executory and demandable. A motion for reconsideration of the Commissioner's
denial of the protest or administrative appeal, as the case may be, shall not toll the
thirty (30)-day period to appeal to the CTA.
taxpayer may either: (i) appeal to the CTA within thirty (30) days from after the
expiration of the one hundred eighty (180)-day period; or (ii) await the final decision of
the Commissioner on the disputed assessment and appeal such final decision to the
CTA within thirty (30) days after the receipt of a copy of such decision.
It must be emphasized, however, that in case of inaction on protested assessment

within the 180-day period, the option of the taxpayer to either: (1) file a petition for
review with the CTA within 30 days after the expiration of the 180-day period; or (2)
await the final decision of the Commissioner or his duly authorized representative on
the disputed assessment and appeal such final decision to the CTA within 30 days
after the receipt of a copy of such decision, are mutually exclusive and the resort to
one bars the application of the other.
3.1.6 Final Decision on a Disputed Assessment (FDDA). — The decision of the

Commissioner or his duly authorized representative shall state the (i) facts, the
applicable law, rules and regulations, or jurisprudence on which such decision is
based, otherwise, the decision shall be void (see illustration in ANNEX "C" hereof),
and (ii) that the same is his final decision.
3.1.7 Modes of Service. — The notice (PAN/FLD/FAN/FDDA) to the taxpayer herein

required may be served by the Commissioner or his duly authorized representative
through the following modes:
(i) The notice shall be served through personal service by delivering personally a copy
thereof to the party at his registered or known address or wherever he may be
found. A known address shall mean a place other than the registered address
where business activities of the party are conducted or his place of residence.
(Colossians 3:23)
71
In case personal service is not practicable, the notice shall be served by substituted
service or by mail.
(ii) Substituted service can be resorted to when the party is not present at the
registered or known address under the following circumstances:
The notice may be left at the party's registered address, with his clerk or with a
person having charge thereof.
If the known address is a place where business activities of the party are
conducted, the notice may be left with his clerk or with a person having charge
thereof.
If the known address is the place of residence, substituted service can be made by
leaving the copy with a person of legal age residing therein.
If no person is found in the party's registered or known address, the revenue

officers concerned shall bring a barangay official and two (2) disinterested
witnesses to the address so that they may personally observe and attest to such
absence. The notice shall then be given to said barangay official. Such facts shall
be contained in the bottom portion of the notice, as well as the names, official
position and signatures of the witnesses.
Should the party be found at his registered or known address or any other place
but refuse to receive the notice, the revenue officers concerned shall bring a
barangay official and two (2) disinterested witnesses in the presence of the party
so that they may personally observe and attest to such act of refusal. The notice
shall then be given to said barangay official. Such facts shall be contained in the
bottom portion of the notice, as well as the names, official position and signatures
of the witnesses.
"Disinterested witnesses" refers to persons of legal age other than employees of

the Bureau of Internal Revenue.
(iii) Service by mail is done by sending a copy of the notice by registered mail to the
registered or known address of the party with instruction to the Postmaster to return
the mail to the sender after ten (10) days, if undelivered. A copy of the notice may
also be sent through reputable professional courier service. If no registry or
reputable professional courier service is available in the locality of the addressee,
service may be done by ordinary mail.
The server shall accomplish the bottom portion of the notice. He shall also make a
written report under oath before a Notary Public or any person authorized to
administer oath under Section 14 of the NIRC, as amended, setting forth the
manner, place and date of service, the name of the person/barangay
official/professional courier service company who received the same and such
other relevant information. The registry receipt issued by the post office or the
official receipt issued by the professional courier company containing sufficiently
identifiable details of the transaction shall constitute sufficient proof of mailing and
shall be attached to the case docket.
(Colossians 3:23)
72
Service to the tax agent/practitioner, who is appointed by the taxpayer under
circumstances prescribed in the pertinent regulations on accreditation of tax
agents, shall be deemed service to the taxpayer."
SECTION 4. Civil Penalties.
4.1 Twenty-Five Percent (25%) Surcharge. — There shall be imposed, in addition to the
basic tax required to be paid, a penalty equivalent to twenty-five percent (25%) thereof,
in any the following cases:
4.1.1 Failure to file any return and pay the tax due thereon as required under the provisions
of this Code or rules and regulations on the date prescribed; or
4.1.2 Unless otherwise authorized by the Commissioner, filing a return with an internal
revenue officer other than those with whom the return is required to be filed; or
4.1.3 Failure to pay the deficiency tax within the time prescribed for its payment in the notice
of assessment; or
4.1.4 Failure to pay the full or part of the amount of tax shown on any return required to be
filed under the provisions of this Code or rules and regulations, or the full amount of
tax due for which no return is required to be filed, on or before the date prescribed for
its payment.
4.2 Fifty Percent (50%) Surcharge:
4.2.1 In case of willful neglect to file the return within the period prescribed by the Code, or
in case a false or fraudulent return is willfully made, the penalty to be imposed shall be
fifty percent (50%) of the tax or of the deficiency tax, in case any payment has been
made on the basis of such return before the discovery of the falsity or fraud: Provided,
That a substantial underdeclaration of taxable sales, receipts or income, or a
substantial overstatement of deductions, as determined by the Commissioner or his
duly authorized representative, shall constitute prima facie evidence of a false or
fraudulent return: Provided, further, That failure to report sales, receipts or income in
an amount exceeding thirty percent (30%) of that declared per return, and a claim of
deductions in an amount exceeding thirty percent (30%) of actual deductions, shall
render the taxpayer liable for substantial underdeclaration of sales, receipts or income
or for overstatement of deductions, as mentioned herein: Provided, further, that the
term "willful neglect to file the return within the period prescribed by the Code" shall not
apply in case the taxpayer, without notice from the Commissioner or his authorized
representative, voluntarily files the said return, in which case, only 25% surcharge shall
be imposed for late filing and late payment of the tax in lieu of the above 50%
surcharge. Conversely, the 50% surcharge shall be imposed in case the taxpayer files
the return only after prior notice in writing from the Commissioner or his duly authorized
representative.
4.2.2 Section 6 (A) of the Code provides that any tax return filed by a taxpayer "may be
modified, changed or amended" by the taxpayer "within three (3) years from date of
such filing" provided, however, that "no notice for audit or investigation of such return,
statement or declaration has, in the meantime, been actually served upon the
taxpayer." Thus, if upon investigation, it is determined that the taxpayer's originally filed
tax return is false or fraudulent, such taxpayer shall remain liable to the 50% civil
penalty regardless that the taxpayer has filed his amended tax return, if the said
(Colossians 3:23)
73
amended tax return, however, has been filed only after issuance of the Letter of
Authority for the investigation of the taxpayer's tax return or such amendment has been
made in the course of the said investigation.
SECTION 5. Mode of Procedures in Computing for the Tax and/or Applicable

Surcharge.
Shown hereunder are illustrative cases for the computation and assessment of the tax,
inclusive of surcharge (if applicable) and interest:
5.1 Late filing and late payment of the tax. — Illustration: Income tax return for the calendar
year 1998 was due for filing on April 15, 1999 but the taxpayer voluntarily filed his tax
return, without notice from the BIR, only on June 30, 1999. The tax due per return
amounts to P100,000. In this case, the taxpayer shall be liable for delinquency
penalties consisting of 25% surcharge, plus 20% interest per annum, computed from
due date of the tax until date of payment, computed as follows:
Calendar Year 1998
Income tax due per return P100,000.00

Add: 25% surcharge for late filing and late
payment (P100,000.00 times 25%) P25,000.00
20% int. p.a. from 4-15-99 to 6-30-99
(P100,000.00 times .0415524) P4,155.24 P29,155.24
Total amount due (excluding suggested compromise for

late filing and late payment of the tax) P129,155.24
=========
Only one 25% surcharge shall be imposed for late filing of the return and late payment
of the tax.
5.2 The tax return is filed on time but filed through an internal revenue officer other than
with whom the return is required to be filed. — Illustration: The taxpayer's 1998 income
tax return is required to be filed through the authorized agent bank under the
jurisdiction of RDO East Makati. But, without prior authorization from the BIR, the
taxpayer filed his tax return and paid the tax through the authorized agent bank under
the jurisdiction of RDO Davao City. Tax due and paid per return is P100,000.00.
Calendar Year 1998

Add: 25% surcharge P25,000.00
—————
Total amount due P125,000.00
Less: Amount paid P100,000.00
—————
Amount still due P25,000.00
=========
5.3 Late filing and late payment due to taxpayer's willful neglect. — Illustration: The
taxpayer did not file his income tax return for the calendar year 1997 which was due
for filing on April 15, 1998. He was notified by the BIR of his failure to file the tax return,
(Colossians 3:23)
74
for which reason, he filed his tax return and paid the tax, only after the said notice, on
June 30, 1999. The tax due per return is P100,000.00.
Calendar Year 1997
Add: 50% surcharge for willful neglect to

file the return and late payment of the tax
(P100,000 times 50%) P50,000.00
20% int. p.a. fr. 4-15-98 to 6-30-99

(P100,000.00 times .2415524) P24,155.24 P74,155.24
————— —————
Total amount due (excluding suggested compromise

for late filing and late payment of the tax) P174,155.24
=========
5.4 Penalty or penalties for deficiency tax. — As a rule, no surcharge is imposed on

deficiency tax and on the basic tax. However, if the amount due inclusive of penalties
is not paid on or before the due date stated on the demand letter, the corresponding
surcharge shall be imposed.
Illustration No. 1: Taxpayer filed on time his income tax return for calendar year 1997
and paid P100,000.00 on April 15, 1998. Upon pre-audit of his return, it was disclosed
that he erroneously computed the tax due. The correct amount of tax due is
P120,000.00. The taxpayer is assessed for deficiency income tax in a letter of demand
and assessment notice issued on June 30, 1999.
Calendar Year 1997

Tax due per pre-audit P120,000.00
Less: Amount assessed and paid per tax return filed P100,000.00
—————
Deficiency income tax P20,000.00
Add: 20% int. p.a. from 4-15-98 to 6-30-99

(P20,000.00 times .2415524) P4,831.05
—————
Amount still due P24,831.05
=========
Illustration No. 2: ABC CORPORATION filed its income tax return for calendar year
1997 and paid on time its income tax shown thereunder, amounting to P100,000. Said
taxpayer was investigated. Upon verification of its accounting records, it was disclosed
that its deduction, from gross income, of representation expenses in the amount of
P200,000.00 did not meet all the statutory requisites for deductibility. The corporation
was duly notified of the said discrepancy through a Preliminary Assessment Notice.
Based on the 35% income tax rate on corporations applicable in the year 1997, the
income tax due after investigation amounts to P170,000.00. After deduction of income
tax paid per return filed, the basic deficiency income tax amounts to P70,000, excluding
penalties. Failing to protest on time against the preliminary assessment notice, a formal
(Colossians 3:23)
75
letter of demand and assessment notice was issued on May 31, 1999, requiring
payment of the assessment not later than June 30, 1999.
Calendar Year 1997
Income tax due per investigation P170,000.00

Less: Income tax paid per return P100,000.00
—————
Add: 20% int. p.a. fr. 4-15-98 to 6-30-99 (P70,000 times .2415524) P16,908.67
—————
Total amount still due P86,908.67
=========
Illustration No. 3: XYZ CORPORATION filed its income tax return for calendar year
1997 with a net taxable income of P500,000.00. At the applicable income tax rate of
35% for the year 1997, its income tax amounted to P175,000.00. However, upon
investigation, it was disclosed that its income tax return was false or fraudulent
because it did not report a taxable income amounting to another P500,000.00. On its
net income of P1,000,000.00, per investigation, the income tax due is P350,000.00.
Deducting its payment per return filed, the deficiency, excluding penalties, amounted
to P175,000.00. It was duly informed of this finding through a Preliminary Assessment
Notice. Failing to protest on time against the preliminary assessment notice, a formal
letter of demand and assessment notice was issued on May 31, 1999 calling for
payment of the deficiency income tax on or before June 30, 1999.
In this case, said corporation is liable for the civil penalties of 50% surcharge for having
filed a false or fraudulent return, plus 20% interest per annum on the deficiency,
computed as follows:
Calendar Year 1997

—————
Add: 50% surcharge for filing a fraudulent or false
return (P175,000.00 times 50%) P87,500.00
20% int. p.a. fr. 4-15-98 to 6-30-99
(P175,000.00 times .2415524) P42,271.67 P129,771.67
————— —————
=========
5.5 Late payment of a deficiency tax assessed. — In general, the deficiency tax assessed
shall be paid by the taxpayer within the time prescribed in the notice and demand,
otherwise, such taxpayer shall be liable for the delinquency interest incident to late
payment.
Illustration 1: Based on the above Illustration No. 3, Scenario 4, assuming that the
calendar year 1997 deficiency income tax assessment against XYZ CORPORATION,
in the amount of P304,771.67, is not paid by June 30, 1999, the deadline for payment
of the assessment, and assuming further that this assessment has already become
(Colossians 3:23)
76
final and collectible. In this case, such corporation shall be considered late in payment
of the said assessment. Assuming, further, that the corporation pays its tax
assessment only by July 31, 1999, the delinquency interest for late payment shall be
computed as follows:
Calendar Year 1997

–––––––––––
Add: 50% surcharge for filing a
fraudulent or false return
(P175,000.00 times 50%) P87,500.00
20% int. p.a. fr. 4-15-98 to 7-31-99
(P175,000.00 times .258630) P45,260.27
–––––––––––
Add: 20% delinquency interest p.a. from 7-1-99 to

7-31-99
Basic Tax 175,000.00
Surcharge 87,500.00
20% int. p.a. fr. 4-15-98
to 6-30-99 42,271.67
–––––––––––
Total 304,771.67
(P304,771.67 times .0166667) P5,079.54
–––––––––––
penalty for late payment) P312,839.81
==========
Illustration 2: Based on the immediately preceding Illustration, assuming that the calendar year
1997 deficiency income tax assessment against XYZ CORPORATION, in the amount of
P304,771.67, is not paid by June 30, 1999, the deadline for payment of the assessment but is
instead timely protested. Assuming further that after exhaustion of all administrative remedies,
the assessment was upheld and became final, executory and demandable on July 1, 2000.
However, payment was made by the taxpayer only on June 30, 2002. In this case, such
corporation shall be considered late in payment of the said assessment. The civil penalties for
late payment shall be computed as follows:
Calendar Year 1997

–––––––––––
fraudulent or false return
(P175,000.00 times 50%) P87,500.00
20% int. p.a. fr. 4-15-98 to 6-30-2002
(P175,000.00 times .841644) P147,287.70
(Colossians 3:23)
77
–––––––––––
Add: 20% delinquency interest p.a. from 7-2-2000 to

6-30-2002
Surcharge 87,500.00
20% int. p.a. fr. 4-15-98
to 7-1-00 (.4427397) 77,479.45
–––––––––
Total 339,979.45
(P339,979.45 times .3989041) P135,619.20
–––––––––––
penalty for late payment) P545,406.90
==========
Illustration 3: Assuming that in calendar year 1997, XYZ CORPORATION filed a false or
fraudulent return and was assessed of deficiency basic income tax amounting to Php100,000.
Assuming further that XYZ CORPORATION timely protested the said assessment. After
exhaustion of all administrative remedies, the assessment was upheld and became final,
executory and demandable on April 15, 2001. However, payment was made by the taxpayer
only on April 15, 2003.
In this case, such corporation shall be considered late in payment of the said assessment.
The civil penalties for late payment shall be computed as follows:
Calendar Year 1997
Total deficiency income tax assessment P100,000.00

fraudulent or false return P50,000.00
20% interest p.a. from 4-15-1998 to
4-15-2003 (P100,000 x 20% x 5) P100,000.00
Delinquency Interest
20% interest p.a. from 4-15-2001 to 4-15-2003
Surcharge 50,000.00
20% int. p.a. fr. 4-15-98
to 4-15-01 60,000.00
––––––––––
Total 210,000.00
(P210,000.00 x 20% x 2) P84,000.00
–––––––––––
Total Amount Due as of April 15, 2003
(excluding suggested compromise penalty for late payment) P334,000.00
==========
5.6 Computation of 20% interest per annum in case of partial or installment payment of a
tax liability. — Illustration No. 1: In case extended payment of the tax is duly authorized.
— DEF CORPORATION, due to financial incapacity, requested that it be allowed to
pay its income tax liability per return for calendar year 1998, in the amount of
(Colossians 3:23)
78
P1,000,000.00, in four (4) monthly installments, starting April 15, 1999. Its request has
been duly approved pursuant to Sec. 53 of the Tax Code.
In this case, no 25% surcharge shall be imposed for late payment of the tax since its
deadline for payment has been duly extended. However, 20% interest per annum for
the extended payment shall be imposed, computed based on the diminishing balance
of the "unpaid amount", pursuant to the provisions of Section 249 (D) of the Code.
No 25% surcharge on extended payment shall be imposed provided, however, that the
taxpayer's request for extension of the period within which to pay is made on or before
the deadline prescribed for payment of the tax due. Conversely, if such request is made
after the deadline prescribed for payment, the taxpayer shall already be treated late in
payment, in which case, the 25% surcharge shall be imposed, even if payment of the
delinquency be allowed in partial amortization.
Example:
Calendar Year 1998
Income tax due per return P1,000,000.00

Less: 1st installment of the tax on or before 4-15-99 P250,000.00
——————
Balance as of 4-15-99 P750,000.00
Add: 20% int. p.a. from 4-15-99 to 5-15-99
(P750,000.00 times .0166667) P12,500.03
——————
Amount due on 5-15-99 P762,500.03
Less: 2nd installment on 5-15-99 (P250,000.00 plus
P12,500.03 interest) P262,500.03
——————
Balance as of 5-15-99 P500,000.00
Add: 20% int. p.a. from 5-15-99 to 6-15-99
(P500,000.00 times .0166667) P8,333.35
——————
Amount due on 6-15-99 P508,333.35
Less: 3rd installment on 6-15-99 (P250,000.00 plus
P8,333.35 interest) P258,333.35
——————
Balance as of 6-15-99 P250,000.00
Add: 20% int. p.a. from 6-15-99 to 7-15-99
(P250,000.00 times .0166667) P4,166.68
——————
4th and final installment on 7-15-99 P254,166.68
===========
Illustration No. 2: Computation of tax delinquency in case of partial payment of the tax
due without prior BIR authorization for extended payment. —
Example: GHI CORPORATION did not file its final adjustment income tax return for
the calendar year 1998 which was due on April 15, 1999. The BIR informed the
corporation of its failure to file its said tax return and required that it file the same,
inclusive of the 25% surcharge and 20% interest per annum penalties incident to the
said omission. On May 15, 1999 it advised that its income tax due for the said year
(Colossians 3:23)
79
amounts to P1,000,000.00 but, however, due to its adverse financial condition at the
moment, it will be unable to pay the entire amount, inclusive of the delinquency
penalties. Hence, on May 15, 1999, it made a partial payment of P400,000.00.
Assuming that the BIR demanded payment of the unpaid balance of its tax obligation
payable by June 15, 1999, the unpaid balance of the corporation's delinquent income
tax shall be computed as follows:
Calendar Year 1998
Income tax due per return P1,000,000.00

Add: 25% surcharge for late filing and
late payment P250,000.00
20% interest per annum from 4-15-99
to 5-15-99 (P1,000,000.00
times .0166667) P16,666.70 P266,666.70
————— —————
Amount due as of 5-15-99 P1,266,666.70
Less: Partial payment on 5-15-99 P400,000.00

—————
Balance as of 5-15-99P866,666.70
Add: 20% interest per annum from 5-15-99
to 6-15-99 (P866,666.70 times .0166667) P14,444.47
—————
Amount still due (exclusive of the suggested compromise
penalty for late filing and late payment P811,111.17
=========
If the said taxpayer fails to pay the amount of P811,111.17 by June 15, 1999, no further
25% surcharge for late payment of the tax shall be imposed. Instead, only the 20%
interest per annum shall be imposed against the taxpayer against the taxpayer,
computed from due date thereof (i.e., June 15, 1999) until paid. If said taxpayer pays
the same on partial payment basis, the 20% interest per annum shall be computed on
the diminishing balance thereof, pursuant to the procedures in the preceding
Illustration No. 1, Section 6.6 hereof.
SECTION 6. Suggested Compromise Penalty in Extra-judicial Settlement of a

Taxpayer's Criminal Violation.
Section 204 of the Tax Code of 1997 provides that "All criminal violations may be compromised
except: (a) those already filed in court, or (b) those involving fraud." This means that, in
general, the taxpayer's criminal liability arising from his violation of the pertinent provision of
the Code may be settled extra-judicially instead of the BIR instituting against the taxpayer a
criminal action in Court. A compromise in extra-judicial settlement of the taxpayer's criminal
liability for his violation is consensual in character, hence, may not be imposed on the taxpayer
without his consent. Hence, the BIR may only suggest settlement of the taxpayer's liability
through a compromise.
The extra-judicial settlement of the taxpayer's criminal liability and the amount of the
suggested compromise penalty shall conform with the schedule of compromise penalties
provided under Revenue Memorandum Order No. 1-90 or as hereafter revised.
(Colossians 3:23)
80
SECTION 7. Repealing Clause.
Any revenue issuance which is inconsistent herewith shall be considered repealed, amended,
or modified accordingly.
SECTION 8. Effectivity.
8.1 General Rule. — In general, the provisions of these Regulations shall be effective
beginning January 1, 1998 pursuant to the provisions of Section 8 of R.A. No. 8424,
otherwise known as the National Internal Revenue Code of 1997.
8.2 Computation of Surcharge and Interest on Deficiency Tax Assessment. — Any

deficiency tax assessment issued beginning January 1, 1998 shall be governed by the
rules prescribed in these Regulations.
8.3 Other Provisions. — Any provision of these Regulations not otherwise specifically
provided in the National Internal Revenue Code of 1997 shall take effect fifteen (15)
days after publication in any newspaper of general circulation.
(SGD.) EDGARDO B. ESPIRITU

Secretary
Department of Finance
Recommending Approval:
(SGD.) BEETHOVEN L. RUALO
Commissioner
Bureau of Internal Revenue
(Colossians 3:23)
81
May 2, 2013
Revenue Memorandum Circular (RMC) No. 38-13
SUBJECT: Clarifying the Implication of Legal Petition Notices/Declarations and

Similar Documents on the Audit/Assessment Process
Background
It has been observed that there is a proliferation of Legal Petition Notices (LPNs)/Declarations
and similar documents coming from taxpayers and practitioners questioning the validity of the
electronic Letters of Authority (eLAs) issued. Even as we repeatedly reply to these LPNs
reiterating the validity of the eLAs pursuant to Sections 6 (A) and 10 (c) of the National Internal
Revenue Code of 1997 (Tax Code), as amended, these taxpayers/practitioners persist on
sending LPNs, thinking that LPNs, will stop or defer the investigation process. However, it is
evident that they misconstrue the consequence of these LPNs and are ignoring the long
established procedures for audit, assessment and protesting deficiency assessments.
Henceforth, there is a need to make taxpayers understand the implication of these LPNs in
the process and/or certain procedures related to audit, such as issuance of Subpoena Duces
Tecum (SDT) and assessment notices, to prevent any attempt by taxpayers and practitioners
to thwart and undermine the authority of the Bureau to exercise its functions provided by law.
Clarification
I. On the Audit/Investigation Pursuant to Issued Letters of Authority
The normal process and/or procedures related to audit/investigation arising from eLA issued
will not be suspended notwithstanding the receipt of LPN pertaining to the case. Moreover,
the National Office shall no longer entertain any LPN questioning the validity and enforceability
of the eLA duly issued by the concerned Regional Director for the audit of taxpayer within the
region inasmuch as the issue has already been clarified under RMC No. 6-2013. Thus, there
shall be no impediment on the investigation of the taxpayer's internal revenue tax liabilities
and the eventual recommendation for an issuance of SDT, if warranted, in accordance with
Revenue Memorandum Order (RMO) Nos. 45-2010 and 88-2010.
II. On the Issuance of Preliminary Assessment Notice (PAN), Formal Letter of

Demand (FLD) and Final Assessment Notice (FAN)
Correspondingly, upon receipt of the PAN or FLD and FAN, the taxpayer is given fifteen (15)
or thirty (30) days, as the case may be, to rebut the assessment upon his compliance with the
requirements of filing a protest pursuant to Revenue Regulations (RR) No. 12-99 . Thus, any
LPN, declaration or any similar document protesting the assessment addressed to the
Commissioner or any official in the National Office without the issuance of a Final Decision on
Disputed Assessment (FDDA) from the regional office shall be considered premature and
invalid.
III. Responsibility of Taxpayers on Their LPN
As stated in Section 9 of RR No. 11-2006, as amended, and clarified in RMC No. 6-2013, the
BIR can refuse to transact official business with tax agents/practitioners who are not
accredited before it. Therefore, the responsibility is on taxpayers to ensure that the tax
agents/practitioners whom they choose to engage are accredited with the BIR. Aside from
(Colossians 3:23)
82
knowing whether consultants are accredited or not, taxpayers are forewarned to be more
circumspect in scrutinizing the credibility and competence of the consultants and the veracity
of the contents of the LPN/Declaration or any document before affixing their signature therein
since these documents will not gain merit and may lead to adverse consequences, such as
the filing of the necessary charges in court.
All concerned revenue officials and employees are hereby enjoined to give this Circular as
wide a publicity as possible.
(SGD.) KIM S. JACINTO-HENARES

Commissioner
(Colossians 3:23)
83
April 4, 2013
SUBJECT: Receipt of Protest Letter on Final Assessment Notices and Final Decision
on Disputed Assessments
I. Background
It has been observed that substantial number of tax cases covered by Final Assessment
Notices (FANs) and Formal Letters of Demand which had been reported by the Regional
Assessment Divisions under the prescribed Monthly Summary of Taxes Assessed-
Unprotested (BIR Form 40.00) were still allowed to be referred to the concerned investigating
office for reinvestigation, notwithstanding that the assessments were already final and
executory. Further, since they have become delinquent accounts, they are already subject to
enforcement collection through summary remedies under Sections 205, 206 and 207 of the
National Internal Revenue Code (NIRC) of 1997, as amended. However, taxpayers alleged
that their protest letters had been filed with other offices of the Bureau before the prescribed
deadline under existing regulations and that the same failed to reach the concerned Regional
Assessment Divisions before the submission of the BIR Form 40.00 report to other concerned
offices.
II. Clarification
In order to avoid the conduct of unwarranted reinvestigation cases, to prevent the undue
accumulation of delinquent accounts, and to obviate the premature enforcement of summary
remedies against the concerned taxpayers, the guidelines for receipt of protest letters and
other similar correspondences are clarified as follows:
1. All letters of protest, requests for reinvestigation/reconsideration and similar

correspondences shall only be filed by the taxpayers or their duly authorized
representatives, in person or through registered mail with return card, with the Office
of the concerned Regional Director (RD), Assistant Commissioner-Large Taxpayers
Service (ACIR-LTS) and Assistant Commissioner-Enforcement Service (ACIR-ES),
who signed the Preliminary Assessment Notices (PANs), FANs and Formal Letters of
Demand, for proper recording of the protests, and evaluation if the same is in
accordance with Section 228 of the NIRC, as implemented by Revenue Regulations
No. 12-99 . If the aforesaid procedures are not followed, then the letters of protest,
requests for reinvestigation/reconsideration and similar correspondences shall be
considered void and without force and effect.
The abovementioned revenue officials shall be primarily responsible in ensuring the

preparation of a complete/accurate report on all protests that were filed in their
respective offices and the prompt submittal thereof to the Commissioner of Internal
Revenue (CIR) every Monday of each week in hard and soft copies. The soft copy of
the report shall be emailed to kim.jacinto-henares@bir.gov.ph and
flor.mercado@bir.gov.ph. The format of the Report on Protest Letters Received
Covering Final Assessment Notices and Final Decisions on Disputed Assessments is
hereto attached as Annex "A".
2. Based on this weekly report, the Office of the CIR shall create a database of all letters
of protest, requests for reinvestigation/reconsideration and similar correspondences
(Colossians 3:23)
84
received by the different offices of the Bureau. The information contained therein can
be provided to the other concerned offices, subject to the CIR's approval of the release
of such information and upon written request of the concerned revenue official. The
said database shall be regularly updated for purposes of providing accurate
information on the matter to all concerned officials and employees.
3. In the event that no letter of protest, request for reinvestigation/reconsideration and

similar communication has been received during any given week, the herein prescribed
report shall nevertheless be accomplished and submitted within the same period with
the notation "No Letter of Protest or Request for Reinvestigation/Reconsideration
Received".
4. Any letter of protest, request for reinvestigation/reconsideration, or other similar

communication allegedly filed by any taxpayer but are not included in the
aforementioned database shall be deemed as not officially filed with the Bureau and
shall not be used as basis for the grant of any request for
reinvestigation/reconsideration of any FAN or Final Decision on Disputed Assessment
(FDDA) issued against the taxpayer.
5. These guidelines and policies shall be strictly observed until such time that a more
sophisticated and information technology-driven document receipting and tracking
system has been put in place.
6. All letters of protest, requests for reinvestigation/reconsideration or similar

correspondences that will be accepted from taxpayers beginning April 15, 2013 shall
be guided by this Circular.
All internal revenue officials and employees are enjoined to provide this Circular as wide a
publicity possible.

Commissioner
(Colossians 3:23)
85
February 18, 2014
SUBJECT: Clarifying Certain Issues Relative to Due Process Requirement in the

Issuance of a Deficiency Tax Assessment Pursuant to Revenue
Regulations (RR) 12-99, as Amended by RR 18-2013
TO: All Internal Revenue Officers and Others Concerned
This Circular is issued to clarify certain issues relative to the amendments introduced to
Revenue Regulations (RR) 12-99 by RR 18-2013.
i. RR 12-99, as amended by RR 18-2013, provides that the Commissioner or his duly

authorized representative shall issue the Preliminary Assessment Notice (PAN), Formal
Letter of Demand/Final Assessment Notice (FLD/FAN) and Final Decision on Disputed
Assessment (FDDA). The term "duly authorized representative" therein refers to Revenue
Regional Directors, Assistant Commissioner-Large Taxpayers Service, and Assistant
Commissioner-Enforcement and Advocacy Service.
Accordingly, pursuant to Revenue Memorandum Circular No. 39-2013, taxpayers shall

submit/file their responses to the PAN and protests (requests for
reconsideration/reinvestigation) to the FLD/FAN with the duly authorized representative of
the Commissioner who signed the PAN and FLD/FAN. Protests in the nature of requests
for reconsideration of taxpayers elevated to the Commissioner arising from inactions or
adverse decisions of the "duly authorized representatives" shall be filed with the Office of
the Commissioner.
i. Prior to the issuance of the PAN, the taxpayer may be allowed to make voluntary
payments of probable deficiency taxes and penalties.
ii. An FLD/FAN issued reiterating the immediate payment of deficiency taxes and penalties
previously made in the PAN is a denial of the response to the PAN. A final demand letter
for payment of delinquent taxes may be considered a decision on a disputed assessment
(Commissioner of Internal Revenue vs. Isabela Cultural Corporation; G.R. No. 135210;
July 11, 2001). This includes a disputed PAN. So long as the parties are given the
opportunity to explain their side, the requirements of due process are satisfactorily
complied with (Calma vs. Court of Appeals; G.R. No. 122787; February 9, 1999).
iii. An FDL/FAN issued beyond fifteen (15) days from filing/submission of the taxpayer's
response to the PAN shall be valid, provided that, it is issued within the period of limitation
to assess internal revenue taxes. The non-observance of the fifteen (15)-day period,
however, shall constitute an administrative infraction and the revenue officers who caused
the delay shall be subject to administrative sanctions as provided for by law and pertinent
revenue issuances.
iv. RR 12-99, as amended by RR 18-2013, provides that "[f]or requests for reinvestigation,
the taxpayer shall submit all relevant supporting documents in support of his protest within
sixty (60) days from date of filing of his letter of protest, otherwise, the assessment shall
become final." The term "the assessment shall become final" means that the failure of the
taxpayer who requested for a reinvestigation to submit all relevant supporting documents
within the sixty (60)-day period shall render the FLD/FAN "final" by operation of law. He/it
shall be barred from disputing the correctness of the FLD/FAN by the introduction of newly
discovered or additional evidence because he/it is deemed to have lost his/its chance to
(Colossians 3:23)
86
present these evidence. The BIR shall then deny the request for reinvestigation through
the issuance of an FDDA.
v. The notice (PAN/FLD/FAN/FDDA) shall first be served to the taxpayer's registered

address before the same may be served to the taxpayer's known address, or in the
alternative, may be served to the taxpayer's registered address and known address
simultaneously. All other issuances inconsistent herewith are hereby repealed or modified
accordingly. All concerned are hereby enjoined to be guided accordingly and give this
Circular as wide a publicity as possible.
This Circular shall take effect immediately.

Commissioner
(Colossians 3:23)
87
June 13, 2016
Revenue Memorandum Order (RMO) No. 26-16
SUBJECT : Policies and Guidelines in Handling Disputed Assessments

TO : All Internal Revenue Officials, Employees and Others Concerned
I. Objectives
In line with Section 228 of the National Internal Revenue Code, as amended, and pursuant to
Revenue Regulations No. 18-2013 which amends certain Sections of Revenue Regulations
No. 12-99 relative to the Due Process Requirement in the issuance of a deficiency tax
assessment, this Order is hereby issued to prescribe policies, uniform guidelines and
procedures in handling disputed assessments, and in issuing Final Decision on Disputed
Assessment (FDDA) and revision thereof by the Commissioner of Internal Revenue.
II. Policies and Guidelines
1. A taxpayer must be given an opportunity, if he/she/it so chooses, to explain his/her/its

objection to an assessment and present necessary documents in support of his/her/its
objection, before a FDDA is issued.
2. Protest against Preliminary Assessment Notice (PAN) is optional/not mandatory.
3. Formal Letter of Demand and Final Assessment Notice (FLD)/(FAN) shall be issued
fifteen (15) days from date of receipt by the taxpayer of the PAN, whether the same
was protested or not.
4. If the taxpayer shall upon receipt of the PAN, accepts and pays the assessment either
partially or fully, a FLD/FAN shall be issued to formalize the assessment, and Payment
Form 0605 shall be duly prepared, filed and paid to acknowledge and provide evidence
for the settlement of the assessment or portion of the assessment paid.
5. Within thirty (30) days from receipt of the FLD/FAN, the taxpayer shall either:
a. Accept the assessment, fully or partially, and pay the amount due on the
assessment accepted, or
b. Protest the assessment fully or partially by filing either of the following remedy, and
the filing of one precludes the filing of the other remedy:
i. Request for Reconsideration if the taxpayer is not going to submit any other
additional evidence or documents and merely pleas for a re-evaluation of an
assessment;
ii. Request for a Reinvestigation on the basis of newly discovered evidence or if

the taxpayer intends to present or submit additional evidence or documents.
6. After the issuance of the FAN/FLD, the taxpayer accepts and settles/pays the
assessment in full, Payment Form 0605 shall be duly prepared, filed and paid as
evidenced of the settlement of the assessment. If the taxpayer accepts and settle/pays
the assessment in part, and protests the remaining portion, Payment Form 0605 shall
be prepared, filed and paid for that portion of the assessment accepted and settled,
(Colossians 3:23)
88
and a FDDA shall be issued for the portion of the assessment not settled and resolved.
For that portion of the assessment resolved in favor of the taxpayer, an Authority to
Cancel Assessment (ATCA) shall be prepared to evidence the cancellation of the
assessment.
7. If a request for Reinvestigation was made, the taxpayer shall submit all the relevant
supporting documents in support of his/her/its protest within sixty (60) days from the
date of the filing of the taxpayer's letter of protest. Evaluation of the protest shall be
based exclusively on the documents submitted within this period, and no further
document shall be accepted after the expiration of the said period. The assessment
shall become final and executory in the event the taxpayer fails to submit the relevant
supporting documents within this 60 days period, and a Collection Letter and other
collection remedies such as but not limited to garnishment, warrant and levy shall be
issued against the taxpayer.
8. All decisions on protest to the FAN, whether the taxpayer's protest is accepted or
denied partially or wholly, shall be communicated to the taxpayer through the issuance
of a Final Decision on a Disputed Assessment (FDDA).
9. All protest shall be considered a request for reconsideration, unless said protest clearly
indicates that the request is for reinvestigation.
10. A request for Reinvestigation shall be available in a protest to a FAN/FLD only. After
the issuance of a FDDA, a request for Reinvestigation shall no longer be available as
a taxpayer remedy.
11. If the protest is not acted upon by the Commissioner's duly authorized represented *
within 180 days counted from the date of the filing of the protest in the case of a request
for reconsideration, or from the lapse of the 60 days period to submit relevant
document in the case of a request for reinvestigation, and the taxpayer appeals to the
Court of Tax Appeals within 30 days after the expiration of the 180 days period, an
FDDA shall be issued automatically.
12. All the periods provided for under RR No. 18-2013 is mandatory and non-extendible.
13. After the issuance of the FDDA, the taxpayer may accept and settle the assessment
contained therein, partially or fully. Payment Form 0605 shall be prepared, filed and
paid for the assessment accepted and settled by the taxpayer. If the FDDA were issued
by the Commissioner's duly authorized representative, the taxpayer shall within thirty
(30) days from receipt of the FDDA file a motion for reconsideration with the
Commissioner of Internal Revenue or appeal to the Court of Tax Appeals. In appealing
the protest to the Court of Tax Appeals, the taxpayer shall manifest and state that the
appeal pertains only to the portion of the FDDA not settled and paid and attached to
their appeal a copy of the duly filed and paid Payment Form 0605.
14. Appeal to the Commissioner or to the Court of Tax Appeals of the FDDA, shall not
preclude the taxpayer from voluntarily settling the assessment, partially or fully.
Payment Form 0605 shall be duly prepared, filed and paid and the taxpayer shall
manifest before the Court of Tax Appeals the fact of settlement of the assessment,
partially or fully, present the duly filed and paid Payment Form 0605, and file a motion
for dismissal with prejudice as to the assessment or portions thereof that has been
settled and paid on the ground that the appealed disputed assessment has become
moot and academic.
(Colossians 3:23)
89
15. An assessment shall become final, executory and demandable due to, among others,
the following grounds:
a. Failure of the taxpayer to file a valid protest within thirty (30) days from receipt of
the Formal Letter of Demand and Final Assessment Notice (FLD/FAN);
b. Failure of the taxpayer to submit all relevant documents in support of his protest by
way of request for reinvestigation within sixty (60) days from the date of filing
thereof;
c. Failure of the taxpayer to appeal to the Commissioner of Internal Revenue or the

Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of the FDDA
issued by the Commissioner's duly authorized representative;
d. Failure of the taxpayer to appeal to the CTA within thirty (30) days from date of
receipt of the FDDA issued by the Commissioner;
e. Failure of the taxpayer to timely file a motion for reconsideration or new trial before
the CTA Division or failure to appeal to the CTA En Banc and Supreme Court based
on existing Rules of Procedure; or
f. Failure of the taxpayer to receive any assessment notices because it was served
in the address indicated in the BIR's registration database and the taxpayer
transferred to a new address or closed/ceased operations without updating and
transferring its BIR registration or cancelling its BIR registration as the case may
be, through the accomplishment and filing of BIR Form No. 1905 — Application for
Registration Information Update, as prescribed by pertinent issuance and/or
amendments thereto.
III. Repealing Clause
All revenue issuances and portions thereof inconsistent with this Order are hereby amended
or repealed accordingly.
IV. Effectivity
This Order shall take effect immediately.
(Colossians 3:23)
90
January 22, 2018
Revenue Regulations (RR) No. 07-18
SUBJECT : Amending Certain Sections of Revenue Regulations No. 12-99, as

Amended by Revenue Regulations No. 18-13, Relative to the Due Process
Requirement in the Issuance of a Deficiency Tax Assessment
SECTION 1. Scope. – Pursuant to the provisions of Section 224, in relation to Section 245 of
the National Internal Revenue Code of 1997 (Tax Code), as amended, these Regulations are
hereby promulgated to amend provisions of Revenue Regulations (RR) No. 12-99, as
amended by RR No. 18-13.
SECTION 2. Amendment. – Section 3 of RR 12-99, as amended by RR No. 18-13, is hereby

amended by adding Section 3.1.1 providing for the preparation of a Notice of Informal
Conference, thereby renumbering other provisions thereof, and prescribing other provisions
for the assessment of tax liabilities. The pertinent provisions of Section 3 of RR 12-99 shall
now read as follows:
“SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax

Assessment. –
3.1.1 Notice for Informal Conference. – The Revenue Officer who audited the
taxpayer’s records shall, among others, state in his report whether or not the taxpayer
agrees with his findings that the taxpayer is liable for deficiency tax or taxes. If the
taxpayer is not amenable, based on the said Officer’s submitted report of investigation,
the taxpayer shall be informed, in writing, by the Revenue District Office or by the
Special Investigation Division, as the case may be (in the case of Revenue Regional
Offices) or by the Chief of Division concerned (in the case of the BIR National Office)
of the discrepancy or discrepancies in the taxpayer’s payment of his internal revenue
taxes, for the purpose of “Informal Conference,” in order to afford the taxpayer with an
opportunity to present his side of the case.
The Informal Conference shall in no case extend beyond thirty (30) days from
receipt of the notice for informal conference. If it is found that the taxpayer is still liable
for deficiency tax or taxes after presenting his side, and the taxpayer is not amenable,
the Revenue District Officer or the Chief of the Special Investigation Division of the
Revenue Regional Office, or the Chief of the Division in the National Office, as the
case may be, shall endorse the case within seven (7) days from the conclusion of the
Informal Conference to the Assessment Division of the Revenue Regional Office or
the Commissioner or his duly authorized representative for the issuance of a deficiency
tax assessment.
Failure on the part of Revenue Officers to comply with the periods indicated
herein shall be meted with penalty as provided by existing laws, rules and regulations.”
SECTION 3. Repealing Clause. – Any rules and regulations or parts thereof inconsistent with
the provisions of these Regulations are hereby repealed, amended, or modified accordingly.
SECTION 4. Effectivity. – The provisions of these Regulations shall take effect after fifteen
(15) days following the publication in any newspaper of general circulation.
(Colossians 3:23)
91
(Colossians 3:23)
92
April 4, 2016
Revenue Memorandum Order (RMO) No. 14-16
SUBJECT: Guidelines for the Execution of Waivers from the Defense of Prescription
Pursuant to Section 222 of the National Internal Revenue Code of 1997,
as Amended
TO : All Revenue Officials, Personnel and Others Concerned
I. Objective
This Revenue Memorandum Order is being issued to revise the guidelines relative to
the execution of Waiver of the Statute of Limitations under Section 222 in relation to
Section 203 of the National Internal Revenue Code of 1997 (NIRC), as amended, as
prescribed by Revenue Memorandum Order (RMO) No. 20-90 dated April 4, 1990 and
Revenue Delegation Authority Order (RDAO) No. 05-01 ; and clarified in Revenue
Memorandum Circular (RMC) Nos. 06-05 and 29-12 dated February 2, 2005 and
June 29, 2012, respectively.
II. Background
Section 222 (b) of the NIRC, as amended, provides that the Commissioner of Internal
Revenue or her duly authorized representative and the taxpayer or its authorized
representative may agree in writing as to a specific future date within which to assess
the taxpayer for internal revenue taxes for a given taxable period, before the expiration
of the period to assess taxes prescribed in Section 203 of the same Code.
Moreover, pursuant to Section 222 (d) of the NIRC, as amended, the Commissioner of
Internal Revenue or her duly authorized representative and the taxpayer or its
authorized representative may agree in writing as to specific future date within which
to collect from the taxpayer the assessed internal revenue taxes for a given taxable
period, before the expiration of the period to collect taxes.
However, it has been a rampant practice by the taxpayers to contest the validity of their
own waivers of the statute of limitations after having availed of the benefits thereof.
Thus, there is a clear necessity to revise the procedures provided for the proper
execution of such waivers.
III. Guidelines
1. The waiver may be, but not necessarily, in the form prescribed by RMO No. 20-90
or RDAO No. 05-01. The taxpayer's failure to follow the aforesaid forms does not
invalidate the executed waiver, for as long as the following are complied with:
a. The Waiver of the Statute of Limitations under Section 222 (b) and (d) shall be
executed before the expiration of the period to assess or to collect taxes. The
date of execution shall be specifically indicated in the waiver;
b. The waiver shall be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any
of its responsible officials;
(Colossians 3:23)
93
c. The expiry date of the period agreed upon to assess/collect the tax after the
regular three-year period of prescription should be indicated.
2. Except for waiver of collection of taxes which shall indicate the particular taxes
assessed, the waiver need not specify the particular taxes to be assessed nor the
amount thereof, and it may simply state "all internal revenue taxes" considering
that during the assessment stage, the Commissioner of Internal Revenue or her
duly authorized representative is still in the process of examining and determining
the tax liability of the taxpayer.
3. Since the taxpayer is the applicant and the executor of the extension of the period
of limitation for its benefit in order to submit the required documents and accounting
records, the taxpayer is charged with the burden of ensuring that the waivers of
statute of limitation are validly executed by its authorized representative. The
authority of the taxpayer's representative who participated in the conduct of audit
or investigation shall not be thereafter contested to invalidate the waiver.
4. The waiver may be notarized. However, it is sufficient that the waiver is in writing
as specifically provided by the NIRC, as amended.
5. Considering that the waiver is a voluntary act of the taxpayer, the waiver shall take
legal effect and be binding on the taxpayer upon its execution thereof.
6. It shall be the duty of the taxpayer to submit its duly executed waiver to the
Commissioner of Internal Revenue or official/s previously designated in existing
issuances or the concerned revenue district officer or group supervisor as
designated in the Letter of Authority/Memorandum of Assignment who shall then
indicate acceptance by signing the same. Such waiver shall be executed and duly
accepted prior to the expiration of the period to assess or to collect. The taxpayer
shall have the duty to retain a copy of the accepted waiver.
7. Note that there shall only be two (2) material dates that need to be present on the
waiver:
a. The date of execution of the waiver by the taxpayer or its authorized

representative; and
b. The expiry date of the period the taxpayer waives the statute of limitations.
8. Before the expiration of the period set on the previously executed waiver, the period
earlier set may be extended by subsequent written waiver made in accordance
with this Order.
IV. Repealing Clause

The provisions of Revenue Memorandum Order No. 20-90 dated 4 April 1990 and all
other rules, orders or portions thereof that are contrary to or inconsistent with the
provisions of this Order are hereby modified and/or repealed accordingly.
V. Effectivity
This Order shall take effect immediately.
(Colossians 3:23)
94
(Colossians 3:23)
95
Republic Act (R.A.) No. 1125, as amended by Republic Act (R.A.) No. 9282222 &
Republic Act No. (R.A.) No. 9503223
June 16, 1954
An Act Creating the Court of Tax Appeals
Section 1. Court; Justices; Qualifications; Salary; Tenure. - There is hereby created a

Court of Tax Appeals (CTA) which shall be of the same level as the Court of Appeals,
possessing all the inherent powers of a Court of Justice, and shall consist of a Presiding
Justice and eight (8) Associate Justices. The incumbent Presiding Judge and Associate
Judges shall continue in office and bear the new titles of Presiding Justice and Associate
Justices. The Presiding Justices and the two (2) most Senior Associate Justices, all of whom
are incumbent, shall serve as chairmen of the three (3) Divisions. The other three (3)
incumbent Associate Justices and the three (3) additional Associate Justices shall serve as
members of the Divisions. The additional three (3) Justices as provided herein and the
succeeding members of the Court shall be appointed by the President upon nomination by the
Judicial and Bar Council. The Presiding Justice shall be so designated in his appointment, and
the Associate Justices shall have precedence according to the date of their respective
appointment or when the appointments of two (2) or more of them shall bear the same date,
according to the order in which their appointments were issued by the President. They shall
have the same qualifications, rank, category, salary, emoluments and other privileges, be
subject to the same inhibitions and disqualifications, and enjoy the same retirement and other
benefits as those provided for under existing laws for the Presiding Justice and Associate
Justices of the Court of Appeals.
Whenever the salaries of the Presiding Justice and the Associate Justices of the Court of
Appeals are increased, such increases in salaries shall be deemed correspondingly extended
to and enjoyed by the Presiding Justice and Associate Justices of the CTA.
The Presiding Justice and Associate Justices shall hold office during good behavior, until they
reach the age of seventy (70), or become incapacitated to discharge the duties of their office,
unless sooner removed for the same causes and in the same manner provided by law for
members of the judiciary of equivalent rank.
Section 2. Sitting En Banc or Division; Quorum; Proceedings. - The CTA may sit en banc
or in three (3) Divisions, each Division consisting of three (3) Justices.
Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for
sessions of a Division. Provided, That when the required quorum cannot be constituted due
to any vacancy, disqualification, inhibition, disability, or any other lawful cause, the Presiding
Justice shall designate any Justice of other Divisions of the Court to sit temporarily therein.
The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse
a decision of a Division but a simple majority of the Justices present necessary to promulgate
a resolution or decision in all other cases or two (2) members of a Division, as the case may
be, shall be necessary for the rendition of a decision or resolution in the Division Level.
Section 3. Clerk of Court; Division Clerks of Court; Appointment; Qualification;

Compensation. - The CTA shall have a Clerk of Court and three (3) Division Clerks of Court
who shall be appointed by the Supreme Court. No person shall be appointed Clerk of Court
or Division Clerk of Court unless he is duly authorized to practice law in the Philippines. The
222 Approved: March 30, 2004

223 Approved: June 12, 2008
(Colossians 3:23)
96
Clerk of Court and Division Clerks of Court shall exercise the same powers and perform the
same duties in regard to all matters within the Court's jurisdiction, as are exercised and
performed by the Clerk of Court and Division Clerks of Court of the Court of Appeals, in so far
as the same may be applicable or analogous; and in the exercise of those powers and the
performance of those duties they shall be under the direction of the Court. The Clerk of Court
and the Division Clerks of Court shall have the same rank, privileges, salary, emoluments,
retirement and other benefits as those provided for the Clerk of Court and Division Clerks of
Court of the Court of Appeals, respectively.
Section 4. Other subordinate employees. - The Supreme Court shall appoint all officials
and employees of the CTA, in accordance with the Civil Service Law. The Supreme Court
shall fix their salaries and prescribe their duties.
Section 5. Disqualifications. - No Justice or other officer or employee of the CTA shall

intervene, directly or indirectly, in the management or control of any private enterprise which
in any way may be affected by the functions of the Court. Justices of the Court shall be
disqualified from sitting in any case on the same grounds provided under Rule one hundred
thirty-seven of the Rules of Court for the disqualification of judicial officers. No person who has
once served in the Court in a permanent capacity, either as Presiding Justice or as Associate
Justice thereof, shall be qualified to practice as counsel before the Court for a period of one
(1) year from his retirement or resignation.
Section 6. Place of office. - The CTA shall have its principal office in Metro Manila and shall
hold hearings at such time and place as it may, by order in writing, designate.
Section 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or other
laws administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal Revenue Code
or other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which case the inaction
shall be deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for customs

duties, fees or other money charges, seizure, detention or release of property affected,
fines, forfeitures or other penalties in relation thereto, or other matters arising under
the Customs Law or other laws administered by the Bureau of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals;
(Colossians 3:23)
97
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically
for review from decisions of the Commissioner of Customs which are adverse to the
Government under Section 2315 of the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural

product, commodity or article, and the Secretary of Agriculture in the case of
agricultural product, commodity or article, involving dumping and countervailing duties
under Section 301 and 302, respectively, of the Tariff and Customs Code, and
safeguard measures under Republic Act No. 8800, where either party may appeal the
decision to impose or not to impose said duties.
b. Jurisdiction over cases involving criminal offenses as herein provided:
1. Exclusive original jurisdiction over all criminal offenses arising from violations of the
National Internal Revenue Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided,
however, That offenses or felonies mentioned in this paragraph where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than
One million pesos (P1,000,000.00) or where there is no specified amount claimed shall
be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any
provision of law or the Rules of Court to the contrary notwithstanding, the criminal
action and the corresponding civil action for the recovery of civil liability for taxes and
penalties shall at all times be simultaneously instituted with, and jointly determined in
the same proceeding by the CTA, the filing of the criminal action being deemed to
necessarily carry with it the filing of the civil action, and no right to reserve the filling of
such civil action separately from the criminal action will be recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts
in tax cases originally decided by them, in their respected territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the exercise of their appellate jurisdiction over tax cases originally
decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
1. Exclusive original jurisdiction in tax collection cases involving final and

executory assessments for taxes, fees, charges and penalties: Provided,
however, That collection cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos
(P1,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan
Trial Court and Regional Trial Court.
2. Exclusive appellate jurisdiction in tax collection cases:
a. Over appeals from the judgments, resolutions or orders of the Regional

Trial Courts in tax collection cases originally decided by them, in their
respective territorial jurisdiction.
(Colossians 3:23)
98
b. Over petitions for review of the judgments, resolutions or orders of the
Regional Trial Courts in the Exercise of their appellate jurisdiction over tax
collection cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective
jurisdiction.
Section 8. Court of record; seal; proceedings. - The Court of Tax Appeals shall be a court
of record and shall have a seal which shall be judicially noticed. It shall prescribe the form of
its writs and other processes. It shall have the power to promulgate rules and regulations for
the conduct of the business of the Court, and as may be needful for the uniformity of decisions
within its jurisdiction as conferred by law, but such proceedings shall not be governed strictly
by technical rules of evidence.
Section 9. Fees. - The Court shall fix reasonable fees for the filing of an appeal, for certified
copies of any transcript of record, entry or other document, and for other authorized services
rendered by the Court or its personnel.
Section 10. Power to Administer Oaths; Issue Subpoena; Punish for Contempt. - The
Court shall have the power to administer oaths, receive evidence, summon witnesses by
subpoena duces tecum, subject in all respects to the same restrictions and qualifications as
applied in judicial proceedings of a similar nature. The Court shall, in accordance with Rule
seventy-one of the Rules of Court, have the power to punish for contempt for the same causes,
under the same procedure and with the same penalties provided therein.
Section 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely
affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the
Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or
the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial
Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision
or ruling or after the expiration of the period fixed by law for action as referred to in Section
7(a)(2) herein.
Appeal shall be made by filing a petition for review under a procedure analogous to that
provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30)
days from the receipt of the decision or ruling or in the case of inaction as herein provided,
from the expiration of the period fixed by law to act thereon. A Division of the CTA shall hear
the appeal: Provided, however, That with respect to decisions or rulings of the Central Board
of Assessment Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction
appeal shall be made by filing a petition for review under a procedure analogous to that
provided for under rule 43 of the 1997 Rules of Civil Procedure with the CTA, which shall hear
the case en banc.
All other cases involving rulings, orders or decisions filed with the CTA as provided for in
Section 7 shall be raffled to its Divisions. A party adversely affected by a ruling, order or
decision of a Division of the CTA may file a motion for reconsideration of new trial before the
same Division of the CTA within fifteens (15) days from notice thereof: Provide, however, That
in criminal cases, the general rule applicable in regular Courts on matters of prosecution and
appeal shall likewise apply.
No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer
or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture,
as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of
(Colossians 3:23)
99
the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided,
however, That when in the opinion of the Court the collection by the aforementioned
government agencies may jeopardize the interest of the Government and/or the taxpayer the
Court any stage of the proceeding may suspend the said collection and require the taxpayer
either to deposit the amount claimed or to file a surety bond for not more than double the
amount with the Court.
In criminal and collection cases covered respectively by Section 7(b) and (c) of this Act, the
Government may directly file the said cases with the CTA covering amounts within its
exclusive and original jurisdiction.
Section 12. Taking of evidence. - The Court may, upon proper motion on or its initiative,
direct that a case, or any issue thereof, be assigned to one of its members for the taking of
evidence, when the determination of a question of fact arises upon motion or otherwise in any
stage of the proceedings, or when the taking of an account is necessary, or when the
determination of an issue of fact requires the examination of a long account. The hearing
before such member shall proceed in all respects as though the same had been made before
the Court.
Upon the recommendation of such hearing such member, he shall promptly submit to the
Court his report in writing, stating his findings and conclusions; and thereafter, the Court shall
render its decisions on the case, adopting, modifying, or rejecting the report in whole or in part,
as the case may be, or the Court may, in its discretion recommit it with instructions, or receive
further evidence.
Section 13. Decision, Maximum Period for Termination of Cases. - Cases brought before
the Court shall be decided in accordance with Section 15, paragraph (1), Article VIII (Judicial
Department) of the 1987 Constitution. Decisions of the Court shall be in writing, stating clearly
and distinctly the facts and the law on which they are based, and signed by the Justices
concurring therein. The Court shall provide for the publication of its decision in the Official
Gazette in such form and manner as may best be adopted for public information and use.
The Justices of the Court shall each certify on their applications for leave, and upon salary
vouchers presented by them for payment, or upon the payrolls under which their salaries are
paid, that all proceedings, petitions and motions which have been submitted to the Court for
determination or decision for a period required by the law or the Constitution, as the case may
be, have been determined or decided by the Court on or before the date of making the
certificate, and no leave shall be granted and no salary shall be paid without such certificate.
Section 14. Effect of decision that tax is barred by statute of limitations. - If the
assessment or collection of any tax is barred by any statute of limitations, the decisions of the
Court that effect shall be considered as its decision that there is no deficiency in respect of
such tax.
Section 15. Publicity of proceedings and publication of decisions. - All decisions of, and
all evidence received by the Court and its divisions, including transcript of stenographic reports
of the hearings, shall be public records open to the inspection of the public, except that after
the decision of the Court in any proceedings has become final the Court may, upon motion of
the taxpayer or the Government permit the withdrawal, by the part entitled thereto of originals
of books, documents and records, and or models, diagrams, and other exhibits, introduced in
evidence before the Court or any division; or the Court may, on its own motion, make such
other disposition thereof as it deems advisable. The Court shall provide for the publication of
(Colossians 3:23)
100
its decisions in the Official Gazette in such form and manner as may be best adopted for public
information and use.
Section 16. Damages. - Where an appeal is found to be frivolous, or that proceedings have
been instituted merely for delay, the Court may assess damage against the appellants in an
amount not exceeding five hundred pesos, which shall be collected in the same manner as
fines or other penalties authorized by law.
Section 17. Violation of penal law. - When, in the performance of its functions, it should
appear to the Court that a crime or other violation of law has been committed, or, that there
are reasonable grounds to believe that any official, employee or private person is guilty of any
crime, offense or other violation, the Court shall refer the matter to the proper department,
bureau or office for investigation or the institution of such criminal or administrative action as
the facts and circumstances of the case may warrant.
Section 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving
matter arising under the National Internal Revenue Code, the Tariff and Customs Code or the
Local Government Code shall be maintained, except as herein provided, until and unless an
appeal has been previously filed with the CTA and disposed of in accordance with the
provisions of this Act.
A party adversely affected by a resolution of a Division of the CTA on a motion for

reconsideration or new trial, may file a petition for review with the CTA en banc.
Section 19. Review by certiorari. - A party adversely affected by a decision or ruling of the
CTA en banc may file with the Supreme Court a verified petition for review on certiorari
pursuant to Rule 45 of the 1997 Rules of Civil Procedure.
Section 20. Appropriation. - The sum of seventy-thousand pesos is hereby appropriated out
of any funds in the National Treasury not otherwise appropriated for the salaries and the
purchase of supplies and equipment necessary for the operation of the Court of Tax Appeals
herein established during the current fiscal year. Thereafter the funds necessary for the
operation of the Court shall be included in the regular Appropriation Act.
Section 21. General provisions. - Whenever the words "Board of Tax Appeals" are used
in Commonwealth Act Numbered Four hundred and seventy, otherwise known as the
Assessment Law, or in other laws, rules and regulations relative thereto, the same shall read
"Board of Assessment Appeals."
The Central Board of Tax Appeals created under section two of Commonwealth Act Numbered
Five hundred and thirty is hereby abolished.
Executive Order Numbered Four hundred and one-A, dated the fifth of January, nineteen
hundred and fifty- one, is repealed and the Board of Tax Appeals created therein, abolished:
Provided, however, That all cases heretofore decided by the said Board of Tax Appeals and
thence appealed to the Supreme Court pursuant to Executive Order Numbered Four hundred
one-A shall be decided by the Supreme Court on the merits to all intents and purposes as if
said Executive Order has been duly enacted by the Congress: And, Provided, further, That all
cases now pending in the said Board of Tax Appeals shall be transferred to the Court of Tax
Appeals and shall be heard and decided by the latter to all intents and purposes as if they had
been originally filed therein.
(Colossians 3:23)
101
Any law or part of law, or any executive order, rule or regulation or part thereon, inconsistent
with the provisions of this Act is hereby repealed.
Section 22. Pending cases to be remanded to Court. - All cases involving disputed
assessment of Internal Revenue taxes or customs duties pending determination before the
Court of First Instance shall be certified and remanded by the respective clerk of court to the
Court of Tax Appeals for final disposition thereof.
Section 23. Separability Clause. - If any clause, sentence, paragraph or part of this act shall
be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect,
impair or invalidate the remainder of this Act, but shall confined in its operations to the clause,
sentence, paragraph or part thereof directly involved in the controversy.
Section 24. This Act shall take effect upon its approval.
Approved: June 16, 1954
(Colossians 3:23)
102
Republic Act (R.A.) No. 9282
March 30 2004
An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank
to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its
Membership, Amending for the Purpose of Certain Sections or Republic Act No. 1125,
as amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for
other purposes
Section 13. Distraint of Personal Property and/or Levy on Real Property. - Upon the
issuance of any ruling, order or decision by the CTA favorable to the national government, the
CTA shall issue an order authorizing the Bureau of Internal Revenue, through the
Commissioner to seize and distraint any goods, chattels, or effects, and the personal property,
including stocks and other securities, debts, credits, bank accounts, and interests in and rights
to personal property and/or levy the real property of such persons in sufficient quantity to
satisfy the tax or charge together with any increment thereto incident to delinquency. This
remedy shall not be exclusive and shall not preclude the Court from availing of other means
under the Rules of Court.
Section 14. Retention of Personnel; Security of Tenure; Upgrading of Positions and

Salaries. - All existing permanent personnel of the CTA shall not be adversely affected by this
Act. They shall continue in office and shall not be removed or separated from the service
except for cause as provided for by existing laws. Further, the present positions and salaries
of personnel shall be upgraded to the level of their counterparts in the Court of Appeals.
Section 15. Transitory Provisions. - In consonance with the above provision, the incumbent
Presiding Judge and Associate Judges shall comprise a Division pending the constitution of
the entire Court.
Section 16. Appropriations. - The amount necessary to carry out the provisions of this Act
shall be included in the General Appropriations Act of the year following its enactment into law
and thereafter.
Section 17. Repealing Clause. - All laws, executive orders, executive issuances or letter of
instructions, or any part thereof, inconsistent with or contrary to the provisions of this Act are
hereby deemed repealed, amended or modified accordingly.
Section 18. Separability Clause. - If for any reason, any section or provision of this Act shall
be declared unconstitutional or invalid, the other parts thereof not affected thereby shall remain
valid.
Section 19. Effectivity Clause - This Act shall take effect after fifteen (15) days following its
publication in at least (2) newspapers of general circulation.
Approved,
FRANKLIN DRILON
President of the Senate
JOSE DE VENECIA JR.

Speaker of the House of Representatives
(Colossians 3:23)
103
This Act which is a consolidation of Senate Bill No. 2712 and House Bill No. 6673 was finally
passed by the Senate and the House of Representatives on December 8, 2003 and February
2, 2004, respectively.
OSCAR G. YABES
Secretary of Senate
ROBERTO P. NAZARENO
Secretary General
House of Represenatives
Approved: March 30 2004
GLORIA MACAPAGAL-ARROYO
President of the Philippines
(Colossians 3:23)
104
Republic Act (R.A.) No. 9503
June 12, 2008
Further amending Sec. 1 and 2 of RA 1125
An Act Enlarging the Organizational Structure of the Court of Tax Appeals, Amending
for the Purpose Certain Sections of the Law Creating the Court of Tax Appeals, and for
Other Purposes
Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:
SECTION 1. Section 1 of Republic Act No. 1125, as amended, is hereby further amended to
read as follows:
"SECTION 1. Court; Justices, Qualifications; Salary; Tenure. - There is hereby created a Court
of Tax Appeals (CTA) which shall be of the same level as the Court of Appeals, possessing
all the inherent powers of a Court of Justice, and shall consist of a Presiding Justice and eight
(8) Associate Justices. The incumbent Presiding Judge and Associate Judges shall continue
in office and bear the new titles of Presiding Justice and Associate Justices. The Presiding
Justices and the two (2) most Senior Associate Justices, all of whom are incumbent, shall
serve as chairmen of the three (3) Divisions. The other three (3) incumbent Associate Justices
and the three (3) additional Associate Justices shall serve as members of the Divisions. The
additional three (3) Justices as provided herein and the succeeding members of the Court
shall be appointed by the President upon nomination by the Judicial and Bar Council. The
Presiding Justice shall be so designated in his appointment, and the Associate Justices shall
have precedence according to the date of their respective appointment or when the
appointments of two (2) or more of them shall bear the same date, according to the order in
which their appointments were issued by the President. They shall have the same
qualifications, rank, category, salary, emoluments and other privileges, be subject to the same
inhibitions and disqualifications, and enjoy the same retirement and other benefits as those
provided for under existing laws for the Presiding Justice and Associate Justices of the Court
of Appeals.
"Whenever the salaries of the Presiding Justice and the Associate Justices of the Court of
Appeals are increased, such increases in salaries shall be deemed correspondingly extended
to and enjoyed by the Presiding Justice and Associate Justices of the CTA.
"The Presiding Justice and Associate Justices shall hold office during good behavior, until they
reach the age of seventy (70), or become incapacitated to discharge the duties of their office,
unless sooner removed for the same causes and in the same manner provided by law for
members of the judiciary of equivalent rank."
SEC. 2. Section 2 of the same Act, as amended, is hereby further amended, to reach as
follows:
"SEC. 2. Sitting En Banc or Division; Quorum; Proceedings. - The CTA may sit en banc or in
three (3) Divisions, each Division consisting of three (3) Justices.
"Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for
sessions of a Division. Provided, That when the required quorum cannot be constituted due
to any vacancy, disqualification, inhibition, disability, or any other lawful cause, the Presiding
Justice shall designate any Justice of other Divisions of the Court to sit temporarily therein.
(Colossians 3:23)
105
"The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse
a decision of a Division but a simple majority of the Justices present necessary to promulgate
a resolution or decision in all other cases or two (2) members of a Division, as the case may
be, shall be necessary for the rendition of a decision or resolution in the Division Level."
SEC. 3. Appropriations. - The amount of Twenty million pesos (20,000,000.00) necessary to

carry out the provisions of this Act shall be appropriated immediately to be generated from
whatever source that are available in the National Treasury, based on a special supplemental
budget to be submitted to the Department of Budget and Management (DBM) which shall not
exceed the herein appropriation.
SEC. 4. Repealing Clause. - All laws, executive orders, executive issuances or letters of
instruction or any part thereof inconsistent with or contrary to the provisions of this Act are
hereby deemed repealed, amended or modified accordingly.
SEC. 5. Separability Clause. - If, for any reason, any section or provision of this Act shall be
declared unconstitutional or invalid, the other parts thereof not affected thereby shall remain
valid.
SEC. 6. Effectivity Clause. - This Act shall take effect after fifteen (15) days following its
publication in at least two (2) newspapers of general circulation.
Approved,
(Sgd.) PROSPERO C. NOGRALES

Speaker of the House of Representatives
(Sgd.) MANNY VILLAR

President of the Senate
This Act which is a consolidation of House Bill No. 1890 and Senate Bill No. 2009 was finally
passed by the House of Representative and the Senate on April 22, 2008 and March 12, 2008,
respectively.
(Sgd.) MARILYN B. BARUA-YAP

Secretary General
House of Represenatives
(Sgd.) EMMA LIRIO-REYES

Secretary of Senate
Approved: June 12, 2008
(Sgd.) GLORIA MACAPAGAL-ARROYO

President of the Philippines
(Colossians 3:23)
106

Taxpayer's Quick Guide in Disputing BIR Tax Assessment: By: Ernesto "Jon" Dayao, Jr. END Tax Notes

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Taxpayer’s Quick Guide in Disputing BIR Tax Assessment

By: Ernesto “Jon” Dayao, Jr. END Tax Notes

LOA is valid only for 30 days from the

BIR fieldwork/walkthrough should be

Notice of Informal Conference shall be

Protest to the PAN and supporting

Protest to the FAN should be submitted

Issuance of Final Decision on Disputed If the protest of the taxpayer is denied in

In case the protest of the taxpayer is

An assessment "refers to the determination of amounts due from a person obligated

2. When does the assessment process starts?

d. When taxes are due but no return is filed.

5. When does the BIR audit process begin?

6. What is a Letter of Authority (LOA)?

7. Differentiate Letter of Authority (LOA) from Letter Notice (LN).

Letter of Authority (LOA) Letter Notice (LN)

198941 November 9, 2016.

8. Explain the so-called RELIEF System

“Preprocessed” RELIEF data refer to historical data on Summary List of Purchases

Company A bought goods from Company B for P100 (VAT exclusive)11

SLS (Company A) = 100

SLS (Company A) = 112

10. Can a Letter Notice (LN) replace a Letter of Authority (LOA)/e-LOA?

11. Is it possible to convert an LN into a LOA/e-LOA?

b. Deputy Commissioners; and

Investigating Office Approving Official

LTS18 and its Division Assistant Commissioner (ACIR) – LTS

ES19 and its Division Deputy Commissioner – Legal and

15. Who has the authority to serve the LOA/e-LOA?

16. Is the issuance of a manually-prepared LOA still valid?

Section C of RMO No. 43-90 provides that:

“A Letter of Authority [LOA] should cover a taxable period not

198941 November 9, 2016.

19. What is the prescribed period in serving the e-LOA?

20. Procedures in revalidating e-LOA.

21. Is the issuance of a “Revalidation Notice” valid?

25 Revenue Memorandum Order (RMO) No. 43-90

The LOA/e-LOA will not be invalidated in case the audit/examination of the RO

25. How to spot a defective e-LOA

a) Determine if the period under audit/examination is specifically and expressly

b) Check the authority of the signatory of the e-LOA.

In case the taxpayer spots any of the above-mentioned instances, it is appropriate to

b) If the LOA/e-LOA was served beyond the 30-day mandatory period.37

28. Can a taxpayer be audited for 3 consecutive years?

As a general rule, taxpayers should be audited for 2 consecutive years only.

Insurance Corp. v. CIR, CTA EB Case No. 1223, January 4, 2016.

29. What is the period of limitation to assess?

30. What are the exceptions to the period of limitation to assess?

• The exceptions to the law on prescription should perforce be strictly

For the purpose of safeguarding taxpayers from any unreasonable

• Section 222(a) of the NIRC of 1997 should be interpreted to mean a

In the case of Pacifichub Corp. v. Commissioner of Internal Revenue,42 the

40 Sec. 203 of the NIRC, as amended

3. Failure to file a return;

Which is strengthened immeasurably by the last portion of the provision that

As held in the case of Commissioner of Internal Revenue vs. Arturo Tulio,44

(1) When a false return is filed,

(2) When a fraudulent return is filed with intent to evade tax or

(3) When there is failure to file a return.

• Difference between "false return" and "fraudulent return"

That there is a difference between "false return" and "fraudulent return"

• A prescribed return cannot be used as a basis for a tax evasion case

• There is no probable cause to indict a taxpayer if there was no clear