Mendoza, Joven A.

2018400124 – Tax 1 – 3S

Until just recently, the prevailing rules on the proper execution of the waiver of the Statute of
Limitations under the National Internal Revenue Code of the Philippines (Tax Code) can be
found in Revenue Memorandum Order (RMO) 20-90 of the Bureau of Internal Revenue (BIR). In
the landmark case of Philippine Journalists, Inc. v. Commissioner of Internal Revenue (G.R. No.
162852, 16 December 2004), the Supreme Court (SC) gave a stringent interpretation of RMO
20-90, requiring faithful compliance with its requirements for a waiver to be valid. The court
ruled that since a waiver to extend the period for the BIR to issue an assessment and collect
taxes “is a derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations, waivers of this kind must be carefully and strictly construed.”

Recently however, the Supreme Court adjusted its stance. In the case of CIR vs Next Mobile,
Inc., G.R. No. 212825 dated Dec. 29, 2015, the high court laid down exceptions to the rule. In
this case, the BIR and the corporate taxpayer were considered in pari delicto or in equal fault,
and the Court deemed it more equitable to allow BIR’s lapses to pass (mentioning that proper
administrative sanctions could be imposed on the negligent BIR officials). Consequently, the
validity of the waivers were upheld in support of the principle that tax collection is the lifeblood
of the state. Since the taxpayer was also at fault, it was not allowed to benefit from its own
wrongdoing by invalidating the signed waivers. For failure to raise any objections, the taxpayer
was estopped from questioning the validity of the waivers. 

In parallel with this SC decision, the BIR found it high time to repeal RMO 20-90. Thus, on April
4, the BIR issued RMO 14-2016, providing a new set of rules on executing waivers. Under the
new relaxed rules, the waiver may be, but not necessarily in the form prescribed by RMO 20-90
or the related Revenue Delegation Authority Order No. 05-01. The taxpayer’s failure to follow
the prescribed forms will not invalidate the executed waiver, as long as the following minimum
conditions are complied with:
1. The waiver of the Statute of Limitations shall be executed before the expiration of
the period to assess or to collect taxes. The date of execution shall specifically be
indicated in the waiver.

2. 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.

3. The expiry date of the period agreed upon to assess/collect the tax after the regular
three-year period of prescription should be indicated. 

In addition, the taxpayer is now charged with the burden of ensuring that the waivers are
validly executed by its authorized representatives. The BIR no longer requires that the
delegation of authority to a representative be in writing and notarized. This means that it is
presumed that the person signing has the authority to do so. Thus, the taxpayer is now
estopped from questioning the authority of its representative who signed the waiver. Also, the
waiver itself need not be notarized. It is sufficient that they be in writing to produce legal effect
and to bind the taxpayer upon its execution. The apparent departure from RMO 20-90 is the
previous requirement that only the authorized revenue officials are allowed to accept the
waiver. With the new relaxed rules, the group supervisor as designated in the Letter of
Authority or Memorandum of Assignment can accept the waiver. Further, the date of
acceptance of the signed waiver by the BIR is no longer required to be indicated. RMO 14-2016
only considers two material dates: 1) the date of the execution of the waiver by the taxpayer or
its authorized representative; and 2) the expiry date of the period the taxpayer waives the
statute of limitations. 

Even under the old rules, taxpayers must consider carefully whether or not they should execute
waivers to extend the prescriptive period. Now, with these new relaxed rules that lean in favor
of the BIR, the decision should be weighed more carefully because once signed, waivers can no
longer be challenged.

While it would seem unfair for the BIR to change a long-standing rule to its advantage, it is but
proper since the Commissioner, under the Tax Code, is vested with powers, not only to assess
and collect taxes, but also to prescribe additional requirements for tax administration and
enforcement. This means that the Commissioner has the power to make, amend or repeal
rulings he may deem necessary for the proper implementation and interpretation of the tax
laws.

With the enactment of RMO 14-2016, the BIR would seem to always win. As for the taxpayers,
however, the law may be harsh, but like players in a game of poker, they will have to play by
the rules