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  • CIR v. La Flor Case Digest

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    The CIR issued deficiency withholding tax assessments against La Flor in 2009. However, the Court of Tax Appeals cancelled the assessments because the waivers extending the period of assessment failed to specify the kind and amount of tax as required. The CIR argued the waivers were still valid and the prescriptive period did not apply to deficiency withholding tax liabilities. However, the Supreme Court ruled that the waivers were invalid for lack of tax specification and that deficiency withholding tax liabilities were taxes, not penalties, so the prescriptive period did apply.

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    CIR v. La Flor case digest

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    The CIR issued deficiency withholding tax assessments against La Flor in 2009. However, the Court of Tax Appeals cancelled the assessments because the waivers extending the period of assessment failed to specify the kind and amount of tax as required. The CIR argued the waivers were still valid and the prescriptive period did not apply to deficiency withholding tax liabilities. However, the Supreme Court ruled that the waivers were invalid for lack of tax specification and that deficiency withholding tax liabilities were taxes, not penalties, so the prescriptive period did apply.

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    90 views1 page

    CIR v. La Flor Case Digest

    Uploaded by

    laurence obaob
    The CIR issued deficiency withholding tax assessments against La Flor in 2009. However, the Court of Tax Appeals cancelled the assessments because the waivers extending the period of assessment failed to specify the kind and amount of tax as required. The CIR argued the waivers were still valid and the prescriptive period did not apply to deficiency withholding tax liabilities. However, the Supreme Court ruled that the waivers were invalid for lack of tax specification and that deficiency withholding tax liabilities were taxes, not penalties, so the prescriptive period did apply.

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    © All Rights Reserved
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    of 1

    COMMISSIONER OF INTERNAL REVENUE (CIR) v. LA FLOR DELA ISABELA, INC.

    G.R. No. 211289, January 14, 2019


    SECOND DIVISION, J. REYES, JR

    Validity of waiver of prescription; Withholding agent’s liability for deficiency tax

    Requirements under RMO No. 20-90 governing the execution of waivers on the prescription
    of tax assessment (including that the kind and amount of tax due be specified) are
    mandatory and must be strictly followed.

    Withholding tax at source is a procedure of collecting income tax wherein the withholding
    agent is merely a tax collector (on behalf of the government) and not itself the taxpayer.
    The agent is not liable for the tax (as he earned no income), but is personally liable only
    insofar as he failed in his duty to withhold the correct amount of taxes and remit it to the
    government.

    On November 2009, the CIR issued assessment notices against La Flor for the latter’s 2005
    deficiency withholding tax liabilities. Upon La Flor’s protest, the Court of Tax Appeals
    cancelled the assessments for having been barred by prescription finding that the waivers
    supposedly extending the period of assessment failed to specify the kind and amount of tax
    involved.

    CIR argued that (a) lack of specification of kind and amount of taxes does not affect the
    validity of the waivers; and (b) even assuming it does, the prescriptive periods for tax
    assessments does not, anyway, apply to liabilities for deficiency withholding taxes since the
    latter are in the nature of penalties.

    Were the waivers valid?

    NO.

    A waiver of the statute of limitations is a bilateral agreement between the taxpayer and the
    BIR to extend the period to assess or collect deficiency taxes on a certain date. Logically,
    there can be no agreement if the kind and amount of the taxes to be assessed or collected
    were not indicated. Hence, specific information in the waiver is necessary for its validity.

    Are liabilities for deficiency withholding taxes penalties?

    NO.

    While the liability of the withholding agent is distinct and separate from the tax liability of
    the income earner (i.e. for failing in its duty to correctly collect and remit and not as itself a
    taxpayer); nevertheless the tax deficiencies assessed of and paid by the agent remain to be
    taxes, not penalties. Withholding tax assessments contemplate “deficiency internal revenue
    taxes.” Their aim is to collect unpaid income taxes and not merely to impose a penalty on
    the withholding agent for its failure to comply with its statutory duty.

    Withholding taxes do not cease to become income taxes just because it is collected and paid
    by the withholding agent.

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