JER Remedies Lecture

Taxpayers Rights &
Remedies
► Atty. Jules E. Riego, J.D. LLM.
► Principal, Business Tax Services
► jules.e.riego@ph.ey.com
► 07 October 2016
► UP College of Law
DISCUSSION OUTLINE
► Tax Assessment Process
► Due process requirements in the issuance of Preliminary
Assessment Notice (PAN) and Final Assessment Notice
(FAN)
► Periods to protest the PAN and FAN
► Reinvestigation vs. Reconsideration
► Deficiency Interest vs. Delinquency Interest
► Jurisdiction of the CTA
► Prescriptive Period for Claims for Refund
► Selected Cases
Pre-Bar Lecture in Taxation: Taxpayers Rights and Remedies

ASSESSMENT PROCESS – NATIONAL
INTERNAL REVENUE TAXES

Basic Assessment Process in a Nutshell –
Administrative Proceedings A
15 days to file
Position Paper 60 days to submit documents
BIR issues CIR or Appeal to the

BIR issues Final Submission
BIR issues representative CTA within 30
Preliminary Assessment Protest
Letter of of Documents denies protest days from
Assessment Notice (FAN) /
Authority Letter within 180 denial of
Notice (PAN) Formal Letter days protest
of Demand
30 days to file Protest
180 days to decide
► If there is a Request for Reinvestigation

Basic Assessment Process in a Nutshell –
Administrative Proceedings B
15 days to file
Position Paper
BIR issues CIR or Appeal to the

BIR issues Final
BIR issues representative CTA within 30
Preliminary Assessment Protest
Letter of denies protest days from
Assessment Notice (FAN) /
Authority Letter within 180 denial of
Notice (PAN) Formal Letter days protest
of Demand
30 days to file Protest

180 days to decide
► If there is a Request for Reconsideration

Importance of Tax Audit or Investigation

Can BIR dispense with own investigation; rely on
plunder case to prove willful failure to pay taxes?
Spouses Joseph Ejercito Estrada and Luisa P. Ejercito vs. CIR
CTA (Second Division) Case 7847 promulgated 23 November 2015
• BIR assessed the spouses Joseph Estrada and Luisa

Ejercito (“the Estradas”) for deficiency income tax for taxable
1 year 1999. The assessed amount was based on the findings
of the Sandiganbayan that Estrada owned the Jose Velarde
account and its judgment that he was guilty of plunder.
• The Estradas protested the assessment and upon denial of

2 its protest by the CIR, filed a Petition for Review at the CTA.
• At the CTA, the Estradas argued, among others, that the BIR
3 did not accord them due process when it merely adopted the
decision of the Sandiganbayan and applied it to resolve a tax
issue.
Taxpayers Rights & Remedies

Can BIR dispense with own investigation; rely on
plunder case to prove willful failure to pay taxes?
CTA (Second Division) Case 7847 promulgated 23 November 2015
• The CIR insisted that she did not rely on the

Sandiganbayan’s decision which is a mere contingency
4 that paved the way for the FAN. The CIR also argued
that they initiated an investigation, which was
suspended pending the resolution of the
Sandiganbayan case.
Issue:
Can the BIR merely rely on the findings of the Sandiganbayan to determine
the tax liability of the Estradas?

Tax assessment cannot be sustained without vital
documents from which the CTA can verify its correctness

Ruling:
► No. Section 228 of the Tax Code requires that the taxpayer shall be informed in
writing of the law and the facts on which the assessment is made. Otherwise, the
assessment is void.
► The CTA found that the basis of the Estradas’ alleged deficiency tax arose from
the investigation and findings of another tribunal. The BIR’s Legal and
Enforcement Group admitted basing their recommendation on the
Sandiganbayan’s decision on the plunder case and concluded that the Estradas
have willfully and intentionally failed to report taxable receipts and acquisition of
assets in violation of the Tax Code.
► The BIR should have conducted an independent investigation in the determination

of the amount of deficiency taxes due the taxpayers and not merely rely on the
findings of another agency or tribunal. In the absence of vital documents from
which the CTA can verify the correctness of the assessment, the deficiency
income tax assessment cannot be sustained.
Modes of Service of Assessment Notice
RR No. 18-2013 (Cont.)
► The notices to the taxpayer herein required, i.e. PAN, FLD/FAN, and FDDA,
may be served by the CIR or his authorized representative through the
following modes:
1. Personal service
2. Substituted service
3. Service by mail
4. Service to authorized tax practitioner
Taxpayer’s Rights & Remedies

Modes of Service of Assessment Notices
Personal Service
RR No. 18-2013 (Cont.)
► 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.
► In case personal service is not practicable, the notice shall be
served by substituted service or by mail.

Substituted Service
RR No. 18-2013 (Cont.)
► Substituted service – can be resorted when the party is not present at the
registered or known address under the following circumstances:
1. Notice may be left at the party’s registered address, with his clerk
or with a person having charge thereof;
2. If 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;
3. If known address is the place of residence, the notice may be left
with a person of legal age residing therein;
4. If no person is found in the party’s registered or known address,
the revenue officers concerned shall bring a barangay official and
2 disinterested witnesses to the address so they may personally
observe and attest to such absence
Substituted Service
RR No. 18-2013 (Cont.)
► The notice shall 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 shall bring a
barangay official and 2 disinterested witnesses in the presence of the
party so that they may personally observe and attest to such act of refusal.
► Disinterested witnesses are persons of legal age other than employees of

the BIR.

Service by Mail
RR No. 18-2013 (Cont.)
► 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 10 days, if undelivered.
► A copy of the notice may also be sent through a 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.

Service by Mail
RR No. 18-2013 (Cont.)
► 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 details of the transaction shall
constitute sufficient proof of mailing and shall be attached to the case
docket.

Service to Tax Practitioner
RR No. 18-2013 (Cont.)
► Service to the tax 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.

Service of Notices
Can the BIR legally add other modes of service of
notices other than personal service and registered
mail?
Section 228
"Within a period to be prescribed by implementing
rules and regulations, the taxpayer shall be required
to respond to said notice. If the taxpayer fails to
respond, the Commissioner or his duly authorized
representative shall issue an assessment based on
his findings.”

Service of PAN
► Is the service of the PAN absolutely required?
► If the FAN was served before the taxpayer is able

to answer the PAN, is the FAN void?
► If the PAN and FAN was served at the same

time, is there substantial compliance with due
process?
► If the PAN did not state the facts and the law on
which the assessment is based, is the FAN void?
Service of PAN
Section 228
“When the Commissioner or his duly authorized representative finds that proper
taxes should be assessed, he shall first notify the taxpayer of his findings:
Provided, however, That a preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in
the computation of the tax as appearing on the face of the return; 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.
Service of PAN is required to comply with due process
requirements
► Commissioner of Internal Revenue vs. Metro Star Superama, Inc.
G.R. No. 185371 promulgated December 8, 2010:
► Section 228 of the Tax Code clearly states that a PAN be sent to the
taxpayer where the latter is informed that he is liable for deficiency
taxes. He must be informed of the facts and the law upon which the
assessment is made. This is a substantive and not merely a formal,
requirement.
► This is confirmed under the provisions Revenue Regulations No. 12-

99 of the BIR, which requires the sending of a PAN to taxpayer to
inform him of the assessment. Under RR 12-99, the PAN is 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. The use of the word “shall”
in RR 12-99 describes the mandatory nature of the service of a PAN.
When BIR has Actual Knowledge of Change of Address,
Service of Notices must be sent in that Address
CIR vs. v Basf Coating + Inks Phils., Inc. Supreme Court (Third Division),
G.R. No. 198677 promulgated November 26, 2014
► In January 2003, the BIR sent by registered mail a Final Assessment Notice
(FAN) to Basf Coating + Inks Phils., Inc. (BCIPI) for deficiency tax liabilities
for the taxable year 1999. The FAN was sent to BCIPI’s former Las Piñas
City address. The BIR also sent a “Notice Before Issuance of Warrant of
Distraint and Levy” to the residence of one of BCIPI’s directors in March
2004.
► BCIPI protested the FAN on the grounds of lack of due process and
prescription. As the CIR failed to act on the protest, BCIPI filed a Petition
for Review with the CTA.

FAN sent by the BIR to a wrong address of the taxpayer is
not deemed received and cannot attain finality
CIR vs. v Basf Coating + Inks Phils., Inc. (Cont.)
► The CTA ruled in favor of BCIPI and cancelled the assessments. The CTA
found that the BIR was actually aware of BCIPI’s new address and that the
CIR’s failure to send the FAN to BCIPI’s new address must not be taken
against BCIPI. Since there were no valid notices sent to BCIPI, the
assessments made against it were void.
► The CIR appealed to the Supreme Court and argued that the prescriptive
period to assess under Sections 203 and 222 of the Tax Code was
suspended when BCIPI failed to notify the CIR, in writing, of its change of
address, pursuant to Section 223 of the Tax Code, as implemented by
Section 11 of Revenue Regulations (RR) No. 12-85.

Was there a valid issuance of the FAN by the CIR?
► No, BCIPI is not liable for deficiency taxes because there was no valid
issuance of the FAN by the CIR.
► Section 223 in relation to Section 203 of the Tax Code prescribes that if the
taxpayer cannot be located in the address given by him in the return filed
upon which a tax is being assessed or collected, the three-year prescriptive
period for assessment will be suspended. If the taxpayer informs the CIR of
any change in address, the running of the prescriptive period will not be
suspended.

► Section 11 of RR No. 12-85, on the other hand, provides that in case of

change of address, the taxpayer must give a written notice to the RDO
having jurisdiction over his former legal residence and/or place of
business. In case of failure to provide notice, any communication
previously sent to his former legal residence or business address as
appearing in its tax returns for the period involved shall be considered valid
and binding, for purposes of the period within which to reply.
► However, the foregoing provisions apply only if the CIR is not aware of the
whereabouts of the taxpayer.

► The CIR is well aware that BCIPI had moved to its new address in
Calamba, Laguna, as shown by documents which form part of the BIR’s
records. All of the documents were accomplished and signed by officers of
the BIR, clearly show that BCIPI’s address is at Carmelray Industrial Park,
Canlubang, Calamba, Laguna.
► Moreover, the CTA found that BIR officers, at various times prior to the
issuance of the FAN, conducted its investigation of BCIPI’s 1999 tax
liabilities at BCIPI’s new address in Laguna, as evidenced by a September
27, 2001 letter signed by Revenue Officer (RO) Eugene R. Garcia and the
Final Request for Presentation of Records before Subpoena Duces Tecum
dated March 20, 2002.

The simultaneous receipt of the PAN and FAN violates
the right to due process
► Commissioner of Internal Revenue vs. Yumex Philippines
Corporation CTA (En Banc) Case 1139 promulgated August 11, 2015
► Petitioner CIR assessed Respondent Yumex Philippines Corporation

(YPC) for alleged deficiency income tax, fringe benefits tax, and
Improperly Accumulated Tax (IAET) for taxable year 2007. YPC paid
the deficiency income tax and fringe benefits tax assessments but
continued to protest the IAET assessment arguing that it is not subject
to IAET since it is a PEZA-registered enterprise.
► The CIR denied the protest and issued a Final Decision on Disputed
Assessment reiterating the deficiency IAET assessment. YPC filed a
Petition for Review with the CTA. In its Petition for Review, YPC
alleged that it received on the same day both the Preliminary
Assessment Notice (PAN) dated December 16, 2010 and the Formal
Assessment Notice (FAN) dated January 10, 2011.
The simultaneous receipt of the PAN and FAN violates
the right to due process
► Commissioner of Internal Revenue vs. Yumex Philippines
Corporation CTA (En Banc) Case 1139 promulgated August 11, 2015
► Yes. The CIR violated due process requirements in issuing the

subject assessment by depriving YPC of the 15-day period within
which to answer the PAN. FAN was VOID.
► The CTA En Banc sustained the Third Division and ruled that the
irregular issuance of the PAN and FAN was in fact raised as an issue
in YPC’s pleadings. The CIR ignored fairness when she did not
provide YPC the opportunity to contest the issued PAN. For lack of
said opportunity, there was a violation of the taxpayer’s right to due
process.

Issuance of Final Assessment Notice
RR No. 18-2013 (Cont.)

► In case of failure to respond within 15 days from receipt of the PAN:
► Taxpayer shall be considered in default and a Formal Letter of

Demand and Final Assessment Notice (FLD/FAN) shall be
issued for assessment of the deficiency tax liability, inclusive of
applicable penalties.
► If the taxpayer, within 15 days from receipt of the PAN, responds that he
disagrees with the assessment findings:
► An FLD/FAN shall be issued within 15 days from filing of the

response for payment of the deficiency taxes, inclusive of
applicable penalties.

The Formal Letter of Demand (FLD) sent to taxpayer
must include an Formal Assessment Notice (FAN)
Derek Arthur P. Ramsay vs. CIR
CTA (Third Division) Case 8456 promulgated September 17, 2015
• CIR issued a PAN against Derek Arthur P. Ramsay for alleged
1 deficiency income tax and VAT for 2006 to 2009.
• Ramsay protested the PAN, arguing that he did not receive any
Letter of Authority and that he filed his tax returns for the covered
2 years in October 2010, wherein he paid the corresponding penalties
for late filing.
• On January 4, 2012, the BIR issued the Formal Letter of Demand
(FLD) and on February 20, 2012, a Final Demand Letter was issued
3 demanding payment of the assessed deficiency taxes.
• On February 21, 2012, Ramsay protested the FLD arguing that
4 since no notice of assessment was issued, the FLD was illegal.
• He argued that he was denied due process when the BIR only sent
the FLD with details of discrepancy without the Assessment
5 Notice.

An FLD without an Assessment Notice cannot be
enforced
Ramsay vs. CIR (Cont.)
Was Ramsay denied due process when he was only served with a
FLD without an Assessment Notice?
Ruling:
► Yes. A Formal Letter of Demand without the corresponding
Assessment Notice cannot be validly enforced on a taxpayer. Section
228 of the Tax Code provides that the taxpayer shall be informed in
writing of the law and facts on which the assessment is made.
Otherwise, the assessment is void.
► Due process requires that not only the FLD be sent to the taxpayer
but it must indicate an assessment notice, which is a “notice to the
effect that the amount therein stated is due as tax” with a demand for
payment thereof.

An assessment notice must mention a definite time
when payment was due and demandable
Ramsay vs. CIR (Cont.)
► What was stated in the FLD were (1) computation and tabulations of
the alleged deficiency taxes due, together with interest, surcharge,
penalty, and their respective basis; (2) a request to pay the deficiency
taxes through the duly authorized agent bank; and (3) a note that the
interest and the total amount due shall be adjusted if paid beyond
February 8, 2012.
► These statements do not amount to an Assessment Notice as there

was no mention of a definite time when payment was due and
demandable.

Protesting an Assessment
Contents of a Valid Protest
RR No. 18-2013 (Cont.)
► The taxpayer shall state in his protest:
1. 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;
2. Date of the assessment notice; and
3. 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. (THIS HAS NO LEGAL BASIS).

A taxpayer protesting the assessment may file a request for
reinvestigation or reconsideration
RR No. 18-2013
► 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.
► 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.
(Commissioner of Internal Revenue vs. Philippine Global Communication, G.R.

No. 167146, October 31, 2006; Royal Bank of Scotland Phil. Inc. vs.
Commissioner of Internal Revenue, CTA EB Case No. 446, October 23, 2009)

60 days to submit supporting documents in request for
reinvestigation
RR No. 18-2013 (Cont.)
► Request for reinvestigation – it tolls the BIR’s 5-year prescriptive period to

collect provided the request is granted by the BIR. Request for
reconsideration does not toll prescriptive period to collect.
- the taxpayer shall submit all relevant supporting documents in support of the
protest within 60 days from date of filing of the letter protest. Otherwise, the
assessment shall become FINAL.
NOTE: In Revenue Memorandum Order 26-2016 dated June 13, 2016, BIR
said that failure to submit documents within 60-day period will make the FAN
final, demandable and executory. This has no legal basis
► The term ‘relevant supporting documents’ refers to those documents

necessary to support the legal and factual bases in disputing a tax
assessment, as determined by the taxpayer.
Additional Guidelines in Handling Disputed Assessments
RMO 26-2016 (Cont.)
► FAN shall become final, executory and demandable due to:
a. Failure to file a valid protest within 30 days from receipt of the

FLD/FAN
b. Failure to submit all relevant documents in support of his
protest by way of a request for reinvestigation within 60 days
from the date of filing thereof; (THIS HAS NO LEGAL BASIS)
c. Failure to appeal to the CIR or the CTA within 30 days from
receipt of the FDDA issued by the CIR’s duly authorized
representative;
d. Failure to appeal to the CTA within 30 days from the date of
receipt of the FDDA issued by the Commissioner;
e. Failure to appeal to the CTA within 30 days from receipt of
decision on the MR filed before the CIR
Additional Guidelines in Handling Disputed Assessments
RMO 26-2016 (Cont.)
► Assessment shall become final, executory and demandable due

to:
e. Failure to timely file a motion for reconsideration or new trial

before the CTA Division or failure to appeal to the CTA En Banc
and SC based on existing Rules of Procedure; or
f. Failure 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
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
1905 (Application for Registration Information Update).

Taxpayer’s remedies if protest to FAN is denied by CIR
representative on or before the lapse of the 180-day period
RR No. 18-2013 (Cont.)
► If the protest is denied (in whole or in part) by the CIR’s duly authorized
representative, the taxpayer may either:
1. Appeal or file a Petition for Review with the CTA within 30 days
from date of receipt of the decision; or
2. File a request for reconsideration with the CIR within 30 days

from date of receipt of the said decision.
► No request for reinvestigation shall be allowed in administrative appeal with

the CIR.
► Only issues raised in the decision of the CIR’s duly authorized
representative shall be entertained by the CIR.

Taxpayer’s remedies if protest to FAN not acted upon within
180 days by CIR’s representative
RR No. 18-2013 (Cont.)
► If the protest is not acted upon by the CIR’s duly authorized representative
within 180 days from filing of the protest in case of a request
reconsideration, or 180 days from submission by the taxpayer of the
required documents in case of a request for reinvestigation, the taxpayer
may 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 CIR’s duly authorized representative

on the disputed assessment, and appeal to the CTA within 30
days from receipt of the decision.
Taxpayer’s remedy if protest or administrative appeal is
denied by CIR himself
RR No. 18-2013 (Cont.)
► If the protest to the FAN or administrative appeal, as the case may be, is
denied (in whole or in part) by the CIR himself, the taxpayer may appeal to
the CTA within 30 days from date of receipt of the said decision.
► Otherwise, the assessment shall become final, executory and demandable.
► A Motion for Reconsideration on the CIR’s denial of the protest or

administrative appeal shall not toll the 30-day period to appeal to the CTA.

Taxpayer’s remedies if protest or administrative appeal not
acted upon by CIR himself.
RR No. 18-2013 (Cont.)
► If the protest or administrative appeal is not acted upon by the CIR himself
within 180 days from the date of filing of the protest, the taxpayer may
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 CIR on the disputed assessment

and appeal such final decision to the CTA within 30 days after the
receipt of the decision.

Taxpayer’s option is mutually exclusive: Appeal to CTA or
await decision of CIR
RR No. 18-2013 (Cont.)
► 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 expiration of the 180-day period, or (2) await the final
decision of the CIR or his duly authorized representative and appeal such
final decision to the CTA within 30 days after the receipt of a copy of such
decision is mutually exclusive.
► Resort to one option bars the application of the other.
(Spouses Evono vs. Department of Finance, Commissioner of Internal

Revenue and Republic of the Philippines, CTA Case EB No. 705
promulgated June 4, 2012)

Issuance of the Final Decision on Disputed Assessment
(FDDA)
RR No. 18-2013 (Cont.)
► Final Decision on Disputed Assessment (FDDA) – The decision of the

Commissioner or his duly authorized representative shall state the
following:
1. Facts, the applicable law, rules and regulations or jurisprudence

on which such decision is based, otherwise, the decision shall be
VOID; and
2. That the same is his final decision.

Effect of a void FDDA on the tax assessment
Commissioner or Internal Revenue (CIR) vs. Liquigaz Philippines

Corporation / Liquigaz Philippines Corporation vs. CIR
G.R. No. 215534/G.R. No. 215557, April 18, 2016
• Liquigaz was assessed for EWT, FBT and WTC for taxable year
2005. Liquigaz accordingly received a copy of the LOA in 2006 and
1 the corresponding PAN and FLD/FAN in 2008.
• Liquigaz filed its protest against the FLD/FAN and subsequently filed
a Petition for Review with the CTA after receiving the FDDA denying
2 its protest on July 1, 2010.
• In 2012, the CTA Division, while maintaining the WTC assessment,

cancelled the EWT and FBT assessments noting that unlike the PAN
and the FLD/FAN, the FDDA issued did not provide the details
3 thereof, hence, Liquigaz had no way of knowing what items were
considered by the CIR in arriving at the deficiency assessments. The
CTA En Banc affirmed the decision of the CTA Division.

Effect of a void FDDA on the tax assessment
Assessment vs. Decision
Commissioner of Internal Revenue (CIR) vs. Liquigaz (Cont.)
• The CTA En Banc affirmed the decision of the CTA Division.

4
Is the CTA correct in cancelling the EWT and FBT assessments due to a
void FDDA?
 No. The CTA erred in cancelling the EWT and FBT assessments. In
resolving the issue on the effects of a void FDDA, the SC noted that it is
necessary to differentiate an “assessment” from a “decision.” Citing a 1958
case, the SC explained that:

The nullity of an FDDA does not result in the nullification
of the entire assessment
Commissioner or Internal Revenue (CIR) vs. Liquigaz (Cont.)
 Assessment vs. Decision
“An assessment becomes a disputed assessment after a taxpayer has

filed its protest to the assessment in the administrative level.
Thereafter, the CIR either issues a decision on the disputed
assessment or fails to act on it and, is, therefor, considered denied.
The taxpayer may then appeal the decision on the disputed
assessment or the inaction of the CIR. As such, the FDDA is not the
only means that the final tax liability of a taxpayer is fixed, which may
then be appealed by the taxpayer. xxx”
 Clearly, a decision of the CIR on a disputed assessment differs from

the assessment itself. Hence, the invalidity of one does not
necessarily result in the invalidity of the other – unless the law or
regulations otherwise provide.

The nullity of an FDDA does not result in the nullification
of the entire assessment
Commissioner of Internal Revenue (CIR) vs. Liquigaz (Cont.)
► Section 228 of the NIRC provides that an assessment shall be void if

the taxpayer is not informed in writing of the law and the facts on
which it is based. It is, however, silent with regard to a decision on a
disputed assessment by the CIR which fails to state the law and the
facts on which it is based.
► This void is filled by RR 12-99 where it is stated that the failure of the
FDDA to reflect the facts and the law on which it is based will make
the decision void. It, however, does not extend to the nullification of
the entire assessment.

Void FDDA is tantamount to a denial by inaction by the
CIR
Commissioner or Internal Revenue (CIR) vs. Liquigaz (Cont.)
► Interestingly, the SC went on to state that:
“xxx it is as if there was no decision rendered by the CIR. It is

tantamount to a denial by inaction by the CIR, which may still be
appealed before the CTA and the assessment evaluated on the basis
of the available evidence and documents.”
* Note, however, that the FDDA is void only insofar as the EWT and FBT
assessments are concerned. The WTC assessment was upheld.

New Waiver Rules
1
Requisites of a Valid Waiver
Requirements of a valid waiver PRIOR TO REVENUE MEMORANDUM

ORDER NO. 14-2016 issued on April 18, 2016
1. In the form prescribed under RDAO No. 05-01
2. Signed by taxpayer or his duly-authorized representative. For

corporations, it must be signed by any of its responsible officials.
3. The CIR or authorized revenue official shall sign the waiver,

indicating agreement to the waiver and date of acceptance.

Requisites of a Valid Waiver PRIOR TO REVENUE
MEMORANDUM ORDER NO. 14-2016
4. Date of execution & acceptance must be before expiration of the

prescriptive period or lapse of the period previously agreed upon.
5. Executed in 3 copies (original attached to case docket, 2nd copy for

taxpayer, and 3rd copy for BIR office accepting the waiver).
6. The taxpayer must received a copy of the waiver accepted by the

BIR.
7. Waiver must indicate date of BIR acceptance.
Philippine Journalists, Inc. vs. Commissioner of Internal Revenue,

G.R. No. 162852, promulgated on December 16, 2004,
Union Cement vs. CIR, CTA Case No. 6842, January 18, 2012;
Revenue Delegated Authority Order No. (RDAO) 05-01
Requisites of a Valid Waiver PRIOR TO REVENUE
MEMORANDUM ORDER NO. 14-2016
► A Waiver that does not indicate the date of acceptance by the CIR or
his duly authorized representative is defective, and does not suspend
the running of the 3-year period for assessment.
► After the Waiver is signed by the taxpayer, the CIR or authorized
revenue official shall also sign and indicate that the BIR has accepted
and agreed to the same.
► The date of notarization of the Waiver cannot be regarded as the date
of acceptance of the Waiver by the CIR or the authorized revenue
official. (CIR vs. East Asia Power Resources Corporation,
Court of Tax Appeals EB Case No. 879, June 17, 2013)

Waivers of Statute of Limitations
Form prescribed by RMC 29-12
WAIVER OF THE DEFENSE OF PRESCRIPTION UNDER THE STATUTE OF LIMITATIONS OF THE NATIONAL INTERNAL REVENUE CODE
I, ______________ of _______________________________ request for approval by the Commissioner of Internal Revenue for more time to submit the documents required in
connection with the investigation/reinvestigation/re-evaluation/collection enforcement of my/its _____________________ tax liabilities for the year _______. I/We hereby waive
the defense of prescription under the statute of limitations prescribed in Sections 203 and 222, and other related provisions of the National Internal Revenue Code, and consent
to the assessment and/or collection of tax or taxes of said year which may be found due after investigation/reinvestigation/re-evaluation at any time before or after the lapse of
the period of limitations fixed by said sections of the National Internal Revenue Code but not later than ________.
The intent and purpose of this waiver is to afford the Commissioner of Internal Revenue ample time to carefully consider the legal and/or factual questions involved in the
determination of the aforesaid tax liabilities. It is understood, however, that the undersigned taxpayer/taxpayer represented below, by the execution of this waiver, neither
admits in advance the correctness of the assessment/assessments which may be made for the year above-mentioned nor waives the right to use any legal remedies accorded
by law to secure a credit or refund of such tax that may have been paid for the same year pursuant to the provisions of Sections 204 and 229 of the National Internal Revenue
Code.
The period so stated herein may be extended by subsequent waiver in accordance with existing rules and regulations of the Bureau of Internal Revenue.
Executed this _________ day of __________ in ________________ Philippines.
_________________________________ ACCEPTED BY:

TAXPAYER OR DULY AUTHORIZED Commissioner of Internal Revenue
SIGNATORY
___________________ By: POSITION ___________________________
______________________ REVENUE OFFICIAL/POSITION
WITNESS _____________ __________
OFFICE DATE
ACKNOWLEDGMENT
Republic of the Philippines) S.S.
____________________)
In the City of _______________, on this ______ day of _____________, personally appeared before me _____________, with (government-issued identification) No.
____________ issued at ___________ on __________, in his/her capacity as _____________ of ____________, known to me and to me known to be the same person who
executed the foregoing waiver for and in behalf of the said taxpayer, and he/she acknowledged to me that the same is the voluntary act and deed of
______________________, and that he/she is duly authorized to sign the same.
WITNESS MY HAND AND SEAL at the place and on the date first above written.
Notary Public
Doc. No. ______ Until ________
Page No. ______ PTR No. _____
Book No. ______ Issued at _____
Series No. ______ On __________

New Rules on Waiver
Salient Features of Revenue Memorandum Order (RMO) No. 14-2016

dated April 4, 2016
Old rules/requisites Revised rules under RMO 14-

2016
Form In the form prescribed under May or may not be in the form
RDAO No. 05-01 prescribed under RMO 20-90 or
RDAO 05-01
Person Signed by taxpayer or his duly-authorized representative. For
authorized corporations, it must be signed by any of its responsible officials
to sign for
taxpayer

New Rules on Waiver
Salient Features of RMO No. 14-2016 dated April 4, 2016

2016
BIR Officers The CIR or authorized revenue The CIR or officials previously
authorized to official shall sign the waiver, designated in existing issuances, or
accept indicating agreement to the waiver concerned RDO or group of
and date of acceptance supervisors designated in the
LOA/Memorandum of Assignment
shall indicate the acceptance by
signing (date of acceptance is not
specifically required to be indicated)
Time of Date of execution and acceptance must be before expiration of the
Execution by prescriptive period or lapse of the period previously agreed upon.
the taxpayer
and
Acceptance
by the BIR

New Rules on Waiver

2016
Material The material dates are: The only material dates are:
dates a) execution by the taxpayer; a) execution and
b) Notarization; b) expiry date of the period the
c) acceptance by the BIR; and taxpayer waives the statute
d) expiry date of the period the of limitations
taxpayer waives the statute NOTE: We believe date of
of limitations acceptance by the BIR is critical to
know if it was signed by BIR within
the 3-year period
Number of Executed in 3 copies (original Not specifically required
copies for attached to case docket, 2nd
execution copy for taxpayer, and 3rd copy
for BIR office accepting the
waiver)
New Rules on Waiver

2016
Requirement The taxpayer received a copy Not specifically required.
for taxpayer of the waiver accepted by the
to receive a BIR NOTE: We believe the taxpayer
copy of the must be given a copy because
duly accepted this is a contract.
Waiver

Taxpayer estopped from impugning the validity of
waiver after benefiting from it
Commissioner of Internal Revenue vs. Next Mobile, Inc.
Supreme Court (3rd Division), G.R. No. 212825 promulgated 7 Dec 2015
• The CIR assessed Respondent Next Mobile for alleged

1 deficiency taxes for taxable year 2001
• . Next Mobile filed its protest and argued that the BIR’s right to
assess deficiency taxes for 2001 had already prescribed since
2 the 5 Waivers of the Statute of Limitations signed by Next
Mobile’s Finance Director were null and void and did not extend
the BIR’s 3-year period to assess the company.
Issue: Are the Waivers valid and binding upon Next Mobile?

Taxpayer estopped from impugning the validity of waiver
after benefiting from it
CIR vs. Next Mobile, Inc. (cont’d.)
 Ruling: Yes. The Waivers are valid and binding upon Next Mobile.
 Ordinarily, a Waiver must strictly comply with the requirements of

RMO No. 20-90. Otherwise, it is invalid and ineffective to extend the
BIR’s prescriptive period to assess taxes.
 RDAO No. 05-01 further provides that the BIR’s authorized revenue
official has the duty to ensure that the Waivers are duly accomplished
and signed by the taxpayer or his authorized representative before
affixing his signature to signify acceptance of the same.

 Ruling: In case the authority is delegated by the taxpayer to a

representative, the concerned revenue official shall see to it that such
delegation is in writing and duly notarized. The waiver should not be
accepted by the concerned BIR office and official unless duly
notarized.
 The Waivers had the following flaws:

► They were executed by the Finance Director without a notarized board
authority;
► The dates of acceptance by the BIR were not indicated in the Waivers;
► The fact of receipt by Next Mobile of its copy of the Second Waiver was
not indicated on the face of the Waiver.

 Ruling: The BIR has failed, for five times, to perform its duties in
relation to the Waivers, including verifying the authority of the Finance
Director to execute the Waivers, demanding presentation of a
notarized document evidencing the same, refusing acceptance of the
Waivers when no such document was presented, affixing the dates of
its acceptance on each Waiver, and indicating on the Second Waiver
the date of receipt by Next Mobile.
 However, both Next Mobile and the BIR are at fault. Both parties knew
the infirmities of the Waivers and yet they continued to deal with each
other on the strength of these documents without bothering to rectify
these infirmities.

 Ruling: Next Mobile, after deliberately executing defective Waivers,

raised the very same deficiencies it caused to avoid the tax liability
determined by the BIR during the extended assessment period. Next
Mobile’s act of impugning these Waivers after benefiting from them
and allowing the BIR to rely on the same is an act of bad faith.
 BIR’s negligence is so gross that it amounts to malice and bad faith.

The BIR knew that the Waivers should conform strictly with RMO No.
20-90 and RDAO No. 05-01 in order to be valid.

 Ruling: As a general rule, when a waiver does not comply with the
requisites for its validity under RMO No. 20-90 and RDAO No. 05-01, it
is invalid and ineffective to extend the prescriptive period to assess
taxes. However, due to its peculiar circumstances, the Waivers are
deemed valid.
 The BIR’s negligence may be addressed by enforcing the provisions

imposing administrative liabilities upon the officers responsible for the
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 in bad faith. The case
is referred back to the CTA for determination of the merits of Next
Mobile’s petition asking for nullification of the BIR’s assessment notices.
Common Issues in BIR Audits and Taxpayers' Possible Defenses

Other Court Decisions
May the BIR disallow 50% of expenses if there is unjustified
refusal by taxpayer to produce books of accounts?
Village Green Hog Farm, Inc. vs. Commissioner of Internal Revenue
CTA (En Banc) Case No. 1252 promulgated 17 May 2016
• BIR assessed Village Green Hog Farm, Inc. (VGHFI) for
deficiency income tax for taxable year 2007. VGHFI protested
1
the assessments.
• Per the Final Decision on Disputed Assessment (FDDA), 50%
of VGHFI’s business expenses were disallowed due to its
2 alleged “unjustified refusal” to produce the books of accounts
and other accounting records.
• The BIR based its application of the 50% rule of approximation

3 on disallowed expenses on the Best Evidence Obtainable
Rule under Revenue Memorandum Circular (RMC) 23-2000.
• VGHFI challenged the use of the Best Evidence Obtainable

Rule in determining its deficiency tax liabilities, insisting that it
4 submitted and made available to the BIR the documentary
requirements.
Best evidence obtainable rule
When may BIR properly apply the rule
Village Green Hog Farm, Inc. vs. CIR (Cont.)
Issue: Did the BIR correctly disallow 50% of VGHFI’s claimed

deductions from gross income?
Ruling: Yes, under the Best Evidence Obtainable Rule pursuant to

Section 6(B) of the Tax Code, as implemented by Sections 2.3 and 2.4(c)
of RMC 23-2000.
► The Best Evidence Obtainable Rule applies when a tax report

required by law for the purpose of assessment is not available or
when the tax report is incomplete or fraudulent.

Best evidence obtainable rule
When may BIR properly apply the rule
Village Green Hog Farm, Inc. vs. CIR (Cont.)
► The BIR sent, and VGHFI received, three requests for submission of
certain documents/schedules, and the presentation of books of
accounts for examination.
► There was clear refusal to present accounting records, especially in
relation to its expenses and purchases.
► Thus, the BIR was justified in disallowing 50% of VGHFI’s expense
based on the Best Evidence Obtainable Rule prescribed under RMC
23-2000.
► See also the case of Farcon Marketing Corporation vs.
Bureau of Internal Revenue
CTA (2nd Division) Case 8367 promulgated February 3, 2015

Will the receipt of warrants of garnishment prior to
issuance of FAN invalidate assessment?
Esper R. Vargas, Jr. vs. Commissioner of Internal Revenue

CTA (Third Division) Case No. 8750 promulgated 8 March 2016
• The BIR assessed Petitioner Vargas for alleged deficiency income tax and
VAT for 2007 based on a computerized matching of information from third
party sources as against the taxpayer’s declarations per VAT returns. The BIR
1 alleged that Vargas under declared his purchases in 2007, resulting in
undeclared income, which should be subject to income tax and VAT.
• The BIR issued a Final Assessment Notice (FAN) but prior to Vargas’ receipt
of the FAN, it enforced at least one of the several Warrants of Garnishment
issued against Vargas’ bank accounts. Vargas learned of the garnishment on
the same day it secured a copy of the FAN. Vargas filed a Petition for Review
2 at the CTA with an application for a Temporary Restraining Order and Writ of
Preliminary Injunction.
• At the CTA, Vargas argued that the BIR failed to comply with the due process
requirements, as he was not notified in writing of his liability for deficiency
taxes. As such, the assessments were null and void and could not become
3 final, executory and demandable. He also prayed for actual damages against
the BIR in the form of filing fees and attorney’s fees for its oppressive
assessment and the illegal garnishment of his bank account, where he
incurred costs to protect his interest.
Can CIR be held liable for actual damages arising from
assessment case?
CTA (Third Division) Case No. 8750 promulgated 8 March 2016
• The BIR countered that Vargas should have filed a protest to the
FAN instead of a Petition for Review and having failed to do so,
4 the CTA did not acquire jurisdiction over the case.
Issues:
1. Are the deficiency tax assessments valid?
2. Can the CIR be held liable for actual damages resulting from the
assessment?

Assessments that are void for failure to comply with due
process cannot become final, executory & demandable
Esper R. Vargas, Jr. vs. Commissioner of Internal Revenue (Cont.)
Ruling:
► 1. No. The assessments were void for failure to comply with due
process and cannot become final, executory and demandable. To be
valid, an assessment must actually be received by the taxpayer.
► The assessments and the subsequent collection violated the right to

due process of Vargas, who had no opportunity to assail the
assessment as he was not even aware that assessments were issued
against him. There was no valid notice of assessment sent to the
taxpayer.

CIR cannot be held liable for actual damages as he is
immune from suit under the doctrine of sovereign immunity.
Ruling:
► 2. No. The CTA has consistently disallowed the award of actual damages in
tax cases. In the case of Farolan, Jr. v. CTA, GR 42204 dated 21 January
1993, the Supreme Court ruled that the CIR cannot be held liable for actual
damages as he is immune from suit following the doctrine of sovereign
immunity.
► It is the BIR’s prime duty to perform tax assessments and tax collections. In
issuing the subject assessment and enforcing its collection, the CIR was
merely exercising the authority accorded to her under the Tax Code.
Attorney’s fees and expenses of litigation cannot be recovered unless the
claimant is compelled to litigate or incur expenses to protest his interest.
However, Vargas did not offer a compelling reason for the award of filing fees
and attorney’s fees.

Deficiency interest and delinquency interest
Presentation title
Deficiency Interest vs. Delinquency Interest
RR No. 18-2013 (Cont.)
► “Deficiency is defined as the amount still due and collectible from a

taxpayer upon audit or investigation; whereas delinquency is defined
as the failure of the taxpayer to pay the tax due on the date fixed by
law or indicated in the assessment notice or letter of demand.
xxx xxx xxx
Deficiency interest is imposed for the shortage of taxes paid,
while delinquency interest is imposed for the delay in payment
of taxes.” (Emphasis supplied)
(Takenaka Corporation Philippine Branch vs. Commissioner of

Internal Revenue CTA EB Case No. 745, September 4, 2012; First
Lepanto Taisho Insurance Corporation vs. Commissioner of Internal
Revenue, G.R. No. 197117 dated April 10, 2013.)
Deficiency Interest vs. Delinquency Interest
Deficiency interest Delinquency interest

Tax base Basic tax Basic tax plus deficiency
interest & surcharge
Reckoning From the date From the due date

point/date prescribed for its appearing in the notice
payment until the full and demand of the CIR
payment thereof until the amount is fully
paid
Rate 20% per annum 20% per annum

Imposable Interests in case of Deficiency Assessments
To illustrate:
► Taxpayer was assessed for deficiency income tax for taxable year 2000.
Taxpayer received the assessment on April 1, 2004 demanding payment on
April 30, 2004. Taxpayer protested the assessment which the CIR denied in
2005 and demanded the full payment of the tax assessed. The CTA denied
the taxpayer’s appeal in 2007, while the Supreme Court denied the same in
2010. The total assessment was fully paid in 2011. The interests
applicable shall be reckoned as follows:
DEFICIENCY INTEREST – 20% per annum on the basic tax computed
April 16, 2001 DELINQUENCY INTEREST – 20% per annum on the total deficiency
tax assessed and on the deficiency interest
Taxable year 2004 2007 2010 2011

2000 FAN served on CTA denies SC denies the Full payment of
April 1 appeal of taxpayer’s deficiency taxes
demanding taxpayer appeal
payment on April
30
Imposable Interests in case of Deficiency Assessments
To illustrate: 50 Million Basic Tax

x 20% x 3 years = 30 Million by
80 Million by April 15, 2004
By 2005: (123 Million)
50 Million
X 25% surcharge (12.5M)
62.5 M + 40 Million deficiency interest + 20.5 M delinquency interest
DEFICIENCY INTEREST – 20% per annum on the basic tax computed
April 16, 2001 DELINQUENCY INTEREST – 20% per annum on the total deficiency
tax assessed and on the deficiency interest
May 1, 2004
Taxable year 2004 2007 2010 2011

2000 FAN served on CTA denies SC denies the Full payment of
April 1 appeal of taxpayer’s deficiency taxes
demanding taxpayer appeal
payment on April
30
Deficiency interest may be imposed on all types of taxes
CIR vs. Philippine Tobacco Flue-Curing and Redrying Corporation

CTA (En Banc) Case No. 1218 and 1220 promulgated April 11, 2016
• The CIR assessed Philippine Tobacco Flue-Curing and

Redrying Corporation (PTFC) for deficiency income tax, VAT,
withholding tax on compensation (WTC), expanded withholding
tax (EWT), final withholding tax (FWT), documentary stamp tax
1 (DST), and inspection fees. PTFRC protested the assessments
and after reinvestigation, the BIR issued a Final Decision on
Disputed Assessment (FDDA) reducing the tax deficiency.
• PTFC filed a Petition for Review with the CTA. The CTA First
Division reduced the BIR’s deficiency tax assessment and
imposed penalties including 25% surcharge, 20% deficiency
interest, and 20% delinquency interest. Aggrieved, PTFC
2 elevated the case to the CTA En Banc.

CIR vs. Philippine Tobacco (Cont.)
Can the 20% deficiency interest be imposed on all types of taxes?
► Yes, the Tax Code authorizes the imposition of deficiency interest on

all tax types.
► Section 247 (a) of the Tax Code provides that the imposition of
additions to the tax applies to all taxes. The authority to impose
additions [such as surcharges under Section 248, deficiency interest
under Section 249 (B), delinquency interest under Section 249 (C) and
interest on extended payment under Section 249 (D)] extends to all
taxes regardless of the title under which they are classified. The law
does not limit these additions only to income tax, estate tax and
donor’s tax.
► Accordingly, the additions to the deficiency tax such as, surcharge,

deficiency interest, and delinquency interest, are applicable to the
deficiency income tax, VAT, WTC, EWT, DST and inspection fees of
PTFC.

Deficiency and delinquency interest may be imposed
simultaneously
Can deficiency interest and delinquency interest be imposed

simultaneously?
► Yes, the Tax Code authorizes the simultaneous imposition of

deficiency interest and delinquency interest.
► The CTA En Banc held that a plain reading of Section 249 of the Tax
Code justifies the simultaneous imposition of deficiency interest and
delinquency interest. Section 249 (B) and (C) are clear that both
deficiency interest and delinquency interest are to be reckoned from
the date prescribed for their payment and until the full payment
thereof.

Prescription
The prescriptive period for deficiency donor’s tax on the
sale of shares is reckoned from filing of CGT return
Urbano L. Velasco vs. Bureau of Internal Revenue
CTA (First Division) Case No. 8497 promulgated May 17, 2016
• Bureau of Internal Revenue assessed Petitioner Urbano Velasco

(Velasco) for deficiency donor’s tax on the sale of his shares of
stock in Gervel, Inc. (Gervel) and Metropolitan Management
1 Corporation (MMC) in 2008.
• The BIR demanded payment of the donor’s tax due based on the
difference between the book value and the selling price of the
2 shares (selling price is lower than book value).
• BIR issued a Preliminary Assessment Notice (PAN) assessing

3 donor’s tax. Velasco protested the assessment.

The prescriptive period for deficiency donor’s tax on the
sale of shares is reckoned from filing of CGT return
Urbano L. Velasco vs. Bureau of Internal Revenue (cont’d.)
• On October 14, 2011, BIR issued a Final Assessment Notice.

4 Velasco raised prescription and argued that since he filed the
corresponding Capital Gains Tax (CGT) Returns on September 24,
2008, the BIR only had until September 24, 2011 to assess.
5 • The BIR countered that since Velasco failed to file a donor’s tax
return, it has 10 years to assess the deficiency donor’s tax.
Issue: Is Velasco subject to deficiency donor’s tax?

Excess of fair market value over the consideration
received for the stocks sold is subject to donor’s tax
Urbano L. Velasco vs. Bureau of Internal Revenue (cont’d)
Ruling: No. The right of the BIR to assess Velasco for the deficiency
donor’s tax has prescribed.
Donor’s tax is imposed upon the transfer by any person of the property
by gift as provided under Section 98 of the Tax Code. The excess in the
fair market value over the consideration received for the stocks sold is
deemed gift subject to donor’s tax.

Even if TP fails to file donor’s tax return, prescriptive period
to assess donor’s tax is 3 years from filing of CGT return
Urbano L. Velasco vs. Bureau of Internal Revenue (cont’d)
► However, the CTA ruled that the donor’s tax assessment against
Velasco should be cancelled due to prescription.
► Although the assessment was for donor’s tax, Velasco’s filing of the
CGT Returns constitutes sufficient compliance with the requirement of
filing a tax return under Section 103 of the Tax Code, as amended, for
the purpose of computing prescription covering the transaction. The
FAN was dated October 13, 2011 or more than 3 years after the filing
of the CGT Returns on September 24, 2008.

Claim for Refund
Refund Flowchart for Erroneously Paid Taxes Under
Section 229 of the Tax Code
Filing of the administrative claim
for refund with the BIR within 2
years from the payment of taxes
CIR denies claim for refund

CIR grants claim
or does not act on the claim
refund within the 2-year period
Appeal the denial or inaction

End with the CTA before the lapse of
the 2-year period.
Refund Flowchart for Unutilized Input VAT under
Section 112 of the Tax Code
Taxpayer files claim for refund
with the BIR within 2 years from
close of taxable quarter when the
sales were made.
(CIR vs. San Roque)
Taxpayer submits
complete supporting
documents
CIR renders decision within 120

days from taxpayer’s
submission of complete
supporting documents
CIR grants claim for CIR denies claim for Claim for refund remains
refund/issuance of tax refund/issuance of tax unacted upon after lapse
credit certificate of 120 days
credit certificate
(denial by inaction)
Taxpayer appeals
denial/inaction with the
END CTA within 30 days from
receipt of denial OR
lapse of 120 days
Prior to RMC 54-2014, what rules govern the submission
of supporting documents; when to reckon 120 days?
Pilipinas Total Gas vs. Commissioner of Internal Revenue
Supreme Court En Banc, G.R. No. 207112 promulgated 8 December 2015
• On 15 May 2008, Pilipinas Total Gas, Inc. (“Total Gas”) filed with
the BIR a claim for refund of excess input VAT, together with
supporting documents, covering the first two quarters of Calendar
1 Year 2007. On 28 August 2008, Total Gas submitted additional
supporting documents.
• For failure of the BIR to act on its claim, Total Gas filed an appeal
with the CTA on 23 January 2009. The CTA Division dismissed the
2 petition for being prematurely filed. It explained that Total Gas failed
to complete the necessary documents enumerated in RMO No. 53-
98 to substantiate its claim.
• On appeal, the CTA En Banc also denied Total Gas’ petition and
3 concluded that the CTA has no jurisdiction over the case since the
claim for refund was filed late, as the Court reckoned the 120 days
for the BIR to rule on the claim on 15 May 2008, the day Total Gas
filed its administrative claim.
Under RMC 54-2014, what is prevailing rules on submission
of supporting documents; when is 120 days reckoned?
Pilipinas Total Gas vs. Commissioner of Internal Revenue (Cont.)
• In the same decision, the CTA En Banc affirmed the CTA

Division’s ruling that Total Gas failed to submit complete
supporting documents and hence, the judicial claim was
prematurely filed because the 120-day period for the CIR to
4 decide on the claim had yet to commence.
• Total Gas questioned the decision of the CTA En Banc as the

Court stated that the petition was filed both belatedly and
prematurely.
5 • Total Gas argued that the reckoning point of the 120-day

period should be 28 August 2008, the date it filed its
additional documents since it is only then that the submission
of all documents was completed.
Issue: Did Total Gas timely file its claim for VAT refund with the CTA?

NIRC: CIR shall refund (or deny) within 120 days from
date of submission of complete documents
Ruling:
► Yes, Total Gas filed its claim for VAT refund with the CTA on time.
► Section 112 (C) of the Tax Code provides that the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input VAT “within one
hundred twenty (120) days from the date of submission of complete
documents in support of the application filed.” In case of denial of the claim,
or the failure of the BIR to act on the application within the prescribed period,
the taxpayer may, within 30 days from the receipt of the denial or after the
expiration of the 120-day period, appeal the decision or the unacted claim
with the CTA.

RMC 49-2003: The documents shall be filed within 30 days
from filing of claim; the 120 days commences thereafter
Ruling:
► It is the taxpayer who ultimately determines when complete documents have
been submitted. The 120-day period within which the BIR must decide the
VAT claim is reckoned from the date the taxpayer submitted its last supporting
documents and not from the date the claim for tax refund was filed.
► RMC No. 49-2003, which clarifies issues on the processing of claims for VAT
refund, provides that from the date an administrative claim is filed, a taxpayer
has 30 days within which to submit the documentary requirements sufficient
to support his claim, unless given further extension by the CIR. Then, upon
filing by the taxpayer of complete documents to support his application, or
expiration of the period given, the CIR has 120 days within which to decide
the claim for VAT refund. Should the taxpayer, on the date of his filing,
manifest that he no longer wishes to submit additional documents to support
his claim, the 120-day period allowed to the CIR begins to run from the date
of filing.
RMC 54-2014: Taxpayer shall attach an affidavit attesting
to completeness of documents at the time of filing
► In all cases, whatever documents a taxpayer intends to file to support his

claim must be completed within the two-year period under Section 112(A) of
the Tax Code. The taxpayer has 30 days from denial of the claim or from the
expiration of the 120-day period within which to appeal the denial or inaction
of the CIR to the CTA. These rules should only be made applicable to claims
for refund filed prior to 11 June 2014, such as the present case.
► As it now stands, RMC No. 54-2014 mandates that the application for VAT
refund/ tax credit must be accompanied by complete supporting documents
as enumerated in its Annex A. In addition, the taxpayer shall attach a
statement under oath attesting to the completeness of the submitted
documents. The affidavit shall further state that the said documents are the
only documents which the taxpayer will present to support the claim.

RMC 54-2014: Upon submission of its supporting documents,
the claim shall be processed and no other documents shall be
accepted/required from the taxpayer
► Upon submission of the administrative claim and its supporting

documents, the claim shall be processed and no other documents
shall be accepted/required from the taxpayer in the course of its
evaluation. A decision shall be rendered by the CIR based only on the
documents submitted by the taxpayer. The application for tax
refund/tax credit shall be denied where the taxpayer/claimant failed to
submit the complete supporting documents. For this purpose, the
concerned processing/investigating office shall prepare and issue the
corresponding Denial Letter to the taxpayer/claimant.

The right to reckon the 120-day period has been
withdrawn from the taxpayer by RMC No. 54-2014
► Thus, the right to reckon the 120-day period has been withdrawn from
the taxpayer by RMC No. 54-2014, since it requires him at the time he
files his claim to complete his supporting documents and attest that
he will no longer submit any other document to prove his claim. The
taxpayer is also barred from submitting additional documents after the
claim is filed.
► In the present case, since Total Gas submitted its additional

documents on 28 August 2008, it should be the reckoning point of the
120-day period for the BIR to decide. Hence, its appeal with the CTA
on 23 January 2009 was filed within the prescribed period. The case
is returned to the CTA Division for trial on whether Total Gas is entitled
to the VAT refund.

What BIR notices may be protested to constitute
disputed assessment; appealable to the CTA?
Landbank of the Philippines vs. Commissioner of Internal Revenue
CTA (Second Division) Case 8684 promulgated 21 January 2016
• The BIR assessed the Landbank of the Philippines (Landbank) for
deficiency expanded withholding tax (EWT) and documentary
stamp tax (DST) on the consolidation of a land title in its name as
1 the winning bidder. The BIR also imposed a 25% surcharge of the
basic tax, interest of 20% per annum, and compromise penalties for
alleged late payment of the taxes due.
• Landbank paid the taxes and penalties as computed in the One-

Time Transaction (ONETT) Computation Sheet. Landbank then
2 filed a protest with the BIR against the imposition of the surcharge,
interest and compromise penalties. In the same protest letter,
Landbank sought the refund of the penalties paid.
• Upon denial of its protest, Landbank filed a Petition for Review with
3 the CTA.

Can a claim for refund prosper if it was raised in
taxpayer's protest letter to an assessment?
Landbank of the Philippines vs. CIR
• Records show that the redemption period expired on September

29, 2012, a Saturday, and both Landbank and the CIR agreed that
the right to redeem could still be legally exercised until October 1,
4 2012. As such, Landbank argued that its deadline to pay the EWT
and DST was extended to 10th and 5th day, respectively, of the
month following the sale or on November 10 and 5, respectively.
On the other hand, the CIR asserted that the extension of the right
to redeem does not apply to the remittance of the EWT and DST,
which were nonetheless due on October 10 and October 5,
respectively.
Issues:
1.Does the CTA have jurisdiction over the CIR’s inaction on Landbank’s
protest based on the ONETT Computation Sheet?
2. Is Landbank entitled to a refund of the penalties paid?

ONETT computation sheet is not an assessment
contemplated under Section 228; CTA has no jurisdiction
Rulings:
► No. The CTA has jurisdiction only on the inaction of the CIR over Landbank’s
disputed assessment pursuant to Section 228 of the Tax Code, as amended.
The ONETT Computation Sheet is not the assessment contemplated under
Section 228 that would require a protest. It does not formally inform a
taxpayer of its tax liabilities and there is no formal demand to pay the same.
Without the formal demand for payment, Landbank has no way to determine
the period within which to protest the tax liabilities computed by the CIR.
► Thus, the CTA did not acquire jurisdiction over the Petition. In CIR vs.
PASCO Realty and Development Corp., GR No. 128315 promulgated on
June 29, 1999, the Supreme Court explained that not all documents coming
from the BIR containing a computation of the tax liability can be deemed
assessments. An assessment contains not only a computation of tax
liabilities, but also a demand for payment within a prescribed period.

Claim for refund should have been filed instead of protest
to recover penalties paid
Rulings:
► 2. No. To be able to claim a refund under Section 229 of the Tax Code,
Landbank must have filed an administrative claim before the BIR. No such
administrative claim for refund or issuance of a tax credit certificate was filed
by Landbank with the BIR.

Can taxpayer validly assail results of Oplan Kandado
with the CTA?
Commissioner of Internal Revenue vs. Elric Auxiliary Services
Corporation/Sacred Heart Services Gas Station
CTA (En Banc) Case No. 1174 promulgated March 3, 2016
• The BIR assessed Respondent Elric Auxiliary Services Corporation (EASC) for
1 deficiency VAT after a surveillance was conducted on EASC’s gasoline station
for 10 days under the BIR’s Oplan Kandado Program. The BIR issued a 48-hour
notice for EASC to explain why the business establishment should not be closed
• . After submission of its explanation, EASC received VAT Compliance Notice
requiring the payment of alleged deficiency VAT within 5 days. EASC filed a
letter-explanation under oath disputing the assessment. Upon receipt of the
2 BIR’s denial of its explanation, EASC filed a Petition for Review with the Court of
Tax Appeals (CTA) within 30 days.
• EASC questioned the basis and the method of computation of its sales during
the period of surveillance for being arbitrary, and sought the cancellation of the
3 VAT assessment. The CIR argued, among others, that the CTA has no
jurisdiction to review its administrative enforcement of the provisions of the Tax
Code, such as Oplan Kandado, which imposes administrative sanctions on
taxpayers for non- compliance with essential VAT requirements.
4 • The CTA Second Division ruled in favor of EASC, prompting the CIR to elevate
to case to the CTA En Banc.

Validity of Oplan Kandado program may be appealed to
CTA under "other matters arising under the NIRC"
Issues:
1. Does the CTA have jurisdiction over cases arising from BIR’s Oplan Kandado
Program?
2. Are the 48-hour Notice and 5-day VAT Compliance Notice valid?
Ruling:
1. Yes. The CTA’s jurisdiction is not limited to a decision, ruling or inaction of the
CIR on disputed assessments.
The CTA can determine the validity of the 48-hour Notice and 5-day VAT
Compliance Notice issued by the BIR under its Oplan Kandado Program. Oplan
Kandado is based on Section 115 of the Tax Code, which empowers the CIR to
suspend the business operations of a taxpayer. As such it falls within the
meaning of “other matters arising under the NIRC” under Section 7 RA No. 1125,
which is covered by the jurisdiction of the CTA.
BIR should explain surveillance methods used in arriving at
sales estimates; otherwise deemed arrived without basis
2. No. In the absence of any explanation on the factual basis of the results of the
surveillance, the taxpayer cannot be deemed to be sufficiently informed on the
basis of the assessment of the VAT liability. Without such basis, the taxpayer
cannot adequately respond or specifically refute the deficiency VAT assessment.
Other than a statement that the result of the surveillance resulted in a VAT
liability, the basis and the method of computation of the liability must likewise be
disclosed. The BIR neither described how the surveillance was conducted nor
explained the methods used in arriving at the sales estimates. There was no way
for the Court to determine whether the factual basis gives rise to a reasonable
estimate. Without such information, the sales amounts used by the BIR cannot
be considered prima facie valid as they appear to have been arrived at without
any basis.

On what bases may the CTA dispense with the cash
bond requirement in appealed tax cases?
Spouses Emmanuel D. Pacquiao and Jinkee J. Pacquiao vs. The Court of
Tax Appeals and the Commissioner of Internal Revenue
Supreme Court (Second Division) G.R. No. 213394 promulgated 06 April 2016
• BIR Revenue District Office No. 43 issued a Letter of Authority (LA)

for the audit of Manny Pacquiao’s books for 2008 and 2009.
1 Pacquiao failed to include in his 2009 ITR, income from his
winnings in the US.
• During pendency of RDO No. 43 audit, the Commissioner of

Internal Revenue (CIR) issued another LA authorizing the BIR’s
2 National Investigation Division (NID) to examine the books of both
Pacquiao and his wife, Jinkee Pacquiao (or Jinkee), from 1995 to
2009.
• The BIR alleged that fraud had been established. The CIR also
justified the reinvestigation of the years prior to 2007 pursuant to a
3 fraud investigation under the Run After Tax Evaders (RATE)
program of the BIR.

Spouses Pacquiao vs. CTA and CIR
• The BIR assessed Manny and Jinkee Pacquiao for deficiency

income tax and VAT for 2008 and 2009, based on the best
4 evidence obtainable, totaling Php2.26 billion inclusive of interests
and charges. The Spouses Pacquiao requested that they be
allowed to pay their deficiency VAT liabilities in installments, which
they eventually did. They appealed the deficiency income tax
assessments to the CTA
• Pending resolution of their appeal, they sought the suspension of

the issuance of warrants of distraint and/or levy and warrants of
garnishment. The BIR denied the request to defer the collection
5 enforcement for lack of legal basis and proceeded to issue the
warrants.
• The Spouses asked the CTA to lift the warrants and to dispense
with the requirement for a cash deposit or the filing of a bond
6 arguing that the CIR’s assessment of their liabilities was highly
questionable. They manifested that they were willing to file a bond
for such reasonable amount to be fixed by the Court.

Spouses Pacquiao vs. CTA and CIR
• The CTA ordered the CIR to desist from collecting the deficiency
tax assessments and noted that the amount sought to be collected
was way beyond the Spouses’ net worth of P1.18 billion, based on
7 Pacquiao’s Statement of Assets, Liabilities and Net Worth.
• However, the CTA ruled that there was no justification for the
Spouses to deposit less than the amount of P3.3 billion or post a
8 bond of less than the amount of P4.9 billion..
• The Spouses Pacquiao appealed to the Supreme Court.

9

Spouses Pacquiao vs. CTA and CIR (Cont.)
Issues:
► 1. Is there an exception to the cash deposit or bond requirement under
Section 11 of RA 1125?
► 2. If so, does the exception apply in this case?
Ruling:
► Yes, there is an exception to the requirement for a cash deposit or bond.
► Pursuant to the case of Collector of Internal Revenue vs. Jose Avelino, the
courts may dispense with the requirement “if the method employed by the
Collector of Internal Revenue in the collection of tax is not sanctioned by law.”
In the Avelino case, the demand of then CIR was made without authority of
law because it was made five years and 35 days after the last two returns of
Jose Avelino were filed, which is clearly beyond the three-year prescriptive
period to assess.

Cash bond may not be required when method employed
by BIR in the collection of tax is not sanctioned by law
► In Collector of Internal Revenue vs. Aurelio Reyes, the Supreme

Court ruled that the cash deposit or bond requirement applies only
where the collection is carried out in consonance with law. It should
not be required “when the said processes are obviously in violation of
the law to the extreme that they have to be SUSPENDED for
jeopardizing the interests of the taxpayer.”
► The authority of the courts to dispense with the deposit of the amount
claimed or filing of the required bond is not confined to cases where
prescription has set in. Instead, whenever it is determined that the
method employed by the CIR in the collection of tax is not sanctioned
by law, the bond requirement should be dispensed with.

Case is remanded to the CTA for determination of whether
the dispensation or the reduction of cash bond is proper
► It would be absurd for the CTA to declare that the collection was made
in violation of law and, in the same breath, require the taxpayer to
make the deposit or to file the bond as a prerequisite to stop the said
illegal collection.
► It cannot be determined, however, if the exception applies in this case

as there is no sufficient factual basis in the records to determine
whether the cash deposit or bond requirement should be dispensed
with.
► Hence, the case is remanded to the CTA for a preliminary

determination of whether the dispensation or the reduction of the
required cash deposit or bond is proper.

Questions?
► Taxpayers Rights & Remedies

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Taxpayers Rights &

Pre-Bar Lecture in Taxation: Taxpayers Rights and Remedies

Pre-Bar Lecture in Taxation: Taxpayers Rights and Remedies

BIR issues CIR or Appeal to the

30 days to file Protest

180 days to decide

► If there is a Request for Reinvestigation

Pre-Bar Lecture in Taxation: Taxpayers Rights and Remedies

BIR issues CIR or Appeal to the

30 days to file Protest

► If there is a Request for Reconsideration

Pre-Bar Lecture in Taxation: Taxpayers Rights and Remedies

Pre-Bar Lecture in Taxation: Taxpayers Rights and Remedies

• BIR assessed the spouses Joseph Estrada and Luisa

• The Estradas protested the assessment and upon denial of

Taxpayers Rights & Remedies

• The CIR insisted that she did not rely on the

Taxpayers Rights & Remedies

Spouses Joseph Ejercito Estrada and Luisa P. Ejercito vs. CIR

► The BIR should have conducted an independent investigation in the determination

RR No. 18-2013 (Cont.)

Taxpayer’s Rights & Remedies

RR No. 18-2013 (Cont.)

► Personal service – by delivering personally a copy thereof to the party at

Taxpayer’s Rights & Remedies

► Disinterested witnesses are persons of legal age other than employees of

Taxpayer’s Rights & Remedies

RR No. 18-2013 (Cont.)

► Done by sending a copy of the notice by registered mail to the registered or

► A copy of the notice may also be sent through a reputable professional

► If no registry or reputable professional courier service is available in the

Taxpayer’s Rights & Remedies

RR No. 18-2013 (Cont.)

Taxpayer’s Rights & Remedies

RR No. 18-2013 (Cont.)

► Service to the tax practitioner, who is appointed by the

Taxpayer’s Rights & Remedies

Taxpayer’s Rights & Remedies

► If the FAN was served before the taxpayer is able

► If the PAN and FAN was served at the same

► This is confirmed under the provisions Revenue Regulations No. 12-

Taxpayer’s Rights & Remedies

CIR vs. v Basf Coating + Inks Phils., Inc. (Cont.)

Taxpayer’s Rights & Remedies

CIR vs. v Basf Coating + Inks Phils., Inc. (Cont.)

Was there a valid issuance of the FAN by the CIR?

Taxpayer’s Rights & Remedies

CIR vs. v Basf Coating + Inks Phils., Inc. (Cont.)

► Section 11 of RR No. 12-85, on the other hand, provides that in case of

Taxpayer’s Rights & Remedies

CIR vs. v Basf Coating + Inks Phils., Inc. (Cont.)

Taxpayer’s Rights & Remedies

► Petitioner CIR assessed Respondent Yumex Philippines Corporation

► Yes. The CIR violated due process requirements in issuing the

Taxpayer’s Rights & Remedies

RR No. 18-2013 (Cont.)

► Taxpayer shall be considered in default and a Formal Letter of

► An FLD/FAN shall be issued within 15 days from filing of the

Taxpayer’s Rights & Remedies

Taxpayers Rights & Remedies

Taxpayers Rights & Remedies

► These statements do not amount to an Assessment Notice as there

Taxpayers Rights & Remedies