Supreme Court says void FDDA does not invalidate tax liability of Liquigaz

THE SUPREME COURT, deciding on a “novel issue” presented by the case of Liquigaz Philippines Corp., has ruled that a void Final Decision on Disputed Assessment (FDDA) does not invalidate the tax liability itself.

In a 19-page decision dated Apr. 18, the SC Second Division remanded the Liquigaz case to the Court of Tax Appeals (CTA) to tackle its liability for expanded withholding tax (EWT) and fringe benefits tax (FBT) for the year 2005.

This revives the issue of the EWT and FBT assessments after it was canceled by the CTA’s May 22, 2014 en banc decision for being borne out of a void FDDA. It invalidated the FDDA for failing to inform Liquigaz of the factual and legal bases of the assessment. 

An FDDA is a decision issued by the Commissioner of Internal Revenue when it acts on the taxpayer’s protest against a Final Letter of Demand (FLD) or a Final Assessment Notice (FAN). 

The high court posed the question: “When may a Final Decision on Disputed Assessment be declared void, and in the event that the FDDA is found void, what would be its effect on the tax assessment?”

In the decision penned by Associate Justice Jose Catral Mendoza, the SC affirmed that the 2010 FDDA is void for merely notifying Liquigaz without elaborating on the details.

But the high court drew the distinction between the assessment itself and the CIR’s decision on the ensuing protest.

It simply considered the CIR not to have acted on the protest, which meant Liquigaz will now have to appeal the assessment itself to be evaluated by the CTA.

“A ‘decision’ differs from an ‘assessment’ and failure of the FDDA to state the facts and law on which it is based renders the decision void -- but not necessarily the assessment,” the decision read. “The merits of the EWT and FBT assessment should have been discussed and not merely brushed aside on account of the void FDDA.”

Because of this, the Liquigaz case was remanded to the CTA to continue proceeding with the dispute.

Associate Justices Antonio T. Carpio, Arturo D. Brion, Mariano C. del Castillo, and Marvic M.V.F. Leonen concurred with the decision.

Under the FDDA, Liquigaz was liable for P3.48-million EWT and P14.39-million FBT, plus P4.51 million for withholding tax on compensation (WTC). All in all, the liabilities inclusive of interest amounted to P22.38 million. The FLD/FAN Liquigaz contested billed it for P5.54-million EWT, P14.3-million FBT, and P4.5-million WTC.

source:  Businessworld