For BIR's benefit

Every taxpayer wants to have peace of mind, free from unreasonable examination, investigation, or assessment. As such, we commonly encounter queries from taxpayers seeking assurance that a particular tax assessment has been settled, and that local tax authorities will no longer run after them.
Some mention the Bureau of Internal Revenue’s (BIR) practice of issuing Authority to Cancel Assessment (ATCA) for tax deficiency and/or tax delinquency assessment that are paid. As a result, the question of whether a taxpayer is entitled to the issuance of an ATCA persists.

With its renewed efforts to account for clean, and determine collectivity of its Accounts Receivables/Delinquent Accounts (ARs/DAs) as part of its concerted tax collection activities, the BIR recently issued Revenue Memorandum Order (RMO) No. 33-2018. The RMO aims to implement an improved system for managing BIR’s ARs/Das while simultaneously setting an objective write-off mechanism to purge its database of tax arrears longer collectible.

Under RMO No. 33-2018, the issuance of ATCA as proof of cancellation of the applicable tax assessments pursuant to a Final Assessment Notice/Formal Letter of Demands (FAN/FLD) is mandatory. Accordingly, issuance of ATCA shall be made on the following:

The difference between the amounts of the original tax assessment and the reduced tax assessment after the originally issued FAN/FLD has been modified, amended, or declared null and void pursuant to final administrative decision by the BIR commissioner or his duly authorized representative.
A final approval of the applications for compromise settlement and abatement or cancellation of penalties has been secured.

A court of competent authority has decided to modify, amend, or declare with finality the nullity of a tax assessment, as shown in the entry of judgement.

A court of competent authority has declared that the AR/DA is uncollectible due to the insolvency of the taxpayer.

The taxpayer availed of tax amnesty as indicated by the taxpayer’s inclusion in the List of Tax Amnesty Availers provided by the Office of the BIR commissioner or the BIR deputy commissioner for Operations.

Condonation of the assessment by virtue of law as duly approved by the BIR commissioner or his authorized representative.

When the right of the government to assess/collect the deficiency/delinquent taxes has prescribed and such cancellation due to the aforesaid reason has been approved by the commissioner based on the recommendation of the National Committee on Prescribed Cases.

ARs/DAs recommended for write-off and approved by the BIR Commissioner or his authorized representative on grounds such as but not limited to the following:

• Individual taxpayer is deceased and no distrainable or leviable asset can be found
• Permanent cessation of business
• Dissolution
• Taxpayer is a general partnership and the individual partners are already deceased
• AR/DA cases with a total amount due of P20,000 and below, provided that all collection enforcement summary remedies have been fully exhausted.

Other meritorious cases deemed necessary by the BIR commissioner to be covered by ATCA.
The issuance of an ATCA is not mandatory after the payment of tax deficiency and tax discrepancy assessments. The non-inclusion of payment of tax assessments in the above list bolsters the claim of tax officers that the best evidence for the conclusion of a particular assessment are the payment forms used in the settlement of assessed amounts.

While it may be argued that tax assessment cases can be included in the category “Other meritorious cases”, it seems otherwise. If there was actual intent on the part of the BIR to include paid tax assessments on the list, then it would have specifically provided for it in RMO No. 33-2018, in the same vein that the difference between the original assessment indicated in the FAN/FLD and the assessment indicated in the FDDA is provided in the aforementioned list.

Further, there was no discussion of any participation from the taxpayer in the procedure for issuing an ATCA. While RMO 33-2018 provides that the ATCA shall be prepared in quadruplicates, the taxpayer is not entitled to receive a copy of such since each copy of the ATCA is allotted to the docket of the case and the relevant divisions of the BIR.

Obviously, the ATCA is an internal document of the BIR and serves the purpose of tracking and accounting receivables, collections, delinquent, and uncollectible BIR accounts. In other words, the ATCA is a tool by the BIR to manage its accounts and is not meant to be issued for the convenience or security of taxpayers.

The author is a Senior Manager with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

source:  Manila Times

Waves of waivers

Some of the important lessons in life we learn from unpleasant experiences. Learning from the mistakes of our past keeps us from repeating them. Wisdom comes from accepting errors and exercising better judgment in the future.


The above statements hold true even in tax collection. In the past, the Bureau of Internal Revenue (BIR) lost assessment cases due to the issue of waivers on the statute of limitations for the assessment of deficiency taxes. It may have learned its lesson the hard way, but the Bureau has implemented improved measures stemming from its experience.

In a 2004 case (G.R. 162852 dated Dec. 16, 2004), the Supreme Court ruled that a waiver must strictly conform to the requirements set forth under the rules; otherwise, the waiver is invalid. At that time, the prevailing rule on the proper execution of a waiver of the statute of limitations was Revenue Memorandum Order (RMO) No. 20-1990 and Revenue Delegation Authority Order No. 5-2001.

In a subsequent case (G.R. No. 212825 dated Dec. 7, 2015), the Supreme Court provided an exception to the general rule on validity of waivers. The crux of the issue pertained to the issuance of defective waivers, arising from the fault of both the taxpayer and the BIR. The waivers were said to be executed by the taxpayer’s accountant without a notarized board authority to sign in behalf of the company. On the other hand, the BIR was considered to be careless in performing its functions when it did not ensure that the waiver was duly accomplished and signed by an authorized representative, among others.

In that case, the Supreme Court tolerated the BIR’s slip-ups for equitable reasons. The validity of the waiver in favor of the state was then upheld on the strength of the time-honored principle that taxes are the lifeblood of the government. In its decision, the Court said the BIR’s right to collect taxes should not be jeopardized merely because of the mistakes and lapses of its officers, especially in cases where the taxpayer was obviously in bad faith when it voluntarily executed the waivers and subsequently insisted on their invalidity by raising the very same defects it caused. Thus, the taxpayer was estopped from questioning the validity of the waivers.

As for the erring BIR officials, the Court suggested enforcing administrative liabilities for their failure to properly comply with the procedures.

In a more recent decision (G.R. No. 213943 dated March 22, 2017), the Supreme Court ruled that the three-year period to assess was not extended because all the waivers executed by the taxpayer were considered defective. What is significant to note is that the waivers were considered defective because the BIR failed to provide the third copies to the office accepting the waivers and these copies were merely attached to the docket of the case. Also, the revenue official who accepted the third waiver was not authorized to do so. In this case, the defects were solely due to the fault of the BIR.

While the BIR argued that the taxpayer was estopped from questioning the validity of the waivers, the Courts clarified that the BIR cannot shift the blame to the taxpayer for the defective waivers. The BIR cannot easily invoke the doctrine of estoppel to cover its failure to comply with the requirements for valid issuance of waivers. Having caused the defects, the BIR must bear the consequences. Considering that the waivers are defective, the assessment was considered issued beyond the three-year prescriptive period, and thus, void. Contrary to the 2015 case, the Court ruled in favor of the taxpayer here because it played no part in the waivers’ defects.

With the issuance of a new RMO last year, the question is -- Can taxpayers apply the above decisions of the Supreme Court for issues on waivers today?

On April 18, 2016, the BIR issued RMO No. 14-2016 which laid down new guidelines on the execution of waivers. According to the new RMO, compliance with the prescribed form is not mandatory. A taxpayer’s failure to follow the forms would not invalidate the executed waiver, for as long as (1) it is executed before the expiration period, and the date of execution is specifically provided in the waiver; (2) the waiver is signed by the taxpayer or duly appointed representative/responsible official; and (3) the expiry date of the period agreed upon to assess/collect the tax after the three-year period is indicated.

In addition, the new RMO provides that the taxpayer is charged with the burden of ensuring that the waivers are validly executed. The taxpayer must submit the duly executed waiver to the Commissioner of Internal Revenue or to the authorized revenue official (e.g., concerned revenue district officer or group supervisor as designated in the Letter of Authority or Memorandum of Assignment) who shall then indicate acceptance by signing the waiver. Moreover, the taxpayer must retain a copy of the accepted waivers.

Under the new RMO which seems to favor the BIR, it appears that upon execution of the waiver, taxpayers can no longer challenge its validity.

Thus, while there is a level of comfort in the decision of the Court that taxpayers should not be made to suffer for lapses of the BIR, this will only apply to waivers that have been executed prior to the effectivity of the new RMO. The BIR has learned from past mistakes. Here’s to hoping that taxpayers have learned from their own.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Maria Jonas Yap is a Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 845-2728

maria.jonas.s.yap@ph.pwc.com

source:  Businessworld