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It is a
basic principle in law that every right or privilege may
be waived. A waiver is a voluntary and intentional
relinquishment or abandonment of a known legal right or
privilege (Castro v. Del Rosario, et al., No. L-17915,
January 31, 1967).
In
taxation, one of the rights or privileges that may be
waived by the taxpayer is the defense of prescription
under Section 203 of the National Internal Revenue Code
(NIRC). Generally, the Bureau of Internal Revenue (BIR)
has a period of three years, counted from the period
fixed by law for the filing of the tax return or the
actual date of filing, whichever is later, within which
an assessment may be issued. Under Section 222 (B) of
the NIRC, the three-year prescriptive period may be
waived upon agreement in writing both by the
commissioner of Internal Revenue and the taxpayer. To
implement Sections 203 and 222 (B) of the NIRC, the BIR
issued Revenue Memorandum Order (RMO) 20-90 dated April
4, 1990 (Re: Proper execution of the waiver of the
statute of limitations under the National Internal
Revenue Code).
Recently, the Supreme Court, in the case of Commissioner
of Internal Revenue v. FMF Development Corporation, G.R.
No. 167765, June 30, 2008, declared that the procedures
prescribed in RMO 20-90 should be applied in determining
the validity of a waiver of the defense of prescription.
Essentially, the following are the procedures enumerated
in RMO 20-90 that must be strictly followed:
§
The
waiver must be in the form identified in RMO 20-90 as
Annex “A”;
§
The
waiver shall be signed by the taxpayer himself or his
duly authorized representative. In the case of a
corporation, the waiver must be signed by any of its
responsible officials.
Soon
after the waiver is signed by the taxpayer, the
commissioner of Internal Revenue or the revenue official
authorized by him shall sign the waiver indicating that
the BIR has accepted and agreed to the waiver. The date
of such acceptance by the BIR should be indicated. Both
the date of execution by the taxpayer and date of
acceptance by the BIR should be before the expiration of
the period of prescription or before the lapse of the
period agreed upon in case a subsequent agreement is
executed.
The
following revenue officials are authorized to sign the
waiver:
A. In
the national office, for tax cases involving not more
than P500,000, the waiver must be signed by the
assistant commissioners for Internal Revenue (ACIRs) for
collection, special operations, national assessment,
excise and legal on tax cases pending before their
respective offices. In the absence of the ACIR, the head
executive assistant may sign the waiver. For tax cases
involving not more than P500,000 but not more than P1
million, the waiver must be signed by a deputy
commissioner of the BIR national office. For tax cases
involving more than P1 million, the waiver must be
signed by the commissioner of Internal Revenue.
B. For
cases in regional offices which are still pending
investigation and the period to assess is about
regardless of amount, the waiver should be signed by the
revenue district officer (RDO).
The
waiver must be executed in three copies, the original
copy to be attached to the docket of the case, the
second copy for the taxpayer and the third copy for the
office accepting the waiver. The fact of receipt by the
taxpayer of his/her file copy shall be indicated in the
original copy.
In the
aforementioned case, FMF Development Corp., through its
president, executed a waiver of the three-year
prescriptive period within which the BIR may assess
internal-revenue taxes for the taxable year 1995 until
October 31, 1999. On October 25, 1999, FMF Development
Corp. received the BIR’s formal letter of demand and
assessment notice setting forth the former’s alleged
deficiency in taxes and accrued interests totaling
P2,053,698.25. FMF Development Corp. filed a protest
letter against the assessment, invoking, among other
things, the defense of prescription by reason of the
invalidity of the waiver.
Applying
RMO 20-90, the Supreme Court ruled that the waiver was
defective and did not validly extend the original
three-year prescriptive period. First, it was not proved
that FMF Development Corp. was furnished a copy of the
BIR-accepted waiver. Second, the waiver was signed only
by an RDO, when it should have been signed by the
commissioner as mandated by the NIRC and RMO 20-90,
considering that the case involves an amount of more
than P1 million, and the period to assess was not yet
prescribed. Last, it did not contain the date of
acceptance by the commissioner of Internal Revenue, a
requisite necessary to determine whether the waiver was
validly accepted before the expiration of the original
three-year period. The Supreme Court declared that the
waiver was a bilateral agreement, thus necessitating the
very signatures of both the commissioner and the
taxpayer to give birth to a valid agreement. Absent the
consent of the commissioner, such waiver had no binding
effect on FMF Development Corp.
As
enunciated by the Supreme Court in the case of
Philippine Journalists, Inc. v. Commissioner of Internal
Revenue (G.R. No. 162852, December 16, 2004), a waiver
of the statute of limitations under the NIRC, to a
certain extent, is a derogation of the taxpayer’s right
to security against prolonged and unscrupulous
investigations. Hence, taxpayers who executed a waiver
of the defense of prescription must carefully scrutinize
and determine if the procedures prescribed in RMO 20-90
were strictly followed.
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The
author is an associate of BDB Law. If you have any
comments or questions concerning the article, you can
e-mail the author at roy.n.relato@bdblaw.com.ph or call
8562952. |
