prescription of tax collection

Subject to certain exceptions, the Bureau of Internal Revenue (BIR) has five years, following the assessment of taxes, within which to initiate the collection of taxes. But have you ever received a collection notice even after the expiration of this period? If your case is not one of the instances where the suspension of the prescriptive period applies, then you have all the right to contest the collection.

More often, if an assessment is not settled even after the issuance of a final-assessment notice, the remedy of the taxpayer is to file an administrative protest. The protest must be filed within 30 days from the receipt of the assessment, otherwise, the same becomes final.

Once a protest is seasonably filed, is the BIR granted an indefinite period of time within which to collect? Or should the taxpayer consider an assessment closed   after the lapse of a certain period of time?

While the Tax Code fixes a specific period within which deficiency assessments may be collected, there are also a number of instances where the period of limitations can be affected, adjusted or suspended. The most common form is the issuance of a valid waiver of the statute of limitations by the taxpayer, duly accepted by the BIR commissioner or his authorized representative. But even in the absence of a valid waiver, the suspension or nonsuspension of the period may depend upon the type of protest filed by the taxpayer. A protest may either be a request for reconsideration or reinvestigation.  A request for reconsideration is a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence.  On the other hand, a request for reinvestigation is a plea for re-evaluation of an assessment on the basis of newly discovered evidence or additional evidence that a taxpayer intends to present in the investigation. Both types of protests may involve questions of fact, or law or both.

Based on court decisions, this distinction is significant because a request for reconsideration does not interrupt the running of the statute of limitations on the collection of deficiency-tax assessments. The running of the prescriptive period for collection of taxes can only be suspended through a request for reinvestigation, and not through a request for reconsideration. This is justified on the ground that a request for reconsideration is limited to the evaluation of evidence already made available to the BIR, while a request for reinvestigation requires the production of additional evidence by the taxpayer and the evaluation thereof by the BIR, which, understandably, requires more time.

Nonetheless, the filing of a request for reinvestigation does not itself automatically suspend the period within which the deficiency taxes may be collected. The Tax Code requires that the request for reinvestigation must be granted by the commissioner in order that it suspends the running of the prescriptive periods for the assessment and collection. In fact, it should not be the taxpayer who should prove such fact. This is a matter which the BIR must substantiate, especially so if denied by the taxpayer.  If no written justifications are available, this may be implied from the actions of the commissioner or his representatives.

Absent a showing that the request for reinvestigation is granted by the commissioner, the running of the statute of limitations cannot be suspended. Thus, aside from proving the type of protest filed by the taxpayer, the BIR must also show the request has been granted.

Taxpayers must, therefore, understand the significance of the difference between a request for reconsideration and a request for reinvestigation. Aside from the effects discussed in the column, there are other differences which may affect the remedies available to a taxpayer. While the type of the protest may be deduced from the position stated by the taxpayer in the protest, it is still important that this should be specified in the protest. Nonobservance of these rules may result in the undue denial of a basic remedy available to a taxpayer.

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The author is a partner at Benedicta-Du Baladad (BDB) and associates.  If you have any comments or questions concerning the article, you can e-mail the author at fulvio.d.dawilan@bdb.com.ph or call 856-2952.

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