Tax notes: Validity of waiver of defense of prescription

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Monday, May 5, 2014


UNDER Section 222(b) of the Tax Code, the three-year prescriptive period may be extended through execution of a waiver of defense of prescription between the taxpayer and the Commissioner of Internal Revenue (CIR). However, in order to be valid, strict compliance with the form and procedures laid down in Revenue Memorandum Order (RMO) No. 20-90, which implements Section 222(b) of the Tax Code, is mandatory.

In the execution of waiver of defense of prescription, Section 1 of RMO No. 20-90 requires, among others, that: (a) the waiver must be in the form identified under RMO 20-90; (b) the waiver shall be signed by the taxpayer himself or his duly appointed representative; and (c) the date of acceptance by the Bureau of Internal Revenue (BIR) should be indicated in the waiver. In case of failure to comply with the provisions of RMO No. 20-90, the waiver shall be deemed defective, and thus, it shall not extend the three-year prescriptive period of assessment.

After review of the agreement between the BIR and the taxpayer, the Court of Tax Appeals (CTA) found the waiver defective and therefore no valid agreement between the taxpayer and BIR can be construed to have taken place due to the following reasons: (a) the waiver did not state the amount of assessed taxes as required under the prescribed form; and (b) the waiver lacks the required signature and date of acceptance of the taxpayer or of the duly authorized representatives of the BIR (Dole Philippines, Inc., vs. Commissioner of Internal Revenue, CTA Case No. 8155, March 21, 2014).

Due to the defects of the waiver, the period to assess was not further extended, and consequently, the deficiency tax assessment issued by the BIR had prescribed for having been issued beyond the three-year prescriptive period provided by law (Source: Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on May 06, 2014.

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