7/25/2019 Waiver BIR

1/3

BDB Laws Tax Law For Businessappears in the opinion section of BusinessMirroreveryThursday. BDB Law is an affiliate of Punongbayan & Araullo (P&A).

Waiver on defense of prescription on tax assessments

The Bureau of Internal Revenue normally has a period of three (3) years after thelast day prescribed by law for filing of tax returns to issue an assessment. Thisthree-year period is counted from the date prescribed by law for the filing of thereturn.

The statute of limitations for this assessment and collection of internal revenuetaxes is intended to safeguard the interest of the taxpayer against unreasonableinvestigations. There are, however, exceptions to the three-year prescriptiveperiod. For instance, if before the time prescribed for the assessment of the taxexpires, both the Commissioner and the taxpayer agree in writing to have theassessment after such time, the tax may be assessed within the mutually agreedupon period. This is usually referred to as the waiver of the statute of limitations.

To a certain extent, a waiver of statute of limitations is a derogation of thetaxpayer's right to security against a prolonged investigation. Nonetheless, thewaiver of the statute of limitations, whether on assessment or collection, shouldnot be considered a waiver of the right to invoke the defense of prescription but,rather, an agreement between the taxpayer and the BIR to extend the period to acertain date, within which the latter could still assess or collect taxes due. Theexecution of the waiver does not mean that the taxpayer is totally relinquishingthe right to invoke prescription.

7/25/2019 Waiver BIR

2/3

In fact, a waiver must comply with certain requirements to be considered valid.Among other requisites, the waiver must be: (1) in writing; (2) agreed upon byboth the Commissioner and the taxpayer; (3) executed before the expiration of

the ordinary prescriptive periods for assessment and/or collection; and (4)applicable for a definite period beyond the ordinary prescriptive periods forassessment and collection.

Revenue Memorandum Order No. 20-90 requires that the waiver beaccomplished in three (3) copies, the original copy to be attached to the docket ofthe case, the second copy for the taxpayer and the third copy for the BIR Officeaccepting the waiver. The fact of receipt by the taxpayer of his file copy shall beindicated on the original copy.

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 ofits responsible officials.

Another important element of the waiver is that it is not a unilateral act by eitherthe taxpayer or the BIR, but a bilateral agreement between two parties. Thus,the waiver must be accepted by the Commissioner of Internal Revenue or hisduly authorized representative, and the date of acceptance must be indicated.The taxpayer must be furnished a copy of the waiver accepted by the BIR.(Philippine Journalists, Inc. vs. Commissioner of Internal Revenue, G.R. No.162852, promulgated on December 16, 2004)

The Court also had the occasion to rule on the case of Commissioner of InternalRevenue v. Enron Subic Power Corp. (CA-GR SP No. 82966, December 21,2004) that a waiver is defective if it fails to indicate the name or designation ofthe alleged authorized representative of the Commissioner. This is so because itcould not be ascertained whether or not the signatory was indeed an authorizedrepresentative.

An equally significant aspect of a waiver is that it is merely an extension of aperiod. Thus, both the date of execution by the taxpayer and the date ofacceptance by the Bureau should be before the expiration of the prescriptiveperiod or before the lapse of the period agreed upon in case a subsequentagreement is executed. A prescriptive period that has already expired cannot beextended.

7/25/2019 Waiver BIR

3/3

Furthermore, a written waiver of a statute of limitations must specify a periodwithin which the Commissioner of Internal Revenue may assess the tax beyondthe regular three-year prescription period. Without a specified period, the

assessment may take forever, to the prejudice of the taxpayer, a situation whichthe requirement specifically intends to avoid. A waiver must not constitute a totalabdication of the statute of limitations but should only apply for a specified periodstated in the waiver.

For some reasons, the execution of a waiver may be beneficial to the taxpayer orto the BIR or both. Considering however, that it results to a derogation of some ofthe rights of the taxpayer, the waiver must be executed in accordance with theprocedures and formalities prescribed by the rules. Otherwise, it does not serveits purpose and the taxpayer has all the right to invoke its nullity.