The requisites for a valid waiver of the three-year (3-year) prescriptive period for the BIR to assess taxes due in the taxable year are prescribed by Revenue Memorandum Order (RMO) No. 20-90:
1. The waiver must be in the proper form prescribed by RMO 20-90.
2. The waiver must 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. In case the authority is delegated by the taxpayer to a representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must 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. However, before signing the waiver, the CIR or the revenue official authorized by him must make sure that the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau 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.
6. 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 must be indicated in the original copy to show that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement.
After being assessed by the BIR with alleged deficiency income taxes, VVV Corporation (VVV) through Enrique, its President, executed a waiver of the prescriptive period. The waiver was signed by Revenue District Officer (RDO) Alfredo. However, the waiver did not state the date of execution by the taxpayer and date of acceptance by the BIR. Enrique was also not furnished a copy of the waiver by the BIR.
VVV claims that the waiver is void due to non-compliance with RMO 20-90. Hence, the period for assessment had already prescribed. Moreover, since the assessment involves P2 million, the waiver should have been signed by the CIR and instead of a mere RDO. On the other hand, the BIR contends that the requirements ofRMO No. 20-90 are merely directory; that the execution of the waiver by VVV was a renunciation of its right to invoke prescription and that the government cannot be estopped by the mistakes committed by its revenue officers. Is VVV liable? Explain. (5%)
Suggested answer only. Not an official answer and not legal advice.
No, VVV is not liable because the deficiency assessment has prescribed. Under Section 222(b) of the NIRC and RMO 20-90, procedural rules for executing waivers are mandatory and strictly construed. A waiver
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Quick check
What is the legal nature of a waiver of the statute of limitations under RMO Number 20-90?
A waiver of the statute of limitations is a bilateral agreement extending the assessment period that requires strict compliance with RMO Number 20-90.
What is the legal effect of failing to state the date of execution and acceptance on a tax waiver?
Failing to state the dates of execution and acceptance violates mandatory RMO Number 20-90 requirements and renders the waiver void.
Why is the BIR prohibited from invoking estoppel to validate a defective waiver executed by its revenue officers?
The BIR cannot invoke estoppel because it is bound by its own mandatory rules and cannot profit from its officers' failure to comply.
What requirement regarding taxpayer notification is essential for the perfection of a tax waiver under RMO 20-90?
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How are rules governing the execution of waivers of the statute of limitations construed under Philippine tax law?
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Learn more about these topics
1. Waiver Requirements
Under Revenue Memorandum Order Number 20-90 and Revenue Delegation Authority Order Number 05-01, a waiver of the statute of limitations is not a unilateral act of the taxpayer but a bilateral agreement between the taxpayer and the Bureau of Internal Revenue. Strict compliance with the procedures set forth in RMO 20-90 is mandatory. Among these mandatory requirements are indicating the exact dates of execution and acceptance, properly notarizing the document, and furnishing the taxpayer a copy showing receipt of acceptance. Failure to satisfy these mandatory procedural requirements renders the waiver void and ineffective.
2. Strict Construction Rule
A waiver of the statute of limitations extends the government's right to assess taxes beyond the statutory three-year prescriptive period. Because it derogates the taxpayer's statutory protection against prolonged tax audits, rules governing the execution of waivers are strictly construed against the revenue authorities. The Bureau of Internal Revenue cannot claim that waiver requirements are merely directory or that non-compliance is cured by estoppel. When revenue officers fail to observe mandatory waiver formalities, the waiver is completely invalid, and the period to assess tax liabilities continues to run.
3. Prescription Defense
When a waiver of prescription is declared void due to non-compliance with statutory and administrative requirements, the government loses its legal authority to issue a deficiency tax assessment after the three-year period expires. An assessment issued after the lapse of the prescriptive period is void. The government cannot invoke the general principle that estoppel does not run against the State to validate a void waiver, because the State cannot profit from the negligence or omission of its own revenue officers in failing to comply with mandatory regulations.