BIR is prohibited to issue FLD to corporations under Rehabilitation

A corporation, with its inability to meet its obligations due, may file a petition for corporate rehabilitation
pursuant to RA 10142, otherwise known as Financial Rehabilitation and Insolvency Act of 2010. During
such, the Rehabilitation Court may issue a Commencement Order declaring the corporation to be under
rehabilitation which suspends all actions or proceedings, in court or otherwise, for the enforcement of
claims against the corporation including all claims of the government, whether national or local,
including taxes, tariffs, and custom duties.

In this case, BIR issued a Notice of Informal Conference and a Formal Letter of Demand for unpaid taxes
to the distressed corporation in spite being adequately notified for the formers rehabilitation, assailing
the Commencement Order.

The SC held that it was improper for BIR to collect, or even attempt to collect, deficiency taxes from
corporations under Rehabilitation. Creditors of distressed corporations may seek remedy by ventilating
their claims before the Rehabilitation Court.

(G.R. No. 224764 dated April 24, 2017)

RCG
Suggested Titles:
- Prohibited: Issuance of FLD to corporations under Rehabilitation
- BIR is prohibited from issuing FLD to corporations under Rehabilitation