Business Name

Address

REPLY

February , 2018
Regional Director
Bureau of Internal Revenue
Revenue Region

Sir/Madame;

This refers to the Preliminary Assessment Notice received by this

Corporation on __________________, informing hereof of the deficiency
Income tax, Value Added Tax, Expanded Withholding Tax for the
Taxable Year 2014.

Please be informed that the herein taxpayer is availing Section 228 of

Republic Act 8424, as amended otherwise known as the National
Internal Revenue Code of 1997, and Section 3.1.4 of Revenue
Regulations 18-2013, herein quoted the applicable provisions, to wit:

“SEC. 228. Protesting of Assessment. - When the

Commissioner or his duly authorized representative finds that
proper taxes should be assessed, he shall first notify the
taxpayer of his findings x x x

x x x Within a period to be prescribed by implementing rules

and regulations, the taxpayer shall be required to respond to
said notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized representative shall
issue an assessment based on his findings. x x x”
“SECTION 3. Due Process Requirement in the Issuance of
a Deficiency Tax Assessment. -
 3.1 Mode of procedure in the issuance of a deficiency tax
assessment:

3.1.1 Preliminary Assessment Notice (PAN). — If after

review and evaluation by the Commissioner or his duly
authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the
taxpayer for any deficiency tax or taxes, the said Office
shall issue to the taxpayer a Preliminary Assessment Notice
(PAN) for the proposed assessment. It shall show in detail
the facts and the law, rules and regulations, or
jurisprudence on which the proposed assessment is based

If the taxpayer fails to respond within fifteen (15) days from

date of receipt of the PAN, he shall be considered in
default, in which case, a Formal Letter of Demand and Final
Assessment Notice (FLD/FAN) shall be issued calling for
payment of the taxpayer's deficiency tax liability, inclusive
of the applicable penalties.”

by submitting its response and disagreement to the aforementioned

Preliminary Assessment Notice, as follows:

I. DEFICIENCY INCOME TAX

Disallowed Expenses due to non-withholding

Under Revenue Regulation No. 6-2018 re: Revenue Regulation No.

12-2013, Thereby Reinstating the Provisions of Section 2.58.5 of RR No. 14-
2002, as Amended by RR No. 17-2003, in which relevant provision are
quoted as follows:

“Sec. 2.58.5. Requirements for Deductibility. - An

income payment which is otherwise deductible under the
Code shall be allowed as a deduction from the payor's gross
 income only if it is shown that the income tax required to be
withheld has been paid to the Bureau in accordance with
Secs. 57 and 58 of the Code.

A deduction will also be allowed in the following cases

where no withholding of tax as made:

(B) The recipient/payee failed to report the income on

the due date thereof, but the withholding agent/taxpayer
pays the tax, including the interest incident to the failure to
withhold the tax and surcharges if applicable, at the time of
audit/investigation or reinvestigation/reconsideration.”

By the provision of the recent Revenue Regulation, assuming

arguendo that the Corporation has failed to remit the income tax from its
purchases which ultimately led to its disallowance, the latter should be
given the benefit of the disallowance of expenses through payment of
which during audit or reinvestigation.

Unsupported Creditable Wittholding Tax, P436,000.00

The non-inclusion of the withholding tax certificates (BIR Form 2307)

which resulted to the assessment to the amount of P436,000.00 was due to
a mere oversight with no intention to conceal nor misrepresent any amount
tax due. The mere error may be corrected by presenting the same if and
when ordered to be submitted.

II. VALUE ADDED TAX

Other income not subjected to VAT, P480,000.00

The aforementioned Value Added Tax out of the line in the

Preliminary Assessment Pan as merely “Other Income Not Subjected to VAT
- P480,000.00, is in contravention of Section 228 of the National Internal
Revenue Code quoted as follows:

“SEC. 228. Protesting of Assessment. x x x

x x xThe taxpayers shall be informed in writing of the law and

the facts on which the assessment is made; otherwise, the
assessment shall be void.”

It is clear in the foregoing that the assessment is without legal nor

factual justification, as the Preliminary Assessment Notice merely included
the account “Other Income Not Subjected to VAT”, with no explanation to
fully appraise the undersigned of the facts and circumstances regarding the
alleged deficiency.

In the case of Commissioner of Internal Revenue vs. Enron Subic

Power Corporation, Gr No. 166387, the Supreme Court stated:

“We note that the old law merely required that the
taxpayer be notified of the assessment made by the CIR. This
was changed in 1998 and the taxpayer must now be informed
not only of the law but also of the facts on which the
assessment is made. Such amendment is in keeping with the
constitutional principle that no person shall be deprived of
property without due process. In view of the absence of a fair
opportunity for Enron to be informed of the legal and factual
bases of the assessment against it, the assessment in question
was void. We reiterate our ruling in Reyes v. Almanzor, et
al.:

Verily, taxes are the lifeblood of the Government and so

should be collected without unnecessary hindrance.
However, such collection should be made in accordance
with law as any arbitrariness will negate the very reason for
the Government itself.”
 At any rate, the undersigned wishes to clear and correct the above
mentioned discrepancy if proven to be correct and true.

III. EXPANDED WITHHOLDING TAX

Basic Expanded withholding tax due, P1,605,989.62

The undersigned believes that the assessment of deficient Expanded

Withholding Tax is not in accordance with Revenue Regulation 17-2003 in
which the pertinent provision is quoted as follows:

xxx (M) Income payments made by the top ten thousand

(10,000) private corporations to their local/resident
supplier of goods and local/resident supplier of services
other than the covered by other rates of withholding tax -
Income payments made by any of the top ten thousand
(10,000) private corporations, as determined by the
Commissioner, to their local/resident supplier of goods and
local/resident supplier of services, including non-resident
alien engaged in trade or business in the Philippines x x x

x x x Top ten thousand (10,000) private corporations shall

include a corporate taxpayer who has been determined and
notified by the Bureau of Internal Revenue (BIR) x x x

As per the provision of the said Revenue Regulation, Income

payments being made by the undersigned with its expenses need not be
withheld and remitted with the Bureau of Internal Revenue from time to
time as the former believes that it is not one of the Top Ten Thousand
(10,000) Taxpayers being described by the said Revenue Regulation.
Furthermore, even if the undersigned is one of the said Top Ten Thousand
(10,000) Taxpayer, the requirement that it is determined and notified by
the Bureau of Internal Revenue is lacking as far as the undersigned believes
in good faith.

Lastly, to assess and demand from the undersigned deficient

Expanded Withholding Tax which was already reported and paid by the
supplier would tantamount to Direct Double Taxation, as the same taxable
article is being subjected to the same kind of tax, within the same taxable
year, in the same taxing authority within the same jurisdiction, which is
highly disfavoured being obnoxious.

At any rate, the undersigned wishes to clear and correct the

foregoing discrepancy if proven to be correct and true.