BIR W AIVER OF DEFENSE OF PRESCRIPTION

The salient features of RMO No. 14-2016 include the following:

· The waiver may not necessarily be in the form prescribed by RMO 20 -90 or RDAO
05-01 provided that the following conditions are complied with:

The waiver is executed before the expiration of the period to assess or to collect
taxes;

The waiver is signed by the taxpayer himself, his duly authorized representative, or
by any of the responsible officials for corporations; and,

The expiry date of the period ag reed upon to assess/collect the tax is indicated.

The waiver need not specify the taxes to be assessed nor the amount thereof except
in cases of waiver for collection of taxes.

The taxpayer has the burden to ensure that the waiver is validly executed by it s
authorized representative. The waiver cannot thereafter be invalidated on the ground
that the taxpayer’s representative who participated in the conduct of the audit is not
authorized to sign the waiver.

Notarization of the waiver is now optional.

The waiver can be accepted by the Commissioner’s authorized representative as

prescribed in existing regulations, the revenue district officer, or the group supervisor
designated in the Letter of Authority for the audit.

To be valid, there are only two dates that need to be present on the waiver, namely
(1) the date of execution, and (2) the expiry date of the period the taxpayer waives
the statute of limitations.

Taxwise or Otherwise

By Caryl H. Granada-Bacay, 5 May 2016

Casino Rule: The house always wins. Something to keep in mind for who study the tax
system, particularly in light of the recent policy turnaround in regard to the waiver of the
Statute of Limitations.
Until just recently, the prevailing rules on the proper execution of the waiver of the
Statute of Limitations under the National Internal Revenue Code of the Philippines (Tax
Code) can be found in Revenue Memorandum Order (RMO) 20-90 of the Bureau of
Internal Revenue (BIR). In the landmark case of Philippine Journalists, Inc. v.
Commissioner of Internal Revenue (G.R. No. 162852, 16 December 2004), the
Supreme Court (SC) gave a stringent interpretation of RMO 20-90, requiring faithful
 compliance with its requirements for a waiver to be valid. The court ruled that since a
waiver to extend the period for the BIR to issue an assessment and collect taxes “is a
derogation of the taxpayer’s right to security against prolonged and unscrupulous
investigations, waivers of this kind must be carefully and strictly construed.”

Recently however, the Supreme Court adjusted its stance. In G.R. No. 212825 dated
Dec. 29, 2015, the high court laid down exceptions to the rule. In this case, the BIR and
the corporate taxpayer were considered in pari delicto or in equal fault, and the Court
deemed it more equitable to allow BIR’s lapses to pass (mentioning that proper
administrative sanctions could be imposed on the negligent BIR officials).
Consequently, the validity of the waivers were upheld in support of the principle that tax
collection is the lifeblood of the state. Since the taxpayer was also at fault, it was not
allowed to benefit from its own wrongdoing by invalidating the signed waivers. For
failure to raise any objections, the taxpayer was estopped from questioning the validity
of the waivers.

In parallel with this SC decision, the BIR found it high time to repeal RMO 20-90. Thus,
on April 4, the BIR issued RMO 14-2016, providing a new set of rules on executing
waivers. Under the new relaxed rules, the waiver may be, but not necessarily in the
form prescribed by RMO 20-90 or the related Revenue Delegation Authority Order No.
05-01. The taxpayer’s failure to follow the prescribed forms will not invalidate the
executed waiver, as long as the following minimum conditions are complied with:

 The waiver of the Statute of Limitations shall be executed before the expiration of the
period to assess or to collect taxes. The date of execution shall specifically be indicated
in the waiver.

 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 of its
responsible officials.

 The expiry date of the period agreed upon to assess/collect the tax after the regular
three-year period of prescription should be indicated.

In addition, the taxpayer is now charged with the burden of ensuring that the waivers
are validly executed by its authorized representatives. The BIR no longer requires that
the delegation of authority to a representative be in writing and notarized. This means
that it is presumed that the person signing has the authority to do so. Thus, the
taxpayer is now estopped from questioning the authority of its representative who
signed the waiver. Also, the waiver itself need not be notarized. It is sufficient that they
be in writing to produce legal effect and to bind the taxpayer upon its execution.

The apparent departure from RMO 20-90 is the previous requirement that only the
authorized revenue officials are allowed to accept the waiver. With the new relaxed
rules, the group supervisor as designated in the Letter of Authority or Memorandum of
Assignment can accept the waiver. Further, the date of acceptance of the signed
waiver by the BIR is no longer required to be indicated. RMO 14-2016 only considers
two material dates: 1) the date of the execution of the waiver by the taxpayer or its
authorized representative; and 2) the expiry date of the period the taxpayer waives the
statute of limitations.

Even under the old rules, taxpayers must consider carefully whether or not they should
execute waivers to extend the prescriptive period. Now, with these new relaxed rules
that lean in favor of the BIR, the decision should be weighed more carefully because
once signed, waivers can no longer be challenged.

While it would seem unfair for the BIR to change a long-standing rule to its advantage,
it is but proper since the Commissioner, under the Tax Code, is vested with powers,
not only to assess and collect taxes, but also to prescribe additional requirements for
tax administration and enforcement. This means that the Commissioner has the power
to make, amend or repeal rulings he may deem necessary for the proper
implementation and interpretation of the tax laws.

With the enactment of RMO 14-2016, the BIR would seem to always win. As for the
taxpayers, however, the law may be harsh, but like players in a game of poker, they will
have to play by the rules.

The views or opinions expressed in this article are solely those of the author and do not
necessarily represent those of Isla Lipana & Co. The firm will not accept any liability
arising from the article 9
http://www.pwc.com/ph/en/taxwise-or-otherwise/2016/the-new-rule-on-waivers.html)