Protesting the Deficiency Tax Assessment

A taxpayer may protest the deficiency tax assessment within 30 days from date of receipt
of the FLD/FAN. If the taxpayer fails to file a valid protest against the FLD/FAN within the
30-day period, the deficiency tax assessment shall become final, executory and
demandable, and no request for reconsideration or reinvestigation shall be granted.
Under the new rules, a taxpayer may protest the deficiency tax assessment by filing a
written request for reconsideration or reinvestigation. The new rules do not use these
words loosely; in fact, the new rules differentiate these 2 modes of protest and their
requirements.

A request for reconsideration I s a plea for the re-evaluation of the deficiency tax
assessment on the basis of existing records, without need of additional evidence. On the
other hand, a request for reinvestigation is defined as a plea for the re-evaluation of the
assessment on the basis of newly-discovered or additional evidence that a taxpayer
intends to present in the reinvestigation.

The taxpayer is required to state in his protest (i) the nature of the protest (whether it is
one for reconsideration or reinvestigation) specifying newly-discovered or additional
evidence he intends to present if it is for reinvestigation, (ii) the date of the assessment
notice, and (iii) the applicable law, rules and regulations, or jurisprudence on which his
protest is based.

If there are several issues in the FLD/FAN and the taxpayer disputes or protests only
some of them, the assessment relating to the undisputed issue(s) shall become final,
executory and demandable. Moreover, if the taxpayer disputes or protests issues in the
FLD/FAN but he fails to state the facts, the applicable law, rules and regulations, or
jurisprudence in support of his protest, the issues shall be considered undisputed and the
related assessment shall likewise become final, executory and demandable. In both cases,
the BIR shall issue a collection letter requiring the taxpayer to pay the deficiency tax or
taxes on these undisputed items. This is a process that may eventually lead to the BIR’s
exercise of collection enforcement measures such as the service of a warrant of
distraint/garnishment.

If the taxpayer files a request for reinvestigation, he is required to submit all relevant
supporting documents (meaning, those which he are necessary to support the legal and
factual bases in disputing the tax assessment) within 60 days from filing the
protest/request for reinvestigation; if he fails to do so within the 60-day period, the
assessment shall become final. The taxpayer will then be barred from disputing the
correctness of the assessment by introducing newly-discovered or additional evidence,
and the BIR shall issue its Final Decision on Disputed Assessment (FDDA).

On the other hand, if the taxpayer files a request for reconsideration, the requirement to
submit relevant supporting documents within the 60-day period will not apply, since the
taxpayer is, by definition, requesting the reconsideration of the assessment on the basis of
previously submitted documents or records already existing with the BIR examiners. After
filing the protest, the next step would be for the taxpayer to wait for the BIR’s decision.
The BIR has 180 days to render its decision, counted from the date of filing of the protest,
in case of a request reconsideration, or from date of submission by the taxpayer of the
required documents, in case of a request for reinvestigation.

Remedy of an Appeal

If the Commissioner’s duly authorized representative (such as the Regional Director, in

case the audit is done by the revenue district office) denies the protest, in whole or in part,
within the 180-day period, the taxpayer has two options. He may appeal either to the Court
of Tax Appeals (CTA) within 30 days from receipt of the decision, or to the Commissioner,
by way of a request for reconsideration, also within the same 30-day period.
If the taxpayer appeals to the Commissioner, the Commissioner will not allow any request
for reinvestigation and will only entertain issues which were raised in the decision of the
Commissioner’s duly authorized representative (egg, the Regional Director). The taxpayer
may then appeal the Commissioner’s decision to the CTA within 30 days from receipt of
the decision. In case of inaction by the Commissioner, the taxpayer may appeal to the CTA
within 30 days from the same 180-day period counted from date of filing of the taxpayer’s
protest.

If, say, the Regional Director fails to act on the protest within the 180-day period, the
taxpayer may likewise appeal to the CTA but must do so within 30 days after the expiration
of the 180-day period. Alternatively, he may choose to wait until the Commissioner’s duly
authorized representative renders a final decision (or until the Commissioner decides on
the subsequent reconsideration of this decision) before resorting to a judicial appeal at the
CTA.

The decision of the Commissioner or his duly authorized representative (known as the
Final Decision on Disputed Assessment or FDDA) shall clearly state (i) the facts, the
applicable law, rules and regulations, or jurisprudence on which such decision is based;
and (ii) that the same is his final decision.
Service of Notices to Taxpayers

While the old rules required service of notices to the taxpayer either through personal
delivery or registered mail, the new rules have expanded the allowed modes of service.

Under the new rules, the PAN, FLD/FAN and FDDA may be served by the CIR or his duly
authorized representative through: (i) personal service at the registered or known address
of the taxpayer, or “wherever he may be found,” (ii) substituted service, where the
taxpayer is not present at the registered or known address, or refuses to accept the
notice, or (iii) by mail.

In case a taxpayer refuses to receive the notice, the revenue officers concerned shall
bring a barangay official and two disinterested witnesses (meaning, persons other than
employees of the BIR), so that they may personally observe and attest to such act of
refusal.

Service to the tax agent or practitioner shall be deemed service to the taxpayer.

Delinquency Interest
Finally, the new rules provide that in case of late payment of a deficiency tax assessed,
the taxpayer shall be liable for the 20% delinquency interest prescribed under the Tax
Code.
Going through a BIR audit may be a painful experience for many, but armed with an
awareness of one’s remedies and with the right amount of preparation, a taxpayer will
survive the audit.