BDB Law’s “Tax Law for Business” appears in the opinion section of Business Mirror every Thursday.

Protesting a tax assessmentThe Department of Finance recently issued Revenue Regulation 18-2013 amending the Ruleson Assessment of National Internal Revenue Taxes (RR 12-99). Notably, the requirement forthe preparation and issuance of a Notice for Informal Conference was deleted. The clearmessage of this deletion is that the issuance of a Notice for Informal Conference is no longerpart of the procedures in the issuance of deficiency tax assessment. As a result, the PreliminaryAssessment Notice (PAN) shall be the first official notice from the Bureau of Internal Revenue,informing a taxpayer of a proposed tax assessment.

As in the old rules, a taxpayer is given 15 days from the receipt of the PAN within which torespond. If no response is submitted within the said period, the taxpayer is considered indefault. As a consequence, the BIR shall issue a Formal Letter of Demand (FLD) and FormalAssessment Notice (FAN) calling for the payment of tax liabilities, including interests andpenalties. On the other hand, if the taxpayer files a response to the PAN, expressing hisdisagreement to the proposed deficiency taxes, the BIR shall issue the FLD/FAN within 15 daysfrom filing/submission of the taxpayer’s response. It appears that under this new rule, theissuance of a PAN will automatically be followed by issuance of FAN, regardless of whether aresponse to the PAN is filed or not.

If a taxpayer disputes the assessment contained in the FLD/FAN, he must file a written protestwithin 30 days from its receipt. The protest should state the applicable law, rules andregulations, or jurisprudence on which the protest is based. Failure to do so would render theprotest void and without force and effect. Findings and issues not protested are consideredundisputed, in which case, the same becomes final, executory and demandable.

The new rules now require the taxpayer to specify the nature of the protest, that is, whether it isa request for reconsideration or reinvestigation. A request for reconsideration is a plea for re-evaluation of an assessment on the basis of existing records without need of additionalevidence. It may involve both a question of fact or of law or both. On the other hand, a requestfor reinvestigation is a plea for re-evaluation of an assessment on the basis of newly discoveredor additional evidence that a taxpayer intends to present. Like a request for reconsideration, itmay also involve a question of fact or of law or both.

In a request for reinvestigation, the taxpayer has to submit all relevant supporting documentswithin a period of 60 days from the date of filing of the letter of protest, otherwise theassessment becomes final. There is no similar period required or allowed in a request forreconsideration since the re-evaluation is supposed to be based only on existing records.

Some other new provisions are included in the new rules. But these merely captured some ofthe rules found elsewhere or taken from jurisprudence. It is worth emphasizing though thatunder RR 18-2013, in case of late payment of deficiency taxes, imputation of delinquencyinterest pursuant to Section 249 (c)(3) of the Tax Code will be imposed. A delinquency interestat the same rate of 20-percent per annum, aside from the usual 20 percent deficiency interest,shall be imposed on the assessed basic tax, surcharge and interest. This means that there aretwo types of interest that may be imposed—deficiency and delinquency interests.

Tax assessments are usually despised by taxpayers. This is an irritant to most taxpayers,especially those who believe they are paying the right amount of taxes. As annoying as it may,receipt of an assessment should not be ignored. Every taxpayer must still wisely address anassessment and observe the procedures laid down under the rules, even if an assessmentseems to be without basis. Otherwise, someone may end up paying taxes because of simpledisregard of the rules.

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The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), amember-firm of World Tax Services (WTS) Alliance.

The article is for general information only and is not intended, nor should be construed as asubstitute for tax, legal or financial advice on any specific matter. Applicability of this article toany actual or particular tax or legal issue should be supported, therefore, by a professionalstudy or advice. If you have any comments or questions concerning the article, you can e-mailthe author at anthony.prestoza@bdblaw.com.ph or call 403-2001 local 370.