Validity of waiver of the statute of limitations

Under Section 203 of the Tax Code, the BIR has up to three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return -- whichever comes later – to make a tax assessment. As an exception to the three-year rule, the period of limitation of assessment may be extended by an agreement to waive the statute of limitation made between the Commissioner of Internal Revenue and the taxpayer before the expiration of the three-year prescriptive period.

However, in order to be valid, the waiver of the statute of limitations executed by the taxpayer and the BIR must strictly comply with the procedures laid down under Revenue Memorandum Order (RMO) 20-90 and Revenue Delegation of Authority Order (RDAO) No. 05-01, which, among others, require that the waiver be notarized and the date of acceptance by the BIR be indicated in the waiver. Failure to conform strictly to the detailed procedure for the proper execution of the waiver as mandated under RMO 20-90 and RDAO 05-01 would render the waiver invalid, hence, without force and effect.

In the instant case, the waiver executed by the taxpayer and the BIR was deemed not properly notarized while the date of acceptance was not clearly indicated in the waiver. According to the CTA, these infirmities have the effect of making the waiver invalid. As such, it did not toll the running of the three-year prescriptive period under Section 203 of the Tax Code.

(Belle Corporation v. Commissioner of Internal Revenue, CTA Case No. 8175, September 18, 2012)

Tax Brief – October 2012

Punongbayan and Araullo