Tax Updates April 2023 (SyCipLaw Tax Issues And Practical Solutions (T.I.P.S.) Vol. 24)

• Published date: 05 July 2023
• Subject Matter: Tax, Income Tax, Sales Taxes: VAT, GST, Property Taxes, Withholding Tax
• Law Firm: SyCip Salazar Hernandez & Gatmaitan
• Author: -1 SyCip Salazar Hernandez & Gatmaitan

1. May a revenue officer ("RO") conduct an examination of a taxpayer's accounts based on a Letter of Authority ("LOA") that contains the name of another RO and a Memorandum Referral signed by the Revenue District Officer?

No. In Republic of the Philippines vs. Robiegie Corporation (G.R. No. 260261, October 3, 2022), the Supreme Court ("SC") held that a new LOA is needed if the Bureau of Internal Revenue ("BIR") will reassign, from one RO to another, the examination or investigation of a taxpayer's records. In this case, the SC also explained that the reassignment of an RO may be delegated by the Commissioner of Internal Revenue ("CIR") to his or her duly authorized representatives under the National Internal Revenue Code of 1997, as amended ("NIRC").

Robiegie Corporation is a corporation engaged in operating a drugstore. The BIR issued an LOA dated July 27, 2009 (the "2009 LOA") authorizing RO Jose Francisco David, Jr. ("RO David") to examine Robiegie Corporation's books of account and other accounting records. Subsequently, the 2009 LOA was reassigned to RO Cecille D. Dy ("RO Dy") pursuant to a Memorandum Referral signed by the BIR Revenue District Officer.

In light of the findings of RO Dy pursuant to the 2009 LOA, the CIR assessed Robiegie Corporation with a total tax deficiency of PhP10,804,991.21, consisting of deficiency value added tax, deficiency expanded withholding tax, and compromise penalty. Failing to find any leviable or garnishable property of Robiegie Corporation, the BIR filed a complaint before the Court of Tax Appeals ("CTA") to collect deficiency taxes.

Robiegie Corporation argued that the assessments made by RO Dy were null and void because she had no authority to conduct an investigation. It argued that the 2009 LOA authorized only RO David, not RO Dy, to examine Robiegie Corporation's books of account. Without a valid LOA, any investigation is not permitted. On the other hand, the CIR argued that an investigation conducted by an RO pursuant to a memorandum of assignment under an LOA issued in favor of another RO is valid.

The SC ruled against the CIR and upheld the ruling of the CTA finding that the assessments made by RO Dy were null and void for lack of authority. The SC agreed with the CTA's finding that a validly issued LOA is needed for the valid conduct of a taxpayer investigation. Citing its previous decisions, the SC echoed that the reassignment of the examination of a taxpayer's books of accounts to another RO necessitates the issuance of a new LOA pursuant to existing law (Sections...