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LEGAL DEFENSES AGAINST TAX ASSESSMENTS

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Know your rights! 

The government is hard-pressed for funds to finance economic recovery programs and so, much of the burden falls on the Bureau of Internal Revenue (BIR) to increase tax collections. Thus there is also a need for taxpayers to know their rights to effectively defend themselves against tax assessments.

While tax assessments are an integral part of governance to ensure everyone pays their correct dues, taxpayers are still entitled to a proper assessment process. Our insights below enumerate actions that might invalidate an entire tax assessment case.


Here are some defenses which may apply to tax assessment cases:


1. No LOA was issued

  • Always check if a valid Letter of Authority (LoA) was issued prior to the assessment. LoA only has a validity of thirty (30) days for the taxpayer to receive.
  • This defense may be used in an investigation process that may have started through a Letter Notice (LN).
  • The BIR is required to issue a new LoA if new officers will continue the tax audit.


2. Improper or no service of the assessment notice

  • If the taxpayer denies receiving the assessment notice, the BIR must prove that the letter was indeed received by the taxpayer.



3. Violation of procedural due process

  • Taxpayers should always check the dates when Preliminary Assessment Notice (PAN) and the Final Assessment Notice (FAN) were issued and received to ascertain if due process was observed.


4. Unreasonable disregard of evidence

  • The BIR's inaction and omission to give due consideration to the arguments and evidence submitted by the taxpayer were held by the Supreme Court in one case as "deplorable transgressions of the taxpayer's right to due process."




5. Prescription

  • The BIR generally has three years to assess the taxpayer
  • The period counted from the time the taxpayer filed his return or was required to file his return, whichever is later
  • If the FAN was issued after the said date, it is possible that the right of the BIR to assess has been prescribed






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