ii. Suspension and Waiver of Prescriptive Period

Suspension of the Running of Statute of Limitations

The running of the periods for assessment and collection is suspended on the grounds specified in NIRC, Sec. 223. When the CIR is prohibited from making the assessment or beginning distraint or levy or a proceeding in court, suspension lasts for that period and sixty (60) days thereafter:

• When the CIR is prohibited from making the assessment or beginning the distraint or levy or a proceeding in court – during such period and for 60 days thereafter;

When a case is on appeal to the CTA, the CIR is prevented from filing an ordinary action to collect the tax in the regular courts; the filing of the petition for review in the CTA interrupts the running of the prescriptive period for collection, until its termination in the Supreme Court. (Republic v. Ker, G.R. No. L21609)¹

• When the taxpayer requests for a reinvestigation which is granted by the CIR;

There must be a request for reinvestigation which the CIR grants; not merely a request for reconsideration. (CIR v. Philippine Global Communication, Inc., G.R. No. 167146, 31 October 2006)²

The taxpayer must request a reinvestigation, and the CIR must grant it; a request for reconsideration alone does not suspend prescription. (NIRC, Sec. 223)³

Note: The burden of proof that the taxpayer’s request for reinvestigation had been actually granted is with the CIR. (BPI v. CIR, G.R. No. 139736)⁴

• When the taxpayer cannot be located in the address given by him in the return, unless he informs the CIR of any change in his address;

This rule does not apply even if the taxpayer failed to follow the process for the notification on the change of address as long as there is proof that BIR is in fact aware of the whereabouts of the taxpayer. (CIR v. Basf Coating + Inks Phils., Inc., G.R. No. 198677, 26 November 2014)⁵

• When the warrant of distraint or levy is duly served, and no property is located; and
• When the taxpayer is out of the Philippines. (NIRC, Sec. 223)⁶

Nature of Waiver of Statute of Limitations

A waiver of the statute of limitations, [it] being a derogation of the TP’s right to security against prolonged and unscrupulous investigations, must be carefully and strictly construed (CIR v. Philippine Daily Inquirer, Inc., G.R. No. 213943, 22 March 2017)⁷

General Rule: Taxpayer and CIR may agree to waive the prescriptive period if they comply with the requirements of a valid waiver.

Only upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-year period (NIRC, Sec. 222[b]⁸)

Requirements of a Valid Waiver of the Statute of Limitations (R.M.O. 14-2016)

• The waiver may not necessarily be in the form prescribed by RMO 20-90 or RDAO 05-01, provided that the following conditions are complied with:
• The waiver is executed before the expiration of the period to assess or to collect taxes;
• The waiver is signed by the taxpayer himself, his duly authorized representative, or by any of the responsible officials for corporations; and
• The expiry date of the period agreed upon to assess/collect the tax after the three-year period of prescription.
• The waiver need not specify the taxes to be assessed nor the amount thereof except in cases of waiver for collection of taxes. It may simply state “All internal revenue taxes” except for waiver of collection of taxes which shall indicate the particular taxes assessed.
• The taxpayer has the burden to ensure that the waiver is validly executed by its authorized representative. The waiver cannot thereafter be invalidated on the ground that the taxpayer’s representative who participated in the conduct of the audit is not authorized to sign the waiver.
• Notarization of the waiver is now optional. However, it is sufficient that the waiver is in writing as specifically provided by the NIRC, as amended.

The waiver shall take legal effect and be binding on the taxpayer upon its execution and acceptance of the waiver by the relevant BIR Officer. The BIR officer shall indicate acceptance by signing the same. Both the execution of waiver and the acceptance must be done prior to the expiration of the period to assess or collect.

• The waiver can be accepted by the Commissioner on Internal Revenue, the Commissioner’s authorized representative as prescribed in existing regulations, the revenue district officer, or the group supervisor designated in the Letter of Authority for the audit.
• There are only two dates that need to be present on the waiver, namely:
• The date of execution; and
• The expiry date of the period the taxpayer waives the statute of limitations.

The expiry date of the period the taxpayer waives the statute of limitations.

Note: Under the earlier RMO 20-90 procedure, the waiver must be executed in 3 copies, the original to be attached to the docket, the second copy for the taxpayer and the third copy for the Office accepting the waiver. Under that procedure, the taxpayer must be furnished a copy of the waiver in order to perfect the agreement since the waiver is not a mere unilateral act. Under RMO 14-2016, the waiver takes effect upon its execution and acceptance by the relevant BIR officer before the applicable period expires; notarization is optional. (RMO 20- 90; See also CIR v. Stanley Works Sales (Phils.), Inc., G.R. No. 187589, 2014)

Recently, the Bureau of Internal Revenue issued Revenue Memorandum Order No. 14-2016, which further clarifies that:

• The waiver shall be executed before the expiration of period to assess or collect taxes. The date of execution shall be specifically indicated in the waiver
• The waiver shall be signed by the taxpayer himself or his duly authorized representative. The taxpayer is charged with the burden of ensuring that the waiver is validly executed by its authorized representative. The authority of the taxpayer's representative who participated in the audit or investigation shall not be thereafter contested to invalidate the waiver.
• The expiry date of the period agreed upon to assess/collect the tax after the regular 3-year period of prescription should be indicated.

A waiver of the statute of limitations, being a derogation of the TP’s right to security against prolonged and unscrupulous investigations, must be carefully and strictly construed (CIR v. Philippine Daily Inquirer, G.R. No. 213943, 2017)

The waiver must be signed by the taxpayer himself or his duly authorized representative. In the case of a corporation, the waiver must be signed by any of its responsible officials. In case the authority is delegated by the taxpayer to a representative, such delegation should be in writing and duly notarized. Under the earlier procedure considered in Kudos Metal, the waiver should be duly notarized. (CIR v. Kudos Metal Corp., G.R. No. 178087, 2010)

Note: Notarization of the waiver is now optional. (R.M.O. 14-2016)

Updated: A waiver of the statute of limitations must be strictly construed, requiring strict adherence to the BIR's detailed execution procedures, and the doctrine of estoppel cannot be applied to excuse the BIR's failure to comply with its own rules (La Flor Dela Isabela, Inc. v. CIR, G.R. No. 202105, 28 April 2021).

Doctrine of Equitable Estoppel (CIR v. Next Mobile, G.R. No. 212825, 2015)

Doctrine of Equitable Estoppel (CIR v. Next Mobile, Inc., G.R. No. 212825, October 10, 2016)

CTA found the following flaws in multiple waivers executed by the taxpayer: (i) lack of notarized board authority; (ii) dates of acceptance by the BIR not indicated; (iii) fact of receipt by the TP not indicated. However, SC ruled that the waivers were valid, in contrast to its ruling in Kudos Metal

Both parties knew the infirmities of the waivers yet they continued dealing with each other based on these documents. The waiver should have been void for being defective but due to peculiar circumstances, this is an exception and the waivers are valid because the parties are in pari delicto. (CIR v. Next Mobile, Inc., G.R. No. 212825, October 10, 2016)

Updated: However, the Supreme Court has since held that a waiver of the statute of limitations must be strictly construed, and the doctrine of estoppel cannot be applied to validate an assessment or excuse the BIR's failure to comply with procedural requirements for the waiver's execution (La Flor Dela Isabela, Inc. v. CIR, G.R. No. 202105, 28 April 2021).

Partial Payment

Partial payment of the assessment issued within the extended period to assess as provided in the Waiver of Defense of Prescription is an implied admission of the validity of the waiver. (RCBC v. CIR, G.R. No. 170257, 2011)

Estoppel applies if both the BIR and the taxpayers are at fault. The TP’s act of impugning its waivers after benefitting from them was considered an act of bad faith. Likewise,the BIR was at fault whenit accepted Transitions’ Waivers despite their non-compliance with the requirements in the RMO. TP is then estopped. However, since the FAN was issued beyond the extended period, prescription had nevertheless set in. (CIR vs. Transition Optical Philippines, Inc., G.R. No. 227544, 2017)

BUT SEE: A taxpayer, by paying the other tax assessments covered by a Waiver of the Statute of Limitations, is not estopped from questioning the validity of said waiver (on the basis that CIR did not sign it and some dates were lacking) with respect to the other covered but unsettled assessments. In this case, the taxpayer did not waive the prescription of the other deficiencies as it continued to raise the issue of prescription in its Pre-Trial Brief, Joint Stipulations, direct testimonies, and Memorandum filed. (CIR v. Standard Chartered Bank, G.R. No. 192173, 2015)

Updated: The Supreme Court has since clarified that the doctrine of estoppel cannot be applied to validate a prescribed assessment or excuse the BIR's failure to comply with its own procedural issuances governing the proper execution of waivers (La Flor Dela Isabela, Inc. v. CIR, G.R. No. 202105, 28 April 2021).