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BIR Chief's first order of business: Review previous tax issuances

When the new Bureau of Internal Revenue (BIR) Commissioner, lawyer Cesar Dulay, formally assumed office on July 1, it appeared to many that he intended to make an impression. Wasting no time, the Commissioner took many by surprise with three new issuances.


The three, released on Friday, consisted of two revenue memorandum circulars (RMC) -- RMC Nos. 69-2016 and 70-2016, and one revenue memorandum order (RMO) -- RMO No. 38-2016.

RMC No. 69-2016 suspends until further notice the issuances of his predecessor in the period covering June 1 to 30, 2016. The new Commissioner being true to his promise that he will review all tax issuances that dismayed many taxpayers.

Among those suspended are RMO No. 26-2016. This RMO provides: “Formal Letter of Demand and Final Assessment Notice (FLD)/(FAN) shall be issued fifteen (15) days from date of receipt by the taxpayer of the PAN (preliminary assessment notice), whether the same was protested or not.”

This controversial RMO was interpreted by taxpayers as rendering their reply to the PAN as meaningless. The suspension of this RMO gives taxpayers hope that a more reasonable assessment procedure will be followed under the current BIR administration.

Also suspended was RMO 27-2016. This issuance recognizes the outright grant by the BIR of preferential tax treaty rates on dividends (except for dividend tax sparing provision), interest, and royalties, subject to the keeping of documents for later BIR audit. However, the BIR still appears to have retained its requirement for application of tax treaty relief rulings for other types of income paid to non-residents.

Further, the BIR required a separate application for a BIR ruling on the taxpayer’s availment of the reduced 15% tax rate on intercorporate dividends under the tax sparing provision of the 1997 Tax Code, as amended [Section 28(B)(5) of the Tax Code]. 

Hence, the suspension of RMO 27-2016 likewise gives hope to taxpayers that the procedures in availing of preferential tax treaty rates and the dividend tax sparing rates will become more expedient on the part of the taxpayers.

The BIR Web site contains the full list of suspended BIR issuances as of June 2016.

On the other hand, Mr. Dulay also issued RMC No. 70-2016 suspending all tax audits and other field operations of the BIR related to the examinations of taxpayer’s books of accounts, records and other transactions. Although the suspension does not cover those taxpayers retiring from business, national government agencies, local government units and government owned and controlled corporations including subsidiaries and affiliates, and those with cases prescribing on or before Oct. 31, 2016, many taxpayers certainly welcomed this suspension. It is a common sentiment that the previous BIR administration appeared to force collections from taxpayers during BIR audits.

Many are hopeful that with the new BIR administration, a fair examination of procedures will take place. In addition, the bureau should also look into emphasizing accountability on the part of examiners who resort to harassing taxpayers to agree to settlements.

Finally, the new BIR Chief also issued RMO No. 38-2016, which revoked RMO Nos. 24-2016 and 25-2016. It can be recalled that these RMCs prescribed the guidelines and procedures in the conduct of investigation on the capacity of parties to acquire properties. These issuances have resulted in many questions about the fairness of the judgments on the financial incapacity of parties to acquire property.

Certain comments on these suspended RMOs include observations that they promote corruption and give the BIR examiners wide latitude or discretion in determining what would constitute necessary documents to be submitted, and determine capacity to acquire. These RMOs also appear to presume that the taxpayers have committed fraud. Thus, many taxpayers are counting on these issuances to be revoked. 

Change has finally arrived. Let’s hope that, moving forward, the BIR will continue look into calls by taxpayers for more fairness.

Should we prepare for more issuances? After only three days into his six-year term, the new Commissioner may have more up his sleeve.


Arianne Cyril L. Mandac is a senior of the Tax Advisory and Compliance division of Punongbayan & Araullo.


As published in Business World, dated 5 July 2016