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An alternative remedy for tax protest

An alternative remedy for tax protest by: Jean Ross L. Abenasa

As the Bureau of Internal Revenue (BIR) is bent on improving tax collection efforts more and more these days, the taxpayer’s remedy of protesting a deficiency tax assessment becomes a paramount consideration in today’s thriving businesses. 

Let us revisit the long established procedures for protesting deficiency tax assessments.

As provided for under Section 228 of the National Internal Revenue Code (Tax Code of 1997) in relation to Section 3.1.5 of Revenue Regulations (RR) No. 12-99, dated September 6, 1999, a taxpayer has the remedy of filing an administrative protest against the written assessment of the Commissioner of Internal Revenue (CIR) or his authorized representative within thirty (30) days from receipt of the assessment, and submit all relevant supporting documents within sixty (60) days from the filing of the protest; otherwise, the assessment becomes final. 

The written assessment, which is required by law to be duly protested, refers to the Formal Letter of Demand (FLD) or the Formal Assessment Notice (FAN).

The law and implementing regulations provide further that if the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from the submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals (CTA) within thirty (30) days from the receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period.  Otherwise, the decision shall become final, executory and demandable.  

Here, the law explicitly states that the taxpayer is given only thirty (30) days to appeal the decision to the CTA and failure to do so would make the assessment and the decision final and executory.

Recently, the BIR came up with a draft revenue regulation that proposes, among others, to establish the remedy of filing a motion for reconsideration of the denial of the CIR’s authorized representative (usually, the revenue district officer or the regional director who issued the FLD or the FAN), institutionalize a tax tribunal who will hear and decide the said motion, and prescribe for the rules on the reception of evidence for this purpose.

The proposed regulation is in line with the rule of exhaustion of administrative remedy—a well-observed rule in administrative law.   As pronounced by the Supreme Court, “[t]he doctrine allows, indeed requires, an administrative decision to first be appealed to the administrative superiors up to the highest level before it may be elevated to a court of justice for review. Thus, if a remedy within the administrative machinery can still be had by giving the administrative officer concerned every opportunity to decide on the matter that comes within his jurisdiction, then such remedy should be priorly (sic) exhausted before the court's judicial power is invoked.”  (Land Car, Inc. vs. Bachelor Express, Inc. et. al. G.R. No. 154377 December 8, 2003).  As applied to tax protest, the CIR, through the BIR-Appellate Division, has the final say on taxpayer’s liability prior to the case being elevated to the CTA.

Under the proposed revenue regulation, the taxpayer may file with the CIR:

     · Motion for reconsideration on the denial of the protest by the duly authorized representative of the CIR through a Final Decision on Disputed Assessment (FDDA), within thirty (30) days from receipt of the original copy of the FDDA
      · Motion for reconsideration on the deemed denial of the protest by the duly authorized representative of the CIR, as when the latter fails to promulgate its decision on the protest of the taxpayer within 180 days from the lapse of the 60-day period to submit all relevant documents in support of the protest or from the time all relevant supporting documents are submitted.

The motion will be heard by the Tribunal that will be c omposed of the BIR-Appellate Division’s Chief, the Assistant Chief and an Action Attorney to whom the case under consideration is assigned. 

Arguably the most important feature of the proposed revenue regulation is the effect of the filing of the motion for reconsideration with the CIR.  The draft regulation provides that the timely filing of the motion for reconsideration before the Office of the CIR stays the execution of the FDDA of the duly authorized representative of the CIR, who loses jurisdiction over the case.

If adopted, will the revenue regulation bring a significant help to both the government and the taxpayer? 

To the government, this remedy may aid in de-clogging the cases pending with the CTA.  But to wary taxpayers, the revenue regulation will beg the question—will this “alternative course of action” receive due regard from the courts, in so far as it can prevent the FDDA from becoming final and executory?

In this connection, the decision of the Supreme Court in Fishwealth Canning Corporation vs. Commissioner of Internal Revenue (G.R. No. 179343 January 21, 2010) should be given great emphasis.  In this case, the taxpayer’s administrative protest was denied by a FDDA which was duly received by the taxpayer. 

Instead of appealing the case to the CTA, the taxpayer filed a motion for reconsideration of the FDDA.  The taxpayer later appealed to the CTA upon receipt of the Preliminary Collection Letter from the CIR. 

In dismissing the petition, the Supreme Court held that the taxpayer has thirty (30) days from receipt of the FDDA to appeal the denial to the CTA, pursuant to Section 228 of the Tax Code of 1997.   

The Supreme Court ruled that the taxpayer lost its right of appeal before the CTA since “a motion for reconsideration of the denial of the administrative protest does not toll the thirty-day period to appeal to the CTA.”

According to the draft regulation, if, during the pendency of the motion for reconsideration, the taxpayer appeals the FDDA to the CTA, the motion for reconsideration is deemed abandoned by the taxpayer. 

In conjunction with the decision of the Supreme Court in the above-mentioned case, this should mean that the filing of a motion for reconsideration of the denial of the administrative protest does not prevent a taxpayer from exercising his right of appeal before the CTA, as long as the taxpayer does so within the period prescribed by law.

This article is not intended to be a substitute for professional advice.  For comments and inquiries, you may e-mail the author at  For other tax concerns, please check out our other tax services.