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Waiver on defense of prescription on tax assessments

The Bureau of Internal Revenue normally has a period of three (3) years after the
last day prescribed by law for filing of tax returns to issue an assessment. This
three-year period is counted from the date prescribed by law for the filing of the
return.
The statute of limitations for this assessment and collection of internal revenue
taxes is intended to safeguard the interest of the taxpayer against unreasonable
investigations. There are, however, exceptions to the three-year prescriptive
period. For instance, if before the time prescribed for the assessment of the tax
expires, both the Commissioner and the taxpayer agree in writing to have the
assessment after such time, the tax may be assessed within the mutually agreed
upon period. This is usually referred to as the waiver of the statute of limitations.
To a certain extent, a waiver of statute of limitations is a derogation of the
taxpayer's right to security against a prolonged investigation. Nonetheless, the
waiver of the statute of limitations, whether on assessment or collection, should
not be considered a waiver of the right to invoke the defense of prescription but,
rather, an agreement between the taxpayer and the BIR to extend the period to a
certain date, within which the latter could still assess or collect taxes due. The
execution of the waiver does not mean that the taxpayer is totally relinquishing
the right to invoke prescription.

In fact, a waiver must comply with certain requirements to be considered valid.

Among other requisites, the waiver must be: (1) in writing; (2) agreed upon by
both the Commissioner and the taxpayer; (3) executed before the expiration of
the ordinary prescriptive periods for assessment and/or collection; and (4)
applicable for a definite period beyond the ordinary prescriptive periods for
assessment and collection.
Revenue Memorandum Order No. 20-90 requires that the waiver be
accomplished in three (3) copies, the original copy to be attached to the docket of
the case, the second copy for the taxpayer and the third copy for the BIR Office
accepting the waiver. The fact of receipt by the taxpayer of his file copy shall be
indicated on the original copy.
The waiver shall 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.
Another important element of the waiver is that it is not a unilateral act by either
the taxpayer or the BIR, but a bilateral agreement between two parties. Thus,
the waiver must be accepted by the Commissioner of Internal Revenue or his
duly authorized representative, and the date of acceptance must be indicated.
The taxpayer must be furnished a copy of the waiver accepted by the BIR.
(Philippine Journalists, Inc. vs. Commissioner of Internal Revenue, G.R. No.
162852, promulgated on December 16, 2004)
The Court also had the occasion to rule on the case of Commissioner of Internal
Revenue v. Enron Subic Power Corp. (CA-GR SP No. 82966, December 21,
2004) that a waiver is defective if it fails to indicate the name or designation of
the alleged authorized representative of the Commissioner. This is so because it
could not be ascertained whether or not the signatory was indeed an authorized
representative.
An equally significant aspect of a waiver is that it is merely an extension of a
period. Thus, both the date of execution by the taxpayer and the date of
acceptance by the Bureau should be before the expiration of the prescriptive
period or before the lapse of the period agreed upon in case a subsequent
agreement is executed. A prescriptive period that has already expired cannot be
extended.

Furthermore, a written waiver of a statute of limitations must specify a period

within which the Commissioner of Internal Revenue may assess the tax beyond
the regular three-year prescription period. Without a specified period, the
assessment may take forever, to the prejudice of the taxpayer, a situation which
the requirement specifically intends to avoid. A waiver must not constitute a total
abdication of the statute of limitations but should only apply for a specified period
stated in the waiver.
For some reasons, the execution of a waiver may be beneficial to the taxpayer or
to the BIR or both. Considering however, that it results to a derogation of some of
the rights of the taxpayer, the waiver must be executed in accordance with the
procedures and formalities prescribed by the rules. Otherwise, it does not serve
its purpose and the taxpayer has all the right to invoke its nullity.