Form and manner of protesting matters

With the government’s proposed national budget for 2026 pegged at P6.793 trillion — a 7.4% increase from the previous year’s budget — it is clear that the Bureau of Internal Revenue (BIR) will be intensifying its tax collection efforts to raise the much-needed funds.

Collections will largely come from income tax, withholding tax, value-added tax and other taxes; and from the BIR’s assessments for deficiency taxes as a result of examinations of taxpayers’ books of account and other accounting records.

Depending on the stage of the tax audit process, assessments for deficiency taxes may be contained in a Preliminary Assessment Notice (PAN) and/or Formal Letter of Demand and Final Assessment Notice (FLD/FAN).

A PAN is issued if the BIR finds sufficient basis to assess the taxpayer for deficiency taxes after a review and evaluation of the taxpayers’ explanation and supporting documents to the Notice of Discrepancy issued by the BIR. If the taxpayer does not agree with the findings in the PAN, it has 15 days from the date of receipt to respond. Otherwise, if no response is submitted, the taxpayer is considered in default, in which case, a FLD/FAN is issued by the BIR.

The FLD/FAN may be protested administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt. A request for reconsideration is a plea for re-evaluation of an assessment on the basis of existing records without need of additional evidence. On the other hand, a request for reinvestigation refers to a plea of re-evaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present.

It is worth mentioning that for the protest to be considered valid, it must comply with the form and manner of filing as provided under existing regulations.

First, the taxpayer should state the nature of the protest, whether it is for reconsideration or reinvestigation. A protest shall be considered a request for reconsideration unless it is clearly indicated as a request for reinvestigation. In case of the latter, the taxpayer should specify the newly discovered or additional evidence he intends to present to support his protest, and all relevant supporting documents should be submitted within 60 days from filing of the protest; otherwise, the assessment becomes final and executory.

Further, the protest letter should state the applicable law, rules and regulations, or jurisprudence on which his protest is based, otherwise, the protest will be considered void and without force and effect. If there are several assessment items in the FLD/FAN, the taxpayer must dispute or protest all the issues by stating the facts, the applicable law, rules and regulations, or jurisprudence in support of his protest. Undisputed assessment items become final, executory and demandable and the taxpayer is required to pay the deficiency tax or taxes attributable thereto.

In some decisions of the Court of Tax Appeals (CTA) I have encountered, the CTA held that the protest filed by the taxpayer is void and without force and effect for failure of the latter to comply with the form and manner of filing protests as prescribed under the BIR regulations, which rendered the assessment final and executory.

In CTA Case No. 10039 decided on Jan. 29, 2024, the CTA considered the protest letter filed by the taxpayer requesting for reinvestigation as void for failure to specify the applicable laws, rules, regulations and jurisprudence on which the protest was based as well as the newly discovered or additional evidence which the taxpayer intends to submit during the reinvestigation.

Similarly, in CTA Case No. 10821 decided on Sept. 27, 2024, while the protest filed by the taxpayer sought a request for reinvestigation, cited the date of the assessment notice and the Tax Code provision and a revenue regulation, the protest letter did not explain the applicability of such provisions nor raise any defense which the Commissioner of Internal Revenue (CIR) may consider.

In CTA Case No. 10425 decided earlier this year, while the taxpayer filed its protest letter/request for reinvestigation within the prescribed 30-day period from receipt of the FAN/FLD and indicated in the protest the documents it intends to submit (vouchers, contracts, invoices and official receipts, GL entries and accounts, reconciliation schedules, etc.), the protest letter submitted was still considered void as the taxpayer eventually failed to submit the documents it committed to present.

The recent decisions of the CTA highlight a crucial lesson for taxpayers: careful attention to procedural requirements and deadlines is indispensable to safeguarding against costly consequences. Forgetting these details can lead to the unfortunate consequence of paying deficiency taxes, potentially amounting to millions, just because of mere technicalities in the protest submitted. Such oversights can render a protest void, making the assessment final and executory, even before the merits of the case can be considered. Understanding not only the available remedies and their due dates, but also the prescribed form and manner to properly contest assessment notices received from the BIR, is essential.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Rachel Sison is a senior manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of the PwC network.

+63 (2) 8845-2728

rachel.d.sison@pwc.com