On BIR’s authority to cancel assessments
ATTY. PEACHES ARANAS
The BIR has issued Revenue Memorandum Order (RMO) No. 33-2018, which consolidates, clarifies and reiterates the existing policies and procedures in the issuance by the BIR of the Authority to Cancel Assessment (ATCA).
To the layman, to be able to understand what an ATCA is, one has to talk about tax assessments in general, and particularly, the issuance by the BIR ofa Final Assessment Notice (FAN). Without going into too much detail, for taxpayers who have been remiss in the payment of the proper National Internal Revenue taxes, the BIR may issue a tax assessment, calling for the payment of the deficiency taxes. If after review and evaluation the BIR has determined that there is sufficient basis to assess a taxpayer deficiency taxes, it shall issue a Formal Letter of Demand/Formal Assessment Notice (FLD/FAN), which shall state the facts, the law, rules and regulations on which the assessment is based. The FLD/FAN also contains the total amount of deficiency taxes the taxpayer is liable for.
Upon receipt of the FLD/FAN, a taxpayer is generally faced with two options: he can either accept and pay the full amount of the assessment; or he may file a letter of protest (a request for reconsideration or a request for reinvestigation) with the BIR within 30 days from receipt of the FAN. Depending on the options considered by the taxpayer, and mostly in large part to the results of the BIR’s investigation, the original amount of the deficiency taxes the taxpayer is liable for may be cancelled, reduced, modified, or amended, thus necessitating a process, in the form of the issuance of an ATCA, to effect such changes.
Generally, the ATCA shall be issued as proof of the cancellation of tax assessments with issued FLD/FAN, as a result of any of the following instances:
• The difference between the amounts of the original tax assessment and the reduced tax assessment has been amended or declared “null and void” and is covered by a final administrative decision by the Commissioner of Internal Revenue (CIR) as shown in the Final Decision on Disputed Assessment (FDDA);
– Final approval by the BIR of an application for compromise settlement and abatement or cancellation of penalties under the Tax Code;
– Decision by a competent court where the assessment is either modified, amended or declared “null and void” with finality as shown in the entry of judgment;
– Declaration by a competent court that the tax assessment is uncollectible due to insolvency of the taxpayer;
– Taxpayer’s availment of the tax amnesty;
– Condonation of the assessment by virtue of law, as approved by the CIR;
– When the right of the government to assess/collect the corresponding deficiency taxes has prescribed;
– Tax assessment cases that are recommended for write-off and approved by the CIR on the following grounds:
i. Individual taxpayer is deceased and no distrainable or leviable assets could be found;
ii. Permanent cessation of business;
iii. Dissolution;
iv. Taxpayer is a general partnership and the individual partners are already deceased;
v. Tax assessment cases with a total amount due of P20,000 and below, provided that all collection enforcement summary remedies have been fully exhausted; and
vi. Such other meritorious cases which the CIR may deem necessary to be covered by an ATCA.
The BIR Accounts Receivable Monitoring Division (ARMD), acting as the Secretariat of the National Committee on Prescribed Cases, shall only prepare the ATCA, after approval by the CIR of the recommendation for write-off.
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