Implementing Rules of the First Paragraph of Sec. 4 of the NIRC of 1997, Repealing Department Order No. 005-99

October 5, 2001 DOF DEPARTMENT ORDER NO . 023-01 PROVIDING FOR THE IMPLEMENTING RULES OF THE FIRST PARAGRAPH OF SECTION 4 OF THE NATIONAL INTERN AL REVENUE CO DE OF 1997, REPEALING FOR THIS PURPOSE DEPARTMENT ORDER NO. 00 5-99 AND REVENUE ADMINISTRATIVE ORD ER NO. 1-99 WHEREAS, Section 4 of the National Internal Revenue Code of 1997 ("the NIRC") vests with the Commissioner of Internal Revenue exclusive and original jurisdiction to interpret its provisions and other tax laws, subject to review by the Secretary of Finance; WHEREAS, Department Order No. 005-99, dated January 26, 1999 and Revenue Administrative Order No. 1-99, dated February 5, 1999, implements the power of the Secretary of Finance to review rulings of the Commissioner of Internal Revenue; NOW THEREFORE, I, JOSE ISIDRO N. CAMACHO, Secretary of Finance, by virtue of the powers of supervision and control over the Bureau of Internal Revenue granted to me by Section 2 of the NIRC and Book IV, Title II, Chapter 4, Section 18 of the Administrative Code of 1987, do hereby order. SECTION 1. Scope of this Order . This Department Order shall apply to all rulings of the Bureau of Internal Revenue (BIR) that implement the provisions of the NIRC and other tax laws. SECTION 2. Validity of Rulings . A ruling by the Commissioner of Internal Revenue shall be presumed valid unless modified, reversed or superseded by the Secretary of Finance. SECTION 3. Rulings Adverse to the Taxpayer . A taxpayer who receives an adverse ruling from the Commissioner of Internal Revenue may, within thirty (30) days from the date of receipt of such ruling, seek its review by the Secretary of Finance, either by himself/itself or through his/its duly accredited agent or representative. The request for review shall be in writing and under oath, and must: a) be addressed to the Secretary of Finance and filed with the Revenue Operations Group, Department of Finance, DOF Building, BSP Complex, Roxas Boulevard corner Pablo Ocampo Street, City of Manila; TcAECH b) contain the heading "Request for Review of BIR Ruling No. ____"; c) allege and show that the request was filed within the reglementary period; d) allege the material facts upon which the ruling was requested; e) state that exactly the same set of facts were presented to the BIR; f) define the issues to be resolved; g) contain the facts and the law relied upon to dispute the ruling of the Commissioner; h) be signed by or on behalf of the taxpayer filing the request for review, provided that, only those lawyers engaged by the taxpayer and/or tax agents accredited by the BIR may sign on behalf of the taxpayer; i) indicate the Taxpayer Identification Number (TIN) of the taxpayer; j) be accompanied by a copy of the Commissioner's challenged ruling; k) contain a statement of the Office of the Commissioner of Internal Revenue, indicating that a copy of the request for review of the ruling was received by the Commissioner's Office and; l) specifically state that the taxpayer does not have a pending assessment or case in any court of justice where the same issues are being considered. Furthermore, the taxpayer must, at the time of filing of the request for review, submit a duplicate copy of the records on file with the BIR pertaining to his request, which set of records must be authenticated and certified by the BIR. These are mandatory requirements, and failure to comply with any of the stated substantive requirements shall be sufficient basis for the Secretary of Finance to dismiss with prejudice the request for review. SECTION 4. Affirmation, Reversal or Modification by the Secretary of Finance . The Secretary of Finance may affirm, reverse or modify a ruling of the Commissioner of Internal Revenue. The action of the Secretary shall consider only the same set of facts presented to the BIR in the first instance. In the case of an affirmation, the Secretary of Finance may rely wholly on the reasons stated in the ruling of the Commissioner of Internal Revenue. Subject to the provisions of Section 246 of the NIRC, a reversal or modification of the ruling shall terminate its effectivity upon the earlier date of the receipt of written notice of such reversal or modification by the taxpayer or by the BIR. SECTION 5. Certification Fee to be Imposed by the BIR . For this purpose, the BIR is given the authority to impose appropriate certification fees to carry out the provisions of this Order. SECTION 6. Repealing Clause . Department Order No. 005-99 and Revenue Administrative Order No. 1-99, as well as all other existing Department Orders and issuances of the Commissioner of Internal Revenue that are inconsistent with this Order, are hereby repealed. SECTION 7. Effectivity . This Department Order shall take effect immediately. Done in the City of Manila this 5th day of October 2001. (SGD.) JOSE ISIDRO N. CAMACHO Secretary MEMORANDUM FOR : Undersecretary CORNELIO G. GISON FROM : Commissioner RENE G. BAEZ SUBJECT : Comments on the Draft Department Order Repealing Department Order No. 00 5-95 and Revenue Administrative Order N o. 1-99 This refers to your Memorandum dated September 10, 2001 that was received by this Office on September 11, 2001, requesting for our comments on the proposed Department Order that will repeal Department Order No. 5-95 and Revenue Administrative Order No. 1-99. HCETDS Accordingly, the following are our comments on the matter: I. On the DOF's Powers Over the BIR . Although Section 2 of the National Internal Revenue Code of 1997 (Tax Code of 1997) provides that the BIR shall be under the supervision and control of the Department of Finance, Section 4 thereof specifically states that "[t]he power to interpret the provisions of [the Tax] Code [of 1997] and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance . In this regard, we express our overriding consideration about the application of the provisions of Section 270 of the Tax Code of 1997 that prohibits any officer or employee of the BIR from divulging to any person the following, namely: any information regarding the business, income, or estate of any taxpayer; and, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties. While the BIR recognizes the ascendancy of the DOF over it, we nevertheless would like the said Section 270 to be considered. Accordingly, we submit that there should be a redefinition of the standards for review and of the hierarchy of authorities, as well as the various types of rulings of the BIR that will be the subject of the Secretary's actions on review. II. Jurisdictional Considerations . In this respect, we would like to call attention to Sections 3 and 6 of the proposed Department Order. Section 3 allows the adversely affected taxpayer to seek review by the Secretary of Finance of the subject ruling; Section 6 authorizes the Secretary of Finance to motu proprio review a ruling by the Commissioner. In the light of Section 270 of the Tax Code of 1997, we submit that the Commissioner's rulings may only be reviewed on the basis of the adversely affected taxpayer's action for review. Moreover, we suggest that such action for review should be brought to the DOF by the taxpayer or his/its duly accredited tax agent or representative within 30 days from receipt of the subject ruling. III. On the Requirement to Transmit the Docket and to Comment . The taxpayer, by seeking a review of the ruling issued in his/its favor, should include as part of his submissions, a certified true copy of all the documents submitted to the BIR. All documents already submitted to the BIR should remain with the agency. We state in this regard the policy not to allow the withdrawal of any and all of the original documents already submitted to the BIR. The comments required of the BIR would be a surplusage considering that the factual and legal reasons for any adverse decision against the taxpayer are necessarily stated already in the subject Ruling, and in view of the presumption of validity of the rulings issued by the Commissioner in the exercise of his original and exclusive jurisdiction to interpret the provisions of the Tax Code and other tax laws. IV. Specific Recommendations . In sum, we submit the following specific recommendations: a. The DOF shall exercise its power of revision/review of rulings on the basis of the action for review brought to it by the adversely affected taxpayer or the latter's duly accredited agent or representative; b. The action for review shall be brought to the DOF within thirty (30) days from receipt by the taxpayer of the adverse ruling; c. The taxpayer himself or if the taxpayer is a juridical person, the duly authorized officer of the entity who has personal knowledge of the facts, shall undertake to submit the duplicate set of documents submitted to the BIR in the first instance. The same shall be certified true copies and duly authenticated by the BIR upon payment of a certification fee. ECTAHc On the basis of the foregoing comments, therefore, we would like to submit a modified proposed Department Order as herein attached. For your consideration. (SGD.) RENE G. BAEZ Commissioner of Internal Revenue