Assessments Pursuant to Issued Letter Notices

June 3, 2019 JOINT OPERATIONS MEMORANDUM NO. 01-19 TO : The Assistant Commissioner, Assessment Service The Assistant Commissioner, Collection Service The Assistant Commissioner, Large Taxpayers Service The Assistant Commissioner, Legal Service The Regional Directors The Revenue District Officers The Chiefs, Regional Assessment Divisions The Chiefs, Regional Collection Divisions The Chiefs, Regional Investigation Divisions The Chiefs, Regional Legal Divisions The Chiefs, Accounts Receivables Monitoring Division The Chiefs, Large Taxpayers Audit Divisions The Chief, Large Taxpayers Collection Enforcement Division The Chief, Legal and Legislative Division The Chief, National Investigation Division All Others Concerned SUBJECT : Assessments Pursuant to Issued Letter Notices This Memorandum is issued in order to address the issues and concerns on protested/disputed and delinquent assessments made pursuant to a Letter Notice, in view of the Decision of the Supreme Court in the case of Medicard Philippines, Inc. vs. Commissioner of Internal Revenue (G.R. No. 222743) dated 05 April 2017, in which the Court held that the "assessment issued against Medicard Philippines, Inc. is hereby declared unauthorized for having been issued without a Letter of Authority by the Commissioner of Internal Revenue or his duly authorized representatives." Revenue Memorandum Circular (RMC) No. 75-2018 dated September 5, 2018 emphasized and clarified that any tax assessment issued without a Letter of Authority (LOA) is a violation of taxpayer's right to due process and is therefore "inescapably void." Thus, any assessment issued pursuant to a Letter Notice (LN) which was not replaced by LOA is invalid and, therefore, should be cancelled and/or withdrawn. DETACa In order to resolve the issues on assessments issued based on LNs not replaced by LOAs, which have become final, executory and demandable, including disputed/protested assessments, the following guidelines shall be observed: 1. The Revenue District Offices (RDOs), Assessment Divisions (ADs), Collection Divisions (CDs), and Legal Divisions (LDs) under the Revenue Regional Offices, as well as the Legal and Legislative Division (LLD), Accounts Receivables Monitoring Division (ARMD), Large Taxpayers Audit Divisions (LTADs) under the LTS and Large Taxpayers Collection Enforcement Division (LTCED) in the National Office shall prepare inventory lists of all LN dockets in their custody. The inventory lists shall be submitted in hard and soft copies to the Audit Information, Tax Exemption and Incentives Division (AITEID) within five (5) days from issuance of this memorandum, using the format prescribed in Annex "A" hereof. The soft copy of the list shall be sent through email address [emailprotected] . 2. For protested/disputed LN cases which were referred to the LD or LLD for confirmatory ruling or opinion, the office having custody of the dockets shall refer the dockets with a transmittal list to the concerned RDO or LT Division, for evaluation in accordance with paragraph no. 3 below. A copy of the transmittal list shall be furnished to the Assessment Service, Attention: AITEID. 3. Assessments covered by LNs which are dated prior to January 2010 shall no longer be pursued and the aforesaid offices shall recommend the issuance of Authority to Cancel Assessment (ATCA) in accordance with the policies and guidelines prescribed in Revenue Memorandum Order (RMO) No. 33-2018. For assessments covered by LNs which are dated January 2010 and onwards; the concerned RDOs, ADs, CDs, ARMD, LTADs and LTCED, where the case/docket is pending, shall evaluate the discrepancies involved per LN based on the Details of Discrepancies attached to the Final Assessment Notice (FAN)/Formal Letter of Demand (FLD) or Final Decision on Disputed Assessment (FDDA). If the discrepancy is 30% or less, the concerned office shall recommend for the issuance of ATCA since the assessment is no longer within the three (3)-year period to assess prescribed in Section 203 of the 1997 Tax Code, as amended. However, if the discrepancy is more than thirty percent (30%) and the 10-year prescriptive period to assess has not yet prescribed pursuant to Section 222 (a) of the 1997 Tax Code, as amended, based on the date of the LN as the reckoning date, it shall be referred for issuance of electronic Letter of Authority (eLA) to the concerned Regional Investigation Division (RID) under the Revenue Region having jurisdiction over the RDO where the taxpayer is registered, or to the National Investigation Division (NID) in case the taxpayer is registered as large taxpayer. A copy of the referral/transmittal to the RID or NID, as the case may be, shall be furnished to the Assessment Service, Attention: AITEID. aDSIHc Upon receipt by the RID/NID of the LN cases, it shall prepare a list of taxpayers with LN cases for issuance of eLAs for the approval of the Regional Director or Assistance Commissioner, Enforcement and Advocacy Service (EAS). Upon approval, the RID/NID shall request for a "Data Fix" in order to generate the eLAs for the LN cases, through the Electronic Letter of Authority Monitoring System (ELAMS). The requests, together with the approved lists shall be referred to the Assessment Service, Attention: AITEID. 4. The RID/NID shall ensure that the report of investigation shall be transmitted to the concerned reviewing offices not later than six (6) months prior to the end of the ten (10)-year period to assess pursuant to Section 222 (a) of the 1997 Tax Code, as amended. For strict and immediate compliance. (SGD.) MARISSA O. CABREROS Deputy Commissioner Legal Group (SGD.) ARNEL SD. GUBALLA Deputy Commissioner Operations Group