BDB Laws Tax Law for Business appears in the opinion section of Business Mirror every Thursday.

Request for rulings

IT is a basic assumption that every citizen must be accorded the right to be informed and
clarified as to the nature of tax and how it is applied to him or her, or to his or her transactions.
The taxpayers right to be informed is part and parcel of the due-process system embodied in our
Constitution. Specifically, a certain taxpayer may seek guidance from the Bureau of Internal
Revenue (BIR) itself so as to protect himself or herself from the possibility of not paying the
correct taxes due to the government or not following the correct procedures in complying with
his or her tax obligations due to an erroneous interpretation.

To shed light on the confusing and ambulatory provisions in our tax laws, the BIR commissioner
has the power to interpret the provisions in the tax code and other tax laws that are subject to
review by the finance secretary (Section 4 of the National Internal Revenue Code). Among
others, the interpretation of tax laws can be done through the issuance of tax rulings upon the
request of taxpayers or interested parties.

Tax rulings are defined as the official positions of the BIR on inquiries of taxpayers who request
clarification on certain provisions in the tax code, other tax laws or their implementing
regulations, usually for the purpose of seeking tax exemptions. (Revenue Memorandum Order 9-
2014) The rulings are the interpretations of tax laws based on certain facts and circumstances
presented by taxpayers.
As so provided in the memorandum order, a request for a tax ruling can be filed by any person,
natural or juridical, on the needed clarification on the application of tax laws, including questions
on the tax status of taxpayers and the effect of transactions for taxation purposes. While
taxpayers have the right to be informed on any tax concern affecting them, they cannot simply
request for rulings on any issue they believe should be addressed by the BIR.

The BIR does not entertain requests involving no-ruling areas. No-ruling areas refer to cases
where rulings need not be issued as when the case is fictitious, hypothetical or there is a pending
investigation or assessment. Also, the BIR is not a consultant that gives advice on how
transactions should be planned. Thus, any request for a ruling that calls for the issuance of tax-
planning ideas may not be entertained. Similarly, if the action requested can be determined
through some other process, the same will not be entertained.

Likewise, the BIR may not issue rulings under the following instances:

The taxpayer has directed a similar inquiry to another office of the BIR;

The same issue involving the same taxpayer or related taxpayer is pending in a case in litigation;
and

The same issue involving the same taxpayer is a subject of a pending investigation, ongoing
audit, administrative protest, claim for refund or issuance of tax-credit certificate, or collection
proceeding.

There are various modes by which a taxpayer may file his or her request for ruling before the
BIR, two of which are preferredin person or by registered mail. The prevailing practice is that
a request is made in a letter. The new memorandum order now states that the request letter shall
be a sworn statement executed under oath by the individual taxpayer or by the authorized
representative of a juridical entity. The request should contain the following: factual background
of the request; issues or questions sought to be confirmed; legal grounds and authorities relied
upon by the taxpayer to support his or her position of the taxpayer; list of documents submitted
and affirmations stating that a similar inquiry has not been filed and is not pending in another
office of the BIR, there is no pending case in litigation involving the same issue and the same
taxpayer or related taxpayer, the subject of the request is not pending investigation, ongoing
audit, administrative protest, claim for refund or issuance of tax-credit certificate, collection
proceeding or judicial appeal, and the documents submitted are complete and no other
documents will be submitted in connection with the request.

The evaluation, processing and approval and issuance involve several steps and approving
authorities. After the request has been properly received, it is assigned to a lawyer who will make
the initial evaluation as to whether it covers a no-ruling area or not. The lawyer drafts the reply
to the request, which then goes through several approval steps, ending with the BIR
commissioner as the final approving authority. The rule now is that the commissioner approves
and signs any action on the request, unless delegated to another BIR official.
All in all, the time spent within which a request for a ruling will normally be released will
actually depend on several factors, such as, but not limited to, the level of difficulty of the issues
involved (whether the rulings is of first impression or with precedents); workload of the lawyer
handling the matter; tardiness and absenteeism of the lawyer; fortuitous event; and lack of
coordination between the lawyer and the requesting taxpayer. But, sometimes, the delays are also
caused by the taxpayer, such as the insufficiency of the information and documents provided,
which are necessary for the resolution of the request. Both parties should then be aware of his or
her respective obligation for the speedy resolution of requests for rulings.

****

The author is a junior associate of Du-Baladad and Associates Law Offices, a member-firm of
the World Tax Services Alliance.

The article is for general information only, and is neither intended nor should be construed as a
substitute for tax, legal or financial advice on any specific matter. Applicability of this article to
any actual or particular tax or legal issue should be supported by professional study or advice.
For comments or questions about the article, e-mail the author at
nicolas.pataueg@bdblaw.com.ph or call 403-200,1 local 350.