In view of the increasing confirmed cases of COVID-19, the government has placed the entire country under a state of national emergency. As a result, several measures were being implemented to protect the health and safety of the public, such as strict social distancing, enhanced community quarantine (ECQ) and location-specific lockdowns. 

In recognition of the fact that the current pandemic and concurrent measures adopted to address the same had necessarily resulted in suspension of business operations and work stoppage throughout the country, the Bureau of Internal Revenue (BIR) issued several regulations and guidelines to address the concerns of taxpayers. These include several issuances granting extensions for the filing and payment of tax returns, and submission of documents required by law to the tax office.

The problem now is that the government needs more money to fund its COVID-19 crisis response programs. According to the Department of Finance (DOF), the extensions granted had resulted in a shortfall of some Php 145 billion in needed revenue. The government is now faced with the challenge of striking a balance between protecting the health and welfare of its constituents, addressing the need to raise funds to enable it to implement its programs to address the pandemic, and maintaining a healthy economy. Thus, in view of the extensions granted, the BIR had also suspended the Statue of Limitations, so that the Bureau would not be hampered by technicalities in its collection of much needed funds.

The Statute of Limitations refers to the period during which the BIR can assess and collect taxes.  Under the Tax Code, the BIR has three (3) years to conduct an assessment reckoned from the last day prescribed by law for the filing of the return or from the day the return was filed, whichever is later. In case of a false or fraudulent return with intent to evade tax or of failure to file a return, the prescriptive period is extended to ten (10) years counted from the time the falsity, fraud or omission is discovered. For the collection of taxes, Section 222 of the Tax Code generally provides for a 5-year prescriptive period.

On 30 March 2020, the BIR released Revenue Memorandum Circular (RMC) No. 34-2020 and Revenue Regulations (RR) No. 07-2020 to temporarily suspend the Statute of Limitations for the assessment and collection of taxes from 16 March 2020 up to sixty days after the lifting of the order of state of emergency.  Then on 08 April 2020 and 14 April 2020, the BIR released RMC No. 39-2020 and RR No. 10-2020, respectively, which likewise provides for the temporary suspension of the Statute of Limitations for the assessment and collection of taxes for up to sixty days after the lifting of the order of state of emergency. 

RMC No. 34-2020 and RR No. 7-2020 were issued when the ECQ period was only up to 12 April 2020, whereas RMC No. 39-2020 and RR No. 10-2020 were released by the BIR after the President extended the ECQ period to 30 April 2020.  Further, RMC No. 34-2020 and RR No. 7-2020 only speaks of state of emergency.  In the case of RMC No. 39-2020, there is an express reference of the phrase “state of emergency” to the ECQ period.  Interestingly, RR No. 10-2020 only reiterates state of emergency similar to RR No. 7-2020.

Note that the total number of days of suspension, assuming that the ECQ period will end on 30 April 2020, is 106 days counted from 16 March 2020 to 29 June 2020.  29 June 2020 being the 60th day from 30 April 2020.  This means that after 29 June 2020, the BIR has an additional 106 days to issue notices of assessments and/or warrants for collection of taxes to taxpayers who are the subject of a tax audit or assessment for years that are non-prescribing during the suspension period.

This suspension may not be good news to all, but as the saying goes, taxes are the lifeblood of the nation.  For truly, in order to navigate this crisis, the payment and collection of the correct taxes are essential for the government to have the resources in order to address the needs of the people.  

_{Joanna T. Sarmiento is an Associate from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.}

_{This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.}

_{The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com}