Don't bark up the wrong tree

Don't bark up the wrong tree

by: Lizandro C. Amandy


“Barking up the wrong tree” can vary in meaning depending on the situation. But for purposes of this article, allow me to use this phrase in the context of asking for help or seeking redress.

don't bark up the wrong tree

In taxation, barking up the wrong tree can have dire consequences especially for taxpayers undergoing the process of a full-blown tax audit investigation conducted by the Bureau of Internal Revenue (BIR).

Many assessment cases in the Philippines have been elevated to the Court of Tax Appeals (CTA) and even to the Supreme Court (SC) for final determination. But before a case reaches the CTA, existing Philippines tax rules prescribe that an assessment must first go through the following stages:

  1. BIR’s issuance of Letter of Authority (LOA), Notice of Informal Conference (NIC), and Preliminary Assessment Notice (PAN);
  2. Taxpayer’s reply to the PAN;
  3. BIR’s issuance of Formal Letter of Demand (FLD)/Final Assessment Notice (FAN);
  4. Taxpayer’s submission of an administrative protest requesting for reconsideration or reinvestigation against the FLD/FAN; and
  5. BIR’s issuance of the Final Decision on Disputed Assessment (FDDA), which embodies the decision of the BIR on the taxpayer’s administrative protest to the FLD/FAN.

If the taxpayer’s protest is denied, in whole or in part, by the representative of the Commissioner of Internal Revenue (CIR), the taxpayer may: (1) file a Petition for Review (PFR) with the CTA within 30 days from the receipt of the denial (i.e., judicial appeal); or (2) file a Request for Reconsideration with the CIR within 30 days from the receipt of the denial (i.e., administrative appeal), and if the protest is still denied by the CIR, appeal to the CTA within 30 days from the receipt of the denial. A Motion for Reconsideration may still be filed with the CIR but this will not toll the 30-day period to appeal to the CTA.

If the taxpayer’s protest is not acted upon by the CIR within 180 days from the date of filing, the taxpayer may: (1) appeal to the CTA within 30 days from the expiry of the 180-day period; or (2) wait for the final decision of the CIR and then appeal said decision to the CTA within 30 days after receipt thereof.

But what if the BIR did not issue an FDDA as a reply to the taxpayer’s protest and, instead, issued a Preliminary Collection Letter (PCL)? Could the PCL be considered as the BIR’s FDDA?

In some cases, the CTA answered in the affirmative and explained that the counting of the abovementioned 30 days to file a PFR before the CTA would then start from the taxpayer’s receipt of the PCL; and if the taxpayer happens to overlook the date when it received the PCL and mistakenly uses the end of the 180-day period as the reckoning point for filing the PFR, the taxpayer would already be barking up the wrong tree.

In a recent decision of the CTA (CTA Case No. 9597 dated 13 July 2020), after properly undergoing the process of a tax assessment (from the issuance of a LOA to the issuance of the FLD/FAN), a taxpayer filed an administrative protest on 15 January 2014 requesting for reinvestigation on the alleged deficiency taxes raised in the FLD/FAN. On 02 July 2014, instead of an FDDA, the taxpayer unexpectedly received a PCL demanding settlement of the alleged deficiency taxes. The PCL was challenged through a series of letters protesting that the request for reinvestigation has not yet been acted upon and thereby violating the taxpayer’s right to due process. The BIR then issued a Demand Letter on 10 May 2017.                       

On 24 May 2017, the taxpayer filed a PFR before the CTA praying that the assessment by the BIR be annulled and declared void. Apparently, it was the taxpayer’s understanding that seeking redress from the CTA was still an available remedy at that stage.

Unfortunately, the CTA disagreed and ruled that it had no jurisdiction over the PFR. The CTA explained that the protest filed by the taxpayer was void and without any legal effect “because it utterly failed to state the facts, the applicable law, rules and regulations, or jurisprudence on which it is based. The taxpayer “merely perfunctorily requested a reinvestigation of the deficiency tax assessment issued by respondent without stating any factual or legal basis therefor.”

But even assuming that the protest was valid, the CTA still ruled that it is bereft of jurisdiction over the PFR. What were the problems? Did the taxpayer really bark up the wrong tree?

The taxpayer treated the date when it received the Demand Letter from the BIR as the date when the 30-day period to file a PFR should start. In other words, the taxpayer considered the Demand Letter as the FDDA. If that were the case, the taxpayer would have had until 10 June 2017 to file a PFR before the CTA. And since, the PFR was filed on 24 May 2017, the CTA would have had jurisdiction over the matter.

However, the CTA ruled that instead of the Demand Letter, it was the PCL that essentially constituted an FDDA. The date when the taxpayer received the PCL should have been the reckoning point for the 30-day period to file a PFR with the CTA because the PCL sent by the BIR to the taxpayer was of a character similar to that of an FDDA. Thus, the taxpayer had 30 days from 02 July 2014 to file an appeal. Any appeal by the taxpayer to the CTA beyond 01 August 2014 would just result to dismissal for lack of jurisdiction.

So can a PCL (or a Demand Letter) be considered as the BIR’s FDDA? In this case, YES. The CTA explained that if the language or tenor used in the PCL strongly suggests a character of finality, the same may then be considered as an FDDA and thus, already appealable to the CTA. However, it is also vital that the appeal be made within 30 days from the receipt of the PCL. Otherwise, a taxpayer may end up barking up the wrong tree as all the time spent, efforts exerted, and litigation costs incurred would be all for naught.

Lizandro C. Amandy 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 or

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