Waiving the statute of limitations on tax prescription

LET’S TALK TAX STEPHANIE JOY D. CARRION

- STEPHANIE JOY D. CARRION

Time heals all wounds. In the realm of taxation, however, time does something more powerful: it heals liabilities.

The statute of limitations on tax cases is designed to draw the line between the government's right to assess tax and the taxpayer's right to finality. While taxes are the lifeblood of the government, its citizens must not be drained by perpetual uncertainty. The state’s remedy expires once that prescriptive period lapses, allowing the taxpayer to finally rest easy. But what happens when time is no longer the shield it is meant to be?

Tax laws provide not only the rules on how taxes are assessed and collected, but also the limits within which the government may enforce its right to collect. One of these limits is the statute of limitations, which sets a definite period for the Bureau of Internal Revenue (BIR) to assess and collect taxes. This principle exists to protect taxpayers from indefinite extensions and to ensure fairness in tax enforcement. However, the law allows exceptions to this protection. Among these is the voluntary waiver of the statute of limitations, executed by the taxpayer in favor of the government. This waiver essentially extends the period within which the BIR may issue an assessment or enforce collection. Because this waiver involves the relinquishment of a legal right, strict compliance with statutory and regulatory requirements is essential for its validity. In Philippine Journalists, Inc. v. Commissioner of Internal Revenue (CIR), G.R. No. 162852, the Supreme Court underscored that such waivers must be carefully and strictly construed, as they derogate the taxpayer’s right to protection against prolonged and potentially abusive investigations.