Timing of Tax Offense and Prescription Rules

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KRI REVENUE MEMORANDUM CIRCULAR NO. 101-90: Timing of Tax Offense & Prescription Rules

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Title Source: Supreme Court: Timing of Tax Offense and Prescription Rules

Law: Kri Revenue Memorandum Circular No. 101-90

Decision Date: Nov 26, 1990

The Supreme Court ruling clarifies that the cause of action for willful failure to pay deficiency tax arises only upon receipt of the final notice and demand, with a five-year prescriptive period commencing from that point, emphasizing the necessity of judicial proceedings for the offense to be considered actionable.

Law Summary

Commencement of Prescription Period under Section 280 of the Tax Code

The five-year prescriptive period for an offense of willful failure to pay deficiency tax begins only after the taxpayer receives the final notice and demand and refuses payment.
If the assessment is protested, the five-year period starts from the service of the final notice and demand that disposes of the protest, not from the date of the original assessment.

Discovery of the Offense

An offense under the Tax Code is considered discovered only when the manner of commission, nature, and extent of the fraud is clearly determined.
This occurs when the Bureau of Internal Revenue (BIR) issues its final decision requiring the taxpayer to pay the deficiency tax.
This approach departs from the earlier practice of reckoning discovery from the examiner's report, as noted in prior case law (People vs. Tierra).

Conditions for the Start of the Prescription Period

The mere discovery of the offense does not start the five-year prescriptive period.
The prescription period starts only when formal judicial proceedings, such as a preliminary investigation by the Prosecutor's Office, are initiated.
As a result, offenses under the Tax Code are effectively imprescriptible if the period from discovery and the initiation of judicial proceedings to the filing of the information in court does not exceed five years.

General Guidance

The circular emphasizes the importance of publicizing these points widely to inform all concerned parties.
The guidelines clarify the timing for actionable offenses and the proper calculation of prescription periods related to tax deficiency cases to ensure the correct application of the law.

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