THE cornerstone of a fair tax system is due process. Taxpayers have the fundamental right to be informed in writing of the factual and legal basis for any tax assessment. Thus, proper service of assessment-related notices — including the Notice of Informal Conference, Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN) — is paramount, and failure to comply thereof renders the assessment void.
To streamline this process, the Bureau of Internal Revenue (BIR) enacted Revenue Regulations (RR) 18-2013, amending RR 12-99. These regulations outline the permissible methods of serving assessment notices.
As a rule, assessment notices must be sent personally to the taxpayer by delivery of a copy to his or her registered or known address. If the taxpayer is a corporation, it should always be considered present or found at its current address, and the document must be given to the authorized representative of the corporation (Court of Tax Appeals [CTA] Case 10629, Aug. 6, 2024; CTA En Banc [EB] Case 2537, June 22, 2023).
However, when personal service is impracticable, the BIR may resort to substituted service or service by mail as alternative methods.
Rules for substituted service
The Court of Tax Appeals (CTA) has consistently ruled that substituted service is a secondary mode of service to personal service. This means that revenue officers must establish the impracticability of personal service before resorting to alternative methods (CTA EB Case 2537, June 22, 2023; CTA EB Case 2564, July 3, 2023; CTA Case 10049, Sept. 6, 2023).
Substituted service may only be availed of in the following instances: “(1) when the party is not present at the registered or known address; (2) if no person is found in the party’s registered or known address; and (3) if the party be found at the registered or known address but refuses to receive the notice” (CTA Case 10629, Aug. 6, 2024).
The rules for substituted service are summarized as follows:
– For an individual taxpayer, notice must be left at his or her registered address with the clerk or person having charge thereof.
– For a corporate taxpayer (where business activities are conducted), notice must be left at the registered address with the clerk or person having charge thereof.
– If the address is a residence address, notice must be given to a resident, who is of legal age.
– If no person is found in the registered or known address, the revenue officer shall bring a barangay official and two disinterested witnesses to observe and attest to the absence of the taxpayer.
– If the taxpayer refuses to receive the notice, the revenue officer shall bring a barangay official and two disinterested witnesses to observe and attest to the act of refusal (Sec. 3.1.6, RR 18-2013).
Similar rules are also applicable for substituted service of Letter of Authority (Revenue Memorandum Circular 110-20, Sept. 24, 2020).
In one case, the CTA Division explained that the term “clerk or the person having charge thereof” must refer to a “competent person managing the office or place of business with sufficient knowledge to understand the importance and effects of the notice.” Thus, service of FAN to the receptionist was rendered invalid since such receptionist is not the person managing the office or place of business (CTA Case 9547, Oct. 13, 2021, as affirmed by CTA EB Case 2537, June 22, 2023).
Similarly, service of FAN to a security guard is invalid and cannot be considered service to a clerk or the person having charge thereof (CTA EB Case 2564, July 3, 2023).
In another case, the CTA declared an assessment void when the revenue officer served the PAN to a person without even ascertaining the authority of such person to receive the notice. Furthermore, it was established therein that the taxpayer refused to accept the PAN. Thus, the CTA pointed out that, in such a case, the revenue officer should have brought a barangay officer and two disinterested witnesses instead to observe the service and attest to the refusal and not serve the PAN to any other person (CTA Case 10629, Aug. 6, 2024).
The foregoing cases emphasize how critical it is that the assessment notices are served strictly in accordance with existing rules and regulations as this is crux of a taxpayer’s right to procedural due process.
Aziza Hannah A. Bacay is a senior associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at [email protected] or visit MTF website at www.mtfcounsel.com.
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