NextGen Day

The Court of Tax Appeals (CTA) found in favor of a health care management corporation that was disputing a deficient value-added tax (VAT) assessment of PHP419.7 million for 2012.

The CTA en banc dismissed the BIR petition for lack of merit and upheld the First Division’s earlier decision in favor of Maxicare Healthcare Corporation, which claimed it was denied due process.

Maxicare received a preliminary assessment notice (PAN) for PHP618,251,527.72 for 2012, inclusive of fines and surcharges, which the health maintenance organization (HMO) appealed in September 2015.

A month later, the BIR issued a formal letter of demand/final assessment notice (FLD/FAN) for PHP419,774,484.21, inclusive of penalties and costs, for a reduced amount of PHP419,774,484.21. Three weeks later, Maxicare filed a protest.

After the BIR issued a final decision on disputed assessment (FDDA) in December 2015, Maxicare took the case to the CTA, reiterating the assessment of deficit VAT and compromise penalty.

The 12-page decision, written by Associate Justice Ma. Belen Ringpis-Liban on November 25, ruled that the taxpayer must be given 60 days after filing a protest and request for investigation to submit all relevant supporting documents as part of the due process required to be observed in the issuance of a deficiency tax assessment.

The BIR’s contention that the company’s protest was a request for reconsideration rather than a request for reinvestigation, for which the 60-day term does not apply, was rejected by the tax court.

The HMO’s “intention to submit supporting documentation in its protest only serves to show that respondent (Maxicare) is seeking a reinvestigation of its tax assessment on the basis of additional material to be given,” according to the court.

“Petitioner robbed the taxpayer of a legitimate opportunity to be heard by failing to wait for the submission of the supporting documents to the FLD/FAN,” the court said.

The FDDA was declared void by the CTA since it was based solely on a partially completed protest and without a review of the respondent’s necessary supporting papers.

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