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every Tuesday.
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Rulings of first impression

Lets Talk Tax
BusinessWorld, February 10, 2009
By: Kristine S. Casa-Siervo

Early this year, the Commissioner of the Bureau of Internal Revenue (BIR) issued a
Revenue Memorandum Circular (RMC) informing all internal revenue officials, employees
and others concerned of the revocation of a previously issued BIR ruling.
The reason cited for the revocation was that the ruling requested by the taxpayer is
considered as a ruling of first impression, thus, the same should have been presented to the
Commissioner for evaluation and approval.
Under the Tax Code, the power to issue rulings of first impression or to reverse, revoke or
modify any existing ruling of the Bureau is exclusively vested on the Commissioner of
Internal Revenue and it cannot be delegated.
Rulings of first impression, according to Revenue Administrative Order No. 01+03, refer to
rulings, opinions and interpretations of the BIR Commissioner with respect to the

provisions of the Tax Code and other tax laws without established precedent, and which are
issued in response to a specific request for a ruling or an opinion filed by a taxpayer with the
BIR. The same includes reversals, modifications or revocations of any existing rulings.
With the issuance of the above RMC, it may be good to take a step back and revisit RMC
No. 37+07 which deals with the delegation of authority to sign rulings granting and/or
confirming tax exemptions, tax incentives, and tax treaty relief through the ruling process.
The rules on the delegation of authority, according to RMC No. 37+07, may be summarized
as follows:
1. The regional directors have been delegated the authority to deal with and to approve
requests to the use of pre+numbered loose+leaf forms, receipts, invoices and books of
account (manual), as well as those that involve requests for change in accounting period
(except for change in accounting method).
2. The assistant commissioner for Legal Service Division has been delegated the authority to
sign rulings that involve, in any manner, the granting and the confirmation of tax
exemptions and/or tax incentives. It includes, among others, the authority to sign the
following rulings:
(a) requests for rulings relative to tax+deferred exchanges of property for shares
under Section 40(C)(2) of the 1997 Tax Code;
(b) requests for rulings pertaining to transfer of property by a pre+need corporation
to a trustee in accordance with existing guidelines of the Securities and Exchange
Commission on the establishment of trusts by pre+need companies;
(c) requests for rulings pertaining to tax consequences of exchanges of properties
made in order to correct clear mistakes of fact relating to ownership of
subdivision lots;
(d) requests made by embassies, either for themselves or on behalf of their
employees, for tax exemption;
(e) requests for confirmation of tax exempt status of nonstock, nonprofit,
educational institutions; and
(f) requests for rulings and/or certifications on topics covered by RMC No. 2+01
and RMC No. 10+01.
3. The deputy commissioner of the Legal and Inspections Group has been authorized to
sign all rulings that grant as well as confirm any tax exemption and/or tax incentive
including tax treaty relief that originate from the value+added tax (VAT) Review
Committee; and provided further, that the said rulings are clearly covered by precedent
ruling and guidelines, as well as pertinent issuance on the subject.
4. All rulings of first impression shall be signed by the Commissioner. In addition, the
Commissioner may, motu propio, reverse, modify or alter any such ruling issued by the
Assistant Commissioner for Legal Services or the Deputy Commissioner of the Legal and
Inspections Group, at any time after its issuance if the Commissioner determines the same
to be not in accordance with the established precedent rulings or pertinent tax laws and
revenue issuance.

In view of the recent revocation of ruling made by the Commissioner, taxpayers applying or
requesting for the issuance of a BIR ruling must protect their interests by making sure that
the ruling issued to them is signed by the proper Revenue Officer.
Likewise, it would be to the taxpayers advantage if, in requesting the ruling, the taxpayer
takes the initiative to search for and present to the approving office other BIR rulings
previously issued to other taxpayers that may be used as precedent. This is especially
recommended if the issue being submitted for a ruling is not a clearly ruled subject. The
letter of request must explain and highlight the similarities between the issue at hand and the
precedent rulings being presented to facilitate the understanding and resolution of the issue
by the approving officers.
The burden to look for precedent rulings must not be shifted to or passed on to the revenue
officer. Since they are often assigned numerous rulings to resolve, they may not have the
time to do extensive research and to look for precedent rulings. In the absence of precedent
rulings, the request for ruling shall be elevated to the Commissioner for his review and
approval. This will add a few more days, weeks or even months to the process of approval.
There is, of course, a possibility that, since there is no precedent ruling, the taxpayer may be
issued a negative ruling or a denial of his request.
(The author is a senior tax manager at Punongbayan & Araullo, a member firm within
Grant Thornton International Ltd. Readers may e!mail Kristine.Casa!Siervo@pna.ph or call
886!5511 for comments or inquiries.)