Wednesday, February 24, 2016

Fluor Daniel vs Commissioner of Internal Revenue (CIR)

FACTS: Fluor Daniel was initially assessed for deficiency Expanded Withholding Tax (EWT) on its software maintenance fees paid to an offshore affiliate. In response to petitioner's protest, the Commissioner of Internal Revenue (CIR) issued a Final Decision on Disputed Assessment (FDDA) cancelling the deficiency EWT but issuing an assessment for Final Withholding Tax (FWT) on the same software fees albeit using a lower 15% rate under the RP-US Tax Treaty.

ISSUE:
Whether or not petitioner was deprived of due process when the FDDA changed the assessment from deficiency EWT to deficiency FWT

RULING: Yes. The change of the assessment in the FDDA itself constituted a new assessment. As such, the taxpayer should have given the chance to dispute the same via the process laid down in the Tax Code which is by way of filing a protest. Given that this is was not complied with and what was issued was already an FDDA, the circumstances certainly deprived the petitioner of a reasonable opportunity to be heard and submit evidence in support of its defense which is a clear violation of due process requirements.

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