Force and Effect of BIR Rulings and Revenue Regulations - ALBURO ALBURO AND ASSOCIATES LAW OFFICES

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

AT A GLANCE:

The Tax Code vested separate and distinct powers on the Department of Finance and the Bureau of Internal Revenue. To carry out their powers under this law, they promulgate various issuances such as revenue regulations, revenue memorandum orders, revenue memorandum rulings, revenue memorandum circulars, and BIR rulings. In any event, these two agencies are the primary agencies for the enforcement of tax laws. (The Philippine Stock Exchange, Inc. et al. vs. Secretary of Finance, G.R. No. 213860, July 05, 2022)

The Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) are the primary agencies responsible for the enforcement of tax laws. The DOF is authorized to promulgate rules for the effective enforcement of the Tax Code; while the BIR recommends and is granted with the power to interpret tax laws. (The Philippine Stock Exchange, Inc. et al. vs. Secretary of Finance, G.R. No. 213860, July 05, 2022)

With this, there are two types of administrative issuances such as: (1) legislative rules and, (2) interpretative rules. A legislative rule (Revenue Regulations) functions as a form of secondary legislation aimed at executing a primary legislative act by furnishing its specific particulars. Conversely, an interpretative rule (BIR Rulings) is formulated to offer directives for the law that the administrative agency is responsible for implementing.

BIR Rulings

The National Internal Revenue Code says:

Section 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.

Embedded within Section 4 of the National Internal Revenue Code is a distinct role assigned to the Commissioner of Internal Revenue (CIR), encompassing the interpretation of laws and the adjudication of cases within its quasi-legislative capacity. The exercise of the CIR’s authority to construe tax laws is manifested through the issuance of revenue-related directives. The CIR under its power to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, issues administrative issuances such as but not limited to revenue orders, revenue memorandum circulars, or rulings.

BIR tax rulings represent the official position of the Bureau of Internal Revenue in response to queries from taxpayers seeking elucidation on particular provisions in the National Internal Revenue Code (NIRC), other tax legislations, and their corresponding implementing regulations. These tax rulings are grounded on specific facts and circumstances provided by the individual taxpayer and are construed as an interpretation of the law. Furthermore, the tax rulings also function as responses to taxpayers’ inquiries pertaining to their taxpayer status and the corresponding impact of their transactions for the purposes of taxation.

It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. When, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. (Commissioner of Internal Revenue vs. Hon. Court of Appeals, Hon. Court of Tax Appeals and Fortune Tobacco Corporation, G.R. No. 119761, August 29, 1996)

Finally, as a BIR Ruling constitutes an interpretative rule, there is no need for publication and hearings. The issuance itself holds inherent validity.

Revenue Regulations

The National Internal Revenue Code says:

Section 244. Authority of the Secretary of Finance to Promulgate Rules and Regulations. – The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.

The National Internal Revenue Code of 1997, with its amendments, explicitly grants the Secretary of Finance the power to establish all necessary rules and regulations to ensure the efficient implementation of tax provisions. This revenue regulation is in the nature of a legislative rule and thus, in order to be valid, there has to be compliance with publication and hearing. Without this, there would be a violation of the due process clause – rendering the legislative rule void.

In summary, the table presented below outlines the key distinctions between a BIR Ruling and a Revenue Regulation.

BIR Ruling	Point of Comparison	Revenue Regulation
Commissioner of Internal Revenue and/or his subordinates, as the case may be.	Issuing Authority	The Secretary of Finance.
An interpretative rule – the Commissioner’s official position regarding taxation concerns of taxpayers	Nature	A legislative rule – an implementing rules and regulations of tax legislation.
Applies to a single taxpayer who made an inquiry. Exception: The ruling is a general interpretative rule in nature hence, applicable to all taxpayers.	Scope	Applies to ALL taxpayers.
Not binding to courts but is considered to have a great weight.	Force and Effect	A subordinate legislation thus binds courts.
Not required.	Hearing Publication Requirement	Required.

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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