7 Basic Features of Independent CPA on CTA Tax Cases Philippines

By: Garry S. Pagaspas, CPA

Court of Tax Appeals (CTA) in Philippines, under Republic Act No. 1125, as amended (e.g. by Republic Act No. 9282) is the tax court in the Philippines handling cases on disputed assessments from electronic letters of authority, tax refunds such as on excess input VAT from zero-rating in Philippines filed by the taxpayer as petitioner. Under the Revised Rules of the Court of Tax Appeals (A.M. No. 05-11-07-CTA dated 22 November 2005 or RRCTA), Rule 13 – Trial by Commissioner, appointment of Independent Certified Public Accountant is allowed, and hereunder quoted:

“Rule 13 – Trial by Commissioner

Section 1. Appointment of Independent Certified Public Accountant (ICPA). – A party desiring to present voluminous documents in evidence before the Court may secure the services of an independent Certified Public Accountant (CPA) at its own expense. The Court shall commission the latter as an officer of the Court solely for the purpose of performing such audit functions as the Court may direct.”

From the above, petitioner in tax cases – e.g. Petition for Review on BIR tax assessment, Petition for Review on Excess Input VAT refund in Philippines, is given an option for an appointment of an Independent CPA (ICPA) as Commissioner by the CTA for purposes of verifying the voluminous pieces of documentary evidence of the Petitioner and submission of its ICPA report with recommendations relative to the issues in the CTA case. Below are the seven (7) basic features of CTA ICPA in tax cases Philippines, based on personal notes of the author:

1. ICPA is qualification based

While all CPA’s could be qualified, CTA normally looks into some other qualifications such as on the independence of the CPA with respect to the petitioner, its qualifications as a CPA, as an accredited practitioner, and its capability to implement its mandate as CTA ICPA. A Judicial Affidavit will be executed by ICPA and copies of the following documents showing ICPA’s qualifications are normally attached:

• a. PRC License;
• b. PRC – BOA CPA Certificate;
• c. PRC BOA Accreditation – Public Practice;
• d. BIR tax agent accreditation;
• e. Other accreditations, if any, – SEC, CDA, IC, etc.;
• f. Curriculum Vitae/ Resume with personal and other details along with enumeration of dealings with CTA ICPA in the past, if any; and,
• g. Accounting Firm papers/ accreditations, if ICPA is a partner.

The lawyer/ counsel of the Petitioner will normally file a Motion for Commissioning the ICPA and attached the above along with the Judicial Affidavit of the ICPA, then a hearing on Commissioning conducted where ICPA takes the witness stand for direct/ cross examination by lawyers of petitioner/BIR along with CTA justices, if any. BIR could object the appointment if it sees grounds like independence such as if CPA has been an ICPA with the same taxpayer for more than three (3) times, qualifications, and such other grounds.

2. ICPA is an officer of the Court with specific duties under RRCTA

Upon satisfaction of qualification, CTA will require the ICPA to take an Oath in open court during the hearing, then the Clerk of Court will require ICPA to sign on such Oath for records purposes, and CTA issues an Order for such Commissioner. Notably, the ICPA’s appointment by the CTA is as an officer of the Court where it would report directly to the CTA and serve the ends of justice in the conduct of its functions with impartiality to all parties. Section 2 of RRCTA provides that the CTA ICPA Philippines shall perform the audit in accordance with the generally accepted accounting principles, rules, and regulations which shall include the following:

• a. Examination and verification of receipts, invoices, vouchers and other long accounts;
• b. Reproduction of, and comparison of such reproduction with, and certification that the same are faithful copies of original documents, and pre-marking of documentary exhibits consisting of voluminous documents;
• c. Preparation of schedules or summaries containing a chronological listing of the numbers, dates and amounts covered by receipts or invoices or other relevant documents and the amount(s) of taxes paid;
• d. Making findings as to compliance with substantiation requirements under pertinent tax laws, regulations and jurisprudence;
• e. Submission of a formal report with certification of authenticity and veracity of findings and conclusions in the performance of the audit;
• f. Testifying on such formal report; and,
• g. Performing such other functions as the Court may direct.

CTA ICPA in Philippines should be guided with the above duties for which it has taken oath, otherwise, the CTA may hold the CTA ICPA Philippines in contempt of court for violations and be imposed criminal and/or civil liability, at the discretion of the Court.

4. ICPA files an ICPA Report in Philippines based on verification with recommendation

Upon CTA commissioning or appointment of the CTA ICPA in Philippines, the Court would normally provide for thirty (30) days or at times forty-five (45) days within which the CTA ICPA would conduct the audit and file an ICPA report with CTA in normally eight (8) sets with exhibits of supporting documents and USB/DVD drive/s containing scanned copies of the report and exhibits. The CTA ICPA report in Philippines would contain a summary of the procedures performed, its findings, statement that the exhibits attached are faithful reproduction of the original copies, supporting schedules/illustrations/tables, and recommendations on the issues like tax liabilities for tax assessment case in Philippines, or for amount refundable for excess input VAT refund CTA case in Philippines. At times, the CTA ICPA in Philippines asks for extension of time beyond the 30/45 days, if justifiable, for consideration of the CTA.

The CTA ICPA Report is under oath and false content could subject the CTA ICPA to criminal and/or civil liabilities for perjury.

5. ICPA testifies as witness in the tax case

From the CTA ICPA Report, a Judicial Affidavit of the CTA ICPA in Philippines containing such matters indicated in the CTA ICPA Report will be filed and a hearing will be scheduled for the presentation of the CTA ICPA in Philippines in open court where the CTA ICPA takes the witness stand for examination (direct/cross/re-direct/re-cross) of the counsels of petitioner and BIR.  CTA justices may also asked clarificatory questions as they may deem it necessary.

Presentation of CTA ICPA in Philippines as witness could be completed in one hearing or may continue on next schedule should there be more questions. Upon completion of the CTA ICPA’s presentation as witness, the CTA ICPA commissioning will be deemed completed thereby being excused on subsequent hearings of the CTA case, unless CTA would issue order addressed to the CTA ICPA for some issues/ concerns like submission of missed exhibits, thereafter.

6. CTA not bound by ICPA’s recommendations

While the CTA ICPA in Philippines is an officer of the court and reporting directly to CTA, the CTA ICPA Report is just recommendatory and not conclusive or binding upon the CTA. CTA may or may not adopt the findings and recommendations of the CTA ICPA in Philippines. The CTA decision would normally cite CTA ICPA report on matters it would adopt and would normally mention the name of the CTA ICPA in Philippines on the CTA decision. On the same token, it seems that the petitioner’s counsel could further present documentary evidence should there be those that was not included on the CTA ICPA report for a reason or another.

7. ICPA’s professional fees paid by Petitioner

Yes, while the CTA ICPA is an officer of the court and reporting to the CTA, its professional fees for such services are being paid by the petitioner so normally, the CTA ICPA in Philippines and petitioner would agree first before CTA appointment. Expenses relative to the conduct of audit by the CTA ICPA such as field work costs on the conduct of the audit and reproduction cost of exhibits. CTA may have a say on the reasonableness of the professional fees under the rules.

Summary

The above features provides a basic overview of Independent Certified Public Accountant with Court of Tax Appeals in Philippines relative to tax cases, the process, timeline, documentation and filings aimed for easy reference of CPA practitioners, taxpayers, and the public, in general. The above features are based on author’s personal notes and not from any official enumeration of the Court of Tax Appeals or any government agency.

Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for almost two (2) decades now helping further taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has likewise been helping out local and foreign investors/clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.

Garry has repeatedly been appointed by CTA as Independent CPA on tax assessment and VAT refund cases in Philippines under the rules on Trial by Commissioner and some of those CTA tax cases have already been decided as published in CTA Philippines website.

Disclaimer: This is for purposes of academic discussions only as personally summarized by the author, not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances.