BIR-ISSUED SUBPOENA DUCES TECUM

The Bureau of Internal Revenue (BIR), pursuant to its mandate, possesses the authority to verify the accuracy of tax returns and determine the tax liabilities of individuals or entities. To support this function, the BIR may issue a subpoena duces tecum (SDT) to compel any person liable for tax or required to file a return, as well as any officer, employee, or custodian of records, to produce books, records, and other relevant documents, and to testify before the Commissioner or their authorized representative.

An SDT issued by the BIR is mandatory. Section 266 of the National Internal Revenue Code (NIRC), as amended, penalizes non-compliance:

“Section 266. Any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda or other papers, or to furnish information as required under the pertinent provisions of this Code, neglects to appear or to produce such books of accounts, records, memoranda or other papers, or to furnish such information, shall, upon conviction, be punished by a fine of not less than Five thousand pesos (P5,000) but not more than ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than two (2) years.”

To establish a violation of Section 266, the following must be proven:

1. The offender was duly summoned;

2. The summons required the production of books of accounts, records, memoranda, other documents, or the furnishing of information, as provided under the relevant provisions of the NIRC;

3. The offender failed to appear or to produce the requested documents;

4. If the offender is a juridical person such as a partnership or corporation, the liable individual must be its partner, president, general manager, branch manager, treasurer, officer-in-charge, or any responsible officer or employee.

The Philippine Court of Tax Appeals has ruled that a violation of Section 266 constitutes an act mala prohibita (Steven Go Lo v. People of the Philippines, CTA EB Case No. 049 [2019]). This means that criminal intent is irrelevant; the only consideration being whether the law was violated or the summons disobeyed. If so, the offense is considered committed, regardless of intent.

The BIR's authority, however, is not without limits. The BIR is required to strictly follow the procedural requirements specified in BIR RMO 10-2013, as amended by RMO 8-2014, for the proper issuance and service of an STD.

In the recent case of Ng v. People (C.T.A. En Banc Crim No. 127, [2024]), the Court affirmed the acquittal of the accused because the BIR failed to follow the proper procedure in serving the SDT as required by RMO 10-2013, as amended. The Court ruled:

“The SDT should be personally served to the taxpayer at its registered address. Substituted service is resorted to only if the taxpayer is not present at the registered address. Service of the SDT is effected by a revenue officer assigned to investigate the case. The said officer should accomplish the bottom portion of the SDT and set forth the manner, place, and date of service. The same details should be included in the officer's written report, made under oath before a notary public or any person authorized to administer oath under Section 14 of the NIRC.

In the instant case, the prosecution failed to establish that the SDT was duly served. […] His testimony reveals irregularities and deviations from the mandates of RMO 10-2013, as amended by RMO No. 8- 2014, casting doubt on the value of his testimony.”

In People v. Hon. Abella-Davis (CTA EB Crim No. 097, [2024]), the Court of Tax Appeals En Banc, although in obiter, also affirmed the acquittal of the accused because the revenue officers failed to submit a report in accordance with the requirements of RMO No. 35-90 (now superseded by RMO 10-2013, as amended).

Moreover, while the BIR's authority to issue and enforce SDTs is critical to its mandate, it cannot compel a taxpayer to produce documents or information that do not exist. This principle was reiterated in BIR v. Camp John Hay (CTA Case No. 10298, [2024]), where the Court emphasized that the law does not require the impossible:

“That the compliance requires full obedience to the subpoena duces tecum and nothing less cannot be adopted as the controlling principle. Petitioner must make room for the possibility that the documents being required to be submitted or presented may not be available or not existing, at all. Otherwise, a taxpayer will be at the mercy of petitioner, which may require the production of documents that a taxpayer cannot submit.”

In summary, the BIR must always issue and enforce an SDT in compliance with both the substantive and procedural requirements of the law. While compliance is mandatory, its enforcement must also be fair, practical, and respectful of rights to prevent abuse on the pretext of tax administration. This balance is key to building public trust in the tax system.

This article is for informational purposes only and is not intended to be legal advice. For legal concerns, you may email the firm at legal@cditlaw.net.

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