THE COURT of Tax Appeals (CTA) has voided the Bureau of Internal Revenue’s (BIR) collection of a P78.32-million value-added tax (VAT) assessment against Euro Autocars, Inc., which does business as Lamborghini Manila and Bentley Manila, after ruling that the government’s right to collect had already prescribed.

In a decision promulgated on Aug. 11, the CTA Special First Division granted Euro Autocars’ petition and declared the collection of the deficiency VAT void for having been issued or enforced beyond the prescriptive period.

It also permanently barred the Commissioner of Internal Revenue and its authorized officers from enforcing or collecting the assessment.

The ruling underscores a key feature of tax litigation: even when the merits of an assessment are discussed, the government must still act within the time allowed by law. In this case, the court said the collection deadline had already lapsed before the BIR took its final collection step.

The assessment covered the taxable period from Jan. 1 to June 30, 2014. Following a BIR reinvestigation, the agency demanded P78.32 million, inclusive of surcharge and interest, representing alleged deficiency VAT and an P85,000 compromise penalty.

The BIR had initially demanded P119.33 million before reducing the assessment after Euro Autocars submitted additional documents during the reinvestigation.

The assessment involved alleged gross receipts that were not subjected to VAT, undeclared sales of second-hand trade-in units, an alleged undeclared sale of a Lamborghini Aventador, unaccounted inventory deemed sold, and alleged undeclared output VAT. It also included disallowed input taxes on local purchases and input VAT carried over to the succeeding period.

After reviewing the merits, the CTA recalculated Euro Autocars’ adjusted basic deficiency output VAT at P19.91 million, with P444,923.20 in interest for late remittance.

However, the tax court said the BIR could no longer collect the assessment because the ordinary three-year prescriptive period applied.

The CTA said nothing in the preliminary assessment notice, formal assessment notice, final decision on disputed assessment, or final decision showed that the BIR had invoked fraud in assessing Euro Autocars. It therefore ruled that the longer periods applicable to false or fraudulent returns did not apply.

The prescriptive period was suspended for 301 days after the BIR granted Euro Autocars’ request for reinvestigation on Aug. 22, 2016 until it issued the final decision on disputed assessment on June 19, 2017.

The CTA also excluded 420 days arising from coronavirus disease 2019 (COVID-19) emergency measures in computing the collection period. With both suspensions taken into account, the BIR’s deadline to collect expired on June 17, 2021.

The BIR issued its final decision on Jan. 20, 2023, well after the collection period had expired. The agency later filed its answer before the CTA on May 15, 2023, asking the court to order Euro Autocars to pay the assessment.

The CTA said the case records did not show that the BIR had earlier issued and served a warrant of distraint and/or levy or availed itself of another summary collection remedy. It found that the BIR’s filing of its answer on May 15, 2023 was its only act of collection.

“Unfortunately, by 20 January 2023, respondent’s right to collect had already prescribed,” the CTA said.

It said the BIR’s delay in resolving Euro Autocars’ administrative appeal allowed the prescriptive period to lapse. By the time the BIR filed its answer, its right to collect had already been barred for about one year and 11 months.

Citing the Supreme Court’s November 2025 ruling in Commissioner of Internal Revenue v. Standard Insurance Co., Inc., the CTA said the statute of limitations on tax collection is a substantial right meant to protect taxpayers against unreasonable and stale claims.

“The BIR had its chance and it blew it,” the Supreme Court said in Standard Insurance, as quoted by the CTA. — Mark Joseph M. Sanchez