December 22, 2017

Bureau of Internal Revenue – Assessment Division

Address
Address
Address

Attention: XXxxxx
Regional Director

RE: Name of Company – TIN ________

Protest Letter Against Preliminary Assessment Notice
Alleged Deficiency Taxes for CY 2014

Dear Madam,

We respectfully submit this protest letter against the above subject proposed tax assessment pursuant to Section 228
of the National Internal Revenue Code, as amended and as implemented by Revenue Regulations No. 18-2013.

BACKGROUND

The Preliminary Assessment Notice (PAN) dated ___________ was sent to the (Office Address of the Company or
where the PAN was received) last (date of receipt).

The PAN is requesting SSFI to pay and settle the alleged deficiency tax liabilities (inclusive of interest and penalties) for
taxable year 2014, as follows:

Tax Type Basic Interest Total

Income Tax = 3,168,616.00
P = 1,694,558.47
P =P 4,863,174.47
Value Added Tax 1,974,789.24 1,142,672.57 3,117,461.81
Expanded Withholding Tax 380.42 223.25 603.67
= 5,143,785.66
P = 2,837,454.29
P = 7,981,239.95
P

Timeliness of this Protest

Under the law and as provided in the regulations, the taxpayer may file a protest within fifteen (15) days from date of
receipt of the proposed assessment.

We opted to file this protest letter to request for reconsideration and cancellation for such assessment on alleged
deficiency in income tax and VAT, predicated solely on the alleged undeclared source of income and failure to file VAT
return and to pay its VAT due, respectively, as there is no factual and/or legal basis for such assessment.

DISCUSSION

We would like to manifest our protest and disagreement against the subject tax assessments and request for its
consideration and cancellation for reasons discussed hereunder.
We respectfully discuss our explanation and reconciliation, and our arguments in support of our protest against the
findings and assessments below:

BIR FINDINGS BASIC TAX DUE

I. INCOME TAX
A Net Taxable Income Per Income Statement P
= 768,619.00)
Add/Less: Adjustments per Investigation:
B 1. Undeclared Source of Income P
= 10,000,000.00
2. Non-deductible Various Expenses 7,771.00 10,007,771.00)
Taxable Net Income Per Investigation P
= 10,776,390.00)

Income Tax Due P

= 3,232,917.00)
Add (Less) : Income Tax Credits
Income Tax Withheld P
= 320,625.00
Prior Years Excess Credits Other than MCIT 935,384.00 (1,256,009.00)
Balance 1,976,908.00)
C Add: Amount of overpayment carried-over 1,191,708.00)
Deficiency Income Tax 3,168,616.00
Add: 20% Interest Per Annum From 4/16/15 to 12/17/17 1,694,558.47
SUB-TOTAL AMOUNT DUE P
= 4,663,174.47

D II. VALUE ADDED TAX

Sales/Receipts per Return / FS = 16,456,577.00
P
Multiply by the Tax Rate 12%
Output Tax Due 1,974,789.24
Less: Creditable Input Tax -
Net VAT Payable 1,974,789.24
Less: Tax Withheld/Paid Per Return -
Deficiency Valued Added Tax 1,974,789.24
Add: 20% Interest Per Annum From 1/26/15 to 12/17/17 1,142,672.57
SUB-TOTAL AMOUNT DUE P
= 3,117,461.81

III. EXPANDED WITHHOLDING TAX

Rental 7,500.00 x 5% P
= 375.00
Freight and Handling 271.00 x 2% 5.42
7,771.00 380.42
Add: 20% Interest Per Annum From 1/11/15 to 12/17/17 223.25
SUB-TOTAL AMOUNT DUE P
= 603.67

GRAND TOTAL OF AMOUNT PAYABLE P

= 7,981,239.95
 A. Disallowance of NOLCO as deduction from taxable income since allegedly the same cannot be verified
being not substantiated with supporting documents

Name of Company is assessed for additional taxable income due to disallowance of Net Operating Loss Carry-Over
(NOLCO) on the reason that allegedly it cannot be verified being not substantiated with supporting documents.

We respectfully request for reconsideration on this matter. The NOLCO were applied as follows:

Financial Income before income tax P

= 330,323.00)
Reconciling items:
Reduction on deductibility of interest expense 2,465.00)
Interest income already subjected to a final tax at a lower tax rate (5,977.00)
326,811.00)
Applied NOLCO (326,811.00)
Net Taxable Income -

NOLCO Movement:
Beginning balance 12.31.12 P
=-

Addition (2013)
Financial Income (loss) before income tax (1,537,945.00)
Reconciling items:
Unpaid retirement costs 184,686.00)
Reduction on deductibility of interest expense 1,716.00)
Interest income already subjected to a final tax at a lower tax rate (4,159.00)
Net Taxable Loss during the year (1,355,702.00)

Application in 2014 326,811.00)

Ending balance 12.31.14 (P

= 1,028,891.00)

Revenue Regulations No. 14-2001, Section 7 states that:

Section 7. Presentation of NOLCO in the Tax Return and Unused NOLCO in the income statement. – The NOLCO shall
be separately shown in the taxpayer’s income tax return (also shown in the Reconciliation Section of the Tax Return)
while the Unused NOLCO shall be presented in the Notes to the Financial Statement showing, in detail, the taxable
year in which the net operating loss was sustained or incurred, and any amount thereof claimed as NOLCO deduction
within three (3) consecutive years immediately following the year of such loss. Failure to comply with this requirement
will disqualify the taxpayer from claiming the NOLCO.

The Company’s NOLCO which was incurred in 2013 was properly shown in its Income Tax Return and also shown in the
Reconciliation Section of the Tax Return, both in 2013 and 2014. The NOLCO’s movement was also properly disclosed
and presented in the Notes to the Financial Statement Nos. 15 and 14 in year 2013 and 2014, respectively.

Complying the requirements stated in RR 14-2001, Section 7, we believed that we are qualified and entitled to claim.

Also, the disallowance of our NOLCO was not discussed nor were any supporting documents requested to validate it.
However, we are willing to provide other supporting documents for your perusal and verification.
 B. Undeclared source of income.

It is alleged that Name of Company has an undeclared source of income amounting to P= 10,000,000.00 for the reason
that it failed to substantiate the bank loan settlement.

As disclosed in Notes to Financial Statements No. 7, these loans were obtained from local commercial bank for
company’s working capital requirement. (Discuss further your argument)

In addition, it is impossible for (the Company) to have an undeclared income considering that it has an exclusive hog
growing agreement with XXX. Every revenue it earned and collected from XXX were subjected to withholding tax,
hence, a mere third-party information thru XXXX Summary List of Purchases will disclose all the company’s revenue.

Furthermore, elaborate further your argument.

In view of the above, we respectfully request for reconsideration on this matter.

C. Additional income tax of an amount of overpayment carried-over to the succeeding year.

An amount of overpayment carried-over to the succeeding year amounting to P= 1,191,708.00 were added to the
company’s alleged income tax deficiency.

We cannot refute with the said findings as there were no proper explanation and totally without basis as to why this
was added to the company’s alleged income tax deficiency. Also, we cannot determined where this amount derived
from.

In this regard, we respectfully request for reconsideration and the cancellation of the additional income tax deficiency.

D. Failure to file/pay VAT returns/VAT due on Service Fee

It is alleged that the company failed to file/pay its VAT returns/VAT due on Service Fee being engaged in livestock
management services, hence, an assessment of VAT deficiency amounting to P= 3,117,461.81 was made pursuant to
Sec. 106 and 108 of the National Internal Revenue Code.

We respectfully disagree with the said findings and request for its consideration on the basis of the following
contention.

At the onset, the nature of services performed by the company, which is growing of hogs for XXX, may fall within the
purview of “agricultural contract growers”.

Section 4.109-1(B) (1) (f) of Revenue Regulation (RR) No. 16-2005 defines “agricultural contract growers” as persons
producing for others poultry, livestock or other agricultural and marine food products in their original state.

The same Regulations, implementing Section 109 (F) of the Tax Code, as amended, provides that services by
agricultural contract growers and milling for other of palay into rice, corn into grits and cane into raw sugar shall be
exempt from 12% VAT.

In BIR Ruling No. 006-11 dated January 19, 2011, MFC requested a ruling on VAT exemption pertaining to the hog-
growing services performed by its contracted growers. The BIR ruled that since the growing of livestock fell under the
services performed by “agricultural contract growers” under Section 4.109-1 (B) (1) (f) of RR No. 16-2005,
implementing Section 109 (F) of the Tax Code, as amended, such is considered as VAT exempt.

The above ruling further clarified that the toll processing (i.e., weighing, killing, cut-ups and packaging) offered by
agricultural contract growers as a packaged service to its contract growing shall likewise be VAT exempt, as it may be
within the scope of agricultural contract growing.
Based on the foregoing, since the hogs nurtured by the Company in its breeding farms are owned by XXXX, for which
the former receives certain service fees from the latter, such may be classified as an agricultural contract growing
which is exempt from VAT.

In view of the above, we respectfully request reconsideration and cancellation of the said VAT assessment and its
corresponding penalty for failure to file SLSP and quarterly VAT return.

PRAYER AND MANIFESTATION

In view of the foregoing, we respectfully request:

1. That our protest and request for consideration be given due course, and that the deficiency income tax, VAT
and expanded withholding tax assessments be reconsidered and canceled.

2. That the resolution of this protest against the subject tax assessments case be referred to the appropriate BIR
office.

We trust that our herein discussion will merit your usual attention and kind consideration.

Very truly yours,

XXXXX
President