Introduction

In the Philippine taxation framework, Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) are pivotal imposts on transactions involving the transfer of assets, particularly real property and shares of stock. CGT is levied on the gains realized from the sale or disposition of capital assets under Section 24(D) and 27(D) of the National Internal Revenue Code (NIRC) of 1997, as amended, at rates of 6% for real property and 15% for shares not traded in the stock exchange. DST, governed by Sections 173 to 201 of the NIRC, imposes taxes on various documents, instruments, and papers evidencing transactions, such as deeds of sale, at rates like PHP 15 per PHP 200 for transfers.

Disputes often arise regarding the computation, applicability, or amount of these taxes, leading taxpayers to pay under protest to facilitate transactions (e.g., title transfers) while preserving their right to contest. A key relief mechanism is the waiver of interest, which accrues at 12% per annum on deficiencies under Section 249 of the NIRC. The Bureau of Internal Revenue (BIR) may waive such interest in specific circumstances, particularly when payments are made under protest, to promote equity and administrative efficiency. This article exhaustively covers the legal foundations, grounds, procedures, requirements, implications, special considerations, and related jurisprudence for securing a BIR waiver of interest on CGT and DST paid under protest, within the Philippine context.

Legal Basis for Waiver of Interest

The authority for the BIR Commissioner to waive interest stems from Section 204(C) of the NIRC, which empowers the Commissioner to abate, remit, or refund taxes, interests, or penalties when:

The tax or penalty appears to be unjustly or excessively assessed.
The administration and collection costs involved do not justify the collection of the amount due.
Other equitable considerations warrant relief.

This provision is implemented through Revenue Regulations (RR) No. 13-2012, which outlines guidelines for abatement and compromise, and Revenue Memorandum Order (RMO) No. 20-2007, as amended by RMO No. 7-2015, detailing procedures for compromise settlements, including interest waivers. For CGT and DST specifically, RR No. 6-2008 (on CGT for real property) and RR No. 7-2003 (on DST) incorporate protest mechanisms, while RR No. 18-2013 addresses electronic submissions and payments.

Payment under protest is rooted in Section 229 of the NIRC, requiring such notation for refund claims on erroneously paid taxes. Interest waivers are not automatic but discretionary, subject to the Commissioner's approval or delegation to Regional Directors for amounts below PHP 500,000 under RMO No. 19-2007. Amendments under the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963) and Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act (Republic Act No. 11534) adjusted rates but preserved waiver provisions, emphasizing relief for good-faith disputes.

Grounds for Waiver in the Context of CGT and DST Under Protest

Waivers are granted on merit-based grounds, particularly when CGT or DST is paid under protest. Common scenarios include:

Disputed Valuation: For CGT on real property, zonal values or fair market values may be contested (e.g., via appraisal reports). If paid under protest to release the Certificate Authorizing Registration (CAR), interest on any "deficiency" may be waived if the BIR later upholds the lower value.
Exemptions or Non-Applicability: Claims of exemption (e.g., principal residence under RR No. 13-99 for CGT) or non-liability for DST (e.g., intra-corporate transfers). Protest preserves refund rights, and waivers apply if the dispute is resolved in the taxpayer's favor without willful negligence.
Administrative Errors: BIR miscomputations or delays in processing, leading to accrued interest despite timely intent to pay.
Economic Hardship or Force Majeure: Under RR No. 13-2012, waivers may cover interest if payment delays stem from calamities or financial distress, even in protested cases.
Compromise Settlements: Interest can be waived as part of a compromise under Section 204(A), reducing liability by up to 40% for doubtful validity cases.

Waivers are denied for fraud, willful violations, or repeated offenses, as per RMO No. 7-2015.

Procedure for Payment Under Protest and Seeking Waiver

Step 1: Payment Under Protest

Compute and pay CGT/DST via BIR Form 0619-E (ePayment) or over-the-counter at Authorized Agent Banks (AABs).
Annotate "Under Protest" on the payment form or attach a protest letter detailing grounds (e.g., disputed amount, legal basis).
For CGT on real property, submit to the Revenue District Office (RDO) with documents like Deed of Absolute Sale, Tax Declaration, and BIR Form 1706/1707.
For DST, affix stamps or pay via eDST system under RR No. 6-2014, noting protest.
Secure eCAR or CAR, which is issued despite protest per RMO No. 15-2014.

Step 2: Filing the Protest and Refund Claim

Within 60 days from payment, file a written protest with the RDO or Large Taxpayer Service (LTS) for large taxpayers.
If denied or inaction after 180 days, appeal to the Commissioner or Court of Tax Appeals (CTA) under Section 229.
Simultaneously or subsequently, apply for waiver if interest has accrued (e.g., due to delayed resolution).

Step 3: Application for Waiver of Interest

Submit a sworn Application for Abatement or Compromise (BIR Form 2109) to the Technical Working Group (TWG) on Abatement via the RDO or National Office.
Include:
- Notarized affidavit explaining grounds.
- Proof of payment under protest (e.g., Official Receipts, protest letter).
- Financial statements showing hardship (if applicable).
- Legal opinions or appraisals supporting the dispute.
For amounts over PHP 20 million, approval requires the National Evaluation Board (NEB); otherwise, regional levels suffice.
Processing timeline: 120 days under the Taxpayer's Bill of Rights (RR No. 11-2021), extendable.

Step 4: Resolution and Implementation

If approved, the BIR issues a Certificate of Approval for Waiver.
Refunds, if due, include waived interest but may earn 6% interest from BIR under Section 249(C) if delay is attributable to BIR.
Record the waiver in tax records for compliance.

Electronic submissions via the eAFS system (RR No. 9-2021) are mandatory for certain taxpayers.

Requirements and Documentation

Basic Documents: BIR Forms, payment proofs, protest letter.
Evidentiary Support: Court decisions, BIR rulings, or third-party valuations.
Financial Proofs: Audited financial statements, bank certificates for hardship claims.
Compliance Certifications: No pending criminal cases, updated registrations.
Fees: None for waivers, but compromise may require 10-40% payment of basic tax.

Implications and Effects of Waiver

Taxpayer Benefits: Reduces overall liability, preserves cash flow, and resolves disputes amicably.
BIR Perspective: Encourages voluntary compliance and reduces litigation backlog.
Limitations: Waiver does not extend to surcharges (25% for late payment) unless separately compromised; no waiver for criminal liabilities.
Tax Accounting: Waived interest is non-deductible expense; refunds are non-taxable.
Prescription: Claims must be filed within 2 years from payment (Section 229).

Special Considerations

Real Estate Transactions: Waivers are common for CGT/DST in BIR-Register of Deeds coordination under Memorandum of Agreement (MOA) No. 1-2009, allowing protested payments without halting transfers.
Corporate Reorganizations: DST waivers under RR No. 4-2000 for mergers, if protested.
Digital Transactions: eDST payments under protest follow the same waiver rules per RR No. 7-2024.
Pandemic Relief: Extended waivers under Bayanihan Acts (RA 11469, 11494) for interest on CGT/DST delayed by COVID-19, potentially applicable by analogy.
International Aspects: For non-residents, waivers via tax treaties (e.g., US-Philippines Treaty), processed through International Tax Affairs Division.

Jurisprudence and Precedents

CIR v. Philam Life (G.R. No. 142265, 2006): Upheld waiver discretion when assessment is excessive.
CIR v. Fitness by Design (G.R. No. 215957, 2016): Clarified that payments under protest preserve waiver rights if good faith is shown.
CTA cases like Bank of the Philippine Islands v. CIR (CTA Case No. 8901, 2018) granted interest waivers on disputed DST for loan documents.
Recent rulings emphasize equity, as in CIR v. Megaworld (G.R. No. 228450, 2022), allowing waivers for valuation disputes in CGT.

Challenges and Common Pitfalls

Incomplete documentation leads to denials.
Missing the 60-day protest window bars waivers.
Overreliance on discretion; appeals to CTA if denied.
Audits may revisit waived amounts if fraud is discovered.

Conclusion

The BIR's waiver of interest on CGT and DST paid under protest represents a balanced mechanism in Philippine tax administration, fostering dispute resolution while upholding revenue collection. Rooted in equitable principles under the NIRC, it requires meticulous compliance with procedures and robust evidence. Taxpayers facing such issues should engage certified public accountants or tax lawyers early to maximize chances of approval. As tax laws evolve, this relief underscores the system's adaptability to genuine controversies, ultimately supporting economic transactions and taxpayer rights.