AS a general rule, the Bureau of Internal Revenue (BIR) has three years from the last day prescribed by law for the filing of the tax return or from the day the tax return was filed, whichever is later, to assess internal revenue taxes of a taxpayer. The assessments issued after the expiration of the three-year period shall no longer be valid and effective. The prescriptive period on the right of the BIR to assess is meant to safeguard the interests of taxpayers from unreasonable investigation.

However, the three-year prescriptive period may be extended through the execution of a waiver on the statute of limitations, wherein the commissioner of Internal Revenue or his duly authorized representative and the taxpayer agree in writing before the expiration of the three-year period, as to a specific future date when the period to assess is extended. The waiver must be entered by both parties with utmost good faith and in compliance with the requirements provided in the law.