Issuances Batch 1

7/21/2019 Issuances Batch 1

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REVENUE ADMINISTRATIVE ORDER 01-03 (not the exact

provision

Rulings of first impression, according to Revenue Administrative Order

No. 01-03, refer to rulings, opinions and interpretations of the BIR

ommissioner !ith respect to the provisions of the "a# ode and other

ta# la!s !ithout esta$lished precedent, and !hich are issued in

response to a specific re%uest for a ruling or an opinion filed $& a

ta#pa&er !ith the BIR. "he same includes reversals, modifications or

revocations of an& e#isting rulings.

R!"in#s o$ $irst i%pression

'arl& this &ear, the ommissioner of the Bureau of Internal Revenue

(BIR) issued a Revenue *emorandum ircular (R*) informing all

internal revenue officials, emplo&ees and others concerned of the

revocation of a previousl& issued BIR ruling.

"he reason cited for the revocation !as that the ruling re%uested $& the

ta#pa&er is considered as a ruling of first impression, thus, the same

should have $een presented to the ommissioner for evaluation and

approval.

+nder the "a# ode, the po!er to issue rulings of first impression or to

reverse, revoe or modif& an& e#isting ruling of the Bureau is e#clusivel&

vested on the ommissioner of Internal Revenue and it cannot $e

delegated.

Rulings of first impression, according to Revenue Administrative Order

No. 01-03, refer to rulings, opinions and interpretations of the BIR

ommissioner !ith respect to the provisions of the "a# ode and other

ta# la!s !ithout esta$lished precedent, and !hich are issued in

response to a specific re%uest for a ruling or an opinion filed $& a

ta#pa&er !ith the BIR. "he same includes reversals, modifications or

revocations of an& e#isting rulings.

ith the issuance of the a$ove R*, it ma& $e good to tae a step

$ac and revisit R* No. 3-0 !hich deals !ith the delegation of

authorit& to sign rulings granting and/or confirming ta# e#emptions, ta#

incentives, and ta# treat& relief through the ruling process. "he rules on

the delegation of authorit&, according to R* No. 3-0, ma& $e

summaried as follo!s

1. "he regional directors have $een delegated the authorit& to deal

!ith and to approve re%uests to the use of pre-num$ered loose-leaf

forms, receipts, invoices and $oos of account (manual), as !ell as

those that involve re%uests for change in accounting period (e#cept

for change in accounting method).

2. "he assistant commissioner for egal 4ervice 5ivision has $een

delegated the authorit& to sign rulings that involve, in an& manner,

the granting and the confirmation of ta# e#emptions and/or ta#

incentives. It includes, among others, the authorit& to sign the

follo!ing rulings

(a) re%uests for rulings relative to ta#-deferred e#changes

of propert& for shares under 4ection 60()(2) of the 177

"a# ode8

($) re%uests for rulings pertaining to transfer of propert& $&

a pre-need corporation to a trustee in accordance !ith

e#isting guidelines of the 4ecurities and '#change

ommission on the esta$lishment of trusts $& pre-need

companies8

(c) re%uests for rulings pertaining to ta# conse%uences of

e#changes of properties made in order to correct clear

mistaes of fact relating to o!nership of su$division lots8

(d) re%uests made $& em$assies, either for themselves or

on $ehalf of their emplo&ees, for ta# e#emption8

(e) re%uests for confirmation of ta# e#empt status of

nonstoc, nonprofit, educational institutions8 and

(f) re%uests for rulings and/or certifications on topics

covered $& R* No. 2-01 and R* No. 10-01.

3. "he deput& commissioner of the egal and Inspections 9roup

has $een authoried to sign all rulings that grant as !ell as confirm

an& ta# e#emption and/or ta# incentive including ta# treat& relief

that originate from the value-added ta# (:A") Revie! ommittee8

and provided further, that the said rulings are clearl& covered $&

precedent ruling and guidelines, as !ell as pertinent issuance on

the su$;ect.

6. All rulings of first impression shall $e signed $& the

ommissioner. In addition, the ommissioner ma&, motu propio,

reverse, modif& or alter an& such ruling issued $& the Assistant

ommissioner for egal 4ervices or the 5eput& ommissioner of

the egal and Inspections 9roup, at an& time after its issuance if

the ommissioner determines the same to $e not in accordance

!ith the esta$lished precedent rulings or pertinent ta# la!s and

revenue issuance.In vie! of the recent revocation of ruling made $& the ommissioner,

ta#pa&ers appl&ing or re%uesting for the issuance of a BIR ruling must

protect their interests $& maing sure that the r

signed $& the proper Revenue Officer.

ie!ise, it !ould $e to the ta#pa&er<s advanta

ruling, the ta#pa&er taes the initiative to search

approving office other BIR rulings previousl& iss

that ma& $e used as precedent. "his is especia

issue $eing su$mitted for a ruling is not a cle

letter of re%uest must e#plain and highlight the

issue at hand and the precedent rulings $eing pr

understanding and resolution of the issue $& the

"he $urden to loo for precedent rulings mu

passed on to the revenue officer. 4ince the

numerous rulings to resolve, the& ma& not have t

research and to loo for precedent rulings. In the

rulings, the re%uest for ruling shall $e elevated t

his revie! and approval. "his !ill add a fe! mo

months to the process of approval. "here is, of c

since there is no precedent ruling, the ta#pa

negative ruling or a denial of his re%uest.

REVENUE RE&U'ATION

Issued 4eptem$er 16, 1777 implements the pro

of 177 relative to the rules on assessment of n

ta#es, fees and charges, as !ell as provides ;udicial set tlement of a ta#pa&er=s criminal violat

an& of its implementing Regulations through p

compromise penalt&. As a general principle, in ca

ta#pa&er is paid on a partial or installment $a

deficienc& ta# or on the delin%uenc& ta# lia$ilit&

imposed from due date of the ta# until full pa&me

!ill $e computed $ased on the diminishing $ala

of interests.

R':'N+' R'9+A"ION4 NO. 12-77

4+B>'" Implementing the ProvisionInternal Revenue Code of 1997 Assessment of National InternPenalties and Interest and the of a Taxpa%er&s Criminal 'iolatio



Pa%ment of a $uggested Compromise Penalt%

"O All Internal Revenue (f fi#ers and (thers Con#e rned

4'"ION 1. $#ope. ? @ursuant to the provisions of 4ection 266, in

relation to 4ection 26 of the National Internal Revenue ode of 177,

these Regulations are here$& promulgated to implement the provisions

of 4ections , , 206, 22C, 26, 26C and 267 on assessment of national

internal revenue ta#es, fees and charges and to provide the rules

governing the e#tra-;udicial settlement of a ta#pa&er=s criminal violation

of the said ode or an& of its implementing Regulations through

pa&ment of a suggested compromise penalt&.

4'"ION 2. General Prin#iples. ?

2.1 "he surcharge and/or interest herein prescri$ed

shall appl& to all ta#es, fees and charges

imposed under the ode !hich shall $e

collected at the same time, in the same

manner, and as part of the ta#. cdasia

2.2 In case the ta# due from the ta#pa&er is paid on

a partial or installment $asis, the interest

on the deficienc& ta# or on the delin%uenc&

ta# lia$ilit& of the ta#pa&er shall $e

imposed from due date of the ta# until full

pa&ment thereof. "he interest shall $e

computed $ased on the diminishing

$alance of the ta#, inclusive of interests.

4'"ION 3. )ue Pro#ess Re*uirement in the Issuan#e of a )efi#ien#%

Tax Assessment . ?

3.1 *ode of procedures in the issuance of a deficienc& ta# assessment

3.1.1 Noti#e for informal #onferen#e. ? "he Revenue Officer !ho

audited the ta#pa&er=s records shall, among others, state in his report

!hether or not the ta#pa&er agrees !ith his findings that the ta#pa&er is

lia$le for deficienc& ta# or ta#es. If the ta#pa&er is not amena$le, $ased

on the said Officer=s su$mitted report of investigation, the ta#pa&er shall

$e informed, in !riting, $& the Revenue 5istrict Office or $& the 4pecial

Inves tigation 5 iv is ion, as the case ma& $e ( in the

case RevenueRegional Offices) or $& the hief of 5ivision concerned

(in the case of the BIR National Office) of the discrepanc& or

discrepancies in the ta#pa&er=s pa&ment of his internal revenue ta#es,

for the purpose of DInformal onference,D in order to afford the ta#pa&er

!ith an opportunit& to present his side of the case. If the ta#pa&er fails

to respond !ithin fifteen (1) da&s from date of receipt of the notice for

informal conference, he shall $e considered in default, in !hich case,

the Revenue 5istrict Officer or the hief of the 4pecial Investigation

5ivision of the Revenue Regional Office, or the hief of 5ivision in the

National Office, as the case ma& $e, shall endorse the case !ith the

least possi$le dela& to the Assessment 5 iv is ion of

the Revenue Regional Office or to the ommissioner or his dul&

authoried representative, as the case ma& $e

and issuance of a deficienc& ta# assessment, if !

3.1.2 Preliminar% Assessment Noti#e +PAN.

evaluation $& the Assessment 5ivision or $& th

dul& authoried representative, as the case ma&

there e#ists sufficient $asis to assess the ta#pa&

or ta#es, the said Office shall issue to the

registered mail, a @reliminar& Assessment

proposed assessment, sho!ing in detail, the f

andregulations, or ;urisprudence on !hich the p

$ased (see illustration in ANN'E A hereof).

respond !ithin fifteen (1) da&s from date of rece

$e considered in default, in !hich case, a form

assessment notice shall $e caused to $e issu

calling for pa&ment of the ta#pa&er=s deficienc&

the applica$le penalties. i$e#

3.1.3 x#eptions to Prior Noti#e of the Assessm

informal conference and the preliminar& assessm

re%uired in an& of the follo!ing cases, in !hich

formal assessment notice for the pa&ment of th

ta# lia$ilit& shall $e sufficient

(i) hen the finding for an& deficie

result of mathematical

computation of the ta# app



face of the ta# return filed $& the ta#pa&er8

or

(ii) hen a discrepanc& has $een determined

$et!een the ta# !ithheld and the amount

actuall& remitted $& the !ithholding agent8

or

(iii) hen a ta#pa&er !ho opted to claim a refund or

ta# credit of e#cess credita$le !ithholding

ta# for a ta#a$le period !as determined to

have carried over and automaticall&

applied the same amount claimed against

the estimated ta# lia$ilities for the ta#a$le

%uarter or %uarters of the succeeding

ta#a$le &ear8 or

(iv) hen the e#cise ta# due on e#cisa$le articles

has not $een paid8 or

(v) hen an article locall& purchased or imported

$& an e#empt person, such as, $ut not

limited to, vehicles, capital e%uipment,

machineries and spare parts, has $een

sold, traded or transferred to non-e#empt

persons.

3.1.6 -ormal .etter of )emand and Assessment Noti#e. ? "he formal

letter of demand and assessment notice shall $e issued $& the

ommissioner or his dul& authoried representative. "he letter of

demand calling for pa&ment of the ta#pa&er=s deficienc& ta# or ta#es

shall state the facts, the la!, rules and regulations, or ;urisprudence on

!hich the assessment is $ased, other/ise, the formal letter of demand

and assessment noti#e shall 0e void (see illustration in ANN'E B

hereof). "he same shall $e sent to the ta#pa&er onl& $& registered mail

or $& personal deliver&. If sent $& personal deliver&, the ta#pa&er or his

dul& authoried representative shall acno!ledge receipt thereof in the

duplicate cop& of the letter of demand, sho!ing the follo!ing (a) Fis

name8 ($) signature8 (c) designation and authorit& to act for and in

$ehalf of the ta#pa&er, if acno!ledged received $& a person other than

the ta#pa&er himself8 and (d) date of receipt thereof.

3.1. )isputed Assessment . ? "he ta#pa&er or his dul& authoried

representative ma& protest administrativel& against the aforesaid formal

letter of demand and assessment notice !ithin thirt& (30) da&s from date

of receipt thereof. If there are several issues involved in the formal letter

of demand and assessment notice $ut the ta#pa&er onl& disputes or

protests against the validit& of some of the issues raised, the ta#pa&er

shall $e re%uired to pa& the deficienc& ta# or ta#es attri$uta$le to the

undisputed issues, in !hich case, a collection letter shall $e issued to

the ta#pa&er calling for pa&ment of the said deficienc& ta#, inclusive of

the applica$le surcharge and/or interest. No action shall $e taen on the

ta#pa&er=s disputed issues until the ta#pa&er has paid the deficienc& ta#

or ta#es attri$uta$le to the said undisputed issues. "he prescriptive

period for assessment or collection of the ta# or ta#es attri$uta$le to the

disputed issues shall $e suspended. llcd

"he ta#pa&er shall state the facts, the

and regulations, or ;urisprudence on !hich

other!ise, his protest shall $e consideredvoid

effe#t . If there are several issues involved in th

and the ta#pa&er fails to state the facts, the

andregulations, or ;urisprudence in support of h

of the several issues on !hich the assessment i

$e considered undisputed issue or issues, in !

shall $e re%uired to pa& the corresponding d

attri$uta$le thereto.

"he ta#pa&er shall su$mit the re%uired docum

protest !ithin si#t& (0) da&s from date of filing

other!ise, the assessment shall $ecome

demanda$le. "he phrase Dsu$mit the re%uire

su$mission or presentation of the pertinent doc

evaluation $& the Revenue Officer conduc

said Revenue Officer shall state this fact in his re

If the ta#pa&er fails to file a valid protest agai

demand and assessment notice !ithin thirt&

receipt thereof, the assessment shall $ecom

demanda$le.

If the protest is denied, in !hole or in part, $&

ta#pa&er ma& appeal to the ourt of "a# Appeal

from date of receipt of the said decision, othe

shall $ecome final, e#ecutor& and demanda$le.



In general, if the protest is denied, in !hole or in part, $& the

ommissioner or his dul& authoried representative, the ta#pa&er ma&

appeal to the ourt of "a# Appeals !ithin thirt& (30) da&s from date of

receipt of the said decision, other!ise, the assessment shall $ecome

final, e#ecutor& and demanda$le @rovided, ho!ever, that if the

ta#pa&er elevates his protest to the ommissioner !ithin thirt& (30) da&s

from date of receipt of the final decision of the ommissioner=s dul&

authoried representative, the latter=s decision shall not $e considered

final, e#ecutor& and demanda$le, in !hich case, the protest shall $e

decided $& the ommissioner. cdtai

If the ommissioner or his dul& authoried representative fails to act on

the ta#pa&er=s protest !ithin one hundred eight& (1C0) da&s from date of

su$mission, $& the ta#pa&er, of the re%uired documents in support of his

protest, the ta#pa&er ma& appeal to the ourt of "a# Appeals !ithin

thirt& (30) da&s from the lapse of the said 1C0-da& period, other!ise, the

assessment shall $ecome final, e#ecutor& and demanda$le.

3.1. Administrative )e#ision on a )isputed Assessment . ? "he

decision of the ommissioner or his dul& authoried representative shall

(a) state the facts, the applica$le la!, rules and regulations, or

;urisprudence on !hich such decision is $ased, other/ise, the de#ision

shall 0e void (see illustration in ANN'E hereof), in !hich case, the

same shall not $e considered a decision on a disputed assessment8 and

($) that the same is his final de#ision.

3.1. Constru#tive $ervi#e. ? If the notice to the ta#pa&er herein

re%uired is served $& registered mail, and no response is received from

the ta#pa&er !ithin the prescri$ed period from date of the posting

thereof in the mail, the same shall $e considered actuall& or

constructivel& received $& the ta#pa&er. If the same is personall& served

on the ta#pa&er or his dul& authoried representative !ho, ho!ever,

refused to acno!ledge receipt thereof, the same shall $e constructivel&

served on the ta#pa&er. onstructive service thereof shall $e considered

effected $& leaving the same in the premises of the ta#pa&er and this

fact of constructive service is attested to, !itnessed and signed $& at

least t!o (2) revenue officers other than the revenue officer !ho

constructivel& served the same. "he revenue officer !ho constructivel&

served the same shall mae a !ritten report of this matter !hich shall

form part of the docet of this case (see illustration in ANN'E 5 hereof).

4'"ION 6. Civil Penalties. ?

6.1 T/ent%!-ive Per#ent +23 $ur#harge. ? "here shall $e imposed,

in addition to the $asic ta# re%uired to $e paid, a penalt& e%uivalent to

t!ent&-five percent (2G) thereof, in an& the follo!ing cases

6.1.1 Hailure to file an& return and pa& the ta# due

thereon as re%uired under the provisions

of this ode or rules and regulations on

the date prescri$ed8 or

6.1.2 +nless other!ise authoried $& the

ommissioner, filing a return !ith an

internal revenue officer other than those

!ith !hom the return is re%uired to $e

filed8 or

6.1.3 Hailure to pa& the deficienc&

time prescri$ed for its pa

notice of assessment8 or

6.1.6 Hailure to pa& the full or part of

ta# sho!n on an& return r

filed under the provisions o

rules andregulations, or the

ta# due for !hich no return

$e filed, on or $efore the d

for its pa&ment. cdasia

6.2 -ift% Per#ent +243 $ur#harge

6.2.1 In case of !illful neglect to

!ithin the period prescri$ed

or in case a false or fraud

!illfull& made, the penalt&

shall $e fift& percent (0G)

the deficienc& ta#, in case

has $een made on the $asis

$efore the discover& of

fraud Provided , "hat a

underdeclaration of ta#a$le

or income, or a su$stantial

of deductions, as determ

ommissioner or his du

representative, shall c



fa#ie evidence of a false or fraudulent

return Provided , further , "hat failure to

report sales, receipts or income in an

amount e#ceeding thirt& percent (30G) of

that declared per return, and a claim of

deductions in an amount e#ceeding thirt&

percent (30G) of actual deductions, shall

render the ta#pa&er lia$le for su$stantial

underdeclaration of sales, receipts or

income or for overstatement of deductions,

as mentioned herein @rovided, further,

that the term D/illful negle#t to file the

return /ithin the period pres#ri0ed 0% the

CodeD shall not appl& in case the ta#pa&er,

!ithout notice from the ommissioner or

his authoried representative, voluntaril&

files the said return, in !hich case, onl&

2G surcharge shall $e imposed for late

filing and late pa&ment of the ta# in lieu of

the a$ove 0G surcharge. onversel&, the

0G surcharge shall $e imposed in case

the ta#pa&er files the return onl& after prior

notice in !riting from the ommissioner or

his dul& authoried representative.

6.2.2 4ection (A) of the ode provides that an&

ta# return filed $& a ta#pa&er Dma% 0e

modified, #hanged or amended D $& the

ta#pa&er D/ithin three +5 %ears from date

of su#h filing D provided, ho!ever, that

Dno noti#e for audit or investigation of su#h

return, statement or de#laration has, in the

meantime, 0een a#tuall% served upon the

taxpa%er .D "hus, if upon investigation, it is

determined that the ta#pa&er=s originall&

filed ta# return is false or fraudulent, such

ta#pa&er shall remain lia$le to the 0G

civil penalt& regardless that the ta#pa&er

has filed his amended ta# return, if the

said amended ta# return, ho!ever, has

$een filed onl& after issuance of the etter

of Authorit& for the investigation of the

ta#pa&er=s ta# return or such amendment

has $een made in the course of the said

investigation. cda

4'"ION . 6ode of Pro#edures in Computing for the Tax andor

Appli#a0le $ur#ha rge. ? 4ho!n hereunder are illustrative cases for the

computation and assessment of the ta#, inclusive of surcharge (if

applica$le) and interest

.1 .ate filing and late pa%ment of the tax .

? Illustration Income ta# return for the calendar &ear

177C !as due for filing on April 1, 1777 $ut the ta#pa&er

voluntaril& filed his ta# return, !ithout notice from the BIR,

onl& on >une 30, 1777. "he ta# due p

@100,000. In this case, the ta#pa&

delin%uenc& penalties consisting of

20G interest per annum, computed

ta# until date of pa&ment, computed a

+a"en,ar ear 1**.

Income ta# due per return

Add 2G surcharge for

late filing and late

pa&ment

(@100,000.00 times

2G)

20G int. p.a. from 6-

1-77 to -30-77

(@100,000.00 times .

06126)@6,1.26

????

"otal amount due

(e#cluding suggested

compromise for

late filing and late pa&ment

of the ta#)



(nl% one 23 sur#harge shall 0e imposed for late filing of the return

and late pa%ment of the tax .

.2 The tax return is filed on time 0ut filed

through an internal revenue offi#er other than /ith /hom

the return is re*uired to 0e filed . ? Illustration "he

ta#pa&er=s 177C income ta# return is re%uired to $e filed

through the authoried agent $an under the ;urisdiction of

R5O 'ast *aati. But, !ithout prior authoriation from the

BIR, the ta#pa&er filed his ta# return and paid the ta#

through the authoried agent $an under the ;urisdiction of

R5O 5avao it&. "a# due and paid per return is

@100,000.00.

+a"en,ar ear 1**.

Income ta# due per return @100,000.00

Add 2G surcharge @2,000.00

?????

"otal amount due @12,000.00

ess Amount paid @100,000.00

?????

Amount still due @2,000.00

.3 .ate filing and late pa%ment due to taxpa%er&s

/illful negle#t . ? Illustration "he ta#pa&er did not file his

income ta# return for the calendar &ear 177 !hich !as

due for filing on April 1, 177C. Fe !as notified $& the BIR

of his failure to file the ta# return, for !hich reason, he filed

his ta# return and paid the ta#, onl& after the said notice,

on >une 30, 1777. "he ta# due per return is @100,000.00.

+a"en,ar ear 1**/

Income ta# due per return @100,000.00

Add 0G surcharge for !illful neglect to

f ile the return and late pa&ment of the ta#

(@100,000 times 0G)@0,000.0

0

20G int. p.a. fr. 6-1-7C to -30-77

(@100,000.00 times .26126)@26,1.2

6@6,1.26

??????????

"otal amount due (e#cluding suggested

compromise

for late fil ing and late pa&ment of the ta#) @16,1.26

.6 Penalt% or penalties for

a rule, no surcharge is imposed on

the $asic ta#. Fo!ever, if the amo

penalties is not paid on or $efore th

the demand letter, the correspondin

imposed.

Illustration No8 1 "a#pa&er

income ta# return for calendar &

@100,000.00 on April 1, 177C. +

return, it !as disclosed that he erron

ta# due. "he correct amount of ta#

"he ta#pa&er is assessed for deficie

letter of demand and assessment n

30, 1777. pr

+a"en,ar ear 1**/

"a# due per pre-audit @

ess Amount assessed and paid per ta# return

filed@

?

5eficienc& income ta# @

Add 20G int. p.a. from 6-1 -7C to -30-77

(@20,000 .00 times . 26126) @

?

Amount still due @



Illustration No8 AB OR@ORA"ION filed its

income ta# return for calendar &ear 177 and paid on time

its income ta# sho!n thereunder, amounting to @100,000.

4aid ta#pa&er !as investigated. +pon verification of its

accounting records, it !as disclosed that its deduction,

from gross income, of representation e#penses in the

amount of @200,000.00 did not meet all the statutor&

re%uisites for deducti$ilit&. "he corporation !as dul&

notified of the said discrepanc& through a @reliminar&

Assessment Notice. Based on the 3G income ta# rate on

corporations applica$le in the &ear 177, the income ta#

due after investigation amounts to @10,000.00. After

deduction of income ta# paid per return filed, the $asic

deficienc& income ta# amounts to @0,000, e#cluding

penalties. Hailing to protest on time against the preliminar&

assessment notice, a formal letter of demand and

assessment notice !as issued on *a& 31, 1777, re%uiring

pa&ment of the assessment not later than >une 30, 1777.

+a"en,ar ear 1**/

Income ta# due per investigation @10,000.00

ess Income ta# paid per return @100,000.00

?????

5eficienc& income ta# @0,000.00

Add 20G int. p.a. fr. 6-1-7C to -30-77 (@0,000

times .26126)@1,70C.

?????

"otal amount still due @C,70C.

Illustration No8 5 EJK OR@ORA"ION filed its

income ta# return for calendar &ear 177 !ith a net

ta#a$le income of @00,000.00. At the applica$le income

ta# rate of 3G for the &ear 177, its income ta# amounted

to @1,000.00. Fo!ever, upon investigation, it !as

disclosed that its income ta# return !as false or fraudulent

$ecause it did not report a ta#a$le income amounting to

another @00,000.00. On its net income of @1,000,000.00,

per investigation, the income ta# due is @30,000.00.

5educting its pa&ment per return filed, the deficienc&,

e#cluding penalties, amounted to @1,000.00. It !as dul&

informed of this finding through a @reliminar& Assessment

Notice. Hailing to protest on time against the preliminar&

assessment notice, a formal letter of demand and

assessment notice !as issued on *a& 31, 1777 calling for

pa&ment of the deficienc& income ta# on or $efore >une

30, 1777. llcd

In this case, said corporatio

penalties of 0G surcharge for ha

fraudulent return, plus 20G interes

deficienc&, computed as follo!s

+a"en,ar ear 1**/

Income ta# due pe r inv estigation

ess I ncome ta# pa id pe r r etu rn

5eficienc& income ta#

Add0G surcharge for filing a fraudulent

or false

return (@1,000.00 t imes 0G) @C

20G int. p.a. fr. 6-1-7C to -30-77

(@1,000.00 t imes .26126) @62

??

"otal amount due

. .ate pa%ment of a defi

? In general, the deficienc& ta# asse

the ta#pa&er !ithin the time prescri$

demand, other!ise, such ta#pa&er s

civil penalties incident to late pa&men



Illustration Based on the a$ove Illustration No. 3,

4cenario 6, assuming that the calendar &ear 177

deficienc& income ta# assessment against EJK

OR@ORA"ION, in the amount of @306,1., is not

paid $& >une 30, 1777, the deadline for pa&ment of the

assessment, and assuming further that this assessment

has alread& $ecome final and collecti$le. In this case,

such corporation shall $e considered late in pa&ment of

the said assessment. Assuming, further, that the

corporation pa&s its ta# assessment onl& $& >ul& 31, 1777,

the civil penalties for late pa&ment shall $e computed as

follo!s

+a"en,ar ear 1**/

"otal deficienc& income ta# assessed on *a&

31, 1777 @306,1.

Add 2G surcharge f or late pa&ment

(@306,1. times 2G)@,172.7

2

20G interest p.a. from -1-77 to

-31-77 (@306,1.

times .01) @,07.6 @C1,22.6

??????????

"otal amount due (e#cluding suggested

compromise

penalt& for late pa&ment) @3C,066.13

. Computation of 43 interest per annum in

#ase of partial or installment pa%ment of a tax lia0ilit% .

? Illustration No8 1 In #ase extended pa%ment of the tax

is dul% authoried . ? 5'H OR@ORA"ION, due to

financial incapacit&, re%uested that it $e allo!ed to pa& its

income ta# lia$ilit& per return for calendar &ear 177C, in

the amount of @1,000,000.00, in four (6) monthl&

installments, starting April 1, 1777. Its re%uest has $een

dul& approved pursuant to 4ec. 3 of the "a# ode.

In this case, no 2G surcharge shall $e imposed

for late pa&ment of the ta# since its deadline for pa&ment

has $een dul& e#tended. Fo!ever, 20G interest per

annum for the e#tended pa&ment shall $e imposed,

computed $ased on the diminishing $alance of the

Dunpaid amount D, pursuant to the provisions of 4ection

267 (5) of the ode.

No 2G surcharge on e#tended pa&ment shall $e

imposed provided, ho!ever, that the ta#pa&er=s re%uest for

e#tension of the period !ithin !hich to pa& is made on or

$efore the deadline prescri$ed for pa&ment of the ta# due.

onversel&, if such re%uest is made after the deadline

prescri$ed for pa&ment, the ta#pa&er shall alread& $e

treated late in pa&ment, in !hich cas

shall $e imposed, even if pa&ment o

allo!ed in partial amortiation. cdasia

xample

+a"en,ar ear 1**.

Income ta# due per return @1,000,

ess1st installment of the ta# on or

$efore 6-1-77@20,00

????

Balance as of 6-1-77 @0,00

Add20G int. p.a. from 6-1-77 to -

1-77

(@0,000.00 times .01) @12,00

????

Amount due on -1-77 @2,0

ess2nd installment on -1-77

(@20,000.00 plus

@12,00.03 interest) @22,0

????

Balance as of -1-77 @00,00

Add20G int. p.a. from -1-77 to -

1-77

(@00,000.00 times .01) @C,333

????



Amount due on -1-77 @0C,333.3

ess3rd installment on -1-77

(@20,000.00 plus

@C,333.3 interest) @2C,333.3

??????

Balance as of -1-77 @20,000.00

Add20G int. p.a. from -1-77 to -

1-77

(@20,000.00 times .01) @6,1.C

??????

6th and final installment on -1-77 @26,1.C

Illustration No8 Computation of tax delin*uen#%

in #ase of partial pa%ment of the tax due /ithout prior :IR

authoriation for extended pa%ment . ?

xample 9FI OR@ORA"ION did not file its

final ad;ustment income ta# return for the calendar &ear

177C !hich !as due on April 1, 1777. "he BIR informed

the corporation of its failure to file its said ta# return and

re%uired that it file the same, inclusive of the 2G

surcharge and 20G interest per annum penalties incident

to the said omission. On *a& 1, 1777 it advised that its

income ta# due for the said &ear amounts to

@1,000,000.00 $ut, ho!ever, due to its adverse financial

condition at the moment, it !ill $e una$le to pa& the entire

amount, inclusive of the delin%uenc& penalties. Fence, on

*a& 1, 1777, it made a partial pa&ment of @600,000.00.

Assuming that the BIR demanded pa&ment of the unpaid

$alance of its ta# o$ligation pa&a$le $& >une 1, 1777, the

unpaid $alance of the corporation=s delin%uent income ta#

shall $e computed as follo!s

+a"en,ar ear 1**.

Income ta# due per

return @1,000,000.00

Add2G surcharge

for late filing and

late pa&ment @20,000.00

20G interest per

annum from 6-

1-77

to -1-77

(@1,000,000.00

times .01) @1,.0 @2,.0

????? ?????

Amount due as of -1 -

77 @1,2,.0

ess

@artial pa&ment

on -1-77 @600,000.00

?????

Balance as of -1-77

Add

20G interest per

annum from -

1-77

to -1-77

(@C,.0

times .01)

Amount still due

(e#clus ive of the

suggested compromise

penalt& for late filing and

late pa&ment

If the said ta#pa&er fails t

@C11,111.1 $& >une 1, 1777, no fu

for late pa&ment of the ta# shall $e im

the 20G interest per annum shall $e

ta#pa&er against the ta#pa&er, com

thereof (i.e., >une 1, 1777) until p

pa&s the same on partial pa&ment $a

per annum shall $e computed on the

thereof, pursuant to the procedur

Illustration No. 1, 4ection . hereof.



4'"ION . $uggested Compromise Penalt% in xtra!;udi#ial

$ettlement of a Taxpa%er =s Criminal 'iolation. ? 4ection 206 of the "a#

ode of 177 provides that D All #riminal violations ma% 0e #ompromised

ex#ept +a those alread% filed in #ourt , or +0 those involving fraud .D "his

means that, in general, the ta#pa&er=s criminal lia$ilit& arising from his

violation of the pertinent provision of the ode ma& $e settled e#tra-

;udiciall& instead of the BIR instituting against the ta#pa&er a criminal

action in ourt. A compromise in e#tra-;udicial settlement of the

ta#pa&er=s criminal lia$ilit& for his violation is consensual in character,

hence, ma& not $e imposed on the ta#pa&er !ithout his consent. Fence,

the BIR ma& onl& suggest settlement of the ta#pa&er=s lia$ilit& through a

compromise. pr

"he e#tra-;udicial settlement of the ta#pa&er=s criminal lia$ilit& and the

amount of the suggested compromise penalt& shall conform !ith the

schedule of compromise penalties provided

under Revenue *emorandum Order No. 1-70 or as hereafter revised.

4'"ION . Repealing Clause. ? An& revenue issuance !hich is

inconsistent here!ith shall $e considered repealed, amended, or

modified accordingl&.

4'"ION .. ffe#tivit% . ?

C.1 General Rule. ? In general, the provisions of

these Regulations shall $e effective

$eginning >anuar& 1, 177C pursuant to the

provisions of 4ection C of R.A. No. C626,

other!ise no!n as the National

Internal Revenue ode of 177.

C.2 Computation of $ur#harge an

)efi#ien#% Tax Assessm

deficienc& ta# assess

$eginning >anuar& 1, 1

governed $& the rules

these Regulations. cda

C.3 (ther Provisions. ? An&

these Regulat ions not

specificall& provided in

Internal Revenue ode of 1

effect fifteen (1) da&s afte

an& ne!spaper of general c

LLL

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