SUBJECT : Supplemental Provision to the Previously Issued Revenue
Memorandum Circular (RMC 69-2007) on Issues pertaining to the Tax Amnesty Program Under Republic Act No. 9480 as Implemented by Department Order No. 29-07
TO : All Revenue Officers and Others Concerned
For the information and guidance of the taxpaying public and all internal revenue officers and others concerned, this Revenue Memorandum Circular is issued to clarify certain issues relative to Question and Answer (Q & A) No. 24 of RMC No. 69-2007.
Since Q & A No. 24 mentioned TRS-Letter Notice (TRS-LN) only, the answer and sample given was made specific to the TRS-LN. However, since there are also taxpayers who have received Letter Notice tagged as “SLSP/BOC Letter Notices”, the manner on how these taxpayers can avail of the tax amnesty and the amount of payment that needs to be paid is also illustrated in the examples below:
Letter Notice sent:
Scenario A
A. Discrepancy on Sales (underdeclaration) 500,000.00
B. Discrepancy on Local Purchases (underdeclaration) 1,000,000.00
C. Discrepancy on Imported Purchases (underdeclaration) 750,000.00
Resulting Underdeclaration on Sales/Networth:
Discrepancy on Sales 500,000.00
Discrepancy on Purchases - (1,000,000 + 750,000)/80% 2,187,500.00*
Base Amount 2,687,500.00
*Assumption:
Cost of Sales Ratio = 80%
Since both discrepancies on sales and purchases result to underdeclaration of networth, the P2,687,500 shall be added to any increase in the networth. Hence in the above example, 5% of P2,687,000 (on the assumption that P2,687,500 is the only increase in networth) which is P 134,375 or the prescribed minimum absolute amount, whichever is higher, shall be the tax amnesty payment.
Scenario B
A. Discrepancy on Sales (underdeclaration) 500,000.00
B. Discrepancy on Local Purchases (overdeclaration) 1,000,000.00
C. Discrepancy on Imported Purchases (overdeclaration) 750,000.00
Total Underdeclaration on Gross Income/Net Income :
On sales discrepancy 500,000.00
On discrepancy on purchases 1,750,000.00
Base Amount for purposes of computing the 5% of networth 2,250,000.00
The overdeclaration of purchases has no effect on the taxable gross receipts subject to VAT but has effect on the VAT payable as the taxpayer has over-declared the input tax claimed, while for gross income for income tax purposes, the overdeclaration of purchases results to over-declaration of cost of sales, thereby under-declaring the income by same amount. Under scenario B, the P2,250,000 shall be added to any increase in networth.
Hence, in the said example, 5% of P2,250,000 (on the assumption that P2,250,000 is the only increase in networth) which is P 112,500 or the prescribed minimum absolute amount, whichever is higher, shall be the tax amnesty payment. For cases where taxpayer received two kinds of LN (TRS-LN or Consolidated BOC/SLSP LN), the basis of the tax amnesty amount shall be that LN which discrepancy/ies results to a higher increase in assets/networth.
All internal revenue officers and others concerned are requested to give this circular as wide a publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 76-2007
SUBJECT : Prescribing Additional Mandatory Documentary Requirements for One-time Transactions Involving Transfers of Real Property
TO : All Internal Revenue Officers and Others Concerned
To ensure that all internal revenue taxes due on transfers of real property have been correctly paid and remitted to the government, the following mandatory documentary requirements shall be submitted in addition to the checklist of requirements prescribed under Revenue Memorandum Order No. 15-2003:
1. Photocopy of the official receipts issued by the seller, for purposes of determining whether the sale of real property is on cash basis, a deferredpayment sale (when payments in the year of sale exceed 25% of the selling price) or on installment plan (when payments in the year of sale do not exceed 25% of the selling price). The original copy of the official receipts shall be presented to the Bureau for authentication during the processing of the application for Certificate Authorizing Registration (CAR). However, if the seller is not engaged in business, the acknowledgement receipts issued by the seller to the buyer or any proof of payment shall be presented.
While the Contract to Sell and official receipts of payments are among the documents required for installment sales in Annex A2 of Revenue Memorandum Order No. 15-2003, the taxpayer presents only the Deed of Absolute Sale which is, oftentimes, executed upon full payment. The purpose of requiring the submission of a photocopy of the official receipts is for the Revenue District Office to have a means of validating if the transaction is on cash basis, deferred payment or installment plan.
2. Certified true copy of the original CAR (copy of the Registry of Deeds) pertaining to the transfer of property prior to the issuance of Original/Transfer Certificate of Title (OCT/TCT) or Condominium Certificate of Title (CCT) which is the subject of the current sale/transfer, or certification issued by the Registry of Deeds indicating the serial number of the CAR, date of issuance of CAR, the Revenue District Office Number of the district office that issued the CAR, the name of the Revenue District Officer who signed the CAR, the type of taxes paid and the amount of payment per tax type.
The aforementioned document shall be submitted for OCT/TCT/CCT issued starting 2007, in case the Register of Deeds fails to annotate the information contained in the CAR as prescribed under Section 5 of Revenue Regulations No. 24-2002 dated November 15, 2002 and Section 1 of Memorandum Order No. 233 dated December 11, 2006 issued by President Gloria Macapagal-Arroyo, as circularized in Revenue Memorandum Circular No. 3-2007.
All internal revenue officials and employees are enjoined to give this Circular as wide a publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
I-1
TO : All Internal Revenue Officers and Others Concerned
To ensure that all internal revenue taxes due on transfers of real property have been correctly paid and remitted to the government, the following mandatory documentary requirements shall be submitted in addition to the checklist of requirements prescribed under Revenue Memorandum Order No. 15-2003:
1. Photocopy of the official receipts issued by the seller, for purposes of determining whether the sale of real property is on cash basis, a deferredpayment sale (when payments in the year of sale exceed 25% of the selling price) or on installment plan (when payments in the year of sale do not exceed 25% of the selling price). The original copy of the official receipts shall be presented to the Bureau for authentication during the processing of the application for Certificate Authorizing Registration (CAR). However, if the seller is not engaged in business, the acknowledgement receipts issued by the seller to the buyer or any proof of payment shall be presented.
While the Contract to Sell and official receipts of payments are among the documents required for installment sales in Annex A2 of Revenue Memorandum Order No. 15-2003, the taxpayer presents only the Deed of Absolute Sale which is, oftentimes, executed upon full payment. The purpose of requiring the submission of a photocopy of the official receipts is for the Revenue District Office to have a means of validating if the transaction is on cash basis, deferred payment or installment plan.
2. Certified true copy of the original CAR (copy of the Registry of Deeds) pertaining to the transfer of property prior to the issuance of Original/Transfer Certificate of Title (OCT/TCT) or Condominium Certificate of Title (CCT) which is the subject of the current sale/transfer, or certification issued by the Registry of Deeds indicating the serial number of the CAR, date of issuance of CAR, the Revenue District Office Number of the district office that issued the CAR, the name of the Revenue District Officer who signed the CAR, the type of taxes paid and the amount of payment per tax type.
The aforementioned document shall be submitted for OCT/TCT/CCT issued starting 2007, in case the Register of Deeds fails to annotate the information contained in the CAR as prescribed under Section 5 of Revenue Regulations No. 24-2002 dated November 15, 2002 and Section 1 of Memorandum Order No. 233 dated December 11, 2006 issued by President Gloria Macapagal-Arroyo, as circularized in Revenue Memorandum Circular No. 3-2007.
All internal revenue officials and employees are enjoined to give this Circular as wide a publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
I-1
REVENUE MEMORANDUM ORDER NO. 32-2007
SUBJECT : Prescribing Guidelines and Procedures in Handling 2006 Letter Notices Generated Thru Reconciliation of Listing for Enforcement System (RELIEF) and Third Party Matching-Bureau of Customs (TPM-BOC) Data Program
TO : All Internal Revenue Officers and Others Concerned
I. OBJECTIVE
This Order is issued to simplify procedures and minimize processing time in handling 2006 Letter Notices generated thru the Reconciliation of Listing for Enforcement System (RELIEF)-Summary List of Sales and Purchases (SLSP) and Third Party Matching-Bureau of Customs (TPM-BOC) Data Program to maximize revenue collection.
II. COVERAGE
This Order shall cover the income and value added tax liabilities of individual and corporate taxpayers who were issued LNs based on the Consolidated RELIEFSLSP and TPM-BOC Data Program covering calendar year 2006.
III. POLICIES
1. As provided for under existing Revenue Memorandum Order (RMO) on RELIEF/ SLSP System (i.e., RMO No. 30-2003, as amended by RMO Nos. 42-2003, 24-2004, 32-2005 and 21-2006) and RMO on TPM-BOC Data Program (i.e., RMO No. 34-2004, as amended by RMO Nos. 46-2004, 32-2005 and 21-2006), taxpayers with discrepancy on their sales and/or purchases (domestic or imported) shall be notified of such findings through the issuance of an LN (Annex “A”).
2. LNs covering calendar year 2006 shall be deployed based on the parameters set by Audit Information, Tax Exemptions and Incentives Division (AITEID) as approved by the Commissioner of Internal Revenue (CIR), together with the Details of Taxpayer’s Customers/Suppliers (DTCS) and/or Details of 2 Importations with Return Information Matching (DIRIM), via the Information Delivery Portal (IDP).
3. There shall be no conversion of 2006 LNs to Letters of Authority/Tax Verification Notices (LAs/TVNs). If there is an on- going audit/investigation pursuant to an LA/TVN for taxable year 2006 in accordance with the audit program under RMO No. 12-2007, the LN shall be separately handled and whatever discrepancy paid for under an LN shall be credited against any assessment that may be made by the investigating office handling an LA/TVN provided the discrepancies disclosed by said audit/investigation are of the same nature as the discrepancies reflected in the LN.
4. The CIR shall create an LN Task Force in the National Office to be composed of Revenue Officers –Assessment (ROs-A) performing supervisory functions in the Revenue District Offices (RDOs) who will be assigned in a concurrent capacity to be covered by a Revenue Special Order (RSO), to handle 2006 LNs. This LN Task Force shall be supervised by the Assessment Service of the National Office.
5. The 2006 LNs together with the DTCS/DIRIM shall be served to taxpayers through personal delivery and registered mail with Registered Return Card by the LN Task Force. A Follow-up Letter (Annex “B”) shall be prepared and served to the taxpayer for which no response was received after fifteen (15) days from receipt of the LN.
In the event a taxpayer who has been issued an LN by the LN Task Force refutes the discrepancy, he shall be given an opportunity to reconcile his records with those of the BIR within thirty (30) days from receipt of the LN, to submit documentary proofs in support of his arguments.
If after fifteen (15) days from receipt of Follow-up Letter, no response was received from the taxpayer, or he fails to submit the required documents after filing his protest within the thirty(30)-day period after receipt of the LN, the LN Task Force shall endorse the docket and recommend to the Office of Deputy Commissioner – Operations Group (ODCIR-OG) or to the Office of the Commissioner of Internal Revenue (OCIR) in the absence of the former, thru the Office of the Assistant Commissioner - Assessment Service (OACIRAS) the issuance of an issue-based LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN”. A Notice for Informal Conference together with the LA shall be served to the taxpayer by the LN Task Force. If taxpayer fails to settle his income and value added tax liabilities resulting from LN discrepancy within fifteen (15) days from receipt of Notice for Informal Conference/LA, the LN Task Force shall endorse the docket to ODCIR-OG/OCIR thru OACIR-AS for the issuance of the Preliminary Assessment Notice (PAN)/Final Assessment Notice (FAN) in accordance with the provisions of Revenue Regulations (RR) No. 12-99.
6. LNs which remain unserved due to failure to locate the taxpayers (after exhausting all means to locate a taxpayer as observed in the service of LA/TVN) shall be endorsed by the LN Task Force to the concerned RDO, through the Office of the Regional Director (ORD), for service thereof. The copy of the unserved LN together with the documentary proofs to support the claim of the LN Task Force that the taxpayer cannot be located shall be made as attachments to the endorsement.
The RDO shall exhaust all means to locate the whereabouts of the taxpayer in order to serve the LNs. If served, forward on the following day after receipt of the LN the received copy together with the attachments to the LN Task Force. The RDO, however, shall return to the LN Task Force all LNs which still remain unserved immediately after final determination that the taxpayer cannot be located.
7. For taxpayer issued with an LN who transferred to another investigating office, the concerned office/s shall forward the LN together with the DTCS/DIRIM to AITEID for validation/cancellation and refer to Systems Operations Division (SOD) for regeneration.
8. The deficiency income and value added taxes shall be computed using the formulas prescribed in the attached Computation Sheets for Discrepancy on Sales and/or Purchases [Local and/or Imported] (Annexes “C”, “C-1”, or “C-2”) and the corresponding payment shall be made using BIR Form No. 0611-A. This is in compliance with the “no-contact-audit approach” policy laid down under RMO No. 42-2003, as amended by RMO No. 46-2004, where the concerned RO has no opportunity to examine the records of the taxpayer for purposes of determining his true tax liabilities, but his deficiency tax liabilities are determined using information from third party sources.
9. In case taxpayer files a protest against PAN/FAN and requests for reinvestiga tion/reconsideration, the ODCIR-OG/CIR thru OACIR-AS shall evaluate the protest in accordance with the provisions of RR No. 12-99.
a. If the protest is valid, refer the case to the LN Task Force for appropriate action on the request for reinvestigation.
a.1 The LN Task Force shall act on the protest based on pertinent revenue issuances.
a.2 The report of reinvestigation, whether the taxpayer settles his tax liabilities or not, must be forwarded by the LN Task Force, together with the docket of the case to the OACIR-AS not later than ten (10) days after payment or action on the protest. The OACIR-AS shall conduct review and evaluation of dockets on actions taken on the LNs as to the extent of LN discrepancy utilization/payment.
a.3. After review of the OACIR-AS, the docket shall be forwarded to ODCIR-OG/CIR for approval thereof. b. If the protest, however, is not valid, taxpayer shall be informed in writing that his request for investigation has been denied and the case shall be referred to the appropriate BIR office to effect collection of the deficiency tax(es).
10. Taxpayer shall be entitled to the abatement of interests and penalties provided he pays the deficiency tax(es) within thirty (30) days from receipt of the LN. Any payment of tax liabilities beyond the 30-day period shall be assessed the corresponding interests and penalties. An “Agreement Form” shall be executed by the taxpayer or his duly authorized representative indicating therein the amounts and dates when the deficiency tax(es) shall be paid.
11. Installment payment shall be allowed in cases where the tax liabilities exceeds five hundred thousand pesos (P500,000.00). In this case, a written request for installment payment of the basic tax due plus increments using the Application for Installment Payment (Annex “D”) has to be accomplished. The interest corresponding to the basic tax due per installment shall be computed up to the date of payment as shown in the application. Aforesaid request may be granted by the Head, LN Task Force in accordance with the following:
a. If the amount payable exceeds five hundred thousand pesos (P500,000.00) but not more than three million pesos (P3.0M), payment may be done in two (2) equal monthly installments; or
b. If the amount payable exceeds three million pesos (P3.0M), payment may be done in three (3) equal monthly installments. Any request for deviation from the above-prescribed payment scheme but in no case exceeds six (6) monthly installments shall be subject to the recommendation of the LN Task Force and approval of higher authorities as follows:
a. Over P500,000.00 up to P10.0M . . . . . ACIR-AS
b. Over P10.0M . . . . . . . . . . . . . . . . . . . ... Deputy Commissioner - Operations Group (DCIR-OG)
In case of default of any installment payment, the remaining balance shall become due and demandable immediately without prior notice to taxpayer.
All applications shall be signed by the Recommending Officer and/or Head, LN Task Force, as the case may be. The LN Task Force sha ll keep track of payments of taxpayers with requests for installment payments and indicate the same in the appropriate columns provided in the Monthly Collection and Status Report on Letter Notices for TY ______ (Annex “E”) for submission to OACIR-AS, Attention: AITEID within ten (10) days following the close of each month.
12. The settlement and payment of the deficiency tax(es) under an LN or issue based LA by a taxpayer shall not preclude the Bureau from issuing an LA/TVN covering the comprehensive audit/investigation of his tax liabilities, if warranted. However, any payment of deficiency tax(es) shall be credited against any assessment that may be made by the investigating office pursuant to an LA/TVN provided the discrepancies disclosed by said audit/investigation are of the same nature as the discrepancies reflected in the LN.
13. In all cases, the LN Task Force must forward the LN tax dockets of audit (which contain LN discrepancy findings) to the ODCIR-OG/OCIR through the OACIR-AS within ten (10) days after payment of the deficiency tax(es) for approval thereof. The ODCIR-OG/CIR shall conduct review and evaluation of dockets on actions taken on the LNs as to the extent of LN discrepancy utilization/payment.
14. Revenue Memorandum Circular No. 40-2003 provides that LNs issued to taxpayers can be considered notice of audit/investigation insofar as the amendment of any return covering the period referred to in the LN. Accordingly, a taxpayer is disqualified from amending his return covering the period referred to in the LN upon issuance of the same. Furthermore, CTA Case No. 7093 dated February 22, 2006 states that “LNs issued against a taxpayer in connection with the information of underdeclaration of sales and purchases gathered through Third Party Information Program may be considered as a “notice of audit or investigation” in the absence of evident error or clear abuse of discretion.”
15. The guidelines and procedures in handling LNs as set forth under RMO on “RELIEF”/SLSP System (i.e., RMO No. 30-2003, as amended by RMO Nos. 42-2003, 24-2004, 32-2005 and 21-2006) and RMO on TPM-BOC Data Program (i.e., RMO No. 34-2004, as amended by RMO Nos. 46-2004, 32-2005 and 21-2006), shall continue to remain in force for LNs issued for TY 2005 and prior years by the revenue regions/RDOs.
16. All activities/accomplishments of the LN Task Force relative to this Order shall be monitored online thru the IDP by the OCIR/ODCIR-OG/OACIRAS/ORD/AITEID under the e-Correspondence Monitoring System (eCMS)/Letter Notice Monitoring System (LNMS) based on access rights and privileges granted to those offices.
IV. GUIDELINES AND PROCEDURES
A. Systems Operations Division
1. Activate the processes needed for LN generation covering calendar 2006 based on the discrepancy threshold set by the AITEID as approved by the CIR.
2. Inform, in writing or via e-mail, the AITEID on the generation, via the IDP, of the new batch of 2006 LN packages consisting of the following:
a. List of taxpayers issued LNs sorted by revenue region/RDO;
b. System-generated LNs;
c. DTCS;
d. DIRIM.
3. After the 2006 LN packages are validated by the AITEID, inform, in writing or via e-mail, the ACIR-AS on the deployment via the IDP of the new batch of LN packages.
4. Publish the 2006 LN packages to the LN Task Force channel in the IDP or print the 2006 LN packages if LN Task Force channel in the IDP is not yet available and forward the same to AITEID for deployment to LN Task Force.
5. Receive from AITEID the List of Approved 2006 LNs for cancellation/closure by Assessment Service and reflect the same to the LNMS.
6. Regenerate LNs together with the DTCS/DIRIM of taxpayers who transferred registration.
B. Audit Information Tax Exemption and Incentives Division
1. Spell out the parameters for the issuance and deployment of 2006 LNs based on the policy direction of top management for approval of the CIR.
2. Set the threshold on LN discrepancies before the activation of the processes needed for generation.
3. Acknowledge, in writing or via e-mail, receipt from the Systems Operations Division of information on the generation via the IDP of the new batch of LN packages.
4. Validate the new LN packages before deployment of the same via the IDP.
5. Receive the 2006 LN packages from SOD and effect deployment to the LN Task Force.
6. Receive from LN Task Force and RDOs the LNs of transferred taxpayers for validation and refer to SOD for regeneration.
7. Receive from LN Task Force the LNs recommended for cancellation/closure to LNMS for review and evaluation, and forward the same to ACIR-AS for approval thereof.
8. Receive from LN Task Force Annex “E”.
9. Perform overall monitoring, via the IDP, of LNs issued based on real-time online updates provided by the LN Task Force/RDO and other concerned offices granted access rights and privileges.
10. Provide top management with consolidated reports on LN status and collections as may be required.
C. LN Task Force
1. Acknowledge, in writing or via e-mail, receipt of directive from the ACIR-AS for downloading and printing of the 2006 LN packages from the IDP.
2. Download from the IDP the 2006 LN packages consisting of the following:
a. List of taxpayers issued 2006 LNs sorted by revenue region/RDO;
b. System-generated LNs;
c. DTCS;
d. DIRIM.
3. Print the contents of the 2006 LN packages within three (3) days from downloading of the same or receive from AITEID 2006 LN packages if LN Task Force channel is not yet available in the IDP.
4. The Head of the LN Task Force shall assign the LNs to the ROs for appropriate action, e.g., review, evaluate and validate the discrepancies, and serve them personally to the concerned taxpayers or though registered mail with Registered Return Card, together with the DTCS/DIRIM.
5. Maintain a separate record of all LNs assigned to ROs for accountability. Said record shall contain the following information:
a. LN Number (system-assigned control number);
b. Name of Taxpayer issued LN;
c. TIN of taxpayer;
d. Period Covered;
e. Name of RO assigned to handle the LN;
f. Date of Assignment;
g. Remarks.
6. Refer to AITEID LNs of transferred taxpayers for regeneration.
7. Forward to AITEID LNs recommended for cancellation/closure to LNMS for review and evaluation.
8. Receive from the RDOs the received copies of the LNs served and unserved to taxpayers together with the attachments.
9. Issue a Follow-up Letter (Annex “B”) if the taxpayer fails to respond within fifteen (15) days from receipt of LN.
10. Act on all protests by the taxpayers within the thirty (30)-day period after receipt of the LN.
11. If after fifteen (15) days from receipt of Follow-up Letter, no response was received from the taxpayer or he fails to sub mit the required documents after filing his protest within the thirty (30)-day period after receipt of the LN, prepare issue-based LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN” for signature of DCIR-OG/CIR thru ACIR-AS. Cause the service of Notice for Informal Conference together with approved LA to the taxpayer. If taxpayer fails to settle his income and value added tax liabilities resulting from LN discrepancy within fifteen (15) days from receipt of Notice for Informal Conference/LA, endorse the docket to ODCIR-OG/OCIR thru OACIR-AS for issuance of PAN or FAN, as the case may be, in accordance with RR No. 12-99.
12. If the taxpayer interposes no objection to the discrepancies in the LN and agrees to pay the required taxes within thirty (30) days from date of receipt thereof, collect the basic income and value added taxes without interest and penalties using the formulas prescribed in Annexes “C, “C-1”or “C-2”(Computation Sheets), as the case may be. Require him to execute an “Agreement Form”. If payment will go beyond the 30-day period, collect the total amount due with the corresponding interests and penalties. The payment shall be made using BIR Form No. 0611-A.
13. Receive from taxpayer who refutes the accuracy of the figures in the LN (due to erroneous encoding or due to timing differences) documentary proofs, reconciliation schedules, etc. in support of his arguments within the thirty (30)-day period from receipt of the LN. Evaluate, review and compute the deficiency income and value added taxes based on the corrected/adjusted taxable base plus increments. If there are no documentary proofs or there was incomplete documentary requirements submitted by the taxpayer within the prescribed period in support of his protest, follow the procedures under Number 12 of this Item.
14. Receive from taxpayer Application for Installment Payment (Annex “D”). Evaluate, review and approve the same if it is in accordance with the conditions under 1st paragraph of Item III (11) hereof. However, if there is a deviation from the payment scheme under the same paragraph, prepare recommendation for approval/disapproval of the same by the ACIR-AS if the amount payable is over five hundred thousand pesos (P500,000.00) up to ten million pesos (P10.0M), or by the DCIR-OG if the amount payable is over ten million pesos (P10.0M). The payment shall be made using BIR Form No. 0611-A.
15. Receive dockets from the ODCIR-OG/OCIR thru OACIR-AS to act on protest by taxpayers requesting reinvestigation relative to the LN cases already issued PAN or FAN, as the case may be.
16. Forward to the ODCIR-OG/OCIR through the OACIR-AS tax dockets within ten (10) days after payment of the deficiency tax(es) for approval thereof.
17. Prepare and submit Monthly Collection and Status Report on Letter Notices for TY _______ (Annex “E”) to OACIR-AS, Attention: AITEID, within ten (10) days following the close of each month.
18. Monitor and keep track of payments of taxpayers with approved requests for installment payments. In case of default by taxpayer of any installment payment, collect the balance immediately plus the corresponding interests and penalties without prior notice to taxpayer.
19. Follow, wherever applicable, the procedures prescribed under RMO Nos. 30-2003, 42-2003, 24-2004 and 34-2004, as amended by RMO Nos. 46-2004, 32-2005 and 21-2006, insofar as the verification of the actions on LN discrepancy are concerned.
20. Provide real- time online updates on the status of all LNs via the IDP based on access rights and privileges granted to the LN Task Force.
21. Provide progress reports on LN status and collection as may be required by top management.
D. Revenue Region (Office of the Regional Director)
1. Receive from LN Task Force LNs of taxpayers that cannot be located for appropriate action, i.e., to exhaust all efforts to locate the whereabouts of these taxpayers (e.g., MERALCO, telephone directories, etc.)
2. Refer to the concerned RDO the above-mentioned LNs for appropriate action.
3. Monitor compliance by the RDO, in providing online real- time updates on LN status.
4. Provide online updates on the status of all LNs via the IDP based on the system access rights and privileges granted to the ORD.
E. Revenue District Office
1. Received from the Regional Director the LNs of taxpayers that cannot be located to effect service thereof by exhausting all efforts to locate their whereabouts (e.g., MERALCO, telephone directories, etc.).
2. Forward to LN Task Force LNs already served on the following day after service thereof and return those that remain unserved immediately after final determination that the taxpayer cannot be located.
3. Provide real-time online updates on the status of all LNs referred by and returned to the LN Task Force via the IDP based on access rights and privileges gr anted to the RDO.
F. Assessment Service
1. Receive from AITEID the reviewed and validated LNs recommended for cancellation/closure to LNMS for approval/disapproval.
2. Recommend to the DCIR-OG/CIR the approval of issuance of an LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN”.
3. Recommend to DCIR-OG/CIR the approval of issuance of PAN/FAN in accordance with the provisions of RR No. 12-99 of LN dockets received from LN Task Force after evaluation and review.
4. Receive from LN Task Force LN dockets with reports on recommendations of applications on requests for installment payments and approve/disapprove the same if amount payable is over five hundred thousand pesos (P500,000.00) up to ten million pesos (P10.0M).
5. Forward to ODCIR-OG LN dockets with recommendation for approval/disapproval of Application for Installment Payment if the amount payable is over ten million pesos (P10.0M).
6. Forward tax dockets referred by LN Task Force after review and evaluation thereof to the ODCIR-OG/OCIR for its approval.
7. Provide online updates on the status of all LNs via the IDP based on the system access rights and privileges granted to the AS.
8. Provide progress reports on LN status and collection as may be required by top management.
G. Office of the Deputy Commissioner – Operations Group
1. Receive from the OACIR-AS the LN dockets with reports on recommendations of applications on requests for installment payments and approve/disapprove the same if amount payable is over ten million pesos (P10.0M).
2. Approve and sign LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN” as recommended by the LN Task Force/OACIR-AS.
3. Approve and sign PAN/FAN forwarded by LN Task Force thru OACIRAS in accordance with the provisions of RR No. 12-99.
4. Receive from OACIR-AS tax dockets for final review, evaluation and approval thereof.
5. Monitor compliance by the concerned offices in providing online real-time updates on LN status.
H. Office of the Commissioner
1. Approve and sign LA (in the absence of DCIR-OG) to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN” as recommended by the LN Task Force/OACIR-AS.
2. Approve and sign PAN/FAN (in the absence of DCIR-OG) forwarded by LN Task Force in accordance with the provisions of RR No. 12-99.
3. Receive from OACIR-AS tax dockets (in the absence of DCIR-OG) for review, evaluation and approval thereof.
4. Monitor compliance by the concerned offices in providing online real-time updates on LN status.
V. REPEALING CLAUSE
All other issuances and/or portions thereof inconsistent herewith are hereby repealed, modified or amended accordingly.
VI. EFFECTIVITY
This Order shall take effect immediately.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : All Internal Revenue Officers and Others Concerned
I. OBJECTIVE
This Order is issued to simplify procedures and minimize processing time in handling 2006 Letter Notices generated thru the Reconciliation of Listing for Enforcement System (RELIEF)-Summary List of Sales and Purchases (SLSP) and Third Party Matching-Bureau of Customs (TPM-BOC) Data Program to maximize revenue collection.
II. COVERAGE
This Order shall cover the income and value added tax liabilities of individual and corporate taxpayers who were issued LNs based on the Consolidated RELIEFSLSP and TPM-BOC Data Program covering calendar year 2006.
III. POLICIES
1. As provided for under existing Revenue Memorandum Order (RMO) on RELIEF/ SLSP System (i.e., RMO No. 30-2003, as amended by RMO Nos. 42-2003, 24-2004, 32-2005 and 21-2006) and RMO on TPM-BOC Data Program (i.e., RMO No. 34-2004, as amended by RMO Nos. 46-2004, 32-2005 and 21-2006), taxpayers with discrepancy on their sales and/or purchases (domestic or imported) shall be notified of such findings through the issuance of an LN (Annex “A”).
2. LNs covering calendar year 2006 shall be deployed based on the parameters set by Audit Information, Tax Exemptions and Incentives Division (AITEID) as approved by the Commissioner of Internal Revenue (CIR), together with the Details of Taxpayer’s Customers/Suppliers (DTCS) and/or Details of 2 Importations with Return Information Matching (DIRIM), via the Information Delivery Portal (IDP).
3. There shall be no conversion of 2006 LNs to Letters of Authority/Tax Verification Notices (LAs/TVNs). If there is an on- going audit/investigation pursuant to an LA/TVN for taxable year 2006 in accordance with the audit program under RMO No. 12-2007, the LN shall be separately handled and whatever discrepancy paid for under an LN shall be credited against any assessment that may be made by the investigating office handling an LA/TVN provided the discrepancies disclosed by said audit/investigation are of the same nature as the discrepancies reflected in the LN.
4. The CIR shall create an LN Task Force in the National Office to be composed of Revenue Officers –Assessment (ROs-A) performing supervisory functions in the Revenue District Offices (RDOs) who will be assigned in a concurrent capacity to be covered by a Revenue Special Order (RSO), to handle 2006 LNs. This LN Task Force shall be supervised by the Assessment Service of the National Office.
5. The 2006 LNs together with the DTCS/DIRIM shall be served to taxpayers through personal delivery and registered mail with Registered Return Card by the LN Task Force. A Follow-up Letter (Annex “B”) shall be prepared and served to the taxpayer for which no response was received after fifteen (15) days from receipt of the LN.
In the event a taxpayer who has been issued an LN by the LN Task Force refutes the discrepancy, he shall be given an opportunity to reconcile his records with those of the BIR within thirty (30) days from receipt of the LN, to submit documentary proofs in support of his arguments.
If after fifteen (15) days from receipt of Follow-up Letter, no response was received from the taxpayer, or he fails to submit the required documents after filing his protest within the thirty(30)-day period after receipt of the LN, the LN Task Force shall endorse the docket and recommend to the Office of Deputy Commissioner – Operations Group (ODCIR-OG) or to the Office of the Commissioner of Internal Revenue (OCIR) in the absence of the former, thru the Office of the Assistant Commissioner - Assessment Service (OACIRAS) the issuance of an issue-based LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN”. A Notice for Informal Conference together with the LA shall be served to the taxpayer by the LN Task Force. If taxpayer fails to settle his income and value added tax liabilities resulting from LN discrepancy within fifteen (15) days from receipt of Notice for Informal Conference/LA, the LN Task Force shall endorse the docket to ODCIR-OG/OCIR thru OACIR-AS for the issuance of the Preliminary Assessment Notice (PAN)/Final Assessment Notice (FAN) in accordance with the provisions of Revenue Regulations (RR) No. 12-99.
6. LNs which remain unserved due to failure to locate the taxpayers (after exhausting all means to locate a taxpayer as observed in the service of LA/TVN) shall be endorsed by the LN Task Force to the concerned RDO, through the Office of the Regional Director (ORD), for service thereof. The copy of the unserved LN together with the documentary proofs to support the claim of the LN Task Force that the taxpayer cannot be located shall be made as attachments to the endorsement.
The RDO shall exhaust all means to locate the whereabouts of the taxpayer in order to serve the LNs. If served, forward on the following day after receipt of the LN the received copy together with the attachments to the LN Task Force. The RDO, however, shall return to the LN Task Force all LNs which still remain unserved immediately after final determination that the taxpayer cannot be located.
7. For taxpayer issued with an LN who transferred to another investigating office, the concerned office/s shall forward the LN together with the DTCS/DIRIM to AITEID for validation/cancellation and refer to Systems Operations Division (SOD) for regeneration.
8. The deficiency income and value added taxes shall be computed using the formulas prescribed in the attached Computation Sheets for Discrepancy on Sales and/or Purchases [Local and/or Imported] (Annexes “C”, “C-1”, or “C-2”) and the corresponding payment shall be made using BIR Form No. 0611-A. This is in compliance with the “no-contact-audit approach” policy laid down under RMO No. 42-2003, as amended by RMO No. 46-2004, where the concerned RO has no opportunity to examine the records of the taxpayer for purposes of determining his true tax liabilities, but his deficiency tax liabilities are determined using information from third party sources.
9. In case taxpayer files a protest against PAN/FAN and requests for reinvestiga tion/reconsideration, the ODCIR-OG/CIR thru OACIR-AS shall evaluate the protest in accordance with the provisions of RR No. 12-99.
a. If the protest is valid, refer the case to the LN Task Force for appropriate action on the request for reinvestigation.
a.1 The LN Task Force shall act on the protest based on pertinent revenue issuances.
a.2 The report of reinvestigation, whether the taxpayer settles his tax liabilities or not, must be forwarded by the LN Task Force, together with the docket of the case to the OACIR-AS not later than ten (10) days after payment or action on the protest. The OACIR-AS shall conduct review and evaluation of dockets on actions taken on the LNs as to the extent of LN discrepancy utilization/payment.
a.3. After review of the OACIR-AS, the docket shall be forwarded to ODCIR-OG/CIR for approval thereof. b. If the protest, however, is not valid, taxpayer shall be informed in writing that his request for investigation has been denied and the case shall be referred to the appropriate BIR office to effect collection of the deficiency tax(es).
10. Taxpayer shall be entitled to the abatement of interests and penalties provided he pays the deficiency tax(es) within thirty (30) days from receipt of the LN. Any payment of tax liabilities beyond the 30-day period shall be assessed the corresponding interests and penalties. An “Agreement Form” shall be executed by the taxpayer or his duly authorized representative indicating therein the amounts and dates when the deficiency tax(es) shall be paid.
11. Installment payment shall be allowed in cases where the tax liabilities exceeds five hundred thousand pesos (P500,000.00). In this case, a written request for installment payment of the basic tax due plus increments using the Application for Installment Payment (Annex “D”) has to be accomplished. The interest corresponding to the basic tax due per installment shall be computed up to the date of payment as shown in the application. Aforesaid request may be granted by the Head, LN Task Force in accordance with the following:
a. If the amount payable exceeds five hundred thousand pesos (P500,000.00) but not more than three million pesos (P3.0M), payment may be done in two (2) equal monthly installments; or
b. If the amount payable exceeds three million pesos (P3.0M), payment may be done in three (3) equal monthly installments. Any request for deviation from the above-prescribed payment scheme but in no case exceeds six (6) monthly installments shall be subject to the recommendation of the LN Task Force and approval of higher authorities as follows:
a. Over P500,000.00 up to P10.0M . . . . . ACIR-AS
b. Over P10.0M . . . . . . . . . . . . . . . . . . . ... Deputy Commissioner - Operations Group (DCIR-OG)
In case of default of any installment payment, the remaining balance shall become due and demandable immediately without prior notice to taxpayer.
All applications shall be signed by the Recommending Officer and/or Head, LN Task Force, as the case may be. The LN Task Force sha ll keep track of payments of taxpayers with requests for installment payments and indicate the same in the appropriate columns provided in the Monthly Collection and Status Report on Letter Notices for TY ______ (Annex “E”) for submission to OACIR-AS, Attention: AITEID within ten (10) days following the close of each month.
12. The settlement and payment of the deficiency tax(es) under an LN or issue based LA by a taxpayer shall not preclude the Bureau from issuing an LA/TVN covering the comprehensive audit/investigation of his tax liabilities, if warranted. However, any payment of deficiency tax(es) shall be credited against any assessment that may be made by the investigating office pursuant to an LA/TVN provided the discrepancies disclosed by said audit/investigation are of the same nature as the discrepancies reflected in the LN.
13. In all cases, the LN Task Force must forward the LN tax dockets of audit (which contain LN discrepancy findings) to the ODCIR-OG/OCIR through the OACIR-AS within ten (10) days after payment of the deficiency tax(es) for approval thereof. The ODCIR-OG/CIR shall conduct review and evaluation of dockets on actions taken on the LNs as to the extent of LN discrepancy utilization/payment.
14. Revenue Memorandum Circular No. 40-2003 provides that LNs issued to taxpayers can be considered notice of audit/investigation insofar as the amendment of any return covering the period referred to in the LN. Accordingly, a taxpayer is disqualified from amending his return covering the period referred to in the LN upon issuance of the same. Furthermore, CTA Case No. 7093 dated February 22, 2006 states that “LNs issued against a taxpayer in connection with the information of underdeclaration of sales and purchases gathered through Third Party Information Program may be considered as a “notice of audit or investigation” in the absence of evident error or clear abuse of discretion.”
15. The guidelines and procedures in handling LNs as set forth under RMO on “RELIEF”/SLSP System (i.e., RMO No. 30-2003, as amended by RMO Nos. 42-2003, 24-2004, 32-2005 and 21-2006) and RMO on TPM-BOC Data Program (i.e., RMO No. 34-2004, as amended by RMO Nos. 46-2004, 32-2005 and 21-2006), shall continue to remain in force for LNs issued for TY 2005 and prior years by the revenue regions/RDOs.
16. All activities/accomplishments of the LN Task Force relative to this Order shall be monitored online thru the IDP by the OCIR/ODCIR-OG/OACIRAS/ORD/AITEID under the e-Correspondence Monitoring System (eCMS)/Letter Notice Monitoring System (LNMS) based on access rights and privileges granted to those offices.
IV. GUIDELINES AND PROCEDURES
A. Systems Operations Division
1. Activate the processes needed for LN generation covering calendar 2006 based on the discrepancy threshold set by the AITEID as approved by the CIR.
2. Inform, in writing or via e-mail, the AITEID on the generation, via the IDP, of the new batch of 2006 LN packages consisting of the following:
a. List of taxpayers issued LNs sorted by revenue region/RDO;
b. System-generated LNs;
c. DTCS;
d. DIRIM.
3. After the 2006 LN packages are validated by the AITEID, inform, in writing or via e-mail, the ACIR-AS on the deployment via the IDP of the new batch of LN packages.
4. Publish the 2006 LN packages to the LN Task Force channel in the IDP or print the 2006 LN packages if LN Task Force channel in the IDP is not yet available and forward the same to AITEID for deployment to LN Task Force.
5. Receive from AITEID the List of Approved 2006 LNs for cancellation/closure by Assessment Service and reflect the same to the LNMS.
6. Regenerate LNs together with the DTCS/DIRIM of taxpayers who transferred registration.
B. Audit Information Tax Exemption and Incentives Division
1. Spell out the parameters for the issuance and deployment of 2006 LNs based on the policy direction of top management for approval of the CIR.
2. Set the threshold on LN discrepancies before the activation of the processes needed for generation.
3. Acknowledge, in writing or via e-mail, receipt from the Systems Operations Division of information on the generation via the IDP of the new batch of LN packages.
4. Validate the new LN packages before deployment of the same via the IDP.
5. Receive the 2006 LN packages from SOD and effect deployment to the LN Task Force.
6. Receive from LN Task Force and RDOs the LNs of transferred taxpayers for validation and refer to SOD for regeneration.
7. Receive from LN Task Force the LNs recommended for cancellation/closure to LNMS for review and evaluation, and forward the same to ACIR-AS for approval thereof.
8. Receive from LN Task Force Annex “E”.
9. Perform overall monitoring, via the IDP, of LNs issued based on real-time online updates provided by the LN Task Force/RDO and other concerned offices granted access rights and privileges.
10. Provide top management with consolidated reports on LN status and collections as may be required.
C. LN Task Force
1. Acknowledge, in writing or via e-mail, receipt of directive from the ACIR-AS for downloading and printing of the 2006 LN packages from the IDP.
2. Download from the IDP the 2006 LN packages consisting of the following:
a. List of taxpayers issued 2006 LNs sorted by revenue region/RDO;
b. System-generated LNs;
c. DTCS;
d. DIRIM.
3. Print the contents of the 2006 LN packages within three (3) days from downloading of the same or receive from AITEID 2006 LN packages if LN Task Force channel is not yet available in the IDP.
4. The Head of the LN Task Force shall assign the LNs to the ROs for appropriate action, e.g., review, evaluate and validate the discrepancies, and serve them personally to the concerned taxpayers or though registered mail with Registered Return Card, together with the DTCS/DIRIM.
5. Maintain a separate record of all LNs assigned to ROs for accountability. Said record shall contain the following information:
a. LN Number (system-assigned control number);
b. Name of Taxpayer issued LN;
c. TIN of taxpayer;
d. Period Covered;
e. Name of RO assigned to handle the LN;
f. Date of Assignment;
g. Remarks.
6. Refer to AITEID LNs of transferred taxpayers for regeneration.
7. Forward to AITEID LNs recommended for cancellation/closure to LNMS for review and evaluation.
8. Receive from the RDOs the received copies of the LNs served and unserved to taxpayers together with the attachments.
9. Issue a Follow-up Letter (Annex “B”) if the taxpayer fails to respond within fifteen (15) days from receipt of LN.
10. Act on all protests by the taxpayers within the thirty (30)-day period after receipt of the LN.
11. If after fifteen (15) days from receipt of Follow-up Letter, no response was received from the taxpayer or he fails to sub mit the required documents after filing his protest within the thirty (30)-day period after receipt of the LN, prepare issue-based LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN” for signature of DCIR-OG/CIR thru ACIR-AS. Cause the service of Notice for Informal Conference together with approved LA to the taxpayer. If taxpayer fails to settle his income and value added tax liabilities resulting from LN discrepancy within fifteen (15) days from receipt of Notice for Informal Conference/LA, endorse the docket to ODCIR-OG/OCIR thru OACIR-AS for issuance of PAN or FAN, as the case may be, in accordance with RR No. 12-99.
12. If the taxpayer interposes no objection to the discrepancies in the LN and agrees to pay the required taxes within thirty (30) days from date of receipt thereof, collect the basic income and value added taxes without interest and penalties using the formulas prescribed in Annexes “C, “C-1”or “C-2”(Computation Sheets), as the case may be. Require him to execute an “Agreement Form”. If payment will go beyond the 30-day period, collect the total amount due with the corresponding interests and penalties. The payment shall be made using BIR Form No. 0611-A.
13. Receive from taxpayer who refutes the accuracy of the figures in the LN (due to erroneous encoding or due to timing differences) documentary proofs, reconciliation schedules, etc. in support of his arguments within the thirty (30)-day period from receipt of the LN. Evaluate, review and compute the deficiency income and value added taxes based on the corrected/adjusted taxable base plus increments. If there are no documentary proofs or there was incomplete documentary requirements submitted by the taxpayer within the prescribed period in support of his protest, follow the procedures under Number 12 of this Item.
14. Receive from taxpayer Application for Installment Payment (Annex “D”). Evaluate, review and approve the same if it is in accordance with the conditions under 1st paragraph of Item III (11) hereof. However, if there is a deviation from the payment scheme under the same paragraph, prepare recommendation for approval/disapproval of the same by the ACIR-AS if the amount payable is over five hundred thousand pesos (P500,000.00) up to ten million pesos (P10.0M), or by the DCIR-OG if the amount payable is over ten million pesos (P10.0M). The payment shall be made using BIR Form No. 0611-A.
15. Receive dockets from the ODCIR-OG/OCIR thru OACIR-AS to act on protest by taxpayers requesting reinvestigation relative to the LN cases already issued PAN or FAN, as the case may be.
16. Forward to the ODCIR-OG/OCIR through the OACIR-AS tax dockets within ten (10) days after payment of the deficiency tax(es) for approval thereof.
17. Prepare and submit Monthly Collection and Status Report on Letter Notices for TY _______ (Annex “E”) to OACIR-AS, Attention: AITEID, within ten (10) days following the close of each month.
18. Monitor and keep track of payments of taxpayers with approved requests for installment payments. In case of default by taxpayer of any installment payment, collect the balance immediately plus the corresponding interests and penalties without prior notice to taxpayer.
19. Follow, wherever applicable, the procedures prescribed under RMO Nos. 30-2003, 42-2003, 24-2004 and 34-2004, as amended by RMO Nos. 46-2004, 32-2005 and 21-2006, insofar as the verification of the actions on LN discrepancy are concerned.
20. Provide real- time online updates on the status of all LNs via the IDP based on access rights and privileges granted to the LN Task Force.
21. Provide progress reports on LN status and collection as may be required by top management.
D. Revenue Region (Office of the Regional Director)
1. Receive from LN Task Force LNs of taxpayers that cannot be located for appropriate action, i.e., to exhaust all efforts to locate the whereabouts of these taxpayers (e.g., MERALCO, telephone directories, etc.)
2. Refer to the concerned RDO the above-mentioned LNs for appropriate action.
3. Monitor compliance by the RDO, in providing online real- time updates on LN status.
4. Provide online updates on the status of all LNs via the IDP based on the system access rights and privileges granted to the ORD.
E. Revenue District Office
1. Received from the Regional Director the LNs of taxpayers that cannot be located to effect service thereof by exhausting all efforts to locate their whereabouts (e.g., MERALCO, telephone directories, etc.).
2. Forward to LN Task Force LNs already served on the following day after service thereof and return those that remain unserved immediately after final determination that the taxpayer cannot be located.
3. Provide real-time online updates on the status of all LNs referred by and returned to the LN Task Force via the IDP based on access rights and privileges gr anted to the RDO.
F. Assessment Service
1. Receive from AITEID the reviewed and validated LNs recommended for cancellation/closure to LNMS for approval/disapproval.
2. Recommend to the DCIR-OG/CIR the approval of issuance of an LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN”.
3. Recommend to DCIR-OG/CIR the approval of issuance of PAN/FAN in accordance with the provisions of RR No. 12-99 of LN dockets received from LN Task Force after evaluation and review.
4. Receive from LN Task Force LN dockets with reports on recommendations of applications on requests for installment payments and approve/disapprove the same if amount payable is over five hundred thousand pesos (P500,000.00) up to ten million pesos (P10.0M).
5. Forward to ODCIR-OG LN dockets with recommendation for approval/disapproval of Application for Installment Payment if the amount payable is over ten million pesos (P10.0M).
6. Forward tax dockets referred by LN Task Force after review and evaluation thereof to the ODCIR-OG/OCIR for its approval.
7. Provide online updates on the status of all LNs via the IDP based on the system access rights and privileges granted to the AS.
8. Provide progress reports on LN status and collection as may be required by top management.
G. Office of the Deputy Commissioner – Operations Group
1. Receive from the OACIR-AS the LN dockets with reports on recommendations of applications on requests for installment payments and approve/disapprove the same if amount payable is over ten million pesos (P10.0M).
2. Approve and sign LA to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN” as recommended by the LN Task Force/OACIR-AS.
3. Approve and sign PAN/FAN forwarded by LN Task Force thru OACIRAS in accordance with the provisions of RR No. 12-99.
4. Receive from OACIR-AS tax dockets for final review, evaluation and approval thereof.
5. Monitor compliance by the concerned offices in providing online real-time updates on LN status.
H. Office of the Commissioner
1. Approve and sign LA (in the absence of DCIR-OG) to cover specifically “Income and Value Added Taxes Due to Discrepancy Reflected in the LN” as recommended by the LN Task Force/OACIR-AS.
2. Approve and sign PAN/FAN (in the absence of DCIR-OG) forwarded by LN Task Force in accordance with the provisions of RR No. 12-99.
3. Receive from OACIR-AS tax dockets (in the absence of DCIR-OG) for review, evaluation and approval thereof.
4. Monitor compliance by the concerned offices in providing online real-time updates on LN status.
V. REPEALING CLAUSE
All other issuances and/or portions thereof inconsistent herewith are hereby repealed, modified or amended accordingly.
VI. EFFECTIVITY
This Order shall take effect immediately.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM ORDER NO. 33-2007
SUBJECT : Supplemental Provisions on the Revenue Memorandum Order No. 25- 2007 Restoring the Provisions of Revenue Delegation of Authority Order No. 8-2001 on the Authority to Approve and Sign Various Accountable Forms, Notices, Permits, Reports and Other Documents Processed by the Enforcement Service under the Office of the Deputy Commissioner- Legal and Inspection Group.
TO : All Internal Revenue Officers, Employees and Others Concerned
I. Objective
In order to further expedite the processing of various accountable forms, notices, permits, reports and other documents within the area of jurisdiction of the Enforcement Service under the Legal and Inspection Group, the Assistant Commissioner-Enforcement Service (ACIR-ES) shall be authorized to act on cases, where the Deputy Commissioner for Legal and Inspection Group (DCIRLIG) inhibits himself, by signing/approving documents relevant to the se cases.
II. Supplemental Policy
In cases where the DCIR-LIG inhibits himself from signing any of the abovementioned documents, the ACIR-ES is authorized to sign/approve the same, to expedite action.
III. Repealing Clause
All existing revenue issuances and portions thereof which are inconsistent herewith are hereby repealed or revoked accordingly.
IV. Effectivity
This Order shall take effect immediately.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : All Internal Revenue Officers, Employees and Others Concerned
I. Objective
In order to further expedite the processing of various accountable forms, notices, permits, reports and other documents within the area of jurisdiction of the Enforcement Service under the Legal and Inspection Group, the Assistant Commissioner-Enforcement Service (ACIR-ES) shall be authorized to act on cases, where the Deputy Commissioner for Legal and Inspection Group (DCIRLIG) inhibits himself, by signing/approving documents relevant to the se cases.
II. Supplemental Policy
In cases where the DCIR-LIG inhibits himself from signing any of the abovementioned documents, the ACIR-ES is authorized to sign/approve the same, to expedite action.
III. Repealing Clause
All existing revenue issuances and portions thereof which are inconsistent herewith are hereby repealed or revoked accordingly.
IV. Effectivity
This Order shall take effect immediately.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 74-2007
SUBJECT : Circularizing the Full Text of Unnumbered Memorandum Dated November 12, 2007 Regarding “Table Audit of Pre-need Companies”
TO : All Internal Revenue Officials, Employees and Others Concerned
________________________________________________________________________
For the information and guidance of all internal revenue officials, employees and others concerned, quoted hereunder is the full text of Unnumbered Memorandum dated November 12, 2007 regarding “Table Audit of Pre-need Companies”, as follows:
“MEMORANDUM
TO : Assistant Commissioner / Head Revenue
Executive Assistants of the Large Taxpayers
Service, Regional Directors, Revenue District
Officers and Others Concerned
(Signed)
FROM : LILIAN B. HEFTI
Commissioner
SUBJECT : Table Audit of Pre-need Companies
DATE : November 12, 2007
It has come to the attention of the undersigned that, for purposes of computing Value-Added Tax (VAT), most of the Pre-need Companies are using receipts/contract price net of contribution to the trust fund as their taxable base.
It is hereby clarified that the taxable base of Pre-need Companies for VAT purposes shall be the gross receipts without any deduction. Such contribution is similar or equated to the recorded “Reserve” in the case of insurance companies, whether life or non-life. Reserve is not deductible, for purposes of determining the taxable gross direct premium/writing for non-life insurance companies as well as life insurance companies. The said tax treatments have already been clarified and reiterated under Revenue Regulations (RR) No. 16-2005, as amended.
In view thereof, you are hereby directed to pre-audit the returns of Pre-need Companies to ensure that they are using the correct tax base/gross receipts for purposes of computing the VAT. Companies who will be found to have used incorrect tax base shall immediately be issued Assessment Notice.
Please be guided accordingly.”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : All Internal Revenue Officials, Employees and Others Concerned
________________________________________________________________________
For the information and guidance of all internal revenue officials, employees and others concerned, quoted hereunder is the full text of Unnumbered Memorandum dated November 12, 2007 regarding “Table Audit of Pre-need Companies”, as follows:
“MEMORANDUM
TO : Assistant Commissioner / Head Revenue
Executive Assistants of the Large Taxpayers
Service, Regional Directors, Revenue District
Officers and Others Concerned
(Signed)
FROM : LILIAN B. HEFTI
Commissioner
SUBJECT : Table Audit of Pre-need Companies
DATE : November 12, 2007
It has come to the attention of the undersigned that, for purposes of computing Value-Added Tax (VAT), most of the Pre-need Companies are using receipts/contract price net of contribution to the trust fund as their taxable base.
It is hereby clarified that the taxable base of Pre-need Companies for VAT purposes shall be the gross receipts without any deduction. Such contribution is similar or equated to the recorded “Reserve” in the case of insurance companies, whether life or non-life. Reserve is not deductible, for purposes of determining the taxable gross direct premium/writing for non-life insurance companies as well as life insurance companies. The said tax treatments have already been clarified and reiterated under Revenue Regulations (RR) No. 16-2005, as amended.
In view thereof, you are hereby directed to pre-audit the returns of Pre-need Companies to ensure that they are using the correct tax base/gross receipts for purposes of computing the VAT. Companies who will be found to have used incorrect tax base shall immediately be issued Assessment Notice.
Please be guided accordingly.”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 73-2007
SUBJECT : Re-issuing the Guidelines on the Proper Treatment of Block Sale of Shares of Stock Disposed of in the Stock Exchange
TO : The Philippine Stock Exchange, Internal Revenue Officers and Employees and All Others Concerned
I. Background
The National Internal Revenue Code has traditionally made a distinction between shares of stock that are listed and traded in the Stock Exchange from those that are not. Briefly, under Section 127 of the Tax Code of 1997, sale, barter, exchange or other disposition of shares of stock other than the sale by a dealer in securities, are taxed at the rate of 1/2 of 1% of the gross selling price or gross value in money provided the shares are listed and traded through the local stock exchange; while on the other hand, for shares that are not disposed of through the local stock exchange, a final tax at either 5% or 10% is imposed on the net capital gains under Section 24(C); Section 25(A)(3); Section 25(B); Section 27(D)(2); Section 28(A)(7)(c) and Section 28(B)(5)(c), all of the Tax Code of 1997, as amended.
The fundamental principle underlying this preferential treatment was and still is the national goal of promoting and hastening the development of the domestic capital market by means of enticing and stimulating the general public to actively take part in the trading in the local stock exchange.
II. Statement of Policy
In order to keep-up with modern developments and more importantly give emphasis on the economic as well as substantial aspect rather than on the formal portion of the transaction, sale of shares of stock where the sale is prearranged or the buyer/s is predetermined is taxable under either Section 24(C); Section 25(A)(3); Section 25(B); Section 27(D)(2); Section 28(A)(7)(c) and Section 28(B)(5)(c) notwithstanding the fact that the transaction passed through the Exchange or the said facility was used.
Accordingly, any transaction, which in effect excludes the public by any means from taking part in the trading, shall be taxed under the aforementioned relevant provisions as enumerated in the preceding paragraph.
This Circular expressly covers but is not limited to cases of block sale. A block sale as defined in the Implementing Rules and Regulations of the Securities Regulation Code is a matched trade that does not go through the automated order matching system of an Exchange trading system but instead has been prearranged by and among the Broker Dealer's clients and is then entered as a done deal directly into the trading system.
All internal revenue issuances which are inconsistent herewith, are hereby repealed, modified, and/or amended accordingly.
All internal revenue officers and others concerned are enjoined to give this Circulars wide as publicity as possible.
This Circular shall take effect immediately.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : The Philippine Stock Exchange, Internal Revenue Officers and Employees and All Others Concerned
I. Background
The National Internal Revenue Code has traditionally made a distinction between shares of stock that are listed and traded in the Stock Exchange from those that are not. Briefly, under Section 127 of the Tax Code of 1997, sale, barter, exchange or other disposition of shares of stock other than the sale by a dealer in securities, are taxed at the rate of 1/2 of 1% of the gross selling price or gross value in money provided the shares are listed and traded through the local stock exchange; while on the other hand, for shares that are not disposed of through the local stock exchange, a final tax at either 5% or 10% is imposed on the net capital gains under Section 24(C); Section 25(A)(3); Section 25(B); Section 27(D)(2); Section 28(A)(7)(c) and Section 28(B)(5)(c), all of the Tax Code of 1997, as amended.
The fundamental principle underlying this preferential treatment was and still is the national goal of promoting and hastening the development of the domestic capital market by means of enticing and stimulating the general public to actively take part in the trading in the local stock exchange.
II. Statement of Policy
In order to keep-up with modern developments and more importantly give emphasis on the economic as well as substantial aspect rather than on the formal portion of the transaction, sale of shares of stock where the sale is prearranged or the buyer/s is predetermined is taxable under either Section 24(C); Section 25(A)(3); Section 25(B); Section 27(D)(2); Section 28(A)(7)(c) and Section 28(B)(5)(c) notwithstanding the fact that the transaction passed through the Exchange or the said facility was used.
Accordingly, any transaction, which in effect excludes the public by any means from taking part in the trading, shall be taxed under the aforementioned relevant provisions as enumerated in the preceding paragraph.
This Circular expressly covers but is not limited to cases of block sale. A block sale as defined in the Implementing Rules and Regulations of the Securities Regulation Code is a matched trade that does not go through the automated order matching system of an Exchange trading system but instead has been prearranged by and among the Broker Dealer's clients and is then entered as a done deal directly into the trading system.
All internal revenue issuances which are inconsistent herewith, are hereby repealed, modified, and/or amended accordingly.
All internal revenue officers and others concerned are enjoined to give this Circulars wide as publicity as possible.
This Circular shall take effect immediately.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 72-2007
SUBJECT : Circularizing the Full Text of Administrative Order No. 186, Directing the City Assessor, Municipal Assessor and Provincial Assessor to An notate in all Tax Declarations the Serial Number of the Certificate Authorizing Registration Issued by the Bureau of Internal Revenue.
TO : All Internal Revenue Officials, Employees and Others Concerned.
___________________________________________________________________
For the information and guidance of all concerned, quoted hereunder is the full text of Administrative Order No. 186 issued by the President of the Philippines on July 31, 2007.
“ADMINISTRATIVE ORDER NO. 186 DIRECTING THE CITY ASSESSOR, MUNICIPAL ASSESSOR AND PROVINCIAL ASSESSOR TO ANNOTATE IN ALL TAX DECLARATIONS THE SERIAL NUMBER OF THE CERTIFICATE AUTHORIZING REGISTRATION ISSUED BY THE BUREAU OF INTERNAL REVENUE
WHEREAS, tax collection is always among the top priority measures of the State;
WHEREAS, tax collection in the transfer of real property, due to brisk turnover, is an important source of funding for the government;
WHEREAS, prior to registering any deed and securing a Tax Declaration for registered and unregistered real properties, the Tax Reform Act of 1997 requires the payment of transfer taxes with the Bureau of Internal Revenue (BIR), and tax clearance is manifested by a Certificate Authorizing Registration with a unique serial number;
WHEREAS, Memorandum Order No. 233, dated December 11, 2006, was issued directing the Land Registration Authority, through the concerned Register of Deeds, to annotate in the Transfer Certificate of Title the serial number of the Certificate Authorizing Registra tion (CAR) issued by the Bureau of Internal Revenue;
WHEREAS, the City, Municipal and Provincial Assessors are the ones cancelling, issuing and revising a Tax Declaration both for registered and unregistered real properties;
WHEREAS, annotating the CAR serial number, not only in the Transfer Certificate of Title, but also in the Tax Declaration, will provide an effective measure to verify and back-check tax payments and ensure that transfer tax payments are paid as a condition precedent to the issuance of a new Tax Declaration by the Local Assessors;
WHEREAS, under the Local Government Code of 1991, the Local Assessors are mandated to establish a systematic method of real property assessment and to ensure that all laws and policies governing the apprais al and assessment of real properties for taxation purposes are properly executed;
WHEREAS, the President, under the Constitution, shall exercise general supervision over local government units to ensure that their acts are within the scope of their prescribed powers and functions.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order:
SECTION 1. Additional Annotation Requirement. – The City, Municipal and Provincial Assessors are hereby directed to annotate in all Tax Declarations the serial number of the Certificate Authorizing Registration (CAR) issued by the BIR, the date of its issuance, the Revenue District Office Number of the district office that issued the CAR, the name of the Revenue District Officer who signed the CAR and the taxes paid on each transfer of ownership. This shall be indispensable requirement prior to the issuance of a Tax Declaration by the respective Municipal, City and/or Provincial Assessors.
In case of revaluation and/or changes made in the Tax Declaration, all previous information contained in the previous tax declaration must be annotated at the back of the new tax declaration, including the information contained in the previous CAR.
SECTION 2. Objectives. – This additional annotation requirement shall allow the verification and back-checking of tax payments and shall ensure that transfer tax payments are paid as a precondition to the issuance of a new Tax Declaration.
SECTION 3. Scope. – The additional annotation requirement shall cover all transfers of registered real properties, as well as, unregistered real properties securing a copy of a new tax declaration.
SECTION 4. Announcement to the Public. – The BIR shall post in the BIR website the monthly list of CARs issued, with mention of the CAR number; date of issue; name and number of issuing Revenue District Office; name of the signing Revenue District Officer; name of transferor; name of transferee; land area; land classification; amount of tax; and tax type paid.
SECTION 5. Administrative Penalty. – Failure on the part of the City, Municipal and Provincial Assessors to comply with the directives under this Administrative Order shall make them liable for administrative sanction pursuant to existing laws, rules and regulations.
SECTION 6. Repealing Clause. – All executive issuance, rules and regulations or parts thereof, which are inconsistent with this Administrative Order, are hereby repealed or modified accordingly.
SECTION 7. Effectivity. – This Administrative Order shall take effect fifteen (15) days after its publication in a national newspaper of general circulation.
DONE in the City of Manila, on this 31st day of July in the year of Our Lord, Two Thousand and Seven.
(Original Signed)
GLORIA MACAPAGAL-ARROYO
By the President:
(Original Signed)
EDUARDO R. ERMITA
Executive Secretary”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : All Internal Revenue Officials, Employees and Others Concerned.
___________________________________________________________________
For the information and guidance of all concerned, quoted hereunder is the full text of Administrative Order No. 186 issued by the President of the Philippines on July 31, 2007.
“ADMINISTRATIVE ORDER NO. 186 DIRECTING THE CITY ASSESSOR, MUNICIPAL ASSESSOR AND PROVINCIAL ASSESSOR TO ANNOTATE IN ALL TAX DECLARATIONS THE SERIAL NUMBER OF THE CERTIFICATE AUTHORIZING REGISTRATION ISSUED BY THE BUREAU OF INTERNAL REVENUE
WHEREAS, tax collection is always among the top priority measures of the State;
WHEREAS, tax collection in the transfer of real property, due to brisk turnover, is an important source of funding for the government;
WHEREAS, prior to registering any deed and securing a Tax Declaration for registered and unregistered real properties, the Tax Reform Act of 1997 requires the payment of transfer taxes with the Bureau of Internal Revenue (BIR), and tax clearance is manifested by a Certificate Authorizing Registration with a unique serial number;
WHEREAS, Memorandum Order No. 233, dated December 11, 2006, was issued directing the Land Registration Authority, through the concerned Register of Deeds, to annotate in the Transfer Certificate of Title the serial number of the Certificate Authorizing Registra tion (CAR) issued by the Bureau of Internal Revenue;
WHEREAS, the City, Municipal and Provincial Assessors are the ones cancelling, issuing and revising a Tax Declaration both for registered and unregistered real properties;
WHEREAS, annotating the CAR serial number, not only in the Transfer Certificate of Title, but also in the Tax Declaration, will provide an effective measure to verify and back-check tax payments and ensure that transfer tax payments are paid as a condition precedent to the issuance of a new Tax Declaration by the Local Assessors;
WHEREAS, under the Local Government Code of 1991, the Local Assessors are mandated to establish a systematic method of real property assessment and to ensure that all laws and policies governing the apprais al and assessment of real properties for taxation purposes are properly executed;
WHEREAS, the President, under the Constitution, shall exercise general supervision over local government units to ensure that their acts are within the scope of their prescribed powers and functions.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order:
SECTION 1. Additional Annotation Requirement. – The City, Municipal and Provincial Assessors are hereby directed to annotate in all Tax Declarations the serial number of the Certificate Authorizing Registration (CAR) issued by the BIR, the date of its issuance, the Revenue District Office Number of the district office that issued the CAR, the name of the Revenue District Officer who signed the CAR and the taxes paid on each transfer of ownership. This shall be indispensable requirement prior to the issuance of a Tax Declaration by the respective Municipal, City and/or Provincial Assessors.
In case of revaluation and/or changes made in the Tax Declaration, all previous information contained in the previous tax declaration must be annotated at the back of the new tax declaration, including the information contained in the previous CAR.
SECTION 2. Objectives. – This additional annotation requirement shall allow the verification and back-checking of tax payments and shall ensure that transfer tax payments are paid as a precondition to the issuance of a new Tax Declaration.
SECTION 3. Scope. – The additional annotation requirement shall cover all transfers of registered real properties, as well as, unregistered real properties securing a copy of a new tax declaration.
SECTION 4. Announcement to the Public. – The BIR shall post in the BIR website the monthly list of CARs issued, with mention of the CAR number; date of issue; name and number of issuing Revenue District Office; name of the signing Revenue District Officer; name of transferor; name of transferee; land area; land classification; amount of tax; and tax type paid.
SECTION 5. Administrative Penalty. – Failure on the part of the City, Municipal and Provincial Assessors to comply with the directives under this Administrative Order shall make them liable for administrative sanction pursuant to existing laws, rules and regulations.
SECTION 6. Repealing Clause. – All executive issuance, rules and regulations or parts thereof, which are inconsistent with this Administrative Order, are hereby repealed or modified accordingly.
SECTION 7. Effectivity. – This Administrative Order shall take effect fifteen (15) days after its publication in a national newspaper of general circulation.
DONE in the City of Manila, on this 31st day of July in the year of Our Lord, Two Thousand and Seven.
(Original Signed)
GLORIA MACAPAGAL-ARROYO
By the President:
(Original Signed)
EDUARDO R. ERMITA
Executive Secretary”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 71-2007
SUBJECT : Circularizing the Full Text of Executive Order No. 646, on the Accessibility of Information on Taxpayers Between the Bureau of Internal Revenue and the Local Government Units for Tax Collection Purposes.
TO : All Internal Revenue Officials, Employees and Others Concerned.
For the information and guidance of all concerned, quoted hereunder is the full text of Executive Order No. 646 issued by the President of the Philippines on August 3, 2007.
“Executive Order No. 646
ACCESSIBILITY OF INFORMATION ON TAXPAYERS BETWEEN THE BUREAU OF INTERNAL REVENUE AND THE LOCAL GOVERNMENT UNITS FOR TAX COLLECTION PURPOSES
WHEREAS, information on taxpayers is vital to the effective collection of taxes by both the national government and the local government units;
WHEREAS, the Bureau of Internal Revenue (BIR) and the Local Government Units (LGUs) can help each other in their collection efforts through accessibility of information that they have on record as regards their respective taxpayers;
WHEREAS, in order to ascertain the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, Section 5 (B) of the National Internal Revenue Code of 1997 (NIRC) empowers the Commissioner of Internal Revenue to obtain on a regular basis from, among others, any office or officer of the local governments any information such as, but not limited to, costs and volume of production, receipts or sales, and gross income of taxpayers;
WHEREAS, Section 270 of the NIRC penalizes any BIR officer or employee who divulges information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties;
WHEREAS, as an exception to Section 270 of the NIRC, Section 171 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, provides that records of the revenue district office of the BIR shall be made available to the local treasurer, his deputy or duly authorized representative for the purpose of ascertaining, assessing , and collecting the correct amount of local taxes, fees or charges.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order:
Section 1. LGUs’ Access to Records/Information. - In order to ascertain, assess, and collect the correct amount of local taxes, fees or charges, the BIR records pertaining to any person, partnership, corporation or association subject to local taxes, fees, and charges shall be made available to the local treasurer, his deputy or duly authorized representative.
Section 2. BIRs’ Access to Records/Information. - For the purpose of ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the LGUs, upon proper request of the Commissioner of Internal Revenue or his duly authorized representative, shall provide the BIR with any information such as, but not limited to, costs and volume of production, receipts or sales, and gross incomes of taxpayers.
Section 3. Utilization of Records/Information. - The LGUs’ access to records of, or information provided for by, BIR and vice versa shall be utilized for the aforementioned purposes only, and shall not be used for any other purpose, or disclosed to unauthorized persons.
Section 4. Guidelines. - The Department of Finance shall prepare and issue the necessary guidelines for the effective implementation of this Executive Order, with due regard to the security of taxpayers’ information.
Section 5. Administrative Penalty. - Failure on the part of the BIR and the LGUs to comply with the directives under this Executive Order shall make them liable for administrative sanction pursuant to existing laws, rules and regulations.
Section 6. Repealing Clause. - If any provision of this Executive Order is declared invalid, the remainder thereof shall not be affected thereby.
Section 7. Separability Clause. – All laws, decrees, and orders, or parts thereof, inconsistent therewith are deemed repealed or modified accordingly.
Section 8. Effectivity. – This Executive Order shall take effect immediately.
DONE in the City of Manila , this 3rd day of August in the year of Our Lord, Two Thousand and Seven.
(Original Signed)
GLORIA MACAPAGAL-ARROYO
By the President:
(Original Signed)
EDUARDO R. ERMITA
Executive Secretary”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : All Internal Revenue Officials, Employees and Others Concerned.
For the information and guidance of all concerned, quoted hereunder is the full text of Executive Order No. 646 issued by the President of the Philippines on August 3, 2007.
“Executive Order No. 646
ACCESSIBILITY OF INFORMATION ON TAXPAYERS BETWEEN THE BUREAU OF INTERNAL REVENUE AND THE LOCAL GOVERNMENT UNITS FOR TAX COLLECTION PURPOSES
WHEREAS, information on taxpayers is vital to the effective collection of taxes by both the national government and the local government units;
WHEREAS, the Bureau of Internal Revenue (BIR) and the Local Government Units (LGUs) can help each other in their collection efforts through accessibility of information that they have on record as regards their respective taxpayers;
WHEREAS, in order to ascertain the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, Section 5 (B) of the National Internal Revenue Code of 1997 (NIRC) empowers the Commissioner of Internal Revenue to obtain on a regular basis from, among others, any office or officer of the local governments any information such as, but not limited to, costs and volume of production, receipts or sales, and gross income of taxpayers;
WHEREAS, Section 270 of the NIRC penalizes any BIR officer or employee who divulges information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties;
WHEREAS, as an exception to Section 270 of the NIRC, Section 171 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, provides that records of the revenue district office of the BIR shall be made available to the local treasurer, his deputy or duly authorized representative for the purpose of ascertaining, assessing , and collecting the correct amount of local taxes, fees or charges.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order:
Section 1. LGUs’ Access to Records/Information. - In order to ascertain, assess, and collect the correct amount of local taxes, fees or charges, the BIR records pertaining to any person, partnership, corporation or association subject to local taxes, fees, and charges shall be made available to the local treasurer, his deputy or duly authorized representative.
Section 2. BIRs’ Access to Records/Information. - For the purpose of ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the LGUs, upon proper request of the Commissioner of Internal Revenue or his duly authorized representative, shall provide the BIR with any information such as, but not limited to, costs and volume of production, receipts or sales, and gross incomes of taxpayers.
Section 3. Utilization of Records/Information. - The LGUs’ access to records of, or information provided for by, BIR and vice versa shall be utilized for the aforementioned purposes only, and shall not be used for any other purpose, or disclosed to unauthorized persons.
Section 4. Guidelines. - The Department of Finance shall prepare and issue the necessary guidelines for the effective implementation of this Executive Order, with due regard to the security of taxpayers’ information.
Section 5. Administrative Penalty. - Failure on the part of the BIR and the LGUs to comply with the directives under this Executive Order shall make them liable for administrative sanction pursuant to existing laws, rules and regulations.
Section 6. Repealing Clause. - If any provision of this Executive Order is declared invalid, the remainder thereof shall not be affected thereby.
Section 7. Separability Clause. – All laws, decrees, and orders, or parts thereof, inconsistent therewith are deemed repealed or modified accordingly.
Section 8. Effectivity. – This Executive Order shall take effect immediately.
DONE in the City of Manila , this 3rd day of August in the year of Our Lord, Two Thousand and Seven.
(Original Signed)
GLORIA MACAPAGAL-ARROYO
By the President:
(Original Signed)
EDUARDO R. ERMITA
Executive Secretary”
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 70-2007
Subject : Clarification on the Proper Treatment of Cases Under Administrative or Judicial Protest for Amnesty Tax Purposes.
To : All Internal Revenue Officials, Employees and Others Concerned.
With the issuance of Republic Act No. 9480 or the Tax Amnesty Law, there are so many queries as to whether cases under administrative protest or judicial protest which involve issues which were previously decided by the court with finality are still covered by the benefits under the said Amnesty Law.
To clarify these concerns, it is hereby enunciated that these cases are no longer covered by said amnesty law considering that the issues have already been ruled by the Supreme Court with finality and has been applied to other cases under similar circumstances. Article 6, Section 28 of the Philippine Constitution provides that “The rule of taxation shall be uniform and equitable”. Thus, persons, properties and events similarly situated should be treated alike. Since there is already a final resolution to the issue that has been applied to at least one instance, the same treatment should be accorded to all other instances similarly situated.
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
To : All Internal Revenue Officials, Employees and Others Concerned.
With the issuance of Republic Act No. 9480 or the Tax Amnesty Law, there are so many queries as to whether cases under administrative protest or judicial protest which involve issues which were previously decided by the court with finality are still covered by the benefits under the said Amnesty Law.
To clarify these concerns, it is hereby enunciated that these cases are no longer covered by said amnesty law considering that the issues have already been ruled by the Supreme Court with finality and has been applied to other cases under similar circumstances. Article 6, Section 28 of the Philippine Constitution provides that “The rule of taxation shall be uniform and equitable”. Thus, persons, properties and events similarly situated should be treated alike. Since there is already a final resolution to the issue that has been applied to at least one instance, the same treatment should be accorded to all other instances similarly situated.
All concerned are hereby enjoined to be guided accordingly and give this circular a wide publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
REVENUE MEMORANDUM CIRCULAR NO. 69 - 2007
SUBJECT : Clarification of Issues Concerning The Tax Amnesty Program Under Republic Act No. 9480 as Implemented by Department Order No. 29-07.
TO : All Internal Revenue Officers and Others Concerned.
Republic Act No. 9480 (RA 9480) entitled “An Act Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes Imposed by the National Government for Taxable Year 2005 and Prior Years”, became effective on June 16, 2007. In order to implement the provisions of the said Act, Department of Finance has issued Department Order No. 29-07 (DO 29-07) prescribing the rules and regulations for the availment of the tax amnesty granted under said law.
For the purpose of clarifying certain issues relative to the availment thereof, presented hereunder, in question and answer format, are the corresponding resolutions on some of the recurring questions raised during the fora and symposia held with the private sector on the matter.
Q-1 What type of taxes and what taxable period/s are covered by the Tax Amnesty Program under RA 9480 as implemented by DO 29-07?
A-1 The Tax Amnesty Program (TAP) covers all national internal revenue taxes such as income tax, estate tax, donor’s tax and capital gains tax, value added tax, other percentage taxes, excise taxes and documentary stamp taxes, except withholding taxes and taxes passed-on and already collected from the customers for remittance to the BIR, these taxes/funds being considered as funds held in trust for the government. Moreover, the time-honored doctrine that “No person shall unjustly enrich himself at the expense of another” should always be observed.
In case of donor’s tax and capital gains tax, only cases that have underdeclarations/undervaluations and were already issued with Certificate Authorizing Registration (CAR) by the BIR are covered. The period covered is Taxable Year 2005 and prior years for the abovementioned national internal revenue taxes, with or without assessments duly issued therefore, that have remained unpaid as of December 31, 2005.
For purposes of complying with the provisions of the Tax Amnesty Law, Taxable Year 2005 shall include all taxable years which end in any month of the year 2005, whether calendar year or fiscal year. This means that for fiscal year basis taxpayers, the Balance Sheet filed as of the end of any month in 2005 except December, which is the taxpayer’s fiscal year end, shall be considered as a Balance Sheet filed as of year end of 2005 which shall be the basis in determining any increase in networth, by comparing it with the amended Balance Sheet as of the same end period while for calendar year basis taxpayers, the increase in networth shall be reckoned from the figures reflected in the Balance Sheet filed as of December 31, 2005 by comparing the original version with the amended version.
Q-2 Who can avail of the tax amnesty?
A-2
a. Individuals, whether resident or non-resident citizens, or resident or nonresident aliens;
b. Estates and trusts;
c. Corporations;
d. Cooperatives and tax exempt entities that have become taxable as of December 31, 2005;
e. Other juridical entities, including partnerships
In the case of an individual who is at the same time an executor or administrator of the estate of a deceased taxpayer, he may avail of the amnesty for himself or for the estate or both. In the same manner that a trustee of a taxable trust may opt to avail of the tax amnesty for himself or that for the trust or for both. One Amnesty Tax Return shall be filed for every taxpayer availing of the program.
Q-3 Are cases subject of criminal complaint filed with the DOJ still covered by the Tax Amnesty?
A-3 Yes, except cases filed under the RUN AFTER TAX EVADER (RATE) Program of the BIR and other cases involving tax evasion initiated and instituted with the approval of the Commissioner of Internal Revenue or his authorized representatives, pursuant to Section 220 of the National Internal Revenue Code of 1997, as amended.
Q-4 Does availment of the TAP have an effect on assessments against the taxpayer/availer where such assessments have become final and executory prior to the said availments?
A-4 No. Amnesty availment will not have an effect on assessments against said taxpayer where the said assessments have become final and executory prior to the amnesty availment considering that these assessments are already accounts receivable of the BIR or assets of the government.
Q-5 What are the benefits and privileges accorded to persons or entities availing of the tax amnesty under RA 9480?
A-5
a. Immunity from the payment of taxes as well as additions thereto and the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years.
b. The taxpayer’s Tax Amnesty Return and the Statement of Asset, Liabilities and Networth (SALN) as of December 31, 2005 shall not be admissible as evidence in all proceedings that pertain to taxable year 2005 and prior years, insofar as such proceedings relate to internal revenue taxes, before judicial, quasi- judicial or administrative bodies in which he is defendant or respondent except for the purpose of ascertaining the networth beginning January 1, 2006. The same shall not be examined, inquired or looked into by any person or government office. However, the taxpayer may use this amnesty availment as a defense, whenever appropriate, on cases brought against him.
c. The books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined by the BIR. However, the Commissioner of Internal Revenue or his authorized representative may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for any tax refund, tax credit (other than refund or credit of taxes withheld on wages), tax incentives and/or exemptions under existing laws, whether these cases are pending with the Bureau of Internal Revenue, One Stop Shop of the Dept. of Finance, Bureau of Custom and with any Court, as well as looking at taxpayer’s records and books to check tax liabilities of other taxpayers under its access power to third parties.
Q-6 Are the benefits and privileges accorded by the tax amnesty law absolute?
A-6 No. The benefits and privileges accorded by the tax amnesty law shall not apply under the following instances:
a. where the person failed to file a SALN and the Tax Amnesty Return, or;
b. where the amount of networth as of December 31, 2005 or as of end of fiscal year of any month in year 2005, whichever is applicable, is proven to be understated to the extent of thirty percent (30%) or more in accordance with the provisions of Section 4 of RA 9480 and Section 9, Rule IV of Department Order No. 29-07.
Q-7 Section 4 of RA 9480 and Section 9, Rule IV of DO No. 29-07 provide for the presumption of correctness of SALN. What does this mean?
A-7 This means that SALN as of taxable year 2005 (calendar or fiscal) filed by the taxpayer pursuant to this tax amnesty program shall be presumed to represent the true and correct networth of said taxpayer as of such period.
Q-8 What are the instances when the presumption of correctness would not apply?
A-8 The presumption of correctness of SALN shall not apply in the following cases:
a. Where the amount of declared networth is understated to the extent of thirty percent (30%) or more as may be established in the proceedings initiated within one (1) year following the date of filing of the Tax Amnesty Return and the SALN, by or at the instance of parties other than the BIR or its agents, as when any person, entity or government agency informs the BIR, with sufficient evidence, that the amount of the declared networth is understated to the extent of thirty percent (30%) or more.
b. When the findings of or admission in congressional hearings or proceedings in administrative agencies of the government and in courts, prove that there is at least thirty percent (30%) underdeclaration of networth.
Q-9 What is the effective period within which qualified taxpayers may avail of the tax amnesty?
A-9 Rule III Section 6.4 of Department Order No. 29-07 provides for the filing of the tax amnesty return together with the SALN and the payment of the tax amnesty within six (6) months from the effectivity of said Order. The said Order became effective last September 6, 2007. Thus, qualified taxpayers have until March 6, 2008 to avail of the said tax amnesty program.
Q-10 What is the basis of computing the tax amnesty and what are the tax amnesty rates prescribed therefor?
A-10
a. For those qualified taxpayers who have no previously filed statements of assets and liabilities/balance sheet as of December 31, 2005, the tax amnesty payment shall be computed based on higher amount between the five percent (5%) of the networth as of December 31, 2005 (including fiscal year ending in any month of 2005) as declared in the SALN and the minimum amnesty payments as presented in the following schedule of tax amnesty computation:
a.1 Individuals (whether resident or nonresident citizens, including resident and nonresident aliens), Estates and Trusts - 5% of networth or P50,000, whichever is higher
a.2 Corporations
a.2.1 With subscribed capital of above P50M - 5% of networth or P500,000, whichever is higher
a.2.2 With subscribed capital of above P20M up to P50 M - 5% of networth or P250,000, whichever is higher
a.2.3 With subscribed capital of P5M up to P20M - 5% of networth or P100,000, whichever is higher
a.2.2 With subscribed capital of below P5M 5% of networth or P25,000, whichever is higher
a.3 Other juridical entities including partnerships but not limited to cooperatives and foundations that have become taxable as of December 31, 2005 - 5% of networth or P50,000, whichever is higher
Illustration:
The last time that Mr. X filed his Statement of Assets and Liabilities was in Year 2003 where he declared his networth to be P4,000,000. In Year 2005, his networth amounted to P10,000,000. If Mr. X desires to avail of the tax amnesty, the basis of the five percent (5%) tax amnesty rate shall be the entire networth of P10,000,000, which therefore amounts to P500,000 (P10,000,000 times 5%) and not on the net increase in the networth of P6,000,000 (P10,000,000 minus P4,000,000) which is the difference between the last declared networth in Year 2003 and the declared networth in Year 2005.
As an individual availing of the tax amnesty, his tax amnesty liability therefore amounts to P500,000 which is the amount higher than the minimum tax amnesty payment of P50,000 prescribed for individuals.
b. For those qualified taxpayers who have filed with BIR’s authorized agents their SALN/balance sheet together with their income tax returns for taxable year 2005 and who desire to avail of the tax amnesty, they shall amend their previously filed statements by including still undeclared assets and/or liabilities and pay an amnesty tax equal to five percent (5%) based on the resulting increase in the networth or the minimum amount prescribed by the Tax Amnesty Law for each category of taxpayer, whichever is higher. (Refer to the schedule of minimum payments in the table above).
Q-11 In the filing of the Statement of Assets, Liabilities and Networth (SALN) as of Taxable Year 2005 pursuant to RA 9480, what should such statement contain?
A-11 The SALN should contain the following:
a. Assets within or without the Philippines (in the case of resident and non-resident citizens and domestic corporations) or assets within the Philippines (in the case of resident and non-resident foreign corporations, resident and non-resident aliens), whether real or personal, tangible or intangible, whether or not used in trade or business:
a.1 Real properties shall be accompanied by a statement of the following information:
i. TCT/OCT/CCT Number;
ii. Tax Declaration Number;
iii. Classification;
iv. Description;
v. Exact Location;
vi. Measurement (in square meter); and
vii. Value
a.2 Personal properties other than money (e.g. automobiles, shares of stock, investments, etc.), shall state the following:
i. Quantity;
ii. Kind of asset;
iii. Description (e.g. Certificate of Registration, Machine Number); and
iv. Value
a.3 Assets denominated in foreign currency converted into the corresponding Philippine currency at the rate of exchange prevailing as of Balance Sheet date;
a.4 Cash on hand and in bank in peso as of Balance Sheet date as well as cash on hand and in bank in foreign currency converted to peso at the rate of exchange prevailing as of Balance Sheet date.
b. All existing liabilities which are legitimate and enforceable, secured or unsecured, whether or not incurred in trade or business, disclosing or indicating clearly the name and address of the creditor and the amount of the corresponding liability as of SALN date.
c. The total networth of the taxpayer which shall be the difference between the total assets and total liabilities.
Q-12 For amnesty availment purposes, what are the valuation rules?
A-12 The following valuation rules should be observed for purposes of availment of the TAP:
FOR CORPORATIONS –
All assets, liabilities and networth shall be valued and reflected in the SALN/Balance Sheet following/observing prevailing Philippine Financial Reporting Standards (PFRS/IFRS) unless a different rule is mandated or allowed by the concerned regulatory agency, e.g. SEC, etc.
FOR INDIVIDUALS –
a. For business-related assets and/or liabilities and networth, valuation should follow the Generally Accepted Accounting Principles (GAAP).
b. For non-business-related assets and/or liabilities and networth, valuation should be at cost, if acquired through purchase or at Fair Market Value, if acquired through inheritance or donation. Valuation shall be at Fair Market Value/Zonal Value at the time of death or the date of donation, whichever is applicable.
FOR COOPERATIVES, FOUNDATIONS AND PARTNERSHIPS –
The valuation of the assets and liabilities and networth shall follow the mandated rules of the concerned regulatory agency namely: Securities and Exchange Commission (SEC), Cooperatives Development Authority (CDA), etc.
FOR ESTATE –
For estate under administration, the valuation of assets and liabilities and networth shall follow GAAP; whereas for estate not under administration, the valuation of assets, liabilities and networth shall follow GAAP, for business-related assets, and valued at cost if assets/liabilities are acquired by purchase or at fa ir market value, if assets/liabilities are acquired through donation or inheritance, for non-business related assets/liabilities.
FOR TRUST –
The valuation of assets and liabilities and networth shall follow GAAP.
Q-13 What are the procedures for availment?
A-13 A person or entity who would wish to avail of the Tax Amnesty shall follow these procedures:
a. Accomplish and prepare for submission the following forms:
a.1 NOTICE OF AVAILMENT OF TAX AMNESTY FORM, to be filled up by the person who will avail of the tax amnesty (such form can be presented to the BIR representative for proper computation or taxpayer himself can compute for the amnesty amount);
a.2 Statement of Assets, Liabilities and Networth (SALN) as of Balance Sheet date and/or the Balance Sheets, both original and amended, in case where the taxpayer had previously filed his/its Balance Sheet together with the income tax return for 2005;
a.3 Tax Amnesty Return (BIR Form No. 2116);
a.4 Payment Form (BIR Form No. 0617)
a.5 Such other documentary requirements that may be required, as discussed in subsequent paragraphs.
b. Pay the Amnesty Tax:
The taxpayer shall pay the amnesty tax using Amnesty Tax Payment Form No. 0617 to the authorized agent bank or in the absence thereof, the Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business/place of work.
c. File the Amnesty Tax Return:
Ø After payment, the Notice of Availment of Tax Amnesty, the Tax Amnesty Return, together with the SALN/Balance Sheet, both original and amended, and a copy of the TAX AMNESTY PAYMENT FORM (BIR Form 0617) shall be filed as follows:
· Residents shall file with the Revenue District Office (RDO)/Large Taxpayer District Office (LTDO) of the BIR which has jurisdiction over the legal residence or principal place of business/employment of the taxpayer, as the case may be. (The head of the RDO/LTDO shall create an Amnesty Task Force which is in charged of receiving Amnesty Tax Availment and giving advice, if needed.)
· Non-residents shall file with the Office of the Commissioner of the BIR, or with any RDO.
Q-14 For taxpayers who had been filing their correct networth and have no additional asset to declare further, but would like to participate in the amnesty program, will they be allowed to do so?
A-14 In cases where the taxpayer decides to avail but does not declare additional assets or decides that he/it should not make any amendments of his/its networth as December 31, 2005, he/it can avail of the amnesty program by paying five percent (5%) of the total declared networth as of Balance Sheet date in 2005 or the prescribed minimum absolute amount, whichever is higher.
Q-15 In lieu of the SALN, can taxpayers be allowed to file a Balance Sheet for purposes of tax amnesty availment?
A-15 While the Balance Sheet may be equivalent to the SALN, the regulations have prescribed a specific SALN format to be filled-up and submitted for purposes of availment. Thus, in the availment of the tax amnesty, the Balance Sheet should be converted to the SALN format as provided by the BIR in the SALN form.
Q-16 Can taxpayer amend its 2006 Balance Sheet to reflect the 2005 SALN/networth as beginning balance for 2006?
A-16 Amendments of 2006 Balance Sheet shall be allowed even if Letters of Authority (LAs), Tax Verification Notices (TVNs) or audit notices (ANs) were already issued only if the taxpayer avails of the TAP. The amendment should be limited only to increase in previously declared business-related assets and networth. The purpose of the amendment is for the taxpayer to reflect the newly reported asset and therefore reflect the correct beginning networth of the taxpayer in 2006. No other item in the Financial Statements can be amended within three (3) years from submission thereof or when an LA/AN/TVN has already been issued within the said three-year period except those that were reported in the SALN/Balance Sheet for purposes of amnesty availment.
Resulting effect to nominal accounts shall be closed directly to Retained Earnings, for corporate taxpayers, and Capital, for individua ls and partnerships.
Q-17 May husband and wife be allowed to submit only one SALN? Would they be separately liable for the minimum amount of amnesty tax if they avail of the amnesty?
A-17 No. They have to submit two separate SALNs reflecting their exclusive properties and liabilities as well as their respective shares in the conjugal properties and liabilities. In such a case, the tax amnesty liability of each spouse shall be the higher amount between the 5% of his/her total declared networth or increase in his/her networth and the minimum absolute amount of P50,000.
Q-18 Will individuals engaged in business submit two SALNs - one strictly for business-related assets/liabilities/networth and another one for nonbusiness related assets/liabilities/networth?
A-18 An individual taxpayer/availer shall submit only one SALN or Balance Sheet presenting the assets and liabilities and networth into two major groups which are those that are classified as business-related and those that are non-business related.
Q-19 In the case of a representative office in the Philippines of a foreign corporation which is only required to file audited statements of receipts and disbursements, what would be the content of the SALN to be filed?
A-19 The resident foreign corporation shall report assets and liabilities and networth related to the business in the Philippines and the amnesty tax shall be the 5% of the total declared Philippine networth or 5% of the resulting increase in Philippine networth, whichever is applicable, or the minimum absolute amount, whichever is higher.
Q-20 What would be used as basis in determining the minimum amnesty payment of a local branch of a foreign corporation where the subscribed capital stock is not determinable for this purpose?
A-20 The basis of the 5% shall be the networth or increase in networth of the branch located in the Philippines, whichever is applicable, and the amnesty tax payable is whichever is higher between the resulting product therefrom and the minimum absolute amount prescribed by the Tax Amnesty Law where the subscribed capital refers to the assigned capital in the Philippine Branch lodged in the account “Due to Head Office”.
Q-21 Can the SALN be presented using US dollars or the company’s functional currency?
A-21 Yes. The SALN can be presented in US dollars or the company’ s functional currency provided that the peso value shall also be shown in the SALN converted using the exchange rate as of Balance Sheet date.
Q-22 The SALN prescribed by BIR appears to be very specific as to description of assets and liabilities. Is it also applicable to big companies (such as the banks which have accounts receivables, ROPOAs, stocks traded, investments, inventories) whose assets and liabilities are so varied and numerous which would require substantive schedules to detail the specific description of all of their accounts? Are they still required to comply strictly with this requirement?
A-22 Yes, these companies should file and declared ALL their assets and liabilities and networth using the SALN format prescribed by the BIR.
Q-23 Can a taxpayer who has availed of the tax amnesty still be issued a Letter of Authority or TVN to audit his tax liabilities for the year 2005 and prior taxable years?
A-23 Yes, but the audit shall be limited only to withholding taxes, unpaid self-assessed taxes and funds collected from customers held in trust for the Government.
Q-24 How do we compute the minimum increase in networth in case a taxpayer wants to avail of the tax amnesty due to the discovered under declaration of sales as a result of TRS-Letter Notice (TRS-LN) matching as illustrated below:
AGENT-TAXPAYER RECONCILLIATION:
------------------------------------------VAT---------PERCENTAGE TAX--------INCOME TAX
Discrepancy on gross
sales/revenue/receipt---------------------13,500,000------------------------15,000,000
DISCREPANCY ON
TAXES WITHHELD
CLAIMED BY PAYEE---------------------------------0---------------------------1,000,000
A-24
Taxpayers who want to avail of the tax amnesty program because they have underdeclarations of sales/income as shown in the TRS-LN can avail of the program provided that the underdeclared/undeclared sales shall be treated as undeclared assets. The higher amount (gross sales/revenue/receipt) in the table of discrepancies as shown above, shall be added to any increase in the networth. Hence, in the example above, 5% of P15,000,000 (on the assumption that P15,000,000 is the only increase in networth) which is P750,000 or the prescribed minimum absolute amount, whichever is higher, shall be the tax amnesty payment. Discrepancy on taxes withheld claimed by the payee is not covered by the tax amnesty it representing unpaid self-assessed tax. Discrepancy discovered under the module “Agent Reconciliation” is not covered by the tax amnesty it representing error in withholding tax computation and remittance.
Q-25 I have an ongoing examination for taxable period 2004 and no assessment yet has been issued. Can I avail of the tax amnesty? Wha t will happen to the examination?
A-25 The company can avail of the amnesty. Upon presentation of the duly received Notice of Availment, Tax Amnesty Return, payment form, SALN and the other documentary requirements, the LA/TVN and Audit Notice pertaining to that taxable year shall be deemed cancelled except for those specifically excluded by law, e.g. withholding tax, unpaid self-assessed tax, funds collected from customers for remittance to the BIR as these are funds held in trust for the Government.
Q-26 We have been issued a Final Assessment Notice (FAN) on which we have filed a protest. Can we still avail of the amnesty?
A-26 As a rule, duly protested FAN can be covered by the tax amnesty, except those excluded under existing rules (e.g. Withholding Tax Liabilities; Taxes passed on and collected from customers for remittance to the Bureau of Internal Revenue (BIR); Delinquent Accounts/Accounts Receivable assets of the Bureau of Internal Revenue/Government, including unpaid self-assessed tax; issues that were already ruled by the Court in favor of the Bureau of Internal Revenue/Government prior to amnesty availment of the taxpayer, etc.).
Q-27 If BIR suspects commission of tax fraud for taxable year 2005 and prior years, can the taxpayers still avail of the TAP?
A-27 Yes. What is not covered by the amnesty tax law are pending criminal cases filed in court as well as tax evasion cases and cases under the BIR RATE Program already filed with the DOJ on or before the date of effectivity of the tax amnesty law which is June 16, 2007.
Q-28 If a company which is in a deficit position (negative networth) amends its Balance Sheet to include additional assets resulting to a reduction in deficit, can it avail of the amnesty tax law on the change in networth (still in a deficit position)? What about companies in deficit position that will not amend their Balance Sheets but would want to avail of the tax amnesty, can they qualify?
A-28 Only companies reflecting positive networth can avail of the tax amnesty law.
Q-29 Can payments under the NAP, IVAP and EVAP be deducted from amnesty payment?
A-29 No, these types of administrative amnesty payments are not allowed to be deducted from the Tax Amnesty payments under RA 9480.
Q-30 Can the tax amnesty payments be allowed as deductible expense?
A-30 No. The amnesty tax is a non-deductible expense for tax purposes.
Q-31 What is the extent of examination which the BIR can conduct on the books and record of taxpayers who would availed of the tax amnesty but have pending claim for refund/tax credit before the BIR or DOF or BOC or the Courts?
A-31 The examination of the said books of accounts and other records shall be limited to the purpose of verifying whether the claim for refund /tax credit is valid and duly supported and substantiated. Disallowances may be made on
the tax refund/tax credit being claimed on account of the findings made as a result of the verification . Tax assessments can still be issued on the audit coverage.
Q-32 May surviving or new corporations avail of the tax amnesty in behalf of the corporations absorbed or dissolved pursuant to a merger or consolidation that took effect prior to Taxable Year 2005? Can they avail of the Tax Amnesty?
A-32 Yes, these companies can avail of the tax amnesty for purposes of obtaining tax clearances for the dissolved or absorbed corporations.
Q-33 What about retiring corporations under liquidation and/or dissolution, can they avail of the tax amnesty law? A-33 Yes, the program is also available to retiring companies under liquidation and/or dissolution.
Q-34 If there is already an ongoing investigation when the tax amnesty is availed of and the covering LA includes all internal revenue taxes, will the investigation be allowed to continue?
A-34 Yes, but the investigation will cover only the withholding taxes and the collection of unpaid self assessed taxes and taxes passed-on and collected from customers for remittance to the BIR which are considered as funds held in trust for the Government.
Q-35 Is there only one application for the tax amnesty covering taxable year 2005 and prior years or should the taxpayer file an amnesty application on a per year basis?
A-35 Yes, the tax amnesty is a one-time availment and it shall cover taxable year 2005 and all prior years.
Q-36 Will the BIR suspend LAs issued for taxable years 2004 and 2005 to pave the way for the taxpayers to avail of the tax amnesty?
A-36 No. The investigation and other legal processes on the said taxable years shall continue. The only time such investigation will cease is upon presentation of the proof that the taxpayer has availed of the tax amnesty.
Q-37 Can the excess creditable withholding taxes (CWT)/input taxes, taxes carried-over, Tax Credit Certificates (TCCs), Tax Debit Memo (TDMs) be used as payment for amnesty tax?
A-37 No. Excess CWT/input taxes, taxes carried-over, TCCs or TDMs cannot be used as payment for the Amnesty Tax. Only CASH payments are allowed.
Q-38 Can the taxpayer pay the amnesty tax on installment?
A-38 No, the law does not provide for installment payments. Full payment of the tax amnesty amount is required for the availment of the program.
Q-39 Are PEZA-registered companies, business enterprises operating within the Freeport Zones (Subic, Clark, etc.), and business enterprises operating within the other Special Economic Zones covered by the Tax Amnesty?
A-39 Yes. All corporations liable for internal revenue taxes may avail of the tax amnesty. The law does not make of any distinction.
Q-40 Our company is a PEZA-registered entity paying 5% GIT where 3% thereof represents the share of the National Government and the remaining 2% represents the share of the LGU. Does this mean that in the availment of the tax amnesty, there is a need to pay the 2% of the 5% tax amnesty rate to LGU?
A-40 The amnesty tax covers only national internal revenue taxes. The LGU does not have a direct share on the 5% amnesty tax, and therefore the entire 5% amnesty tax payment shall be paid directly to the BIR through its authorized collection agents.
Q-41 For purposes of determining the zonal value or fair market value of properties forming part of an estate, in what period should the valuation be based for purposes of tax amnesty availment ( Should it be in the year when the decedent died or should it be the value in year 2005)?
A-41 The valuation of the properties of the decedent shall be at the time of death.
Q-42 In case of estate under administration, who is the person liable to avail of the tax amnesty?
A-42 In case of estate under administration, the one that should avail of the tax amnesty for the estate is the administrator/executor of the estate, in representation of the estate.
Q-43 In case of estate not under administration, who is the person liable to avail of the tax amnesty?
A-43 In case of estate not under administration, the persons liable to avail of the tax amnesty shall be the estate and the heirs.
Q-44 If the estate involved is still in the name of another decedent, can the present holder declare one estate tax return/amnesty tax return for all the other decedents through which this property shall pass?
A-44 No. The present holder shall file tax amnesty return for each decedent.
Q-45 What will be the basis of the amnesty tax payment of estate?
A-45 The basis of the amnesty tax payment of the estate shall be the networth of such estate valued at the time of death of the decedent.
Q-46 How do we compute the networth of an estate?
A-46 Networth is equa ls to assets less liabilities. For purposes of computing the networth of the estate, only the decedent’s exclusive properties and liabilities as well as share in the conjugal assets and liabilities shall be included. The deductible liabilities shall refer to unpaid legitimate and enforceable obligations incurred in acquiring the properties included in the gross taxable estate.. Thus, family home, medical expenses incurred, funeral expenses incurred, standard deduction and other deductions not related to the acquisition of the properties forming part of the gross taxable estate are not allowed as claimed liabilities for purposes of computing the networth of the estate for tax amnesty availment purposes.
Q-47 Are Delinquent Accounts/Accounts Receivable, including unpaid selfassessed taxes, in the records of the BIR which are already Accounts Recievable of the BIR/assets of the Government as of date of amnesty availment by the taxpayer still covered by such amnesty availment?
A-47 No. This is so because these are already properties/assets of the Government prior to/upon taxpayer’s date of amnesty availment.
Q-48 In the case of transactions involving sale of real property and/or donation of real property, are these covered by the tax amnesty program?
A-48 The only instance when these transactions may be covered by the tax amnesty program is when the real property has already been transferred and/or declared in the name of the taxpayer/donee and the capital gains tax/DST/donor’s taxes have already been paid but during the time of transfer there was underdeclaration in the selling price/consideration or undervaluation made in the declaration of such real property. In availing of the tax amnesty, the resulting increase in networth cannot be lower than the amount representing the difference between the true and correct value of the real property and the previously declared value. The resulting increase in the networth is still the basis of the 5% amnesty tax rate which is compared with the prescribed minimum absolute amount and the amnesty tax payable is the higher amount between the two compared amounts.
Q-49 Are tax assessments that are disputed administratively or judicially still covered by the tax amnesty law?
A-49 As a rule yes, except those cases excluded from the coverage of the Tax Amnesty Program as discussed in this CIRCULAR and those cases involving issues that have already been ruled by the trial court/appellate court in favor of the BIR/Government prior to taxpayer’s availment of the amnesty law.
Q-50 If the real property of the taxpayer is registered in the name of another person, can taxpayer declare the said property in his SALN and pay the amnesty tax A-50 No, because this kind of scenario is not covered by the tax amnesty program.
Q-51 Are corporations that filed notice of dissolution to the BIR as of taxable year 2005 covered by the tax amnesty? Upon presentation of proof of availment, will the BIR issue the corresponding tax clearance?
A-51 Yes, the dissolving corporations as of taxable year 2005 can be covered by the tax amnesty for as long as in the availment thereof, they pay 5% of the increase in the networth determined by comparing original SALN with amended SALN as of said year or 5% of the networth as of Balance Sheet/SALN date, whichever is applicable, which resulting amount should not, of course, be lower than the prescribed minimum absolute amount.. Consequently, upon availment and presentation of proof of availment, the BIR will issue the corresponding tax clearance.
Q-52 In the filing of the amended 2005 SALN/Balance Sheet for purposes of tax amnesty availment, should the same require the opinion of an independent auditor?
A-52 No. The amended SALN/Balance Sheet is considered as a truthful declaration by the taxpayer himself which does not need an evidence aliunde to establish its correctness.
Q-53 In case a company is originally classified as tax exempt but currently its status is in question, can such company avail of the tax amnesty?
A-53 Yes. The basis of such exempt entity of the tax amnesty rate of 5% shall be the total networth or the resulting increase in networth, whichever is applicable, but the amnesty tax payable is still the higher amount between the resulting figure therefrom and the prescribed minimum absolute amount.
Q-54 Is it possible to amend the SALN already filed under the Tax Amnesty Program?
A-54 Yes. As long as the next amendment would reflect only an inclusion of additional asset with corresponding increase in networth. No reduction in payment shall be allowed.
Q-55 Can minors avail of the tax amnesty?
A-55 Yes, minors who would want to avail of the TAP may avail provided that their amnesty tax payment is the higher amount between the resulting product of 5% of his total declared networth or 5% of the increase in networth, as the case maybe, and the prescribed minimum absolute amount of P50,000.
Q-56 In cases where the taxpayer has already agreed to pay the deficiency taxes and has in fact already entered into an agreement with the Bureau to pay such deficiency taxes on installment basis, will the same be covered by the tax amnesty?
A-56 No. The taxpayer who has already entered into an agreement with the BIR to pay taxes, whether in full amount or on installment basis, can no longer avail of the tax amnesty in so far as this particular tax case is concerned. It/he can avail of tax amnesty to cover its/his other tax liabilities, if there is no legal impediment for such availment.
Q-57 Are tax cases covered by compromise agreement and/or abatement agreement in accordance with existing revenue regulations relative to the compromise settlement program and abatement program of the Bureau covered by the tax amnesty?
A-57 No, such cases which have been covered by the compromise program or abatement program of the Bureau can no longer avail of the tax amnesty insofar as the tax subject of the compromise/abatement is concerned.
All internal revenue officers and others concerned are hereby enjoined to give this Circular as wide a publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
TO : All Internal Revenue Officers and Others Concerned.
Republic Act No. 9480 (RA 9480) entitled “An Act Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes Imposed by the National Government for Taxable Year 2005 and Prior Years”, became effective on June 16, 2007. In order to implement the provisions of the said Act, Department of Finance has issued Department Order No. 29-07 (DO 29-07) prescribing the rules and regulations for the availment of the tax amnesty granted under said law.
For the purpose of clarifying certain issues relative to the availment thereof, presented hereunder, in question and answer format, are the corresponding resolutions on some of the recurring questions raised during the fora and symposia held with the private sector on the matter.
Q-1 What type of taxes and what taxable period/s are covered by the Tax Amnesty Program under RA 9480 as implemented by DO 29-07?
A-1 The Tax Amnesty Program (TAP) covers all national internal revenue taxes such as income tax, estate tax, donor’s tax and capital gains tax, value added tax, other percentage taxes, excise taxes and documentary stamp taxes, except withholding taxes and taxes passed-on and already collected from the customers for remittance to the BIR, these taxes/funds being considered as funds held in trust for the government. Moreover, the time-honored doctrine that “No person shall unjustly enrich himself at the expense of another” should always be observed.
In case of donor’s tax and capital gains tax, only cases that have underdeclarations/undervaluations and were already issued with Certificate Authorizing Registration (CAR) by the BIR are covered. The period covered is Taxable Year 2005 and prior years for the abovementioned national internal revenue taxes, with or without assessments duly issued therefore, that have remained unpaid as of December 31, 2005.
For purposes of complying with the provisions of the Tax Amnesty Law, Taxable Year 2005 shall include all taxable years which end in any month of the year 2005, whether calendar year or fiscal year. This means that for fiscal year basis taxpayers, the Balance Sheet filed as of the end of any month in 2005 except December, which is the taxpayer’s fiscal year end, shall be considered as a Balance Sheet filed as of year end of 2005 which shall be the basis in determining any increase in networth, by comparing it with the amended Balance Sheet as of the same end period while for calendar year basis taxpayers, the increase in networth shall be reckoned from the figures reflected in the Balance Sheet filed as of December 31, 2005 by comparing the original version with the amended version.
Q-2 Who can avail of the tax amnesty?
A-2
a. Individuals, whether resident or non-resident citizens, or resident or nonresident aliens;
b. Estates and trusts;
c. Corporations;
d. Cooperatives and tax exempt entities that have become taxable as of December 31, 2005;
e. Other juridical entities, including partnerships
In the case of an individual who is at the same time an executor or administrator of the estate of a deceased taxpayer, he may avail of the amnesty for himself or for the estate or both. In the same manner that a trustee of a taxable trust may opt to avail of the tax amnesty for himself or that for the trust or for both. One Amnesty Tax Return shall be filed for every taxpayer availing of the program.
Q-3 Are cases subject of criminal complaint filed with the DOJ still covered by the Tax Amnesty?
A-3 Yes, except cases filed under the RUN AFTER TAX EVADER (RATE) Program of the BIR and other cases involving tax evasion initiated and instituted with the approval of the Commissioner of Internal Revenue or his authorized representatives, pursuant to Section 220 of the National Internal Revenue Code of 1997, as amended.
Q-4 Does availment of the TAP have an effect on assessments against the taxpayer/availer where such assessments have become final and executory prior to the said availments?
A-4 No. Amnesty availment will not have an effect on assessments against said taxpayer where the said assessments have become final and executory prior to the amnesty availment considering that these assessments are already accounts receivable of the BIR or assets of the government.
Q-5 What are the benefits and privileges accorded to persons or entities availing of the tax amnesty under RA 9480?
A-5
a. Immunity from the payment of taxes as well as additions thereto and the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years.
b. The taxpayer’s Tax Amnesty Return and the Statement of Asset, Liabilities and Networth (SALN) as of December 31, 2005 shall not be admissible as evidence in all proceedings that pertain to taxable year 2005 and prior years, insofar as such proceedings relate to internal revenue taxes, before judicial, quasi- judicial or administrative bodies in which he is defendant or respondent except for the purpose of ascertaining the networth beginning January 1, 2006. The same shall not be examined, inquired or looked into by any person or government office. However, the taxpayer may use this amnesty availment as a defense, whenever appropriate, on cases brought against him.
c. The books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined by the BIR. However, the Commissioner of Internal Revenue or his authorized representative may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for any tax refund, tax credit (other than refund or credit of taxes withheld on wages), tax incentives and/or exemptions under existing laws, whether these cases are pending with the Bureau of Internal Revenue, One Stop Shop of the Dept. of Finance, Bureau of Custom and with any Court, as well as looking at taxpayer’s records and books to check tax liabilities of other taxpayers under its access power to third parties.
Q-6 Are the benefits and privileges accorded by the tax amnesty law absolute?
A-6 No. The benefits and privileges accorded by the tax amnesty law shall not apply under the following instances:
a. where the person failed to file a SALN and the Tax Amnesty Return, or;
b. where the amount of networth as of December 31, 2005 or as of end of fiscal year of any month in year 2005, whichever is applicable, is proven to be understated to the extent of thirty percent (30%) or more in accordance with the provisions of Section 4 of RA 9480 and Section 9, Rule IV of Department Order No. 29-07.
Q-7 Section 4 of RA 9480 and Section 9, Rule IV of DO No. 29-07 provide for the presumption of correctness of SALN. What does this mean?
A-7 This means that SALN as of taxable year 2005 (calendar or fiscal) filed by the taxpayer pursuant to this tax amnesty program shall be presumed to represent the true and correct networth of said taxpayer as of such period.
Q-8 What are the instances when the presumption of correctness would not apply?
A-8 The presumption of correctness of SALN shall not apply in the following cases:
a. Where the amount of declared networth is understated to the extent of thirty percent (30%) or more as may be established in the proceedings initiated within one (1) year following the date of filing of the Tax Amnesty Return and the SALN, by or at the instance of parties other than the BIR or its agents, as when any person, entity or government agency informs the BIR, with sufficient evidence, that the amount of the declared networth is understated to the extent of thirty percent (30%) or more.
b. When the findings of or admission in congressional hearings or proceedings in administrative agencies of the government and in courts, prove that there is at least thirty percent (30%) underdeclaration of networth.
Q-9 What is the effective period within which qualified taxpayers may avail of the tax amnesty?
A-9 Rule III Section 6.4 of Department Order No. 29-07 provides for the filing of the tax amnesty return together with the SALN and the payment of the tax amnesty within six (6) months from the effectivity of said Order. The said Order became effective last September 6, 2007. Thus, qualified taxpayers have until March 6, 2008 to avail of the said tax amnesty program.
Q-10 What is the basis of computing the tax amnesty and what are the tax amnesty rates prescribed therefor?
A-10
a. For those qualified taxpayers who have no previously filed statements of assets and liabilities/balance sheet as of December 31, 2005, the tax amnesty payment shall be computed based on higher amount between the five percent (5%) of the networth as of December 31, 2005 (including fiscal year ending in any month of 2005) as declared in the SALN and the minimum amnesty payments as presented in the following schedule of tax amnesty computation:
a.1 Individuals (whether resident or nonresident citizens, including resident and nonresident aliens), Estates and Trusts - 5% of networth or P50,000, whichever is higher
a.2 Corporations
a.2.1 With subscribed capital of above P50M - 5% of networth or P500,000, whichever is higher
a.2.2 With subscribed capital of above P20M up to P50 M - 5% of networth or P250,000, whichever is higher
a.2.3 With subscribed capital of P5M up to P20M - 5% of networth or P100,000, whichever is higher
a.2.2 With subscribed capital of below P5M 5% of networth or P25,000, whichever is higher
a.3 Other juridical entities including partnerships but not limited to cooperatives and foundations that have become taxable as of December 31, 2005 - 5% of networth or P50,000, whichever is higher
Illustration:
The last time that Mr. X filed his Statement of Assets and Liabilities was in Year 2003 where he declared his networth to be P4,000,000. In Year 2005, his networth amounted to P10,000,000. If Mr. X desires to avail of the tax amnesty, the basis of the five percent (5%) tax amnesty rate shall be the entire networth of P10,000,000, which therefore amounts to P500,000 (P10,000,000 times 5%) and not on the net increase in the networth of P6,000,000 (P10,000,000 minus P4,000,000) which is the difference between the last declared networth in Year 2003 and the declared networth in Year 2005.
As an individual availing of the tax amnesty, his tax amnesty liability therefore amounts to P500,000 which is the amount higher than the minimum tax amnesty payment of P50,000 prescribed for individuals.
b. For those qualified taxpayers who have filed with BIR’s authorized agents their SALN/balance sheet together with their income tax returns for taxable year 2005 and who desire to avail of the tax amnesty, they shall amend their previously filed statements by including still undeclared assets and/or liabilities and pay an amnesty tax equal to five percent (5%) based on the resulting increase in the networth or the minimum amount prescribed by the Tax Amnesty Law for each category of taxpayer, whichever is higher. (Refer to the schedule of minimum payments in the table above).
Q-11 In the filing of the Statement of Assets, Liabilities and Networth (SALN) as of Taxable Year 2005 pursuant to RA 9480, what should such statement contain?
A-11 The SALN should contain the following:
a. Assets within or without the Philippines (in the case of resident and non-resident citizens and domestic corporations) or assets within the Philippines (in the case of resident and non-resident foreign corporations, resident and non-resident aliens), whether real or personal, tangible or intangible, whether or not used in trade or business:
a.1 Real properties shall be accompanied by a statement of the following information:
i. TCT/OCT/CCT Number;
ii. Tax Declaration Number;
iii. Classification;
iv. Description;
v. Exact Location;
vi. Measurement (in square meter); and
vii. Value
a.2 Personal properties other than money (e.g. automobiles, shares of stock, investments, etc.), shall state the following:
i. Quantity;
ii. Kind of asset;
iii. Description (e.g. Certificate of Registration, Machine Number); and
iv. Value
a.3 Assets denominated in foreign currency converted into the corresponding Philippine currency at the rate of exchange prevailing as of Balance Sheet date;
a.4 Cash on hand and in bank in peso as of Balance Sheet date as well as cash on hand and in bank in foreign currency converted to peso at the rate of exchange prevailing as of Balance Sheet date.
b. All existing liabilities which are legitimate and enforceable, secured or unsecured, whether or not incurred in trade or business, disclosing or indicating clearly the name and address of the creditor and the amount of the corresponding liability as of SALN date.
c. The total networth of the taxpayer which shall be the difference between the total assets and total liabilities.
Q-12 For amnesty availment purposes, what are the valuation rules?
A-12 The following valuation rules should be observed for purposes of availment of the TAP:
FOR CORPORATIONS –
All assets, liabilities and networth shall be valued and reflected in the SALN/Balance Sheet following/observing prevailing Philippine Financial Reporting Standards (PFRS/IFRS) unless a different rule is mandated or allowed by the concerned regulatory agency, e.g. SEC, etc.
FOR INDIVIDUALS –
a. For business-related assets and/or liabilities and networth, valuation should follow the Generally Accepted Accounting Principles (GAAP).
b. For non-business-related assets and/or liabilities and networth, valuation should be at cost, if acquired through purchase or at Fair Market Value, if acquired through inheritance or donation. Valuation shall be at Fair Market Value/Zonal Value at the time of death or the date of donation, whichever is applicable.
FOR COOPERATIVES, FOUNDATIONS AND PARTNERSHIPS –
The valuation of the assets and liabilities and networth shall follow the mandated rules of the concerned regulatory agency namely: Securities and Exchange Commission (SEC), Cooperatives Development Authority (CDA), etc.
FOR ESTATE –
For estate under administration, the valuation of assets and liabilities and networth shall follow GAAP; whereas for estate not under administration, the valuation of assets, liabilities and networth shall follow GAAP, for business-related assets, and valued at cost if assets/liabilities are acquired by purchase or at fa ir market value, if assets/liabilities are acquired through donation or inheritance, for non-business related assets/liabilities.
FOR TRUST –
The valuation of assets and liabilities and networth shall follow GAAP.
Q-13 What are the procedures for availment?
A-13 A person or entity who would wish to avail of the Tax Amnesty shall follow these procedures:
a. Accomplish and prepare for submission the following forms:
a.1 NOTICE OF AVAILMENT OF TAX AMNESTY FORM, to be filled up by the person who will avail of the tax amnesty (such form can be presented to the BIR representative for proper computation or taxpayer himself can compute for the amnesty amount);
a.2 Statement of Assets, Liabilities and Networth (SALN) as of Balance Sheet date and/or the Balance Sheets, both original and amended, in case where the taxpayer had previously filed his/its Balance Sheet together with the income tax return for 2005;
a.3 Tax Amnesty Return (BIR Form No. 2116);
a.4 Payment Form (BIR Form No. 0617)
a.5 Such other documentary requirements that may be required, as discussed in subsequent paragraphs.
b. Pay the Amnesty Tax:
The taxpayer shall pay the amnesty tax using Amnesty Tax Payment Form No. 0617 to the authorized agent bank or in the absence thereof, the Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business/place of work.
c. File the Amnesty Tax Return:
Ø After payment, the Notice of Availment of Tax Amnesty, the Tax Amnesty Return, together with the SALN/Balance Sheet, both original and amended, and a copy of the TAX AMNESTY PAYMENT FORM (BIR Form 0617) shall be filed as follows:
· Residents shall file with the Revenue District Office (RDO)/Large Taxpayer District Office (LTDO) of the BIR which has jurisdiction over the legal residence or principal place of business/employment of the taxpayer, as the case may be. (The head of the RDO/LTDO shall create an Amnesty Task Force which is in charged of receiving Amnesty Tax Availment and giving advice, if needed.)
· Non-residents shall file with the Office of the Commissioner of the BIR, or with any RDO.
Q-14 For taxpayers who had been filing their correct networth and have no additional asset to declare further, but would like to participate in the amnesty program, will they be allowed to do so?
A-14 In cases where the taxpayer decides to avail but does not declare additional assets or decides that he/it should not make any amendments of his/its networth as December 31, 2005, he/it can avail of the amnesty program by paying five percent (5%) of the total declared networth as of Balance Sheet date in 2005 or the prescribed minimum absolute amount, whichever is higher.
Q-15 In lieu of the SALN, can taxpayers be allowed to file a Balance Sheet for purposes of tax amnesty availment?
A-15 While the Balance Sheet may be equivalent to the SALN, the regulations have prescribed a specific SALN format to be filled-up and submitted for purposes of availment. Thus, in the availment of the tax amnesty, the Balance Sheet should be converted to the SALN format as provided by the BIR in the SALN form.
Q-16 Can taxpayer amend its 2006 Balance Sheet to reflect the 2005 SALN/networth as beginning balance for 2006?
A-16 Amendments of 2006 Balance Sheet shall be allowed even if Letters of Authority (LAs), Tax Verification Notices (TVNs) or audit notices (ANs) were already issued only if the taxpayer avails of the TAP. The amendment should be limited only to increase in previously declared business-related assets and networth. The purpose of the amendment is for the taxpayer to reflect the newly reported asset and therefore reflect the correct beginning networth of the taxpayer in 2006. No other item in the Financial Statements can be amended within three (3) years from submission thereof or when an LA/AN/TVN has already been issued within the said three-year period except those that were reported in the SALN/Balance Sheet for purposes of amnesty availment.
Resulting effect to nominal accounts shall be closed directly to Retained Earnings, for corporate taxpayers, and Capital, for individua ls and partnerships.
Q-17 May husband and wife be allowed to submit only one SALN? Would they be separately liable for the minimum amount of amnesty tax if they avail of the amnesty?
A-17 No. They have to submit two separate SALNs reflecting their exclusive properties and liabilities as well as their respective shares in the conjugal properties and liabilities. In such a case, the tax amnesty liability of each spouse shall be the higher amount between the 5% of his/her total declared networth or increase in his/her networth and the minimum absolute amount of P50,000.
Q-18 Will individuals engaged in business submit two SALNs - one strictly for business-related assets/liabilities/networth and another one for nonbusiness related assets/liabilities/networth?
A-18 An individual taxpayer/availer shall submit only one SALN or Balance Sheet presenting the assets and liabilities and networth into two major groups which are those that are classified as business-related and those that are non-business related.
Q-19 In the case of a representative office in the Philippines of a foreign corporation which is only required to file audited statements of receipts and disbursements, what would be the content of the SALN to be filed?
A-19 The resident foreign corporation shall report assets and liabilities and networth related to the business in the Philippines and the amnesty tax shall be the 5% of the total declared Philippine networth or 5% of the resulting increase in Philippine networth, whichever is applicable, or the minimum absolute amount, whichever is higher.
Q-20 What would be used as basis in determining the minimum amnesty payment of a local branch of a foreign corporation where the subscribed capital stock is not determinable for this purpose?
A-20 The basis of the 5% shall be the networth or increase in networth of the branch located in the Philippines, whichever is applicable, and the amnesty tax payable is whichever is higher between the resulting product therefrom and the minimum absolute amount prescribed by the Tax Amnesty Law where the subscribed capital refers to the assigned capital in the Philippine Branch lodged in the account “Due to Head Office”.
Q-21 Can the SALN be presented using US dollars or the company’s functional currency?
A-21 Yes. The SALN can be presented in US dollars or the company’ s functional currency provided that the peso value shall also be shown in the SALN converted using the exchange rate as of Balance Sheet date.
Q-22 The SALN prescribed by BIR appears to be very specific as to description of assets and liabilities. Is it also applicable to big companies (such as the banks which have accounts receivables, ROPOAs, stocks traded, investments, inventories) whose assets and liabilities are so varied and numerous which would require substantive schedules to detail the specific description of all of their accounts? Are they still required to comply strictly with this requirement?
A-22 Yes, these companies should file and declared ALL their assets and liabilities and networth using the SALN format prescribed by the BIR.
Q-23 Can a taxpayer who has availed of the tax amnesty still be issued a Letter of Authority or TVN to audit his tax liabilities for the year 2005 and prior taxable years?
A-23 Yes, but the audit shall be limited only to withholding taxes, unpaid self-assessed taxes and funds collected from customers held in trust for the Government.
Q-24 How do we compute the minimum increase in networth in case a taxpayer wants to avail of the tax amnesty due to the discovered under declaration of sales as a result of TRS-Letter Notice (TRS-LN) matching as illustrated below:
AGENT-TAXPAYER RECONCILLIATION:
------------------------------------------VAT---------PERCENTAGE TAX--------INCOME TAX
Discrepancy on gross
sales/revenue/receipt---------------------13,500,000------------------------15,000,000
DISCREPANCY ON
TAXES WITHHELD
CLAIMED BY PAYEE---------------------------------0---------------------------1,000,000
A-24
Taxpayers who want to avail of the tax amnesty program because they have underdeclarations of sales/income as shown in the TRS-LN can avail of the program provided that the underdeclared/undeclared sales shall be treated as undeclared assets. The higher amount (gross sales/revenue/receipt) in the table of discrepancies as shown above, shall be added to any increase in the networth. Hence, in the example above, 5% of P15,000,000 (on the assumption that P15,000,000 is the only increase in networth) which is P750,000 or the prescribed minimum absolute amount, whichever is higher, shall be the tax amnesty payment. Discrepancy on taxes withheld claimed by the payee is not covered by the tax amnesty it representing unpaid self-assessed tax. Discrepancy discovered under the module “Agent Reconciliation” is not covered by the tax amnesty it representing error in withholding tax computation and remittance.
Q-25 I have an ongoing examination for taxable period 2004 and no assessment yet has been issued. Can I avail of the tax amnesty? Wha t will happen to the examination?
A-25 The company can avail of the amnesty. Upon presentation of the duly received Notice of Availment, Tax Amnesty Return, payment form, SALN and the other documentary requirements, the LA/TVN and Audit Notice pertaining to that taxable year shall be deemed cancelled except for those specifically excluded by law, e.g. withholding tax, unpaid self-assessed tax, funds collected from customers for remittance to the BIR as these are funds held in trust for the Government.
Q-26 We have been issued a Final Assessment Notice (FAN) on which we have filed a protest. Can we still avail of the amnesty?
A-26 As a rule, duly protested FAN can be covered by the tax amnesty, except those excluded under existing rules (e.g. Withholding Tax Liabilities; Taxes passed on and collected from customers for remittance to the Bureau of Internal Revenue (BIR); Delinquent Accounts/Accounts Receivable assets of the Bureau of Internal Revenue/Government, including unpaid self-assessed tax; issues that were already ruled by the Court in favor of the Bureau of Internal Revenue/Government prior to amnesty availment of the taxpayer, etc.).
Q-27 If BIR suspects commission of tax fraud for taxable year 2005 and prior years, can the taxpayers still avail of the TAP?
A-27 Yes. What is not covered by the amnesty tax law are pending criminal cases filed in court as well as tax evasion cases and cases under the BIR RATE Program already filed with the DOJ on or before the date of effectivity of the tax amnesty law which is June 16, 2007.
Q-28 If a company which is in a deficit position (negative networth) amends its Balance Sheet to include additional assets resulting to a reduction in deficit, can it avail of the amnesty tax law on the change in networth (still in a deficit position)? What about companies in deficit position that will not amend their Balance Sheets but would want to avail of the tax amnesty, can they qualify?
A-28 Only companies reflecting positive networth can avail of the tax amnesty law.
Q-29 Can payments under the NAP, IVAP and EVAP be deducted from amnesty payment?
A-29 No, these types of administrative amnesty payments are not allowed to be deducted from the Tax Amnesty payments under RA 9480.
Q-30 Can the tax amnesty payments be allowed as deductible expense?
A-30 No. The amnesty tax is a non-deductible expense for tax purposes.
Q-31 What is the extent of examination which the BIR can conduct on the books and record of taxpayers who would availed of the tax amnesty but have pending claim for refund/tax credit before the BIR or DOF or BOC or the Courts?
A-31 The examination of the said books of accounts and other records shall be limited to the purpose of verifying whether the claim for refund /tax credit is valid and duly supported and substantiated. Disallowances may be made on
the tax refund/tax credit being claimed on account of the findings made as a result of the verification . Tax assessments can still be issued on the audit coverage.
Q-32 May surviving or new corporations avail of the tax amnesty in behalf of the corporations absorbed or dissolved pursuant to a merger or consolidation that took effect prior to Taxable Year 2005? Can they avail of the Tax Amnesty?
A-32 Yes, these companies can avail of the tax amnesty for purposes of obtaining tax clearances for the dissolved or absorbed corporations.
Q-33 What about retiring corporations under liquidation and/or dissolution, can they avail of the tax amnesty law? A-33 Yes, the program is also available to retiring companies under liquidation and/or dissolution.
Q-34 If there is already an ongoing investigation when the tax amnesty is availed of and the covering LA includes all internal revenue taxes, will the investigation be allowed to continue?
A-34 Yes, but the investigation will cover only the withholding taxes and the collection of unpaid self assessed taxes and taxes passed-on and collected from customers for remittance to the BIR which are considered as funds held in trust for the Government.
Q-35 Is there only one application for the tax amnesty covering taxable year 2005 and prior years or should the taxpayer file an amnesty application on a per year basis?
A-35 Yes, the tax amnesty is a one-time availment and it shall cover taxable year 2005 and all prior years.
Q-36 Will the BIR suspend LAs issued for taxable years 2004 and 2005 to pave the way for the taxpayers to avail of the tax amnesty?
A-36 No. The investigation and other legal processes on the said taxable years shall continue. The only time such investigation will cease is upon presentation of the proof that the taxpayer has availed of the tax amnesty.
Q-37 Can the excess creditable withholding taxes (CWT)/input taxes, taxes carried-over, Tax Credit Certificates (TCCs), Tax Debit Memo (TDMs) be used as payment for amnesty tax?
A-37 No. Excess CWT/input taxes, taxes carried-over, TCCs or TDMs cannot be used as payment for the Amnesty Tax. Only CASH payments are allowed.
Q-38 Can the taxpayer pay the amnesty tax on installment?
A-38 No, the law does not provide for installment payments. Full payment of the tax amnesty amount is required for the availment of the program.
Q-39 Are PEZA-registered companies, business enterprises operating within the Freeport Zones (Subic, Clark, etc.), and business enterprises operating within the other Special Economic Zones covered by the Tax Amnesty?
A-39 Yes. All corporations liable for internal revenue taxes may avail of the tax amnesty. The law does not make of any distinction.
Q-40 Our company is a PEZA-registered entity paying 5% GIT where 3% thereof represents the share of the National Government and the remaining 2% represents the share of the LGU. Does this mean that in the availment of the tax amnesty, there is a need to pay the 2% of the 5% tax amnesty rate to LGU?
A-40 The amnesty tax covers only national internal revenue taxes. The LGU does not have a direct share on the 5% amnesty tax, and therefore the entire 5% amnesty tax payment shall be paid directly to the BIR through its authorized collection agents.
Q-41 For purposes of determining the zonal value or fair market value of properties forming part of an estate, in what period should the valuation be based for purposes of tax amnesty availment ( Should it be in the year when the decedent died or should it be the value in year 2005)?
A-41 The valuation of the properties of the decedent shall be at the time of death.
Q-42 In case of estate under administration, who is the person liable to avail of the tax amnesty?
A-42 In case of estate under administration, the one that should avail of the tax amnesty for the estate is the administrator/executor of the estate, in representation of the estate.
Q-43 In case of estate not under administration, who is the person liable to avail of the tax amnesty?
A-43 In case of estate not under administration, the persons liable to avail of the tax amnesty shall be the estate and the heirs.
Q-44 If the estate involved is still in the name of another decedent, can the present holder declare one estate tax return/amnesty tax return for all the other decedents through which this property shall pass?
A-44 No. The present holder shall file tax amnesty return for each decedent.
Q-45 What will be the basis of the amnesty tax payment of estate?
A-45 The basis of the amnesty tax payment of the estate shall be the networth of such estate valued at the time of death of the decedent.
Q-46 How do we compute the networth of an estate?
A-46 Networth is equa ls to assets less liabilities. For purposes of computing the networth of the estate, only the decedent’s exclusive properties and liabilities as well as share in the conjugal assets and liabilities shall be included. The deductible liabilities shall refer to unpaid legitimate and enforceable obligations incurred in acquiring the properties included in the gross taxable estate.. Thus, family home, medical expenses incurred, funeral expenses incurred, standard deduction and other deductions not related to the acquisition of the properties forming part of the gross taxable estate are not allowed as claimed liabilities for purposes of computing the networth of the estate for tax amnesty availment purposes.
Q-47 Are Delinquent Accounts/Accounts Receivable, including unpaid selfassessed taxes, in the records of the BIR which are already Accounts Recievable of the BIR/assets of the Government as of date of amnesty availment by the taxpayer still covered by such amnesty availment?
A-47 No. This is so because these are already properties/assets of the Government prior to/upon taxpayer’s date of amnesty availment.
Q-48 In the case of transactions involving sale of real property and/or donation of real property, are these covered by the tax amnesty program?
A-48 The only instance when these transactions may be covered by the tax amnesty program is when the real property has already been transferred and/or declared in the name of the taxpayer/donee and the capital gains tax/DST/donor’s taxes have already been paid but during the time of transfer there was underdeclaration in the selling price/consideration or undervaluation made in the declaration of such real property. In availing of the tax amnesty, the resulting increase in networth cannot be lower than the amount representing the difference between the true and correct value of the real property and the previously declared value. The resulting increase in the networth is still the basis of the 5% amnesty tax rate which is compared with the prescribed minimum absolute amount and the amnesty tax payable is the higher amount between the two compared amounts.
Q-49 Are tax assessments that are disputed administratively or judicially still covered by the tax amnesty law?
A-49 As a rule yes, except those cases excluded from the coverage of the Tax Amnesty Program as discussed in this CIRCULAR and those cases involving issues that have already been ruled by the trial court/appellate court in favor of the BIR/Government prior to taxpayer’s availment of the amnesty law.
Q-50 If the real property of the taxpayer is registered in the name of another person, can taxpayer declare the said property in his SALN and pay the amnesty tax A-50 No, because this kind of scenario is not covered by the tax amnesty program.
Q-51 Are corporations that filed notice of dissolution to the BIR as of taxable year 2005 covered by the tax amnesty? Upon presentation of proof of availment, will the BIR issue the corresponding tax clearance?
A-51 Yes, the dissolving corporations as of taxable year 2005 can be covered by the tax amnesty for as long as in the availment thereof, they pay 5% of the increase in the networth determined by comparing original SALN with amended SALN as of said year or 5% of the networth as of Balance Sheet/SALN date, whichever is applicable, which resulting amount should not, of course, be lower than the prescribed minimum absolute amount.. Consequently, upon availment and presentation of proof of availment, the BIR will issue the corresponding tax clearance.
Q-52 In the filing of the amended 2005 SALN/Balance Sheet for purposes of tax amnesty availment, should the same require the opinion of an independent auditor?
A-52 No. The amended SALN/Balance Sheet is considered as a truthful declaration by the taxpayer himself which does not need an evidence aliunde to establish its correctness.
Q-53 In case a company is originally classified as tax exempt but currently its status is in question, can such company avail of the tax amnesty?
A-53 Yes. The basis of such exempt entity of the tax amnesty rate of 5% shall be the total networth or the resulting increase in networth, whichever is applicable, but the amnesty tax payable is still the higher amount between the resulting figure therefrom and the prescribed minimum absolute amount.
Q-54 Is it possible to amend the SALN already filed under the Tax Amnesty Program?
A-54 Yes. As long as the next amendment would reflect only an inclusion of additional asset with corresponding increase in networth. No reduction in payment shall be allowed.
Q-55 Can minors avail of the tax amnesty?
A-55 Yes, minors who would want to avail of the TAP may avail provided that their amnesty tax payment is the higher amount between the resulting product of 5% of his total declared networth or 5% of the increase in networth, as the case maybe, and the prescribed minimum absolute amount of P50,000.
Q-56 In cases where the taxpayer has already agreed to pay the deficiency taxes and has in fact already entered into an agreement with the Bureau to pay such deficiency taxes on installment basis, will the same be covered by the tax amnesty?
A-56 No. The taxpayer who has already entered into an agreement with the BIR to pay taxes, whether in full amount or on installment basis, can no longer avail of the tax amnesty in so far as this particular tax case is concerned. It/he can avail of tax amnesty to cover its/his other tax liabilities, if there is no legal impediment for such availment.
Q-57 Are tax cases covered by compromise agreement and/or abatement agreement in accordance with existing revenue regulations relative to the compromise settlement program and abatement program of the Bureau covered by the tax amnesty?
A-57 No, such cases which have been covered by the compromise program or abatement program of the Bureau can no longer avail of the tax amnesty insofar as the tax subject of the compromise/abatement is concerned.
All internal revenue officers and others concerned are hereby enjoined to give this Circular as wide a publicity as possible.
(Original Signed)
LILIAN B. HEFTI
Commissioner of Internal Revenue
Subscribe to:
Posts (Atom)