Tax amnesty on delinquencies: Take it or leave it

Much has been said about the Tax Amnesty Act (TAA) when it was enacted as Republic Act (RA) No. 11213. Even prior to its signing into a law, it has been described by many as a one-of-a-kind tax amnesty. As the entire Title III or the provisions on the general tax amnesty was vetoed by the President, taxpayers are left with the estate tax amnesty and the tax amnesty on delinquencies (TAD).

To expedite the enforcement of the TAA, the BIR is tasked to issue the implementing rules and regulations (IRR) within 90 days from effectivity. As a result, the TAD IRR was issued on April 5 through Revenue Regulations (RR) No. 4-2019.

The IRR covers the following internal revenue tax liabilities for taxable year 2017 and prior years wherein the qualified taxpayer may avail of the tax amnesty: (i) Delinquent accounts on or before the effectivity of the IRR, including those with pending or denied application for compromise settlement, delinquent withholding taxes due to non-withholding, and delinquent estate taxes; (ii) Criminal cases under the Tax Code, as amended, which are pending either with the DOJ/Prosecutor’s Office or the courts on or before the effectivity of the IRR; (iii) Tax cases subject of final and executory judgment by the courts on or before the effectivity of the IRR; and, (iv) Withholding taxes due to non-remittance to the BIR.

The term “delinquent account” encompasses only those arising from a tax audit which had been issued assessment notices (AN) which became final and executory. This poses a concern as “delinquent account” has always been referred to as the unpaid amount which may arise either from a self-assessed tax liability or a deficiency assessment.

Revenue Memorandum Order (RMO) No. 011-14 defines “self-assessed tax liability” as a tax liability resulting from any of the following: (a) Dishonored check (check used to pay the tax liability, but was later dishonored by the concerned depository bank of the delinquent taxpayer); (b) Tax due per return filed by taxpayers who failed to pay the same within the time prescribed for its payment; and, (c) Non-payment of the 2nd installment due from individual taxpayers who availed of installment payments of income tax under Sec. 56(A)(2) of the Tax Code, as amended.

During the public consultation conducted by the BIR on March 12, the BIR addressed this concern by explaining that it is of the opinion that tax amnesty should not be extended to taxpayers who filed returns but failed or refused to pay the same. The BIR also stated that those whose payments were not accepted due to a bounced check should not benefit from the TAA either.

Another possible point of interest on the definition of delinquent account is the absence of provision addressing the issue of withdrawal of administrative or judicial appeals after the effectivity of the IRR. The definition deals with delinquent accounts which have become final and executory as of the effectivity of the IRR, but not afterwards.

As the TAD rates range from 40 percent to 100 percent of the basic tax assessed depending on the nature of tax liabilities, illustrations are provided in the IRR in order to guide taxpayers in the computation of the amount of tax amnesty to be paid. In cases of delinquent taxes with denied or pending application for compromise settlement, the amount to be paid shall be based on the net basic tax multiplied by the tax amnesty rate.

The net basic tax is derived at by deducting the amount paid in the compromise settlement application from the amount of tax stated in the AN. In regard to all other cases with partial or installment payments, the tax amnesty rate shall be multiplied by the net amount computed by deducting the partial payments from the basic tax shown in the AN.

The IRR enumerates the documentary requirements, as follows: (i) Duly accomplished Tax Amnesty Return (TAR) made under oath; (ii) Acceptance Payment Form (APF) duly validated by the Authorized Agent Banks (AABs) or stamped received with accompanying bank deposit slip duly validated; (iii) Certificate of Tax Delinquencies issued by the BIR; and, (iv) In cases of delinquent withholding taxes arising from non-withholding, a copy of the Final Assessment Notice/Final Decision on Disputed Assessment. In cases of applications pertaining to withholding tax liabilities of withholding agents due to non-remittance of taxes withheld, the Preliminary Assessment Notice or the Notice of Informal Conference or equivalent document is sufficient to comply with the fourth documentary requirement.

The place of filing is simplified by the IRR as the TAR and other documentary requirements shall be filed with the Revenue District Officer (RDO) where the applicant-taxpayer is registered, in case of non-large taxpayers. In case of large taxpayers (LT), the documentary requirements shall be filed with the LT Collection Enforcement Division (LTCED) with the exception of those registered with the LT Division – Cebu or Davao who shall file the requirements with the LT Division (LTD) where they are registered.

A step-by-step procedure is also laid out in the IRR which may serve as a guide to qualified taxpayers. It includes a three-step process, the first of which instructs that the Certificate of Delinquencies/Tax Liabilities (Certificate) be secured from the concerned BIR office categorized depending on the nature of tax liabilities, and whether the taxpayer is a LT or non-LT.

The second step orders the presentation of the documentary requirements to the concerned RDO/LTCED/LTD for endorsement of the APF and the payment of the tax amnesty amount with the AABs or Revenue Collection Officers, whichever is applicable, by presenting the RDO/LTCED/LTD-endorsed or approved APF.

The last step directs the submission to the RDO/LTCED/LTD, in triplicate copies, the complete documentary requirements and proof of payment, which in no case shall be beyond the one year availment period.

Ivy Carisse M. Peñalba is a supervisor from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected] or [email protected].