Aranas Consunji Barleta Law Offices

January 25, 2008 BIR RULING [DA-045-08] RA 9480 Aranas Consunji Barleta Law Offices Unit 106 G/F Le Metropole Building 326 Tordesillas cor. De la Costa Sts. Salcedo Village, Makati City Attention: Ma. Lorella M. Aranas Partner Gentlemen : This refers to your letter dated January 14, 2008 requesting for a ruling relative to the availment of LG Electronics of the tax amnesty program of the government under Republic Act No. 9480, otherwise known as the Tax Amnesty Act of 2007 ("Act"), Department Order No. 29-07, RMC NO. 55-2007 and RMC No. 69-2007. EcHTCD It is represented that LG Electronics ("LGE") is a domestic corporation with TIN No. 000-286-404-000 and with principal place of business at #15 F. Legazpi Street, Maybunga, Pasig City; that it previously filed its Balance Sheet as of December 31, 2005 and has a subscribed capital of above Fifty Million Pesos (P50,000,000.00);that on October 26, 2007, it availed of the tax amnesty, paid the corresponding minimum tax amnesty rate for corporations in the amount of Five Hundred Thousand Pesos (P500,000.00) under Section 5 (b) of the Act and submitted its tax amnesty forms, i.e. Notice of Availment of Tax Amnesty Form, Tax Amnesty Payment Form (BIR Form No. 0617),Tax Amnesty Return (BIR Form No. 2116) and Statement of Assets, Liabilities and Networth (SALN) to Revenue District Office No. 43 of the BIR of Pasig City; that on January 11, 2008, LGE amended its tax amnesty returns, paid the amount of Eight Million One Hundred Forty Seven Thousand Five Hundred Sixty Five Pesos and Fifty Centavos (P8,147,565.50) representing the remaining balance of its amnesty tax due in the amount of Eight Million Six Hundred Forty Seven Thousand Five Hundred Sixty Five Pesos and Fifty Centavos (P8,647,565.50) and submitted anew its amended tax amnesty forms to Revenue District Office No. 43 of the BIR of Pasig City pursuant to RMC No. 69-2007 dated November 5, 2007, viz .: 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 of 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. CHcTIA Based on the above representations, you are requesting for clarification on the following matters: 1. Can LGE amend its tax amnesty forms under Republic Act No. 9480, Department Order No. 24-07, RMC No. 55-2007 and RMC No. 69-2007 and if so, how much is the amnesty tax rate that it is liable for? 2. What are the immunities and privileges that LGE is entitled to after sufficiently complying with the requirements of Republic Act No. 9480 Department Order No. 24-07, RMC No. 55-2007 and RMC No. 69-2007? In reply, please be informed that LGE can amend its tax amnesty forms pursuant to Republic Act (RA) No. 9480 as implemented by Revenue Memorandum Circular (RMC) No. 55-2007 and RMC No. 69-2007. With regard to your second query on how much is the tax amnesty rate that LGE is liable, Section 5 of the Act provides, viz .: ADcHES SEC. 5. Grant of Tax Amnesty. Except for the person or cases covered in Section 8, hereof, any person, whether natural or juridical may avail himself of the benefits of the tax amnesty under this Act and pay the amnesty tax due thereon based on his networth as of December 31, 2005 as declared in the SALN as of said period in accordance with the following schedule of amnesty tax rates and minimum amnesty tax payments required: xxx xxx xxx (b) Corporations (1) With subscribed capital of above P50 Million 5% or P500,000.00, whichever is higher xxx xxx xxx (d) Taxpayers who filed their balance sheet/SALN, together with their income tax returns for 2005, and who desire to avail of the tax amnesty under this Act shall amend such previously filed statements including still undeclared assets and/or liabilities and pay an amnesty tax equal to five percent (5%) based on resulting increase in networth: Provided, That such taxpayer shall likewise be categorized in accordance with, and subjected to the minimum amounts of amnesty tax prescribed under the provisions of this Section. aCHcIE Similarly, Section 7 of RMC No. 55-2007 provides: SEC. 7. Tax Amnesty Rates. In order to enjoy the benefits of the tax amnesty program, the qualified taxpayers are required to pay an amnesty tax equivalent to five percent (5%) of their total declared networth as of December 31, 2005, as declared in the SALN as of the said period, or resulting increase in networth by amending such previously filed statements for purposes of this tax amnesty, thereby including still undeclared assets and/or liabilities, as the case may be, as of December 31, 2005, or the absolute minimum amnesty payment, whichever is higher in accordance with the following schedule: (emphasis supplied) xxx xxx xxx 2. Corporations (a) With subscribed capital 5% or P500,000, of above P50 Million whichever is higher xxx xxx xxx RMC No. 69-2007 clarified Section 5 of the Act and Section 7 of RMC No. 55-2007 to wit: 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 of 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. EAcTDH On the basis of the foregoing, LGE should pay a tax amnesty rate equivalent to five percent (5%) of its total declared networth as of Balance Sheet dated December 31, 2005. Per attached certified true copy of Balance Sheet of LGE dated December 31, 2005, LGE has a total declared networth of One Hundred Seventy Two Million Nine Hundred Fifty One Thousand Three Hundred Ten Pesos (P172,951,310.00). As such, LGE is liable for the amount of Eight Million Six Hundred Forty Seven Thousand Five Hundred Sixty Five Pesos and Fifty Centavos (P8,647,565.50). It appears that LGE initially paid the amount of Five Hundred Thousand Pesos (P500,000.00) on October 26, 2007 when it first availed of the tax amnesty and it subsequently paid the amount of Eight Million One Hundred Forty Seven Thousand Five Hundred Sixty Five Pesos and Fifty Centavos (P8,147,565.50) on January 11, 2008 when it amended its tax amnesty returns. As such, LGE has fully paid its liabilities under the Act. With respect to the immunities and privileges which LGE is entitled to, after sufficiently complying with the tax amnesty requirements of the government Section 6 of the Act provides, viz .: SEC. 6. Immunities and Privileges. Those who have availed themselves of the tax amnesty under Section 5 hereof, and have fully complied with all its conditions shall be entitled to the following immunities and privileges: (a) The taxpayer shall be immune 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 Returns and the 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 a defendant or respondent, and 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 as a defense, whenever appropriate, in cases brought against him. aTIAES (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: Provided, That the Commissioner of Internal Revenue 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. All these immunities and privileges shall not apply where the person failed to file a SALN and the Tax Amnesty Return, or where the amount of networth as of December 31, 2005 is proven to be understated to the extent of thirty percent (30%) or more, in accordance with the provisions of Section 3 hereof. CADHcI This same provision is reiterated in Section 10 Rule V of RMC No. 55-2007, viz .: SEC. 10. Immunities and Privileges. Taxpayers who have fully complied with the conditions under RA 9480 and these rules shall be entitled to the following immunities and privileges: 1. The taxpayer shall be immune 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. 2. The taxpayer's Tax Amnesty Returns and the 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 a defendant or respondent, and 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 as a defense, whenever appropriate, in cases brought against him. 3. The books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined: Provided, That the Commissioner of Internal Revenue 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. The above-stated immunities and privileges shall not apply where the person failed to file a SALN and the Tax Amnesty Return, or where the amount of networth as of December 31, 2005 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 hereof. CIaDTE Based on the foregoing, the immunities and privileges provided above are available to LGE considering its full compliance with the conditions under the Act. Section 6 (3) of RMC No. 55-2007 provides for the requirements for full compliance with the Act, viz .: SEC. 6. Method of Availment of Tax Amnesty. xxx xxx xxx 3. Payment of Amnesty Tax and Full Compliance. Upon filing of the Tax Amnesty Return in accordance with Section 6 (3) hereof, the taxpayer shall pay the amnesty tax 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. xxx xxx xxx The Acceptance of Payment Form, the Notice of Availment, the SALN, and the Tax Amnesty Return shall be submitted to the RDO, which shall be received only after complete payment. The completion of these requirements shall be deemed full compliance with the provisions of RA 9480. (emphasis supplied) xxx xxx xxx Considering that LGE has paid the amnesty tax due for corporation and has submitted its tax amnesty forms to Revenue District Office No. 47 of the BIR of Pasig City, there is deemed full compliance with the provisions of the Act. As such, LGE is entitled to the immunities and privileges provided for under Section 6 of the Act and Section 10 of RMC No. 55-2007 which provides, among others, immunity from payment of tax liabilities, 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 its failure to pay any and all internal revenue taxes for taxable year 2005 and prior years. This includes immunity from payment of any internal revenue tax liability except those provided for under Section 5 of the Act. STCDaI This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service