BIR Ruling [DA-194-03]

June 20, 2003 BIR RULING [DA-194-03] RR 2-99 Alba Romeo & Co. 7/F, Multinational Bancorporation Centre 6805 Ayala Avenue Makati City Attention: Mr. Alba Romeo Gentlemen : This refers to your letter dated April 14, 2003 requesting in behalf of your client, Cagayan de Oro Medical Center, Inc. for a confirmation of your opinion that 1) the deadline for the availment of the Economic Recovery Assistance Payment (ERAP) for corporations using the fiscal year accounting period ending June 30, 1999 is on October 15, 1999, which is also the last day the return is required to be filed; and 2) Cagayan de Oro Medical Center, having complied with the requirements of the ERAP Program, is entitled to the privilege of immunity from audit and investigation on its income tax. It is represented that Cagayan de Oro Medical Center, Inc., a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with address at Tiano corner Nacalaban Streets, Cagayan de Oro City, filed its income tax return for the fiscal year ended June 30, 1999 and paid the income tax due thereon on October 15, 1999; that your client's income tax return for the year ended June 30, 1999 was filed on October 15, 1999; that the income tax due thereon in the amount of P455,415.00 was likewise paid on the same date, this is more than 120% of the income tax due for the fiscal year ended June 30, 1998 amounting to P377,607.00; and that it is your contention that your client has complied with the 20% increase requirement in the income tax due and filed its income tax return on time therefore, entitled to the benefits of the ERAP Program and consequently, the certificate of immunity from audit is deemed to have been issued as the BIR did not issue such certificate. In reply, please be informed that the Economic Recovery Assistance Payment (ERAP) Program granting immunity from audit and investigation of income tax, VAT and percentage tax returns covering the taxable year 1998, except withholding tax returns (whether for income, VAT, or percentage tax purposes) was initially offered to qualified taxpayers under Revenue Regulations (RR) No. 2-99, as amended by RR No. 6-99 and as implemented by Revenue Memorandum Order (RMO) No. 10-99 and RMO No. 11-99. The same regulations were clarified by Revenue Memorandum Circular (RMC) No. 17-99, RMC No. 18-99 and RMC No. 33-99. To qualify, a taxpayer must pay for taxable year 1998, an increment of at least 20% of what it paid for 1997. The taxpayer will then file an ERAP return and be issued a certificate of qualification which will exempt him from tax audit and investigation for the taxable year. On the basis of the foregoing and the pertinent Revenue Regulations on the matter, we proceed to rule on the particular issues raised for our consideration. 1) Section 1 of Revenue Regulations No. 2-99 which took effect on February 26, 1999 defines the term "Taxable Year 1998" to mean a. Calendar year 1998 b. Any fiscal period ending on the last day of any month from July 31, 1998 up to June 30, 1999 c. For VAT and Percentage taxes all quarters of the entire Calendar year 1998. Revenue Regulations No. 6-99 dated April 15, 1999 extended the deadline for availment of the ERAP Program under Rev. Regs. No. 2-99 until July 15, 1999. Section 3.2 of Rev. Regs. No. 2-99 and Section 4.2 of RMO 10-99 provide, viz. : "Taxpayers whose 1998 tax returns to be filed on or after the effectivity date of these regulations shall pay the additional tax(es) herein required at the same time such return is filed." TAaIDH Corollary to this, the Instructions attached to RMO No. 10-99 which prescribed uniform guidelines and procedures in the implementation of Rev. Regs. No. 2-99 states "6. WHEN TO PAY THE ADDITIONAL AMOUNT REQUIRED UNDER RR 2-99 . (a) In the case of a corporation using the fiscal year accounting period whose income tax return has already been filed as of the effectivity of RR No. 2-99, availment of the immunity from audit and investigation of such return, and payment of the additional amount prescribed, shall be on or before June 30, 1999. In the case of a corporation using the fiscal year accounting period whose income tax return is not yet due for filing as of June 30, 1999 (example: income tax return of a corporation for fiscal year ended June 30, 1999, deadline for filing of which shall be on October 15, 1999), deadline for payment of the additional amount prescribed under RR 2-99 shall be at the same time the said return is required to be filed. . . ." Based on the foregoing, this Office confirms your opinion that the deadline for the availment of the Economic Recovery Assistance Payment (ERAP) for corporations using the fiscal year accounting period ending June 30, 1999 is on October 15, 1999, which is also the last day the return is required to be filed. 2) After determination of taxpayer's full compliance with the requirements of RR 2-99 and upon verification of the correctness of his availment of immunity from audit and investigation, the qualified taxpayer shall be issued with a Certificate of Qualification for immunity from audit and investigation of his 1998 tax returns pursuant to Section 4.4 of Rev. Regs. No. 2-99 and Section 6.3 of RMO No. 10-99. Moreover, RMC No. 33-99 dated May 5, 1999 clarified the issue relative to the issuance of the Certificate of Immunity from Audit when it stated "Q-7: If a return qualifies for the immunity from audit or investigation by complying with the minimum payment requirements and an application for immunity has already been filed by the taxpayer, can the BIR refuse to issue or delay the issuance of the Certificate of Immunity from Audit ? A-7: No. The issuance of the Certificate of Immunity from Audit within 30 days from filing of the application with the required attachments is mandatory. If the BIR fails to issue the Certificate within this period, the same shall be deemed to have been issued, provided, that the taxpayer is qualified for immunity and has filed the application with the necessary information and supporting documents." Provided your client is qualified for immunity and has filed the application with the required attachments, the Certificate of Immunity from Audit is deemed to have been issued as the BIR did not issue such certificate. 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group