BIR Ruling [DA-267-99]

May 5, 1999 BIR RULING [DA-267-99] Diaz Murillo Dalupan 5F, Don Jacinto Building Dela Rosa corner Salcedo Streets Legaspi Village, Makati City Attention: Atty. Millard M. Manseguiao Senior Tax Consultant Gentlemen : This refers to your letter dated September 28, 1998, requesting in behalf of your client 3-Com Philippines, Inc. for the waiver of the surcharge, interest and compromise penalties in the aggregate amount of P532,435.34, resulting from the late remittance of monthly withholding tax from its personnel payroll covering the period from January to July, 1998. It is represented that 3-Com Philippines, Inc. engaged the services of Professional Payroll Specialist, Inc. (Payroll Services) in January, 1998 to handle the preparation of their personnel payroll, to withhold and prepare BIR Form 1601 formerly 1743W to accompany remittance of the creditable withholding tax due from their employees in addition to other payroll related remittances; that Payroll Services failed to remit on due date for the following reasons: 1. that with respect to your enrolment with the Far East Bank and Trust Company Bel Air Branch for purposes of Bureau of Internal Revenue payments, the bank's representative officer informed you that it cannot accept checks payable to the Bureau for the said purpose unless a peso savings account with a minimum maintaining balance in the amount of P5,000.00 was opened; DHEcCT 2. that despite instructions from 3-Com to pay their withholding tax liability through Hongkong and Shanghai Bank, Payroll Services cannot comply because Shanghai Bank is not an authorized agent bank; that because of these impossible conditions, 3-Com Philippines, Inc. failed to remit the monthly withholding tax of 3-Com personnel on due date; that it was only on August 27, 1998 when the BIR, pursuant to Revenue Regulation No. 6-98, allowed the payment of internal revenue taxes by check, through the assistance of Professional Services, Inc.; and that the BIR has assessed the following penalties for late payment as indicated below: Year/Month Surcharge Interest Compromise Total January, 1998 P 42,757.05 P 21,378.55 P 16,000.00 P 80,135.60 February 38,943.10 16,161.38 16,000.00 71,104.48 March 54,810.66 18,361.57 16,000.00 89,182.23 April 45,503.20 11,375.80 16,000.00 72,879.00 May 44,194.20 7,292.05 16,000.00 67,486.25 June 45,405.62 3,859.50 16,000.00 65,265.12 July 66,408.16 3,984.50 16,000.00 86,392.66 Grand Total P338,021.99 P82,413.35 P112,000.00 P532,435.34 ========= ======== ========= ========= In reply thereto, please be informed that the obligation to pay interest and surcharge under the Tax Code is mandatory. ( Commissioner of Internal Revenue vs. Limpan Investment Corporation , L-286444 dated July 31, 1970) The surcharge and interest respectively imposed under Sections 248 and 249 of the Tax Code of 1997 are but just compensation to the state for the delay in paying the tax and the concomitant use by the taxpayer of funds that rightfully should be in the hands of the government. ( Central Azucarera de San Pedro vs. Court of Tax Appeals , 20 SCRA 345) ECcTaH However, your failure to pay your withholding tax liabilities is not entirely your fault and therefore legally justifiable although you should have insisted to the Revenue District Officer to accept your remittance of the said taxes on the ground that you will be penalized if you will not be able to pay it on time. In view thereof, your request for the waiver of the payment of surcharge and compromise penalty is hereby granted but not the payment of interest imposed under Section 249 of the Tax Code of 1997. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue