BIR Ruling [DA-343-03]

October 7, 2003 BIR RULING [DA-343-03] 248 & 249 ETSI Technologies, Inc. 17/F, Salcedo Tower 169 H.V. dela Costa Street Salcedo Village, Makati City Attention: Mr. Santos Capulong General Accountant Gentlemen : This refers to your letter dated January 15, 2001 requesting for waiver of surcharge and compromise penalty for late filing and remittance of withholding tax for the period from July to September, 2000. It is represented that you failed to file the return and remit the withholding tax on fringe benefits on the due date which is October 25, 2000; that the delay in the filing and remittance was due to the fact that you were busy with your year-end activities in preparation for the year-end audit; and that after due notice, you filed the return and paid the basic tax due and interest in the amount of P991,152.51 and P44,533.98, or a total amount of P1,035,686.49 per Land Bank of the Philippines O.R. No. 7064402, on January 15, 2001. In reply, please be informed that the taxes deducted and withheld by the withholding agent shall be held as a special fund in trust for the government until paid to the collecting officers pursuant to Section 58 in relation to Section 81 of the Tax Code of 1497. Moreover, paragraph 2 of Section 2.58.1 of Revenue Regulations No. 2-98 implementing Section 58 of the Tax Code of 1997 provides that "The taxes withheld by the withholding agents shall be maintained in separate accounts and should not be commingled with any other funds of the withholding agent. They shall be considered as a trust fund held for the government until they are remitted." Finally, under Section 248(a)(1) and (3), both of the Tax Code of 1997, the imposition of the surcharge on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The laws imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasion or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and the maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the state on time. The imperatives of public welfare will not approve of this result. ( Jamora vs. Meer , 74 Phil. 22) In view thereof, your request for waiver of surcharge for late filing and remittance of withholding tax on fringe benefits for the period from July to September, 2000 is hereby denied for lacy of legal basis. TaCSAD On the other hand, a compromise penalty is a certain amount of money which the taxpayer pays to compromise a tax violation. This is paid in lieu of criminal prosecution. In Commissioner vs. Fireman's Fund Insurance Co ., L-30644, March 9, 1987 and UST vs. Collector , 104 Phil 1962, the Supreme Court ruled that a compromise implies mutual agreement. Hence, compromise penalties cannot be imposed in the absence of a showing that the taxpayer consented thereto. If the Commissioner's offer of compromise is rejected by the taxpayer, the Commissioner cannot enforce it but he may file a criminal action against the taxpayer for the tax violation. 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