BIR Ruling [DA-348-05]

August 12, 2005 BIR RULING [DA-348-05] SEC. 282 (A) Hon. Margarito Teves Secretary of Finance Manila S i r : We are forwarding for your approval the herein claim for informer's reward of DRA. IRIS RAFANAN-IIGO under Section 282 (A) of the Tax Code of 1997, including the whole docket relative to the internal revenue tax case of ASIAWEALTH PROPERTIES, INC. for taxable years 1999 and 2000. The records show that on July 20, 2001, the above-named informer filed a letter with the Office of the Commissioner denouncing ASIAWEALTH PROPERTIES, INC. for deliberately evading the payment of correct internal revenue taxes for taxable years 1999 and 2000. Subsequently, she executed an Affidavit of Confidential Information on July 24, 2001 which was later denominated as Confidential Information No. 45-2001 for purposes of claiming reward. On the basis of the preliminary report of investigation submitted by the examiners of the Tax Fraud Division, Letter of Authority No. 00029318 was issued on April 17, 2002 to investigate ASIAWEALTH PROPERTIES, INC. for all internal revenue taxes for taxable year 2000 and unverified prior years. It was ascertained in the investigation that subject taxpayer is a domestic corporation organized primarily to acquire by purchase, lease, donation or otherwise, and to own, use, improve, develop, subdivide, sell, mortgage, exchange, lease, develop and hold for investment or otherwise real estate of all kinds; that it was found out that in the audit of its books of accounts that for taxable years 1999 and 2000, ASIAWEALTH did not subject the salaries, wages and supervision fees of its employees amounting to P601,147.32 and P89,463.97 (taxable year 1999) and P53,760.65 (taxable year 2000) to withholding taxes on compensation, hence, disallowed; that the sale of condominium unit No. 1525 to Dra. Iris Rafanan-Iigo consisting of the collected principal on the actual contract price, penalties and interest thereon amounting to P288,262.34 (taxable year 1999) and P227,916.04 (taxable year 2000) were unreported; that the real estate taxes paid by condominium owners in their personal capacities as absolute owners thereof for the months of June, November and December in the sum of P61,688.69 were claimed as deduction from revenues by ASIAWEALTH, hence it was disallowed; that the unreported receipt of collections in the sale of the condominium unit #1525 to Dra. Iris Rafanan-Iigo amounting to P216,170.21 and P36,817.13 and the customer's deposit of P711,854.65 were not subjected to the 1.0% value-added tax; that likewise, income payments to several payees were not subjected to the expanded withholding taxes i.e. Security/Rental/Professional fees and Advertising expenses. DHITcS Thus, there is still due from herein taxpayer total deficiency internal revenue taxes, in the sum of P1,236,303.57 representing deficiency income taxes, value-added taxes and expanded withholding taxes, summarized as follows: PARTICULAR 1996 1998 1999 2000 TOTAL a) Deficiency Income taxes - - 707,661.44 219,720.87 927,382.31 b) Deficiency Value-Added taxes - - 225,959.49 7,066.67 233,026.16 c) Deficiency Expanded Withholding taxes 4,551.20 20,145.90 - 48,165.20 72,862.30 d) Registration fees 3,032.80 - - - 3,032.80 TOTAL 7,584.00 20,145.90 933,620.93 274,952.74 1,236,303.57 Thus, the taxpayer paid the following: KIND OF TAX YEAR INVOLVED AMOUNT MC-Registration Fees 1996 P 3,032.80 Withholding tax 1996 4,551.20 Withholding tax 1998 20,145.90 Withholding tax 1998 48,165.55 VAT 2000 7,066.67 VAT 1999 225,959.49 IT 2000 219,720.87 IT 1999 707,661.44 TOTAL P1,236,303.92 ========= which was certified by the Chief, Revenue Accounting Division that the collection listed were verified and found included in the Makati RDC data file as representing payment of taxes as remitted per CRDC and Central Bank Credit Advice. The records further show that the information furnished by the informer was in writing and under oath; that it was not yet in the possession of the BIR nor is the aforesaid tax liability pending or previously investigated by any official or employee of this Bureau or by the Department of Finance; and that the informer, as represented, is not related to any internal revenue official or employee or to any public officer within the sixth degree of consanguinity. It appearing that the information furnished by Dra. Iris Rafanan-Iigo was instrumental in the discovery of a violation of the internal revenue laws and in the recovery of taxes which otherwise would not have been effected, it is respectfully recommended that she be paid the amount equivalent to 10% of P1,236,303.92 or the amount of P123,630.39 as informer's reward pursuant to Section 282 (A) of the Tax Code of 1997, the law applicable herein. The said reward shall be subject to the 10% final tax imposed under Section 2.57 (1) of Revenue Regulations No. 2-98. Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue