BIR Ruling [DA-474-03]

December 10, 2003 BIR RULING [DA-474-03] Secs. 58, 251 & 255; 2-95 & 88-94 Hon. John Paul K. Alvarez Municipal Mayor Ilog, Negros Occidental S i r : This refers to your letter dated July 24, 2002 requesting for condonation of surcharges, interest and penalties on late remittance of withholding taxes due for the period January 1, 1999 to June 30, 2000, as reflected in the Pre-assessment Notice dated January 29, 2002. It is represented that the Municipality of Ilog, being a Fourth Class Municipality is dependent on Internal Revenue Allotment (IRA), as well as assistance from other sources; that during the same period, remittance of IRA was likewise delayed, and this adversely affected your financial operation, specifically your cash position, because you had to prioritize the salaries and wages of your employees; and that all collections due the Bureau of Internal Revenue had already been remitted. 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 1997. 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." Under Sections 251 and 255 of the Tax Code of 1997, it is specifically provided that "SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax . Any person required to withhold, account for and remit any tax imposed by this Code or who willfully fails to withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this Chapter, be liable upon conviction to a penalty equal to the total amount of the tax not withheld, or not accounted for and remitted." xxx xxx xxx "SEC. 255. Failure to File Return, Supply Correct and Accurate information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation . Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply correct and accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years." It is clear that the imposition of the penalties prescribed therein for failure to remit taxes withheld is mandatory, as shown from the language and content, and therefore, cannot be waived. aTHCSE Finally, any person required to collect, account for, and remit any tax imposed by the Tax Code of 1997, who willfully fails to collect such tax, or account for and remit such tax or willfully assists in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for in Chapter I and II, Title X of the Tax Code of 1997, be liable to a penalty equal to the total amount of the tax not collected, or not accounted for and remitted. In view of the foregoing, this Office regrets to deny your request. This serves as our final stand. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group