Atty. Jose N. Tan

September 27, 2007 BIR RULING [DA-514-07] Atty. Jose N. Tan Regional Director Revenue Region No. 13 Cebu City S i r : This refers to your letter dated September 24, 2007 requesting for a clarification as to whether or not the Revenue District Office (RDO) No. 80, Mandaue City, can proceed with the scheduled auction sale and whether or not subject taxpayer is qualified to avail of the tax amnesty under Republic Act (R.A.) No. 9480, as implemented by Department Order No. 29-07 dated August 15, 2007. It appears that Philippine Dream Company, Inc. with principal office at CMR Building, Mandaue Road, Punta, Rizal Street, Poblacion, Lapulapu City has an outstanding internal revenue tax liability for the taxable year 2002 in the respective amounts of P58,065,654.25 and P415,423.57 representing value-added tax (VAT) and expanded withholding tax (EWT) per Assessment Notice Nos. 80-VAT-13-2002-2006-3-24 and 80-EWT-13-2002-2006-3-75; that the aforementioned assessment has become final and executory; that the RDO No. 80, Mandaue City, has pursued the collection of the said delinquent liability through summary remedies; that a warrant of distraint was served upon the Maritime Industry Authority (MARINA) to annotate the tax lien on the vessel "MV Philippine Dream"; that pursuant to the guidelines for collection of taxes under summary remedies, the Philippine Dream Company, Inc. through its local representative was served the warrant of distraint and levy together with the information that the attached vessel will be auctioned by the RDO No. 80, Mandaue City, on September 28, 2007 after the publication of the notice for three (3) consecutive weeks in the newspaper of general circulation; that interested bidders and brokers have already inquired with the office and manifested their intention to participate in the bidding; that consequently, the Bureau of Customs, Port of Cebu, through its District Collector called the attention of RDO No. 80 on its claim on the vessel for customs duties in the amount of P12,000,000.00 before the scheduled date of auction; and that on September 21, 2007, Atty. Pericles Consunji, representing Philippine Dream Company, Inc., informed the District Collection Supervisor of RDO No. 80, Mandaue City, that his client has availed of the tax amnesty and paid the amount of P100,000.00 on September 21, 2007 as evidenced by BIR tax payment deposit slip from the Land Bank of the Philippines, BIR Form No. 2116, BIR Form No. 0617 and the Statement of Assets and Liabilities as of December 31, 2005 as required by RMC No. 25-2007. In reply thereto, please be informed that a tax amnesty, much like a tax exemption, is never favored nor presumed in law and if granted by statute, the terms of the amnesty like that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the tax authority. (People vs. Castaeda, Jr., G.R. No. 46881, September 15, 1988) Thus, in order to enjoy the benefits of the tax amnesty statute, the taxpayers must show that they have individually complied with and come within the terms of that statute. Section 7 of RMC No. 25-2007 provides that "SEC. 7. Tax Amnesty Rates . In order to enjoy the benefits of the tax amnesty program, the qualified taxpayers are required to pay an amnesty tax equivalent to five percent (5%) of their total declared networth as of December 31, 2005, as declared in the SALN as of the said period, or resulting increase in networth by amending such previously filed statements for purposes of this tax amnesty, thereby including still undeclared assets and/or liabilities, as the case may be, as of December 31, 2005, or the absolute minimum amnesty payment, whichever is higher, in accordance with the following schedule: xxx xxx xxx 2. Corporations (a) With subscribed capital of above 5% or P500,000, P50 Million whichever is higher (b) With subscribed capital above 5% or P250,000, P20 Million up to P50 Million whichever is higher (c) With subscribed capital of P5 5% or P100,000, Million to P20 Million whichever is higher (d) With subscribed capital of below 5% or P25,000, P5 Million whichever is higher xxx xxx xxx" Prescinding from the above-cited provisions, it is undisputed that there are two (2) tax amnesty rates under the program i.e., 5% of their total declared networth or the above-mentioned amounts based on the subscribed capital, whichever is higher. In the instant case, Philippine Dream Company, Inc. availed of the tax amnesty and paid the amount of P100,000.00 based on its authorized capital stock of P14,177,600.00 without considering its networth. Thus, there is no point wherein the BIR can determine whether it has in fact complied with the said program. SUCH BEING THE CASE, this Office holds that notwithstanding the payment of P100,000.00, representing 5% amnesty tax based on its subscribed capital, Philippine Dream Company, Inc. is deemed not to have complied fully with the provisions of R.A. No. 9480 and consequently, will not prevent the RDO No. 80, Mandaue City, from proceeding with the scheduled auction sale on September 28, 2007. Please be guided accordingly. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service