Nisce Mamuric Guinto Rivera & Alcantara

December 22, 2009 BIR RULING [DA-(C-341) 824-09] Section 255; BIR Ruling Nos. DA187-03 & DA-110-08 Nisce Mamuric Guinto Rivera & Alcantara Unit 804, 139 Corporate Center Bldg., Valero St. Salcedo Village, Makati City Attention: Atty. Emelyn Corpus-Martinez Gentlemen : This refers to your letter dated September 18, 2009 requesting for a clarificatory ruling on the matter of imposition of penalties in case of failure to file a return on time. As represented, one of your client's family-owned holding corporation organized in 2006, inadvertently failed to file its income tax returns for the years 2006, 2007 and 2008. As the corporation did not earn any income since its organization, no income tax was due for the said years. Upon being advised of the deficiency, your client attempted to file its income tax return for the year 2008. The concerned BIR Revenue District Office refused to accept the return until and unless your client first files the returns for the prior years ("open cases") i.e., Income Tax Returns for 2006 and 2007, and VAT Returns for all quarters of 2006, 2007 and 2008. Moreover, the RDO wishes to impose a penalty of P1,000 per return citing Section 250 of the National Internal Revenue Code ("NIRC"). You now request for clarification on the following: 1) The basis for the BIR RDO's refusal to accept the ITR for 2008 until compliance with the submission of returns for the open cases; and, 2) Which Section of the NIRC applies in this instance with respect to the compromise penalty due Section 250 or 255. We now rule on the issues before us. In reply, please be informed that we do not have jurisdiction over No. 1 above since this is not a legal issue. Your recourse is with the office of the Operations Group. TECcHA Regarding issue No. 2, Sections 250 and 255 of the NIRC provides as follows: "SEC. 250. Failure to File Certain Information Returns. In the case of each failure to file an information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be paid by the person failing to file, keep or supply the same, One thousand pesos (P1,000) for each such failure: Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-five thousand pesos (P25,000)." "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. Any person who attempts to make it appear for any reason that he or another has in fact filed a return or statement, or actually files a return or statement and subsequently withdraws the same return or statement after securing the official receiving seal or stamp of receipt of an internal revenue office wherein the same was actually filed shall, upon conviction therefor, be punished by a fine of not less than Ten thousand pesos (P10,000) but not more than Twenty thousand pesos (P20,000) and suffer imprisonment of not less than one (1) year but not more than three (3) years." Section 250 of the NIRC applies to tax exempt corporations who failed to file the required information return, statement or list, or keep any record, or supply any information. On the other hand, Section 255 applies to taxable persons who failed to pay the required 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 information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required. The imposition of the penalties prescribed in Section 255 of the Code, for failure to file the required return is mandatory. Since you represented that the concerned taxpayer is a holding corporation which is, therefore, a taxable person, Section 255 of the NIRC will apply. HaTAEc 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service