BIR Ruling No. 011-10

June 10, 2010 BIR RULING NO. 011-10 Head Revenue Executive Assistant Regular Large Taxpayer Service BIR National Office Building Gentlemen : This refers to your memorandum dated June 30, 2008 wherein you forwarded to the Law Division the tax docket of Mindanao I Geothermal Partnership (MIGP) for resolution of a legal issue. It is represented that Mindanao I Geothermal Partnership (MIGP) is a domestic partnership organized and existing under the laws of the Philippines; that it has been assessed deficiency income taxes; that on the day the Formal Letter of Demand was served, MIGP signed the Taxpayer's Agreement Form, agreeing to pay the basic deficiency Income Tax of PHP51,476,060.29 on or before June 30, 2007; that on June 28, 2007, MIGP paid thru EFPS the amount of PHP25,738,030.14, representing 50% of the basic deficiency income tax; that in a letter dated February 28, 2008 MIGP informed the Bureau that it has availed of the Tax Amnesty Program and that it has paid the tax amnesty due for the deficient tax liability on September 27, 2007. The legal issue raised is whether MIGP's availment of the tax amnesty under Republic Act (R.A.) No. 9480 extinguished its liability to pay deficiency income taxes for the year 2003. In reply thereto, please be informed that the tax amnesty under R.A. No. 9480 covers all national internal revenue for the taxable year 2005 and prior years, with or without assessments that have remained unpaid as of December 31, 2005. However, under Revenue Memorandum Circular (RMC) No. 69-2007, a taxpayer who has already entered into an agreement with the BIR to pay taxes, whether in full amount or on installment basis, can no longer avail of the tax amnesty in so far as that particular that case is concerned. IcHTCS Moreover RMC 19-2008, entitled; "A BASIC GUIDE ON THE TAX AMNESTY ACT OF 2007", expressly provides the following exceptions of who may not avail of the amnesty, to wit: 1. Withholding agents with respect to their withholding tax liabilities; 2. Those with pending cases: Under the jurisdiction of the PCGG; Involving violation of the Anti-Graft and Corrupt Practices Act; Involving violations of the Anti-Money Laundering Law; For tax evasion and other criminal offenses under the NIRC and/or RPC. 3. Issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer. ( e.g. , Taxpayers who have failed to observe or follow BIR and/or PEZA rules on entitlement to Income Tax Holiday Incentive and other incentives); 4. Cases involving issues ruled with finality by the Supreme Court prior to the effectivity of R.A. No. 9480 ( e.g. , DST on Special Savings Account); 5. Taxes passes-on and collected from customers for remittance to the BIR; 6. Delinquent Account/Accounts Receivable considered as assets of the BIR/Government, including self-assessed tax . (Emphasis supplied) It is clear from the above-cited revenue memorandum circulars that receivables already due in favor of the BIR prior to the application for tax amnesty excludes such receivable from the coverage of R.A. No. 9480. While MIGP's tax amnesty availment may cover other taxes/assessments that it may have or may arise for 2005 and prior years, it should not cover delinquent accounts as these are already properties/assets of the Government prior to/upon the taxpayer's date of amnesty availment. The absence of a distinction for receivables under the provisions of R.A. No. 9480 is of no moment since exemptions from taxation are construed strictly against the taxpayer and liberally in favor of the taxing authority. The Implementing Rules and Regulations of R.A. No. 9480, as regards the law's construction, empowers the Secretary of Finance, in coordination with the BIR, to issue necessary clarifications in case of conflict or ambiguity. IcSADC In addition, MIGP's legal counsel executed a Taxpayer's Agreement Form (TAF) which reads: TAXPAYER'S AGREEMENT FORM The LT Audit & Investigation Division BIR National Office Bldg., Diliman, Quezon City Sir: Please be informed that after having been apprised of the findings of Revenue Officer E. Larin under Group Supervisor Corazon R. Balinas , on the examination of the records of MINDANAO I GEOTHERMAL PARTNERSHIP for deficiency Income Tax on disallowed portion of Income Tax Holiday availed for the calendar year ending December 31, 2003 under Referral No. LQ-040-02-07 dated February 28, 2007. I/We find the hereunder-proposed assessment acceptable: Kind of Tax Basic Surcharge Interest Compromise Total IT 51,476,060.29 0.00 32,211,321.01 0.00 83,687,381.30 I/We, therefore voluntarily agree and bind myself to pay the basic income tax amounting to P51,476,060.29 on or before June 30, 2007 , and we would seek a waiver of penalties with respect to the interest, subject to review by higher authorities. The payment will consist of 50% cash to be paid using the BIR electronic system of payment and the other 50% by a Tax Credit Certificate. (Underscoring ours) HCacDE Very truly yours, By: (Sgd.) Atty. Gari Tiongco Legal Counsel By executing the aforecited TAF, MIGP voluntarily agreed to pay the basic income tax. It should not be allowed to renege on its commitment by availing of the tax amnesty. The power of taxation is necessary to the existence of government and is considered as the lifeblood of the State, hence taxation is considered as the rule while exemption is considered the exception. The express intention of R.A. No. 9480 is to put a moratorium on the grant tax amnesty in order to encourage and improve tax compliance of taxpayers. 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, (SGD.) JOEL L. TAN-TORRES Commissioner of Internal Revenue