Grant of Request for Waiver of Penalties, Surcharges and Interests Relative to Late Payment of GRT and DST

April 14, 1999 BIR RULING NO. 050-99 Sec. 204 R.A. 7906-000-00-050-99 Development Bank of the Philippines Sen. Gil Puyat Avenue Makati City Attention: Atty . Carlos R . Cruz Chief Legal Counsel Gentlemen : This refers to your letter dated March 3, 1997, addressed to the Regional Director of Revenue Region No. 8, BIR-Makati City, requesting for the waiver of penalties/surcharges and interests relative to the late payment of Gross Receipts Tax (GRT) and Documentary Stamp Tax (DST) pursuant to Section 204 of the Tax Code, as amended. prLL Documents submitted to this Office show that the Development Bank of the Philippines (DBP) has paid the GRT for the taxable year starting February 7, 1996 until July 30, 1996 in the total amount of Seventy-two Million Fifteen Thousand One Hundred Twenty-Six Pesos and 20/100 (P72,015,126.20); that on September 12, 1996, it had likewise paid the DST for the period covering February 1996 to June 30, 1996 in the total amount of Two Million One Hundred Ninety Thousand Seven Hundred Ten Pesos and 40/100 (P2,190,710.40); that over and above the basic taxes paid, it had been assessed the corresponding surcharges/penalties and interests; that the herein request is premised on DBP's assumption that it is a thrift bank pursuant to its Charter, Executive Order No. 81, specifically in Section 2, par. 2 thereof, to wit: "The primary purpose of the Bank shall be to provide banking services principally to "service the medium and long-term needs of agricultural and industrial enterprises, particularly in the countryside and preferably for small and medium-scale enterprises; Provided , however , that the pursuit of these objectives shall be undertaken within the context of financially viable and stable banking institution; Provided , further , that the Bank shall continue to be classified as a development bank, and Provided , finally , that unless otherwise provided herein, the Bank may perform all other functions of a thrift bank." (Emphasis supplied) that DBP was operating as a thrift bank from December 1986, which is the effectivity date of its Charter, until January 1997 when it ceased to engage in thrift banking operations since it was already granted a license to operate as a universal commercial bank (EKB/Expanded Commercial Bank) in February 1996; that the status of being a "thrift bank" was based on a legal opinion issued by the BSP's General Counsel, thus the Governor of the Bangko Sentral ng Pilipinas (BSP), Gov. Gabriel Singson, quoted, viz. : "DBP can be a unibank, without losing its status as a thrift bank, because the Charter of DBP says it is a thrift bank". (Bulletin Today, July 21, 1995 issue) that, being such, Section 17 of Republic Act No. 7906, otherwise known as the Thrift Bank Act of 1995 , provides that: "SEC. 17. Tax exemptions . All thrift banks, whether created or organized under this Act or in operation as of the date of effectivity of this Act, shall be exempt from payment of all taxes, fees and charges of whatever nature and description, except the corporate income taxes and local taxes, fees and charges for a period of five (5) years, counted from the date of commencement of operations for thrift banks created under this Act and from the date of the effectivity of this Act for existing thrift banks." (Emphasis supplied.) that notwithstanding the aforequoted tax exemptions, DBP still paid the above-mentioned taxes for the taxable year 1996; that while DBP invoked the aforesaid tax exemptions, it did not, however, request for any refund of the taxes thus paid, but rather is simply requesting for a waiver of penalties or interests relating to the delay in the remittance of the abovementioned taxes, viz, the GRT and DST. In reply, please be informed that pursuant to Section 204 of the Tax Code, as amended (also Section 204 of the Tax Code of 1997), the Commissioner of Internal Revenue may compromise or abate a tax liability only when a reasonable doubt as to the validity of the claim against the taxpayer exists or when the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax, or when the tax thereof appears to be unjustly or excessively assessed; otherwise, the same must be paid, including the corresponding interests and surcharges, to compensate for the concomitant use of the funds by the taxpayer beyond the date when it was supposed to have been paid. On the other hand, if an overpayment or erroneous payment of the tax has been made, or a tax incentive was granted under existing laws and still the taxes thereon have been paid, then a tax credit is being issued to the taxpayer. DBP's request for abatement of interests, penalties and surcharges was premised on its claim that it erroneously paid the GRTs and DSTs for the period thus indicated. Hence, it should likewise be granted a relief. On the basis of the foregoing facts and the cited provision of Sec. 204 of the Tax Code, your request for the waiver of the aforementioned interest, penalties and surcharges is hereby granted. On one hand, this Office hereby holds that this waiver of penalties and interest shall not extend to interests and surcharges that may hereafter be assessed or charged on any GRT and DST which the Development Bank of the Philippines (DBP) may be made liable to pay. This ruling is being issued on the basis of the foregoing facts as represented. However, that if upon investigation, it will be disclosed that the facts as represented, are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue