Request for Waiver of Surcharge or Penalty for Delay in Remittance of Value-Added Tax on Royalties

June 15, 1998 BIR RULING NO. 091-98 204-000-00-091-98 California Manufacturing Company, Inc. P.O. Box 1955, Makati Central Post Office 1299 Makati City Attention: Mr . Reynaldo B . Castillo Sales Accounting Service Manager Gentlemen : This refers to your letter dated February 6, 1997 requesting for a waiver of surcharge or penalty for the delay in the remittance of value-added tax on royalties. It is represented that during the months of October to December 1996. California Manufacturing Company, Inc. (CMCI) had declared a royalty in the amount of P31,718,820; that due to oversight, the corresponding value-added tax in the amount of P3,171,882, which should have been remitted on or before the 20th of the month following the end of the quarter, was made only on January 30, 1997; that accordingly, the oversight was partly attributed to the extra accounting and administrative workload in connection with the January 20, 1997 deadline of local business taxes and licenses of its seven (7) provincial branches, two (2) factories and its principal office; that CMCI had voluntarily paid, in addition to the basic tax, the interest for the delay in the amount of P15,642.15 on January 30, 1997; and finally as the number 8 corporate taxpayer in the country, CMCI's track records show that it is religious in paying its tax obligations, hence, this request for a favorable consideration on the matter. In reply, please be informed that pursuant to Section 204 of the Tax Code, as amended, 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, it is reasonable that the same must be paid, including the corresponding interest and surcharge, to compensate for the concomitant use of the funds by the taxpayer beyond the date when it was supposed to have been paid. Accordingly, your request for waiver from payment of the aforementioned surcharge/penalty is hereby denied for lack of legal basis. Furthermore, you are advised to pay within ten (10) days from receipt of this letter the surcharge/penalty thus assessed for the delay in the remittance of the value-added tax on royalties. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue