Payment of Increments Attendant to Late Payments

May 29, 1990 BIR RULING NO. 102-90 72 000-00 102-90 Gentlemen : This refers to your letter dated September 15, 1989 requesting a ruling as to whether or not you are required to pay increments attendant to late payments; and corollary to the tax exemption provisions under Section 12 of your charter, Executive Order No. 1037, you are likewise requesting a ruling as to whether or not you are bound to secure a certificate of tax exemption from this Office and whether or not you are required to file income tax returns. aisadc It is represented that in a letter-advice dated August 24, 1989, this Office, thru the Asst. Revenue District Officer of Revenue District No. 32, Makati East, Metro Manila, assessed and advised you to pay P21,579.83 representing increments (surcharges and interest) attendant to late payment; that such assessment was issued in view of the delay in the remittance of the amount of P68,542.20, representing payment for withholding tax on wages for the month of January to March 1988 by you, a government-owned corporation under the Office of the President; that although ordinarily such a delay in payment entails payment of increment for the delay, you are of the opinion that under your charter, Executive Order No. 1037, you should not be so penalized since Section 12 of Executive Order No. 1037 provides, viz: "Sec. 12 Exemption from Fees, Duties and Taxes . The System is hereby declared exempt from all income and other internal revenue taxes, tariff and customs duties and all other kinds of taxes, fees, charges and assessment/issued by the Government and its political subdivisions, agencies and instrumentalities. The President of the Philippines, upon recommendation of the Minister of Finance, may partially and entirely lift the exemptions herein granted, if he shall find that the System is already self-sustaining and finally capable of paying such taxes, customs duties, fees, charges and other assessments, after providing for the debt service requirements and the projected capital and operating expenditure of the System." and that the repealing clause or Section 18 of Executive Order No. 1037 provides as follows: "Sec. 18. Repealing Clause . All laws, executive orders, rules and regulations or parts thereof inconsistent with this Executive Order, are hereby repealed, amended or modified accordingly. The provisions of this Executive Order shall not be repealed, amended or modified unless expressly so provided in subsequent general as Special Laws." In reply, please be informed that in case the taxes deducted and withheld by the employer are not paid within the time prescribed for payment, there shall be imposed a civil penalty of 25% and interest at the rate of twenty percent per annum from the date prescribed for payment until paid (Sec. 248 (3) and 249(a), Tax Code). If the withholding agent is the government of any of its agencies, political subdivisions, or instrumentalities, or is a government-owned or controlled corporation, the employee or officer thereof responsible for the withholding and/or remittance of the tax shall be personally liable for the surcharge and interest imposed as aforestated. [Sec. 247(b), Ibid] Such being the case, and since you are a government-owned corporation you are not required to pay the aforesaid increments attendant to late payments, however, your employee or officer responsible for the remittance of the withholding tax on wages shall be personally liable for the surcharge and interest incident to the delay in its remittance. Moreover, as regards the tax exemption provisions of Section 12 of your charter, Executive Order No. 1037, please be informed that beginning March 10, 1987 the effective date of Executive Order No. 93 all tax and duty incentives granted to government and private entities have been withdrawn with the exception of those enumerated under Section 1 of said Executive Order. Accordingly, and since you are not among those exempted under Section 1 of Executive Order No. 93, the tax and duty incentives granted in your favor under Section 12 of Executive Order No. 1037 has therefore, been withdrawn as of March 10, 1987. Consequently, you are required as of said date to file your income tax return and pay the tax imposed under Section 24(a) and (e) of the Tax Code, as amended. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner