BIR Ruling No. 151-10

December 21, 2010 BIR RULING NO. 151-10 000-00 ETM Tax Agent Office (ETM-TAO), Inc. No. 30 Plaridel Street, Doa Aurora Quezon City Attention: Anthony Macarayan PR Officer Cecilia Sevilla Marketing Officer Sir : This refers to your letter which was received by this Office on 22 September 2010 questioning the validity of Revenue Regulations 9-2010, thus requesting the Office of the Ombudsman to issue a cease and desist order for allegedly being contrary to law. aAHTDS In reply, please be informed as follows: Contrary to your allegation that "RR 9-2010 is contrary to law and public order because Republic Act No. 9480 clearly prohibits the tax authority to give any general administrative tax amnesty without the concurrence and consent of the Philippine Congress vis-a-vis the Philippine president", there is a broad distinction between tax amnesty and tax abatement, in this case, RA 9480 and RR 9-2010, respectively. Republic Act (RA) No. 9480 refers to the tax amnesty program that condones the liabilities incurred by a taxpayer due to his incorrect or non-payment of taxes on condition that the taxpayer complies with certain requirements, such as the mandatory filing of a statement of assets, liabilities and networth (SALN) as of December 31, 2005. The tax amnesty law grants tax delinquents the privilege of being free from prosecution if they apply for tax amnesty and pay the measly tax amnesty fee. Even companies or individuals with pending tax cases in courts, as long as the cases have not been decided with finality, may avail themselves of the amnesty. The amnesty program covers all unpaid national internal revenue taxes imposed by the national government for taxable year 2005 and prior years, whether or not assessment has been issued to the taxpayer. The amnesty payment should be equal to 5% of taxpayer's declared networth as of December 31, 2005. However, each type of taxpayer shall be required to pay whichever is higher between the computed 5% based on networth and the minimum amnesty payment listed under the said Act which the taxpayers have to pay the corresponding amnesty tax dues within six (6) months following the effectivity of the law, specifically, from September 6, 2007 until March 6, 2008. Section 15 of Department Order No. 29-07, Rules and Regulations to Implement RA 9480, which provides in part: "SEC. 15. Moratorium on the Grant of Tax Amnesty. In order to encourage and improve tax compliance by taxpayers, it is hereby declared as a matter of policy that the grant of tax amnesty, in whatever manner and form, shall not henceforth be allowed, provided that this moratorium shall likewise apply to any administrative tax amnesty by the BIR. It is understood, however, that any compromise or abatement under Sec. 204 of the National Internal Revenue Code of 1997, as amended, shall not be construed as an administrative amnesty." In the exercise of the power granted to the Commissioner of Internal Revenue under Section 204 (B) (2), in relation to Section 7 (c) of the Tax Code, as amended, Revenue Regulations (RR) No. 9-2010 was issued as a one-time abatement program that provides an opportunity for taxpayers to settle their delinquent accounts or assessments by simply paying the full amount of the basic tax assessed inclusive of interest due thereon less all compromise penalties and/or surcharges by October 29, 2010. Clearly, this is another program of the Bureau aimed in providing incentive to taxpayers voluntarily paying taxes who have failed to file their returns and/or pay correct taxes as well as those who filed tax returns but have paid incorrect taxes by the cancellation of the 25% surcharge imposed under Section 248 as well as the cancellation of the compromise penalty for criminal violations of the Tax Code of 1997 not involving commission of fraudulent act. Unlike in RA 9480 wherein the taxpayer may avail the tax amnesty program of the government despite the existence of a Preliminary Assessment Notice, Final Assessment Notice or have been assessed tax for collection and even though there is an on-going tax audit or informal conference, it is a prerequisite that a taxpayer, in availing the one-time abatement program, no Letter of Authority, Tax Verification Notice, Audit Notice, Letter Notice or any discrepancy notices of whatever nature has/have been serve on the taxpayer concerned for the tax period for which a return is being filed. Likewise, RR 9-2010 does not require the submission of the taxpayer SALN, which is a mandatory documentary requirement under RA 9480. Further, the pertinent difference between RA 9480 and RR 9-2010 is that the availment of one-time abatement program shall not preclude the Bureau from investigating the correctness of the returns filed or sufficiency of the attachments, and/or prosecuting criminal violations since there is a presumption of full and accurate disclosure by the taxpayer in his filing of original return/amended returns. All the declarations filed by availing taxpayers shall be subject to review by the Technical Working Committee in view of the fact that the RR 9-2010 was specifically issued in line with the Run After Tax Evaders (RATE) program of the Department of Finance and the Bureau to deter tax evasion and to encourage voluntary compliance with the internal revenue tax laws. This is in contrast to RA 9480, particularly Section 6 thereof, wherein the taxpayers availing of the tax amnesty will enjoy immunity from the payment of taxes as well as from the civil, criminal or administrative penalties arising from its tax liabilities in the covered period. Any tax amnesty declaration shall not be used against taxpayer before any judicial, quasi-judicial or administrative bodies. Moreover, the taxpayer's books and records shall be immune from further examination as well as inadmissibility of Tax Amnesty Return and SALN as evidence before judicial, quasi-judicial or administrative bodies for tax cases, except (a) to ascertain networth on Jan. 1, 2006 and (b) to use as defense in cases brought against the taxpayer. IcSHTA It is unfortunate that you have assumed that a legislative grant is a prerequisite in order for this Office to extend an abatement program to taxpayers. Under Section 11 of RA 9480, the moratorium on the grant of tax amnesty shall apply to any administrative tax amnesty by the BIR. It is clear that during the effectivity of RA 9480, the law does not prohibit this Office to grant any compromise or abatement under Section 204 of the Tax Code of 1997 since compromise or abatement shall not be construed as an administrative amnesty. Particularly noteworthy is that the revenue issuance on one-time abatement program was approved by the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue that prescribes the rules and regulations for the effective enforcement of the one-time abatement program pursuant to the power of the Commissioner under the Tax Code of 1997 particularly Section 204 (B) (2) in relation to Section 7 thereof. As head of the office, the Commissioner, under Section 29 of Executive Order No. 232, shall exercise overall authority in matters within the jurisdiction of the Bureau, including those relating to its operations, and enforce all laws and regulations pertaining to it. Hence, the Tax Code of 1997 is clear and leaves no room for any interpretation contrary to the intention of the law. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue