Failure to File Statement of Net Worth (balance sheet) and Operations (profit and loss)

April 1, 1959 BIR RULING NO. 179-59 Mr. Eustaquio T. Reyes Vigan, Ilocos Sur S i r : In reply to your letter dated March 12, 1959, I have the honor to inform you as follows: prcd A person who, being required to file with his income tax returns the statement of net worth (balance sheet) and operations (profit and loss), fails to file the said statement commits as many violations as there are failures on his part to comply with the said requirement. A compromise penalty can be imposed on each of these violations. Accordingly, a merchant required to file the statement of net worth and operations with his income tax returns who fails to file the said statement during the years 1952, 1953, 1954, 1955, and 1956 shall be liable to five separate and distinct compromise penalties. If he chooses not to pay the compromise penalties, he shall be liable for each violation to a fine of not more than P300.00 or an imprisonment of not more than six months, or both, pursuant to Section 352 of the Tax Code. Revenue Regulations No. V-13 was published in volume 47 of the Official Gazette, No. 8, August 1951, page 4048. The said Regulations took effect on January 1, 1952. Publication of the Regulations in the Official Gazette is sufficient notice to the taxpayers. It would not be correct, therefore, to state, as you have, that the taxpayers were informed of the existence and effectivity of Revenue Regulations No. V-13 only in 1957 considering that the same was published in the Official Gazette way back in August 1951. That a taxpayer does not know of the requirements under the regulations is not an excuse for non-compliance therewith. Unless otherwise provided, all violations of the provisions of the Tax Code or any regulation made in accordance with the same prescribe after the lapse of five years from the commission of the violation or, if the same be not known at the time, from the discovery thereof. This Office has, therefore, five years within which to prosecute or impose the compromise penalty on the said violations. Accordingly, the imposition of the compromise penalty in 1957 on the failure to file the statement of net worth and operations committed in 1952, 1953, 1954, 1955, and 1956 is still within the five-year period and, is, therefore, legal and proper. Professionals such as lawyers, doctors, engineers, accountants, etc. whose only source of income is their salary need not file the statement of net worth and operations. However, professionals engaged in the practice of their profession or any taxable business are required to file the said statement. They should also keep and use the books of accounts required by section 334 of the Tax Code and the Bookkeeping Regulations. Contrary to your belief, professionals engaged in business or in the practice of their profession are required to issue a receipt or invoice for every sale or service made or rendered by them valued at P2.00 or more. If their gross sales, receipts, or earnings during the preceding year exceed P20,000, they shall issue a receipt or invoice for every sale or service made or rendered regardless of the value of such sale or service. (Sec. 204, Tax Code.) A person whose income consists of his salary and the proceeds from the sale of the products of his land is required to file the statement of net worth and operations, he being subject to internal revenue tax, such as the income tax. cdta Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue