Questions and Answers on Presidential Decrees Involving Internal Revenue Tax Matters

February 16, 1973 REVENUE MEMORANDUM CIRCULAR NO. 18-73 SUBJECT : Questions and Answers on Presidential Decrees Involving Internal Revenue Tax Matters TO : All Internal Revenue Officers and Others Concerned There are Published hereunder the questions propounded during the recent seminars on internal revenue tax matters which are covered by Presidential Decrees as well as the answers to said questions: Presidential Decree No . 67 1. Q. Can cash hoarded in private vaults, safety deposits and/or in private domestic banks be reported as untaxed wealth under Presidential Decree No. 23? In Revenue Regulations No. 8-72 and 8A-72, these were mentioned, but in Revenue Regulations No. 15-72, there is no mention about these deposits. A. Yes, they should be included in the return required under Section 6(c), Revenue Regulations No. 15-72. 2. Q. If a taxpayer availed of Presidential Decree No. 23 as implemented by Revenue Regulations No. 8-72, but which in the subsequent amending regulations, the same taxpayer is no longer qualified, is his payment under Revenue Regulations No. 8-72 valid? A. Yes. 3. Q. After the unreported wealth was taxed, there shall be sudden increase in the networth of the taxpayer from the previous years as compared to this year. Will this sudden increase in networth be not taxed again? A. No, if what is reported and taxed explains the increase in networth. However, if the increase in networth cannot be explained by what is reported and taxed, the excess over the reported untaxed wealth shall be taxed. 4. Q. Will a government employee who will avail of the privilege granted under Presidential Decree No. 23 as amended, and implemented under Revenue Regulations No. 15-72, be exempted from civil, criminal, and administrative liability pertaining to his unexplained wealth? A. Yes, provided that at the time of his availment of the privilege, his crime has not yet been discovered. 5. Q. Can a taxpayer file an amended income tax return for the year 1971 or prior years, instead of availing of the tax amnesty under Presidential Decree No. 23, as amended. This is on the assumption that no valid information has been filed against him under Republic Act No. 2338 and no investigation of said years has been made by the Bureau of Internal Revenue. A. Yes. 6. Q. A taxpayer declared an income derived from business. Is the 10% tax based on the gross income? In the affirmative, is it not unfair or unjust to the taxpayer without giving him the benefit of deduction where a businessman incur ordinary and necessary expenses in operating the business. A. No. The 10% tax is based on the net income. 7. Q. X inherited a piece of property in 1940 worth P20,000 without paying any tax and without filing any estate and inheritance tax return. Can X avail of the amnesty, if so, what will be the amount to be declared? A. Yes, the total amount of P20,000 should be declared. 8. Q. Under Presidential Decree No. 23, as amended, all previously untaxed income and/or wealth are taxed at 10%. What about untaxed gross receipts due to non-declaration; are they not subject to the payment of any tax? A. No. Upon payment of 10% of untaxed income, taxpayer is relieved from all other internal revenue tax liability on the gross income or gross receipts from which said reported income resulted. 9. Q. A, has a pending anti-graft case, in court, Now, the taxpayer wants to avail of the 10% amnesty. Can he be absolved from criminal or civil liability, there being no investigation because of this law? A. No, as this crime or offense has already been discovered. Presidential Decree No . 68 1. Q. What is the basis of providing or including the phrase "final, executory and demandable'' in Section 12 of Revenue Regulations No. 14-72 when Presidential Decree No. 68 does not so provide? What is the effect of this provision in connection with cases pending in the Court of Tax Appeals if the taxpayer does not avail of the concessions granted under Presidential Decree No. 68? A. The basis is the last sentence of paragraph 2 of Presidential Decree No. 68 which provides that "if the delinquent taxpayer does not avail of the concession under (a) and (b), the delinquent tax account shall be collected by court action or summary proceedings." Ordinarily, the Commissioner resorts to these civil remedies for collection of taxes, if the assessment has already became final, executory and demandable. Cases pending in the Court of Tax Appeals may continue to be heard, but the Bureau may proceed to collect unless enjoined by the said Court from collecting. 2. Q. Will you please clarify the definition of unpaid delinquent tax account? A. "The term unpaid delinquent tax account' means an account appearing in the IBM lists of the Bureau of Internal Revenue as of November 24, 1972, or an account, although unlisted, has been demanded in a letter of demand or assessment notice issued on or before November 24, 1972. It shall include the tax proper, surcharges, interests accruing as of November 24, 1972, and penalties." (Sec. 3(a), Revenue Regulations No. 14-72) 3. Q. In cases where the unpaid accounts had been partially paid before Presidential Decree No. 68, what is the basis of the discount? Is it the original amount plus increment or the balance only? A. The balance, plus the increment thereon shall be the basis of the discount. 4. Q. Does the amount of P100.00 and below which is condoned includes all increments incident to the delinquency or will it be as per assessment notice? A. Per assessment notice. It does not include increments. 5. Q. Only unpaid accounts should be the basis of the 40%. Supposing after tendering several payments, the balance is only P100.00 or below? A. The balance is condoned. 6. Q. Are demand letters issued by Revenue District Officers, before November 24, 1972, but no assessment notices issued by the Regional Office covered by the Amnesty? A. Yes, provided issued before November 24, 1972. 7. Q. Are unpaid 2nd installments (income tax) covered by letter reminder considered demanded for purposes of this Amnesty? A. Yes, for prior years up to 1971. 8. Q. If a protected case which is listed has already been decided by the Court, but not yet paid by the taxpayer, can the taxpayer avail of the tax amnesty on delinquent accounts? A. No. The decree speaks of assessments the final resolution of which are still pending in the Bureau of Internal Revenue and/or in courts. 9. Q. Are compromise penalties included within the purview of the amnesty? A. Yes. 10. Q. The tax due per return of an individual for 1971 was not paid so that it is included in the delinquency list as of November 24, 1972. Can the taxpayer avail of the amnesty? A. Yes. 11. Q. The amount of the delinquent account in the list is P95.00. If we compute the interest up to November 24, 1972, the account will amount to P102.00. Will the account be considered as belonging to the category of P100.00 or less or in the category of more than P100.00? A. Yes, in category of P100.00 or less. 12. Q. If a forest concessionaire had been receiving collection letters from the Bureau of Forestry for payment of forest charges copy furnished Collection Agent, but such account was not reflected in our IBM list, likewise the Revenue District Officer also issued collection letters based on the letter sent by the Bureau of Forestry, can the taxpayer avail of the privilege granted to him under Presidential Decree No. 68? A. Yes, provided letter of Revenue District Office was issued before November 24, 1972. 13. Q. If a taxpayer has received the five (5) day letter of demand and the taxpayer agreed to the assessment before the declaration of Presidential Decree No. 68, and the formal demand had not been issued, can the taxpayer avail of the privilege granted to him under Presidential Decree No. 68? A. Yes Presidential Decree No . 30 1. Q. Will quarterly returns be verified? If so how often? A. Yes, they will be verified but only after the final return is filed. 2. Q. Will corporation be required to submit quarterly list of inventories? A. No. 3. Q. Is there any penalty to be imposed on a corporation which filed its income tax return and paid its income tax in a place other than where its principal office is located and where its books of accounts are kept? A. Yes, there is a penalty. Section 5(a) of Revenue Regulations No. 12-72 dated December 1, 1972 provides that the quarterly returns shall be filed and the income tax due thereon paid, in the place where its principal office is located and where its books of accounts are kept. Violation of this provision is punishable under Section 352 of the Tax Code. Presidential Decree Nos . 16 and 16-A 1. Q. What should be invested, the net proceeds or the gross income? A. Gross proceeds 2. Q. Does the holding period apply to the proceeds to be invested? A. Under Presidential Decrees Nos. 16 and 16-A, the length of time that a capital asset is held is not material, as said decrees suspended effect of paragraphs (1) and (2) of Section 34(b). All internal revenue officers and others concerned are enjoined to be guided accordingly. aisa dc MISAEL P. VERA Commissioner of Internal Revenue