Liability of Taxpayers to the Fixed Tax Resulting from the Revocation of Their Tax Exemption Privilege

December 12, 1984 REVENUE MEMORANDUM CIRCULAR NO. 37-84 SUBJECT : Liability of Taxpayers to the Fixed Tax Resulting from the Revocation of Their Tax Exemption Privilege TO : All Internal Revenue Officers and Others Concerned Under P.D. No. 1955, the tax exemption privileges granted to certain private business enterprises and/or persons engaged in any economic activity have been withdrawn. Examples are NACIDA manufacturers and rural banks. The question that has been raised, in this regard, is the amount of fixed tax payable by said taxpayers after their tax exemption privileges were withdrawn as of October 15, 1985, the effective date of P.D. No. 1955. Under Section 192 of the Tax Code, the amounts of fixed taxes are for the whole year so that a taxpayer starting his business at any time for the year should first pay the fixed tax for the whole year or for the remaining months of the year. aisa dc In the case of a taxpayer whose tax exemption privilege has been withdrawn but has continued doing business after October 15, 1984, said taxpayer if on the calendar year basis shall be subject to fixed tax for the period beginning from said date up to December 31, 1984. If the taxpayer is on the fiscal year basis, it shall be subject to the fixed tax for the period beginning from October 15, 1984 up to the end of the fiscal year. The fixed tax should be paid within thirty (30) days from October 15, 1984; otherwise, the taxpayer shall become delinquent thereby rendering him liable for the payment of the 25% surcharge and 20% annual interest under Sections 190 and 191 of the Tax Code. However, considering the fact that December 31, 1984 and fiscal-year periods are about to end and the further fact that P.D. No. 1955 is not yet known to many affected taxpayers, it would seem that the imposition of the 25% surcharge and 20% annual interest on taxpayers who failed to pay the fixed tax within thirty (30) days from October 15, 1984 might appear to be unjust. Such being the case, the 25% surcharge and 20% annual interest should not be imposed in case of late payments. This is in accordance with Section 295 of the Tax Code which authorizes the Commissioner to abate or cancel a tax liability which appears to be unjust or excessive. aisa dc However, for the calendar year 1984 or the succeeding fiscal year, as the case may be, the taxpayer concerned should pay the fixed tax "on or before the last day of the first month of the taxable year adopted by the taxpayer for income tax purposes" (Section 190, Tax Code). In case of failure to pay the fixed tax within the said period, the taxpayer shall become delinquent; hence, liable for the payment of the surcharge and interest incident to delinquency. All concerned are enjoined to give this Circular as wide a publicity as possible. (SGD.) ROMULO M. VILLA Deputy Commissioner