Criteria for the Abatement or Compromise of a Delinquent Account Due to Insolvency or Financial Difficulty of a Taxpayer and Other Circumstances Provided for in RMO No. 33-82 Dated October 8, 1982

January 31, 1983 REVENUE MEMORANDUM ORDER NO. 02-83 SUBJECT : Criteria for the Abatement or Compromise of a Delinquent Account Due to Insolvency or Financial Difficulty of a Taxpayer and Other Circumstances Provided for in RMO No. 33-82 Dated October 8, 1982 TO : All Revenue Service Chiefs, Revenue Regional Directors, Chiefs of Branches, Revenue District Officers, Revenue District Collection Supervisors and Others Concerned I. PURPOSE This Revenue Memorandum Order is being issued as a complementing measure to Revenue Memorandum Order No. 33-82 dated October 8, 1982 to establish the criteria or guidelines in considering the offer by a taxpayer of abatement or compromise of his tax delinquency based on the facts and/or circumstances enumerated therein to ensure uniform implementation of the second phase of "Operation Linis" cdt II. CIRCUMSTANCES UNDER WHICH A DELINQUENT ACCOUNT MAY BE ENTITLED TO ABATEMENT OR COMPROMISE A. Insolvency or financially unable to pay The taxpayer is insolvent or in financial distress if - (a) His/Its liabilities, excluding tax liabilities, are equal to, or more than, his/its assets as shown by his/its latest audited financial statement certified to by an independent Certified Public Accountant (CPA) not black-listed by the BIR or certified correct by the taxpayer if the financial statement does not require a CPA certificate; or (b) His source of livelihood derived solely from compensation income is barely enough to support his family. B. The assessment or letter of demand was issued apparently to beat the prescriptive period . (a) Cases like jeopardy (table) assessments where all or 50% of the expenses claimed were disallowed by the revenue examiner to beat the prescriptive period without giving the taxpayer the chance to be heard or (b) Where the taxpayer failed to respond to the notice of assessment or letter of demand due to causes beyond his/its control, and that he/it would have paid the deficiency tax had he/it been given a chance to present his/its side. C. Liability of stockholder with unpaid subscribed stocks If the corporation was dissolved, leaving no leviable properties and the successor-in-interest cannot be ascertained, the Task Forces at all levels shall demand from all stockholders with unpaid subscribed stocks to pay their proportionate shares in the tax liability of the corporation, but not more than their unpaid subscribed stocks. No offers of compromise will be entertained in these cases. III. JURISDICTIONAL RESPONSIBILITY A. Under RMO No. 33-82, delinquent taxpayers, whose tax liabilities are under the jurisdictional amounts of District and Regional Task Forces, offering to abate or compromise the same below 50% of the deficiency tax (including increments up to the day of actual payment) shall be forwarded to the National Task Force for consideration, except as authorized hereunder: (a) The District Task Forces may accept offers of settlement by compromise of not less than 25% of the deficiency taxes as defined above, if the tax liabilities are not over P5,000.00 subject to the approval of the Regional Task Forces. (b) The Regional Task Force may accept offers of settlement by compromise of not less than 30% of the deficiency taxes as defined above, if the tax liabilities are over P5,000.00 but not more than P20,000.00. (c) The National Task Force may accept offers of settlement by compromise of not less than 35% of the deficiency taxes as defined above, if the tax liabilities are over P20,000.00 but not more than P50,000. Other offers of compromise settlement of delinquent accounts involving P50,000 or more may be accepted subject to the approval of the Commissioner or his authorized Deputy. cd (d) Task Forces accepting compromise settlements of less than 50% of the deficiency taxes under Sub-paragraphs a, b and c of this Section shall submit summary reports to the Revenue Service Chief (Collection) concerning the same not later than the 10th day following the end of each month. Said reports shall include (1) the name and address of the taxpayer, (2) Assessment/Demand No., (3) Kind of tax, (4) Amount Due (including increments), (5) Amount paid and (6) ROR or RTR/CR Number, date, and place of payment. B. Delinquent accounts elevated to a Court of competent jurisdiction may be compromised upon agreement between the delinquent taxpayer and the BIR with the approval of said Court. BIR trial attorneys handling delinquent tax cases in court shall be guided by RMO No. 33-82 and these criteria or guidelines in considering the offer of compromise by the taxpayer. IV. REPEALING CLAUSE The provisions of Revenue Special Order No. 40-81, dated May 14, 1981, Revenue Memorandum Order No. 15-81, dated May 14, 1981, Revenue Memorandum Order No. 33-82, dated October 8, 1982 and other issuances inconsistent herewith are hereby repealed or modified accordingly. V. EFFECTIVITY This order shall take effect immediately. (SGD.) RUBEN B. ANCHETA Acting Commissioner