Prescribing the Policies and Guidelines for Intensified Collection/Settlement of Delinquent Accounts Under R.A. 8424 Otherwise Known as the Tax Reform Act of 1997 and Allowing Taxpayers A Grace Period for the Settlement of Accounts Which Have Been Delinquent as of December 31, 1996

January 21, 1998 REVENUE MEMORANDUM ORDER NO. 02-98 SUBJECT : Prescribing the Policies and Guidelines for Intensified Collection/Settlement of Delinquent Accounts Under R.A. 8424 Otherwise Known as the Tax Reform Act of 1997 and Allowing Taxpayers A Grace Period for the Settlement of Accounts Which Have Been Delinquent as of December 31, 1996 TO : All Internal Revenue Officers and Others Concerned I. PREMISES The many official holidays declared during the latter half of December 1997 limited the time within which taxpayers could avail of the compromise and/or abatement program prescribed under Revenue Memorandum Order 61-97 and pay the compromise amount prior to the deadline of December 29, 1997, thereby restricting the full potential of the benefits granted by the said RMO to government and taxpayers alike. It is the continuing policy of the government to intensify the collection and settlement of delinquent accounts consistent with the mandate of the Tax Reform Act of 1997, which pursuant to Section 204, NIRC as amended by RA 8424, provides: "...The Commissioner may (A) Compromise the payment or any internal revenue tax, when: (1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. "The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity, a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax; and For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. Where the basic tax involved exceeds one million pesos (P1,000,000) or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to approval of the evaluation board which shall be composed of the Commissioner and the four (4) deputy commissioners. (B) Abate or cancel a tax liability, when: (1) The tax or any portion thereof appears to be unjustly or excessively assessed; or (2) The administration and collection costs involved do not justify the collection of the amount due. All criminal violations may be compromised except: (a) those already filed in court, or (b) those involving fraud. ..." II. OBJECTIVES This Order is issued to give taxpayers with outstanding delinquent accounts with the Bureau to settle their tax liabilities, reduce if not eliminate the large inventory of such delinquent accounts in every Revenue District Office, eliminate the huge administration and collection costs attendant in such accounts, and afford taxpayers and the Bureau to, as much as possible, come up with a clean slate in view of the implementation of the new Tax Code, under R.A. 8424. III. POLICIES 1. The Revenue Regional Approval Committee (RRAC),with the Regional Director as its Chairman, created under Revenue Memorandum Order No. 45-93 dated September 29, 1993 is hereby authorized to settle by way of compromise and/or abatement delinquent accounts covering 1996 and prior taxable years, the basic taxes of which do not exceed FIVE HUNDRED THOUSAND PESOS (P500,000.00),provided that the collection in each case shall not be lower than the following prescribed minimum percentages: Tax due per Return 100% of the basic tax Second Installment of Income Tax 100% of the basic tax Other Delinquent Account Cases 50% of the basic tax 2. The same minimum percentages shall apply to delinquent account cases with basic taxes exceeding FIVE HUNDRED THOUSAND PESOS (P500,000.00).However, dockets of the subject cases shall be forwarded to the MANCOM, for final approval. 3. Final assessments issued against Large Taxpayers as defined under Section 245 of the Tax Reform Act of 1997 shall not be compromised for less than fifty percent (50%). Any such compromise involving said taxpayers lower than fifty percent (50%) shall be subject to the approval of the Secretary of Finance. 4. Cases with WDL shall be included in the compromise settlement and/or abatement of penalties. 5. Cases pending in court except those involving criminal fraud may, with leave of court, be the subject of a compromise settlement as prescribed in this Order. IV. PROCEDURES The following procedures shall be observed by all Regional/Revenue District Offices: 1. Evaluate all delinquent accounts under its jurisdiction to determine which account will qualify as tax due per return or second installment payment or other assessment cases. 2. Issue the appropriate Payment Form/ATAP for the amount to be paid by the taxpayer under this Order. 3. Direct the taxpayer to pay said tax liability to any Authorized Agent Banks (AABS) or the Revenue Collection Officer only in the absence of an AAB, where the taxpayer is registered. 4. Prepare an ATCA to cancel the corresponding amount covered by the compromise payment, to be signed by the Regional Director. 5. Prepare a weekly list of the taxpayers who availed of the compromise settlement and submit the same to the Regional Directors, copy furnished the Deputy Commissioner for Operations and the Assistant Commissioner for Collection. 6. The Regional Director shall prepare a report of all availments of compromise settlement under his jurisdiction pursuant to this Order which shall contain the following facts and information, among others: names and addresses of taxpayers whose cases have been subject of compromise; amount involved; amount compromised; and taxable year(s) covered. V. REPEALING CLAUSE All revenue issuances and/or portion(s) thereof which are inconsistent herewith are hereby amended accordingly. VI. EFFECTIVITY This Order shall take effect immediately until February 27, 1998. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue