Intensifying Collection/Settlement of Delinquent Accounts and Disputed Assessments

September 7, 2000 REVENUE MEMORANDUM ORDER NO. 42-00 SUBJECT : Intensifying Collection/Settlement of Delinquent Accounts and Disputed Assessments TO : All Internal Revenue Officers and Others Concerned I. PURPOSE : The purpose of this Order is to accelerate the collection of taxes through compromise pursuant to Section 204 of the Tax Code, as amended by RA 8424. II. OBJECTIVES : This Order is issued to give opportunity to taxpayers with outstanding receivable accounts and disputed assessments with the Bureau, including those already filed in court, to settle their tax liabilities and, accordingly reduce, if not eliminate, the huge number thereof. This is also in preparation of the forthcoming roll out of the ITS Accounts Receivable System (ARS) under the BIR Tax Computerization Project (TCP) to lessen the accounts receivable inventory of case dockets which shall be converted into and shall form part of the ARS database. III. SCOPE : The following cases may, upon compliance with the basis set forth under Part IV hereof, be the subject matter of compromise settlement under this Order: 1. Delinquent accounts; 2. Cases under administrative protest pending in the Regional Offices, Revenue District Offices, Legal Service, the Large Taxpayer Service (LTS), Enforcement Service (ES), and the Excise Taxpayers Service (ETS) and Collection Service; 3. Cases disputed before the courts, e.g. CTA, CA, SC; 4. Cases for collection filed in courts; and 5. Criminal Violations, except a.) those already filed in court or b.) those involving fraud. IV. BASIS OF COMPROMISE SETTLEMENT : Pursuant to Section 204 of the Tax Code, the Commissioner may compromise the payment of 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. aDCIHE V. POLICIES : 1. All National and Regional Offices are hereby authorized to accept taxpayers; offers of compromise of all outstanding delinquent accounts and disputed assessments as of June 30, 2000, based on the following prescribed minimum percentages: Assessments involving taxable year 1994 & prior years Financial Incapacity 10% of the basic assessed tax Doubtful validity 20% of the basic assessed tax Assessments involving taxable years 1995 to 1997 Financial Incapacity 10% of the basic assessed tax Doubtful validity 40% of the basic assessed tax Assessments involving taxable years 1998 to 1999 Financial Incapacity 20% of the basic assessed tax Doubtful validity 50% of the basic assessed tax Assessments already issued and sustained by any Court but has not become final (i.e. subject to appeal) may be the subject of compromise upon payment of 100% of the basic assessed tax. The herein prescribed minimum percentages shall likewise apply in compromise settlement of assessments consisting solely of increments, i.e., surcharge, interest, etc., based on the total amount assessed. For purposes of this Order, the term taxable year shall mean the calendar year ending December 31 of the year mentioned therein and the fiscal year ending on or before June 30 of the succeeding year. Hence, taxable year 1994 includes calendar year 1994 and the fiscal years ending on or before June 30, 1995. 2. Basis for Acceptance of Compromise Offer A. Reasonable-Doubt as to the Validity of Assessment . The offer to compromise a delinquent account or disputed assessment under this Order on the ground of reasonable doubt as to the validity of the assessment may be accepted when it is shown that: i.) The delinquent account or disputed assessment is one resulting from a jeopardy assessment as herein defined; or ii.) The assessment seems to be arbitrary in nature. appearing to be based on presumptions and there is reason to believe that it is lacking in legal and/or factual basis; or iii.) The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of assessment or preliminary assessment and there is reason to believe that the assessment is lacking in legal and/or factual basis; or iv.) The taxpayer failed to file a request for reinvestigation/reconsideration within 30 days from receipt of assessment notice and there is reason to believe that the assessment is lacking in legal and/or factual basis: or cCAaHD v.) The taxpayer failed to elevate to the CTA an adverse decision of the Commissioner within 30 days from receipt thereof and there is reason to believe that the assessment is lacking in legal and/or factual basis; or vi.) Assessments issued on or after January 1, 1998 where the demand notice allegedly failed to comply with the formalities prescribed under Sec. 228 of the Tax Code. B. Financial Incapacity . The offer to compromise based on financial incapacity may be accepted upon showing that: i.) The inability to pay is evident as when the audited Balance Sheet for the taxable year preceding the year when the offer is made show a capital deficit of at least 5% or the Balance Sheet reflects a negative networth of at least 5%; or ii.) The taxpayer is declared by competent court to be bankrupt or insolvent; or iii) The taxpayer has already been dissolved; or iv.) The taxpayer is a compensation income earner with no other source of income and the family gross annual income does not exceed P250,000, it appearing that he possesses no other leviable/distrainable assets. Circumstances that would place the taxpayer-applicant's inability to pay in serious doubt can be a ground to refuse the offer to compromise based on financial incapacity to pay. 3. It shall be the responsibility of the National Evaluation Board (NEB) created under Section 204 of the Tax Code of 1997 and Regional Evaluation Board (REB) created under Section 7 (c) of the same Code to evaluate and approve/disapprove the applications for settlement of each delinquent account/disputed assessment case under this Order. The composition of the National and Regional Evaluation Boards are as follows: A. National Evaluation Board (NEB) Commissioner of Internal Revenue Chairman Four (4) Deputy Commissioners Members Where the basic assessed tax exceeds One million pesos (P1,000,000.00) or where the settlement offered is less than the minimum rates of forty percent (40%) and ten percent (10%) of the basic tax as prescribed under Section 204 (A) of the Tax Code, the compromise shall be subject to the approval of the National Evaluation Board (NEB), notwithstanding the provisions of Paragraph V (1) of this Order. For compromise offers on delinquent accounts and disputed assessments where the assessment notices were issued by the Regional Offices and the basic assessed tax exceeds Five hundred thousand pesos (P500,000.00) but not over One million pesos (P1,000,000.00), or for assessments issued by the National Office where the basic assessed tax does not exceed One million pesos (P1,000,000.00), the compromise offer, after evaluation by the Technical Working Group, shall be approved by the Commissioner. B. Regional Evaluation Board (REB) Regional Director Chairman Members: Assistant Regional Director Chief, Legal Division Chief, Assessment Division Chief, Collection Division Revenue District Officer having jurisdiction over the taxpayer-applicant The REB may compromise assessments issued by the regional offices involving basic assessed taxes of Five Hundred Thousand Pesos (P500,000.00) or less. The evaluation of offers of compromise shall, in all cases, be conducted by a Technical Working Group (TWG) in the National and Regional levels, respectively, to be constituted for the purpose through the issuance of a Revenue Special Order. The NEB and the REBs shall each create a SECRETARIAT to handle the administrative functions of their respective Technical Working Groups. 4. In general, delinquent accounts and disputed assessments of taxpayers registered under the Large Taxpayer Service (LTS), and the Excise Tax Service (ETS), shall not be compromised for less than fifty percent (50%) of the basic assessed tax. Any offer of compromise lower than fifty percent (50%) by said taxpayers shall be subject to the approval of the National Evaluation Board. HaAISC 5. Cases with Warrants of Distraint and/or Levy (WDL) and/or Warrants of Garnishment are included in this compromise settlement program. Cases with final decision of any Court can only be compromised on the ground of financial incapacity. 6. Attachments to Application Form For Compromise Settlements: a. Deficiency Assessment Notice (Preliminary or Final) and/or Warrant of Distraint and/or Levy b. Previously filed protest letter and/or "Request for Re-investigation or Reconsideration", if applicable c. "Petition for Review" filed with the Court, if applicable. d. Documents to prove inability to pay, e.g. court order, resolution declaring bankruptcy, etc. e. Latest Income Tax Return and Certified Financial Statements f. Waiver of Secrecy of Bank Deposits (required only in cases of offers of compromise due to financial incapacity) g. Duly validated Payment Form 0605 as proof of payment of the compromised amount. 7. The following cannot be the subject of a compromise settlement under this Order: a. Withholding tax cases; b. Criminal tax fraud cases; c. Criminal violations already filed in court; d. Cases involving assessments issued after June 30, 2000; and e. Delinquent accounts with duly approved schedule of installment payments. 8. For purposes of this program, the term " jeopardy assessment " shall refer to a delinquency tax assessment which was assessed without the benefit of complete or partial audit by an authorized revenue officer, who has reason to believe that the assessment and collection of a deficiency tax will be jeopardized by delay because of the taxpayer's failure to comply with the audit and investigation requirements to present his books of accounts and/or pertinent records, or to substantiate all or any of the deductions, exemptions, or credits claimed in his return. 9. Payment of the amount offered shall be made at anytime after filing of the application for compromise using BIR Payment Form No. 0605 at the Authorized Agent Bank (AAB) or RCO of the RDO/other BIR office where the taxpayer is registered. Tax Credit Certificates (TCCs) shall not be accepted in payment of taxes under this Order. 10. The evaluation of the offers of compromise shall be done on a per tax type basis. Thus, in the event that a taxpayer offers a compromise on his delinquent account for 1997 Income tax, VAT, and DST, there shall be three (3) evaluations for the three types of taxes. In fine, the determination of the jurisdictional amount, for purposes of approval thereof, shall consider, not the aggregate of the three taxes, but rather individually, the respective basic taxes of the three assessments. 11. For compromise offers of delinquent accounts and disputed assessments issued by the regional offices whose basic assessed tax do not exceed Five hundred thousand (P500,000.00), the REB shall evaluate the legal and factual basis for compromise. In the manner of deliberation, the REB chairman shall cast his vote only in case of a deadlock. In the formal resolution, however, the Chairman shall always endorse the Board's collective decision. A. If the compromise settlement offer is equivalent to or more than the prescribed 10% and 40% minimum percentages under Sec. 204 and the same is approved by the REB upon finding of legal and factual basis for compromise, the TWG-REB shall notify the taxpayer-applicant of the approval of the compromise offer and, upon verification of duly validated BIR Payment Form 0605 showing payment of the approved compromise amount, shall issue Authority to Cancel Assessment (ATCA) for signature of the approving authority and return the docket to the Revenue District Offices/Collection Division for closing of the A/R in their GCL. AcDaEH B. If the compromise settlement offer is disapproved for lack of legal/factual basis for compromise, the TWG-REB shall notify the taxpayer of the denial of their application and the docket shall be returned to the Revenue District Offices/Collection Division for follow up of collection or other appropriate action. Previous payments should be credited to the existing Accounts Receivables/Assessments issued against the taxpayer. C. If the compromise settlement offer is less than the 10% and 40% minimum percentages prescribed under Sec. 204, the TWG-REB shall forward the docket to the Technical Working Group-NEB for evaluation of the legal/factual basis and for recommendation of approval/disapproval of the compromise by the NEB. D. For compromise offers involving assessments for a particular year of at least two tax types with different jurisdictional amounts, e.g. Income and VAT, where the basic deficiency income tax is P400,000.00 while the basic deficiency VAT is P1.2 M, the REB shall evaluate and act on the offer falling within its jurisdiction, i.e. the income tax case, and thereafter forward the case docket to the TWG-NEB for resolution of the offers falling thereunder, i.e. the VAT case. 12. Compromise offers on delinquent accounts and disputed assessments issued by the Regional Office with basic assessed tax of over P500,000.00 but not exceeding P1,000,000.00 shall be referred to the Technical Working Group-NEB for evaluation. The report on the legal and factual basis for compromise and the accompanying recommendation shall be forwarded to the Office of the Commissioner for approval. A. If the compromise settlement offer is approved, the TWG-NEB shall notify the taxpayer-applicant of approval of the compromise offer and, upon verification of duly validated BIR Payment Form 0605 showing payment of the approved compromise amount, shall issue the Authority to Cancel Assessment (ATCA) for signature of the approving authority. The entire case docket shall then be forwarded to the originating office (i.e., RDO/Collection Division/CED, etc.) for cancellation of the A/R in their GCL. B. If the compromise settlement offer is disapproved for lack of legal/factual basis, the TWG-NEB shall notify the taxpayer-applicant of the denial of the compromise offer and the docket shall be forwarded to the originating office (i.e., Revenue District Offices/Collection Division/CED, etc.) for follow up of collection or other appropriate action. Previous payments should be credited to the existing Accounts Receivable/Assessments issued against the taxpayer. 13. Compromise offers on delinquent accounts and disputed assessments issued by the National Office with basic assessed tax not exceeding P1,000,000.00 shall be referred to the Technical Working Group-NEB for evaluation. The report on the legal and factual basis for compromise and the accompanying recommendation shall be forwarded to the Office of the Commissioner for approval. A. If the compromise settlement offer is approved, the TWG-NEB shall notify the taxpayer-applicant of approval thereof and, upon verification of duly validated BIR Payment Form 0605 showing payment of the approved compromise amount, shall issue Authority to Cancel Assessment (ATCA) for signature of the approving authority. The entire case docket shall be forwarded to the originating office (i.e., RDO/Collection Division/CED, etc.) for cancellation of the A/R in their GCL. B. If the compromise settlement offer is disapproved for lack of legal/factual basis, the TWG-NEB shall notify the taxpayer-applicant of the denial of the compromise offer and the docket shall be forwarded to the originating office (i.e., RDO/Collection Division/CED, etc.) for follow up of collection or other appropriate action. Previous payments should be credited to the existing Accounts Receivable/Assessments issued against the taxpayer. CIDTcH 14. For compromise offers whose basic assessed tax exceeds P1,000,000.00, or where the compromise offer is less than the minimum percentage prescribed under Sec. 204, the application with attachments, appended to the case docket shall be forwarded to the Technical Working Group-NEB for evaluation on the legal and factual basis of compromise. The recommendation shall be forwarded to the NEB for deliberation/approval. A. If the compromise settlement offer is approved, the TWG-NEB shall notify the taxpayer-applicant of approval thereof and, upon verification of duly validated BIR Payment Form 0605 showing payment of the approved compromise amount, shall issue Authority to Cancel Assessment (ATCA) for signature of the approving authority. The entire case docket shall be forwarded to the originating office (i.e., RDO/Collection Division/CED, etc.) for cancellation of the A/R in their GCL. B. If the compromise settlement offer is disapproved for lack of legal/factual basis, the TWG-NEB shall notify the taxpayer-applicant of the denial of the compromise offer and the docket shall be forwarded to the originating office (i.e., RDO/Collection Division/CED, etc.) for follow up of collection or other appropriate action. Previous payments on the offer of compromise shall be credited against the corresponding delinquent account and/or disputed assessment. 15. The deadline for the filing of the application for compromise settlement under this Order shall be on November 15, 2000. VI. PROCEDURES AND RESPONSIBILITIES : A. TAXPAYER: The taxpayer shall 1) Accomplish Application Form for the Compromise Settlement of Delinquent Account/Disputed Assessment (see Annex A). 2) File the accomplished Application together with the Attachments at the following offices: OFFICE SUBJECT Collection Service/ For Delinquent Accounts/ Collection Enforcement Disputed Assessments in the Division National Office Revenue District Office/ For Delinquent Accounts/ Collection Division of the Disputed Assessments in the Regional Office Regional Offices/District Offices 3) Pay the amount offered for compromise with the AAB/or RCO located at the RDO/appropriate office where the taxpayer is registered using BIR Payment Form 0605 and attach the said duly validated form to the accomplished Application Form. B. Authorized Agent Bank (AAB)/Revenue Collection Officer (RCO); The AAB/RCO in the absence of an AAB shall 1) Receive payment, issue acknowledgment receipt and validate BIR Form 0605. C. Revenue District Office/Regional Office shall 1) Make an inventory of the Delinquent Account/Disputed Assessment dockets in their possession. 2) Segregate the tax dockets into: a) Those with basic assessed tax of more than P500,000 of; and IcaHTA b) Those with basic assessed tax of not more than P500,000.00. 3) Receive Applications for Compromise Settlement of Delinquent Accounts/Disputed Assessments. (RDO and Collection Division only) 4) Make preliminary evaluation of the Applications for Compromise with due consideration of the following: a) Taxable year covered b) Basis of compromise (see V (2) above) c) Amount of basic tax and compromise offer d) Kind of Tax, and e) Complete required attachments. 5) Locate the docket covered by the Application for Compromise; (RDO and Collection Division only) 6) Forward to Technical Working Group REB applications for compromise, together with the case dockets, of delinquent accounts and disputed assessments issued by the Regional Offices whose basic assessed tax do not exceed P500,000.00, for evaluation of the factual and/or legal basis. 7) Forward to the Technical Working Group NEB applications for compromise, together with case dockets, of delinquent accounts and disputed assessments issued by the Regional Offices whose basic assessed tax exceed P500,000.00 and devolved national office cases, regardless of amount, for evaluation of the factual and/or legal basis. 8) Close the A/R on their GCL upon receipt of a signed Authority to Cancel Assessment (ATCA). (Applicable to Collection Division and Revenue District Office only) D. Collection Enforcement Division, Collection Service shall 1) Make an inventory of Delinquent Account/Disputed Assessment dockets in their possession. 2) Receive application for compromise settlement of the following cases: a) Delinquent Accounts/Disputed Assessments involving assessments issued by the National Office, b) Delinquent Accounts/Disputed Assessments cases referred by the TWG-REB. c) Delinquent Accounts/Disputed Assessments previously transmitted by the regional offices. 3) Locate the dockets covered by the Application for Compromise; 4) Forward the application for compromise and the case docket to the Technical Working Group-NEB for review and evaluation. 5) For approved cases, close/cancel A/R in the GCL upon receipt of duly-signed Authority to Cancel Assessment (ATCA) E. Large Taxpayers Service, Excise Taxpayers Services Enforcement Service and Legal Service shall 1) Make an inventory of Delinquent Accounts/Disputed Assessment dockets/cases in their possession. ITSCED 2) Forward case dockets covered by an application for compromise under this Order to the Technical Working Group-NEB for review and evaluation upon request by the latter or the Collection Service. F. The Technical Working Group (TWG) -REB or NEB: The TWG- REB or NEB shall 1) Receive inventory lists of delinquent account/disputed assessment dockets from the appropriate offices. 2) Receive dockets for compromise from appropriate offices. 3) Evaluate the compromise offer of the taxpayer. 4) Prepare evaluation reports with recommendations whether to approve/disapprove the offer. 5) Forward evaluation reports and delinquent account/disputed assessment dockets to REB or NEB for approval/disapproval. 6) TWG-REB shall forward applications for compromise where the compromise settlement offer is less than the 40% or 10% minimum percentage or if the basic assessed tax exceeds P1,000,000.00 to TWG-NEB for evaluation. 7) Notify taxpayers-applicants of the action of the Board (REB/NEB), whether approved or disapproved. 8) For offers of compromise approved by the proper authority, issue Authority to Cancel Assessment (ATCA) upon verification that the amount in the duly validated BIR Form 0605 corresponds to the compromised amount, and return the docket to the appropriate office for the closing of A/R in their GCL. 9) For offers of compromise disapproved by the proper authority, return the docket to the appropriate office for collection or other appropriate action. See to it that previous payments shall be credited against Accounts Receivable/Assessments issued against the taxpayer. G. Regional/National Evaluation Boards/Commissioner: The REB/NEB/Commissioner 1) Shall take action on the recommendation of the Technical Working Group. VII. REPORTING REQUIREMENTS 1. The Chief, Collection Division (Region) and RDOs, shall collate all collection reports submitted by all AABs and RCOs within their jurisdiction and submit collection report twice a week under this program to the Regional Director, copy furnished the Collection Service. (Annex B) 2. The Regional Director, as Chairman of the Regional Evaluation Board (REB), shall submit a report showing the number of applicants/cases received for compromise settlements, details of the total collections for the week under this Program and the total amount of delinquency accounts applied for compromise settlement, and another report on the corresponding ATCA's issued for the approved compromise offers under this Order to the Collection Service (Attention: Collection Enforcement Division) not later than Tuesday of the following week using the report format prescribed by the Collection Service. (Annexes C and D) 3. The Collection Service shall submit to the Commissioner not later than Wednesday of the following week a weekly statistical report containing, among others, the number of applicants/cases received for compromise settlement, the total amount collected therefrom, and the total amount of delinquency accounts applied for compromise settlement, approved by both the REB and the NEB under this Order, and another report on the corresponding ATCAs issued for cases approved by REB and NEB. VIII. REPEALING CLAUSE : All orders and other issuances inconsistent herewith are hereby modified or repealed accordingly. IX. EFFECTIVITY : This order shall take effect upon its approval. (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue ANNEX A APPLICATION FOR COMPROMISE SETTLEMENT OF DELINQUENT ACCOUNTS Name of Taxpayer __________________ T.I.N. _____________________________ Address _____________________________________________________________ DETAILS OF DELINQUENT ACCOUNT: KIND OF TAX ASSESSMENT NO. TAXABLE BASIC TAX PENALTIES AMOUNT YEAR A. Computation of Compromise Settlement Amount: Basic Assessed Tax P ____________ Multiplied by minimum percentage rate: For financial incapacity: - 10% of basic assessed tax (1997 & prior Years - 20% of basic assessed tax (1998-1999) For doubtful validity of assessment: - 20% of basic assessed tax for taxable year 1994 and prior years - 40% of basic assessed tax for taxable years 1995 to 1997 - 50% of basic assessed tax for taxable years 1998 to 1999 ____________ Compromise Settlement Offer P ____________ B. ATTACHMENTS (please check) [ ] Deficiency Assessment Notice (Preliminary or Final) and/or Warrant of Distraint and/or Levy. DaCEIc [ ] Previous filed protest letter and/or Request for Re-investigation or Reconsideration, if applicable. [ ] Petition for Review filed with the Court, if applicable. [ ] Documents to prove inability to pay, e.g. court order, resolution declaring bankruptcy, etc. [ ] Latest Income Tax Return and Certified Financial Statements. [ ] Waiver of Secrecy of Bank Deposits (required only in cases of offers of compromise due to financial incapacity). [ ] Duly validated Payment Form 0605 as proof of payment of the compromised amount. ______________________ (Taxpayer/Representative) ANNEX B Revenue Region No . ____ Collection Division Collection Report on Compromise Settlement Offers For the period ___________ to _________, 2000 For the period last reported P Add: For this period Total Amount to date P Prepared by: Chief, Collection Division Date * This report is to be submitted by the Chief, Collection Division to the Office of the Regional Director, copy furnished, the Collection Service National Office every Wednesday and Mondays of the week. ANNEX C Statistical Report on Compromise Settlement Applications ANNEX D Report on Approved Compromise Offers Compromise Settlement Program Per RMO No. 42-2000 implementing RR No. 6-2000 1. What is the objective of the BIR Compromise Settlement Program ? The Program aims to give opportunity to taxpayers with outstanding accounts receivable and disputed assessments with the Bureau of Internal Revenue (BIR), including those already filed in court, to settle their tax liabilities through compromise settlement. 2. Who can avail of the Compromise Settlement Programs ? Taxpayers who have any of the following cases may avail of the Program: Delinquent accounts Cases under administrative protest pending in the Regional Offices, Revenue District Offices, Legal Service, Large Taxpayers Service, Enforcement Service, Excise Taxpayers Service and Collection Service Civil tax cases disputed before the courts (i.e. CTA, CA, SC) Collection cases filed in courts Criminal violations (except those already filed in court or those involving criminal tax fraud) 3. What are the cases not covered by the Compromise Settlement Program ? Cases not covered by the Program are: Withholding tax cases Criminal tax fraud cases Criminal violations already filed in court Cases involving assessments issued after June 30, 2000 Delinquent accounts with duly approved schedule of installment payments 4. What are the basis for the acceptance or approval of a taxpayer's offer of compromise ? 1. Doubtful Validity of Assessment the offer to compromise based on doubtful validity of assessment may be accepted when it is shown that: a) The delinquent account or disputed assessment is one resulting from a jeopardy assessment, as defined in RR No. 6-2000; or b) The assessment seems to be arbitrary in nature, appearing to be based on presumptions;* or c) The taxpayer failed to file an administrative protest due to alleged failure to receive notice of assessment or preliminary assessment;* or d) The taxpayer failed to file a request for reinvestigation/reconsideration within 30 days from receipt of assessment notice;* or e) The taxpayer failed to elevate to the CTA an adverse decision of the Commissioner within 30 days from receipt thereof; * or f) Assessment is issued on or after January 1, 1998 where the demand notice allegedly failed to comply with the formalities prescribed under Section 228 of the Tax Code * And there is reason to believe that the assessment is lacking in legal and/or factual basis (applicable only for items b, c, d and e) 2. Financial Incapacity the offer to compromise based on financial incapacity may be accepted upon showing that: a) The inability to pay is evident as when the audited Balance Sheet for the taxable year preceding the year when the offer is made shows a capital deficit of at least 5% or the Balance Sheet reflects a negative networth of at least 5%; or acHETI b) The taxpayer is declared by a competent court to be bankrupt or insolvent; or c) The taxpayer has already been dissolved (in case of corporations); or d) The taxpayer is a compensation income earner with no other source of income and the family's gross annual income does not exceed P250,000, it appearing that the taxpayer possesses no other leviable/distrainable assets (in case of individuals). 5. What are the prescribed minimum percentages for the availment of the Compromise Settlement Program ? Assessments involving taxable year 1994 & prior years Financial Incapacity 10% of the basic assessed tax Doubtful Validity 20% of the basic assessed tax* Assessments involving taxable years 1995 to 1997 Financial Incapacity 10% of the basic assessed tax Doubtful Validity 40% of the basic assessed tax Assessments involving taxable years 1998 to 1999 Financial Incapacity 20% of the basic assessed tax Doubtful Validity 50% of the basic assessed tax Assessment issued and sustained by any court but has not become final 100% of the basic assessed tax * subject to the approval of the National Evaluation Board 6. What is meant by taxable year ? Taxable year shall mean the calendar year ending December 31 of the year mentioned therein and the fiscal year ending on or before June 30 of the succeeding year. Hence, taxable year 1999 includes calendar year 1999 and the fiscal year ending on or before June 30, 2000. 7. Who will evaluate and approve the applications for the settlement of each delinquent account/disputed assessment ? The National Evaluation Board (NEB) will evaluate and approve applications where the basic assessed tax exceeds P1,000,000.00, or where the settlement offered is less than the prescribed minimum rates of 40% (for doubtful validity), 10% (for financial incapacity) and 50% (in cases of taxpayers registered under LTS and ETS) of the basic tax. The Regional Evaluation Board (REB) , on the other hand, will evaluate and approve applications for compromise settlement of assessments issued by the respective Regional Offices involving basic assessed taxes of P500,000.00 or less. For assessments issued by the Regional Offices where the basic assessed tax exceeds P500,000.00 but not over P1,000,000.00, or for assessments issued by the National Office where the basic assessed tax does not exceed P1,000,000.00, the compromise offer shall be approved by the Commissioner of Internal Revenue . 8. How will the offers of compromise be evaluated ? Evaluation will be done on a per tax type basis. Thus, in the event that a taxpayer offers a compromise on his delinquent account for 1997 Income Taxes VAT and DST, there shall be three (3) evaluations for the three types of taxes. 9. Can taxpayers registered under the Large Taxpayers Service and Excise Taxpayers Service avail of the Compromise Settlement Program ? Yes, provided that the compromise offer is not less than 50% of the basic assessed tax. Any offer of compromise by said taxpayers lower than 50% shall be subject to the approval of the NEB. 10. Are cases with Warrants of Distraints and/or Levy (WDL) and/or Warrants of Garnishment included in the Compromise Settlement Program ? Yes, said cases are included in the Program. cACTaI 11. What about cases with final decision of any court ? Cases with final decision of any court can only be compromised on the ground of financial incapacity. 12. What must a taxpayer do in order to avail of the Compromise Settlement Program ? The taxpayer must file an accomplished Application Form for the Compromise Settlement of Delinquent Accounts, together with the required attachments, at the following offices not later than November 15, 2000 : OFFICE SUBJECT Collection Service/ For Delinquent Accounts/ Collection Enforcement Disputed Assessments in the Division National Office Revenue District Office/ For Delinquent Accounts/ Collection Division of the Disputed Assessments in the Regional Office Regional Offices/District Offices The following are the required attachments to the Application Form: a. Deficiency Assessment Notice (Preliminary or Final) and/or Warrant of Distraint and/or Levy b. Previously filed protest letter and/or "Request for Re-investigation or Reconsideration", if applicable c. "Petition for Review" filed with the Court, if applicable. d. Documents to prove inability to pay, e.g. court order, resolution declaring bankruptcy, etc. e. Latest Income Tax Return and Certified Financial Statements f. Waiver of Secrecy of Bank Deposits (required only in cases of offers of compromise due to financial incapacity) g. Duly validated BIR Payment Form No. 0605 as proof of payment of the compromised amount 13. What are the payment procedures for the Compromise Settlement Program ? Payment of the compromised amount shall be made at the Authorized Agent Bank or Revenue Collection Officer of the Revenue District Office/other BIR office where the taxpayer is registered. This shall be done using BIR Payment Form No. 0605. Tax Credit (defines shall not be accepted in the Payment of taxes under the Program.