Guidelines for the implementation of Expanded Tax Amnesty under Executive Order No. 64

November 24, 1986 REVENUE MEMORANDUM ORDER NO. 42-86 SUBJECT : Guidelines for the implementation of Expanded Tax Amnesty under Executive Order No. 64 TO : All Internal Revenue Officers and Others Concerned This Memorandum Order is issued to implement the provisions of Executive Order No. 64 dated November 17, 1986, otherwise known as the Expanded Tax Amnesty, which amended and expanded the coverage of the income tax amnesty provided under Executive Order No. 41 which was issued on August 22, 1986. 1. Scope 1.1 - Taxable period embraced . - The immunities and privileges granted hereunder shall cover the period from taxable year 1981 to 1985. If the taxable period is on a fiscal year basis, coverage shall be for fiscal year beginning on or after August 1, 1980 up to fiscal year ending on or after June 30, 1986. casia 1.2 - Internal revenue taxes embraced . - This tax amnesty shall embrace the following internal revenue taxes: 1.2.1 - Income taxes under Title II of the Tax Code; 1.2.2 - Estate tax under Chapter I, Title III thereof; 1.2.3 - Donor's gift tax under Chapter II, Title III thereof: 1.2.4 - Business taxes under Chapter II, Title V thereof, namely: a) Annual fixed taxes; b) Sales taxes; c) Millers taxes; d) Compensating tax; e) Contractor's taxes; f) Percentage tax on hotels, motels, and others g) Caterers tax; h) Percentage tax on common carriers and keepers of garages; i) Percentage tax on stock, real estate, commercial, customs and immigration brokers and cinematographic film owners, lessors or distributors; and j) Percentage tax on dealer in securities and lending investors. 1.2.5 - National internal revenue taxes not included in the enumerations provided in the preceding paragraph 1.2 hereof shall not be embraced by the expanded tax amnesty. 2. Disqualified persons . - Pursuant to Section 4 of Executive Order No. 41, as amended by Section 2 of Executive Order No. 64, the persons disqualified from availing of the expanded tax amnesty shall accordingly include the following: 2.1 - Those persons, natural or juridical, falling within the purview of Executive Order Nos. 1, 2 and 14 and as enumerated under Section 3(a) of Revenue Regulations No. 14-86; 2.2 - Those with income tax, donor's gift tax, estate tax, or business tax case already filed in court; 2.3 - Those with criminal cases involving a violation of the income, donor's, estate or business tax law already filed in court; 2.4 - Those with withholding tax liabilities under the National Internal Revenue Code, as amended, insofar as the said liabilities are concerned; 2.5 - Those with tax cases pending investigation by the Bureau of Internal Revenue arising from a valid information furnished under Section 316 of the Tax Code, as amended; 2.6 - Those with pending cases involving unexplained or unlawfully acquired wealth before the Sandiganbayan; 2.7 - Those liable under Title Seven, Chapter Three (frauds, illegal exactions and transactions) and Chapter Four (malversation of public funds and property) of the Revised Penal Code, as amended. 3. Method of availment 3.1 - For taxpayers who have already availed of Executive Order No. 41 . - Those who want to avail further of tax amnesty on business, estate and donor's tax liabilities shall file the tax amnesty return under BIR FORM NO. 187 on which they should (a) indicate the file numbers which were assigned to them at the time of availment of Executive Order No. 41 and (b) declare therein the same amount of increase in networth and (c) pay the additional amnesty tax due thereon at the rate of 5% based on the said increase in networth, or the minimum amount of P4,000 for individuals and P9,000 for corporations, whichever is higher. The return should be marked "SUPPLEMENTAL TAX AMNESTY RETURN" to identify the same as having been filed under Executive Order No. 64. A taxpayer is not, however, precluded from amending his statement of assets, liabilities and networth in order to reflect a higher increase in networth, in which case, the tax return shall be marked "AMENDED TAX AMNESTY RETURN". In this latter case, the total amount of tax due on the increased networth shall be diminished by the amount of tax previously paid under Executive Orders 41 or 53. For this purpose, the amended sworn statement of assets, liabilities and networth and photocopies of the Confirmation Receipts/Payment Order or Revenue Official Receipt shall be attached to the amended amnesty tax return. In no case shall the increase in networth filed under the said amended tax amnesty return be lower in amount than what had been already declared in the taxpayer's tax amnesty return filed under Executive Order Nos. 41 or 53. If the taxpayer is availing of immunity from the donor's tax and/or estate tax, he shall declare and include as part of his assets his distributive share from the estate and/or the donated property, regardless of whether or not the said property is already in his actual possession. 3.2 - For those who have not yet availed of the tax amnesty under Executive Order No. 41 . - Taxpayers who have not yet availed of the benefits granted under Executive Order No. 41 who now want to avail of both the benefits under Executive Order No. 41 and Executive Order No. 64 shall file a tax amnesty return under BIR FORM NO. 187, together with the required attachments, and compute the tax at the rate of 15% on the increase in networth to be declared therein. However, the amount of amnesty tax may not be lower than the amount of P9,000 in the case of individuals and P19,000 in the case of corporations. Taxpayers may still avail of the benefits of income tax amnesty only under Executive Order No. 41 by paying 10% of the increase in networth. Taxpayers desiring to avail of the benefits for income, donor's, estate and business taxes can only do so by paying 15% of the increase in networth or the minimum amount of P9,000 for individuals and P19,000 for corporations, whichever is higher. In no case shall a taxpayer be allowed to avail of the expanded tax amnesty by paying 5% of the increase in networth or the minimum amount of P4,000 for individuals and P9,000 for corporations. 3.3 - Situational coverage of the expanded tax amnesty . - The expanded tax amnesty shall apply only to the following: (a) Where a tax return had been filed, whether or not the said return is undergoing or had already undergone a tax audit investigation; (b) Where a tax return had been filed, already tax audited, and BIR clearance had already been issued, but the taxpayer has a doubt on the correctness of the tax payment/s made in connection therewith; (c) For estate tax purposes, where an estate tax return had been filed and where the period provided by law within which the said return may be filed was within the period from January 1, 1981 to December 31, 1985. The period for filing shall mean from date of death of the decedent to the deadline or the last day within which the same may be filed, or authorized to be filed in case extension for filing had been granted in writing by the Commissioner; or (d) Income, donor's, estate or business tax cases where a deficiency tax assessment had been issued beginning August 22, 1986, regardless of the date the said assessment was actually received by the taxpayer. Income, donor's, estate or business tax cases where no tax return had been filed shall not qualify under the expanded tax amnesty. This case of delinquency shall be embraced by the compromise settlement provisions of Executive Order No. 44, as implemented by Revenue Regulations No. 17-86 and Revenue Memorandum Order No. 39-86. Income, donor's, estate, business and other internal revenue tax cases where a deficiency tax assessment had been issued beginning January 1, up to August 21, 1986 shall not likewise qualify under the expanded tax amnesty. This case shall neither be embraced by the compromise settlement provisions of Executive Order No. 44. However, this case shall be embraced by the Compromise settlement provisions of Revenue Memorandum Circular No. 31-86. 3.4 - Procedure for availment of immunity from unpaid donor's or estate tax under the expanded tax amnesty . - Actual or constructive transmission of property through a donation or inheritance, on which transmission, the corresponding donor's or estate tax has not been duly paid, may be embraced by the expanded tax amnesty under Executive Order No. 64, subject to conditions prescribed in preceding paragraph 3.3 hereof. In order that the said unpaid tax shall be embraced under the expanded tax amnesty - 3.4.1 - The donee (in case of donation) or the heir (in case of inheritance) shall declare in his own name and in his own tax amnesty return and as part of his own assets, the donated property or his distributive share from the hereditary estate, whether or not the said assets are in his actual possession. 3.4.2 - The transmission of the said assets to any donee/heir shall be considered tax-paid for purposes of the donor's gift tax or estate tax, as the case may be, only sofar as the said donee/heir who availed of the tax amnesty is concerned. Insofar as this donee/heir is concerned, BIR clearance authorizing actual transmission of the said donated/inherited property shall be issued upon proof that the said donee/heir availed of the expanded tax amnesty by including the said donated property or his distributive share from the estate. 3.4.3 - Should there be two or more heirs and not all of the said heirs have availed of the expanded tax amnesty, the estate shall remain liable for the unpaid estate tax equivalent to an amount allocable to the share of the heirs who did not avail of the expanded tax amnesty. EXAMPLE. - Assuming there are two heirs whose shares are equal and the estate tax due on the entire net taxable estate is P100, if only one of the said heirs availed of the expanded tax amnesty, one-half (or P50) shall remain collectible against the estate, inclusive of applicable increments. If not all of the heirs availed of the expanded tax amnesty, the estate shall remain subject to tax audit investigation. If all of the said heirs availed of this tax amnesty, the estate tax case shall be considered closed. 3.4.4 - In case of a donation where there are two or more donees, the principle of allocation discussed in the preceding paragraph 3.4.3 shall also be applied. 3.4.5 - BIR clearance for donor's or estate tax purposes . - For purposes of BIR clearance re donor's or estate tax, the said clearance shall be issued only in favor of the donee/heir who availed of the tax amnesty. No BIR clearance shall be issued authorizing actual transmission of the property to the donee/heir who has not availed of the expanded tax amnesty for the unpaid donor's or estate tax on the gratuitous transmission of the said property. Rather, said untaxed transmission of property shall be cleared for transmission only after the corresponding donor's gift tax or estate tax, as the case may be, shall have been duly paid in accordance with the principle of allocation discussed in the preceding paragraphs 3.4.3 to 3.4.4 hereof. The BIR clearance which shall be issued to the heir, if such heir is the surviving spouse of the decedent, shall include not only his/her share from the hereditary estate but also (a) his share from the conjugal property and (b) his exclusive property. The said clearance shall be issued by the Tax Amnesty Implementation Officer upon proof that the donee/heir had actually availed of and qualified under the expanded tax amnesty. 3.4.6 - Additional documentation to embrace donor's or estate tax . - The donee/heir availing of the expanded tax amnesty shall file with his tax amnesty return a schedule of the donated/inherited assets on the transmission of which, whether actual or only constructive, the donor's or estate tax has not been duly paid, in accordance with BIR FORM ______ (ANNEX "A") hereof. 3.4.7 - Availment of the expanded tax amnesty with intention to include immunity from the donor's tax or estate tax shall be made only by the corresponding donee/heir in his own behalf since the donated/inherited property shall form part of his assets for purposes of computing increase in networth, whether or not the said property had already been actually transferred to him. Accordingly, since the actual or constructive transmission of property in case of donation or inheritance diminishes the networth of the donor or the estate, the expanded tax amnesty which is based on increase in networth cannot be logically applied if the availment shall be in the name of the donor or the estate. Hence, while the donor or the estate is not precluded from availing of the tax amnesty in his/its own name, should the donor or the estate, in his/its own name, file an expanded tax amnesty return, such availment shall not comprehend immunity from donor's or estate tax. Such availment shall extend immunity in favor of the donor/estate only for purposes of (a) income tax; and (b) business taxes as provided under paragraphs 1.2.1 and 1.2.4 hereof. cd 4. This Memorandum Order supplements Revenue Regulations No. 14-86, Revenue Memorandum Circular Nos. 31-86 and 42-86. Any provisions thereof and any revenue issuance inconsistent herewith are hereby considered amended or revoked accordingly. 5. Effectivity . - This Memorandum Order shall take effect immediately. (SGD.) BIENVENIDO A. TAN, JR. Commissioner