Prescribing additional guidelines for the implementation of RMO 45-93 dated September 29, 1993 including the use of BIR Form 189-A (Application of Compromise Settlement/Abatement of Penalties under RMO 45-93) and BIR Form 189 (Action on Application of Compromise Settlement/Abatement of Penalties) and the procedures for processing the same

December 1, 1993 REVENUE MEMORANDUM ORDER NO. 54-93 SUBJECT : Prescribing Additional Guidelines for the Implementation of RMO 45-93 Dated September 29, 1993 Including the Use of BIR Form 189-A (Application of Compromise Settlement/Abatement of Penalties under RMO 45-93) and BIR Form 189 (Action on Application of Compromise Settlement/Abatement of Penalties) and the Procedures for Processing the Same TO : All Internal Revenue Officers and Others Concerned I. OBJECTIVES: A. Prescribe additional guidelines in the implementation of RMO 45-93 including the use of BIR Form 189-A (Application of Compromise Settlement/Abatement of Penalties under RMO 45-93 or AF); and BIR Form 189 (Action on Application for Compromise Settlement/Abatement of Penalties or AA); B. Provide the procedures for processing by the different offices of BIR Form Nos. 189-A and 189; cd i C. Serve as a primer of RMO 45-93 for all concerned. II. GUIDELINES: A. Coverage 1. For Compromise Settlement: a. There is a reasonable doubt as to the validity of the assessment against the taxpayer, or b. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. All internal revenue taxes under the Tax Code for which formal deficiency assessments for any and/or all taxable years up to 1992 have been issued may be the subject of the compromise settlement under RMO No. 45-93. Formal deficiency assessments include assessments arrived at during conference after audit; assessments covered by post reporting notices, preliminary notices, and final notices, whether or not protested by taxpayer. Assessments involving criminal violations under the Tax Code may be the subject of compromise with the exception of those already filed in court, and those involving fraud. 2. For Abatement of Penalties a. Failure to file the required return and pay the corresponding tax; or b. Failure to report and pay the correct amount of tax; or c. Failure to pay the full amount of tax due per tax return already filed. B. Exclusions to Compromise Settlement/Abatement of penalties Under RMO 45-93 1. Compromise Settlement: a. All criminal violations under the Tax Code which are already filed in court and those involving fraud. cd i b. Withholding tax assessments. 2. Abatement of Penalties a. Penalties incident to withholding tax liabilities. C. Approval of Applications 1. The Revenue Regional Approval Committee (RRAC) shall approve offers of compromise involving assessments of P1 million and below and the offer of compromise is at least 50% of the total assessment, inclusive of surcharge and interest. 2. The Revenue National Approval Committee (RNAC) shall approve the following cases: a. Offers of compromise involving assessments over P1 million and the offer of compromise is at least 50% of the total assessment, inclusive of surcharge and interest, wherever the application is filed. b. Offers of compromise involving assessments of P1 million and below and the offer of compromise is at least 50% of the total assessment, inclusive of surcharge and interest if the application is filed with the Collection Service or direct to the Commissioner's Office. c. Offers of compromise below 50% of the total assessment, inclusive of surcharge and interest, regardless of amount and wherever the application is filed. casia 3. The RDO, the Revenue Regional Director (RRD) or the Commissioner (CIR) as the case may be, shall approve actions on applications for abatement of penalties or AA (Form 189) filed in their respective offices. All records pertaining to AFs and AAs filed and approved by the RDOs and RRDs shall be forwarded to the Office of the CIR for review to determine if further audit examination or investigation of the case is warranted. Only the CIR can authorize the audit/investigation of a taxpayer under this circumstance. D. Where to File 1. For compromise cases to be approved by the RRAC, the application shall be filed with the Revenue District Office (RDO) or Revenue Regional Office (RRO) where the applicant's place of business or legal residence is located. Applications received by the RDO shall be immediately forwarded to the RRAC for evaluation and approval in accordance with No. III-A and No. II-C-1 of this Order. cd i 2. For compromise cases to be approved by the RNAC, the application shall be filed with the RDO or the RRO where the applicant's place of business or legal residence is located, the Collection Service (CS) or the Office of the Commissioner (OCIR) in the National Office (NO). Applications received by the RDO or the RRO shall be immediately forwarded to the RNAC for evaluation and approval in accordance with No. III-A and No. II-C-(a-c) of this Order. For cases which are ordinarily approved by the RRAC but the taxpayer decides to file the cases with the CS or the OCIR, the application shall be approved by the RNAC. 3. For abatement cases, the application shall be filed with the RDO or the RRO where the applicant's place of business or legal residence is located or with the CS (NO) or the OCIR at the choice of the taxpayer. The RDO, RRD and CIR where the application was filed shall immediately act on such applications filed in their respective offices in accordance with No. II C3 of this Order. Applications received by the CS shall be approved by the CIR. Provided however , that in the case of applications for abatement cases involving capital gains tax, estate and donor's tax, the receiving offices shall see to it that the existing rules on the valuation of real properties are complied with. 4. In the case of non-resident citizens, the application shall be filed with or mailed to the Office of the Commissioner, BIR Office Building, Diliman, Quezon City. E. Amount of Offers of Compromise Settlement and Abatement of Penalties. Pursuant to RMO 45-93, the compromised amount shall be at least 50% of the amount assessed, inclusive of surcharge and interest, forming part of the said assessment. In certain cases, offers for compromise of less than 50% may be accepted pursuant to Section 204 of the Tax Code but these shall be acted upon only by the CIR upon recommendation of the RNAC. In case of requests for abatement of penalties, it shall involve payment of the basic tax due. F. Attachments to Application Form 1. For Compromise Settlements: a. Formal Deficiency Assessment Notice b. Documents to prove inability to pay c. Latest Certified Financial Statements d. Previously filed protest letter and/or statement of facts and basis of protest e. Waiver form under secrecy provisions of RA 1405 (required only in the case of compromise settlement the reason of which is financial incapacity to pay). 2. For Abatement of Penalties: a. Tax return and/or amended return with copy of previous return filed b. Evidence of payment of first installment of tax due c. Latest Certified Financial Statements if the taxpayer is engaged in business. G. Benefits Under Abatement The abatement of penalties shall relieve the taxpayer from any criminal or civil liability incident to the late filing of the return and late payment of the tax. However, the taxpayer is not exempted from any audit examination/investigation of his tax return and/or civil or criminal liability incident to other violations of the provisions of the Tax Code such as misrepresentations in the taxpayer's declarations or findings of fraud. Any examination shall be conducted only upon authority of the Commissioner. H. Deadline for Application The deadline for the filing of the application for compromise settlement or abatement of penalties shall be extended from December 31, 1993 to March 31, 1994. casia I. Forms and Report 1. BIR Form 189-A (Application of Compromise Settlement/Abatement of Penalties) shall be accomplished and filed by the taxpayer in triplicate. 2. BIR Form 189 (Action on Application of Compromise Settlement/Abatement of Penalties) shall indicate the action taken on the application, whether it is approved or not. If approved, this form shall replace the Authority to Accept Payment (ATAP). It shall be presented to the bank upon payment of the amount due and validated accordingly. It shall be prepared in quadruplicate by the RRAC or the RNAC in case of offers of compromise settlement or by the RDO/RD/CIR as the case may be in applications for abatement of penalties. 3. Report on Applications Received and Actions Made or RARAM (Annex A) shall contain relevant information on applications received and actions made and shall be prepared in duplicate by the different concerned offices processing such applications for compromise settlement or abatement of penalties including the amount paid by the taxpayer. cd i J. Interim Procedures 1. Since RMO 45-93 took effect on September 29, 1993, the Bureau has been accepting applications for compromise settlement and abatement of penalties event without the form and report prescribed in this RMO. In instances where the applications were already acted upon by the officials concerned and the tax due therein already paid, no further action is required except to include them in the report prescribed in #2 below if not previously reported. However, if the different receiving offices or approving committees which have custody of these applications/cases have not yet acted on them, to date; the taxpayers concerned shall be required to accomplish BIR Form 189-A. The approving officials shall likewise start using Form 189 for their actions on the applications. 2. The offices required to prepare the prescribed weekly report. - Report on Applications Received and Actions Made Under RMO 45-93 - shall prepare a cumulative report covering all applications received and actions made from September 29, 1993 to December 15, 1993. After such period, the report shall be prepared on a weekly basis in accordance with the prescribed procedures under this Revenue Memorandum Order. aisa dc III. PROCEDURES: A. Compromise Settlement 1. Taxpayer a. File his application for compromise settlement together with the required attachments (see list of attachments under II, Section F Supra ), in triplicate, using BIR Form 189-A, with the appropriate RDO or CS as the case may be (Sec. II, Section C Supra ). b. Upon receipt of the approved AA, pay the amount due with an appropriate accredited bank. Receive from the bank the duplicate copy of the validated AA. Present to the RDO/CS his validated copy of the AA or give a xerox copy of the validated AA for notation of his payment in the docket of the case. 2. Revenue District Office (RDO) or Collection Service (CS). a. Check the completeness of taxpayer's application. If incomplete, return such application to taxpayer for completion. If complete, the same shall be stamped "Received" with the date of receipt and the triplicate copy thereof given to taxpayer as his file copy. b. Retrieve the corresponding docket from the records/file of the district and/or region and attach it to the Application Form. Forward the docket, if any, and the Application Form within two (2) working days from date of receipt to the Regional Approval Committee for offers of compromise settlement below P1 million or to the National Approval Committee for offers or compromise above P1 million or offers of compromise below 50% of total assessment. In case the applications were filed with the CS, it shall ensure that the docket is retrieved either from the district or the region or at the National Office and forwards the docket to the RNAC. casia c. Receive the approved quadruplicate copy of the AA (BIR Form 189) with the AF, ATCA, attachments and collection docket from the RRAC or the RNAC. d. Receive/pick-up the triplicate copy of the validated AA covered by the applicable BCS from the bank; attach it to the docket with the quadruplicate copy of the AA, original copy of the ATCA and AF and forward the same to the appropriate Collection Branch for file. Distribute copies of the ATCA as follows: Duplicate - CISS Triplicate - Collection Service Quadruplicate - Preparing Office e. If taxpayer does not pay the amount due, or if his application is disapproved, the RDO which has jurisdiction over the taxpayer shall collect the total amount of deficiency tax and penalties in accordance with existing procedures. The ATCA shall be cancelled accordingly. f. Every Friday, prepare in duplicate the RARAM based on the copy of AA and AF on file. The RDO/RRAC or RNAC shall forward the original copy of the report to the CS not later than Wednesday of the following week and files copy 2. g. The Collection Service shall make statistical report containing among others the number of applicants and the total amount of collections to the Commissioner every 15th day of the following month. 3. Revenue Regional Approval Committee or the Revenue National Approval Committee a. Receive original copy of AF, together with the docket from the receiving office. The members of the RRAC or RNAC shall meet at least once a week to evaluate the applications filed. For this purpose, minutes of meeting of the committee are to be prepared and maintained by a Secretariat to be created by the committee. b. Prepare the AA and ATCA, if necessary, in quadruplicate. The Chairman of the Committee shall sign the AA and ATCA upon approval of an offer of compromise settlement. Inform the taxpayer either by mail, telephone, fax or other means of communication of the action taken on his application. If taxpayer is present, give the original, duplicate and triplicate copies of the AA to the taxpayer. The AA shall serve as the authority to accept payment. c. Attach the quadruplicate copy of the AA and all copies of the ATCA to the application and docket and forwards these to the office who received the AF. cdt d. Every Friday, prepare in duplicate the RARAM on the basis of the copy of AA and AF on file. Forward the original copy of the report to the Collection Service not later than Wednesday of the following week and files copy 2. 4. Accepting Accredited Bank a. Upon presentation of this original, duplicate and triplicate copies of the AA, check if it has been properly accomplished including that of the signature of the approving officer. b. Accept the payment and validate the AA under NPCS procedures. The AA shall replace the ATAP only for payments under this Revenue Memorandum Order and RMO 45-93. c. Return the duplicate copies of the Validated AA to the taxpayer. d. Comply strictly with the requirements prescribed under the NPCS system in accepting the payments of compromise settlement covered by the AA and in reporting the same to the Bureau. B. Abatement of Penalties 1. Taxpayer a. File his application for abatement of penalties together with the required attachments (see list of attachments under II, Section F Supra ), in triplicate, under BIR Form 189-A, with the concerned Revenue District Office (RDO), the concerned Regional Office or at the Collection Service at the National Office (See II, Section C, Supra ). b. Pay the basic tax due as indicated in the return or in case of non payment of the second installment as indicated in the Action on Application (AA) with the appropriate accredited bank. Present his validated copy of the return or AA or give a xerox copy of said documents to the RDO, RR or CS for notation of his payment. 2. Revenue District Office, Regional Office or Collection Service a. Evaluate the application and check the completeness of taxpayer's application for abatement. For applications due to non filing of return/non-payment of tax, require a return to be accomplished by the taxpayer. In addition, for applications without a TIN, instruct the taxpayer to obtain a TIN. For applications due to the filing of an amended return, require the attachment of the previous return filed. If the application is for non payment of the second installment, require as attachment to the AF the original return filed where the payment of the first installment was indicated. b. If the application and all attachments are in order, stamp "Approved under RMO 45-93" on the return and on the application form. Prepare the AA in quadruplicate and give all copies of the return and the AA (original duplicate, triplicate copies) to the taxpayer for payment of amount due to any accredited bank of his choice. c. Receive/pick-up the validated copy of the return or AA (triplicate copy) from the bank in accordance with NPCS procedures (RMO 19-91, as amended by RMO 29-91). Segregate from the batch of returns covered by a BCS report, validated abatement returns and/or AAs with the application forms and attachments and forward it to the appropriate office (Collection Service or Regional Office). The appropriate office shall forward all applications AAs, tax returns and other attachments to the Office of the CIR for review and final safekeeping. Retain on file quadruplicate copy of AA and the duplicate copy of AF. d. Every Friday, prepare in duplicate the RARAM, the RDO and the RD shall forward the original copy of the report to the Collection Service not later than Wednesday of the following week and file copy 2. e. In case information has been received by the RDO of any misrepresentation on the return filed by the taxpayer, make the necessary communication to the Commissioner of Internal Revenue for the issuance of the Letter of Authority. f. The Collection Service shall make statistical report containing, among others, the number of applicants and the total amount of collections to the Commissioner every 10th day of the following month. acd 3. Accepting Accredited Bank a. Upon presentation of the return of AA, check if it has been properly accomplished and approved by proper authorities of the Bureau of Internal Revenue. b. Accept the payment and validate the return of AA as follows: 1. For payments covered by a tax return or amended return, validate payments on the return itself following the ordinary NPCS procedures. On the other hand, stamp "Received" on the AA and also indicate in writing, the details of payment in the carbonized portion of the form. 2. For second installment payments, validate payments on the appropriate space in the AA similar to what is validated in a tax return or AFAP. c. Return the duplicate copy of the Validated return and/or AA to the taxpayer. d. Comply strictly with the requirements prescribed under the NPCS system in accepting the payments of abatement cases covered by the AA and in reporting the same to the Bureau. C. Processing at the Computer Information Systems Service (CISS) Based on the approved AA received from the bank the CISS shall prepare the following printouts: 1. Summary List of Taxpayers availing of the compromise settlement showing the reference and AA number, Name, TIN, Address and amount paid. 2. Summary List of Taxpayers availing of the abatement of penalties showing the kind of tax returns filed, if any, the reference and AA number, Name, TIN, Address and amount paid. 3. Summary List of all AAs showing the AA number, name, TIN, address and amount paid. IV. REPEALING CLAUSE: All orders and other issuances inconsistent herewith are modified or repealed accordingly. cdt V. EFFECTIVITY: This order shall take effect upon its approval. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue