Condoning Penalties for Certain Violations of the Income Tax Law

September 17, 1980

PRESIDENTIAL DECREE NO. 1740

CONDONING PENALTIES FOR CERTAIN VIOLATIONS OF THE INCOME TAX LAW UPON VOLUNTARY DISCLOSURE OF UNDECLARED INCOME FOR INCOME TAX PURPOSES AND REQUIRING PERIODIC SUBMISSION OF NET WORTH STATEMENT

WHEREAS, the Bureau of Internal Revenue has launched an extensive and thorough investigation of income tax returns for the purpose of ferreting out individuals who have under-declared their net taxable income for the years 1974 to 1979;

WHEREAS, individuals who, after investigation, are found to have incorrectly paid their income tax liabilities for the aforesaid years through deliberate failure to report taxable income, willful understatement of gross income or intentional filing of claims for fictitious deductions or exemptions, will be assessed the 50% fraud penalty and thereafter will be prosecuted for purposes of seeking their conviction;

WHEREAS, there is a substantial number of individuals who have evaded payment of income taxes and who are now amenable to the filing of amended tax returns where they will voluntarily declare their true and correct taxable income if given the opportunity to do so without the payment of the corresponding surcharges, penalties and interests; casia

WHEREAS, there is an urgent need to up-date the government's statistics on the assets, liabilities and net worth of taxpayers in the country for purposes of tax and economic development planning;

WHEREAS, the statement of assets, liabilities and net worth filed by taxpayers under Presidential Decree Nos. 379 and 631 is considered by the government for tax purposes, as their true and accurate net worth as of January 1, 1974 and any unexplained increase in their respective net worth after that date shall be presumed as taxable income in the year when such increase occurred, was established or discovered;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of the powers in me vested by the Constitution do hereby order and decree: cdt

SECTION 1. Voluntary Disclosure of Correct Taxable Income. — Any individual who, for any or all of the taxable years 1974 to 1979, had failed to file a return is hereby allowed to file a return for each of the aforesaid taxable years and accurately declare therein the true and correct income, deductions and exemptions and pay the income tax due per return. Likewise, any individual who filed a false or fraudulent return for any taxable year in the period mentioned above may amend his return and pay the correct amount of tax due after deducting the taxes already paid, if any, in the original declaration.

SECTION 2. Coverage. — The provisions of this Decree shall apply to income tax liabilities covering the period 1974 to 1979, inclusive, except the following:

a. Criminal cases already filed in Court or with the Fiscal's Office on or before the effective date of this Decree; cd

b. Income tax cases involving civil liability which are the subject of a pending criminal action in the Fiscal's Office or the Court prior to the effectivity of this Decree;

c. Withholding tax at source liabilities provided for in Sections 53, 54 and Chapter XI of Title II of the National Internal Revenue Code; and

d. Deficiency income taxes assessed on or before the effectivity of this Decree.

SECTION 3. Time and Manner of Filing of Return and Payment of Tax. — The income tax return, amended or original, shall be filed and the tax due thereon paid in the same manner as provided for under the pertinent provisions of the National Internal Revenue Code and Regulations, on or before March 15, 1981.

SECTION 4. Payment of Tax on Installment. — If the tax due exceeds P50,000, the same shall be paid in accordance with the following schedule:

a. If the amount due exceeds P50,000 but does not exceed P100,000, the tax may be paid in two equal installments, the first installment to be paid upon the filing of the return and the second installment, on or before May 15, 1981.

b. If the amount due exceeds P100,000, the tax may be paid in three equal installments as follows: cd i

i) The first installment shall be paid upon the filing of the return;

ii) The second installment shall be paid on or before May 15, 1981; and

iii) The third installment shall be paid on or before June 15, 1981.

c. If any installment payment is not paid on the due date of said installment, the whole unpaid amount will become due and demandable and shall be subject to interest and penalties imposed under the Tax Code. The corresponding letter of demand and assessment notice shall immediately be issued for the collection of the amount due and increments thereon.

SECTION 5. Immunity from Penalties. — Any individual who voluntarily files a return under this Decree and pays the income tax due thereon shall be immune from the penalties, civil or criminal, under the National Internal Revenue Code arising from failure to pay the correct income tax with respect to the taxable years for which an amended return was filed or for which an original return was filed in cases where no return has been filed for any of the taxable years 1974 to 1979: Provided, however, That these immunities shall not apply in cases where the amount of net taxable income declared under this Decree is understated to the extent of 25% or more of the correct net taxable income. cd i

SECTION 6. Filing of Net Worth Statement. — (a) Persons required to make a statement of net worth. All individuals, whether a citizen residing in the Philippines or abroad or any alien residing in the Philippines owning assets and/or properties amounting to P50,000 or more as of December 31, 1979 and who is not required to file a statement of assets, liabilities and net worth under Republic Act No. 3019, as amended by Presidential Decree Nos. 677 and 1288 shall file a sworn statement of assets, liabilities and net worth as of December 31, 1979.

(b) When and where to file. — The statement of assets, liabilities and net worth as of December 31, 1979 shall be filed in the form prescribed on or before April 15, 1981. The statement of assets, liabilities and net worth shall be filed with the Commissioner of Internal Revenue, Regional Director, Revenue District Officer, Collection Agent or the authorized Municipal Treasurer who has been designated as collection officer of the Bureau of Internal Revenue, where the taxpayer has his legal residence or place of business in the Philippines, or if he has no legal residence or place of business in the Philippines, then with the Commissioner of Internal Revenue. In the case of non-resident citizens, they may file their statement with the nearest consular office in the foreign country where they reside or may file the statement directly with the Commissioner of Internal Revenue.

SECTION 7. Valuation. — (a) Assets. — The value of the assets, whether real or personal shall be the cost thereof if acquired by purchase or the fair market value as of the date of acquisition if acquired by exchange or by gratuitous title. If the property is used in trade or business, the depreciated value as of December 31, 1979 shall be included in the statement. In the case of assets already declared in the statement of assets and liabilities filed by the taxpayer pursuant to Presidential Decree No. 379 or 631, the value of such assets as declared therein shall be used.

(b) Liabilities. — Only liabilities and enforceable obligations reducible in sums of money as of December 31, 1979 shall be included in the statement.

SECTION 8. Unlawful Divulgence of Information. — (a) No information contained in the statement herein required shall be published except in the form of tabulations and summaries having no specific reference to the individual filing the statement. cdt

(b) Except for internal revenue tax purposes, it shall be unlawful for any officer or employee of the Bureau of Internal Revenue or any government entity having knowledge of such declaration of assets, liabilities and net worth to disclose to any person, any information relative to such declaration and any violation hereof shall subject such offender to a fine in the amount of not less than five thousand pesos or imprisonment for not less than two years, or both, and shall be summarily dismissed from the service for cause.

SECTION 9. Penalty for Filing False or Fraudulent Returns. — Any individual who is subsequently found to have willfully filed false or fraudulent amended return in cases where an original return has already been filed, or original return in cases where no return had been filed for any of the taxable years 1974 to 1979, shall be subject to the penalties prescribed under Section 73 of the National Internal Revenue Code.

SECTION 10. Penalties for Failure to File Statement or Rendering False or Fraudulent Statement. — Any individual required to file the statement of assets, liabilities and net worth under this Decree who knowingly makes a false declaration or who deliberately fails to comply with any of the provisions hereof, shall upon conviction pay a fine of not less than Five Thousand Pesos (P5,000.00) and imprisonment of not less than two (2) years.

SECTION 11. The Ministry of Finance shall, upon the recommendation of the Commissioner of Internal Revenue promulgate the necessary rules and regulations for the effective implementation of the provisions of this Decree.

SECTION 12. Effectivity. — This Decree shall take effect upon approval.

DONE in the City of Manila, this 17th day of September, in the year of Our Lord, Nineteen Hundred and Eighty.

Published in the Official Gazette, Vol. 79 No. 21 Page 3150 on May 23, 1983.