Tax amnesty on delinquencies

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Republic Act 11213, otherwise known as the Tax Amnesty Act, granted amnesty on tax delinquencies and estate tax. The Bureau of Internal Revenue (BIR) issued Revenue Regulations 04-2019 dated 8 April 2019 (IRR) implementing the amnesty on delinquent tax liabilities in taxable year 2017 and prior years (Tax Amnesty on Delinquencies).

The IRR was published on 9 April 2019 and took effect on 24 April 2019. With the effectivity of the IRR, taxpayers may themselves avail of the Tax Amnesty on Delinquencies within one year from the effectivity of the IRR or until 24 April 2020. The BIR clarified certain features of the IRR in Revenue Memorandum Circular (RMC) 57-2019; among others, the amnesty may be availed for internal revenue liabilities covering taxable years 2017 and prior years, which have become delinquent on or before 24 April 2019.

To avail of the Tax Amnesty on Delinquencies, the taxpayer should: 1. secure a certificate of delinquencies/tax liabilities from the concerned BIR office; 2. obtain the BIR’s endorsement of the Acceptance Payment Form (APF), which in practical terms means that the concerned BIR office agreeing to the computed tax amnesty payment in order for the authorized agent banks and/or revenue collection agents to accept payment; and 3. after payment, the taxpayer should submit to the proper Revenue District Office / Large Taxpayer’s Division / Large Taxpayers Collection Enforcement Division where the taxpayer is registered the duly accomplished tax amnesty return, proof of payment of the tax amnesty amount and other documentary requirements. All these processes must be done on or before 24 April 2020. In this connection, RMC 57-2019 clarified that “… if no payment is required as in the case when the assessment consists only of unpaid penalties due to either late filing/payment of other assessed penalties for non-compliance of reportorial requirements, the phrase ‘no payment required’ shall be indicated in the APF.”

Aside from providing guidelines in the application for availing the delinquency amnesty, the BIR has emphasized that delinquent estate tax liabilities are covered by the Tax Amnesty on Delinquencies and not by the estate tax amnesty. As such, to avail of the amnesty, taxpayers which have delinquent estate tax liabilities should pay 40 percent of the net basic tax, and not the six percent amnesty rate under the Estate Tax Amnesty. In other words, if the estate tax liability of a taxpayer is already covered by an assessment issued by the Bureau, which has already become final and executory, said taxpayer may no longer apply for estate tax amnesty.

The BIR further clarified the applicable amnesty for taxpayers with delinquent withholding tax liabilities. If the delinquent taxpayer is a withholding agent who failed to withhold tax from its payment, the applicable amnesty tax rate is 40 percent of the net basic tax. On the other hand, if the delinquent taxpayer withheld tax from the payee but failed to remit the same to the BIR, said taxpayer shall be required to pay 100 percent of the amount withheld and the amnesty will apply to any unpaid penalties due; e.g., interest, surcharge and compromise penalties.

For example, Company X which leases office space for a monthly rent of P100,000 will be required to withhold five percent on its rental payments and remit the same to the BIR under current regulations. Thus, Company X should only pay the amount P95,000 to its lessor, and the amount of P5,000 should be withheld by Company X and remitted to the BIR. If the delinquent withholding tax liability of Company X is due to its failure to withhold the five percent on its rental payments, that is, Company X delivers the entire amount of P100,000 to its lessor, Company X may apply for amnesty by paying 40 percent of the net basic withholding tax. On the other hand, pursuant to the IRR, if Company X withheld P5,000 from its lessor, but failed to remit the same to the BIR, Company X may avail himself of the amnesty by paying the entire amount of the net basic withholding tax, but it will not be subject to civil penalties such as interest, surcharge and compromise penalties.

Finally, and in connection with the coverage of delinquent accounts, I quote the interesting statement of RMC 57-2019 that: “The requirement that tax liabilities must be delinquent accounts prior to effectivity of RR 4-2019, however, does not apply to liabilities of withholding agents pertaining to failure to remit taxes for taxable year 2017 and prior years which may be the subject of tax amnesty on delinquencies at any stage/time of investigation for as long (sic) the amount of tax liabilities are properly determined by the BIR.” Thus, if a taxpayer-withholding agent withheld applicable withholding taxes (e.g., withholding tax on compensation) but did not remit the same to the tax authorities, the taxpayer may avail himself of the Tax Amnesty on Delinquencies even without a deficiency withholding tax assessment being issued by the BIR.

I encourage concerned taxpayers to take advantage of the tax amnesty program of the government.

Email: cabdo@divinalaw.com

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