On April 5, 2019, the Secretary of Finance, Carlos G. Dominguez, promulgated the Tax Regulations (“RR”) No. 4-2019 to implement the provisions relating to the tax amnesty in the event of default under of the law of the Republic n ° 11213 (“Law on fiscal amnesty”). RR n ° 4-2019 was published in Malaysia on April 9, 2019 and entered into force fifteen (15) days after its publication, i.e. April 24, 2019.
The tax amnesty law submitted by Congress originally provided for a general tax amnesty in addition to a property tax amnesty and an overdue tax amnesty. President Rodrigo Duterte has vetoed the entire section on the general tax amnesty for all unpaid domestic income taxes and asked Congress to pass another general tax amnesty bill that includes guarantees and additional measures against tax evasion. RR n ° 4-2019 concerns the tax amnesty for unpaid bills. The inheritance tax amnesty provisions will be covered by separate tax regulations.
Who can take advantage of the tax amnesty
Physical and legal taxpayers with internal tax debts covering the tax year 2017 and previous years can avail themselves of the tax amnesty on unpaid debts within one year of the entry into force of the rules. , or until April 24, 2020.
What tax liabilities are covered
The overdue tax amnesty covers internal tax debts for the 2017 tax year and previous years in the following circumstances:
1. Overdue accounts, including (a) those with an out-of-court settlement request, whether it has been refused or is still pending by April 24, 2019, (b) withholding obligations to the overdue source resulting from withholding tax, and (c) overdue inheritance taxes;
An overdue account relates to a tax owed by a taxpayer resulting from the audit of the Bureau of Internal Revenue (“BIR”) when a tax notice (a final tax notice or “FAN” / Formal Letter of Demand or “FLD”) a become final and enforceable as a result of the following:
(i) failure to file a valid claim within thirty (30) days of receipt of the FAN / FLD,
(ii) failure to file an appeal with the Tax Appeal Court (“CTA”) or an administrative appeal with the Tax Commissioner (“CIR”) within thirty (30) days of receipt of the decision rejecting the protest, or
(iii) failure to file an appeal with CTA within thirty (30) days of receipt of the CIR decision rejecting the appeal against the Contested Final Decision on Assessment (“FDDA”).
2. With pending criminal cases with the Ministry of Justice (“DOJ”) / Prosecutor’s Office or courts for tax evasion and other criminal offenses under the Tax Code, with or without duly issued tax notice;
3. With final and enforceable judgment of the courts no later than April 24, 2019; and
4. Withholding taxes payable by withholding officers due to their non-payment of withholding taxes.
Tax amnesty rate and calculation of tax amnesty payments
The tax amnesty rates are:
1. 40% for overdue accounts that have become final and enforceable;
2. 50% for tax cases submitted to final and enforceable judgment by the courts;
3. 60% for criminal cases pending before the DOJ or the Public Prosecutor’s Office; and
4. 100% for withholding officers who have not remitted withholding taxes to the BIR.
To calculate the payment of the tax amnesty, the tax amnesty rate is applied to the base tax assessed less any base tax paid before April 24, 2019. The base tax assessed is the tax due shown on the tax notice excluding penalties, or the base amount the tax obligations indicated in the criminal complaint filed with the DOJ or the prosecutor’s office or in the information filed with the courts, or the basic tax obligations in accordance with the decision final and enforceable court.
RR n ° 4-2019 provides two examples to illustrate the calculation of the amount of the tax amnesty:
In the event that the overdue account consists only of unpaid penalties due to late filing or payment and there is no base tax assessed, the taxpayer can avail himself of the tax amnesty by submitting the required documents without making any payment.
Method and place of filing the tax amnesty
Applicants for tax amnesty must first obtain a certificate of defaults / tax debts from the relevant BIR office as follows:
1. For outstanding tax matters District Tax Office (“RDO”) where the requesting taxpayer is registered, or the Regional Collection Division for requesting taxpayers under the jurisdiction of Tax Region No.5, 6, 7 or 8 (Caloocan, Manila, Quezon City and Makati, respectively), or the Large Taxpayers Division (Cebu or Davao) or the Large Taxpayer Collection Enforcement Division, as the case may be;
2. For tax cases which are the subject of a final and enforceable judgment by the courts Legal Division of the Regional Office or Litigation / Prosecution Division of the National Office which handled the case; and
3. For tax obligations covered by a pending criminal case filed with the DOJ / Prosecutor’s Office / Courts – Legal Division of the Regional Office or Tax Region (for Caloocan, Manila, Quezon City and Makati) or the Prosecution Division of the National Office that handled the case.
Applicants for the overdue tax amnesty must then submit the following documents to the RDO or the large taxpayer division office where the taxpayer applicant is registered:
- Declaration of tax amnesty (BIR form n ° 2118-DA);
- Duly validated payment acceptance form (BIR form n ° 0621-DA);
- Certificate of unpaid debts / tax debts issued by the BIR offices concerned; and
- In the event of an overdue withholding tax resulting from the non-withholding of tax, a copy of the valuation found in the FAN / FDDA;
- In the case of withholding agent withholding obligations resulting from non-payment of withholding taxes, the Preliminary Assessment Notice / Informal Conference Notice or equivalent document is sufficient.
Completion of all steps under section 5 (C) of RR No.4-2019 (which includes filing of all required documents and payment of taxes and penalties (if applicable)) must be carried out within the one-year availability period. i.e. until April 24, 2020.
Cancellation of the assessment
The BIR must issue a notice of issuance of the authorization to cancel the assessment to the requesting taxpayer within fifteen (15) calendar days of the submission of the tax amnesty declaration and the payment acceptance form. Otherwise, the stamped “received” duplicates of these documents will be considered sufficient proof of availability.
Effect of tax amnesty
The offenses for which the taxpayers have availed themselves of the amnesty are considered settled, and the related criminal case and its corresponding civil or administrative case, if any, are closed.
The enjoyment of the tax amnesty on unpaid debts and the issuance of the corresponding Payment Acceptance Form does not imply any recognition of criminal, civil or administrative liability on the part of the beneficiary taxpayer.