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CM 304.1 - TP OPTION - TAXPAYER INTENDS TO PAY THE TAX LIABILITY IN FULL

If the taxpayer is willing to pay his outstanding tax liability in full, the Revenue Officer shall:

  1. Compute the additional increments incident to delinquency from the date the assessment was issued up to date of the payment of the tax liability, as follows:

               Computation of the Applicable Surcharge and Interest[1]- Refer to Interest Rate Table (Annex 300-1.17)

               Scenario 1.         Late filing of the tax return and late payment of the tax due thereon.

               Illustration: Income tax return for the calendar year 2008 was due for filing on April 15, 2009 but the taxpayer voluntarily filed his tax return, without notice from the BIR, only on June 30, 2009. The tax due per return amounts to P100,000.00. In this case, the taxpayer shall be liable for delinquency penalties consisting of 25% surcharge, plus 20% interest per annum, computed from the due date of the tax until date of actual payment, computed as follows:

                              Income tax due per return                                                                        P100,000.00

                              Add:       25% surcharge for late filing

and late payment

                                             (P100,000.00 x 25%)                                     P25,000.00

                                             20% interest per annum

                                             From 4/15/09 to 6/30/09

                                             (P100,000.00 x .0415524)                                 4,155.24            29,155.24

                              Total amount due (excluding suggested

                              compromise for late filing and late

                              payment of the tax)                                                                                   P129,155.34

               Only one 25% surcharge shall be imposed for late filing of the return and late payment of the tax.

Scenario 2.         The tax return without prior authorization from the BIR, is filed on time but filed through an internal revenue officer other than with whom the return is required to be filed (filing of a tax return with the wrong venue).

Illustration: The taxpayer’s 2008 income tax return is required to be filed through the Authorized Agent Bank (AAB) under the jurisdiction of RDO East Makati. But, without prior authorization from the BIR, the taxpayer filed his tax return and paid the tax through the AAB under the jurisdiction of RDO Davao City. The tax due per return is P100,000.00.

               Income tax due per return                                                                        P100,000.00

               Add:       25% surcharge for filing the return

                              at wrong venue                                                                                25,000.00

               Total amount due                                                                                       P125,000.00

               Less:      Amount paid                                                                                   100,000.00

               Amount still due                                                                                          P  25,000.00

Scenario 3.         Late filing of the return and late payment of the tax due to taxpayer’s willful neglect.

Illustration: The taxpayer did not file his income tax return for the calendar year 2007 which was due for filing on April 15, 2008. He was notified by the BIR of his failure to file the tax return, for which reason, he filed his tax return and paid the tax, only after the said notice, on June 30, 2009. The tax due per return is P100,000.00

Income tax due per return                                                                                       P100,000.00

               Add:       50% surcharge for willful neglect

                              to file the return and late payment

                              of the tax due (P100,000.00 x 50%)                         P50,000.00

                              20% interest per annum from

                              4/15/08 to 6/30/09

                              (P100,000.00 x 0.2415524)                                           24,155.24              74, 155.24

               Total amount due (excluding suggested

               compromise penalty for late filing of the

               return and late payment of the tax due)                                                             P174,155.24

Scenario 4.         Late payment of a deficiency tax assessed per Final Assessment Notice and Letter of Demand. In general, the deficiency tax assessed shall be paid by the taxpayer within the time prescribed (due date) in the Assessment Notice and letter of demand, otherwise, such taxpayer shall be liable for the delinquency penalties incident to late payment.

Illustration: XYZ CORPORATION filed its final adjustment income tax return for calendar year 2007 with a net taxable income of P500,000.00. At the applicable income tax rate of 35% for the year 2007, its income tax amounted to P175,000.00. However, upon investigation, it was disclosed that its income tax return was false or fraudulent because it did not report a taxable income amounting to another P500,000.00. On its net income of P1,000,000.00 per investigation, the income tax due is P350,000.00. Deducting its payment per return filed, the deficiency, excluding penalties, amounted to P175,000.00. It was duly informed of this finding through a Preliminary Assessment Notice. Failing to protest on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 2009 calling for payment of the deficiency income tax on or before June 30, 2009, as shown below:

               Income tax due per investigation                                                                          P350,000.00

               Less:      Income tax paid per return                                                                         175,000.00

               Deficiency income tax                                                                                              P175,000.00

               Add:       50% surcharge for filing a fraudulent

                              or false return (P175,000.00 x 50%)          P87,500.00

                              20% interest per annum

                              from 4-15-08 to 6-30-09

                              (175,000.00 x .2415524)                                42,271.67                           129,771.67

               Total amount due                                                                                                      P304,771.67

Assuming that the aforementioned deficiency income tax assessment against XYZ CORPORATION, in the amount of P304,771.67, is not paid by June 30, 2009, the deadline for payment of the assessment, and the taxpayer failed to file a protest within the reglementary period (thirty (30) days from receipt of the assessment notice), the assessment becomes final and executory. Assuming further, that the corporation pays its tax assessment only by July 31, 2009, the delinquency penalties for late payment shall be computed as follows:

              

Total deficiency income tax assessed on May 31, 2009                                   P304,771.67

               Add:       25%surcharge for late payment

                              (304,771.67 x 25%)                                        P76,192.92

                              20% interest per annum from

                              7-1-09 to 7-31-09

                              (304,771.67 x .0166667)                                  5,079.54                             81,272.46

                              Total amount due (excluding suggested

                              Compromise penalty for late payment)                                                P386,044.13

  1. Prepare BIR Payment Form No. 0605 to be signed by the authorized signatory;
  2. Give the signed BIR Payment Form No. 0605 to the taxpayer and demand that the payment thereof be made to any AAB within the RDO where it/he/she is registered. In case there is no AAB in that District or Regional Office, the taxpayer can pay directly to the Revenue Collection Officer (RCO) who shall issue a Revenue Official Receipt (ROR).

               In case of large taxpayers and other taxpayers paying through the Electronic Filing and Payment System (eFPS), provide the taxpayer with the updated computation of delinquency taxes and/or penalties with instruction that the same should be paid immediately through the eFPS facility;

  1. Instruct the taxpayer to submit a copy of the bank-validated BIR Payment Form No. 0605 and attach the same together with the photocopy of the AAB Confirmation Receipt or the ROR issued by the duly authorized Revenue Collection Officer (RCO) to the case docket;
  2. Validate the payments made by the taxpayer as posted in the taxpayer’s ledger in the Collection and Bank Reconciliation System (CBR) and the Taxpayer Account System (TAS) of the Integrated Tax System (ITS);
  3. Prepare a closing memorandum report (Annex 300-1.18) to be approved by the RDO/LTDO/ LTCED through the Chief of the Collection Section. Furnish the Collection division of the Regional Office/LTS with photocopies of the Assessment Notice, Confirmation Receipts, validated BIR Payment Form No. 0605/ROR and the closing memorandum report;
  4. Record the case in the General Control Ledger as a closed case;
  5. Forward the docket to the Administrative Division of the Regional Office/Records Division in the National Office (NO) for file/future reference; and
  6. Prepare and submit monthly GCL and Monthly Updates of Delinquent Accounts (Annex 300-1.19) on the 10th day of the following month to the CED, copy furnished the Collection Division of the Regional Office/LTS (Refer to CM 306 Monitoring of ARs/DAs)

 

[1] Section 248 and 249 of the NIRC of 1997, as amended.