Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 12-99)
The regulations implement provisions of the National Internal Revenue Code of 1997 on assessment of national internal revenue taxes, civil penalties, interest, and provide rules on the extra-judicial settlement of a taxpayer's criminal violations through payment of a suggested compromise penalty.
All taxes, fees, and charges imposed under the National Internal Revenue Code of 1997 are subject to the prescribed surcharge and/or interest, which shall be collected at the same time and in the same manner as the tax.
The procedure involves informing the taxpayer in writing for an informal conference to present their side if discrepancies are found, followed by issuance of a Preliminary Assessment Notice if sufficient basis exists for assessment, before a formal letter of demand and assessment notice is issued.
Prior notice is not required in cases involving mathematical errors in computation, discrepancies between withheld tax and remittances, wrongful carryover of refund against estimated tax, unpaid excise tax on articles, or sale/transfer of exempt articles to non-exempt persons.
A 25% surcharge is imposed for failure to file and pay the tax on time unless it is a case of willful neglect or fraudulent filing, which may attract a 50% surcharge.
The 25% surcharge is for general failure to file or pay on time, while the 50% surcharge applies to cases of willful neglect to file within the prescribed period or filing false or fraudulent returns.
Interest at 20% per annum is computed from the due date of the tax until full payment, based on the diminishing balance of the tax inclusive of interest.
The taxpayer may file an administrative protest within 30 days from receipt of the formal letter of demand and assessment notice, presenting facts and supporting legal grounds, potentially paying undisputed deficiency tax while disputed issues are being resolved.
If the taxpayer fails to file a valid protest within 30 days of receipt of the assessment notice, or fails to submit required documents within 60 days from protest filing, or if the Commissioner denies the protest and no timely appeal is filed, the assessment becomes final.
The BIR may suggest a compromise penalty for the taxpayer’s criminal liability through extra-judicial settlement, consistent with the schedule of compromise penalties under Revenue Memorandum Order No. 1-90, except for criminal cases already filed in court or involving fraud.