QuestionsQuestions (BIR REGULATIONS NO. 30-2002)
It implements Sections 7(c), 204(A), and 290 of the NIRC of 1997 on compromise settlements of internal revenue tax liabilities, authorizing the CIR to compromise certain tax liabilities involving delinquent accounts, disputed assessments, and related cases, superseding RR Nos. 6-2000 and 7-2001.
Delinquent accounts; cases under administrative protest after issuance of a Final Assessment Notice and still pending in offices; civil tax cases pending in court; collection cases filed in court; and criminal violations other than those already filed in court or involving criminal tax fraud.
Withholding tax cases unless the applicant invokes law casting doubt on withholding obligation; criminal tax fraud cases confirmed by the CIR or authorized representative; criminal violations already filed in court; delinquent accounts with approved installment schedules; certain cases reduced by final reinvestigation/reconsideration decisions if the taxpayer signs the agreement; cases becoming final/executory after court final judgment on doubtful validity grounds; and estate tax cases where compromise is based only on financial incapacity.
On (1) doubtful validity of the assessment, or (2) financial incapacity of the taxpayer, subject to specific conditions stated in the regulations.
Examples include jeopardy assessments; assessments that appear arbitrary and lacking legal/factual basis; failure to file administrative protest due to alleged failure to receive notice; failure to request reinvestigation/reconsideration within 30 days; failure to elevate adverse decision to the CTA within 30 days; demand notices failing formalities under Sec. 228 for assessments issued on/after Jan. 1, 1998; reliance on “best evidence obtainable” where sufficient and competent evidence can dispute the assessment; and questions on authenticity of waivers extending the assessment period.
It is an assessment made without the benefit of complete/partial audit due to reasons to believe collection of deficiency tax will be jeopardized by delay because of taxpayer failure to comply with audit/investigation requirements to present records or substantiate deductions/exemptions/credits. It may support reasonable doubt in compromise applications.
When the taxpayer fits any of the listed circumstances: corporation ceased operations or dissolved (with limits excluding certain return-of-capital related liabilities); severe impairment of capital shown by specified deficits; networth deficit with limitations (individual has no other leviable properties except family home); certain low-income compensation earners with no other leviable assets besides family home; or declaration of bankruptcy/insolvency by competent authority.
Because compromise should not be used to effectively convert/offset obligations where taxpayer holds TCCs or has pending refund/tax credit claims, or has existing/future agreements that could increase equity at the time or future period. Thus, such offers are not considered under the stated conditions.
A waiver in writing of the secrecy of bank deposits under R.A. No. 1405 (allowing inquiry into bank deposits) and a sworn statement that the taxpayer has no TCC on hand or in transit and has no pending claim for tax refund/TCC with the BIR/DOF one-stop-shop or in courts.
As provided: 10% for certain low-income individuals and those with zero/negative net worth or similar cases; 20% for dissolved corporations and certain cases depending on duration/non-operation or insolvency conditions; and 40% for cases where there is a surplus/earnings deficit impairing original capital by at least 50% (with specific enumerations in Section 4).
A minimum equivalent to 40% of the basic assessed tax. The taxpayer may request a lower rate, but must justify in writing and obtain prior NEB approval for offers below 40%.
The minimum percentages prescribed in the regulations apply based on the total amount assessed, even if the assessment consists solely of increments.
Depending on the ground: (1) employer certification of prevailing monthly salary including allowances plus a sworn statement of no other income (for employed individual with limited salary); (2) sworn statement of no income from any source (for individuals without any source of income); (3) copy of latest audited financial statements or audited AIF filed with BIR, plus specific documents like SEC Notice of Dissolution or court/competent order for bankruptcy/insolvency, as applicable. Also, bank secrecy waiver and sworn statement re no TCC/refund claims are required.
The NEB approves, composed of the Commissioner and four (4) Deputy Commissioners; approval is by a majority of all members. Decisions granting the taxpayer’s request (or favorable to the taxpayer) have the consequence of the Commissioner.
Offers involving basic deficiency taxes of P500,000 or less and minor criminal violations discovered by Regional/District Offices are subject to REB approval. However, if the offer is below the prescribed rates in Section 4, NEB approval is still required.
Payment may be made either before or after Board approval at the taxpayer’s option. If disapproved and payment was already made, it will follow procedures in the applicable Revenue Memorandum Order for such disapproval (including amendments).
The Commissioner must submit to the Congressional Oversight Committee every six (6) months each calendar year a report on the exercise of his power to compromise tax liabilities, with REBs submitting necessary reports and data in due time.
Fifteen (15) days after publication in a newspaper of general circulation, except for cases already confirmed by the Secretary of Finance, in which case effectivity is immediate upon publication.