Question & AnswerQ&A (BIR REGULATIONS NO. 30-2002)
The main purpose is to implement Sections 7(c), 204(A) and 290 of the National Internal Revenue Code of 1997, authorizing the Commissioner of Internal Revenue to compromise payment of certain internal revenue tax liabilities, superseding Revenue Regulations Nos. 6-2000 and 7-2001.
Cases eligible for compromise include delinquent accounts, administrative protest cases pending in BIR offices, civil tax cases before courts, collection cases filed in courts, and criminal violations not yet filed in court or not involving criminal tax fraud.
Exceptions include withholding tax cases unless the taxpayer disputes withholding obligation, confirmed criminal tax fraud cases, criminal violations already filed in court, cases with approved installment payments, cases with final reduction reports agreeable to the taxpayer, cases handled by Regional or National Evaluation Boards, cases final and executory after judgment, and estate tax cases on financial incapacity grounds.
The two main grounds are (1) doubtful validity of the assessment and (2) financial incapacity of the taxpayer to pay the assessed tax.
Doubtful validity applies when the assessment is jeopardy assessment, arbitrary or based on presumptions, taxpayer failed to file protest due to no notice, failed to request reinvestigation or elevate to the Court of Tax Appeals, demand notice lacks formalities, assessments based on best evidence rule, or questionable authenticity of waiver of statute of limitations.
Conditions include: corporation ceased operation or dissolved, 50% impairment in original capital, net worth deficit, individual taxpayer with no other leviable property except family home, compensation earner with income below specified thresholds possessing no other leviable assets, or declared bankrupt or insolvent.
Rates vary by condition, from 10% for low-income individuals, zero or negative net worth taxpayers, and long non-operating companies, to 20% for dissolved corporations and bankrupt taxpayers, and up to 40% for those with surplus or earnings deficit impairing capital by at least 50%.
A minimum compromise rate of 40% of the basic assessed tax applies, but lower rates may be requested in writing with reasons and require approval by the National Evaluation Board (NEB).
Requirements include certification of salary from employer and sworn statement of no other income for employed individuals, sworn statement of no income for those without income, audited financial statements for corporations, notice of dissolution for dissolved corporations, court order for bankruptcy, waiver of bank deposit secrecy under RA 1405, and sworn statement of no tax credit certificates or pending claims.
The National Evaluation Board (NEB) composed of the Commissioner and four Deputy Commissioners approves settlements within the National Office jurisdiction. Regional Evaluation Boards (REB) approve cases with basic deficiency taxes of P500,000 or less and minor criminal violations, except if rates offered are lower than prescribed minimums which require NEB approval.