Cases Eligible for Compromise Settlement
- Includes delinquent accounts, cases under administrative protest after final assessment, civil tax cases under court dispute, collection cases in courts, and certain criminal violations not yet filed in court
- Exceptions include withholding tax cases unless specific legal doubt is invoked, confirmed criminal tax fraud, already filed criminal cases, delinquent accounts with approved installment payment schedules, cases with final reconsideration reports with taxpayer acceptance, and cases handled by evaluation boards
- Also includes cases final and executory after court judgment based on doubtful validity, and estate tax cases due to financial incapacity
Basis for Acceptance of Compromise Settlement
- Grounds for compromise:
- Doubtful validity of assessment:
- Includes jeopardy assessments without complete audits
- Arbitrary assessments based on presumptions
- Failure to file protests or appeals within prescribed periods with reasonable doubt
- Noncompliant demand notices
- Assessments within prescriptive period with disputed waiver authenticity
- Financial incapacity:
- Corporations ceased operation or dissolved (excluding subscription receivable-related taxes)
- Taxpayer with at least 50% impairment in original capital as per latest balance sheet
- Net worth deficit with liabilities exceeding assets
- Compensation earners with no other income and low gross monthly income with no other assets besides family home
- Taxes declared bankrupt or insolvent by competent authority
- Offers involving tax credit certificates, pending claims for refunds or credits, or potential future increase in taxpayer equity are not considered
- Written waiver of bank deposit secrecy required for inquiries
- Serious doubts about payment ability grounds to deny compromise
Prescribed Minimum Percentages of Compromise Settlement
- Based on tax type assessed, minimum compromise rates stipulated:
- Financial incapacity cases:
- 10% for low-income individuals with no other assets except family home
- 10% for individuals without income
- 10% for zero or negative net worth
- 20% for dissolved corporations or non-operating companies less than 3 years
- 10% for non-operating companies more than 3 years
- 40% for impairment in original capital by at least 50%
- 20% for declared bankrupt or insolvent taxpayers
- Doubtful validity cases:
- Minimum 40% of basic assessed tax
- Lower rates allowed on written request with legal/factual reasons and prior approval by NEB
- Minimum rates apply also to increments like surcharge and interest
Documentary Requirements for Application
- Certification of salary and sworn statement of no other income for low-income employed individuals
- Sworn statement of no income for individuals without income
- Latest audited financial statements or Account Information Form for financial incapacity cases
- Notice of dissolution for dissolved corporations
- Decree of bankruptcy or insolvency if applicable
- Waiver of secrecy of bank deposits and sworn statement regarding absence of tax credit certificates or refund claims
- Compliance with additional Revenue Memorandum Orders
Approval of Offer of Compromise
- National Office jurisdiction cases approved by majority NEB (Commissioner and four Deputy Commissioners)
- Regional cases (deficiency under P500,000 and minor criminal violations) approved by Regional Evaluation Board (REB)
- Offers below prescribed minimum rates require NEB approval regardless of office
- Payment of compromise offer may be made before or after approval
- Disapproved paid offers handled per existing procedures
Reporting on Compromise Authority Exercise
- Commissioner submits semi-annual report on compromise exercise to Congressional Oversight Committee through Senate and House Ways and Means Chairmen
- REB provides necessary data timely for reporting
Repealing Clause
- Supersedes Revenue Regulations Nos. 6-2000 and 7-2001
- Amends or repeals inconsistent issuances
Effectivity
- Takes effect 15 days after publication in a newspaper of general circulation
- Immediate effect for cases with Secretary of Finance confirmed compromise
This Regulation comprehensively sets the procedural, substantive, and administrative framework for the compromise of internal revenue tax liabilities, establishing clear guidelines on eligible cases, basis for settlements, minimum acceptable compromises, documentation, and approval processes to ensure fair and efficient tax administration.