Revised Compromise Penalties for Tax Code Violations

The Order covers compromise penalties for violations of the National Internal Revenue Code of 1997 (Tax Code), as amended.
The Order retains the applicable policies and guidelines under Revenue Memorandum Order (RMO) No. 19-2007 for strict compliance.
The Order updates and revises the schedule of compromise penalties previously specified under RMO No. 19-2007.
The Order implements a revised schedule and updates the coverage by deleting certain acts previously covered.

The Order adopts a uniform application of compromise penalties involving violations of the Tax Code.
The Order updates the Schedule of Compromise Penalties specified under RMO No. 19-2007.
The Order deletes from coverage certain acts commonly resorted to by taxpayers as means of tax evasion.
The deletion is justified because the deleted acts are stated to have met the requirements of the definition of fraudulent acts.

In all cases of criminal violations of the NIRC that do not involve the commission of fraudulent act, compromise penalties must follow strictly the amounts in the Revised Schedule of Compromise Penalties in Annex “A”.
The revised schedule in Annex “A” is made an integral part of the Order.
The amount of a compromise penalty must not differ from the schedule amounts.
The only recognized exceptions to strict amounts are when duly approved by the Commissioner or the concerned Deputy Commissioner, or in proper cases, by the Regional Directors.
Internal revenue officers must apply the Revised Schedule of Compromise Penalties embodied in Annex “A” to ensure uniformity of action.

Cases involving fraud must be referred to the concerned Division having jurisdiction over the case.
The referral requires the institution of the corresponding criminal action for fraudulent cases.

All amounts of compromise penalties incident to violations must be itemized in the assessment notice and/or demand letter issued to the taxpayer.
Compromise penalty amounts must not form part of the assessment notice that reflects deficiency basic tax, surcharge, and interest.
Compromise penalty amounts must appear in a separate assessment notice/demand letter as the amount suggested to the taxpayer to pay in lieu of criminal prosecution.
If the compromise penalty is paid, the compromise penalties must be collected and accounted for using the usual procedures for internal revenue collection.

Compromise penalties are treated as suggested amounts for settlement of criminal liability.
A compromise penalty may not be imposed or exacted on the taxpayer.
If a taxpayer refuses to pay the suggested compromise penalty, the violation must be referred to the appropriate office for criminal action.

The schedule of compromise penalties does not prevent the Commissioner or a duly authorized representative from accepting a compromise amount higher than the amounts provided in the schedule.
A compromise offer lower than the prescribed amount may be accepted only after approval by the Commissioner of Internal Revenue or the concerned Deputy Commissioner/Assistant Commissioner/Regional Director.

All other orders that are inconsistent with the Order are repealed or revoked accordingly.
The Order takes effect immediately.