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Second chance at tax amnesty on delinquency

If you failed to qualify for the tax amnesty on delinquencies, there may be a second chance for you.

On Valentine’s Day last year, the President signed the Tax Amnesty Act (Republic Act No. 11213) which included the Tax Amnesty on Delinquencies (TAD). The Bureau of Internal Revenue (BIR) then issued the Implementing Rules on TAD (Revenue Regulations No. 4-2019) on April 8, 2019, which became effective on April 24. Although it is not as generous as the vetoed general tax amnesty, it was still a welcome development. As the saying goes, beggars can’t be choosers and, after all, tax amnesty is a privilege and not a right.

Unlike the more forgiving general tax amnesty that could have been availed of by most taxpayers with unpaid taxes and penalties, TAD covers only taxpayers with delinquent accounts as of April 24, 2019. Taxes covered include all internal revenue taxes for the taxable year 2017 and prior years.

A delinquent account, as defined in the implementing rules, pertains to tax due arising from a BIR audit that has been issued Assessment Notices [final assessment notice (FAN)/ final letter of demand (FLD)] that have become final and executory due to the following instances: (a) failure to pay the tax due on the prescribed due date provided in the FAN/FLD and for which no valid protest, whether a request for reconsideration or reinvestigation, has been filed within 30 days from receipt thereof; (b) failure to file an appeal to the Court of Tax Appeals (CTA) or an administrative appeal before the Commission of Internal Revenue (CIR) within 30 days from receipt of the decision denying the request for reinvestigation or reconsideration; or (c) failure to file an appeal to the CTA within 30 days from receipt of the decision of the CIR denying the taxpayer’s administrative appeal to the Final Decision on Disputed Assessment (FDDA).

Based on the discussion above, taxpayers who would have wanted to avail of the amnesty, but protested the assessment within the time allowed by law as of April 24, 2019 would have missed their chance.

The TAD implementing rules triggered many questions from interested taxpayers, which is why on May 22, 2019, a few months after the issuance of RR No. 4-2019, the BIR issued Revenue Memorandum Circular (RMC) No. 57-2019, clarifying the frequently asked questions of taxpayers on TAD. Interestingly, one of the clarifications under RMC No. 57-2019 provided that tax liabilities covered by a FAN that was timely protested, yet the protest was withdrawn on or before April 24, 2019, shall be considered a delinquent account qualified for tax amnesty. It was as if there was no protest filed, provided that the delinquent accounts pertain to taxable year 2017 and prior years and that the period to protest lapsed on or before April 24, 2019.

However, the clarification was issued on May 22, 2019 — way past the April 24 deadline. Hence, many taxpayers were unable to avail of the opportunity to withdraw their protest.

Fortunately, there is a second chance.

On Feb. 6, 2020, the BIR issued RMC No. 11-2020, amending the clarification to extend the withdrawal of the protest until April 23, 2020 to qualify their assessments as delinquent accounts. RMC No. 11-2020 provided that, if the protest or appeal was withdrawn on or before April 23, 2020 and the FAN/FLD or FDDA was received on or before March 25, 2019, the effect is as if no protest or appeal was filed. Therefore, the assessment will have become final and executory as of April 24, 2019, because then the 30-day period counted from the receipt of the FAN, within which the taxpayer is allowed to file a protest or appeal, would have already lapsed. This gives taxpayers a second chance at withdrawing their protest.

In addition to an opportunity to withdraw the protest, RMC No. 11-2020 also reminded taxpayers that the protest may actually be invalid in the first place, and consequently qualifying the assessment notice as final and executory and the assessment, therefore, delinquent. RMC No. 11-2020 provided the following instances when a protest is invalid: (1) the protest to FAN/FLD was filed beyond 30 days from receipt of the FAN/FLD; (2) the appeal to the FDDA was filed beyond 30 days from receipt of the FDDA; (3) the protest to FAN/FLD was not fled with the duly authorized representative of the CIR who signed the FAN/FLD; (4) the appeal to the FDDA (i.e., motion for reconsideration) was not filed with the office of CIR; (5) the protest/appeal failed to state the applicable law, rules and regulations, or jurisprudence on which it is based; and (6) the request for reinvestigation did not specify the newly discovered or additional evidence that the taxpayer intends to present, as required in a valid protest.

If the protest filed by the taxpayer is invalid, the taxpayer will qualify for tax amnesty after the lapse of the 30-day period provided by law to protest the assessment. This means that the FAN/FLD/FDDA should have been received by the taxpayer on or before March 25, 2019 so that the assessment will become final and executory on or before April 24, 2019.

RMC No. 11-2020 also provided an extended period of 30 days to submit the complete documentary requirements to fully comply with the availment of the tax amnesty, provided that the taxpayers have already secured the Certificate of Tax Delinquencies (CTD)/Tax Liabilities and endorsement of the Acceptance Payment Form (APF) and paid the amnesty tax due on or before April 23, 2020, the last day of the availment period.

A word of caution, however, for those who plan to withdraw their protest: taxpayers should consider the costs and benefits of withdrawing the protest to avail of the tax amnesty, because this is a ‘touch-move’ decision. The taxpayer should try to assess which would result in more cost savings, because there is a possibility that the amnesty could actually be higher than what the taxpayer could have settled if the assessment was closed through the usual assessment process. This is true especially if the assessment is significantly higher and far from the true deficiency of the taxpayer. For instance, the basic tax assessed is P50 million, but the actual deficiency is only P2 million, as supported by legal grounds and documents presented by the taxpayer. The 40% amnesty tax amounting to P20 million may be too much. Furthermore, for taxpayers who have partially settled the assessment, the amount paid cannot be credited against the tax amnesty, as computed. The basis for computing the tax amnesty rate is the basic tax assessed less the amount already paid.

Another thing taxpayers need to watch out for is the timeline for availing of tax amnesty. Taxpayers should ensure that they allot ample time to process the withdrawal of protest, file the Tax Amnesty Return, secure the Certificate of Tax Delinquencies/Liabilities and the approved Acceptance Payment Form, and settle the tax amnesty due on or before April 23, 2020. Even if the taxpayer withdraws the protest on April 23, 2020, it would already be too late for the application. With only a few months away from the deadline, seeking professional advice before making a critical decision may be a good investment.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.


Juvy H. de Jesus is a manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.


As published in BusinessWorld, dated 18 February 2020