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The vetoed tax amnesty: Expectations vs reality

Lina Figueroa

News of the approval of the Tax Amnesty Act as Republic Act No. 11213 came out early morning on Sunday, February 17. It was signed on Feb. 14. The reports also indicated that the President vetoed the provisions on the general tax amnesty.

I have three scheduled briefings on the tax amnesty and, for these, I prepared a 50-page slide presentation. After hearing the news of the veto of the general tax amnesty provisions, I am now faced with the problem of fulfilling my two-hour commitment with a 25-page presentation on what is left of the tax amnesty. I am pretty sure my audience will no longer be interested in discussing the expectations prior to the veto, while we are now faced with the reality that there is no more general tax amnesty on ongoing assessments and open years. I hope, though, that the approved Continuing Professional Education credits for the module will not be diminished. This, of course, should be the least of our concerns on tax amnesty.

There are companies that are currently under Bureau of Internal Revenue (BIR) audit and have opted to defer preparing reconciliations and retrieving supporting documents to contest the assessment on the expectation of a general tax amnesty. They have confirmed the value of their assets and computed the amount of amnesty tax payable. Not that they are tax cheats or evaders. It is simply because they think the amount is reasonable, considering that it will cover all open years, including possible fraud allegations beyond the three-year prescriptive period for audit. In a BIR audit, preparing tax reconciliations and supporting documents alone takes time and resources. There are also regulations and documentation requirements that taxpayers usually have difficulty complying with. Taxpayers expect that they will end up paying some deficiency taxes to close the assessment. The reality is that taxpayers currently undergoing tax audit should go back to their worksheets and supporting documents to protest the factual and legal bases.

The general tax amnesty provision was vetoed because of the absence of provisions lifting the bank secrecy for applicants, the legal provisions for compliance with international standards on exchange of information, and the safeguards against abuse and erroneous declarations.

What provisions survived in the Tax Amnesty Act of 2019?

The estate tax amnesty survived, but minus the provision that allows payment of one amnesty tax to cover all transfers of property. Hence, if the property is still in the name of your great grandfather, an amnesty tax has to be computed and paid for the transfer to your grandparent, to your parent, and, finally, to you — three amnesty taxes in all. Remember, though, that the value of the property at each transfer should be the fair market value at the time of the death of each transferor. You need to first check if the property can be covered by the exemption under the prevailing laws. Prior to the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the family home is exempt up to P1 million and there is a standard deduction of another P1 million. The valuation of building and improvements, though, will be tricky. We will need to wait for the BIR guidelines.

The provision on the presumption of the correctness of the estate tax amnesty return has also been stricken out. The veto message notes that the valuation of the properties is a technical aspect that cannot be left to a mere self-declaration. An erroneous valuation will not only affect the amnesty amount, but also impact subsequent transfers, whether by sale, donation, or gift. Hence, the expectation is that the implementing regulations will give the BIR an opportunity to evaluate the truthfulness of the declarations related to the application for estate tax amnesty.

The amnesty on delinquent taxes also survived. The amnesty tax is 40% of the delinquent tax, 50% if there is a final decision of the court, 60% if the case involves tax evasion, and 100% in case of unremitted taxes withheld.

With this reality, though, there are still expectations that can only be answered by the implementing regulations.

If the taxpayer has an ongoing assessment for 2017 and the BIR issues, after the enactment of the Tax Amnesty Act, a Final Decision on Disputed Assessment (FDDA) that the taxpayer opts not to further protest or appeal, the assessed tax will be considered a delinquent tax if unprotested after a 30-day period. Will the amnesty on delinquent taxes be applicable? Can the taxpayer apply for amnesty by paying 40% of the basic tax? These expectations will be resolved if the implementing regulations provide for cut-off periods for qualification.

For taxpayers whose applications for compromise settlement are pending BIR approval, the Tax Amnesty Act provides that they can still qualify as delinquent taxes, even if the BIR has denied the application for compromise settlement before the issuance of the implementing regulations for the tax amnesty. Can they credit the 10% or 40% taxes paid under the compromise settlement program and avail of the tax amnesty instead? I understand that paying the 40% amnesty tax will almost automatically vest the amnesty privilege, while an application for compromise settlement takes time while being routed for approval by at least five offices at the regional level and another five at the national office of the BIR.

Cases in court involving 2017 and prior-year assessments can also qualify as delinquent accounts if the court can issue a final decision that will become executory before the issuance of the implementing regulations. Is it at all possible that the BIR and the courts can also agree on a set of guidelines to allow willing taxpayers to request an immediate issuance of an unfavorable decision, so the taxpayer can qualify for the amnesty?

The Tax Amnesty Act requires the issuance of the implementing rules and regulations within 90 days from the effectivity of the law.

In the veto message, the President expressed hope that Congress can pass a separate general tax amnesty bill that would carry with it the necessary safeguards so that both tax administration and revenue expectations can be met. It seems like we can still raise our expectations after all.


Lina P. Figueroa is a partner of the Tax Advisory and Compliance Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.


As published in BusinessWorld, dated on 19 February 2019