rmo 01-90_amended penalty provision

November 28, 1989 November 28, 1989 REVENUE MEMORANDUM ORDER NO. 1-90

Subject To

:

: Amendments to the provisions of a “Revised Schedule of Compromise Penalties” for internal revenue violations as prescribed in RMO 26-86. All Internal Revenue Officers and Others Concerned

I. Objectives: This Order is issued: A. To update the Schedule of Compromise Penalties with a view to increase the compromise penalties and delete from the coverage thereof certain acts commonly resorted to by taxpayers as a means of tax evasion; B. To reflect the changes in the Schedule which includes the Code Section, Nature of Violation, Criminal Penalty Imposed and Amount of Compromise Penalty which are prescribed on Chapter II, Title X of the revised NIRC; C. To adopt and implement a uniform application of the various compromise penalties for criminal violations of the Tax Code; and casia D. To provide supplemental guidelines on compromise penalties for resident taxfilers and nonresidents as well.

II. Policies: In order to attain these objectives, the following are hereby prescribed for the information and strict compliance by all concerned: 1. In all cases of criminal violations of the National Internal Revenue Code (NIRC), the penalties for which are prescribed in Chapter II, Title X of the revised NIRC, it is directed that henceforth, compromise penalties be governed strictly in accordance with the attached “Revised Schedule of Compromise Penalties”, marked as Annex “A” and made an integral part hereof. 2. Certain acts/violations which are commonly resorted to by resident taxpayers as a means of tax evasion are deleted from the coverage thereof because they involve fraud. These violations include, among others the possession, printing and use of double or multiple sets of invoices. 3. Certain acts/violations which are commonly resorted to and applicable to non-resident taxpayers are imposed the same amount of compromise penalty as the resident taxpayers.

III. Guidelines and Instructions: 1. The internal revenue officers concerned shall apply the Revised Schedule of Compromise Penalties embodied in Annex “A” to ensure uniformity of action. 2. Cases involving fraud shall be referred to the Legal Branch having jurisdiction over the case, or the Prosecution Division as the case may be, for the institution of the corresponding criminal action. 3. In no case shall the compromise penalty differ in amount from those specified in the aforementioned Schedule, except when duly approved by the Commissioner or, in a proper case, by the Regional Directors. 4. Although all amounts of compromise penalties incident to violations shall be itemized in the assessment notice and/or demand letter along with the other administrative penalties like

surcharge and interest, the same should not form part of the total amount assessed/demanded but should appear separately as a suggestion to the taxpayer to pay in lieu of criminal prosecution. If paid, the compromise penalties shall be collected and accounted for under the usual procedures, as internal revenue. 5. Since compromise penalties are only amounts suggested in settlement of criminal liability, and may not therefore be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the suggested compromise penalty, the violation shall be referred for criminal action as heretofore mentioned. 6. Non-resident filers who commit any of the violations stated in the schedule shall pay the equivalent amount of compromise penalty in pesos or its equivalent in U.S. dollars.

IV. Repealing Clause: All other orders which are inconsistent herewith are hereby repealed or revoked accordingly.

V. Effectivity: This Order shall take effect immediately. (Sgd.) JOSE U. ONG Commissioner of Internal Revenue REVISED SCHEDULE OF COMPROMISE PENALTIES (Based on Chapter II, Title X of the revised National Internal Revenue Code) CODE SEC. NATURE OF CRIMINAL PENALTY VIOLATION IMPOSED PENALTY 253

AMOUNT OF COMPROMISE

Willful attempt to evadeFine of not more than This violation cannot be of defeat any tax imposed P10,000 or imprisonment compromised

because it for the National Internal not more than 2 years, or

involves fraud - Sec.

204 Revenue Code or the payment thereof. 254

both.

NIRC.

Willful failure to pay Fine of not less than There is no specific amount any internal revenue tax P5,000 nor more than of compromise penalty at the time or times P50,000 or imprisonment prescribed but the same

may required by law or for not less than 6 months be compromised at the regulation. and 1 day but not more discretion of the than 5 years, or both. Commissioner on a case to case basis. cd Failure to pay any internal

Fine of not more than

If the amount of tax

unpaid revenue tax at the time or P1,000 or imprisonment times required by law orof not more than 6 regulation. months, or both. But Does (Sec. 274, NIRC) Exceeds Not Exceed P xxx P 500 P 200 500 1,000 400

Compromise is

1,000 2,000 700 2,000 5,000 1,000 5,000 7,500 1,500 7,500 10,000 2,000 10,000 15,000 3,000 15,000 20,000 4,000 20,000 30,000 6,000 30,000 50,000 8,500 50,000 100,00012,000 100,000500,00016,000 500,0001,000,000 20,000 1,000,000 x x x 25,000 254 amount of

Willful failure to make/file

Fine of not more than

There is no specific

any return, keep records

P5,000 nor more than

compromised penalty

or supply information at

P50,000 or imprisonment

cribed, but the

the time or times required

for not less than 6 months

compromised at

pressame may be the discretion by law or regulations. and 1 day but not more of the Commissioner on a than 5 years, or both. case to case basis. Failure to make/file any Fine of not more than If gross annual sales, earnings return or supply infor- P1,000 or imprisonment or receipts; or gross estate mation at the time or for not more than 6 or gift times required by law ormonths, or both. regulations. (Sec. 274, NIRC) But Does Compromise Exceeds Not Exceed is P x x x P 10,000 P 200 10,000 20,000 400 20,000 30,000 600 30,000 50,000 1,000 50,000 75,000 1,500 75,000 100,0002,000 100,000300,0003,000 300,000500,0005,000 500,0001,000,000 7,500 1,000,000 5,000,000 10,000 5,000,000 10,000,000 15,000 10,000,000 25,000,000 20,000 25,000,000 x x x 25,000 232 235

Failure to keep/preserve Fine of not more than If gross annual sales, earnings records required by law P1,000 or imprisonment or receipts or regulations for not more than 6 months, or both. But Does Compromise (Sec. 274, NIRC) Exceeds Not Exceed is P x x x P 10,000 P 200 10,000 20,000 400

20,000 30,000 600 30,000 50,000 1,000 50,000 75,000 1,500 75,000 100,0002,000 100,000250,0003,000 250,000500,0005,000 500,0001,000,000 7,500 1,000,000 5,000,000 5,000,000 10,000,000 10,000,000 20,000,000 20,000,000 50,000,000 50,000,000 x x x 50,000

254 Willful failure to withhold no specific amount of

10,000 15,000 20,000 30,000

Fine of not less than There is

or remit withheld taxes at

P5,000 nor more than

compromised penalty

the time or times required

P50,000 or imprisonment

prescribed, but the

same may be by law or regulations. for 6 months and 1 day compromised at the discretion but not more than 5 of the Commissioner on a years, or both. case to case basis. Failure to withhold or Fine of not more than If the amount of tax not remit withheld taxes at P1,000 or imprisonment withheld or remitted the time or times for not more than 6 required by law or months, or both. regulations. (Sec. 274, NIRC) But Does Compromise Exceeds Not Exceed is P x x x P 500 P 200 500 1,000 400 1,000 2,000 700 2,000 5,000 1,000 5,000 7,500 1,500 7,500 10,000 2,000 10,000 15,000 3,000 15,000 20,000 4,000 20,000 30,000 6,500 30,000 50,000 9,000 50,000 100,00012,000 100,000500,00016,000 500,0001,000,000 20,000 1,000,000 x x x 25,000 254

Misrepresentation as to Fine not less than This violation cannot be actual filing of return or P3,000 or imprisonment compromised because it statement or withdrawal of not exceeding 1 year involves fraud. of return or statement or both. (Sec. 204, NIRC) already filed.

255 Any act or omission by a corporation, or corporation which is

Fine of not less than P4,000 for

P10,000 but not exceeding

the amount of

compromise penalized by the NIRC. P100,000 (in addition to penalty set forth in this the liability of responsible Schedule for the particular corporate officer, partner act or omission, whichever is or employee). higher. P2,000 for responsible officer, partner or employee. cdt 256

a) Violations committed Fine of not less than by an independent CPA, P10,000 but not exceeding by any person under his P50,000 or imprisonment of direction as follows: not less than 4 years and a day to 6 years or both. 1) Willful falsification of any report or statement on any examination or audit; rendering reports (including exhibits, statements, etc.) not verified by him personally or under his supervision or by a member of his firm or staff in accordance with sound auditing practices.

This violation cannot be compromised because it involves fraud. (Sec. 204, NIRC)

2) Certification of financial statement of a business enterprise containing an essential misstatement of facts or omission as to transactions, taxable income, deduction and exemption of a client.

This violation cannot be compromised because it involves fraud. (Sec. 204, NIRC)

b) Violations committedFine of not less than by persons who are not P10,000 but not exceeding CPAs - P50,000 or imprisonment of not less than 4 years and 1 day to 6 years or both.

1) Examination and audit P5,000 of books of accounts of taxpayers;

P5,000

2) Offering to sign and P5,000 certify financial statements without audit;

P5,000

3) Offers any taxpayer the use of accounting or bookkeeping records for internal revenue purposes not in conformity with the requirements in the Code and regulations;

P4,000

4) Knowingly making false entry or enters any false or fictitious name in the books of accounts mentioned in the preceding paragraphs;

This violation cannot be compromised because it involves fraud. (Sec. 204, NIRC)

5) Keeping of two or more This violation cannot be sets of such records or compromised because it books of accounts; involves fraud. (Sec. 204, NIRC) 6) In any way commits P1,000 or the compromise an act or omission in penalty set forth in this violation of the provisions Schedule for the particular act of Sec. 256, NIRC; or or omission, whichever is higher; or, cannot be compromised if it involves fraud. 7) (i) Failure to keep books of accounts or records in a native language, English or Spanish or make a true translation; P x 10,000 20,000 30,000

If gross annual sales earnings or receipts But Does Compromise Exceeds Not Exceed is x x P 10,000 P 200 20,000 400 30,000 600 50,000 1,000

50,000 75,000 1,500 75,000 100,0002,000 100,000250,0003,000 250,000500,000 5,000 500,0001,000,000 7,500 1,000,000 5,000,000 10,000 5,000,000 10,000,000 15,000 10,000,000 20,000,000 20,000 20,000,000 50,000,000 30,000 50,000,000 x x x 50,000 (ii) Where books kept This violation cannot be compromised in a native language, because it involves fraud. English or Spanish are (Sec. 204, NIRC) found to be at material variance with books kept in another language. 232 earnings

Failure to have books of

Fine of not more than

If the gross sales,

accounts audited and P1,000 or imprisonment or receipts have the financial state- of not more than 6 ments attached to the months, or both. income tax return (Sec. 274, NIRC) But Does Compromise certified by an Exceeds Not Exceed is independent CPA. P 25,000 P 200,000 P 2,000 for any for the one quarter year 200,000500,0004,000 500,0001,000,000 6,000 1,000,000 5,000,000 10,000 5,000,000 10,000,000 15,000 10,000,000 25,000,000 20,000 25,000,000 x x x 25,000 83

Failure to have the Fine of not more than If the gross estate statement of assets P1,000 or imprisonment of the decedent and of not more than 6 the deductions from months, or both. gross estate certified (Sec. 274, NIRC) But Does Compromise by an independent Exceeds Not Exceed is CPA. P 50,000 P 200,000 P 1,000 200,000500,0001,500 500,0001,000,000 2,000 1,000,000 5,000,000 4,000 5,000,000 10,000,000 7,500 10,000,000 25,000,000 10,000 25,000,000 50,000,000 15,000 50,000,000 x x x 20,000

258

Illegal collection of foreign payments collection of foreign payments under Sec. 60, NIRC without any license or in violation of implementing regulations.

Fine of not less than P5,000 nor more than P25,000 or imprisonment of not less than 6 months, but not exceeding 3 years, or both.

P4,000

259

Unlawful possession Fine of not less than of cigarette paper in P20,000 but not more bobbins or rolls, ciga- than P100,000 and imprirette tipping paper or sonment of not less than cigarette filter tips. 6 years and 1 day but not more than 12 years.

P20,000

260

Unlawful use of Fine of not less than denatured alcohol. P20,000 but not more than P100,000 and imprisonment of not less than 6 years and 1 day but not more than 12 years.

P20,000

261

Shipment or removal of Fine of not less than Compromise allowable on a liquor or tobacco products P20,000 but not more than case to case

basis. acd under false name or brand P100,000 and imprisonment or as an imitation of anyof not less than 6 years existing name or brand. and 1 day but not more than 12 years. 262

Unlawful possession or If the appraised value of

Compromise allowable

on a removal of imported articles subject to excise tax without payment of tax.

the article under the case to case basis. Tariff and Customs Code (TCC) -

But Does Penalty Exceeds Not Exceed is xxx

P 500 Fine: P100-500 (Imprisonment: 15-30 days)

P500

50,000 Fine: P1,000-P5,000 (Imprisonment: 6 mos. &

1 day - 4 years) 50,000 150,000Fine: P25,000 (Imprisonment: 4 years & 1 day - 8 years) 150,000x x x

Fine: P20,000-P50,000

(Imprisonment: 10 years & 1 day - 14 years) b) Unlawful possession Fine of not less than P1,000 of locally manufactured 10 times the amount of articles subject to excise tax due but not excise tax. less than P500 nor more than P10,000 and imprisonment of 6 months and 1 day to 4 years. c) Unlawful removal of Fine of not less than 10 Compromise allowable on a case untaxed articles subject times the amount of to excise tax from the excise tax due but not place of production. less than P1,000 nor more than P100,000 and imprisonment of not less than 6 months and 1 day but not more than 6 years. 263

to case basis.

a) Failure or refusal to Fine of not less than First Second issue receipts or sales P1,000 nor more than Offense Offense or commercial invoices; P50,000 or imprisonissuing receipts or ment of not less than 6 invoices not truly months and 1 day a) For failure to reflecting and/or but not more than 2 issue receipts containing all inforyears or both. or sales or mation required therein commercial or using multiple or invoices P2,000 P5,000 double receipts or invoices. a/ b) For refusal to issue receipts or sales or commercial invoices 3,000 6,000

c)

d)

For issuance of receipts that do not truly reflect and/or contain all the information required to be shown therein 1,000

2,500

If the information missing is the correct amount of the transaction 2,000

5,000

(i) For possession or use of unregistered receipts or invoices;

e)

f)

P5,000 P10,000

(ii) Use of unregistered cash register machines in lieu of invoices or receipts 7,500

15,000

or use of multiple or double receipts or invoices

Not subject to Compromise

For possession

For printing or causing, aiding or abeting the printing of: 1) Receipts or invoices without authority from the BIR 5,000 10,000 2) Double or Not subject multiple sets of to receipts or Compromise invoices 3) Receipts or invoices not bearing any of the following: P5,000 P10,000 a. Consecutive numbers

b. Name of Taxpayer c. Business Style d. Business address of the person or entity to use the same e. Taxpayer Account No. f. Name, address, date, authority no. of the printer and inclusive serial numbers of the batch or receipts printed g. VAT No., if taxpayer is VAT-registered h. For failure of the printer to submit the required quarterly report under Sec. 239 of the Tax Code as amended.

P1,000 P3,000

264 Offenses relating to internal revenue stamps 1) Making, importing, Fine of not more than P10,000 selling, using or P10,000 or imprisonment possessing without for not more than 5 years express authority from or both. the Commissioner any dye for printing or making stamps, label tags or playing cards. 2) Erasing the cancel- Fine of not more than This violation cannot be lation marks of any P10,000 or imprisonment compromised because stamps previously used for not more than 5 it involves fraud. or altering the written years or both. (Sec. 204, NIRC) casia figures or letters, or cancelling marks on internal revenue stamps. 3) Possession of false, Fine of not more than This violation cannot be counterfeit, restored or P10,000 or imprisonment compromised because it altered stamps, labels, for nor more than 5 years involves fraud. or tags, or causes the or both. (Sec. 204, NIRC) commission of any such

offense by another. 4) Selling or offering Fine of not more than This violation cannot be for sale any box or P10,000 or imprisonment compromised because it package containing for not more than 5 years involves fraud. articles subject to or both. (Sec. 240, NIRC) excise tax with false, spurious or counterfeit stamps or labels or sells from any such fraudulent box, package, or container as aforesaid. 5) Giving away or Fine of not more than P500 accepting from another P10,000 or imprisonment or sells, buys, or uses for not more than 5 years containers on which the or both. stamps are not completely destroyed. 265 Failure to obey summons; Fine of not less than This violation should not be to testify; or to appear P1,000 or imprisonment compromised because if and produce books of not more than 1 year or compromised, it will nullify the accounts, records, etc. both. coercive power of the CIR or to furnish information under Sec. 7(b), NIRC to required under the NIRC. obtain information or facts necessary for investigation of tax liabilities. 267

271

Misdeclaration or Summary cancellation or This violation cannot be misrepresentation by withdrawal of permit to compromised because it manufacturers of articles engage in business as a involves fraud. subject to excise tax manufacturer of articles (Sec. 204, NIRC) under Title IV, NIRC, subject to excise tax. or any pertinent data or information required therein.

Failure of government Fine of not less than If the amount of tax not officer or employee P5,000 nor more than P50,000 withheld or remitted charged with the duty to or imprisonment for 6 months deduct and withhold any and 1 day but not more than internal revenue tax and 2 years, or both. But Does Compromise failure to remit the same Exceeds Not Exceed is accordance with the P x x x P 500 P 200 provisions of the NIRC. 500 1,000 400 1,000 2,000 700 2,000 5,000 1,000 5,000 10,000 2,000 10,000 15,000 3,000

15,000 20,000 4,000 20,000 30,000 6,000 30,000 50,000 9,000 50,000 100,00012,000 100,000500,00016,000 500,0001,000,000 20,000 1,000,000 x x x 25,000 274

Violation of any provision Fine of not more than of the National Internal P1,000 or imprisonment Revenue Code or any of not more than 6 regulation of the months or both. Department of Finance for which no specific penalty is provided by law.

P1,000

275

Sale, transfer, encum- Fine of not less than 20% of value of property brance or any other twice the value of the disposition of any property sold, encumbered property or part or disposed of, but not thereof placed under less than P5,000 or constructive distraint, imprisonment of not less without the knowledge than 2 years and 1 day and consent of the but not more than 4 years, Commissioner. or both.

276

Failure to surrender Violator is personally property placed under liable to pay a sum equal distraint and levy. to the value of the property or rights not surrendered (not exceeding the amount of taxes due including penalties and interest). In addition, such violation shall be fined in a sum of not less than P5,000 or imprisonment for not less than 6 months and 1 day but not more than 2 years, or both.

277

Procuring the unlawful Fine of not more than This violation should not be divulgence of any P2,000 or imprisonment compromised because it

P3,000

is confidential informationof not less than 6 months

against public policy to

allow regarding the business, nor more than 5 years, divulgence of confidential income or inheritance of or both. information, unless this is any taxpayer; unlawfully validly authorized under publishing or printing the existing law. cd i

income, profits, losses or expenditures appearing in any income tax return. NOTE: For Non-resident filers: Certain acts/violations which may be resorted to and applicable to non-resident taxpayers are imposed the same amount of compromise penalty as resident taxpayers and may be paid in pesos or its equivalent in U.S. dollars.) a/ The amount of the compromise penalty shall be doubled if the transaction/violator is subject to value-added tax or to any percentage tax of 4% or more. C o p y r i g h t 2 0 0 2 C D T e c h n o l o g i e s A s i a, I n c.