764 Phil. 418
LEONEN, J.:
On February 2, 2000, ING Bank "paid the deficiency assessments for [the] 1996 compromise penalty, 1997 deficiency documentary stamp tax and 1997 deficiency final tax in the respective amounts of P1,000.00, P1,000.00 and P75,013.25 [the original amount of P73,752.47 plus additional interest]."[16] ING Bank, however, "protested [on the same day] the remaining ten (10) deficiency tax assessments in the total amount of P672,576,939.18."[17]
Particulars Basic Tax (P) Surcharge (P) Interest (P) Total (P)Deficiency Income Tax 1996 (ST-INC-96-0174-99) 20,916,785.03 11,346,639.55 32,263,424.581997 (ST-INC-97-0185-99) 133,533,114.54 45,730,518.68 179,263,633.22Deficiency Withholding Tax on Compensation 1996 (ST-WC-96-0175-99) 1,027,267.20 602,288.17 1,629,555.371997 (ST-WC-97-0184-99) 2,505,925.25 968,042.36 3,473,967.61Deficiency Onshore Tax 1996 (ST-OT-96-0176-99) 8,267,437.54 4,847,209.95 13,114,647.49Deficiency Branch Profit Remittance Tax 1996 (ST-RT-96-0177-99) 39,215,700.00 22,992,218[.]63 62,207,918.631997 (ST-RT-97-0181-99) 92,587,381.60 6,729,180.18 40,799,690.39 140,116,252.17Deficiency Documentary Stamp Tax 1996 (ST-DST-96-0178-99 3,838,753.06 959,688.27 4,798,441.331997 (ST-DST-97-0181-99) 1,569,990.18 392,497.55 1,962,487.731997 (ST-DST-97-0180-99) 186,997,288.84 46,749,322.21 233,746,611.05Compromise Penalty 1996 (ST-CP-96-0179-99) 1,000.00 1,000.001997 (ST-CP-97-0186-99) 1,000.00 1,000.00Deficiency Final Tax 1997 (ST-FT-97-0183-99) 53,200.89 20,551.58 73,752.47TOTALS 490.514.844.13 54.830.688.21 127.307.159.31 672.652.691.65
WHEREFORE, the assessments for 1996 and 1997 deficiency income tax, 1996 and 1997 deficiency branch profit remittance tax and 1997 deficiency documentary stamp tax on IBCLs exceeding five days are hereby CANCELLED and WITHDRAWN. However, the assessments for 1996 and 1997 deficiency withholding tax on compensation, 1996 deficiency onshore tax and 1996 and 1997 deficiency documentary stamp tax on special savings accounts are hereby UPHELD in the following amounts:Both the Commissioner of Internal Revenue and ING Bank filed their respective Motions for Reconsideration.[21] Both Motions were denied through the Second Division's Resolution dated November 12, 2004, as follows:Accordingly, petitioner is ORDERED to PAY the respondent the aggregate amount of P240,106,928.94, plus 20% delinquency interest per annum from February 3, 2000 until fully paid, pursuant to Section 249(C) of the National Internal Revenue Code of 1997.
Particulars Basic Tax Surcharge Interest TotalDeficiency Withholding Tax on Compensation 1996 (ST-WC-96-0175-99) P 105,939.86 P 61,445.11 P 167,384.971997 (ST-WC-97-0184-99) 287,795.44 109,362.26 397,157.70Deficiency Onshore Tax 1996 (ST-OT-96-0176-99) 544,991.20 P 136,247.80 316,094.89 997,333.89Deficiency Documentary Stamp Tax 1996 (ST-DST-96-0178-99) 3,838,753.06 959,688.27 4,798,441.331997 (ST-DST-97-0180-99) 186,997,288.84 46,749,322.21 233,746,611.05TOTALS P 191,774,768.40 P 47,845,258.28 P 486,902.26 P 240,106,928.94
SO ORDERED.[20] (Emphasis in the original)
WHEREFORE, the respondent's Motion for Partial Reconsideration and the petitioner's Motion for Reconsideration are hereby DENIED for lack of merit. The pronouncement reached in the assailed decision is REITERATED.On December 8, 2004, ING Bank filed its appeal before the Court of Tax Appeals En Banc.[23] The Court of Tax Appeals En Banc denied due course to ING Bank's Petition for Review and dismissed the same for lack of merit in the Decision promulgated on April 5, 2005.[24]
SO ORDERED.[22]
(1) | Statement of Assets, Liabilities and Net Worth (SALN) as of December 31, 2005 (original and amended declarations);[34] |
(2) | Tax Amnesty Return For Taxable Year 2005 and Prior Years (BIRFormNo. 2116);[35] and |
(3) | Tax Amnesty Payment Form (Acceptance of Payment Form) for Taxable Year 2005 and Prior Years (BIR Form No. 0617)[36] showing payment of the amnesty tax in the amount of P500,000.00. |
In that ruling, bonuses are determined and distributed in the succeeding year "[A]fter [sic] the audit of each company is completed (on or before April 15 of the succeeding year)". The withholding and remittance of income taxes were also made in the year they were distributed to the employees. . . .Respondent Commissioner of Internal Revenue contends that petitioner ING Bank's act of "claim[ing] [the] subject bonuses as deductible expenses in its taxable income although it has not yet withheld and remitted the [corresponding withholding] tax"[65] to the Bureau of Internal Revenue contravened Section 29(j) of the 1997 National Internal Revenue Code, as amended.[66] Respondent Commissioner of Internal Revenue claims that "subject bonuses should also be disallowed as deductible expenses of petitioner."[67]
In petitioner's case, bonuses were determined during the year but were distributed in the succeeding year. No withholding of income tax was effected but the bonuses were claimed as an expense for the year. . . .
Since the bonuses were not subjected to withholding tax during the year they were claimed as an expense, the same should be disallowed pursuant to the above-quoted law.[64]
[N]either the law nor the implementing rules state that a court ruling that has not attained finality would preclude the availment of the benefits of the Tax Amnesty Law. Both R.A. 9480 and DOF Order No. 29-07 are quite precise in declaring that "[t]ax cases subject of final and executory judgment by the courts" are the ones excepted from the benefits of the law. In fact, we have already pointed out the erroneous interpretation of the law in Philippine Banking Corporation (Now: Global Business Bank, Inc.) v. Commissioner of Internal Revenue, viz:Moreover, in the fairly recent case of LG Electronics Philippines, Inc. v. Commissioner of Internal Revenue,[71] we confirmed that only cases that involve final and executory judgments are excluded from the tax amnesty program as explicitly provided under Section 8 of Republic Act No. 9480.[72]The BIR's inclusion of "issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer" as one of the exceptions in RMC 19-2008 is misplaced. RA 9480 is specifically clear that the exceptions to the tax amnesty program include "tax cases subject of final and executory judgment by the courts." The present case has not become final and executory when Metrobank availed of the tax amnesty program.[70] (Emphasis in the original, citation omitted)
SEC. 2. Availment of the Amnesty. - Any person, natural or juridical, who wishes to avail himself of the tax amnesty authorized and granted under this Act shall file with the Bureau of Internal Revenue (BIR) a notice and Tax Amnesty Return accompanied by a Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005, in such form as may be prescribed in the implementing rules and regulations (IRR) of this Act, and pay the applicable amnesty tax within six months from the effectivity of the IRR.Contrary to respondent Commissioner of Internal Revenue's stance, Republic Act No. 9480 confers no discretion on respondent Commissioner of Internal Revenue. The provisions of the law are plain and simple. Unlike the power to compromise or abate a taxpayer's liability under Section 204[73] of the 1997 National Internal Revenue Code that is within the discretion of respondent Commissioner of Internal Revenue,[74] its authority under Republic Act No. 9480 is limited to determining whether (a) the taxpayer is qualified to avail oneself of the tax amnesty; (b) all the requirements for availment under the law were complied with; and (c) the correct amount of amnesty tax was paid within the period prescribed by law. There is nothing in Republic Act No. 9480 which can be construed as authority for respondent Commissioner of Internal Revenue to introduce exceptions and/or conditions to the coverage of the law nor to disregard its provisions and substitute his own personal judgment.
SEC. 4. Presumption of Correctness of the SALN. - The SALN as of December 31. 2005 shall be considered as true and correct except where the amount of declared networth is understated to the extent of thirty percent (30%) or more as may be established in proceedings initiated by, or at the instance of, parties other than the BIR or its agents: Provided, That such proceedings must be initiated within one year following the date of the filing of the tax amnesty return and the SALN. Findings of or admission in congressional hearings, other administrative agencies of government, and/or courts shall be admissible to prove a thirty percent (30%) under-declaration.. . . . . . . . .
SEC. 6. Immunities and Privileges. - Those who availed themselves of the tax amnesty under Section 5 hereof and have fully complied with all its conditions shall be entitled to the following immunities and privileges:
- The taxpayer shall be immune from the payment of taxes, as well as addition thereto, and the appurtenant civil, criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from, the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years.
- The taxpayer's Tax Amnesty Returns and the SALN as of December 31, 2005 shall not be admissible as evidence in all proceedings that pertain to taxable year 2005 and prior years, insofar as such proceedings relate to internal revenue taxes, before judicial, quasi-judicial or administrative bodies in which he is a defendant or respondent, and except for the purpose of ascertaining the networth beginning January 1. 2006, the same shall not be examined, inquired or looked into by any person or government office. However, the taxpayer may use this as a defense, whenever appropriate, in cases brought against him.
- The books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined: Provided, That the Commissioner of Internal Revenue may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for any tax refund, tax credit (other than refund or credit of taxes withheld on wages), tax incentives, and/or exemptions under existing laws. (Emphasis supplied)
With the preceding defense notwithstanding, petitioner now maintained that the portion of the disallowed bonuses in the amounts of P3,879,407.85 and P9,004,402.63 for the respective years 1996 and 1997, were actually payments for reimbursements of representation, travel and entertainment expenses of its officers. These expenses according to petitioner are not considered compensation of employees and likewise not subject to withholding tax.An expense, whether the same is paid ox payable, "shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom [was] paid to the Bureau of Internal Revenue[.]"[79]
In order to prove that the discrepancy in the accrued bonuses represents reimbursement of expenses, petitioner availed of the services of an independent CPA pursuant to CTA Circular No. 1-95, as amended. As a consequence, Mr. Ruben Rubio was commissioned by the court to verify the accuracy of petitioner's position and to check its supporting documents.
In a report dated January 29, 2002. the commissioned independent CPA noted the following pertinent findings: . . .
Findings and Observations 1997 1996 Supporting document is under the name of the employee P 930,307.56 P 1,849,040.70 Supporting document is not under the name of the Bank nor its employees (addressee is "cash"/blank)
537,456.37
53,384.80 Supporting document is under the name of the Bank 7,039,976.36 1,630,292.14 Supporting document is in the name of another person (other than the employee claiming the expense)
362,919.59
62,615.91 Supporting document is not dated within the period (i.e., 1996 and 1997) 13,404.00 423,199.07 Date/year of transaction is not indicated 31,510.00 26,126.49Amount is not supported by liquidation document(s) 313,319.09 935,044.28TOTAL P9,228,892.97 P4,979,703.39
Based on the above report, only the expenses in the name of petitioner's employee and those under its name can be given credence. Therefore, the following expenses are valid expenses for income tax purposes:
1996 1997 Supporting document is under the name of the employee P 1,849,040.70 P 930,307.56Supporting document is under the name of the Bank 1,630,292.14 7,039,976.36TOTAL P3,479,332.84 P 7,970,283.92
Consequently, petitioner is still liable for the amounts of P167,384.97 and P397,157.70 representing deficiency withholding taxes on compensation for the respective years of 1996 and 1997, computed as follows:
1996 1997Total Disallowed Accrued Bonus P 3,879,407.85 P 9,004,402.63Less: Substantiated Reimbursement of Expense 3,479,332.84 7,970.283.92Unsubstantiated P 400,075.01 P 1,034,119.43Tax Rate 26.48% 27.83%Basic Withholding Tax Due Thereon P 105,939.86 P 287,795.44Interest (Sec. 249) 61,445.11 109,362.26Deficiency Withholding Tax on Compensation P 167,384.97 P 397,157.70[78]
Section 29. Deductions from gross income. — In computing taxable income subject to tax under Sec. 21 (a); 24 (a), (b) and (c); and 25 (a) (1), there shall be allowed as deductions the items specified in paragraphs (a) to (i) of this section:Section 3 of Revenue Regulations No. 8-90 (now Section 2.58.5 of Revenue Regulations No. 2-98) provides:. . . . . . . . .
(a) Expenses. — (1) Business expenses. — (A) In general. — All ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; travelling expenses while away from home in the pursuit of a trade, profession or business, rentals or other payments required to be made as a condition to the continued use or possession, for the purpose of the trade, profession or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.. . . . . . . . .
(j) Additional requirement for deducibility of certain payments. — Any amount paid or payable which is otherwise deductible from, or taken into account in computing gross income for which depreciation or amortization may be allowed under this section, shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue in accordance with this section, Sections 51[81] and 74[82] of this Code. (Emphasis supplied)
Section 3. Section 9 of Revenue Regulations No. 6-85 is hereby amended to read as follows:Under the National Internal Revenue Code, every form of compensation for personal services is subject to income tax and, consequently, to withholding tax. The term "compensation" means all remunerations paid for services performed by an employee for his or her employer, whether paid in cash or in kind, unless specifically excluded under Sections 32(B)[83] and 78(A)[84] of the 1997 National Internal Revenue Code.[85] The name designated to the remuneration for services is immaterial. Thus, "salaries, wages, emoluments and honoraria, bonuses, allowances (such as transportation, representation, entertainment, and the like), [taxable] fringe benefits [,] pensions and retirement pay, and other income of a similar nature constitute compensation income"[86] that is taxable.
Section 9. (a) Requirement for deductibility. Any income payment, which is otherwise deductible under Sections 29 and 54 of the Tax Code, as amended, shall be allowed as a deduction from the payor s gross income only if it is shown that the tax required to be withheld has been paid to the Bureau of Internal Revenue in accordance with Sections 50, 51, 72, and 74 also of the Tax Code. (Emphasis supplied)
SECTION 72. Income tax collected at source. — (a) Requirement of withholding. — Every employer making payment of wages shall deduct and withhold, upon such wages a tax determined in accordance with regulations to be prepared and promulgated by the Minister of Finance. (Emphasis supplied)Sections 7 and 14 of Revenue Regulations No. 6-82,[92] as amended,[93] relative to the withholding of tax on compensation income, provide:
Section 7. Requirement of withholding. — Every employer or any person who pays or controls the payment of compensation to an employee, whether resident citizen or alien, non-resident citizen, or nonresident alien engaged in trade or business in the Philippines, must withhold from such compensation paid, an amount computed in accordance with these regulations.Constructive payment of compensation is further defined in Revenue Regulations No. 6-82:
I. Withholding of tax on compensation paid to resident employees. — (a) In general, every employer making payment of compensation shall deduct and withhold from such compensation income for the entire calendar year, a tax determined in accordance with the prescribed new Withholding Tax Tables effective January 1, 1992 (ANNEX "A").
Section 14. Liability for the Tax. — The employer is required to collect the tax by deducting and withholding the amount thereof from the employee's compensation as when paid, either actually or constructively. An employer is required to deduct and withhold the tax notwithstanding that the compensation is paid in something other than money (for example, compensation paid in stocks or bonds) and to pay the tax to the collecting officer. If compensation is paid in property other than money, the employer should make necessary arrangements to ensure that the amount of the tax required to be withheld is available for payment to the collecting officer.
Every person required to deduct and withhold the tax from the compensation of an employee is liable for the payment of such tax whether or not collected from the employee. If, for example, the employer deducts less than the correct amount of tax, or if he fails to deduct any part of the tax, he is nevertheless liable for the correct amount of the tax. However, if the employer in violation of the provisions of Chapter XI, Title II of the Tax Code fails to deduct and withhold and thereafter the employee pays the tax, it shall no longer be collected from the employer. Such payment does not, however, operate to relieve the employer from liability for penalties or additions to the tax for failure to deduct and withhold within the time prescribed by law or regulations. The employer will not be relieved of his liability for payment of the tax required to be withheld unless he can show that the tax has been paid by the employee.
The amount of any tax withheld/collected by the employer is a special fund in trust for the Government of the Philippines.
When the employer or other person required to deduct and withhold the tax under this Chapter XI, Title II of the Tax Code has withheld and paid such tax to the Commissioner of Internal Revenue or to any authorized collecting officer, then such employer or person shall be relieved of any liability to any person. (Emphasis supplied)
Section 25. Applicability; constructive receipt of compensation.On the other hand, it is also true that under Section 45 of the 1997 National Internal Revenue Code (then Section 39 of the 1977 National Internal Revenue Code, as amended), deductions from gross income are taken for the taxable year in which "paid or accrued" or "paid or incurred" is dependent upon the method of accounting income and expenses adopted by the taxpayer.
Compensation is constructively paid within the meaning of these regulations when it is credited to the account of or set apart for an employee so that it may be drawn upon by him at any time although not then actually reduced to possession. To constitute payment in such a case, the compensation must be credited or set apart for the employee without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and must be made available to him so that it may be drawn upon at any time, and its payment brought within his control and disposition. (Emphasis supplied)
Accounting methods for tax purposes comprise a set of rules for determining when and how to report income and deductions.Thus, if the taxpayer is on cash basis, the expense is deductible in the year it was paid, regardless of the year it was incurred. If he is on the accrual method, he can deduct the expense upon accrual thereof. An item that is reasonably ascertained as to amount and acknowledged to be due has "accrued"; actual payment is not essential to constitute "expense."
Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting, expenses not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed as deduction from income for the succeeding year. Thus, a taxpayer who is authorized to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot deduct the same for the next year.
The accrual method relies upon the taxpayer's right to receive amounts or its obligation to pay them, in opposition to actual receipt or payment, which characterizes the cash method of accounting. Amounts of income accrue where the right to receive them become fixed, where there is created an enforceable liability. Similarly, liabilities are accrued when fixed and determinable in amount, without regard to indeterminacy merely of time of payment.
For a taxpayer using the accrual method, the determinative question is, when do the facts present themselves in such a manner that the taxpayer must recognize income or expense? The accrual of income and expense is permitted when the all-events test has been met. This test requires: (1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate determination of such income or liability.
The all-events test requires the right to income or liability be fixed, and the amount of such income or liability be determined with reasonable accuracy. However, the test does not demand that the amount of income or liability be known absolutely only that a taxpayer has at his disposal the information necessary to compute the amount with reasonable accuracy. The all-events test is satisfied where computation remains uncertain, if its basis is unchangeable; the test is satisfied where a computation may be unknown, but is not as much as unknowable, within the taxable year. The amount of liability does not have to be determined exactly; it must be determined with "reasonable accuracy." Accordingly, the term "reasonable accuracy" implies something less than an exact or completely accurate amount.[95] (Emphasis supplied, citations omitted)
(1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or(B) Abate or cancel a tax liability, when:
(2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
The compromise settlement of any tax liability shall be subject to the following minimum amounts:For cases of financial incapacity, a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax; andWhere the basic tax involved exceeds One million pesos (P1,000,000) or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners.
For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax.
(1) The tax or any portion thereof appears to be unjustly or excessively assessed; orAll criminal violations may be compromised except: (a) those already filed in court, or (b) those involving fraud.
(2) The administration and collection costs involved do not justify the collection of the amount due.
. . . .[74] See People v. Sandiganbayan, 504 Phil. 407, 436 (2005) [Per J. Panganiban, Third Division]; Philippine National Oil Company v. Court of Appeals, 496 Phil. 506, 572-574 (2005) [Per J. Chico-Nazario, En Banc]; Koppel (Philippines), Inc. v. Collector of Internal Revenue, 87 Phil. 348, 351 (1950) [Per C.J. Moran, En Banc].
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and House of Representatives, every six (6) months, a report on the exercise of his powers under this Section, stating therein the following facts and information, among others: names and addresses of taxpayers whose cases have been the subject of abatement or compromise; amount involved; amount compromised or abated; and reasons for the exercise of power: Provided, That the said report shall be presented to the Oversight Committee in Congress that shall be constituted to determine that said powers are reasonably exercised and that the government is not unduly deprived of revenues.
Q-1 | What type of taxes and what taxable period/s are covered by the Tax Amnesty Program under RA 9480 as implemented by DO 29-07? |
A-1 | The Tax Amnesty Program (TAP) covers all national internal revenue taxes such as income tax, estate tax, donor's tax and capital gains tax, value added tax, other percentage taxes, excise taxes and documentary stamp taxes, except withholding taxes and taxes passed-on and already collected from the customers for remittance to the BIR, these taxes/funds being considered as funds held in trust for the government. Moreover, the time-honored doctrine that "No person shall unjustly enrich himself at the expense of another" should always be observed. |