REVENUE REGULATIONS NO.

12-99
SUBJECT : Implementing the !"#i$i"n$ "% the N&ti"n&l Inte!n&l Re#en'e C"(e
"% 199) G"#e!ning the R'le$ "n A$$e$$ment "% N&ti"n&l Inte!n&l Re#en'e T&*e$+ Ci#il
en&ltie$ &n( Inte!e$t &n( the E*t!&-,'(i-i&l Settlement "% & T&*p&.e!/$ C!imin&l
Vi"l&ti"n "% the C"(e th!"'gh &.ment "% & S'gge$te( C"mp!"mi$e en&lt.
TO : All Internal Revenue Officers and Others Concerned
SECTION 1. Scope. Pursuant to the provisions of Section !! " in relation to Section !#
of the National Internal Revenue Code of 1$$%" these Re&ulations are here'( pro)ul&ated to
i)ple)ent the provisions of Sections * " % " +! " , " !% " !, and !$ on assess)ent of
national internal revenue ta-es" fees and char&es and to provide the rules &overnin& the e-tra.
/udicial settle)ent of a ta-pa(er0s cri)inal violation of the said Code or an( of its i)ple)entin&
Re&ulations throu&h pa()ent of a su&&ested co)pro)ise penalt(.
SECTION . 1eneral Principles.
.1 The surchar&e and2or interest herein prescri'ed shall appl( to all ta-es" fees and char&es
i)posed under the Code 3hich shall 'e collected at the sa)e ti)e" in the sa)e )anner" and as
part of the ta-.
. In case the ta- due fro) the ta-pa(er is paid on a partial or install)ent 'asis" the interest
on the deficienc( ta- or on the delin4uenc( ta- lia'ilit( of the ta-pa(er shall 'e i)posed fro)
due date of the ta- until full pa()ent thereof. The interest shall 'e co)puted 'ased on the
di)inishin& 'alance of the ta-" inclusive of interests.
SECTION 5. 6ue Process Re4uire)ent in the Issuance of a 6eficienc( Ta- Assess)ent.
5.1 7ode of procedures in the issuance of a deficienc( ta- assess)ent:
5.1.1 Notice for infor)al conference. The Revenue Officer 3ho audited the
ta-pa(er0s records shall" a)on& others" state in his report 3hether or not the ta-pa(er
a&rees 3ith his findin&s that the ta-pa(er is lia'le for deficienc( ta- or ta-es. If the
ta-pa(er is not a)ena'le" 'ased on the said Officer0s su')itted report of investi&ation"
the ta-pa(er shall 'e infor)ed" in 3ritin&" '( the Revenue 6istrict Office or '( the
Special Investi&ation 6ivision" as the case )a( 'e 8in the case Revenue Re&ional
Offices9 or '( the Chief of 6ivision concerned 8in the case of the :IR National Office9
of the discrepanc( or discrepancies in the ta-pa(er0s pa()ent of his internal revenue
ta-es" for the purpose of ;Infor)al Conference"; in order to afford the ta-pa(er 3ith an
opportunit( to present his side of the case. If the ta-pa(er fails to respond 3ithin fifteen
81#9 da(s fro) date of receipt of the notice for infor)al conference" he shall 'e
considered in default" in 3hich case" the Revenue 6istrict Officer or the Chief of the
Special Investi&ation 6ivision of the Revenue Re&ional Office" or the Chief of 6ivision
in the National Office" as the case )a( 'e" shall endorse the case 3ith the least possi'le
dela( to the Assess)ent 6ivision of the Revenue Re&ional Office or to the
Co))issioner or his dul( authori<ed representative" as the case )a( 'e" for appropriate
revie3 and issuance of a deficienc( ta- assess)ent" if 3arranted.
5.1. Preli)inar( Assess)ent Notice 8PAN9. If after revie3 and evaluation '( the
Assess)ent 6ivision or '( the Co))issioner or his dul( authori<ed representative" as
the case )a( 'e" it is deter)ined that there e-ists sufficient 'asis to assess the ta-pa(er
for an( deficienc( ta- or ta-es" the said Office shall issue to the ta-pa(er" at least '(
re&istered )ail" a Preli)inar( Assess)ent Notice 8PAN9 for the proposed assess)ent"
sho3in& in detail" the facts and the la3" rules and re&ulations" or /urisprudence on 3hich
the proposed assess)ent is 'ased 8see illustration in ANNE= A hereof9. If the ta-pa(er
fails to respond 3ithin fifteen 81#9 da(s fro) date of receipt of the PAN" he shall 'e
considered in default" in 3hich case" a for)al letter of de)and and assess)ent notice
shall 'e caused to 'e issued '( the said Office" callin& for pa()ent of the ta-pa(er0s
deficienc( ta- lia'ilit(" inclusive of the applica'le penalties.
5.1.5 E-ceptions to Prior Notice of the Assess)ent. The notice for infor)al
conference and the preli)inar( assess)ent notice shall not 'e re4uired in an( of the
follo3in& cases" in 3hich case" issuance of the for)al assess)ent notice for the pa()ent
of the ta-pa(er0s deficienc( ta- lia'ilit( shall 'e sufficient:
8i9 >hen the findin& for an( deficienc( ta- is the result of )athe)atical error in the
co)putation of the ta- appearin& on the face of the ta- return filed '( the ta-pa(er? or
8ii9 >hen a discrepanc( has 'een deter)ined 'et3een the ta- 3ithheld and the
a)ount actuall( re)itted '( the 3ithholdin& a&ent? or
8iii9 >hen a ta-pa(er 3ho opted to clai) a refund or ta- credit of e-cess credita'le
3ithholdin& ta- for a ta-a'le period 3as deter)ined to have carried over and
auto)aticall( applied the sa)e a)ount clai)ed a&ainst the esti)ated ta- lia'ilities for
the ta-a'le 4uarter or 4uarters of the succeedin& ta-a'le (ear? or
8iv9 >hen the e-cise ta- due on e-cisa'le articles has not 'een paid? or
8v9 >hen an article locall( purchased or i)ported '( an e-e)pt person" such as" 'ut
not li)ited to" vehicles" capital e4uip)ent" )achineries and spare parts" has 'een sold"
traded or transferred to non.e-e)pt persons.
5.1.! @or)al Aetter of 6e)and and Assess)ent Notice. The for)al letter of
de)and and assess)ent notice shall 'e issued '( the Co))issioner or his dul(
authori<ed representative. The letter of de)and callin& for pa()ent of the ta-pa(er0s
deficienc( ta- or ta-es shall state the facts" the la3" rules and re&ulations" or
/urisprudence on 3hich the assess)ent is 'ased" other3ise" the for)al letter of de)and
and assess)ent notice shall 'e void 8see illustration in ANNE= : hereof9. The sa)e
shall 'e sent to the ta-pa(er onl( '( re&istered )ail or '( personal deliver(. If sent '(
personal deliver(" the ta-pa(er or his dul( authori<ed representative shall acBno3led&e
receipt thereof in the duplicate cop( of the letter of de)and" sho3in& the follo3in&: 8a9
Cis na)e? 8'9 si&nature? 8c9 desi&nation and authorit( to act for and in 'ehalf of the
ta-pa(er" if acBno3led&ed received '( a person other than the ta-pa(er hi)self? and 8d9
date of receipt thereof.
5.1.# 6isputed Assess)ent. The ta-pa(er or his dul( authori<ed representative )a(
protest ad)inistrativel( a&ainst the aforesaid for)al letter of de)and and assess)ent
notice 3ithin thirt( 85+9 da(s fro) date of receipt thereof. If there are several issues
involved in the for)al letter of de)and and assess)ent notice 'ut the ta-pa(er onl(
disputes or protests a&ainst the validit( of so)e of the issues raised" the ta-pa(er shall 'e
re4uired to pa( the deficienc( ta- or ta-es attri'uta'le to the undisputed issues" in 3hich
case" a collection letter shall 'e issued to the ta-pa(er callin& for pa()ent of the said
deficienc( ta-" inclusive of the applica'le surchar&e and2or interest. No action shall 'e
taBen on the ta-pa(er0s disputed issues until the ta-pa(er has paid the deficienc( ta- or
ta-es attri'uta'le to the said undisputed issues. The prescriptive period for assess)ent or
collection of the ta- or ta-es attri'uta'le to the disputed issues shall 'e suspended.
The ta-pa(er shall state the facts" the applica'le la3" rules and re&ulations" or
/urisprudence on 3hich his protest is 'ased" other3ise" his protest shall 'e considered
void and 3ithout force and effect. If there are several issues involved in the disputed
assess)ent and the ta-pa(er fails to state the facts" the applica'le la3" rules and
re&ulations" or /urisprudence in support of his protest a&ainst so)e of the several issues
on 3hich the assess)ent is 'ased" the sa)e shall 'e considered undisputed issue or
issues" in 3hich case" the ta-pa(er shall 'e re4uired to pa( the correspondin& deficienc(
ta- or ta-es attri'uta'le thereto.
The ta-pa(er shall su')it the re4uired docu)ents in support of his protest 3ithin si-t(
8*+9 da(s fro) date of filin& of his letter of protest" other3ise" the assess)ent shall
'eco)e final" e-ecutor( and de)anda'le. The phrase ;su')it the re4uired docu)ents;
includes su')ission or presentation of the pertinent docu)ents for scrutin( and
evaluation '( the Revenue Officer conductin& the audit. The said Revenue Officer shall
state this fact in his report of investi&ation.
If the ta-pa(er fails to file a valid protest a&ainst the for)al letter of de)and and
assess)ent notice 3ithin thirt( 85+9 da(s fro) date of receipt thereof" the assess)ent
shall 'eco)e final" e-ecutor( and de)anda'le.
If the protest is denied" in 3hole or in part" '( the Co))issioner" the ta-pa(er )a(
appeal to the Court of Ta- Appeals 3ithin thirt( 85+9 da(s fro) date of receipt of the
said decision" other3ise" the assess)ent shall 'eco)e final" e-ecutor( and de)anda'le.
In &eneral" if the protest is denied" in 3hole or in part" '( the Co))issioner or his dul(
authori<ed representative" the ta-pa(er )a( appeal to the Court of Ta- Appeals 3ithin
thirt( 85+9 da(s fro) date of receipt of the said decision" other3ise" the assess)ent shall
'eco)e final" e-ecutor( and de)anda'le: Provided" ho3ever" that if the ta-pa(er
elevates his protest to the Co))issioner 3ithin thirt( 85+9 da(s fro) date of receipt of
the final decision of the Co))issioner0s dul( authori<ed representative" the latter0s
decision shall not 'e considered final" e-ecutor( and de)anda'le" in 3hich case" the
protest shall 'e decided '( the Co))issioner.
If the Co))issioner or his dul( authori<ed representative fails to act on the ta-pa(er0s
protest 3ithin one hundred ei&ht( 81,+9 da(s fro) date of su')ission" '( the ta-pa(er"
of the re4uired docu)ents in support of his protest" the ta-pa(er )a( appeal to the Court
of Ta- Appeals 3ithin thirt( 85+9 da(s fro) the lapse of the said 1,+.da( period"
other3ise" the assess)ent shall 'eco)e final" e-ecutor( and de)anda'le.
5.1.* Ad)inistrative 6ecision on a 6isputed Assess)ent. The decision of the
Co))issioner or his dul( authori<ed representative shall 8a9 state the facts" the
applica'le la3" rules and re&ulations" or /urisprudence on 3hich such decision is 'ased"
other3ise" the decision shall 'e void 8see illustration in ANNE= C hereof9" in 3hich
case" the sa)e shall not 'e considered a decision on a disputed assess)ent? and 8'9 that
the sa)e is his final decision.
5.1.% Constructive Service. If the notice to the ta-pa(er herein re4uired is served '(
re&istered )ail" and no response is received fro) the ta-pa(er 3ithin the prescri'ed
period fro) date of the postin& thereof in the )ail" the sa)e shall 'e considered actuall(
or constructivel( received '( the ta-pa(er. If the sa)e is personall( served on the
ta-pa(er or his dul( authori<ed representative 3ho" ho3ever" refused to acBno3led&e
receipt thereof" the sa)e shall 'e constructivel( served on the ta-pa(er. Constructive
service thereof shall 'e considered effected '( leavin& the sa)e in the pre)ises of the
ta-pa(er and this fact of constructive service is attested to" 3itnessed and si&ned '( at
least t3o 89 revenue officers other than the revenue officer 3ho constructivel( served
the sa)e. The revenue officer 3ho constructivel( served the sa)e shall )aBe a 3ritten
report of this )atter 3hich shall for) part of the docBet of this case 8see illustration in
ANNE= 6 hereof9.
SECTION !. Civil Penalties.
!.1 T3ent(.@ive Percent 8#D9 Surchar&e. There shall 'e i)posed" in addition to the
'asic ta- re4uired to 'e paid" a penalt( e4uivalent to t3ent(.five percent 8#D9 thereof" in an(
the follo3in& cases:
!.1.1 @ailure to file an( return and pa( the ta- due thereon as re4uired under the
provisions of this Code or rules and re&ulations on the date prescri'ed? or
!.1. Enless other3ise authori<ed '( the Co))issioner" filin& a return 3ith an internal
revenue officer other than those 3ith 3ho) the return is re4uired to 'e filed? or
!.1.5 @ailure to pa( the deficienc( ta- 3ithin the ti)e prescri'ed for its pa()ent in the
notice of assess)ent? or
!.1.! @ailure to pa( the full or part of the a)ount of ta- sho3n on an( return re4uired
to 'e filed under the provisions of this Code or rules and re&ulations" or the full a)ount
of ta- due for 3hich no return is re4uired to 'e filed" on or 'efore the date prescri'ed for
its pa()ent.
!. @ift( Percent 8#+D9 Surchar&e:
!..1 In case of 3illful ne&lect to file the return 3ithin the period prescri'ed '( the
Code" or in case a false or fraudulent return is 3illfull( )ade" the penalt( to 'e i)posed
shall 'e fift( percent 8#+D9 of the ta- or of the deficienc( ta-" in case an( pa()ent has
'een )ade on the 'asis of such return 'efore the discover( of the falsit( or fraud:
Provided" That a su'stantial under declaration of ta-a'le sales" receipts or inco)e" or a
su'stantial overstate)ent of deductions" as deter)ined '( the Co))issioner or his dul(
authori<ed representative" shall constitute pri)a facie evidence of a false or fraudulent
return: Provided" further" That failure to report sales" receipts or inco)e in an a)ount
e-ceedin& thirt( percent 85+D9 of that declared per return" and a clai) of deductions in
an a)ount e-ceedin& thirt( percent 85+D9 of actual deductions" shall render the ta-pa(er
lia'le for su'stantial under declaration of sales" receipts or inco)e or for overstate)ent
of deductions" as )entioned herein: Provided" further" that the ter) ;3illful ne&lect to
file the return 3ithin the period prescri'ed '( the Code; shall not appl( in case the
ta-pa(er" 3ithout notice fro) the Co))issioner or his authori<ed representative"
voluntaril( files the said return" in 3hich case" onl( #D surchar&e shall 'e i)posed for
late filin& and late pa()ent of the ta- in lieu of the a'ove #+D surchar&e. Conversel("
the #+D surchar&e shall 'e i)posed in case the ta-pa(er files the return onl( after prior
notice in 3ritin& fro) the Co))issioner or his dul( authori<ed representative.
!.. Section * 8A9 of the Code provides that an( ta- return filed '( a ta-pa(er ;)a(
'e )odified" chan&ed or a)ended; '( the ta-pa(er ;3ithin three 859 (ears fro) date of
such filin&; provided" ho3ever" that ;no notice for audit or investi&ation of such return"
state)ent or declaration has" in the )eanti)e" 'een actuall( served upon the ta-pa(er.;
Thus" if upon investi&ation" it is deter)ined that the ta-pa(er0s ori&inall( filed ta- return
is false or fraudulent" such ta-pa(er shall re)ain lia'le to the #+D civil penalt(
re&ardless that the ta-pa(er has filed his a)ended ta- return" if the said a)ended ta-
return" ho3ever" has 'een filed onl( after issuance of the Aetter of Authorit( for the
investi&ation of the ta-pa(er0s ta- return or such a)end)ent has 'een )ade in the course
of the said investi&ation.
SECTION #. 7ode of Procedures in Co)putin& for the Ta- and2or Applica'le Surchar&e.
Sho3n hereunder are illustrative cases for the co)putation and assess)ent of the ta-" inclusive
of surchar&e 8if applica'le9 and interest:
#.1 Aate filin& and late pa()ent of the ta-. Illustration: Inco)e ta- return for the calendar
(ear 1$$, 3as due for filin& on April 1#" 1$$$ 'ut the ta-pa(er voluntaril( filed his ta- return"
3ithout notice fro) the :IR" onl( on Fune 5+" 1$$$. The ta- due per return a)ounts to
P1++"+++. In this case" the ta-pa(er shall 'e lia'le for delin4uenc( penalties consistin& of #D
surchar&e" plus +D interest per annu)" co)puted fro) due date of the ta- until date of
pa()ent" co)puted as follo3s:
Calendar Gear 1$$,
Inco)e ta- due per return P1++"+++.++
Add: #D surchar&e for late filin& and late
pa()ent 8P1++"+++.++ ti)es #D9 P#"+++.++
+D int. p.a. fro) !.1#.$$ to *.5+.$$
8P1++"+++.++ ti)es .+!1##!9 P!"1##.! P$"1##.!

Total a)ount due 8e-cludin& su&&ested co)pro)ise for
late filin& and late pa()ent of the ta-9 P1$"1##.!
HHHHHHHHH
Onl( one #D surchar&e shall 'e i)posed for late filin& of the return and late pa()ent of the
ta-.
#. The ta- return is filed on ti)e 'ut filed throu&h an internal revenue officer other than
3ith 3ho) the return is re4uired to 'e filed. Illustration: The ta-pa(er0s 1$$, inco)e ta-
return is re4uired to 'e filed throu&h the authori<ed a&ent 'anB under the /urisdiction of R6O
East 7aBati. :ut" 3ithout prior authori<ation fro) the :IR" the ta-pa(er filed his ta- return and
paid the ta- throu&h the authori<ed a&ent 'anB under the /urisdiction of R6O 6avao Cit(. Ta-
due and paid per return is P1++"+++.++.
Calendar Gear 1$$,
Inco)e ta- due per return P1++"+++.++
Add: #D surchar&e P#"+++.++

Total a)ount due P1#"+++.++

Aess: A)ount paid P1++"+++.++

A)ount still due P#"+++.++

HHHHHHHHH
#.5 Aate filin& and late pa()ent due to ta-pa(er0s 3illful ne&lect. Illustration: The
ta-pa(er did not file his inco)e ta- return for the calendar (ear 1$$% 3hich 3as due for filin&
on April 1#" 1$$,. Ce 3as notified '( the :IR of his failure to file the ta- return" for 3hich
reason" he filed his ta- return and paid the ta-" onl( after the said notice" on Fune 5+" 1$$$. The
ta- due per return is P1++"+++.++.
Calendar Gear 1$$%
Inco)e ta- due per return P1++"+++.++
Add: #+D surchar&e for 3illful ne&lect to
file the return and late pa()ent of the ta-
8P1++"+++ ti)es #+D9P#+"+++.++
+D int. p.a. fr. !.1#.$, to *.5+.$$
8P1++"+++.++ ti)es .!1##!9 P!"1##.! P%!"1##.!

Total a)ount due 8e-cludin& su&&ested co)pro)ise
for late filin& and late pa()ent of the ta-9 P1%!"1##.!
HHHHHHHHH
#.! Penalt( or penalties for deficienc( ta-. As a rule" no surchar&e is i)posed on
deficienc( ta- and on the 'asic ta-. Co3ever" if the a)ount due inclusive of penalties is not paid
on or 'efore the due date stated on the de)and letter" the correspondin& surchar&e shall 'e
i)posed.
Illustration No. 1: Ta-pa(er filed on ti)e his inco)e ta- return for calendar (ear 1$$% and paid
P1++"+++.++ on April 1#" 1$$,. Epon pre.audit of his return" it 3as disclosed that he
erroneousl( co)puted the ta- due. The correct a)ount of ta- due is P1+"+++.++. The ta-pa(er
is assessed for deficienc( inco)e ta- in a letter of de)and and assess)ent notice issued on Fune
5+" 1$$$.
Calendar Gear 1$$%
Ta- due per pre.audit P1+"+++.++
Aess: A)ount assessed and paid per ta- return filed P1++"+++.++

6eficienc( inco)e ta- P+"+++.++

Add: +D int. p.a. fro) !.1#.$, to *.5+.$$
8P+"+++.++ ti)es .!1##!9 P!",51.+#

A)ount still due P!",51.+#

HHHHHHHHH
Illustration No. : A:C CORPORATION filed its inco)e ta- return for calendar (ear 1$$% and
paid on ti)e its inco)e ta- sho3n thereunder" a)ountin& to P1++"+++. Said ta-pa(er 3as
investi&ated. Epon verification of its accountin& records" it 3as disclosed that its deduction"
fro) &ross inco)e" of representation e-penses in the a)ount of P++"+++.++ did not )eet all the
statutor( re4uisites for deducti'ilit(. The corporation 3as dul( notified of the said discrepanc(
throu&h a Preli)inar( Assess)ent Notice. :ased on the 5#D inco)e ta- rate on corporations
applica'le in the (ear 1$$%" the inco)e ta- due after investi&ation a)ounts to P1%+"+++.++.
After deduction of inco)e ta- paid per return filed" the 'asic deficienc( inco)e ta- a)ounts to
P%+"+++" e-cludin& penalties. @ailin& to protest on ti)e a&ainst the preli)inar( assess)ent
notice" a for)al letter of de)and and assess)ent notice 3as issued on 7a( 51" 1$$$" re4uirin&
pa()ent of the assess)ent not later than Fune 5+" 1$$$.
Calendar Gear 1$$%
Inco)e ta- due per investi&ation P1%+"+++.++
Aess: Inco)e ta- paid per return P1++"+++.++

6eficienc( inco)e ta- P%+"+++.++

Add: +D int. p.a. fr. !.1#.$, to *.5+.$$ 8P%+"+++ ti)es .!1##!9 P1*"$+,.*%

Total a)ount still due P,*"$+,.*%

HHHHHHHHH
Illustration No. 5: =GI CORPORATION filed its inco)e ta- return for calendar (ear 1$$% 3ith
a net ta-a'le inco)e of P#++"+++.++. At the applica'le inco)e ta- rate of 5#D for the (ear
1$$%" its inco)e ta- a)ounted to P1%#"+++.++. Co3ever" upon investi&ation" it 3as disclosed
that its inco)e ta- return 3as false or fraudulent 'ecause it did not report a ta-a'le inco)e
a)ountin& to another P#++"+++.++. On its net inco)e of P1"+++"+++.++" per investi&ation" the
inco)e ta- due is P5#+"+++.++. 6eductin& its pa()ent per return filed" the deficienc(" e-cludin&
penalties" a)ounted to P1%#"+++.++. It 3as dul( infor)ed of this findin& throu&h a Preli)inar(
Assess)ent Notice. @ailin& to protest on ti)e a&ainst the preli)inar( assess)ent notice" a
for)al letter of de)and and assess)ent notice 3as issued on 7a( 51" 1$$$ callin& for pa()ent
of the deficienc( inco)e ta- on or 'efore Fune 5+" 1$$$.
In this case" said corporation is lia'le for the civil penalties of #+D surchar&e for havin& filed a
false or fraudulent return" plus +D interest per annu) on the deficienc(" co)puted as follo3s:
Calendar Gear 1$$%
Inco)e ta- due per investi&ation P5#+"+++.++
Aess: Inco)e ta- paid per return P1%#"+++.++

6eficienc( inco)e ta- P1%#"+++.++

Add: #+D surchar&e for filin& a fraudulent or false
return 8P1%#"+++.++ ti)es #+D9 P,%"#++.++
+D int. p.a. fr. !.1#.$, to *.5+.$$
8P1%#"+++.++ ti)es .!1##!9 P!"%1.*% P1$"%%1.*%

Total a)ount due P5+!"%%1.*%
HHHHHHHHH
#.# Aate pa()ent of a deficienc( ta- assessed. In &eneral" the deficienc( ta- assessed
shall 'e paid '( the ta-pa(er 3ithin the ti)e prescri'ed in the notice and de)and" other3ise"
such ta-pa(er shall 'e lia'le for the civil penalties incident to late pa()ent.
Illustration: :ased on the a'ove Illustration No. 5" Scenario !" assu)in& that the calendar (ear
1$$% deficienc( inco)e ta- assess)ent a&ainst =GI CORPORATION" in the a)ount of
P5+!"%%1.*%" is not paid '( Fune 5+" 1$$$" the deadline for pa()ent of the assess)ent" and
assu)in& further that this assess)ent has alread( 'eco)e final and collecti'le. In this case" such
corporation shall 'e considered late in pa()ent of the said assess)ent. Assu)in&" further" that
the corporation pa(s its ta- assess)ent onl( '( Ful( 51" 1$$$" the civil penalties for late
pa()ent shall 'e co)puted as follo3s:
Calendar Gear 1$$%
Total deficienc( inco)e ta- assessed on 7a( 51" 1$$$ P5+!"%%1.*%
Add: #D surchar&e for late pa()ent
8P5+!"%%1.*% ti)es #D9 P%*"1$.$
+D interest p.a. fro) %.1.$$ to
%.51.$$ 8P5+!"%%1.*%
ti)es .+1****%9 P#"+%$.#! P,1"%.!*

Total a)ount due 8e-cludin& su&&ested co)pro)ise
penalt( for late pa()ent9 P5,*"+!!.15
HHHHHHHHH
#.* Co)putation of +D interest per annu) in case of partial or install)ent pa()ent of a ta-
lia'ilit(. Illustration No. 1: In case e-tended pa()ent of the ta- is dul( authori<ed. 6E@
CORPORATION" due to financial incapacit(" re4uested that it 'e allo3ed to pa( its inco)e ta-
lia'ilit( per return for calendar (ear 1$$," in the a)ount of P1"+++"+++.++" in four 8!9 )onthl(
install)ents" startin& April 1#" 1$$$. Its re4uest has 'een dul( approved pursuant to Sec. #5 of
the Ta- Code.
In this case" no #D surchar&e shall 'e i)posed for late pa()ent of the ta- since its deadline for
pa()ent has 'een dul( e-tended. Co3ever" +D interest per annu) for the e-tended pa()ent
shall 'e i)posed" co)puted 'ased on the di)inishin& 'alance of the ;unpaid a)ount;" pursuant
to the provisions of Section !$ 869 of the Code.
No #D surchar&e on e-tended pa()ent shall 'e i)posed provided" ho3ever" that the ta-pa(er0s
re4uest for e-tension of the period 3ithin 3hich to pa( is )ade on or 'efore the deadline
prescri'ed for pa()ent of the ta- due. Conversel(" if such re4uest is )ade after the deadline
prescri'ed for pa()ent" the ta-pa(er shall alread( 'e treated late in pa()ent" in 3hich case" the
#D surchar&e shall 'e i)posed" even if pa()ent of the delin4uenc( 'e allo3ed in partial
a)orti<ation.
E-a)ple:
Calendar Gear 1$$,
Inco)e ta- due per return P1"+++"+++.++
Aess: 1st install)ent of the ta- on or 'efore !.1#.$$ P#+"+++.++

:alance as of !.1#.$$ P%#+"+++.++

Add: +D int. p.a. fro) !.1#.$$ to #.1#.$$
8P%#+"+++.++ ti)es .+1****%9 P1"#++.+5

A)ount due on #.1#.$$ P%*"#++.+5

Aess: nd install)ent on #.1#.$$ 8P#+"+++.++ plus
P1"#++.+5 interest9 P*"#++.+5

:alance as of #.1#.$$ P#++"+++.++

Add: +D int. p.a. fro) #.1#.$$ to *.1#.$$
8P#++"+++.++ ti)es .+1****%9 P,"555.5#

A)ount due on *.1#.$$ P#+,"555.5#

Aess: 5rd install)ent on *.1#.$$ 8P#+"+++.++ plus
P,"555.5# interest9 P#,"555.5#

:alance as of *.1#.$$ P#+"+++.++

Add: +D int. p.a. fro) *.1#.$$ to %.1#.$$
8P#+"+++.++ ti)es .+1****%9 P!"1**.*,

!th and final install)ent on %.1#.$$ P#!"1**.*,

HHHHHHHHHHH
Illustration No. : Co)putation of ta- delin4uenc( in case of partial pa()ent of the ta- due
3ithout prior :IR authori<ation for e-tended pa()ent.
E-a)ple: 1CI CORPORATION did not file its final ad/ust)ent inco)e ta- return for the
calendar (ear 1$$, 3hich 3as due on April 1#" 1$$$. The :IR infor)ed the corporation of its
failure to file its said ta- return and re4uired that it file the sa)e" inclusive of the #D surchar&e
and +D interest per annu) penalties incident to the said o)ission. On 7a( 1#" 1$$$ it advised
that its inco)e ta- due for the said (ear a)ounts to P1"+++"+++.++ 'ut" ho3ever" due to its
adverse financial condition at the )o)ent" it 3ill 'e una'le to pa( the entire a)ount" inclusive
of the delin4uenc( penalties. Cence" on 7a( 1#" 1$$$" it )ade a partial pa()ent of
P!++"+++.++. Assu)in& that the :IR de)anded pa()ent of the unpaid 'alance of its ta-
o'li&ation pa(a'le '( Fune 1#" 1$$$" the unpaid 'alance of the corporation0s delin4uent inco)e
ta- shall 'e co)puted as follo3s:
Calendar Gear 1$$,
Inco)e ta- due per return P1"+++"+++.++
Add: #D surchar&e for late filin& and
late pa()ent P#+"+++.++
+D interest per annu) fro) !.1#.$$
to #.1#.$$ 8P1"+++"+++.++
ti)es .+1****%9 P1*"***.%+ P**"***.%+

A)ount due as of #.1#.$$ P1"**"***.%+
Aess: Partial pa()ent on #.1#.$$ P!++"+++.++

:alance as of #.1#.$$ P,**"***.%+

Add: +D interest per annu) fro) #.1#.$$
to *.1#.$$ 8P,**"***.%+ ti)es .+1****%9 P1!"!!!.!%

A)ount still due 8e-clusive of the su&&ested co)pro)ise

penalt( for late filin& and late pa()ent P,11"111.1%
HHHHHHHHH
If the said ta-pa(er fails to pa( the a)ount of P,11"111.1% '( Fune 1#" 1$$$" no further #D
surchar&e for late pa()ent of the ta- shall 'e i)posed. Instead" onl( the +D interest per annu)
shall 'e i)posed a&ainst the ta-pa(er a&ainst the ta-pa(er" co)puted fro) due date thereof 8i.e."
Fune 1#" 1$$$9 until paid. If said ta-pa(er pa(s the sa)e on partial pa()ent 'asis" the +D
interest per annu) shall 'e co)puted on the di)inishin& 'alance thereof" pursuant to the
procedures in the precedin& Illustration No. 1" Section *.* hereof.
SECTION *. Su&&ested Co)pro)ise Penalt( in E-tra./udicial Settle)ent of a Ta-pa(er0s
Cri)inal Jiolation. Section +! of the Ta- Code of 1$$% provides that ;All cri)inal
violations )a( 'e co)pro)ised e-cept: 8a9 those alread( filed in court" or 8'9 those involvin&
fraud.; This )eans that" in &eneral" the ta-pa(er0s cri)inal lia'ilit( arisin& fro) his violation of
the pertinent provision of the Code )a( 'e settled e-tra./udiciall( instead of the :IR institutin&
a&ainst the ta-pa(er a cri)inal action in Court. A co)pro)ise in e-tra./udicial settle)ent of the
ta-pa(er0s cri)inal lia'ilit( for his violation is consensual in character" hence" )a( not 'e
i)posed on the ta-pa(er 3ithout his consent. Cence" the :IR )a( onl( su&&est settle)ent of the
ta-pa(er0s lia'ilit( throu&h a co)pro)ise.
The e-tra./udicial settle)ent of the ta-pa(er0s cri)inal lia'ilit( and the a)ount of the su&&ested
co)pro)ise penalt( shall confor) 3ith the schedule of co)pro)ise penalties provided under
Revenue 7e)orandu) Order No. 1.$+ or as hereafter revised.
SECTION %. Repealin& Clause. An( revenue issuance 3hich is inconsistent here3ith shall
'e considered repealed" a)ended" or )odified accordin&l(.
SECTION ,. Effectivit(.
,.1 1eneral Rule. In &eneral" the provisions of these Re&ulations shall 'e effective
'e&innin& Fanuar( 1" 1$$, pursuant to the provisions of Section , of R.A. No. ,!!" other3ise
Bno3n as the National Internal Revenue Code of 1$$%.
,. Co)putation of Surchar&e and Interest on 6eficienc( Ta- Assess)ent. An(
deficienc( ta- assess)ent issued 'e&innin& Fanuar( 1" 1$$, shall 'e &overned '( the rules
prescri'ed in these Re&ulations.
,.5 Other Provisions. An( provision of these Re&ulations not other3ise specificall(
provided in the National Internal Revenue Code of 1$$% shall taBe effect fifteen 81#9 da(s after
pu'lication in an( ne3spaper of &eneral circulation.