COMPROMISE

Compromise
Compromise penalties are amounts collected by the
BIR in lieu of criminal prosecution for violations
committed by taxpayers, the payment of which is
based on a compromise agreement validly entered
into between the taxpayer and the Commissioner of
Internal Revenue

Requisites:

1. The taxpayer must have a tax liability.

2. There must be an offer (by the taxpayer of an
amount to be paid by the taxpayer).
3. There must be an acceptance (by the
Commissioner or taxpayer as the case may be) of the
offer in the settlement of the original claim.

Officers authorized to compromise:

1.
The Commissioner of Internal Revenue with
respect to criminal and civil cases arising from
violations of the Tax Code [Secs. 7(c) and 204, 1997
NIRC].
2. By the Regional Evaluation Board composed of:
a. The Regional Director as Chairman,
b. Assistant Regional Director, the heads of the
Legal, Assessment and Collection Divisions, and
c. The Revenue District Officer having jurisdiction
over the taxpayer, as members;
On assessments issued by the regional offices
involving basic taxes of P500,000 or less, and
minor criminal violations.

Cases which may be compromised:

1. Delinquent accounts
2. Cases under administrative protests
3. Civil tax cases being disputed before the courts
4. Collection cases filed in courts
5. Criminal violations, other than those already filed in
court or those involving criminal tax fraud; and
6. Cases covered by pre-assessment notices but
taxpayer is not agreeable to the findings of the audit
office as confirmed by the review office.

Commissioner may compromise the

payment of any internal revenue tax
when:
1. A reasonable doubt as to the validity of the claim
against the taxpayer exists; or
2. The financial position of the taxpayer demonstrates
a clear inability to pay the assessed tax.

Minimum Compromise Rates (MCR)

of any tax liability
1. In case of financial incapacity:
MCR = 10% of the basic assessed tax
2. Other cases:
MCR = 40% of the basic assessed tax

Compromise of Criminal Violations

General Rule: All criminal violations under the
CTRP may be compromised.
Exceptions:
1. Those already filed in court
2. Those involving fraud [Sec. 204(b), 1997 NIRC].

Extent of the Commissioners

Discretion to Compromise Criminal
Violations

1. Before the complaint is filed with the

Prosecutors Office: The CIR has full discretion to
compromise except those involving fraud.
2. After the complaint is filed with the
Prosecutors Office but before the information is
filed with the court: The CIR can still compromise
provided the prosecutor must give consent.
3. After information is filed with the court: The
CIR is no longer permitted to compromise with or
without the consent of the Prosecutor.

Nature
of
a
Compromise
in
Extrajudicial Settlement of the
Taxpayers Criminal Liability for his
Violation
It is consensual in character, hence, may not be
imposed on the taxpayer without his consent.

Remedy in case the taxpayer

refuses or fails to abide the tax
compromise
1. Enforce the compromise
2. Regard it as rescinded and insist upon original
demand

Compromise Penalty
It is an amount of money that the taxpayer
pays to compromise a tax violation. This is paid in
lieu of criminal prosecution. A taxpayer cannot be
compelled to pay a compromise penalty. If he
does not want to pay, the CIR must institute a
criminal action.