10-01-2001 Revenue Memorandum Order No. 22-01 October 1, 2001 REVENUE MEMORANDUM ORDER NO.

22-01 SUBJECT : Prescribing the Guidelines and Procedures in the Exercise of the Power of the Commissioner to Compromise Taxes Pursuant to Section 204, in Relation to Section 7(c) of the Tax Code of 1997, as Implemented by Revenue Regulations No. 72001. TO : All Internal Revenue Officers and Others Concerned. SECTION 1. Objectives. This Order is issued to prescribe the guidelines and procedures for evaluating, processing and accepting offers of compromise settlement of delinquent accounts and disputed assessments, including those already filed in court, based on the grounds provided for under Section 204, in relation to Section 7 (c) of the Tax Code of 1997 (Code), as implemented and clarified by Revenue Regulations No. 72001 (RR 7-2001) with the end view of substantially reducing, if not totally eliminating, the delinquent accounts and disputed assessments (administrative and judicial) of the Bureau. This Order is likewise issued to define the roles and responsibilities of the National Evaluation Board (NEB) and Regional Evaluation Board (REB) in the exercise by the Commissioner of Internal Revenue (Commissioner) or his duly authorized representative of the power to compromise internal revenue taxes as provided for in Sections 7(c) and 204 of the Code. SECTION 2. Scope. 2.1 The following cases may, upon compliance with the basis and conditions set forth in Section 204 of the Code and RR 7-2001 as reiterated in this Order, be the subject matter of compromise settlement: 2.1.1 Delinquent accounts; 2.1.2 Cases under administrative protest pending in the Regional Offices (ROs), Revenue District Offices (RDOs), Legal Service (LS), Large Taxpayer Service (LTS), Collection Service (CS), Enforcement Service (ES), including offices thereunder, and other offices in the National Office (NO); 2.1.3 Civil tax cases being disputed before the courts, e.g., MTC, RTC, CTA, CA, SC; 2.1.4 Collection cases filed in courts; 2.1.5 Criminal violations, other than those already filed in court or those involving criminal tax fraud; and 2.1.6 Cases covered by pre-assessment notices (PANs) but the taxpayer is not agreeable to the findings of the audit office as confirmed by the review office.

2.2 The following are not covered by the Program: 2.2.1 Withholding tax cases; 2.2.2 Criminal tax fraud cases; 2.2.3 Criminal violations already filed in court; 2.2.4 Delinquent accounts with duly approved schedule of installment payments; 2.2.5 Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision/resolution; and 2.2.6 Cases which have become final and executory after final judgment of a court. SECTION 3. Basis for Acceptance of Compromise Offer. 3.1. Reasonable Doubt as to the Validity of Assessment. The offer to compromise a delinquent account or disputed assessment under this Order on the ground of reasonable doubt as to the validity of the assessment may be accepted when it is shown that: 3.1.1 The delinquent account or disputed assessment is one resulting from a jeopardy assessment as defined in RR 7-2001 and reiterated in this Order, or 3.1.2 The assessment seems to be arbitrary in nature, appearing to be based on presumptions and there is reason to believe that it is lacking in legal and/or factual basis; or 3.1.3 The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of assessment or preliminary assessment and there is reason to believe that the assessment is lacking in legal and/or factual basis; or 3.1.4 The taxpayer failed to file a request for reinvestigation/reconsideration within thirty (30) days from receipt of assessment notice and there is reason to believe that the assessment is lacking in legal and/or factual basis; or 3.1.5 The taxpayer failed to elevate to the Court of Tax Appeals (CTA) an adverse decision of the Commissioner or his duly authorized representative within thirty (30) days from receipt thereof and there is reason to believe that the assessment is lacking in legal and/or factual basis; or 3.1.6 Assessments issued on or after January 1, 1998 where the demand notice allegedly failed to comply with the formalities prescribed under Sec. 228 of the Code; or 3.1.7 Assessments made based on the "Best Evidence Obtainable Rule" under Sec. 6(B) of the Code and there is reason to believe that the same can be disputed by sufficient and competent evidence. 3.2 Financial Incapacity. The offer to compromise based on financial incapacity may be accepted upon showing that: 3.2.1 The corporation ceased operation or is already dissolved;

3.2.2 The taxpayer is suffering from surplus or earnings deficit resulting to impairment of the original capital by at least fifty percent (50%) as reflected in the latest audited Financial Statements (FS) Account Information Form (AIF) filed not later than July 31, 2001; or 3.2.3 The taxpayer is suffering from a networth deficit, computed by deducting total liabilities (net of deferred credits) from total assets net of prepaid expenses, deferred charges, pre-operating expenses, as well as appraisal increases in fixed assets), as reflected in the latest audited FS/AIF filed not later than July 31, 2001, or 3.2.4 The taxpayer is a compensation income earner with no other source of income and the family's gross monthly compensation income does not exceed the levels of compensation income provided for in Subsection 3.3 hereof, and it appears that the taxpayer possesses no leviable/distrainable assets other than his family home; or 3.2.5 The taxpayer has been granted by the Securities and Exchange Commission (SEC) or by any competent tribunal, a moratorium or suspension of payments to creditors, or otherwise declared bankrupt or insolvent. The moratorium or suspension of payments to creditors must have been granted on or before July 31, 2001. 3.3 Prescribed minimum rates for compromise settlement. The compromise settlement of the internal revenue tax liabilities, reckoned on a per tax type assessment basis, shall be subject to the following minimum rates based on basic assessed tax:

SECTION 4. Policies. 4.1 No offer for compromise settlement by reason of financial incapacity shall be considered unless and until the taxpayer waives in writing his privilege of secrecy of bank deposits under Republic Act No. 1405 or under general or special laws. Such waiver shall constitute as the authority of the Commissioner to inquire into the bank deposits of the taxpayer. 4.2 In cases where the basic tax assessed has been adjusted as a result of reconsideration/reinvestigation and the taxpayer has signified in writing his conformity to the adjusted assessment, said taxpayer can no longer request for compromise based on doubtful validity of the assessment. Nonetheless, should the taxpayer still not agree to the adjusted assessment, but he wants to avail of the Program, the offer for compromise settlement shall be decided on a case to case basis but in no instance shall it be lower than the minimum percentage rates prescribed by law. Any offer of compromise on the ground of doubtful validity of the

assessment involving a compromise offer of less than 40% of the basic assessed tax shall state compelling or strong reasons for such offer. All such offers shall be approved by the NEB. 4.3 Assessments confirmed by a lower court but appealed by the taxpayer to a higher court can not be compromised on the ground of doubtful validity of the assessment. 4.4 If the offer of compromise meets the conditions and requirements prescribed by law and regulations as elucidated in this Order, the case is considered provisionally closed on the day the compromise amount is fully paid and the approval of the compromise offer becomes a matter of course on the part of the National Evaluation Board (NEB) or the Regional Evaluation Board (REB), as the case may be. The approval thereof shall be evidenced by a Certificate of Availment (CA) (Annex "B") duly signed by the Chairman of the REB or the NEB, as the case may be, which Certificate must be issued within sixty (60) days from date of payment of compromise amount or submission of documentary requirements, whichever comes later. 4.5 For purposes of this Program, the term "assessment" includes the Pre-assessment Notice (PAN) or Final Assessment Notice (FAN), in those instances where PAN is not required by law, issued as of June 30, 2001 by the appropriate "Review Office". In fine, it does not include the post reporting notice issued by the head of the investigating office. 4.6 For purposes of this Program, the term "jeopardy assessment" shall refer to a tax assessment which was issued without the benefit of complete or partial audit by an authorized revenue officer, who has reason to believe that the assessment and collection of a deficiency tax will be jeopardized by delay because of the taxpayer's failure to comply with the audit and investigation requirements to present his books of accounts and/or pertinent records, or to substantiate all or any of the deductions, exemptions, or credits claimed in his return. 4.7 Non-operating companies shall refer to those which have discontinued operations permanently. Thus, companies under suspended operations (e.g., temporary stoppage due to labor dispute) do not fall under this category. 4.8 It shall be the responsibility of the NEB created under Section 204 of the Code and REB created under Section 7 (c) of the same Code to evaluate and approve/disapprove all applications for compromise settlement. The composition of the NEB/REB are as follows: 4.8.1 National Evaluation Board (NEB) Commissioner of Internal Revenue Chairman Four (4) Deputy Commissioners Members 4.8.2 Regional Evaluation Board (REB)

 Regional Director Chairman Members: Assistant Regional Director Chief, Legal Division Chief, Assessment Division Chief, Collection Division Revenue District Officer having jurisdiction over the taxpayer-applicant 4.9 The NEB shall have authority to approve offers of compromise on the following: 4.9.1 Offers of compromise for less than the prescribed minimum rates provided in Subsection 3.3 hereof; 4.9.2 Offers of compromise on delinquent accounts or disputed tax cases as well as on minor/major criminal violations (other than criminal tax fraud cases and criminal cases already filed in courts) of taxpayers under the jurisdiction of the NO; 4.9.3 Offers of compromise of delinquent accounts or disputed tax cases involving assessments where the basic assessed tax, on a per tax type basis, exceeds Five Hundred Thousand Pesos (P500,000), and of major criminal violations (other than criminal tax fraud cases and criminal cases already filed in courts) of taxpayers under the jurisdiction of the ROs; 4.10 The REB shall have the authority to approve offers of compromise of deficiency assessments issued by the ROs involving basic assessed tax, on a per tax type basis, of Five Hundred Thousand Pesos (P500,000.00) or less, and of minor criminal violations of taxpayers discovered by the RO/RDO having jurisdiction over said taxpayers. 4.11 The prescribed minimum percentages provided in Subsection 3.3 hereof shall likewise apply to offers of compromise settlements of assessments/deficiencies/findings consisting solely of increments, i.e., surcharge, interest. etc., based on total amount assessed. 4.12 Offers of compromise of minor criminal violations committed by taxpayers under the jurisdiction of the ROs, which cases do not involve criminal tax fraud cases or cases already filed with the courts, may be accepted by the investigating office, provided, however, that monthly summaries thereof shall be submitted to the REB for approval. Offers of compromise for major criminal violations allowed to be compromised under existing rules and regulations (i.e., criminal violations other than criminal tax fraud cases and those already filed in courts) shall be referred to the Technical Working Group-NEB (TWG-NEB) for evaluation as to the legal and factual basis of the offer and for recommendation of approval/disapproval by the NEB of the compromise offer. Offers of compromise for minor criminal violations committed by

taxpayers under the jurisdiction of the NO, which cases do not involve criminal tax fraud cases or cases already filed with the courts, may be accepted by the investigating office, provided, however, that monthly summaries thereof shall be submitted to the NEB for approval. Offers of compromise for major criminal violations of taxpayers under the jurisdiction of the NO allowed to be compromised under existing rules and regulations (i.e., criminal violations other than criminal tax fraud cases and those already filed in courts) shall be referred to the TWG-NEB for evaluation as to the legal and factual basis of the offer and for recommendation of approval/disapproval by the NEB of the compromise offer. Minor criminal violations shall refer to violations where the penalties are fines of not exceeding One Hundred Thousand Pesos (P100,000) and/or imprisonment of not exceeding ten (10) years, except criminal tax fraud cases. The foregoing provisions do not affect the procedures on the compromise of cases under the Rules of Court. 4.13 The evaluation of offers of compromise shall, in all cases, be conducted by the Technical Working Groups (TWGs) in the National and Regional levels, respectively, which were already constituted under RSOs issued pursuant to RMO 42-2000, unless new RSOs are issued to reconstitute the same. 4.14 The constituted Secretariat of the NEB and the REBs shall handle the administrative functions of their respective TWGs. 4.15 Taxpayers shall have the option to first have their offer of compromise approved by the NEB or REB, as the case may be, before they pay the amount accepted for compromise, or pay immediately the amount offered for compromise upon filing of the Application for Compromise (BIR Form No. 2107) using the Compromise Payment Form (BIR Form No. 0608) at the Authorized Agent Bank (AAB) or RCO/DMT of the RDO/other BIR office where the taxpayer is required to register after which the application shall be processed accordingly. 4.16 Tax Credit Certificates (TCCs)/Tax Debit Memos (TDMs) shall not be allowed as payment in the offers of compromise. 4.17 The evaluation of the offers of compromise shall be done on a per tax type basis. Thus, in the event that a taxpayer offers compromise of his delinquent account or disputed assessment for taxable year covering three (3) types of tax, such as Income tax, VAT, and DST, there shall be three (3) separate applications and evaluations for the three types of tax. In fine, the determination of the jurisdictional amount, for purposes of approval thereof, shall consider, not the aggregate of the three taxes, but rather individually, the respective basic taxes of the three assessments.

4.18 For compromise offers of delinquent accounts, disputed assessments or minor criminal violations of taxpayers under the jurisdiction of the RO which fall under the jurisdiction of the REB, the REB shall evaluate the legal and factual basis for compromise. In the manner of deliberation, the REB Chairman shall cast his vote, however, in case of deadlock, his decision shall prevail. In the formal resolution, however, the Chairman shall always endorse the Board's collective decision. If the compromise settlement offer, evidenced by BIR Form No. 2107 (Application for Compromise Form), is equivalent to or more than the prescribed minimum rates under existing laws and regulations and the same is approved by the REB upon finding of legal and factual basis for compromise (after documentary requirements were submitted), the TWG-REB shall notify the taxpayer-applicant of the approval of the compromise offer and, upon verification of the submitted requirements and duly validated BIR Payment Form No. 0608 and Bank Official Receipt Or Revenue Official Receipt showing payment of the approved compromise amount, shall issue the Certificate of Availment (CA) duly signed by the Regional Director. After which the docket shall be forwarded to the Collection Division for the preparation of Authority to Cancel Assessment (ATCA) for the signature of the Regional Director. The signing of the ATCA may be delegated by the Regional Director to the Asst. Regional Director. Once ATCA is signed and issued, the docket shall be transmitted to the RDO or Collection Division (CD) or Assessment Division (AD), as the case may be, for the closing of the Accounts Receivable (A/R) in the General Control Ledger (GCL) or recorded assessment in the record book. Thereafter, the docket shall be filed for future reference. If the compromise settlement offer is disapproved for lack of legal/factual basis for compromise, the TWG-REB shall notify the taxpayer of the denial of his application and the reasons for such denial. Within fifteen (15) days from receipt of the Notice of Denial (Annex "C"), said taxpayer may file a request for reconsideration to allow him to rectify the defects and deficiencies noted in the application. Otherwise, the docket shall be returned to the handling office for appropriate action. Previous payments should be credited to the existing Accounts Receivable/Assessments issued to taxpayer. 4.19 For compromise offers involving assessments for a particular year of at least two tax types with different jurisdictional amounts, e.g., Income and VAT, where the basic deficiency income tax is P400,000, while the basic deficiency VAT is P1,200,000, the REB shall evaluate and act on the offer falling within its jurisdiction, i.e.. the income tax case, and thereafter forward the case docket to the TWG-NEB for resolution of the offers falling thereunder, i.e., the VAT case. 4.20 If the compromise settlement offer is less than the 10%, 20%, and 40% minimum

percentages prescribed under Sec. 204 of the Code or involves basic assessed tax of exceeding P500,000, or major criminal violations discovered by the RO of taxpayers under its jurisdiction, the TWG-REB shall forward the docket to the TWG-NEB for evaluation of the legal/factual basis and for recommendation of approval/disapproval of the compromise by the NEB. If the compromise offer involves taxpayers under the jurisdiction of NO, the offer shall be evaluated by the TWG-NEB which shall thereafter recommend the approval or disapproval by NEB of the compromise offer. If the compromise settlement offer, evidenced by BIR Form No. 2107 (Application for Compromise Form), is approved upon finding of the legal and factual basis for compromise (after documentary requirements were submitted), the TWG-NEB shall notify the taxpayer-applicant of approval of the compromise offer and, upon verification of the submitted requirements and duly validated BIR Payment Form 0608 and Bank Official Receipt or Revenue Official Receipt showing payment of the approved compromise amount, shall issue the CA duly signed by the Commissioner. After which, the docket shall be forwarded to the originating office (i.e., RDO, RO, Collection Enforcement Division (CED), Large Taxpayers-Collection Enforcement Division (LTCED), Large Taxpayers Division Office (LTDO)) for the preparation of ATCA to be signed by the appropriate signing authority, i.e., Regional Director, ACIR-Large Taxpayers Service (ACIR-LTS), or ACIR-Collection Service (ACIR-CS), etc., as the case may be. Once ATCA is signed and issued, the docket shall be forwarded to the originating office for cancellation of AR in the GCL or assessment in the record book. Thereafter, the docket shall be filed for future reference. If the compromise settlement offer being handled by NEB is disapproved for lack of legal/factual basis for compromise, the TWG-NEB shall notify the taxpayer of the denial of his application and the reasons for such denial. Within fifteen (15) days from receipt of the Notice of Denial (Annex "C"), said taxpayer may file a request for reconsideration to allow him to rectify the defects and deficiencies noted in the application. Otherwise, the docket shall be forwarded to the originating office (i.e. RDO, CD, AD, CED, LT-CED, LTDO, etc.) for appropriate action. Previous payments should be credited against the Accounts Receivable/Assessments issued to the taxpayer. SECTION 5. Attachments to the Application for Comprise Settlement. 5.1 General Attachments to all application. 5.1.1 Deficiency Assessment Notice (Preliminary or Final) and/or Warrant of distraint/Levy/Garnishment/Notice of Lien or other similar or equivalent documents; 5.1.2 Previously filed protest letter and/or "Request for Re-investigation or

Reconsideration", if applicable; 5.1.3 "Petition for Review" filed with the Court, if applicable; 5.1.4 Copy of duly validated Payment Form 0608 as proof of payment for the compromise offer; and of the compromised amount; 5.1.5 Copy of Official Receipt (OR) issued by the Accredited Agent Bank (AAB) or Revenue Official Receipt (ROR) issued by Revenue Collection Officer (RCO)/Deputized Municipal Treasurer (DMT), whichever is applicable; and 5.1.6 Copy of documents to prove doubtful validity of the assessment, it being alleged to be devoid of factual basis. 5.2 Specific attachments to application involving financial incapacity. 5.2.1 Waiver of Secrecy of Bank Deposits; and 5.2.2 Other specific attachments for each situation of allegation of financial incapacity to pay the tax as shown in the table provided hereunder:

SECTION 6. Procedures And Responsibilities. 6.1 Taxpayer. The taxpayer shall: 6.1.1 Accomplish BIR Form No. 2107 Application for the Compromise Settlement of Delinquent Account/Disputed Assessment (Annex "A"). When the compromise offer covers more than one (1) tax type or one (1) taxable year, there shall be accomplished as many sets in triplicate copies of the application and payment forms corresponding to the tax types and taxable years covered by the offer; 6.1.2 File the accomplished Application together with the Attachments at the following offices: 6.1.3 Pay the amount offered for comprise with the AAB or RCO/DMT under the jurisdiction of the RDO/appropriate office where the taxpayer is required to be registered using BIR Payment Form 0608 and attach the said duly validated form, together with the Official receipt, to the accomplished Application Form. 6.2 AAB or RCO/DMT. The AAB or RCO/DMT, in the absence of an AAB, shall receive payment, issue AAB Official Receipt (OR) or Revenue Official Receipt (ROR) for payments received by RCO/DMT and validate BIR Form 0608. The AAB/RCO/DMT shall retain the duplicate and triplicate copies of the Compromise Settlement Program (CSP) Payment Form (BIR Form No. 0608) after the same has been duly stamped as "received" and initialed by the concerned AAB or RCO/DMT. The

original copy of the CSP payment form as validated, stamped "received" and initialed by the concerned employee of the AAB/RCO/DMT shall thereafter be returned to the taxpayer. In preparing the Batch Control Sheet-A (BCS-A) for summaries of tax payments received by AABs/COs/DMTs, the AABs/RCOs/DMTs concerned should segregate or prepare a separate BCS-A (CSP Payment Form 0608) exclusively for compromise offer payments. 6.3 RDO/RO. The RDO/RO shall: 6.3.1 Make an inventory of the Delinquent Account/Disputed Assessment dockets in their possession; 6.3.2 Segregate the tax dockets into: 6.3.2.1 Those with basic assessed tax, on a per tax type basis, of more than P500,000; 6.3.2.2 Those with basic assessed tax, on a per tax type basis, of not more than P500,000; 6.3.2.3 Those pertaining to major criminal violations; 6.3.2.4 Those pertaining to minor criminal violations; and 6.3.2.5 Those where the compromise offers are below the rates prescribed by the law and regulations. 6.3.3 Receive Applications or Compromise Settlement of Delinquent Accounts/Disputed Assessments (RDO and RO-Collection Division only); 6.3.4 Make a preliminary evaluation of the Applications for Compromise by preparing a schedule showing and giving due consideration on the following: 6.3.4.1 Name of the taxpayer; 6.3.4.2 TIN of the taxpayer; 6.3.4.3 Type of tax and taxable year covered; 6.3.4.4 Amount of basic assessed tax on each type of tax and the corresponding amounts offered for compromise; 6.3.4.5 Ground for the compromise offer (i.e., doubtful validity of the assessment, or financial incapacity of the taxpayer) on the basis of which the compromise offer was made; and 6.3.4.6 List of documentary requirements submitted. 6.3.5 Locate the docket covered by the Application for Compromise (RDO and CD only); 6.3.6 Forward to TWG-REB applications for compromise, together with the documentary requirements, and the case dockets of delinquent accounts and disputed assessments issued by the ROs where basic assessed tax does not exceed P500,000.00 and

with compromise offer of not less than the prescribed minimum rates, for evaluation of the factual and/or legal basis thereof; 6.3.7 Forward to the TWG-NFB applications for compromise, together with documentary requirements and the case dockets of delinquent accounts and disputed assessments issued by the ROs where the compromise offer is less than the prescribed minimum rates or where basic assessed tax exceeds P500,000.00, devolved NO assessed cases, regardless of amount, and major criminal violations discovered by the RO of taxpayers under its jurisdiction, for evaluation of the factual and/or legal basis thereof; 6.3.8 Close the A/R in the GCL, or assessment in the record book, upon receipt of the ATCA duly signed by the RD (Applicable to RDO and CD/AD only); and 6.3.9 Transmit the docket to the appropriate office for appropriate action, if the offer of compromise is not approved, or for future reference, if the offer is approved. 6.4 CED/LT-CED. These Offices shall: 6.4.1 Make an inventory of Delinquent Account/Disputed Assessment dockets in their possession; 6.4.2 Receive applications for compromise settlement of taxpayers with delinquent accounts/disputed assessments involving assessments issued by the NO; 6.4.3 Make a preliminary evaluation of the Applications for Compromise by preparing a schedule showing and giving due consideration on the following: 6.4.3.1 Name of the taxpayer; 6.4.3.2 TIN of the taxpayer; 6.4.3.3 Type of tax and taxable year covered; 6.4.3.4 Amount of basic assessed tax on each type of tax and the corresponding amounts offered for compromise; 6.4.3.5 Ground for the compromise offer (i.e., doubtful validity of the assessment or financial incapacity of the taxpayer) on the basis of which the compromise offer was made; and 6.4.3.6 List of documentary requirements submitted. 6.4.4 Locate the dockets covered by the Application for Compromise; 6.4.5 Forward the application for compromise, together with the documentary requirements, and the case docket to the TWG-NEB for review and evaluation; 6.4.6 For approved cases, close/cancel A/R in the GCL or assessment in the record book, upon receipt of ATCA duly signed by the ACIR-LTS or ACIR-CS, whichever is applicable; and 6.4.7 For disapproved cases, proceed to perform the necessary appropriate action on the case.

6.5 ES and LS. These Offices shall: 6.5.1 Make an inventory of Delinquent Accounts/Disputed Assessment dockets/cases in their possession; 6.5.2 Forward case dockets covered by applications for compromise, together with documentary requirements, to the TWG-NEB for review and evaluation upon request by the latter or the Collection Service; 6.5.3 For approved cases of compromise involving disputed assessments, cancel the assessment in the record book upon signing of the ATCA; and 6.5.4 For disapproved cases, proceed to perform the necessary appropriate action on the case. 6.6 The TWG-REB/TWG-NEB. The TWG-REB or TWG-NEB shall: 6.6.1 Receive inventory lists of delinquent account/disputed assessment dockets from the appropriate offices; 6.6.2 Receive dockets covered by applications for compromise, together with the documentary requirements, including the summary schedule of preliminary evaluation as provided for in Subsection 6.3.4 of Subsection 6.4.3 hereof from appropriate offices; 6.6.3 Evaluate the docket covered by the application of compromise offer of the taxpayer; 6.6.4 Prepare final evaluation report for every case with recommendation whether to approved/disapprove the offer (the evaluation report should be attached to the docket); 6.6.5 Forward delinquent account/disputed assessment dockets with the final evaluation reports to REB or NEB for approval/disapproval; 6.6.6 Notify taxpayers of the action of the REB/NEB, whether approved or disapproved; 6.6.7 For officers of compromise approved by the REB/NEB, issue duly signed CA upon verification that the amount in the duly validated BIR Form 0608 and Bank Official Receipt (for AAB) or Revenue Official Receipt (for RCO/DMT) corresponds to the compromise amount, and return the docket to the appropriate office for the issuance of the ATCA and for the closing of A/R in the GCL/assessment in the record book; and 6.6.8 For Officers of compromise disapproved by the REB/NEB, return the docket to the appropriate office for collection or other appropriate action. See to it that previous payments shall be credited against Accounts Receivable/Assessments issued to the taxpayer. 6.7 REB and the NEB. The REB and the NEB shall take action on the recommendation of their respective TWGs. The Chairman thereof shall sign the CA in case of approval of compromise offer, or Notice Of Denial in case of disapproval.

SECTION 7. Deadline for Availment. The deadline for the filing of application for compromise offer shall be on or before November 15, 2001. SECTION 8. Time Periods for the Processing of Application for Compromise and Issuance of CA or Notice of Denial. Upon receipt of the application for compromise and complete documentary requirements from the taxpayer, the appropriate Offices shall have fifteen (15) days within which to pre-process the application through the preparation of a summary schedule of preliminary evaluation which shall be submitted to the TWGREB or TWG-NEB, as the case may be, together with the application for compromise, complete documentary requirements, and case docket for final processing. The TWG-REB/TWG-NEB, on the other hand, shall be given the same period of fifteen (15) days from receipt of the documents from the appropriate office to evaluate and process the application and to submit its recommendation to the REB/NEB. Upon receipt of the recommendation from the TWG-REB/TWG-NEB, the REB/NEB shall have thirty (30) days to issue the CA in case of approval of application, or Notice of Denial, in case of disapproval. In case of denial of application, the taxpayer may, within seven (7) days from receipt of the Notice of Denial, file a written appeal for reconsideration, together with additional documents, with the TWG-REB/TWG-NEB which shall act on the appeal within a period of seven (7) days by submitting its recommendation to the REB/NEB. Upon receipt of the recommendation, the REB/NEB shall have a period of fifteen (15) days within which to act on the recommendation submitted by the TWG-REB/TWG-NEB and to inform the taxpayer of the final resolution on his request for reconsideration. SECTION 9. Reporting Requirements. 9.1 The ACIR-Information Systems Operations Service (ACIR-ISOS) shall furnish the Regional Directors with CSP summary reports detailing therein the amount of CSP collected by their respective regions (Annex "D") for CSP payments made thru AABs by taxpayers under the jurisdiction of the Regional Offices. A consolidated summary report of CSP collections for all regions shall likewise be furnished by the ACIR-ISOS to the DCIR-Operations Group (DCIR-OG) and the ACIR-CS (Annex "E"). The Chief of the ISOS-VC (Annex "F"), on the other hand, shall be responsible in furnishing the ACIR-Large Taxpayers Service (ACIR-LTS)/ACIR-CS and the DCIR-OG, summary reports of CSP amounts collected thru AABs from taxpayers under the jurisdiction of the LTS. For CSP amounts collected other than thru AABs (i.e., thru RCOs or DMTs) in the ROs, the RDs concerned shall be the ones to furnish the DCIR-OG and ACIR-CS summary reports thereof (Annex "G") based on the CSP collection report

submitted by the RCO/DMT (Annex "H") and RDO (Annex "I"). Annexes "H" and "I" should be attached to the report reflected in Annex "G". 9.2 REB and NEB (Secretariat) shall submit a report (Annexes "J" and "K") showing the number of applicants/cases received for compromise settlements, details of the total collections for the week under this Program and the total amount of delinquency accounts/assessments (base amount only) applied for compromise settlement and cases approved by both the REB and the NEB to the CS (Attention: Collection Enforcement Division) not later than Tuesday of the following week. 9.3 The ATCA issuing offices should submit to the CS, for consolidation, the list of ATCA issued on compromise offer approved by either REB or NEB. 9.4 The CS shall submit to the Commissioner not later than Wednesday of the following week, a weekly statistical report (Annex "L") containing, among others, the number of applicants/cases received for compromise settlement, the total amount collected therefrom, and the total amount of delinquency accounts/assessments (base amount only) applied for compromise settlement, and cases approved by both the REB and the NEB under this Order, and another report on the corresponding ATCAs issued for cases approved by REB and NEB. SECTION 10. Transitory Provisions. 10.1 Offers of compromise made in accordance with previous compromise settlements programs of the Bureau which applications are still pending with any BIR office despite full payment of the compromise offer and full compliance with the conditions and requirements set forth thereunder shall be subjected to evaluation and processing in accordance with the provisions of this Order, but in no case shall a refund, TCC or tax credit be granted to the taxpayer out of the payment previously made. 10.2 Offers of compromise which have been made pursuant to previous compromise settlement programs of the Bureau for which no full payments have yet been made and are still pending with any BIR office shall have to be re-filed in accordance with the provisions of this Order. SECTION 11. Repealing Clause. All revenue memorandum orders and other issuances inconsistent herewith are hereby modified or repealed accordingly. SECTION 12. Effectivity. This Order shall take effect immediately. (SGD.) RENE G. BAEZ Commissioner of Internal Revenue BIR Form No. 2107 - Application for Compromise Settlement

BIR Form No. 2107 Guidelines and Instructions Who shall file 1. Individuals (Estates and Trust) 2. Corporations What cases may be compromised 1. Delinquent accounts; 2. Cases under administrative protest pending in the Regional Offices, Revenue District Offices, Legal Service, Large Taxpayer Service (LTS), Collection Service, Enforcement Service and other offices in the National Office; 3. Civil tax cases being disputed before the courts e.g., MTC, RTC, CTA, CA, SC; 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. Exceptions 1. Withholding tax cases; 2. Criminal tax fraud cases; 3. Criminal violations already filed in court; 4. Delinquent accounts with duly approved schedule of installment payments; 5. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision. On the other hand, other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis; and 6. Cases, which have become final and executory after final judgment of a court. Prescribed minimum percentages For cases of Financial Incapacity If taxpayer is an individual whose only source of income is from employment and whose monthly salary, if single, is P10,500 or less, or if married, whose salary together with his spouse is P21,000 per month, or less and the taxpayer has no leviable property 10% If taxpayer is an individual without any source of income 10% Where the taxpayer is under any of the following conditions:

1. Zero networth computed in accordance with Sec. 3.2(c) of RR 7-2001 10% 2. Negative networth computed in accordance with Section 3.2(c) of RR 7-2001 10% 3. Dissolved corporations 20% 4. Already non-operating companies for a period of: a.) three (3) years or more as of the date of application for compromise settlement 10% b.) less than (3) years 20% 5. Surplus or earnings deficit resulting to impairment in the original capital by at least 50% 20% 6. With moratorium/suspension of payments; declared insolvent or bankrupt 10% For cases of Doubtful Validity A minimum compromise rate equivalent to 40% of the basic assessed tax. Where to file The applicant taxpayer shall file the prescribed application form, BIR Form No. 2107, together with the required attachments at the following offices: OFFICE SUBJECT Collection Service/Collection For Delinquent Accounts/ Enforcement Division (CED)/ Disputed Assessments Large Taxpayers Service/Large in the National Office Taxpayers-Collection & Enforcement Division Revenue District Office/ For Delinquent Collection Division of the Accounts/Disputed Regional Office Assessment in the Regional Offices/District Offices The application for compromise settlement of delinquent accounts/disputed assessment shall be accomplished in triplicate copies and shall be prepared for each tax type applied for: Where to pay The applicant taxpayer shall pay the amount offered for compromise with the Authorized Agent Bank (AAB), or if there are no AAB's with the Revenue Collection Officer (RCO)/Deputized Municipal Treasurer of the Revenue District Office where the taxpayer is registered or required to be registered, using BIR Form No. 0608, accomplished in

triplicate copies. Attachments General attachments to all applications. Deficiency Assessment Notice (Preliminary or Final) and/or Warrant of Distraint/Levy/Garnishment/Notice of Lien or other similar or equivalent documents; Previously filed protest letter and/or "Request for Re-investigation or Reconsideration", if applicable; "Petition for Review" filed with the Court, if applicable; Copy of duly validated Payment Form 0608 as proof of payment of the compromised amount; Copy of Official Receipt issued by the Accredited Agent Bank (AAB) or Revenue Official Receipt (ROR) issued by Revenue Collection Officer (RCO)/Deputized Municipal Treasure (DMT), whichever is applicable; and Copy of documents to prove doubtful validity of the assessment, it being alleged to the devoid of factual basis. Specific attachments to applications involving financial incapacity. Waiver of Secrecy of Bank Deposits; and Other specific attachments for each situation of allegation of financial incapacity to pay the tax provided hereunder: If taxpayer is an individual whose only source of income is from employment and whose monthly salary, if single, is P10,500 or less, or if married, whose salary together with his spouse is P21,000 per month, or less and the taxpayer has no leviable property Employer's Certification of his prevailing monthly income; and Sworn statement executed by the taxpayer that he has no source of income other than from employment and that he has no leviable property other than his family home. If taxpayer is an individual without any source of income Sworn statement executed by the taxpayer that he has no source of income and that he has no leviable property other than his family home. Where the taxpayer is under any of the following conditions: 1.) Zero networth computed in accordance with Sec 3.2(c) of RR 7-2001 Latest audited Financial Statement/Account Information Form 2.) Negative networth computed in accordance with Section 3.2 (c) of RR 7-2001 Latest Audited Financial Statement/Account Information Form 3.) Dissolved corporations Latest audited Financial Statement/Account Information Form;

Notice of Dissolution or equivalent document; If corporation is dissolved by operation of law, Articles of Incorporation or Amended Articles of Incorporation 4.) Already non-operating companies Latest audited Financial Statement/Account Information Form; Notice to SEC; Affidavit of no-operation executed by the taxpayer 5.) Surplus or earnings deficit resulting to impairment in the original capital by at least 50% Latest audited Financial Statement/Account Information Form 6.) With moratorium/suspension of payments; declared insolvent or bankrupt Latest audited Financial Statement/Account Information Form Order granting the moratorium/suspension of payments or declaration of bankruptcy/insolvency. BIR Form No. 2324 ANNEX "B" Republika ng Pilipinas Kagawaran ng Pananalapi Kawanihan ng Rentas Internas CA No. 0000000000 CERTIFICATE OF AVAILMENT This is to certify that _________________________________________ of ________________________ __________________________________________ with Taxpayer Identification Number _________________________________ has availed of the provisions of Revenue Regulations No. 7-2001 and its implementing Revenue Memorandum Order, and his/her/its offer of compromise for the settlement of ___________________ _______________________________________ Tax under Assessment No. ___________________ dated __________________ covering the period ________________________ has been accepted. Issued this ___________ day of _________, 2001. RENE G. BAEZ Commissioner of Internal Revenue By: __________________________ ANNEX "C"

Republika ng Pilipinas Kagawaran ng Pananalapi Kawanihan ng Rentas Internas CSPND No. 00000 __________________ Name of Taxpayer __________________ Address __________________ TIN Number NOTICE OF DENIAL This is to inform you that your offer of compromise pursuant to the provisions of Revenue Regulations No. 7-2001 for ___________________ (Tax Type) covering taxable year ____________ under Assessment Number _______________ has been disapproved due to the following: ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ However, you are hereby advised to file a written request for reconsideration/appeal and/or submit the other documents enumerated above within _______ days from receipt hereof at _____________________ (BIR Office). On the basis of which, your offer for compromise shall be re-evaluated, otherwise this Notice of Denial shall be rendered final as of the date herein stated. As such, your compromise payment amounting to __________________ as evidenced by O.R. No. such, your compromise payment amounting to ____________________ as evidenced by O.R. No. _____________ dated _______________ shall be credited against the tax assessment issued to you under Assessment No. _________________. ____________________________________ Chairman, National/Regional Evaluation Board Compromise Settlement Program