PENALTIES FOR LATE FILING OF TAX RETURNS

A. For late filing of Tax Returns with Tax Due to be paid, the following penalties will be imposed upon filing, in addition to the tax
due:
1. Surcharge
NIRC SEC. 248. - Civil Penalties.
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount
due, in the following cases:
(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the
date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the
return is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules
and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.
2. Interest
NIRC SEC. 249. Interest. (A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20%) per
annum, or such higher rate as may be prescribed by rules and regulations, from the date prescribed for payment until the amount is fully
paid.
3. Compromise
NIRC SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and Refund
Excess Taxes Withheld on Compensation. - Any person required under this Code or by rules and regulations promulgated
thereunder to pay any tax make a return, keep any record, or supply correct the accurate information, who willfully fails to pay such tax,
make such return, keep such record, or supply correct and accurate information, or withhold or remit taxes withheld, or refund excess
taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties
provided by law, upon conviction thereof, be punished by a fine of not less than Ten Thousand Pesos (P 10,000) and suffer
imprisonment of not less than one (1) year but not more than ten (10) years.
Any person who attempts to make it appear for any reason that he or another has in fact filed a return or statement, or actually files a
return or statement and subsequently withdraws the same return or statement after securing the official receiving seal or stamp of
receipt of internal revenue office wherein the same was actually filed shall, upon conviction therefor, be punished by a fine of not less
than Ten Thousand Pesos (P10,000) but not more than Twenty Thousand Pesos (P 20,000) and suffer imprisonment of not less than
one (1) year but not more than three (3) years.
In addition, Annex A of Revenue Memorandum Order (RMO) No. 7-2015 provides for the Revised Consolidated Schedule of
Compromise Penalties for Violations of the National Internal Revenue Code (NIRC), which can be accessed via this link: Annex
From page 5 of Annex A of RMO No. 7-2015

TAX
CODE
SEC
255

CRIMINAL PENALTY
IMPOSED

NATURE OF VIOLATION
Failure to file and/or pay
any internal revenue tax at
the time or times required by
law or regulation

AMOUNT OF COMPROMISE

Fine of not less than

If the amount of tax unpaid
P10,000 and imprisonment
But does Compromise
of not less than one (1) Exceeds
not exceed
is
year but not more than 10
years
P xxx
P 5,000
P 1,000
5,000

10,000

3,000

10,000

20,000

5,000

20,000

50,000

10,000

50,000

100,000

15,000

100,000

500,000

20,000

500,000

1,000,000

30,000

1,000,000

5,000,000

40,000

5,000,000

xxx

50,000

B. For late filing of Tax Returns with NO Tax Due to be paid, the compromise penalty will be imposed upon filing of the Tax Return
based on the following:
1. For violations of the NIRC provisions which are subject to compromise, the reference is found in page 4 of Annex A of RMO No. 72015.
TAX
CODE NATURE OF VIOLATION
SEC
255

Failure to make/file/submit
any return or supply
correct information at the
time or times required by
law or regulation

CRIMINAL PENALTY
IMPOSED
Fine of not less than
P10,000 and imprisonment
of not less than one (1) year
but not more than ten (10)
years

AMOUNT OF COMPROMISE
If gross sales, earnings or receipts;
or gross estate or gift (based on the
subject returns/information for
filing/submission)
Exceeds
P

But does not

Compromise is
exceed

xxx

P 50,000

P 1,000

50,000

100,000

3,000

100,000

500,000

5,000

500,000

5,000,000

10,000

5,000,000

10,000,000

15,000

10,000,000

25,000,000

20,000

25,000,000

xxx

25,000

2. For violations of the NIRC provisions which may be the subject of criminal actions, Section 250 of the NIRC will apply as follows:

NIRC SEC. 250. Failure to File Certain Information Returns. - In the case of each failure to file an information return, statement or
list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless
it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the
Commissioner, be paid by the person failing to file, keep or supply the same, One Thousand Pesos (P 1,000) for each failure: Provided,
however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-Five Thousand
Pesos (P 25,000).
C. For late filing of Statements/Reports required to be filed with NO Tax Due to be paid, the compromise penalty will be imposed
upon filing of the Tax Return based on the following:
NIRC SEC. 275. Violation of Other Provisions of this Code or Rules and Regulations in General.- Any person who violates any
provision of this Code or any rule or regulation promulgated by the Department of Finance, for which no specific penalty is provided by
law, shall, upon conviction for each act or omission, be punished by a fine of not more than One Thousand Pesos (P 1,000) or suffer
imprisonment of not more than six (6) months, or both.

http://www.bir.gov.ph/index.php/penalties.html

TAXPAYERS OBLIGATIONS AND PRIVILEGES

16. What is required of a taxpayer who is being audited?A Taxpayer who is being audited is
obliged to:
Duly acknowledge his receipt of the appropriate Letter of Authority upon its presentation by the
Revenue Officer authorized to conduct the audit by affixing in the Letter of Authority the name of
the recipient and the date of receipt.
Present within a reasonable period of time, his books of accounts and other related accounting
records that may be required by the Revenue Officer; and
Submit the necessary schedules as may be requested by the Revenue Officer within a reasonable
amount of time from his (Taxpayers) receipt of the Letter of Authority.
17. What is the recourse of a Taxpayer who cannot submit the documents being required of him
within the prescribed period of time? If a Taxpayer, believing that he cannot present his books of
accounts and/or other accounting records, intends to request for more time to present these
documents in order to avoid the issuance of a Jeopardy Assessment, the Taxpayer may execute
what is referred to as a Waiver of the Statute of Limitations.
18. What is a Waiver of the Statute of Limitations? The Waiver of the Statute of Limitations is a
signed statement whereby the Taxpayer conveys his agreement to extend the period within
which the Bureau may validly issue an assessment for deficiency taxes. If a Taxpayer opts to
execute a Waiver of the Statute of Limitations, he shall likewise be, in effect, waiving his right to
invoke the defense of prescription for assessments issued after the reglementary period.
No Waiver of the Statute of Limitations shall be considered valid unless it is accepted by a duly
authorized Bureau official.
19. If a Taxpayer does not agree with the assessment made following an audit, can he protest
this Assessment?Yes, he can. A Taxpayer has the right to contest an assessment, and may do so
by filing a letter of protest stating in detail his reasons for contesting the assessment.
20. What are the characteristics of a valid protest? A protest is considered valid if it satisfies the
following conditions:

It is made in writing, and addressed to the Commissioner of Internal Revenue;

It contains the information, and complies with the conditions required by Sec. 6 of Revenue
Regulations No. 12-85; to wit:
a.) Name of the taxpayer and address for the immediate past three (3) taxable year.
b.) Nature of request whether reinvestigation or reconsideration specifying newly discovered
evidence he intends to present if it is a request for investigation.
c.) The taxable periods covered.
d.) Assessment number.
e.) Date of receipt of assessment notice or letter of demand.
f.) Itemized statement of the findings to which the taxpayer agrees as a basis for computing the
tax due, which amount should be paid immediately upon the filing of the protest. For this
purpose, the protest shall not be deemed validly filed unless payment of the agreed portion of
the tax is paid first.
g.) The itemized schedule of the adjustments with which the taxpayer does not agree.
h.) A statement of facts and/or law in support of the protest.
The taxpayer shall state the facts, applicable law, rules and regulations or jurisprudence on
which his protest is based, otherwise, his protest shall be considered void and without force and
effect on the event the letter of protest submitted by the taxpayer is accepted, the taxpayer
shall submit the required documents in support of his protest within sixty (60) days from date of
filing of his letter of protest, otherwise, the assessment shall become final, executory and
demandable.
It is filed within thirty (30) days from the Taxpayers receipt of the Notice of Assessment and
formal Letter of Demand.
21. In the event the Commissioners duly authorized representative denies a Taxpayers protest,
what alternative course of action is open to the Taxpayer? If a protest filed by a Taxpayer be
denied by the Commissioners duly authorized representative, the Taxpayer may request the
Commissioner for a reconsideration of such denial and that his tax case be referred to the
Bureaus Appellate Division. The Appellate Division serves as a "Court", where both parties, i.e.
the Revenue Officer on one hand, and the Taxpayer on the other, can present testimony and
evidence before a Hearing Officer, to support their respective claims.
22. What recourse is open to a Taxpayer if his request for reconsideration is denied or his protest
is not acted?
Should the Taxpayers request for reconsideration be denied or his protest is not acted upon
within 180 days from submission of documents by the Commissioner, the Taxpayer has the right
to appeal with the Court of Tax Appeals (CTA).
Any appeal must be done within thirty (30) days from the date of the Taxpayers receipt of the
Commissioners decision denying the request for reconsideration or from the lapse of the 180
day period counted from the submission of the documents. (Sec. 228 of the Tax Code, as
amended).
23. If the Taxpayer is not satisfied with the CTAs decision, can he appeal the decision to a higher
Court? Yes, he can. Decisions of the Court of Tax Appeals may be appealed with the Court of
Appeals within fifteen (15) days from the Taxpayers receipt of the CTAs decision. In the event

that the Taxpayer is likewise unsatisfied with the decision of the Court of Appeals, he may appeal
this decision with the Supreme Court.
24. Can a Taxpayer claim a refund or tax credit for erroneously or illegally collected taxes? Yes,
he can. The Taxpayer may file such a claim with the Commissioner of Internal Revenue (Sec.229,
NIRC), within two (2) years from the payment of the tax or penalty sought to be refunded. Failure
of the Taxpayer to file such a claim within this prescribed period shall result in the forfeiture of
his right to the refund or tax credit.
25. If a Taxpayer has filed a claim for refund and the Bureau has yet to render a decision on this
claim, can the Taxpayer elevate his claim to the CTA?
Yes, he can, if the two (2) year period stated above is about to end, and the Commissioner has
yet to render a decision on the claim. (Gibbs v. Collector, L-13453, February 29, 1960).

http://www.bir.gov.ph/index.php/taxpayer-bill-of-rights.html#taxpayers-obligations-and-privileges

TITLE II
TAX ON INCOME
(As Last Amended by RA No. 10653)

[5]

CHAPTER I- DEFINITIONS
SEC. 22. Definitions. - When used in this Title:
(A) The term 'person' means an individual, a trust, estate or corporation.
(B) The term 'corporation' shall include partnerships, no matter how created or organized, jointstock companies, joint accounts (cuentas en participacion), association, or insurance companies,
but does not include general professional partnerships and a joint venture or consortium formed
for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal
and other energy operations pursuant to an operating consortium agreement under a service
contract with the Government. 'General professional partnerships' are partnerships formed
by persons for the sole purpose of exercising their common profession, no part of the income of
which is derived from engaging in any trade or business.
(C) The term 'domestic', when applied to a corporation, means created or organized in the
Philippines or under its laws.
(D) The term 'foreign', when applied to a corporation, means a corporation which is not
domestic

(E) The term 'nonresident citizen' means;

(1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of
his physical presence abroad with a definite intention to reside therein.
(2) A citizen of the Philippines who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for employment on a permanent basis.
(3) A citizen of the Philippines who works and derives income from abroad and whose
employment thereat requires him to be physically present abroad most of the time during the
taxable year.
(4) A citizen who has been previously considered as nonresident citizen and who arrives in the
Philippines at any time during the taxable year to reside permanently in the Philippines shall
likewise be treated as a nonresident citizen for the taxable year in which he arrives in the
Philippines with respect to his income derived from sources abroad until the date of his arrival in
the Philippines.
(5) The taxpayer shall submit proof to the Commissioner to show his intention of leaving the
Philippines to reside permanently abroad or to return to and reside in the Philippines as the case
may be for purpose of this Section.
(F) The term 'resident alien' means an individual whose residence is within the Philippines and
who is not a citizen thereof.
(G) The term 'nonresident alien' means an individual whose residence is not within the
Philippines and who is not a citizen thereof.
(H) The term 'resident foreign corporation' applies to a foreign corporation engaged in trade
or business within the Philippines.
(I) The term 'nonresident foreign corporation' applies to a foreign corporation not engaged in
trade or business within the Philippines.
(J) The term 'fiduciary' means a guardian, trustee, executor, administrator, receiver, conservator
or any person acting in any fiduciary capacity for any person.
(K) The term 'withholding agent' means any person required to deduct and withhold any tax
under the provisions of Section 57.
(L) The term 'shares of stock' shall include shares of stock of a corporation, warrants and/or
options to purchase shares of stock, as well as units of participation in a partnership (except
general professional partnerships), joint stock companies, joint accounts, joint ventures taxable
as corporations, associations and recreation or amusement clubs (such as golf, polo or similar
clubs), and mutual fund certificates.
(M) The term 'shareholder' shall include holders of a share/s of stock, warrant/s and/or option/s
to purchase shares of stock of a corporation, as well as a holder of a unit of participation in a
partnership (except general professional partnerships) in a joint stock company, a joint account,
a taxable joint venture, a member of an association, recreation or amusement club (such as golf,
polo or similar clubs) and a holder of a mutual fund certificate, a member in an association, jointstock company, or insurance company.
(N) The term 'taxpayer' means any person subject to tax imposed by this Title.
(O) The terms 'including' and 'includes', when used in a definition contained in this Title, shall
not be deemed to exclude other things otherwise within the meaning of the term defined.

(P) The term 'taxable year' means the calendar year, or the fiscal year ending during such
calendar year, upon the basis of which the net income is computed under this Title. 'Taxable
year' includes, in the case of a return made for a fractional part of a year under the provisions of
this Title or under rules and regulations prescribed by the Secretary of Finance, upon
recommendation of the commissioner, the period for which such return is made.
(Q) The term 'fiscal year' means an accounting period of twelve (12) months ending on the last
day of any month other than December.
(R) The terms 'paid or incurred' and 'paid or accrued' shall be construed according to the
method of accounting upon the basis of which the net income is computed under this Title.
(S) The term 'trade or business' includes the performance of the functions of a public office.
(T) The term 'securities' means shares of stock in a corporation and rights to subscribe for or to
receive such shares. The term includes bonds, debentures, notes or certificates, or other
evidence or indebtedness, issued by any corporation, including those issued by a government or
political subdivision thereof, with interest coupons or in registered form.
(U) The term 'dealer in securities' means a merchant of stocks or securities, whether an
individual, partnership or corporation, with an established place of business, regularly engaged in
the purchase of securities and the resale thereof to customers; that is, one who, as a merchant,
buys securities and re-sells them to customers with a view to the gains and profits that may be
derived therefrom.
(V) The term 'bank' means every banking institution, as defined in Section 2 of Republic Act No.
337, [6] as amended, otherwise known as the "General banking Act." A bank may either be a
commercial bank, a thrift bank, a development bank, a rural bank or specialized government
bank.
(W) The term 'non-bank financial intermediary' means a financial intermediary, as defined in
Section 2(D)(C) of Republic Act No. 337, [7] as amended, otherwise known as the "General
Banking Act," authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking
activities.
(X) The term 'quasi-banking activities' means borrowing funds from twenty (20) or more
personal or corporate lenders at any one time, through the issuance, endorsement, or
acceptance of debt instruments of any kind other than deposits for the borrower's own account,
or through the issuance of certificates of assignment or similar instruments, with recourse, or of
repurchase agreements for purposes of relending or purchasing receivables and other similar
obligations: Provided, however, That commercial, industrial and other non-financial companies,
which borrow funds through any of these means for the limited purpose of financing their own
needs or the needs of their agents or dealers, shall not be considered as performing quasibanking functions.
(Y) The term 'deposit substitutes' shall mean an alternative from of obtaining funds from the
public (the term 'public' means borrowing from twenty (20) or more individual or corporate
lenders at any one time) other than deposits, through the issuance, endorsement, or acceptance
of debt instruments for the borrowers own account, for the purpose of relending or purchasing of
receivables and other obligations, or financing their own needs or the needs of their agent or
dealer. These instruments may include, but need not be limited to bankers' acceptances,
promissory notes, repurchase agreements, including reverse repurchase agreements entered
into by and between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent bank,
certificates of assignment or participation and similar instruments with recourse: Provided,
however, That debt instruments issued for interbank call loans with maturity of not more than

five (5) days to cover deficiency in reserves against deposit liabilities, including those between or
among banks and quasi-banks, shall not be considered as deposit substitute debt instruments.
(Z) The term 'ordinary income' includes any gain from the sale or exchange of property which
is not a capital asset or property described in Section 39(A)(1). Any gain from the sale or
exchange of property which is treated or considered, under other provisions of this Title, as
'ordinary income' shall be treated as gain from the sale or exchange of property which is not a
capital asset as defined in Section 39(A)(1). The term 'ordinary loss' includes any loss from the
sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of
property which is treated or considered, under other provisions of this Title, as 'ordinary loss'
shall be treated as loss from the sale or exchange of property which is not a capital asset.
(AA) The term 'rank and file employees' shall mean all employees who are holding neither
managerial nor supervisory position as defined under existing provisions of the Labor Code of the
Philippines, as amended.
(BB) The term 'mutual fund company' shall mean an open-end and close-end investment
company as defined under the Investment Company Act. [8]
(CC) The term 'trade, business or profession' shall not include performance of services by the
taxpayer as an employee.
(DD) The term 'regional or area headquarters' shall mean a branch established in the
Philippines by multinational companies and which headquarters do not earn or derive income
from the Philippines and which act as supervisory, communications and coordinating center for
their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets.
(EE) The term 'regional operating headquarters' shall mean a branch established in the
Philippines by multinational companies which are engaged in any of the following services:
general administration and planning; business planning and coordination; sourcing and
procurement of raw materials and components; corporate finance advisory services; marketing
control and sales promotion; training and personnel management; logistic services; research and
development services and product development; technical support and maintenance; data
processing and communications; and business development.
(FF) The term 'long-term deposit or investment certificate' shall refer to certificate of time
deposit or investment in the form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other investments with a maturity period of
not less than five (5) years, the form of which shall be prescribed by the Bangko Sentral ng
Pilipinas (BSP) and issued by banks only (not by non-bank financial intermediaries and finance
companies) to individuals in denominations of Ten thousand pesos (P10,000) and other
denominations as may be prescribed by the BSP.
(GG) The term 'statutory minimum wage' shall refer to the rate fixed by the Regional Tripartite
Wage and Productivity Board, as defined by the Bureau of Labor and Employment Statistics
(BLES) of the Department of Labor and Employment (DOLE). [9]
(HH) The term 'minimum wage earner' shall refer to a worker in the private sector paid the
statutory minimum wage or to an employee in the public sector with compensation income of
not more than the statutory minimum wage in the non-agricultural sector where he/she is
assigned. [10]

CHAPTER II
GENERAL PRINCIPLES

SEC. 23. General Principles of Income Taxation in the Philippines. - Except when
otherwise provided in this Code:
(A) A citizen of the Philippines residing therein is taxable on all income derived from sources
within and without the Philippines;
(B) A nonresident citizen is taxable only on income derived from sources within the Philippines;
(C) An individual citizen of the Philippines who is working and deriving income from abroad as an
overseas contract worker is taxable only on income derived from sources within the Philippines:
Provided, That a seaman who is a citizen of the Philippines and who receives compensation for
services rendered abroad as a member of the complement of a vessel engaged exclusively in
international trade shall be treated as an overseas contract worker;
(D) An alien individual, whether a resident or not of the Philippines, is taxable only on income
derived from sources within the Philippines;
(E) A domestic corporation is taxable on all income derived from sources within and without the
Philippines; and
(F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is
taxable only on income derived from sources within the Philippines.

http://www.bir.gov.ph/index.php/tax-code.html#title2