There are also indications that the Bureau of Internal Revenue (BIR) is sending notices to some taxpayers making late payments, as a precursor to a full-blown tax audit.
Late payments were caused by inadvertent oversights in the bank payment process or glitches in the online filing system. The typical problem encountered by a taxpayer under the electronic filing and payment system (eFPS) is that the payment approval failed to materialize after the filing of the tax return.
For late payment of taxes, the Tax Code provides specific penalties for failure to file and pay the return on the prescribed date, as follows:
Section 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 provision of this Code or rules and regulations on the date prescribed;
In the above provision, it will be noted that both the filing and the payment of the tax return must be made within the prescribed date. Otherwise, there is the risk of 25% surcharge.
In addition to the 25% surcharge, there will be interest as per Section 249 of the Tax Code, which prescribes that, in general, there shall be assessed and collected on the any unpaid amount of tax, interest at the rate of 20% per annum, or such higher rates as may be prescribed by rules and regulations, from the date prescribed for payment until the amount is fully paid.
Thus, assuming that a taxpayer has a tax payable of P10 million and failed to accomplish a bank payment, and that the payment was only made after the due date (even though the return was filed on time, as in the case of eFPS filers), the tax penalties would include the 25% surcharge based on the P10 million and the 20% interest per annum computed proportionately from the supposed due date up to the actual payment of the deficiency tax.
Given the above-mentioned tax provisions, the penalties rise accordingly to the point where entities owing hundreds of millions of pesos will definitely be liable for hefty amounts.
In reviewing the issued BIR rules and regulations as to the possible cancelation of penalties being imputed on late payment of taxes, there was a previous regulation that provided for relief to the taxpayers [i.e., Revenue Regulation No. (RR) 13-2001].
The regulation allowed a taxpayer to apply for the abatement or cancellation of the 25% surcharge, but the payment of the 20% interest (pro-rated) would still need to be paid. The grounds for abatement were: a) the late payment being beyond the control of the taxpayer (i.e. Internet glitches); or b) meritorious circumstances which included paying a day late as a result of failure to beat bank cut-off time.
The issuance of RR 4-2012 amended the above regulation to remove the one-day late filing and remittance of payment provision for cancellation.
The amendment of regulations has had the effect of giving taxpayers a sever warning to file and pay taxes on time. Given the risk involved, it is prudent for taxpayers to ensure they have an efficient control and monitoring system for the filing and payment of tax returns.
As part of normal corporate internal control procedures, the functions and duties of the preparer of the return and the approver of tax payment are segregated. In particular, there is a person or department responsible for filing the return while a different person or department authorizes the tax payment to bank.
In this respect, it is critical that both sides of the transaction act in close coordination. The proper advice on the successful execution of the bank payment must be included on the checklist for tax return filing and payment.
Further, the taxpayer provide a buffer of at least one or two days to allow for unforeseen circumstances like system downtime or error. Note that during the last day of return filing under the eFPS, it was not uncommon for the BIR system to slow down as a result of the traffic, with many taxpayers rushing to file simultaneously.
Some would consider the rules on filing and payment of taxes to be very basic and irrelevant. However, given the recent spate of BIR assessment findings, it would be prudent to remind the taxpayers of these rules, as these can easily catch the taxpayer off-guard.
Richard R. IBarra is a tax manager with the Tax Advisory and Compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.
Late payments were caused by inadvertent oversights in the bank payment process or glitches in the online filing system. The typical problem encountered by a taxpayer under the electronic filing and payment system (eFPS) is that the payment approval failed to materialize after the filing of the tax return.
For late payment of taxes, the Tax Code provides specific penalties for failure to file and pay the return on the prescribed date, as follows:
Section 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 provision of this Code or rules and regulations on the date prescribed;
In the above provision, it will be noted that both the filing and the payment of the tax return must be made within the prescribed date. Otherwise, there is the risk of 25% surcharge.
In addition to the 25% surcharge, there will be interest as per Section 249 of the Tax Code, which prescribes that, in general, there shall be assessed and collected on the any unpaid amount of tax, interest at the rate of 20% per annum, or such higher rates as may be prescribed by rules and regulations, from the date prescribed for payment until the amount is fully paid.
Thus, assuming that a taxpayer has a tax payable of P10 million and failed to accomplish a bank payment, and that the payment was only made after the due date (even though the return was filed on time, as in the case of eFPS filers), the tax penalties would include the 25% surcharge based on the P10 million and the 20% interest per annum computed proportionately from the supposed due date up to the actual payment of the deficiency tax.
Given the above-mentioned tax provisions, the penalties rise accordingly to the point where entities owing hundreds of millions of pesos will definitely be liable for hefty amounts.
In reviewing the issued BIR rules and regulations as to the possible cancelation of penalties being imputed on late payment of taxes, there was a previous regulation that provided for relief to the taxpayers [i.e., Revenue Regulation No. (RR) 13-2001].
The regulation allowed a taxpayer to apply for the abatement or cancellation of the 25% surcharge, but the payment of the 20% interest (pro-rated) would still need to be paid. The grounds for abatement were: a) the late payment being beyond the control of the taxpayer (i.e. Internet glitches); or b) meritorious circumstances which included paying a day late as a result of failure to beat bank cut-off time.
The issuance of RR 4-2012 amended the above regulation to remove the one-day late filing and remittance of payment provision for cancellation.
The amendment of regulations has had the effect of giving taxpayers a sever warning to file and pay taxes on time. Given the risk involved, it is prudent for taxpayers to ensure they have an efficient control and monitoring system for the filing and payment of tax returns.
As part of normal corporate internal control procedures, the functions and duties of the preparer of the return and the approver of tax payment are segregated. In particular, there is a person or department responsible for filing the return while a different person or department authorizes the tax payment to bank.
In this respect, it is critical that both sides of the transaction act in close coordination. The proper advice on the successful execution of the bank payment must be included on the checklist for tax return filing and payment.
Further, the taxpayer provide a buffer of at least one or two days to allow for unforeseen circumstances like system downtime or error. Note that during the last day of return filing under the eFPS, it was not uncommon for the BIR system to slow down as a result of the traffic, with many taxpayers rushing to file simultaneously.
Some would consider the rules on filing and payment of taxes to be very basic and irrelevant. However, given the recent spate of BIR assessment findings, it would be prudent to remind the taxpayers of these rules, as these can easily catch the taxpayer off-guard.
Richard R. IBarra is a tax manager with the Tax Advisory and Compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.
source: Businessworld
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