Written by Susan M. Aquino, 11 January 2008
Various information campaigns and seminars on the recent Tax Amnesty Law (TAL) or Republic Act 9480 have already been conducted, most of them focusing on corporate taxpayers wishing to avail of the program.
Not to be neglected, however, is a special segment of the taxpayers which has of recent times been the subject of BIR’s Tax Mapping Operations and Tax Compliance Verification Drives, namely: the "Professionals" or the "Self-Employed."
The term "professional" has been defined by the Bureau of Internal Revenue (BIR) in its primer, "Tax Guide for Professionals," as an individual or a group classified as self-employed, practicing his or their profession or calling, with or without a license under a regulatory board or body. Lawyers, medical practitioners, engineers, accountants and other professionals who have set up their own private practice fall under this classification.
Much has been said about the alleged un-declared/under-declared income of this group which has led the BIR officials to closely monitor their activities particularly regarding their compliance with invoicing requirements. Due to the difficulty in tracking down their income, some of these professionals have been paid a visit by revenue authorities and even worse, cases have been filed against them for tax evasion.
Professionals who, for whatever reason, have not correctly declared their income for the taxable years 2005 and prior years, are included in the coverage of the TAL and as such, may provide a welcome relief for said group.
Under the one-time tax amnesty, the taxpayer is granted immunity from the payment of deficiency taxes including penalties arising from their failure to pay the correct taxes for taxable years 2005 and prior years.
The prescribed amnesty tax rate for individuals under the TAL range from 5% of their declared net worth or P50,000 whichever is higher. For individuals who have previously filed Statements of Assets, Liabilities and Net Worth (SALN) for the taxable year 2005 and would like to amend their SALN to include therein previously undeclared assets and/or liabilities, the 5% rate shall be based on the resulting increase in their net worth or the minimum amnesty tax of P50,000, whichever is higher.
Please note that even assets which are not used in the trade or business of the individual taxpayer availing of the tax amnesty, such as family home, idle, vacant lots, etc., as well as those assets located outside of the Philippines must be declared in the SALN.
Similarly, existing liabilities as of the end of taxable year 2005 whether or not incurred in trade or business which are in the name of the individual taxpayer may also be claimed and deducted from the assets to arrive at their net worth.
How about taxpayers who have failed to file any SALNs for the taxable year 2005 or prior years for that matter? Revenue Memorandum Circular (RMC) No. 69-2007 provides that the 5% amnesty tax rate shall be based on their entire net worth as of Dec. 31, 2005 including fiscal year ending in the month of 2005, as declared in their soon to be filed SALN or P50,000 whichever is higher.
With all the panacea seemingly offered by this law, tax amnesty is not available to all. RA 9480 and its implementing regulations and circulars, exclude those who have already had cases filed against them either in the courts or in the Department of Justice for tax evasion and other similar offenses provided under Chapter II of Title X of the Tax Code on or before the TAL effectivity date which was on June 16, 2007.
It must be recalled that in 2005, the BIR launched its Run After Tax Evaders Program (RATE) and as a result, tax evasion cases were filed against corporate and individual taxpayers including those classified as professionals, i.e. actors, lawyers, physicians, etc. Those with RATE cases pending against them can no longer avail of tax amnesty.
However, the law seems to be lenient with persons who have pending tax assessments because they can still apply for tax amnesty for taxes covered by said law. Such assessments will be canceled upon presentation of proof of availment of tax amnesty.
Take note that cancellation of these assessments shall be limited only to the assessed taxes that are covered by the tax amnesty law, hence assessment of withholding tax liabilities are not deemed withdrawn even after availment of the tax amnesty.
For those contemplating tax amnesty, the following are important points to remember:
The effective period for the tax amnesty is only until March 6, 2008.
The TAL covers all national internal revenue taxes such as income taxes, estate tax, donor’s tax, VAT, other percentage taxes, excise taxes and documentary stamp taxes.
Not included in the coverage of the TAL are withholding taxes and taxes passed on and already collected from customers for remittance to the BIR.
Individuals may still avail of tax amnesty even if there is already a pending final assessment notice against them except when these assessments have become final and executory prior to the amnesty availment.
Professionals who failed to file their SALNs for the taxable year 2005 may still avail of tax amnesty in which case the 5% shall be based on their entire net worth for said period.
An individual’s Tax Amnesty Return and his/her Statement of Assets, Liabilities and Net Worth as of Dec. 31, 2005 cannot be used as evidence against him/her in all proceedings that pertain to taxable year 2005 and prior years before any judicial, quasi-judicial or administrative bodies.
