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. 7-2001.
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 Preassessment 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 TWGNEB 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 (LT-CED), Large Taxpayers Division Office (LTDO)) for the preparation of
ATCA to be signed by the appropriate signing authority, i.e., Regional Director, ACIRLarge 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 TWG-REB 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