• COMPROMISE AND ABATEMENT

• PENALTIES

• FORFEITURE

• SUSPENSION OF BUSINESS OPERATION

COMPROMISE AND ABATEMENT
• It may compromise both civil and criminal liability of the taxpayer
• Unlike compromise which involves a reduction of the taxpayer’s liability,
abatement of tax means that the entire tax liability of the taxpayer is cancelled.
• Compromise and Abatement have different grounds.

GROUNDS FOR COMPROMISE:

1. A reasonable doubt as to the validity of the claim against the taxpayer exists.
2. The financial position of the taxpayer demonstration a clear inability to pay the
assessed tax
GROUNDS FOR ABATEMENT:
1. When the tax or any person thereof appears to be unjustly or excessively
assessed.
2. When the administration and collection costs involved do not justify the
collection of the amount due.

CASES THAT MAY BE COMPROMISED:

1. Delinquent accounts
2. Cases under administrative protest
3. Cases disputed before the courts
4. Cases for collection already files in courts
5. Criminal violations except those already filed and those involving fraud.
CASES THAT MAY NOT BE COMPROMISED:
1. Withholding tax cases
2. Criminal tax fraud cases
3. Criminal cases already filed in court
4. Delinquent accounts with duly approved schedule of installment payments
5. Cases where reduction of payments have already been granted.
6. Cases already decided and are already final and executory.

COMPROMISE OF CRIMINAL VIOLATIONS:

1. it must be made prior to the filling of the information in court.
2. All criminal violations may be compromised except:
- already filed in court, and
- involved in fraud
LIMITATIONS ON COMPROMISE:
1. In case of large taxpayers or excise taxpayers – not less than 50%
2. For cases of financial incapacity, a minimum compromise rate equivalent to
10% of the basic assessed tax, and
3. For other cases, a minimum compromise rate equivalent to 40% of the basic
assessed tax
4. Where the basic tax exceeds one million pesos or where the settlement is less
than the prescribed minimum rates, the compromise shall be subject to the
approval of the evaluation board (Commissioner and 4 deputy commissioners).

DELEGATION OF THE POWER OF COMPROMISE:

1. The Commissioner may delegate his power to compromise to the Deputy
Commissioners and the Regional Directors.
PENALTIES
• Increments to the basic tax incident to the taxpayer’s non-compliance with
certain legal requirements. (NIRC, Sec. 248)
FORFEITURE OF REAL PROPERTY
REAL PROPERTY SUBJECT TO LEVY:
Internal Revenue Officer conducting the sale shall declare the property
forfeited to the Government in satisfaction of the claim for taxes in the following
cases:
1. No bidder for real property exposed for sale; or
2. The highest bid is for an amount insufficient to pay the taxes, penalties and
costs. (NIRC, Sec. 215)
Note: Right of Redemption within 1 year from the date of forfeiture, otherwise it
shall become absolute.
ENFORCEMENT OF FORFEITURE BY THE GOVERNMENT:
1. In case of personal property - by seizure and sale or destruction of specific
forfeited property
2. In case of real property – by judgement of condemnation and sale in a legal
action or proceeding, civil, criminal, as the case may require (NIRC, Sec. 224).

PERIOD TO CONTEST THE FORFEITURE OF PROPERTY:

3. At anytime before the sale or destruction of the property, bring the action
against the person seizing the property or having possession thereof or recover
the same and upon giving proper bond, may enjoin the sale; or
4. After the sale and within 6 months, he may bring an action to recover the net
proceeds realized at the sale. (NIRC, Sec. 231)
MODES OF RESALE:
1. The Commissioner may sell and dispose of the same at a public auction upon giving of
not less than 20 days of notice.
2. Dispose the same at a private sale with the approval of the Secretary of Finance.
Proceeds from the said transaction shall be deposited with the national Treasury.(NIRC, Sec.
216)

DISPOSAL OF FORFEITED GOODS:

3. Sold – same manner and same condition as the public notice and the time and manner
of sale are prescribed for sales of personal property distrained of non payment of taxes.
4. Destroyed – liquors, cigarettes, spirits and the like, consumption of the same shall be
injurious to public health ad enforcement of the law.
5. Sold of Destroyed- discretion of the Commissioner.
Forfeited property shall not be destroyed until at least 20 days after seizure. (NIRC, Sec. 225)
SUSPENSION OF BUSINESS
OPERATION
• The Commissioner or his authorized representation may suspend the business and temporarily
close the business establishment
• Violations:
a. In case of VAT registered person:
- Failure to issue receipts or invoices
- Failure to file VAT return and pay tax due
- Understatement of taxable sales or receipts by 30% or receipts for the taxable quarter
b. Failure of VAT subject person to register.
• NIRC, Sec. 115 and R.M.O 3-2009, Sec. 3.3.2 respectively
- Closure Order – not less than 5 days.
- Lifting of closure order upon fulfillments of the requirements in the closure order.