STATUTORY OFFENSES AND PENALTIES

Additions to Tax

General Provisions
The term “person” includes an officer or employee of a corporation who as such officer,
employee or member is under a duty to perform the act in respect to which the violation
occurs.

Purpose: To discourage delay in the payment of taxes due to the government and, in
this sense, the penalty and interest are not penal but compensatory for the concomitant
use of the funds by the taxpayer beyond the date when he is supposed to have paid
them to the Government. (Philippines Refining Co. v. Court of Appeals, G.R. No.
118794, May 8, 1996)

Tax Deficiency vs. Tax Delinquency

Tax Deficiency – is the amount by which the tax due exceeds the sums of tax shown in
the taxpayer’s return plus amounts previously assessed or collected as deficiency, less
payments, credits or refunds due to the taxpayer.

Tax Delinquency – refers to the state of a person upon whom the personal obligation
to pay the tax has been fixed by lawful assessment and who thereafter fails to pay the
tax within the time limited by law.

Civil Penalties

Civil penalties, otherwise known as surcharge, and interests in addition to all taxes,
fees, and charges, are imposed under the NIRC. The amount so added to the tax is
collected at the same time, in the same manner and as part of the tax. (NIRC, Sec. 248)

Tax laws imposing penalties for delinquencies are intended to hasten tax payments by
punishing evasion and neglect of duty in respect thereof.

Surcharge

A civil penalty imposed by law as an addition to the basic tax required to be paid. A
surcharge added to the main tax is subject to interest.

Rates of Surcharge

A. Twenty-five percent (25%) of the amount due shall be imposed in the

following:
1. Failure to file any return and pay the tax due thereon on the date prescribed;
2. Filing a return with an internal revenue officer other than those with whom the
return is required to be filed (wrong venue);
 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, 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. (NIRC,
Sec. 248)
B. Fifty percent (50%) penalty in case of the following:
1. Willful neglect to file a return within the period prescribed; or

Note: If the taxpayer voluntarily files the return, without notice from the
BIR, only 25% surcharge shall be imposed for late filing and late payment of
the tax.
But if the taxpayer files the return only after prior notice in writing from the
BIR, then the 50% surcharge will be imposed.

2. False or fraudulent return willfully made.

Prima-facie Evidence of False or Fraudulent Return Substantial Underdeclaration

of Sales, Receipts or Income and Substantial Overstatement of Deductions

1. Failure to report sales, receipts, or income in an amount exceeding 30% of that

declared return.
2. Claim of deductions in an amount exceeding 30% of actual deductions.

Interest
In General: There shall be assessed and collected on any unpaid amount of tax,
interest at the rate of double the legal interest rate for loans or forbearance of any
money in the absence of an express stipulation as set by the Bangko Sentral ng
Pilipinas from the date prescribed for payment until the amount is fully paid.
(As amended by Section 75 of the TRAIN Law. Previous rate was 20% per annum)

Regulations implementing Section 249 (Interest) of the National Internal Revenue

Code (NIRC) of 1997, as amended under Section 75 of the Republic Act (RA) No.
10963 or the “Tax Reform for Acceleration and Inclusion (TRAIN Law)” 

The Secretary of Finance has issued Revenue Regulations (RR) No. 21-2018 dated 14
September 2018 to implement Section 249 (Interest) of the NIRC of 1997, as amended
by the TRAIN Law. Accordingly, Section 249 provides that any unpaid amount of tax
shall be subject to interest at the rate of double the effective legal interest rate for loans
or forbearance of any money in the absence of an express stipulation as set by the
Bangko Sentral ng Pilipinas (BSP) from the date prescribed for payment until the
amount is fully paid. 

The rate of legal interest imposable under Section 249 of the Tax Code, as amended,
shall be twelve percent (12%), which is double the 6% interest rate prescribed by the
BSP. In case the BSP prescribes a new rate of interest, the Commissioner shall issue a
circular imposing the new rate.

Deficiency interest is imposed on any deficiency tax due and shall be assessed and
collected from the date prescribed for its payment until full payment thereof, or upon
issuance of a notice and demand by the Commissioner or his duly authorized
representative, whichever comes first. 

On the other hand, delinquency interest is imposed on the failure to pay (1) the amount
of the tax due on any return to be filed, or (2) the amount of the tax due for which no
return is required, or (3) a deficiency tax, or any surcharge or interest thereon on the
due date appearing in the notice and demand of the Commissioner or his authorized
representative until the amount is fully paid, which interest shall form part of the tax. 

With the effectivity of the TRAIN Law, deficiency and delinquency interest shall not be
imposed simultaneously. However, the double imposition of both deficiency and
delinquency interest will still apply in so far as the period between the dates prescribed
for payment until 31 December 2017. 

For tax liability/ies or deficiency tax/es which became due before the effectivity of the
TRAIN Law, and where the full payment thereof will only be accomplished after the said
effectivity date, the interest rates shall be applied as follows: 
Period Applicable interest type and rate

For the period up to 31 December 2017 Deficiency and/or delinquency

interest at 20%

For the period 1 January 2018 until full payment Deficiency and/or delinquency
of the tax liability interest at 12% 
All revenue issuances or portions thereof inconsistent with the provisions of these
Regulations are considered repealed, amended, or modified accordingly.

These regulations are effective beginning 1 January 2018, the effectivity of the TRAIN
Law. 

Interest on Extended Payments – if any person is qualified and elects to pay in

installment but fails to pay the tax or any installment on or before the date prescribed,
there shall be assessed and collected interest rate prescribed hereinabove prescribed
on the tax or deficiency tax or any part thereof unpaid from the date of notice and
demand until it is paid.
General Rule: The payment of the surcharge is mandatory and the Commissioner of
Internal Revenue is not vested with any authority to waive or dispense with the
collection thereof.

Exceptions:
1. Surcharge and interest may be deleted in the following instances:
a. When there is good faith and honest belief that one is not subject to tax on
the basis of previous interpretation of government agencies; or
b. When the imposition of a tax statute was controversial.

Failure to File Certain Information Returns General Rule: For failure to file any
information return, statement or list, or keep record, or supply any information required
on the date prescribed therefore, the taxpayer shall be liable to pay P1,000.00 for each
such failure. The aggregate amount for all such failures during the calendar year shall
not exceed P25,000.00. (NIRC, Sec. 250)

Exception: When failure is due to reasonable cause and not due to willful neglect
(NIRC, Sec. 250)

Crimes, Other Offenses and Forfeitures

General Provisions

1. A person convicted of a crime penalized by the NIRC shall be subject to the

penalties imposed by the Code in addition to the payment of taxes. The payment
of the tax due after apprehension shall not constitute a valid defense in any
prosecution for violation of any provision of the Code or in any action for the
forfeiture of untaxed articles.
2. Any person who willfully aids or abets in the commission of the crime of another
shall be liable in the same manner as the principal.
3. If the offender is not a citizen of the Philippines, he shall be deported immediately
after serving sentence without further proceedings for deportation.
4. If the offender is a public officer or employee:
a. Maximum penalty shall be imposed;
b. He shall be dismissed from public office; and
c. He shall be perpetually disqualified from holding any public office, to vote,
and to participate in any election.
5. If the offender is a CPA, his license shall, upon conviction, be automatically
revoked or cancelled.
6. In case of associations, partnerships or corporations, the penalty shall be
imposed on the partner, president, general manager, branch manager, treasurer,
officer-in-charge and employees responsible for the violation.
7. The fines to be imposed for any violation of the provisions of NIRC shall be lower
than the fines imposed herein or twice the amount of taxes, interests and
surcharges due from the taxpayer, whichever is higher.
Some Acts Punishable under NIRC:

The BIR may institute criminal action against the taxpayer for the commission of the
following acts:
1. Willful attempt to evade or defeat any tax (NIRC, Sec. 254)
Elements of Tax Evasion
a. The End to be achieved; i.e., the payment of less than that known by the
taxpayer to be legally due, or the non-payment of tax when it is shown that a
tax is due;
b. Accompanying state of mind which is evil, in bad faith, willful, or deliberate
and not accidental; and
c. Unlawful course of action or failure of action.
2. Willful failure to file return, supply correct and accurate information, pay tax,
withhold and remit tax and refund excess taxes withheld on compensation.
3. Willfully making false entries, records or reports, or using falsified or fake
accountable forms.
4. Unlawful pursuit of business.
5. Failure or refusal to issue receipts or sales invoices; printing of receipts or sales
invoices without authority from BIR; printing of double or multiple sets; printing of
unnumbered receipts or invoices or not bearing the required information; or
failure to indicate VAT as a separate item in the invoice or receipt.
6. Failure to obey summons; and
7. Perjury

The taxpayer, shall upon conviction in the aforementioned cases, pay a fine and suffer
imprisonment. In addition, it shall carry with it the confiscation and forfeiture in favor of
the government of the proceeds of the crime or value of the goods, and the instruments
or tools in which the crime was committed.

When is the Crime Deemed Complete

A crime is complete when the violator has knowingly and willfully files a fraudulent
return, with intent to evade and defeat tax. The perpetration of the crime is grounded
upon knowledge on the part of the taxpayer that he has made an inaccurate return.

Willful Blindness Doctrine

A taxpayer can no longer raise the defense that the errors in their tax returns are not
their responsibility or that it is the fault of the accountants they hired.

Prescription in Criminal Cases

The prescriptive period for criminal cases is 5 years from the time depending on the
nature of the violation of the taxpayer
1. If failure or refusal to pay taxes due: from service of final notice and demand
for payment of the deficiency taxes upon the taxpayer.
 2. If filing of false or fraudulent returns: from the discovery and institution of
judicial proceedings for its investigation and punishment.

The prescription shall be interrupted when proceedings are instituted against the guilty
persons and shall begin to run again if the proceedings are dismissed for reasons not
constituting jeopardy. The term of prescription shall not run when the offender is absent
from the Philippines.

Penal Liability of Corporations

The penalties shall be imposed upon the responsible corporate officers, partners, or
employees. The corporation, association or general co-partnership shall also be
punished by an additional fine of not less than Fifty thousand pesos (P50,000) but not
more than One hundred thousand pesos (P100,000).

Compromise Penalty

Compromise penalties are amounts collected by the BIR in lieu of criminal prosecution
for violations committed by taxpayers, the payment of which is based on a compromise
agreement validly entered into between the taxpayer and CIR.

Effect of the Taxpayer’s Failure to Comply with the Compromise Agreement

In case the taxpayer reneges on his conformity to the payment of the suggested
compromise, the CIR may not collect the compromise penalty through an action in court
or by distraint and levy. This is because compromise penalty is neither a tax nor an
administrative penalty for tax delinquency. The remedy of the CIR is to file a criminal
action against the taxpayer for the tax violation. (R.M.O. No. 19-2007)

Informer’s Reward

An informer is any qualified person who voluntarily provides definite and sworn
information not yet in the possession of the BIR nor of public knowledge, leading to the
discovery of frauds upon the internal revenue laws or violations of any provision of the
NIRC, resulting to the recovery of revenues and fee and/or conviction of the guilty party
and/or imposition of any fine or penalty. (R.R. No. 16-2010)

An informer’s reward is given to persons instrumental in the:

1. Discovery of violations of the NIRC; and
2. Discovery and seizure of smuggled goods.

A. For Violations of the NIRC Requisites

1. The informer is not disqualified. The informer should not be any of the following:
a. BIR official or employee or any other incumbent public official or
employee.
 b. Relative within the 6th civil degree of consanguinity of a BIR official or
employee, or other public official or employee; and
c. Though already retired or otherwise separated from service, BIR officials
or employees or other public officials or employees or other public officials
who acquired the information in the course of their duties during their
incumbency.
2. The informer voluntarily provides sworn information on the tax fraud or violation
allegedly committed by the denounced taxpayer.
3. The said information is not yet in the possession of the BIR nor of public
knowledge or will reasonably come into the possession of the BIR in the course
of its operations.
4. The said information does not refer to a case already pending or previously
investigated or examined by the CIR or by the SOF or any of their deputies,
agents or examiners.
5. The said information does not refer to or is not exactly similar to a previous
information filed by another informer covering the same taxpayer describing the
same scheme or information covering the same taxable year or period.
6. Such information leads to the discovery of frauds upon internal revenue laws or
violations of any of the provisions thereof.
7. There must be recovery of revenues, surcharges and fees.
Note: Informer’s reward is conditioned upon the payment and collection of
unpaid or deficiency taxes.

Amount of Reward: Ten percent of the revenues, charges or fees recovered and/or
fine or penalty imposed and collected or P1,000,000 per case, whichever is lower.

The same amount of reward shall also be given an informer where the offender has
offered to compromise the violation of law committed by him and his offer has been
accepted by the CIR and collected from the offender.

Grant of Informer’s Reward is NOT Dependent on Classification of Delinquent

Taxpayer

Grant of informer’s reward is not dependent on classification of delinquent taxpayer.

That the reward was sought and given in relation to tax delinquencies of government
agencies provides no reason for disallowance. The law on the matter makes no
distinction whatsoever between delinquent taxpayers in this regard, it being sufficient for
its operation that the person or entity concerned is subject to, and violated, revenue
laws and the informer’s report thereof resulted in the recovery of revenues.

B. For Discovery and Seizure of Smuggled Goods

Amount of Reward: Cash reward equivalent to 10% of the fair market value (FMV) of
the smuggled and confiscated goods of P1,000,000 per case, whichever is lower, shall
be given to persons instrumental in the discovery and seizure of the goods.
Informer’s Cash Rewards Subject to Income Tax

The cash rewards of the informers shall be subject to income tax collected as a final
withholding tax, at the rate of 10%.
ILLUSTRATIVE CASES

1. The income tax return for the calendar year 2018 was due for filing on April 15,
2019. The tax due was P100,000. The taxpayer voluntarily filed his tax return
without notice from the Bureau of Internal Revenue (BIR) only on June 30, 2019.
What is the amount of (a) Surcharge (b) Interest on Delinquency (c) Total
Amount of Tax Due?
Tax due per Return 100,000.00
Add: Surcharge for late filing and
payment of tax (25% x
P100,000) (a) 25,000.00
Interest(April 15-June 30,
2019)* (b) 2,493.15
Total Amount of Tax Due (c) 127,493.15

*Computation of Interest
April 15-June 15, 2019 (2 months)
(100,000 x 12% x 2/12) 2,000.00
June 16-June 30, 2019 (15 days)
(100,000 x 12% x 15/365) 493.15
Total 2,493.15

This is a failure to file any return and pay the tax due thereon on the date prescribed.

Civil Code of the Philippines

Article 13. When the laws speak of years, months, days or nights, it shall be
understood that years are of three hundred sixty-five days each; months, of thirty days;
days, of twenty-four hours; and nights from sunset to sunrise.

If months are designated by their name, they shall be computed by the number of days
which they respectively have.

In computing a period, the first day shall be excluded, and the last day included.

2. The taxpayer’s 2019 income tax return amounting to P200,000 is required to be

filed through the authorized agent bank under the jurisdiction of RDO-Lipa City.
Without prior authorization from the Commissioner, the taxpayer files the return
and pays the tax through an authorized agent bank under the jurisdiction of
RDO-Batangas City on April 15, 2019. The tax due and paid on the return is
P200,000. What is the amount of (a) Surcharge (b) Interest on Delinquency (c)
Total Amount of Tax Still Due?
200,000.0
Tax due per Return 0
Add: Surcharge for wrong venue (25% x
200,000) 50,000.00
Interest 0.00
250,000.0
Total 0
200,000.0
Less: Amount Already Paid 0
Amount Still Due 50,000.00
 3. Taxpayer filed on time his income tax return for calendar year 2016 and paid
P100,000 on April 15, 2017. Upon pre-audit of his return, it was disclosed that he
erroneously computed the tax due. The correct amount of tax due was P120,000.
The taxpayer was assessed for deficiency income tax in a letter of demand and
assessment notice issued on June 30, 2018. How much was the (a) surcharge
(b) interest on deficiency (c) total amount still due?
120,000.0
Tax due per assessment 0
100,000.0
Tax per return 0
Deficiency income tax 20,000.00
Add: Interest on deficiency *
(April 15, 2017 to June 30, 2018) 4,031.05
Amount Still Due 24,031.05

*Computation of Interest
April 15, 2017 -December 15, 2017 (8
months) 2,666.67
(20,000 x 20% x 8/12)
December 16, 2017-December 31, 2017
(16 days)
(20,000 x 20% x 16/365) 164.38
January 1, 2018-June 30, 2018 (6
months)
(20,000 x 12% x 6/12) 1,200.00
Total 4,031.05

For tax liability/ies or deficiency tax/es which became due before the effectivity of the
TRAIN Law, and where the full payment thereof will only be accomplished after the said
effectivity date, the interest rates shall be applied as follows: 
Period Applicable interest type and rate

For the period up to 31 December 2017 Deficiency and/or delinquency

interest at 20%

For the period 1 January 2018 until full payment Deficiency and/or delinquency
of the tax liability interest at 12%