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. 7-

2001 (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 Pre-

assessment 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 TWG-

NEB 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, ACIR-

Large 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. BAÑEZ

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. BAÑEZ

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