The non-filing and the non-payment of tax returns are two of the most common violations committed by the taxpaying public. Whether the non-compliance is a mere omission or a deliberate attempt to commit fraud, our tax code provides corresponding penalties for such violations.
What are the penalties imposed by the tax code for failure to file tax returns?
Under Section 248 of the Philippine tax code, failure to file any return would incur a penalty of 25% of the tax due, to be paid in addition to the principal amount due. However, if the taxpayer is found guilty of willful neglect to file returns or willfully filing a false or fraudulent return, he or she shall pay a penalty equivalent to 50% of the amount of tax required to be remitted on top of the original amount due.
Section 248B states that “a substantial underdeclaration of taxable sales, receipts, or income or a substantial overstatement of deductions, as determined by the Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall constitute prima facie evidence of a false or fraudulent return.”
Section 255 also imposes a compromise penalty of not less than P10,000 and imprisonment of not less than 1 year but not more than 10 years for willfully neglecting to file tax returns.
In addition, 12% annual interest will also be imposed until the date of payment of the assessment.
Are there any other penalties for taxpayers who are proven guilty of willful non-filing of returns to evade tax? Can the convicted taxpayer be imprisoned?
Yes. In addition to the above penalties, any person who willfully attempts to evade or defeat tax in any manner will be fined at least P500,000 but not more than P10 million. He or she may be imprisoned for at least 6 years but not more than 10 years according to Revenue Regulations No. 13-2021, which implements the penalty provisions of certain sections of the Tax Reform for Acceleration and Inclusion or TRAIN law (Republic Act No. 10963). Furthermore, the conviction or acquittal obtained for violations of this section shall not bar the filing of a civil suit for the collection of taxes.
What are the sanctions if the person convicted of a crime is not a citizen of the Philippines?
Section 253 of the Philippine tax code provides that if the offender is not a Filipino citizen, he or she shall be deported immediately after serving the sentence, without further proceedings for deportation.
What are the sanctions if the taxpayer is a public official or employee?
If he or she is a public official or employee, the maximum penalty prescribed for the offense shall be imposed. In addition, he or she shall be dismissed from public service and be perpetually disqualified from holding any public office.
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Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at email@example.com and download the TaxWhizPH app for free if you have tax questions.