#AskTheTaxWhiz: New interest penalties under TRAIN law

What are the new interest penalties under the Tax Reform for Acceleration and Inclusion (TRAIN) law? Aside from the changes in the rates, can it still be imposed twice on every penalty?

To put it simply, the interest penalty is currently 12%, down from the previous 20% rate.

To be exact, however, the interest penalty is equivalent to twice the legal interest for loans set by the Bangko Sentral ng Pilipinas (BSP). If, for instance, the BSP increased the legal interest rate to 10%, then the interest penalty would be back to 20%. The same would happen if the BSP decides to lower the legal interest instead.

The TRAIN law also disallowed the application of both delinquency interest and deficiency interest at the same time. Deficiency interest penalties apply, as the name states, on deficiency tax assessments. Delinquency interest penalties apply when there is failure to pay the tax due. Delinquency interest also applies when deficiency taxes (and penalties) are not paid by the deadline demanded by the Bureau of Internal Revenue (BIR).

I was issued deficiency tax assessments before the TRAIN law was passed. Now that the rate has been reduced, does this mean I will have to pay a lower amount?

According to Revenue Regulations (RR) No. 21-2018, penalties incurred before TRAIN would still be subject to the old rate.

The RR also notes that the new rules (no double imposition and 12% interest penalty rate) apply only upon the effectivity of the TRAIN law. All penalties incurred before December 31, 2017, are still subject to the 20% rate. The double imposition of interest penalties prior to the said period will also apply.

However, some of those taxpayers with deficiencies prior to December 31, 2017, could also avail of the upcoming tax amnesty.

The coverage of the program includes tax amnesty on deficiencies. Preparing for the amnesty beforehand could help you save up. Taxpayers can easily learn about these by attending tax seminars, tax coaching sessions, or an executive tax briefing.

The Tax Whiz Academy will be conducting a free tax seminar on December 14, 2018, at the Philippines’ first Tax Hub. As part of an initiative to promote tax education, the event will be open to all. You can set your reservation here.

For more questions and inquiries, you can leave us an email at consult@acg.ph or call us at (02) 622-7720. For appointments, consultations, or specific concerns, you may also reach us here. – Rappler.com

Mon Abrea, popularly known as the Philippine Tax Whiz, is one of the 2017 Outstanding Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founding president of the Asian Consulting Group (ACG) as well as the Center for Strategic Reforms of the Philippines (CSR Philippines). Assisting him in his column is JM Miñano, communications associate of ACG. He graduated with a bachelor’s degree in Communication Arts from the University of the Philippines Los Baños.

For inquiries, you may email consult@acg.ph or visit www.acg.ph for tax-related concerns.