Time is of the essence: Penalties for tax return late filing.

The Bureau of Internal Revenue (BIR) takes a firm stance toward tax return requirements. It mandates that taxpayers file their tax returns within their given schedule; otherwise, they will accumulate significant monetary tax penalties in the Philippines. They do this because tax returns allow the government to know how much money you have earned and the accrued amount of taxes you have paid. Tax returns are reports that summaries all the transactions covering the taxpayer’s taxable year. Every citizen making any form of income from any source must file this report; failure to do so will result in heavy fines or imprisonment.

Foreign companies who wish to quickly adapt to these rules commonly utilize tax consultants or tax service companies such as Forvis Mazars. Firms like these can significantly simplify the tax process through well-trained tax experts. They can even make payments relevant to government institutions and walk you through essential tax requirements.

We have listed down the potential tax penalties in the Philippines for late filing tax returns since they are quite severe; additionally, it helps inform taxpayers about the specific consequences of a missed tax return submission. These penalties are divided into three sections depending on the due tax to be paid.

A.) For late filing of Tax Returns with Tax Due to being paid, the following penalties will be imposed upon filing, in addition to the tax due:

1.) Surcharge (NIRC SEC. 248. - Civil Penalties)

(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases:

1. Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed
2. Unless otherwise authorised by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed
3. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment
4. Failure to pay the whole or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the total amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.

(B) If a corporation willfully neglects to file the return within the period designated by the Code or by rules and regulations mandated by the BIR, or if they willfully make a false or fraudulent return, they will need to pay for an imposed penalty amounting to fifty percent (50%) of the tax or of the deficiency tax, the payment will have been made based on such return before the discovery of the falsity or fraud. This is accounting that a substantial under-declaration of taxable sales, receipts or income, or a substantial overstatement of deductions was made as determined by the Commissioner according to the rules and regulations to be enforced by the Secretary of Finance, shall constitute prima facie evidence of a false or fraudulent return. Afterwards, the failure to report sales, receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of deductions in an amount exceeding (30%) of actual deductions, shall cause the taxpayer to be liable for substantial under-declaration of sales, receipts or income or for overstatement of deductions, as mentioned herein.

2.) Interest (NIRC SEC. 249. Interest)

This penalty applies to all taxpayers in general; it states that there must be assessed and collected on any unpaid amount of tax, interest at the rate of twelve percent (12%) per annum, or such higher rate as may be prescribed by rules and regulations, from the date specified for payment until the amount is fully paid.

3.) Compromise (NIRC SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation)

Taxpayers falling under this Code or by rules and regulations have to pay any tax to make a return, keep any record, or supply correct, accurate information; who willfully fails to pay such tax, make such return, keep such document, or provide correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten Thousand Pesos (P 10,000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years.

The BIR explains that anyone attempting for any reason that or another to make it appear that he has filed a return or statement or a files return or statement and then withdraws the same return or statement after securing the official receiving seal or stamp of receipt of internal revenue office wherein the same was filed shall, will be convicted and punished by a fine of no less than Ten Thousand Pesos (P 10,000) but not more than Twenty Thousand Pesos (P 20,000) and then suffer imprisonment of not less than one (1) year but not more than three (3) years.

A table on page 5 from Annex A of Revenue Memorandum Order (RMO) No. 7-2015 highlights the Revised Consolidated Schedule of Compromise Penalties for Violations of the National Internal Revenue Code (NIRC).

The link from the source document can be found here: Annex.

B.) For late filing of Tax Returns with NO Tax Due to being paid, the compromise penalty will be imposed upon the filing of the Tax Return based on the following:

1.) For violations of the NIRC provisions subject to compromise, the reference is found on page 4 of Annex A of RMO No. 7-2015.

2.) For violations of the NIRC provisions, which may be the subject of criminal actions, Section 250 of the NIRC will apply as follows:

NIRC SEC. 250. Failure to File Certain Information Returns.

- In the case of each failure to file an information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be paid by the person failing to file, keep or supply the same, One Thousand Pesos (P 1,000) for each failure: Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-Five Thousand Pesos (P 25,000).

C.) For late filing of Statements/Reports required to be filed with NO Tax Due to being paid, the compromise penalty will be imposed upon the filing of the Tax Return based on the following:

NIRC SEC. 275. Violation of Other Provisions of this Code or Rules and Regulations in General.

- Any person who violates any provision of this Code or any rule or regulation promulgated by the Department of Finance, for which no specific penalty is provided by law, shall, upon conviction for each act or omission, be punished by a fine of not more than One Thousand Pesos (P 1,000) or suffer imprisonment of not more than six (6) months, or both.

Tax services with Forvis Mazars    

Keeping up to date with the constant changes and amendments to tax laws can become quite tedious to manage. At Forvis Mazars, we work closely with clients – offering solutions that simplify their compliance and help them navigate complex tax situations with confidence.

Our professionals have deep experience in multiple areas of tax, providing businesses at all stages of their life cycle with specialist advice. Our expertise ranges from corporate and employment tax, to transfer pricing and corporate structuring, to national and international transactions, to assessing tax implications when setting up new operations overseas, among others.

Our solutions include outsourced tax compliance, tax advisory and expert opinions, application for incentives, handling BIR tax assessments and audits, among others.
For more information on Forvis Mazars’ tax services in the Philippines, reach out to us for an initial call or follow the link below.