BIR clarifies 12% interest rate for delinquent account & deficient tax payments

The Bureau of Internal Revenue (BIR) has issued rules mandating a lower delinquency and deficiency interest rate of 12 percent under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
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Revenue Regulations No. 21-2018 issued by Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay on Sept. 14 noted that under Republic Act No. 10963 or the TRAIN law, unpaid taxes were to be slapped interest “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 from the date prescribed for payment until the amount is fully paid.”

​The BSP set the interest rate at 6 percent, hence the rules doubled it at 12 percent. BIR Deputy Commissioner Marissa O. Cabreros told reporters that prior to the TRAIN law, the interest on unpaid taxes was at 20 percent a year.

The BIR defined the deficiency interest as that “imposed on any deficiency tax due, which interest 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 authorized representative, whichever comes first.”

“When we compute for the interest, the delinquency computation is different from the deficiency interest. So the RR was made with an illustration to show how it is going to be computed because the deficiency interest is different from the delinquency interest,” she added.
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Cabreros explained that when a taxpayer gets assessed, the person is given a final assessment notice, which he or she has 30 days to protest. If the person does not protest, it ripens as a final executory assessment and the BIR will send a collection letter. If the taxpayer ignores the collection letter within 30 days, it then becomes a delinquent account, where it becomes a nonpayment issue.

Delinquency interest is that imposed on a taxpayer for failure to pay the amount of the tax due on any return to be filed, or for which no return is required.

Also, a delinquency interest is imposed on “a deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the [BIR] commissioner or his authorized representative until the amount is fully paid, which interest shall form part of the tax.”

A deficiency interest, on the other hand, is imposed when a taxpayer has been assessed as having a deficiency in his or her voluntary declaration of taxes.

In BIR RR 21-2018, the bureau clarified that the imposition of the deficiency interest, and the delinquency interest shall not be done simultaneously.

Under the TRAIN law, there must be no double imposition of interest, the BIR said. Cabreros said that while the TRAIN law kept both the deficiency and delinquency interests, they must be slapped separately and not simultaneously.