RMC No. 3-2022: Clarifies the preparation of assessment notices for compromise penalty

Key points

1. Compromise penalties. These are amounts collected in lieu of criminal prosecution for a violation, based on a compromise agreement validly entered into between the taxpayer and the Commissioner of Internal Revenue. Item III.4 of RMO No. 7-2015 says they are itemized but appear in a separate notice from the deficiency basic tax, surcharge and interest.
2. Reason for the circular. Some assessment notices for deficiency basic taxes and civil penalties also include the compromise penalties. For uniformity, the formats under RR No. 18-2013 are now in two parts.
3. Two-part notices. The Preliminary Assessment Notice and Formal Letter of Demand have Part I for deficiency basic taxes and civil penalties, and Part II for assessed compromise penalties for violations found in the audit. Part II is Annex A (Preliminary Assessment Notice), Annex B.1 (Formal Letter of Demand) and Annex B.2 (Final Assessment Notice).
4. Separate payment forms. BIR Form No. 0605 for the Part I amounts and BIR Form No. 0605 for compromise penalties in Part II (Annex C) are prepared separately.

Who is affected

• Revenue officers preparing assessment notices
• Taxpayers issued deficiency tax assessments