For someone to be forgiven, the truth must first be told. Be it in a quarrel between lovers, wrongdoing by a child, or even in confession to a priest, you must first admit the truth before being forgiven.
The proposed General Tax Amnesty, which is now awaiting the signature of the President, is no exception to this general rule. Under the proposed General Tax Amnesty, taxpayers who want to avail of the privileges of the amnesty must truthfully divulge very important information: their true total assets or true net worth. The General Tax Amnesty Return that a taxpayer must file with the Bureau of Internal Revenue should be accompanied by a notarized Statement of Total Assets (STA) or notarized Statements of Assets, Liabilities, and Net Worth (SALN) as of Dec. 31, 2017.
In exchange for disclosing their true total assets or net worth, taxpayers will be allowed to avail of the general tax amnesty program that shall cover their taxes, subject to some exceptions, for taxable year 2017 and prior years. The General Tax Amnesty will give taxpayers the option to choose a rate between 2% of their total assets or 5% of their net worth.
The Bill defines total assets as the amount of the aggregate assets, whether within or outside the Philippines, real or personal, tangible or intangible, ordinary or capital; net worth, on the other hand, is the difference between the taxpayer’s total assets and total liabilities. The taxpayer availing of the amnesty must admit all assets they have and all liabilities they owe as of Dec. 31, 2017 in the STA or SALN.
The STA shall contain a declaration of the total assets as of Dec. 31, 2017; while the SALN to be filed shall contain the following:
1. Assets located within or outside the Philippines, whether real or personal, tangible or intangible, and regardless of whether used in trade or business;
2. Description of classification, exact location, and valuation of real properties;
3. Personal properties other than money with specific description of the kind and number of assets and their value;
4. Conversion into the corresponding Philippine currency equivalent of assets that are denominated in foreign currency as of the date of the SALN;
5. Cash on hand and in bank in Philippine pesos as of the date of the SALN; and
6. All existing liabilities that are legitimate and enforceable, secured or unsecured, whether or not incurred in trade or business, disclosing or indicating clearly the name and address of the creditor and the amount of the corresponding liability.
To entice taxpayers to declare or disclose their true total assets or true net worth, any information contained in the Tax Amnesty Return, STA/SALN and other accompanying documents shall be confidential in nature and may not be used in any investigation or prosecution against the taxpayer. However, the information that the taxpayers will declare should be truthful; otherwise, the taxpayers could be subject to the crime of perjury.
If the disclosed information is discovered to be untruthful, the taxpayer could also be investigated for tax fraud. For juridical persons, the penalty shall be imposed on the partner, president, general manager, treasurer, officer-in-charge, and employees responsible for the violation.
Thus, although there is a presumption of correctness of the SALN, taxpayers must still file a correct STA or SALN. The Tax Amnesty Bill provides hefty penalties to any person who will file an incorrect STA or SALN.
With regard to the confidentiality of the information to be declared to the BIR, the Tax Amnesty Bill will also penalize any person having knowledge of the Tax Amnesty Return and appurtenant documents and who will disclose any related information. A fine and imprisonment will be imposed on the violator. If the offender is an officer or employee of the BIR or any government entity, the penalty will include perpetual disqualification to hold public office.
The Tax Amnesty Bill is just a signature away from becoming law, and is expected to be implemented within early 2019. Taxpayers may want to consider taking another look at the value of their assets, liabilities, and net worth vis-à-vis the aggregate amount of their potential tax exposures in taxable year 2017 and in prior years. In doing so, taxpayers should ensure that, if they decide to avail of the amnesty program, they will be able to comply with the requirements in the declaration of the true STA or SLN. As the saying goes, the “truth will set us free.”
P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines. You may contact the author thru RG.Moreno@ph.gt.com, or call us at tel. nos. +63(2) 988-2288.
Rufino Gerard G. Moreno III is an associate of the Tax Advisory and Compliance of P&A Grant Thornton.