Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

COMMITTEE REPORT NO. 425

Submitted by the COMMITTEE ON WAYS AND MEANS
on 4. gain a

Re House Bill No. _ 8856
Recommends ils approval in substitution of House Bill No. 3510

Sponsor —_: Representative Hermilando |. Mandanas

MR. SPEAKER:

The Committee on Ways and Means to which was referred House Bill No.
3510, introduced by Honorable Representative Hermilando |, Mandanas, entiled:

“AN ACT ESTABLISHING A SIMPLIFIED INCOME TAX RETURN AUDIT FOR
INDIVIDUALS AND CORPORATIONS BY PAYING A CERTAIN AMOUNT HIGHER
THAN A PRIOR YEAR INCOME TAX PAYMENT”

has considered the same and recommends that the attached House Bill No.
‘entitled:

“AN ACT ESTABLISHING A SIMPLIFIED INCOME TAX RETURN AUDIT FOR
INDIVIDUALS AND CORPORATIONS BY PAYING A CERTAIN AMOUNT HIGHER
THAN A PRIOR YEAR INCOME TAX PAYMENT”

be approved in substitution of House Bill No. 3510 with Representative Hermilando |.
Mandanas as author thereof,

Respectfully submitted:

RMILANDO |. MANDANAS
Committee Chairman
Ways and Means

THE HONORABLE SPEAKER
House of Representatives
Quezon City


<-
REP. GIORGIDI A. AGGABAO

Senior Vice-Chairman

lett if
REP. RODOLFO C. FARINAS

Vice-Chairman

Cb cuales
RI INCENT-P;GRISOLOGO

Vice Chairman

AL I f
<7) y
=P. REYNALDO V. UMALI
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REP. RODOLFO W. ANTONIO
Vice Chairman

tre Sry pew He
REP. ERIC G. SINGSON
Vice-Chairman

REP. ALFREDO D. MARANON Ill
Vice Chairman

REP. PAOLO S. JAVIER
Vice-Chairman


HOUSE BILLNO.__ 3856
(in substitution of House Bill No. 3510)

AN ACT
ESTABLISHING A SIMPLIFIED INCOME TAX RETURN AUDIT FOR INDIVIDUALS
AND CORPORATIONS BY PAYING A CERTAIN AMOUNT HIGHER THAN A
PRIOR YEAR INCOME TAX PAYMENT

FOR THE MAJORITY:

ABAYA , JOSEPH EMILIO A.

ACOP, ROMEO M.

ALCALA, IRVIN M.
ANDAYA. JR. , ROLANDO G. Oo
ANTONIO, PATRICIO A.

APACIBLE, TOMAS V.

ARNAIZ, GEORGE P.
ARQUIZA, GODOFREDO V.
BAGATSING, AMADO S,
BARZAGA, JR., ELPIDIO F.
BIRON, FERJENEL G.
BRAVO, JR., NARCISO R.
BRIONES, NICANOR M.
CAJAYON, MARY MITZI L.
COJUANGCO, ENRIQUE M.

COJUANGCO, KIMI S.



DEFENSOR, JR., ARTHUR R.
DUAVIT, JOEL ROY R.

ECLEO, JR., RUBEN B.
ENVERGA, WILFRIDO MARK M.
FERRER, JEFFREY P.
FERNANDEZ, DANILO RAMON.
FERRIOL, ABIGAIL FAYE
FORTUNO, SALVIO B,

GARCIA, ALBERT RAYMOND S.
GARCIA, PABLO JOHN F.

GO, ANA CRISTINA S.
GONZALES, FERNANDO V,
GULLAS, EDGARDO R.
HERRERA-DY, BERNADETTE R.
JAAPAR, NUR G.

LEDESMA IV, JULIO A.
LIMKAICHONG, JOCELYN S.
MALAPITAN, OSCAR G.
MATUGAS, FRANCISCO T.
MERCADO, ROGER G,
MIRAFLORES, FLORENCIO T.

ONG, EMIL L.

ORTEGA Il, FRANCISCO EMMAN


PONCE-ENRILE, JR., JUAN C.
RAMOS, JR., DEOGRACIAS B.
ROBES, ARTURO B.
RODRIGUEZ, RUFUS B.
SAHIDULLA, NUR-ANA L

SALVACION, ANDRES D., JR.

TIANGCO, TOBIAS REYNALDO M.
TIENG, IRWIN C..
TRENAS, JERRY P.
TUPAS, JR., NEBL C.

UNICO, JR., RENATO J, ———

VILLAPUERTE, LUIS R,

VILLAR, MARK A.

VILLARICA , LINABELLE RUTH R.

Aharon
=
VIOLAGO, JOSEPH GILBERT F.

ZAMORA-APSAY, MARIA CARMEN fog


FOR THE MINORITY:

ALCOVER, JR., PASTOR M.

ARROYO, JR., IGNACIO T.

AUMENTADO, ERICO B.

DIMAPORO, FATIMA ALIAH Q.

MACAPAGAL-ARROYO, GLORIA M.

MAGSAYSAY, MARIA MILAGROS H.

ORTEGA, VICTOR F.

PICHAY, PHILIP 4.

ROMUALDEZ, FERDINAND MARTIN G.



EX-OFFICIO MEMBERS

FELICIANO BELMONTE, JR.
Speaker

RAUL A. DAZA
Deputy Speaker

LORENZO R. TANADA Il
Deputy Speaker

ARNULFO P. FUENTBELLA
Deputy Speaker

JESUS CRISPIN C. REMULLA
Deputy Speaker

MARIA ISABELLE G. CLIMACO
Deputy Speaker

NEPTALI M. GONZALES IL
Ma veader

JANETTE L. GARIN
Sr. Deputy Majority Leader

ROMAN T. ROMULO
Deputy Majority Leader

MAR-LEN ABIGIAL S. BINAY

MAGTANGGOL T. GUNIGUNDO I
Deputy Majority Leader


DAISY A. FUENTES
Deputy Majority Leader

JORGE BANAL
Deputy Majority Leader

ROMERO FERERICO S. QUIMBO.
Deputy Majority Leader

EDCEL C. LAGMAN
Minority Leader

DANILO S. SUAREZ
Sr. Deputy Minority Leader

AUGUSTO BOBOY SYJUCO Ph D.
Deputy Minority Leader

CARLOS M. PADILLA
Deputy Minority Leader

MA. AMELITA C. VILLAROSA
Deputy Minority Leader

MARC DOUGLAS C. CAGAS IV
Deputy Minority Leader


Republic of the Philippines
House of Representatives
Quezon City, Metro Manila
FIFTEENTH CONGRESS.
First Regular Session

House Bill No. 56
(in substitution of House Bill No. 3510)

Introduced by Representative Hermilando |. Mandanas

AN ACT
ESTABLISHING A SIMPLIFIED INCOME TAX RETURN AUDIT FOR
INDIVIDUALS AND CORPORATIONS BY PAYING A CERTAIN
AMOUNT HIGHER THAN THE PRIOR YEAR INCOME TAX PAYMENT

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembled:

Section 1. Short Title. This Act shall be known and cited as the
“Simplified Income Tax Return Audit Act (SITRA) of 2011”

Sec. 2 Declaration of Policy. - The State shall maximize revenue
collection with the least costs, encourage voluntary tax compliance, and
maintain harmonious relations with the taxpayers by granting exemption

from income tax audit and/or investigation. Consistent with the principle


4

16

19

20

of a sound tax system, the government shall properly and efficiently
administer and enforce tax laws with the least inconvenience to the
taxpayer.
Sec. 3. Availment of SITRA. — An income taxpayer may avail of the
privilege of exemption from income tax audit and investigation by
complying with the following conditions:
1. Registration of the income taxpayer before the Bureau of Internal
Revenue (BIR) signifying the intention to avail of SITRA.
2. Existence of the Income Tax Return filed by the taxpayer in the
previous year following the availment of SITRA.
3. Payment of, in addition to the amount of income tax paid in the
previous year, an amount based on the following incremental

rates:

a. 20% of the previous income tax paid for the first year of

availment.

b. 15% of the previous income tax paid for the second year of

availment.

c. 12% of the previous income tax paid for the succeeding years

of availment.


Provided, That the availment of SITRA shall be continuous,
otherwise, taxpayer will have to start over based on the first year's

incremental rate.

Provided further, That the privilege of exemption from income tax
audit and/or investigation may continuously be availed of by paying
income tax based on the above schedule or the following minimum
amounts of income tax, whichever is higher, to wit:

1. Individuals (whether

resident or nonresident
citizens, including resident

or nonresident aliens)

Trusts and Estates- - P100,000

2. Corporations

(a)With subscribed capital

of above P50 Million-—----

----- P500,000

(b)With subscribed capital

of above P20 Million up

to P50 Million--------—--------—----—- P250,000

(c) With subscribed capital of


P20 Million and below---------------- P100,000

3. Other juridical entities, including
Partnerships, but not limited to,
Cooperatives and Foundations
that have become taxable as of

P100,000

December 31, 2010-

Provided furthermore, That the taxpayer shall still have to pay
the actual income tax due even if such amount is higher than the above
prescribed schedule. Provided finally, That transactions subject to a
final tax such as capital gains tax in the sale, transfer or exchange of real
property shall be excluded from the computation of the income tax due
for purposes of availing of the privilege under SITRA. :

Sec. 4. Manner of Availment. —- The applicant-taxpayer shall avail of
exemption from income tax audit and/or investigation authorized and
granted in this Act by filing his application in such form as may be
prescribed in the Implementing Rules and Regulations (IRR) of this Act,
and pay the required amount, as provided in Section 3 hereof, to an
authorized agent bank, Revenue Collection Officer or duly authorized
City or Municipal Treasurer located within the revenue district where the

taxpayer is registered or required to register.


Sec. 5. Installment Payment. — When the income tax liability is in
excess of Five Million Pesos (Php 5,000,000.00), the taxpayer may elect
to pay in three (3) equal installments based on the dates as may be
approved by the Commissioner.

If any installment is not paid on or before the date set by the
Commissioner for its payment, the privilege of SITRA granted to the
income taxpayer shall be cancelled which shall make the whole amount
of unpaid tax immediately due and demandable.

Sec. 6. Exceptions — The following shall be disqualified in availing
exemption from income tax audit and/or investigation:

(a)A taxpayer who has already been issued a Final Assessment

Notice (FAN) with respect to his income tax applicable to the

taxable period(s) covered by the FAN;

(b)A taxpayer under investigation for tax fraud and evasion by the

Bureau of Internal Revenue (BIR);

(c)A taxpayer with tax fraud cases filed and pending in the
Department of Justice, Court of Tax Appeal, or any government

agency or tribunal:

(d)A taxpayer with unpaid income tax liability as admitted and

reflected in his books of accounts/records, or financial


statements and tax return in a particular taxable period, unless
he first pay the said income tax liability.
(e)A taxpayer with a pending case involving any of the following:
a. those falling under the jurisdiction of the Presidential

Commission on Good Government (PCGG).

b. those involving unexplained or unlawfully acquired wealth

under the Anti-Graft and Corrupt Practices Act.

c. those filed in court involving violation of the Anti-Money

Laundering Law.

d. those filed under the Run After Tax Evaders (RATE)
Program.

(f) A taxpayer who paid the Minimum Corporate Income Tax

(MCIT) in the previous year.

Sec. 7. Punishable Act. — It shall be unlawful to divulge the Income
Tax Return filed in this Act which shall be penalized by a fine of not less
than Fifty Thousand Pesos (P50,000.00) and imprisonment of not less
than six (6) years but not more than ten (10) years.

If the offender is an officer or employee of the BIR or any
government entity, he shall suffer the additional penalty of perpetual
disqualification to hold public office, to vote and to participate in any

public election.


Sec. 8. Implementing Rules and Regulations. — For the effective
implementation of this Act, the Secretary of Finance shall, upon
recommendation of the Commissioner of Internal Revenue, promulgate
and publish the necessary rules and regulations within sixty (60) days
from the effectivity of this Act.

Sec. 9. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in any two newspapers of general
circulation, whichever comes earlier.

Approved,


FACT SHEET

HOUSE BILL No. _3856
in Substitution of House Bill No. 3510

AN ACT ESTABLISHING A SIMPLIFIED INCOME TAX RETURN
AUDIT FOR INDIVIDUALS AND CORPORATIONS BY PAYING A
CERTAIN AMOUNT HIGHER THAN THE PRIOR YEAR INCOME TAX
PAYMENT

Committee Chairperson: REP. HERMILANDO I. MANDANAS

OBJECTIVES:

« To enhance the collection of income tax without increasing the
income tax rate:

* To provide peace of mind to taxpayers by granting exemption from
income tax audit and/or investigation.

* To reduce, if not eliminate, undue harassment of taxpayers when
subjected to audit.

KEY PROVISIONS:

« Any income taxpayer will be exempted from income tax audit
and/or investigation by registering with the Bureau of Internal
Revenue (BIR) and by paying a certain amount higher than his
prior year income tax payment.

It provides for the minimum amount of income tax payment and for
the exceptions in availing SITRA.

It offers an installment plan in case the income tax liability exceeds
Five Million Pesos (P5,000,000.00).

It penalizes unlawful divulgence of the Income Tax Return filed
under SITRA.

RELATED LAW:

+ Republic Act No. 8424, as amended.


a>
RECEIVED “@
3 0cr 20

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Manila

FIFTEENTH CONGRESS
First Regular Session

House Bill No.__ 3510

Introduced by Representative HERMILANDO I. MANDANAS

EXPLANATORY NOTE

Our nation’s present fiscal deficit calls for a more aggressive tax collection. It
cannot be denied that the fiscal gap is ballooning primarily because of our poor tax
collection effort. In fact, the Department of Finance divulged the emerging deficit for
the year is about 325.0 billion pesos. Hence, the urgent need to strengthen collection
of tax revenues to fund government programs that would spur economic growth.

This bill seeks to enhance the collection of income tax without necessarily
increasing the income tax rate. An income taxpayer will have an option to be
exempted from income tax audit and/or investigation by registering with the Bureau
of Internal Revenue and by paying a certain amount higher than his prior year
income tax payment. In the event that the amount due is lower than the prescribed
minimum amount, the taxpayer shall pay at least the minimum amount to enjoy the
privilege of tax audit and/or investigation exemption.

The bill intends to provide peace of mind to the taxpayers by granting them
exemption from income tax audit and/or investigation, while the government shall
have a continuous stream of revenue collection automatically increased at a certain
rate. Ultimately, this measure is also designed to reduce, if not eliminate the feeling
of the taxpayer of undue persecution or harassment when subjected to audit of
income tax returns, where the revenue officer's discretion is assumed to usually
prevail



The basic premise of this bill is that government revenues from voluntary
taxation, like income tax, will be increased by simplifying the audit requirements and
reducing occasions for corruption.

The passage of this bill, to be known as “ Simplified Income Tax Return Audit
(SITRA) of 2010” will increase the revenue collections of the government needed
not only to fill in the current fiscal gap but also to fund the socio-economic programs
that will improve the lives of every Filipino.

In view of the foregoing, passage of this bill is earnestly sought.

Yap
? RMILANDO |. MANDANAS

2™ District, Batangas


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Manila

Fifteenth Congress
First Regular Session

3510

House Bill No.

Introduced by Representative HERMILANDO I. MANDANAS-

AN ACT
ESTABLISHING A SIMPLIFIED INCOME TAX RETURN AUDIT FOR
INDIVIDUALS AND CORPORATIONS BY PAYING A CERTAIN AMOUNT HIGHER
THAN THE PRIOR YEAR INCOME TAX PAYMENT

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled,

Section 1. Short Title. This Act shall be known and cited as the “Simplified Income
Tax Return Audit Act of 2010”.

Sec. 2 Declaration of Policy. — It is hereby declared the policy of the State to
maximize revenue collection with least costs, encourage voluntary tax compliance,
and maintain harmonious relations with the taxpayers by granting exemption from
income tax audit and/or investigation. Consistent with the principle of a sound tax
system, the government shall properly and efficiently administer and enforce tax
laws with the least inconvenience to the taxpayer.

Sec. 3. Coverage. - Any person, whether natural or juridical, shall be exempted
from income tax audit and/or investigation by registering with the Bureau of Internal
Revenue (BIR) and by paying an additional twelve percent (12%) over his prior year
income tax payment. Provided that, to avail of this exemption, the taxpayer shall
pay on the first year, an additional twenty percent (20%) of his previous annual
income tax payment, and an additional fifteen percent (15%) for the second year,
following the registration. Provided further, that, any person may register and avail
of the exemption from audit at any time after the effectivity of this Act and will be
subjected to the prescribed rates for the first and second year mentioned herein.


The benefit of exemption from income tax audit and/or investigation may be availed
except for the persons mentioned in Section (6) of this Act, in accordance with the

following schedule:

1. Individuals (whether
resident or nonresident
citizens, including resident

or nonresident aliens)
Trusts and Estates-------—-_ Applicable rate or P100,000
whichever is higher

2. Corporations

(a) With subscribed capital
of above P50 Miillion------------—-. Applicable rate or P500,000
whichever is higher

(b) With subscribed capital

of above P20 Million up
to. P50 Million me Applicable rate or P250,000,

whichever is higher

(c) With subscribed capital of

P20 Million and below-———-- Applicable rate or P100,000,

whichever is higher

3. Other juridical entities, including
Partnerships, but not limited to,
Cooperatives and Foundations
that have become taxable as of

December 31, 2009---. - Applicable rate or P100,000,

whichever is higher

Sec. 4, Manner of Availment. — The applicant-taxpayer shall avail of exemption
from income tax audit and/or investigation authorized and granted in this Act by filing
his application in such form as may be prescribed in the Implementing Rules and
Regulations (IRR) of this Act, and pay the required amount, as provided in Section 3
hereof, to an authorized agent bank, Revenue Collection Officer or duly authorized
City or Municipal Treasurer located within the revenue district where the taxpayer is
registered or required to register.

Sec. 5. Installment Payment. — When the income tax liability is in excess of Five
Million Pesos (Php 5,000,000.00), the taxpayer may elect to pay in three (3) equal
instaliments provided that all installment payments shall be made on or before
December 31, 2011 unless extended by the Commissioner.

If any installment is not paid on or before the date fixed for its payment, the
whole amount of unpaid tax becomes due and payable, otherwise, the SITRA
registration shall be cancelled.


Sec. 6. Exceptions — The exemption from income tax audit and/or investigation
shall not be extended to the following persons:

(a) A taxpayer who has already been issued a Final Assessment Notice (FAN)
with respect to his income tax applicable to the taxable period(s) covered

by the FAN

(b) A taxpayer under investigation as a result of verified information filed by a
Tax Informer, duly processed and recorded in the Bureau of Internal
Revenue (BIR) Official Registry Book;

(0) A taxpayer with tax fraud cases filed and pending in the Department of
Justice or in courts;

(d) A taxpayer with unpaid income tax liability as admitted and reflected in his
books of accounts/records, or financial statements and tax return in a
particular taxable period, unless he first pay the said income tax liability.

(e) A taxpayer with a pending case under the Run After Tax Evaders (RATE)
Program

Sec. 7. Punishable Act. ~ It shall be unlawful to divulge the Income Tax Return
filed in this Act which shall be penalized by a fine of not less than Fifty thousand
pesos (P50,000.00) and imprisonment of not less than six years but not more than
ten (10) years.

If the offender is an officer or employee of the BIR or any government entity,
he shall suffer the penalty of perpetual disqualification to hold public office, to vote
and to participate in any public election

Sec. 8. Implementing Rules and Regulations. — For the effective implementation
of this Act, the Secretary of Finance shall, upon recommendation of the
Commissioner of Internal Revenue, promulgate and publish the necessary rules and
regulations within sixty (60) days from the effectivity of this Act

Sec. 9. Effectivity. ~ This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in any two newspapers of general circulation, whichever
comes earlier.

Approved,


Bemmbtc of the Patippines
House of Represemarives R 5 Ea
Qucson Cup, Metro Samita Wie. tf *

Fifteenth Congress {
First Regular Session

COMMITTEE ON WAYS AND MEANS

FOR HON, FELICIANO BELMONTE, JR.
‘Speaker

THRU ATTY. ARLENE C. DADA-ARNALDO
Deputy Secretary General
Committee Affairs Department

RE ‘SPOT REPORT ON THE MEETING OF THE COMMITTEE ON WAYS AND MEANS HELD ON
DECEMBER 7, 2010, 9:30 AM,ROLANDO R ANDAYA HALL, HOUSE OF
REPRESENTATIVES, QUEZON CITY

DATE December 7, 2010

FOURTH DELIBERATION ON HOUSE BILL NO. 1970 ENTITLED “AN ACT IfPOSING VALUE SIMPLIFIED
TAX IN LIEU OF THE VALUE-ADDED TAX AMENDING FOR THE PURPOSE TITLE IV OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AMENDED”.

On motion of Rep. Remulla, seconded by Rep. Singson Jr, the substitute bill to HB 1970 was approved
by the Committee.

Mm SECOND DELIBERATION ON HOUSE BILL NO. 3510 ENTITLED “AN ACT ESTABLISHING A SIMPLIFIED
INCOME TAX RETURN AUDIT FOR INDIVIDUALS AND CORPORATIONS BY PAYING A CERTAIN AMOUNT
HIGHER THAN THE PRIOR YEAR INCOME TAX PAYMENT”.

On motion of Rep. Ortega, seconded by Rep. Remulla, the substitute bill to HB 3510 was approved by the
Committee.

Certified Correct

R.PULHIN
‘omunittee Secretary

Noted by’

DONALD Z, MARASIGAN
Director IV

ral, The Executive Director, CAD.

Ce: Deputy Speaker. The Chaisperson. Committee on Rules. The Secretary Ge
The Deputy Executive Director. CAD. The Service Director. CASS