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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Tax deficiency is defined as the amount still due and collectible from a taxpayer upon audit or investigation; whereas tax delinquency is defined as the failure of the taxpayer to pay the tax due on the date fixed by law or indicted in the assessment notice or letter of demand. (Takenaka Corporation Philippine Branch v. Commissioner of Internal Revenue, CTA EB No. 745, September 4, 2012)
Tax Deficiency is the amount by which the tax imposed by law exceeds the amount shown in the tax return. If no amount is shown in the return, or if there is no return, then the amount by which the tax is determined by the CIR exceeds the amount previously assessed as deficiency. (Section 56 (B), National Internal Revenue Code)
Deficiency tax must be assessed and must go through the process of filing the protest by the taxpayer and denial of such protest by the Bureau of Internal Revenue (BIR).
Taz Delinquency occurs when the self-assessed tax per return was not paid or only partially paid; or the deficiency tax assessed by the BIR became final and executory.
Delinquency tax may be collected administratively by distraint, levy, or by judicial action.
Jurisprudence says:
“[Tax] deficiency is defined as the amount still due and collectible from a taxpayer upon audit or investigation; whereas [tax] delinquency is defined as the failure of the taxpayer to pay the tax due on the date fixed by law or indicted in the assessment notice or letter of demand.” (Takenaka Corporation Philippine Branch v. CIR, CTA EB No. 745, September 4, 2012)
In relation to the imposition of interest, Taneka Corporation Philippine Branch v. CIR dictates that there is no double imposition of interests given the distinction between tax deficiency and tax delinquency. Moreover:
“Consequently, deficiency interest is imposed upon any tax that is still due and unpaid to the government. Such interest is imposed by the fact that a portion of the tax imposed by law, which is the “deficiency tax”, is still withheld by the taxpayer. Otherwise stated, it is imposed on the amount short of the full tax due, and should be paid to the government, which is the deficiency tax.
Delinquency interest, on the other hand, is the interest imposed on failure to pay (i) the amount of tax due on any return required to be filed, (ii) the amount of tax due for which no return is required, or (iii) deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner. It is the interest upon the delay in the payment of the amount of tax due whether return is required to be filed or not, or delay in the payment of deficiency tax, surcharges and interests thereon.”
Further, jurisprudence dictates that:
“As to when the deficiency and delinquency interests legally accrue, Section 249 (B) and (C)(3) of the NIRC of 1997, as amended, evidently states that the deficiency interest on any deficiency tax shall be assessed “from the date prescribed for its payment until the full payment thereof”; while the assessment of the delinquency interest that is imposed upon failure to pay a deficiency tax, or any surcharge or interest thereon, shall be reckoned from “the due date appearing in the notice and demand of the Commissioner until the amount is fully paid”.
For deficiency interest, the prevailing rate of interest under Section 249 (B) of the National Internal Revenue Code and Revenue Regulation No. 21, series of 2018 (RR 21-2018) is twelve percent (12%) per annum on any deficiency tax due, which interest shall be assessed and collected from the fate prescribed for its payment until:
(a) Full payment thereof; or
(b) Upon the issuance of a notice and demand by the CIR or this authorized representative, whichever comes first.
For delinquency interest, the prevailing rate of interest under Section 249 (C) of the National Internal Revenue Code and RR 21-2018 is twelve percent (12%) per annum on the unpaid amount in case of failure to pay the following:
(1) The amount of tax due on any return required to be filed; or
(2) The amount of tax due for which no return is required; or
(3) A deficiency tax, or any surcharge or interest therein in the due date appearing in the notice and demand of the CIR or his authorized representative until the amount is fully paid, which interest shall form part of the tax.
Lastly, deficiency interest is imposed for the shortage of taxes paid, while delinquency interest is imposed for the delay in payment of taxes.
Related Article/s:
Amendment in the Due Process Requirement in the Issuance of a Deficiency Tax Assessment
Extension of Estate Tax Amnesty under Republic Act No. 11956 (effective August 5, 2023)
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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