When you are busy running and managing a business or self-employment it is easy to overlook the back-end processes such as accounting and tax compliance.
Accounting and tax compliance is often seen as unnecessary because it does not help in increasing sales or profit, rather it is often seen as an added non-value-adding cost that business owners want to cut down on.
However, although accounting and tax compliance does not directly help in increasing sales, it helps to minimize and prevent future cost on penalties arising from lack of or incorrect tax filing, as well as the unseen cost on your physical and mental health due to stress and anxiety brought about by the possible huge deficiency tax assessment of the Bureau of Internal Revenue (BIR) during audit investigation.
It is common to hear stories of business owners or self-employed who became successful or profitable in the business but only to later face financial difficulty and business instability due to the huge amount of tax penalties and emotional distress resulting to the Bureau of Internal Revenue (BIR) audit.
As such, to prevent such a distressful experience, it is therefore important and value-adding to your business or self-employment success, now and in the future, to look after your accounting and tax compliances.
In this article, I will share the BIR tax penalties for failure to file and pay your tax on time that you must know.
1. Surcharge
Whenever you fail to do on time filing and payment of a BIR tax form and it has an amount of tax due for payment, a 25% or 50% surcharge will apply.
Summary of Surcharge:
| Description | Surcharge % |
| Failure to file and pay on or before due date | 25% |
| Willful neglect and filing false or fraudulent tax | 50% |
| Amendment of filed and paid tax form on or before due date | 0% |
For example, you were supposed to file Quarterly Income Tax Return for the second quarter of the year on August 15, 2023, and the amount of tax payable is P5,000. However, you only remembered to file and pay it on October 31, 2023. As such, on top of the tax due for payment you will also pay an additional penalty of P1,250 for failure to file and pay the BIR tax form on or before the deadline of August 15, 2023.
Breakdown of computation:
Tax Due P5,000.00
x Surcharge 25%
Total Surcharge P1,250.00
A higher rate of 50% surcharge applies when there is willful neglect and willful filing of false or fraudulent tax forms. In such case, for the same scenario above, the surcharge penalty will be P2,500.
Breakdown of computation:
Tax Due P5,000.00
x Surcharge 50%
Total Surcharge P2,500.00
In 2022, the Bureau of Internal Revenue released a memorandum stating that surcharge will not apply if the BIR tax form was filed and paid on or before the deadline even if it is amended later.
For example, you filed Quarterly Income Tax Return for the second quarter of the year on the due date August 15, 2023, and the amount of tax paid is P5,000. However, you noticed an error in your filing and decided to amend it on October 31, 2023. The surcharge for amending after the due date is P0.
Breakdown of computation:
Tax Due P5,000.00
x Surcharge 0%
Total Surcharge P 0.00
2. Interest
Aside from surcharge, if you fail to file and pay a BIR tax form and it has an amount of tax due for payment, an interest of 20 or 12% shall apply depending how many days have passed since the due date.
Summary of Interest:
| Period | Interest % |
| For the period up to December 31, 2017 (prior to RA 10963 TRAIN Law) | 20% |
| For the period January 1, 2018, until full payment of the tax liability (After RA 10963 TRAIN Law) | 12% |
For example, you were supposed to file Quarterly Income Tax Return for the second quarter of the year on August 15, 2023, and the amount of tax payable is P5,000. However, you only remembered to file and pay it on October 31, 2023. As such, on top of the tax due for payment and surcharge of P1,250 as computed in No. 1, an additional interest penalty of P125 shall apply for failure to file and pay the BIR tax form on or before the deadline of August 15, 2023.
Breakdown of computation:
Tax Due P5,000.00
x Interest 12%
Total P 600.00
x No. of Days Lapsed 76*
/ No. of Days in a year 365
Total Interest P 125.00
No. of Days Lapsed Computation (*):
August 16 to 31 16
September 1 to 30 30
October 1 to 30 30
Total 76 days
3. Compromise
Lastly, aside from surcharge and interest, if you fail to file and pay a BIR tax form on or before the deadline, a compromise penalty will apply depending on if there’s tax amount payable or none.
a. Failure to file tax form with no tax due
| Gross Sales, earnings, or receipts | Compromise Amount |
| 50,000 and below | 1,000 |
| 50,001 – 100,000 | 3,000 |
| 100,001 – 500,000 | 5,000 |
| 500,001 – 5,000,000 | 10,000 |
| 5,000,001 – 10,000,000 | 15,000 |
| 10,000,001 – 25,000,000 | 20,000 |
| 25,000,001 and up | 25,000 |
b. Failure to file tax form and pay the amount of tax due.
| Amount of tax unpaid | Compromise Amount |
| 5,000 and below | 1,000 |
| 5,001 – 10,000 | 3,000 |
| 10,001 – 20,000 | 5,000 |
| 20,001 – 50,000 | 10,000 |
| 50,001 – 100,000 | 15,000 |
| 100,001 – 500,000 | 20,000 |
| 500,001 – 1,000,000 | 30,000 |
| 1,000,001 – 5,000,000 | 40,000 |
| 5,000,001 and up | 50,000 |
For example, you were supposed to file Quarterly Income Tax Return for the second quarter of the year on August 15, 2023, and the amount of tax payable is P5,000. However, you only remembered to file and pay it on October 31, 2023. As such, on top of the tax due for payment, surcharge of P1,250 as computed in No. 1 and interest of P125 as computed in No. 2, an additional compromise penalty of P1,000 shall apply for failure to file and pay the BIR tax form on or before the deadline of August 15, 2023.
| Amount of tax unpaid | Compromise Amount |
| 5,000 and below | 1,000 |
| 5,001 – 10,000 | 3,000 |
| 10,001 – 20,000 | 5,000 |
| 20,001 – 50,000 | 10,000 |
| 50,001 – 100,000 | 15,000 |
| 100,001 – 500,000 | 20,000 |
| 500,001 – 1,000,000 | 30,000 |
| 1,000,001 – 5,000,000 | 40,000 |
| 5,000,001 and up | 50,000 |
Summary of Penalties
To summarize, the BIR tax penalties imposed by the Bureau of Internal Revenue for your failure to file and pay tax form on or before due date are as follows:
- Surcharge of 25% or 50%
- Interest of 12% or 20%
- Compromise of P1,000 to P50,000
For the example scenario above, in case of failure to file and pay tax form without willful neglect or filing fraudulent / false return, the summary of tax and penalties payable will be:
Tax Due P5,000
+ Surcharge 1,250
+ Interest 150
+ Compromise 1,000
Total Payable P7,400
In the scenario above, only less than 3 months have passed since the deadline and the penalty already represents 48% of the tax due. And that is just one tax form. Imagine if you failed to file on time on multiple tax forms and if the amount is bigger, the penalty and tax due can be huge amount.
This is the reason why if you don’t give importance on your accounting and tax compliance, even if you succeed financially in your business or self-employment, later it may all be wiped out by huge tax penalties the Bureau of Internal Revenue may imposed on you if you are discovered not complying.
Avoid paying penalties by doing proper bookkeeping and tax filing!
It is not too late to do proper bookkeeping and tax filing. You can start now with the use of MPM Accounting Software. Subscribe to free trial here: www.mpm.ph/tax
I hope this article has been helpful for you. Please share it with anyone who you think will benefit from this article.
I have not been able to pay my tax last year due to my form 2316 not released. What should I do now?
If you have other income, you may file BIR Form 1700 (if purely employed) and pay penalty. Penalty will be computed by the BIR RDO you are registered.
ask ko lang po, ano po ba ilalagay ko sa 2551Q kung nag stop sa operations yung business ko and i failed to file for temporary closeur ng business ko?
You need to visit your BIR RDO where you registered and file BIR Form 1905 – Application for Closure. If you missed filing tax forms, you will have to file and pay penalty to successfully close in BIR.
Ive made a mistake during filling and payment , I filled it at the wrong date, I need to pay the month of June in July 10 but instead I payed it every month… example the month of June was paid also on june
If with payment of tax due, you may visit your BIR RDO to ask for possible remedy, if needed, especially if there’s deficiency in tax amount paid.
Wala po bang chance ma waived ung penalty?
i filed self employed last Feb. 2020, ung sa J.O, pinagbayad kami ng 500, but sa ibang rdo naman hndi sila pinagbayad, then kina next month March 2020 nalipat kami sa private agency. After that until now wala na akong inasikaso sa bir. Is there a chance na mawaived ung penalty ng hndi pag file annually nung sa self employed?
The minimum penalty for non-filing of tax form is P1,000. If you don’t file, it will become open case and to remove such open case, you need to pay the penalty. Normally BIR doesn’t waive penalty. But you can visit your RDO to request.
what if hindi tugma ang VAT na declared ni vendor vs buyer? may penalty po ba sya sa BIR?
It may trigger BIR Audit due unreconciled amount of sales (seller) and purchase (buyer). And during BIR audit, that’s when you’ll be exposed to possible tax penalties. To ensure match amount of VAT, ask for BIR registered sales invoice/official from seller and ask them to break down amount including VAT in the invoice/receipt.
Sino po ba dapat mag bayad CGT and DST ?
For Capital Gain Tax – it’s the seller
For Documentary Stamp Tax – usually it’s passed on to the buyer / lessor / debtor.
Hi po, ask ko lng po pano computation ng babayaran sa tax kung nagregister ng Oct 2019 tas di nmn naregister yung business at hndi maalam na need magfile prin ng tax. Ngayon lng naisipan ipaclose due to pandemic at naging busy po sa pagaasikaso ng mga bata. Magkano po nagrarange aabutin po yung babayaran? Wala po bang condonation? At walang wala din tlg kmi ngayon sana po matulungan nyo po ako. Salamat po
Hi, you may visit your RDO to ask for the list of open case, if there is. Once you have the list of open case, you need to prepare and file the tax form. If late, you need to visit RDO again for penalty computation before paying. Hope this helps
hi! what if my compromised penalty ako for not filing the tax, pero wala nman po alo bnabayaran sa taxko dko lang tlga naifile gawa ng bagong pnganak ako nakalimutan ko. i went there and i have a penalty of 5000, nagask ako sa personnel doon if my due date ung penalty n yun, sabi nman po nya wala ako daw bhala kailan ko bayaran. totoo po b? d ako nkpgfile ng annual ko, upto now dko p po nbayaran
Hi, for every missed tax form and period the penalty is P1,000 minimum even if no tax due or payable. If the penalty is P5,000 and no transaction, that means you missed to file five (5) tax forms. If you don’t pay the penalty, it will remain as open case (unfiled/unpaid taxes) in BIR system. Hope this helps.
Hello! Registered my freelance business Dec. 2022. Do I need to file the 2022 ITR, Quarterly income tax and percentage tax? I have been filing only the 2023. Thanks!
Hi, yes, if you registered in December 2022 and your BIR FOrm 2303 – Certificate of Registration is dated December 2022, you need to file Income Tax Return for Year 2022 and other taxes covered for year 2022.
Alternatively, to see your missed tax forms, you can visit your RDO to request for list of open cases (unfiled tax forms). Hope this helps
pano po yun kung nag reg. as freelancer tas hindi pa po na-claim yung receipts printed by BIR? Hindi pa din po nakapag pa-register nung ledger.
Nagregister lang po kasi para sa TIN pero hindi na nag tuloy nung freelancing kasi nag aral na ulit. Nagbabayad naman po online ng tax returns. Gusto na din ipasara yung business na yon kasi nasasayang lang binabayad. Pano po kaya ang gagawin? Maraming salamat po
You can visit your RDO to claim your printed Official Receipt.
If you plan to close, make sure to inform BIR by filing BIR Form 1905 to avoid having problems in the future.
Hello, ask ko lang po, late kasi ako nagfile ng 1701A, so filed just this October (supposedly April 15, 2023). Overpayment ako ng 14k then may handwirtten note na 5k for compromise. 1st, 5k ba talaga dapat yung compromise penalty imposed even if less than 6 months late for filing and with overpayment? 2nd, compromise penalty ba is deductible from overpayment? What will happen to the overpayment, marerefund ba yun sakin or carried over as credits?
Thank you,
Cindy
Hello, ask ko lang po, late kasi ako nagfile ng 1701A, so filed just this October (supposedly April 15, 2023). Overpayment ako ng 14k then may handwirtten note na 5k for compromise. 1st, 5k ba talaga dapat yung compromise penalty imposed even if less than 6 months late for filing and with overpayment? 2nd, compromise penalty ba is deductible from overpayment? What will happen to the overpayment, marerefund ba yun sakin or carried over as credits?
Thank you,
Cindy
Hello, ask ko lang po, late kasi ako nagfile ng 1701A, so filed just this October (supposedly April 15, 2023). Overpayment ako ng 14k then may handwirtten note na 5k for compromise. 1st, 5k ba talaga dapat yung compromise penalty imposed even if less than 6 months late for filing and with overpayment? 2nd, compromise penalty ba is deductible from overpayment? What will happen to the overpayment, marerefund ba yun sakin or carried over as credits?
Thank you!
Good day! I am a contract of service staff and I file my annual income tax every April. For the current year, I partially paid my tax during filing and have a balance of 11k that can be paid on or before October 15, 2023. However, I missed the deadline. How should I go about this? Thanks in advance for your response.
Hello. I resigned from Company A with my last day being August 30, 2021. I didn’t have any employer until February 2022, and Company A provided me with the BIR 2316 in May 2022. I don’t think they submitted my BIR 2316 on time, as it was past the deadline (February 2022). Should I file the BIR 2316 myself?
Thank you!
Hello po, we are under BIR audit and they said that we have undeclared sales. Their basis is the lease contract and the year under audit is 2020, since 2020 was when Covid happened can we challenge their findings po as I think there is law that time that allowed the tenant not to pay certain months and defer it to a later period
What is the BIR penalty for failure to change address (operating in new address and did not inform BIR and SEC ofthe change in business location) still using old address in filing of returns and using ORs wit the old address
thanks
What is the BIR penalty for failure to change address (operating in new address and did not inform BIR and SEC ofthe change in business location) still using old address in filing of returns and using ORs with the old address
thanks
Our institution is filling bir form 1702 ex, i was late on filling so I was charged by our local bir office of panalty amounting to 15,000. how much should i really pay as tax exempt institution? thank you
For no tax due forms, the penalty is based on gross receipts or sales ranging from P1,000 up to P25,000. You were penalized P15,000 probably because your gross receipts or sales is from P5,000,000 to P10,000,000
Hello po, can we still file even zero return po kahit na due na po? Tsaka ko lang kasi na check may mga returns din akong need ifile for monthly and quarterly. Na file lang namin yung 2551Q, di namin nafile yung 1701Q, 1601EQ and 0619E, kakastart lang po ng business nung may 24, 2023. Salamat po sa pagsagot!
Hi, you’ll still be able to file the BIR form. But there may be penalties to be paid if you filed and paid beyond the deadline.