Executive Summary

Late payment of national taxes in the Philippines triggers civil interest under Section 249 of the National Internal Revenue Code (NIRC), as amended. For calendar year 2025, the statutory rate is equal to twice the “legal interest rate for loans” set by the Bangko Sentral ng Pilipinas (BSP). As long as the BSP legal rate remains at 6% per annum, the tax interest rate is 12% per annum, computed on a simple (non-compounding) basis, per day, on the unpaid tax (not on penalties). Separate surcharges (generally 25% or 50%) may also apply, but interest is computed exclusive of those surcharges.

Key rule: Interest is a compensatory charge for the use of money due the government; it is mandatory when statutory conditions are met and is distinct from surcharges and compromise penalties.

Legal Basis & Structure

NIRC §249 (as amended by recent tax reform laws):
- Rate: Double the BSP legal interest rate for loans.
- Nature: Simple interest, computed per day (typically using a 365-day year) on unpaid tax.
- Types of interest:
  1. Deficiency interest – for assessed deficiencies.
  2. Delinquency interest – for amounts unpaid by the due date stated in a notice and demand (assessment) or statutory due date (e.g., return due date).
  3. Interest on extended payment – when payment is deferred/extended with approval.
- No double imposition: Deficiency and delinquency interest must not run simultaneously on the same amount and period. In practice, deficiency interest runs up to the due date specified in the final notice and demand, and delinquency interest runs thereafter until full payment.

The rule “double the BSP legal rate” makes the tax interest floating: when BSP adjusts the legal interest rate, the tax interest changes accordingly. If the BSP legal rate is 6%, the NIRC rate is 12%.

When Does Each Interest Apply?

1) Deficiency Interest

Trigger: A deficiency tax is determined (e.g., after audit).
Period: From the original statutory due date of the tax up to the due date in the assessment’s notice and demand (i.e., the deadline given by the BIR to pay the assessed deficiency).
Base: Deficiency tax only (excludes surcharge and compromise).

2) Delinquency Interest

Trigger: Failure to pay on or before the due date stated in the notice and demand, or failure to pay the amount due on a filed return by its statutory deadline.
Period: From the day after the due date until fully paid.
Base: Amount due and unpaid (again, interest is on the tax, not on the surcharge).

3) Interest on Extended or Deferred Payment

Trigger: The BIR grants an extension or approves installment payment.
Period: During the extension (or on unpaid installments) until payment.
Base: Unpaid balance approved for extension/deferment.

Installments: If the law allows paying in installments (e.g., income tax, estate tax), interest runs only on installments not paid by their specific due dates.

Surcharges vs. Interest (Don’t Mix the Bases)

Surcharge (civil penalty):
- 25% for failure to file/pay on time or wrong mode/place;
- 50% for willful neglect or false/fraudulent returns.
Interest: Separate and distinct.
- Computed only on the tax, not on the surcharge or compromise penalty.
- Simple, per day.

Practical Computation Rules

Annual rate for 2025: 12% per annum (assuming BSP legal rate remains 6%).
Daily rate: 12% ÷ 365 = 0.0328767% per day (approx.).
Interest = Tax Base × Daily Rate × Number of Days.
Counting days: Start the day after the due date; stop on date of payment (payment date not counted if paid within banking hours; follow BIR day-count practice).
Partial payments: Reduce the base from the date a partial payment is posted.

Worked Examples

Late payment on a filed return (no assessment yet)

Tax due on return (due 15 April 2025): ₱100,000
Paid 30 June 2025 (76 days late)
Interest: ₱100,000 × 12% × (76/365) ≈ ₱2,493.15
Surcharge (25%) may also apply if late filing/payment: ₱25,000 (separate).
Total collectible (before compromise penalty): ₱100,000 + ₱25,000 + ₱2,493.15.

Assessment case (deficiency then delinquency)

Deficiency tax: ₱500,000 for TY 2023 (original due 15 April 2024).
BIR issues final assessment on 1 August 2025, payable within 30 days (due 31 August 2025).
- Deficiency interest: 15 Apr 2024 → 31 Aug 2025.
- If still unpaid 1 September 2025, delinquency interest runs from 1 Sept 2025 until payment.
- No overlap between the two interest types on the same period/amount.

Special Topics & Edge Cases

Suspension/abatement: The Commissioner may abate or cancel interest if the assessment or collection is unjust or excessive, or when administrative delays not attributable to the taxpayer cause the accrual (case-by-case; requires a legal/factual showing).
Compromise penalties: Administrative amounts sometimes offered/assessed for minor violations; not part of “tax” for interest base.
Amended returns: If an amended return reflects additional tax past the original due date, interest runs on the incremental tax from the original due date.
Refund/credit offsets: If you have tax credits or refunds pending, interest continues until the credit is applied to the exact liability.
Estate and donor’s taxes: Same interest structure applies; note installment rules in the estate tax context (interest applies only on overdue installments).
Value-Added Tax (VAT): Monthly/quarterly due dates are statutory; delinquency interest applies after those dates when VAT is unpaid.
Withholding taxes: Agents are personally liable; late remittance triggers interest from the statutory remittance date.

Compliance Checklist for 2025

Identify the trigger (late return vs. assessed deficiency vs. installment).
Pin down dates (statutory due, assessment due, actual payment).
Select the correct interest type (deficiency → up to assessment due; delinquency → after assessment due or return due; not both at once).
Compute daily interest at 12% per annum (assuming 6% BSP legal rate), exclusive of surcharges.
Apply surcharges (25% or 50%) separately.
Recompute after partial payments.
Document everything (dates, OR numbers, posting dates).
Consider abatement if there is substantiated BIR-caused delay or excessive imposition.

Frequently Asked Clarifications

Is tax interest compounded? No. It is simple interest computed per day on the unpaid tax.
Does interest stop when I protest an assessment? Generally no; interest typically continues to run unless suspended by law or settled/secured under specific terms.
Can deficiency and delinquency interest both apply for the same period? No. The law bars simultaneous imposition on the same amount and period. The cut-over is the assessment due date.
What if BSP changes the legal rate in 2025? The NIRC rate moves automatically (still double the BSP legal rate). Recompute using the new annual rate prorated by days before/after the change.

Bottom Line for 2025

Default interest rate: 12% per annum (so long as the BSP legal interest rate is 6%).
Computation: Simple, per day, on the unpaid tax, exclusive of surcharges.
Sequence control: Deficiency interest (up to assessment due date) → Delinquency interest (thereafter until payment).
Action point: Time your payments and, where applicable, installments, to minimize daily accruals.