Penalty for Late BIR Form 0605 Payment
Focus: Sole Proprietors in the Philippines
1. What Is BIR Form 0605?
| Aspect | Key Points |
|---|---|
| Purpose | A “payment” return—not a tax return—used to transmit: 1️⃣ Annual Registration Fee (ARF) of ₱500 (Sec. 236 (B), NIRC) 2️⃣ Penalties and deficiency amounts for any internal-revenue tax when no specific return is prescribed (e.g., compromises, delinquency interest, DST on one-off documents). |
| Who files? | Every business taxpayer. For sole proprietors, it is filed in the taxpayer’s TIN/branch code that holds the Certificate of Registration (COR/BIR Form 2303). |
| When due? | ON OR BEFORE 31 JANUARY every calendar year for the ARF, or immediately when settling a deficiency or penalty. |
| Where/how? | • eBIRForms → “BIR Form No. 0605 – Payment Form” • eFPS • AABs, GCash/PayMaya, PESONet, LANDBANK LinkBiz, etc. |
2. Legal Basis for Penalties
| NIRC / Regulation | Provision Relevant to Late Form 0605 |
|---|---|
| Sec. 236 (B) | Mandates payment of the ₱500 ARF and empowers the BIR to impose penalties for non-payment. |
| Sec. 248 | 25 % surcharge on the basic tax for any of the following: failure to file any return/pay on or before the due date; filing with a wrong office; failure to pay a deficiency per notice. Doubled to 50 % if due to willful neglect or a false/fraudulent return. |
| Sec. 249 (as amended by the TRAIN Law, R.A. 10963, effective 1 Jan 2018) | Interest = double the legal interest rate for loans and forbearance of money as set by the BSP (currently 6 % p.a.). Thus, 12 % p.a. simple interest, prorated daily, on the basic tax and surcharge, from the statutory due date until payment. |
| RR 6-2001 & RR 13-2021 | Authorize the Commissioner to publish Schedules of Compromise Penalties for informal violations like late filing/payment. |
| BIR Compromise Penalty Schedule (latest circularized 2022) | LATE ARF PAYMENT ➜ Compromise penalty ₱1,000 (first offense) or ₱2,000–₱5,000 for repeat offenders/aggregated cases. |
| Sec. 253 & 255 | Criminal liability (fine of ₱10,000–₱500,000 and/or imprisonment) for willful failure or tax evasion, reserved for egregious or repeated acts. |
| Sec. 204, RMC 4-2021 | Commissioner may abate or cancel surcharge/interest when (a) the tax is unjust or excessive, or (b) late payment is due to force majeure, casualty, or reasonable causes. |
3. Components of the Monetary Penalty
Basic Tax – For ARF, always ₱500.
Surcharge
- Regular case: 25 % × ₱500 = ₱125
- Fraud/willful neglect: 50 % × ₱500 = ₱250
Interest – 12 % per annum simple interest on ₱500 + surcharge, counted from 1 February (or day after any prescribed due date) until the date actually paid. Daily factor: 12 % ÷ 365 = 0.03288 % per day.
Compromise Penalty – Flat ₱1,000 (first lapse). BIR examiners may recommend a higher amount for habitual delinquents but must follow the published schedule.
Formula Total Amount Due = Basic Tax + Surcharge + Interest + Compromise
Example Computation
Paid on: 30 April 2025 (89 days late)
| Item | Computation | Amount |
|---|---|---|
| Basic Tax | ₱500 | ₱ 500 |
| Surcharge | 25 % × 500 | ₱ 125 |
| Daily Interest | (₱500 + ₱125) × 0.0003288 × 89 days | ₱ 18.37 |
| Compromise | BIR schedule | ₱ 1,000 |
| Total | ₱ 1,643.37 |
Tip: The eBIRForms v7.* automatically computes surcharge and interest; you still enter the compromise manually.
4. Administrative Consequences of Non-Payment
| Consequence | Details & Practical Impact |
|---|---|
| Open Case Tag | TIN is flagged in BIR databases; you cannot print eCOR, secure TCC/TCL, or update registration (e.g., add branches) until cleared. |
| Stop-filing Order | eFPS may bar filing of other returns. |
| Denial of Permits & Licenses | LGUs, DTI business-name renewals, and procurement agencies usually require updated BIR registration fee receipt. |
| BIR Audit Trigger | Persistent open cases feed into the Risk Assessment Engine and may prompt a Letter of Authority (LOA). |
| Closure under “Oplan Kandado” | For multiple and willful ARF lapses combined with sales-tax deficiencies, the BIR may padlock premises for not less than five days. |
5. Remedies & Defensive Measures
Voluntary Payment ASAP – Penalties stop accruing only when Form 0605 is actually filed and the payment is cleared by the bank or electronic channel.
Letter-Request for Abatement (Sec. 204) – File with the RDO if delay was due to robbery, fire, system outage certified by the service provider, or natural calamity. Grant of abatement is discretionary.
Installment Payment Agreement – For small businesses facing liquidity issues; negotiate before delinquency uplifts to the Legal Division.
Compromise Settlement – If assessed through a Final Assessment Notice (FAN), you may still apply for compromise based on:
- a) Doubtful validity (at least 40 % compromise rate), or
- b) Financial incapacity (10 %–40 %, with full disclosure of assets & cash flows).
Judicial Action (CTA) – Rare for ARF cases because the amount involved is small, but constitutionally available within 30 days from receipt of a Decision on Protest.
6. Best-Practice Compliance Checklist for Sole Proprietors
| Task | When | Tool |
|---|---|---|
| Mark calendar for 31 January | Year-start planning | Smartphone reminder; subscribe to BIR e-calendar |
| Use eBIRForms offline | At least 3 days before deadline | Validate, save .xml, and print three copies if paying at an AAB |
| ePay channels | BPI BizLink, GCash, PayMaya, UnionBank Online, LANDBANK LinkBiz | Avoid end-of-day cut-off queues |
| Secure BIR payment confirmation | Immediately after e-payment | Save e-mail and screenshot for five years |
| Annual COR update | February–March | Attach Form 0605 & proof of payment |
| Bookkeeping entry | Debit “Taxes & Licenses”; credit “Cash” | Same date as OR/BIR confirmation |
7. Frequently Asked Questions (FAQ)
| Question | Answer |
|---|---|
| Do I need to file Form 0605 if I already filed and paid online? | Yes—the eBIRForms/eFPS submission itself is the filing; the subsequent payment reference number finalizes it. Retain both XML and payment confirmation. |
| Can I pay the ARF for multiple years in one filing? | No. File and pay one Form 0605 per calendar year. Earlier years must be filed separately, each accruing its own penalties. |
| Is surcharge computed on the compromise penalty? | No. Surcharge and interest apply only on the basic tax (₱500). Compromise is an administrative amount added on top. |
| Does suspension of business operations stop the ARF from accruing? | Only if you have formally applied for temporary closure or cancellation of registration at the RDO before 31 January of the year you wish to suspend. Mere dormancy is not enough. |
| What if the electronic payment went through on 31 January at 11:45 PM but the confirmation e-mail arrived past midnight? | BIR treats the timestamp on the bank’s acknowledgment receipt (“PRN date” or eFPS “Tax Type Entry”) as the date of payment. Keep that record. |
Conclusion
For a Philippine sole proprietor, BIR Form 0605 may look minor—just a ₱500 annual registration fee—but ignoring or forgetting it snowballs quickly:
- ₱500 grows to ₱1,600 + within a few months through the 25 % surcharge, 12 % interest, and ₱1,000 compromise penalty.
- It creates an “open case” that blocks tax clearances, exposes you to audits, and may even trigger business closure under Oplan Kandado.
- Penalties are grounded on Sections 236, 248, 249, and 204 of the NIRC, implemented by a web of Revenue Regulations and Memoranda.
The cure is simple: file and pay on or before 31 January every year—and if you slip, pay immediately and keep documentary proof. For genuine hardship or force majeure, the law provides relief through abatement and compromise, but these require proactive, documented requests.
Disclaimer: This article is for general information only and is not a substitute for formal legal or tax advice. Consult your certified public accountant or tax counsel for guidance tailored to your specific facts.