Reporting Income Tax Evasion to the BIR in the Philippines
A comprehensive legal primer (updated to 25 May 2025)
1. Why tax-evasion reporting matters
Income-tax evasion deprives the National Treasury of revenues needed for public services. The Bureau of Internal Revenue (BIR) therefore maintains robust enforcement programs—most visibly RATE (Run After Tax Evaders)—and offers monetary incentives to whistle-blowers. Private citizens, competitors, auditors, employees, even government agencies can trigger investigations by submitting actionable information.
2. Statutory framework
| Key provision | Subject | Core rule | Criminal penalties* |
|---|---|---|---|
| §204 & §205, National Internal Revenue Code (NIRC) | Assessment & collection | Gives BIR the power to assess deficiencies and pursue civil or criminal remedies | — |
| §256 NIRC | Failure to file return or pay tax | Knowingly failing or refusing | ₱30,000–₱100,000 fine and 2–4 years’ imprisonment |
| §257 NIRC | False/fraudulent return | Willful acts or falsification | ₱50,000–₱100,000 and 2–6 years |
| §270 NIRC | Confidentiality | Protects taxpayer data; limited exceptions for prosecution | — |
| §282 NIRC (as amended by R.A. 10963, TRAIN Act) | Informer’s Reward | 10 % of the actual revenues, fees or fines recovered or ₱1 million, whichever is lower | — |
*For corporations, directors and responsible officers are personally liable (and foreign officers may be deported after sentence). Courts may also impose surcharges, interest and accessory penalties such as perpetual disqualification from public office.
3. Tax evasion vs. tax avoidance
| Aspect | Tax avoidance | Tax evasion |
|---|---|---|
| Legality | Within the letter of the law | Illegal |
| Method | Choosing lower-tax alternatives (e.g., shifting income, timing, incentives) | Concealment, false invoices, double books, “ghost” employees, non-registration |
| BIR response | Challenged through deficiency assessments | Criminal prosecution under §§256-259 NIRC, anti-money-laundering referrals |
Only willful acts—even just deliberate silence—constitute evasion. Honest mistakes fall under civil assessments and typically incur 25 % surcharge plus interest.
4. Who may file a report?
Anyone except:
- current BIR or Bureau of Customs employees,
- public officials who learned the information through their official duties, and
- spouses, parents, or children of the violator (to prevent collusion).
Otherwise, Filipino or foreign informants—including juridical persons—may report.
5. Rewards: mechanics & limitations
| Item | Detail |
|---|---|
| Rate | 10 % of the basic tax, surcharge, interest, compromise penalty, and fine actually collected, capped at ₱1 million per case. |
| When payable | Only after finality of the assessment and full collection (including through compromise or asset sale). |
| Tax treatment | The reward is subject to 10 % final withholding tax and must be reported in the informant’s own ITR. |
| Loss of reward | If the information is public, already in BIR files, or obtained illegally (e.g., wire-tapped). |
6. Step-by-step reporting procedure
Gather evidence
- Scanned invoices/receipts, ledgers, sales summaries, employment records, e-mails, sworn statements.
- Highlight dates, amounts, Taxpayer Identification Numbers (TIN), and counterparties.
Prepare a Sworn Information for Tax Evasion letter
Address to the Commissioner of Internal Revenue or to the Regional Director of the violator’s revenue region.
Include:
- full name, address, TIN (if any) of informant;
- full details of the taxpayer;
- specific taxable years involved;
- concise narration of facts;
- list of enclosures;
- affirmation that information was not obtained from prohibited sources (per §270 NIRC).
Notarize the affidavit.
Complete BIR Form 2117 (Claim for Informer’s Reward)
- File simultaneously or after the initial report; the reward claim is suspended until taxes are collected.
Submit
Personally or by courier to:
- Enforcement & Advocacy Service (National Office, Diliman, QC), or
- the Chief, Assessment Division of the relevant Revenue Region (RR).
Keep proof of receipt (BIR receives stamp).
BIR evaluation
- Anti-Fraud Division (AFD) or RATE Task Force reviews prima facie validity.
- If meritorious, a Tasking Order is issued for field audit.
Investigation & assessment
- Revenue Officers conduct audit, issue Letters of Authority, gather subpoenaed records, control purchases, and interview witnesses.
- If fraud is found, BIR issues a Preliminary Assessment Notice (PAN) then a Final Assessment Notice (FAN).
- For criminal cases, AFD transmits to the Prosecution Division and files a complaint with the Department of Justice (DOJ) under the RATE program.
Collection
- Through compromise, garnishment, distraint of assets, or judicial action.
- Upon full payment, the informant submits a Demand for Reward; BIR validates via the National Collection Verification System (NCVS).
Reward release
- Payable via BIR check or advice to debit-credit, subject to 10 % withholding tax.
7. Time limits and prescription
| Action | Prescriptive period |
|---|---|
| BIR assessment (ordinary) | 3 years from the due date or from filing, whichever is later |
| Assessment (fraud) | 10 years from discovery of the falsity |
| Criminal action | 5 years from the date of commission |
| Collection of assessed tax | 5 years from final assessment |
Tip: Submit reports early; once limitation periods lapse, neither tax nor reward can be collected.
8. Related agencies & parallel remedies
- Anti-Money Laundering Council (AMLC) – may freeze proceeds of tax evasion (tax evasion is a predicate offense since 2013).
- Office of the Ombudsman – for cases involving public officials.
- Securities and Exchange Commission (SEC) – if evasion involves falsified audited financial statements.
- Cooperative Development Authority (CDA) – misdeclared cooperative income.
- Barangay Business Permit Offices / LGUs – for local-tax evasion (separate from BIR jurisdiction).
9. Confidentiality and whistle-blower protection
- The Tax Code’s informer-reward provisions override the secrecy rule for the specific information disclosed.
- BIR keeps the informant’s identity confidential unless court testimony is indispensable; you may request use of John/Jane Doe during preliminary investigation.
- The Whistleblower Protection in Government Service Act (R.A. 6713, jurisprudence-based) extends to private individuals assisting in tax law enforcement.
- However, filing malicious or false information can expose the informant to criminal libel or civil damages—submit only verifiable facts.
10. Illustrative jurisprudence
| Case | G.R. No. | Holding |
|---|---|---|
| People v. Go | 144066 (2003) | Non-filing of income tax returns for several years is prima facie willfulness. |
| People v. Spouses Wong | 141309-10 (2001) | Separate criminal counts for each taxable year. |
| Commissioner v. Smart Communications | 179045 (2012) | Documented third-party information can support deficiency assessments. |
11. Practical tips for a solid report
- Corroborate – Match sales ledgers with bank deposits, delivery receipts with VAT relief data.
- Time-stamp – Screenshots should display URL and capture date.
- Organize – Use folders per taxable year; label files clearly.
- Stay discreet – Do not tip off the subject; destruction of evidence is itself a crime (§ 267 NIRC).
- Consult counsel – While not mandatory, a tax lawyer can ensure compliance with evidentiary and ethical rules.
12. Frequently asked questions (FAQs)
| Q | A |
|---|---|
| Can I stay anonymous and still get the reward? | No. BIR must verify your identity to release payment. You may, however, use a representative (with SPA) to keep your name out of public records. |
| What if the taxpayer settles via amnesty? | Rewards are still due if the settlement is traceable to your information and collection is recorded. |
| Does BIR accept digital evidence? | Yes—e-mails, POS data logs, and cloud-stored ledgers are admissible if properly authenticated (E-Commerce Act). |
| Is there a minimum tax amount to qualify? | None, but investigations below ₱1 million deficiency are usually handled at the Revenue District Office level rather than RATE. |
| Can I sue if the BIR rejects my reward claim? | Yes. File an administrative appeal to the Commissioner; adverse decisions are appealable to the Court of Tax Appeals under §7(a)(1) R.A. 1125. |
13. Caveats & disclaimer
This article is general information based on Philippine statutes, regulations, and published rulings up to 25 May 2025. It is not legal advice; facts vary and laws change. For definitive guidance, consult a Philippine tax professional or the BIR’s Enforcement & Advocacy Service (Tel. #8484, email contact_us@bir.gov.ph).
14. Key takeaways
- Solid evidence + timely filing = highest chance of prosecution and reward.
- Informant incentives are real but capped at ₱1 million and taxed at source.
- The BIR will protect your identity as far as practicable, but court testimony may be required.
- Malicious reporting carries criminal and civil liability; act in good faith.
- Combine BIR action with AMLC or Ombudsman referrals when public funds or money-laundering are involved.
Report tax evasion—not just for the reward, but to strengthen fiscal integrity and the rule of law in the Philippines.