Exploring tax abatement for micro taxpayers

Taxpayers may encounter challenges in meeting their tax obligations when there are changing economic conditions affecting cash flow and the costs of doing business. The disadvantage of missing tax obligations is additional costs that are incurred in the form of penalties, surcharge and interests, which can compound cash flow dilemmas.

To provide relief, the Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) 4-2026, granting qualified micro taxpayers a one-time abatement of taxes and/or penalties.

Micro taxpayers are defined under the Tax Code as taxpayers with gross sales of less than P3 million. For mixed-income earners, only business income is considered in determining eligibility.

RR 4-2026 provides that the abatement program applies to tax cases existing as of Dec. 31, 2025, including delinquent accounts, whether arising from self-assessed or final deficiency taxes; preliminary or final assessment, whether disputed or not; open stop-filer cases and taxpayers who have already ceased operations.

The abatement program caps liabilities open to abatement at P80,000, which applies to the total basic tax liabilities and/or penalties from violations of the Tax Code, as amended, per taxable year. The abatement may only be claimed once.

In order to file a claim for abatement, the taxpayer must file an application for abatement per taxable year, with their respective Revenue District Office. The application must clearly indicate the: (a) tax types involved; and (b) basic amount due, excluding interest.

Within five days from the filing of the application, taxpayers are required to pay the abatement fee of P5,000 and submit the proof of payment to the RDO. Failure to comply voids the application, although refiling is allowed within the availment period or Dec. 31, 2026, unless extended by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue. The fee is non-refundable even if the application is denied, but it may be credited against the taxes sought to be abated.

Once the requirements are completed and the application is approved, a Certificate of Availment will be issued within five working days. This certificate will serve as proof of compliance. Issuance of this certificate results in the closure of the case covered by the application.

These features clearly make the program a practical and accessible way to resolve small-value tax liabilities. Thus, for micro taxpayers, the message is direct: This is a one time-chance to settle past obligations, reduce exposure to penalties and formally close outstanding tax cases. Timely action is essential. Grab it while you still can.

Chiara Louise Caluza-Santos is a supervisor from the Tax Group of R.G. Manabat & Co. (KPMG in the Philippines), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Chiara Louise Caluza-Santos or Mary Karen Quizon-Sakkam through [email protected], social media or visit www.home.kpmg/ph.