The Bureau of Internal Revenue recently issued Revenue Regulations No. 18-2020 on Voluntary Assessment and Payment Program (VAPP). By availing the benefits under the VAPP, the taxpayer shall not be audited for 2018 for the tax types covered by the availment, and in case of pending audit, the issued Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice for Informal Conference, Preliminary Assessment Notice, Final Assessment Notice for pending cases shall be withdrawn and canceled. The VAPP is available until December 31, 2020, unless extended by the Secretary of Finance.
We provide below the details of the said regulations. If you are interested in exploring the benefits under the VAPP (i.e. whether your Company is qualified, the computation of voluntary tax payment etc.), we shall be glad to walk you through.
What are the taxes Covered?
- Internal revenue taxes covering:
- Taxable year ending December 31, 2018 or Fiscal year 2018 ending the last day of months of July 2018 to June 2019 (Subject Period)
- Internal revenue taxes include one tax transactions (ONETT) such as estate tax, donor’s tax, Capital Gains Tax and ONETT-related creditable withholding tax (CWT)/expanded withholding tax and documentary stamp tax (DST)
Who are qualified to avail of the VAPP?
- Those who are liable to pay internal revenue taxes for the Subject Period who, due to inadvertence or otherwise, erroneously paid his/its internal revenue tax liabilities or failed to file returns/pay taxes
Who are not qualified to avail of VAPP?
- Those taxpayers who have already been issued a Final Assessment Notice (FAN) that have become final and executory, on or before the effectivity of these Regulations;
- Persons under investigation as a result of verified information filed by a Tax Informer under Section 282 of the NIRC of 1997, as amended, with respect to the deficiency taxes that may be due out of such verified information;
- Those with cases involving tax fraud filed and pending in the Department of Justice or in the courts; and
- Those with pending cases involving tax evasion and other criminal offenses under Chapter II of Title X of the NIRC of 1997, as amended.
Until when can the VAPP be availed of?
- December 31, 2020, unless extended by the Secretary of Finance
How much is tax to be paid as a condition to avail of the benefits under the VAPP?
|Increase/Decrease in the Total Taxes Due from 2017 to 2018*
|Amount of Voluntary Tax Payment Whichever is the higher of –
|Net increase of not more than 10%||3% of 2018 gross sales**
7% of 2018 taxable net income
|Individuals, estates and trusts – P75,000
a. With subscribed capital of more than P50 Million – P1,000,000.00
b. With subscribed capital of more than P20 million up to P50 Million – P500,000
c. With subscribed capital of more than P5 million up to P20 Million – P250,000
d. With subscribed capital of P5 Million and less – P100,000.00
Other juridical entities, including but not limited to cooperative, foundations, general professional partnerships – P75,000
|Net increase of more than 10% up to 30%||2% of 2018 gross sales
6% of 2018 taxable net income
|Net increase of more than 30%||1% of 2018 gross sales
5% of 2018 taxable net income
|Net decrease of not more than 10%||4% of 2018 gross sales
8% of 2018 taxable net income
|Net decrease of ore than 10%||5% of 2018 gross sales
9% of 2018 taxable net income
|*Total taxes due in 2017 and 2018, for purposes of the above schedule refer to the sum of all tax due per tax return (IT, PT, ET, and DST) and net VAT payable (VAT) before deducting any creditable withholding tax, quarterly payment or advance payment.
**Gross sales and taxable net income shall be based on the Annual Income Tax Return for the taxable year ending December 31, 2018, and fiscal year 2018, ending on the last day of July 2018 to June 2019.
How much is the settlement amount for Final withholding taxes (On compensation, fringe benefits etc.) and creditable withholding tax (CWT) other than CWT on ONETT?
- 5% of the basic withholding tax remittance for the taxable year
How much is the settlement amount for taxes on ONETT, such as Estate Tax, Donor’s Tax, CGT, ONETT-related CWT/Expanded Withholding Tax and DST?
- Basic tax due of the unfiled tax return/unpaid tax due plus 5%
What are the requirements to avail of the benefits under VAPP?
- Mandatory Requirements:
- Duly accomplished BIR Form No. 2119
- Payment Form (BIR Form No. 0622) with proof of payment
- Additional Requirements:
- Filed tax returns (proof of payment of taxes paid in 2017 and 2018 and audited financial statements for the covered taxable year for those availing of the program under Section 9.a/non-ONETT (i.e. income tax, VAT, percentage tax, excite tax, and DST other than DST on ONETT)
- Copy of remittance return and proof of payment of final and creditable withholding taxes for taxpayers availing of the program under Section 9.b (Final Withholding Taxes)
- Copy of duly paid BIR Form 0605 stamped either by the Authorized Agent Banks or Revenue Collection Officers duly signed by the BIR the taxpayer is registered and proof of payment representing settlement of previous deficiency tax, with or without an assessment notice, if any, covering the taxable period
- ONETT Tax returns and corresponding documentary requirements for the transaction of taxpayers availing of the program under Section 9.c
What is the mode of submission?
- Personally or through courier service
What is the mode of payment?
- Cash only. Non-cash mode of payment such as tax debit memo, will not qualify as a valid payment.
Where should the taxpayer pay?
- Authorized Agent Banks (AAB) or Revenue Collection Officer (RCO) under the BIR office having jurisdiction over the taxpayer
- For sale of property: AABs/RCO under the BIR office covering the location of the property
Should the application be separately filed in case of multiple availment?
- Yes, separate application must be filed in case the availment is under non-ONETT and ONETT
What is the BIR’s procedure in handling the VAPP?
- Within thirty (30) working days from receipt, the Revenue Officer will evaluate the Application, Payment Form and other documents submitted, and will endorse the same to the Assistant Chief, LT Office/Assistant Revenue District Officer (ARDO) for review, and to the Chief, LT Office/Revenue District Officer, as the case may be, for approval, who shall affix his signature on the BIR Form No 2119.
- If the review reveals deficiencies or defects in the availment, the approving official shall notify the concerned taxpayer through the email address provided in BIR Form No. 2119 and shall require the taxpayer to rectify the defects and/or comply with/pay the deficiencies within ten (10) working days from receipt of the notification/email. Failure to act and/or pay the required amount on the part of the taxpayer within such period shall result in the denial of the application.
- A Certificate of Availment shall be issued by the concerned LT Office/RDO within three (3) working days from approval of the application. Such Certificate shall serve as proof of the taxpayer’s availment of the VAPP, compliance with the requirements, and entitlement to the privilege granted under these Regulations.
- The LT Office/RDO shall transmit all dockets on approved VAPP applications to the concerned reviewing office not later than the 5th day following the month of issuance of the Certificate of Availment for post review.
What is the consequence if the taxpayer failed to submit the documentary requirements or if the taxpayer submits erroneous/incomplete/falsified information?
- The taxpayer shall not be entitled to avail of the benefits under the VAPP.
- The voluntary payment may be applied against any deficiency tax liability for the taxable year 2018, in case of audit/investigation.
What is the consequence if the availment is found to be invalid, deficient or defective?
- The taxpayer shall not be entitled to the privilege.
- However, the taxpayer may apply the voluntary payments made against any deficiency tax liability for the taxable year 2018 in case of audit/investigation.
What is the effect if the taxpayer is issued Certificate of Availment?
- It/he shall not be audited for 2018 for the tax types covered by the availment.
- In case of audit, the issued Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice for Informal Conference, Preliminary Assessment Notice, Final Assessment Notice for pending cases shall be withdrawn and canceled.
What is the effect if the taxpayer’s tax returns for the covered taxable period are currently being audited?
- The conduct of the audit shall be suspended upon the availment of the VAPP while the availment is under evaluation. It shall resume if the availment has been found invalid.
What are the instances where despite the issuance of a Certificate of Availment, the availment is rendered invalid and shall be subject to audit/investigation:
- When there is strong evidence or findings of under-declaration of sales, receipts or income or overstatement of deductions by more than 30% based on a written report of the appropriate revenue official stating the facts with supporting documents; and/or
- When there is verifiable information that the taxpayer has withheld but failed to remit withholding taxes.
Any voluntary payment may be applied against the deficiency tax due, if any, that may be assessed against the taxpayer after the audit/investigation.
Can taxpayers who failed to file tax returns and/or pay their non-ONETT taxes for the taxable year 2018 avail of the VAPP?
- Yes, provided the unfiled tax returns shall first be filed and/or unpaid taxes plus corresponding penalties for late filing and payment shall first be paid by the taxpayer.
Can taxpayer claim for refund or credit for any payment made under this VAPP (i.e erroneous payment)?
- No, the payment is construed as a waiver of the taxpayer’s right to claim for refund or credit, notwithstanding the collection thereof from an erroneous payment, unless the taxpayer excludes in the availment the specific tax type for which it is pushing the claim for tax credit/refund.
Is payment under the VAPP considered an admission of fraud on the part of the taxpayer?
- No, the act of voluntary payment under this program shall not be deemed as an admission on the part of the taxpayer that there was fraud in the declaration of its taxes and/or there was an intention to pay the tax erroneously.
When is the VAPP effective?
- 15 days after publication on September 5, 2020