Tax Authorities Launch Voluntary Assessment Program

The Bureau of Internal Revenue (“BIR”) will implement a Voluntary Assessment and Payment Program (“VAPP”) covering taxable year 2018. 

The VAPP, launched through Revenue Regulations No. 21-2020 (“VAPP Regulation” or “Regulation”), is intended to encourage an increase in voluntary tax compliance to help defray the increased expenditures of the government largely caused by the current global health emergency. This measure will allow taxpayers to voluntarily pay additional taxes in order to avail of the privilege of immunity from audit.  

Coverage 

The covered period under the VAPP is calendar year 2018 and fiscal years ending 31 July 2018 to 30 June 2019. 

The VAPP covers all internal revenue taxes including taxes on one-time transactions (“ONETT”).

Persons, natural or juridical, including estates and trusts, liable to pay internal revenue taxes for the covered period who, due to inadvertence or otherwise, erroneously paid internal revenue tax liabilities or failed to file tax returns/pay taxes, may apply for the benefits under the Regulation, except:

1. taxpayers who have already been issued a Final Assessment Notice that have become final and executory, on or before the effectivity of the Regulation; 
2. persons under investigation as a result of verified information filed by a tax informer with respect to the deficiency taxes that may be due out of such verified information; 
3. those with cases involving tax fraud filed and pending in the Department of Justice or in the courts; and 
4. those with pending cases involving tax evasion and other criminal offenses under the Tax Code.

VAPP application is possible whether or not the taxpayer is undergoing an existing tax audit or investigation.

Amounts Payable for Availment

The taxpayer may, as a condition to availing of the privileges under the VAPP, pay the amount of voluntary tax payment prescribed. 

Income Tax (“IT”), Value-Added Tax (“VAT”), Percentage Tax (“PT”), Excise Tax (“ET”), and Documentary Stamp Tax (“DST”) other than the DST on ONETT

In respect of these tax types, the amount of voluntary tax payment is the higher of a percentage of 2018 gross sales or 2018 taxable net income, but in no case less than the prescribed minimum VAPP amounts for that type of taxpayer.

The applicable percentages are based on the net increase or decrease of total taxes due from 2017 to 2018. We reproduce the schedule of the amounts payable for VAPP availment below.

Increase/Decrease in the Total Taxes Duefrom 2017 to 2018(A)	Amount of Voluntary TaxPaymentWhichever is the higher of  –(B)	Minimum Amount (C)
Net increase of not more than 10%	3% of 2018 gross sales or 7% of 2018 taxable net income	Individuals, estates and trusts – P75,000  Corporations –   With subscribed capital of more than P50 million – P1,000,000 With subscribed capital of more than P20 million up to P50 million – P500,000 With subscribed capital of more than P5 million up to P20 million –P250,000 With subscribed capital of P5 million and less – P100,000  Other juridical entities, including but not limited to cooperatives, foundations, general professional partnerships – P75,000
Net increase of more than 10% up to 30%	2% of 2018 gross sales or  6% of 2018 taxable net income
Net increase of more than 30%	1% of 2018 gross sales  or 5% of 2018 taxable net income
Net decrease of not more than 10%	4% of 2018 gross sales or 8% of 2018 taxable net income
Net decrease of more than 10%	5% of 2018 gross sales  or  9% of 2018 taxable net income

Final Withholding Taxes (on Compensation, Fringe Benefits) and Creditable Withholding Taxes (“CWT”) other than CWT on ONETT

For these withholding taxes, the amount to be paid is five percent (5%) of the total basic withholding tax remittance for the taxable year 2018.  

Taxes on ONETT (Estate Tax, Donor’s Tax, Capital Gains Tax, as well as ONETT-related CWT/Expanded Withholding Tax and DST) 

For ONETT taxes, the amount to be paid is the basic tax due plus five percent (5%). 

Mode of Payment

Voluntary payment must be made in cash as a condition for availing of the VAPP privilege. Hence, non-cash modes of payment, such as Tax Debit Memo and the like, will not qualify as valid payment. 

Documentary Requirements for VAPP Application

To avail of the VAPP, the taxpayer-applicant must submit the following requirements:

Mandatory Requirements

1. Duly accomplished Application Form or BIR Form No. 2119 (original for the Large Taxpayers (“LT”) Office/Revenue District Office (“RDO”) and duplicate for the taxpayer); and
2. Duly accomplished Payment Form or BIR Form No. 0622 with proof of payment (original for the LT Office/RDO, duplicate for the taxpayer, and triplicate for the collecting agent).

Additional Requirements

1. Copy of duly paid BIR Form 0605 stamped either by the Authorized Agent Banks or Revenue Collection Officers duly signed by the LT Office/RDO where 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 ending 31 December 2018 and fiscal year 2018 ending on the last day of the months of July 2018 to June 2019;
2. 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 VAPP for IT, VAT, PT, ET, and DST other than the DST on ONETT; 
3. Copy of remittance returns and proof of payment of final and creditable withholding taxes for taxpayers availing of the VAP for Final Withholding Taxes (on compensation, fringe benefits, etc.) and CWT other than the CWT on ONETT; and
4. Duly accomplished ONETT tax returns (BIR Form Nos. 1800, 1801, 1706, 1707, 2000 – OT, 0619-E) and corresponding documentary requirements for the transaction of taxpayers availing of the program for taxes on ONETT.  

The above requirements may be filed personally or through courier service. 

The Regulation gives the BIR thirty (30) working days from receipt of the application to review and approve the VAPP availment.

On the other hand, if the review reveals deficiencies or defects in the availment, the BIR will notify the concerned taxpayer through email and require the taxpayer to rectify the defects and pay 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.

Certificate of Availment 

The BIR shall issue a Certificate of Availment within three (3) working days from approval of the application. The Certificate of Availment shall serve as proof of the taxpayer’s availment,  compliance with, and entitlement to the privilege under the VAPP Regulation.

Privilege and Consequences

A taxpayer with a duly issued Certificate of Availment shall not be audited for the taxable year 2018 for the tax types covered by the availment. 

In case the taxpayer is being audited for taxable year 2018, the audit will be suspended while the VAPP application is under evaluation. The audit will resume if the availment has been found invalid. If the availment is determined to be valid, the Certificate of Availment discussed above shall be issued and consequently, the 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. 

Despite the issuance of a Certificate of Availment, the taxpayer’s availment shall be rendered invalid and the taxpayer shall be subject to audit or investigation in the following instances: 

• When there is strong evidence or findings of underdeclaration of sales, receipts or income or overstatement of deductions by more than thirty percent (30%) based on a written report of the appropriate revenue official; and/or
• When there is verifiable information that the taxpayer has withheld but failed to remit withholding taxes. 

Any payment made under the VAPP Regulation is construed as a waiver of the taxpayer’s right to claim for refund or credit, notwithstanding the collection thereof from an erroneous payment.

Non-Submission of Requirements and Invalid, Deficient or Defective Availment

Non-submission or submission of erroneous/incomplete/falsified information shall not entitle the taxpayer to avail of the privilege under the Regulation. Moreover, the voluntary payment may be applied against any deficiency tax liability for taxable year 2018 in case of a tax audit. 

Taxpayers whose availment is found to be invalid, deficient or defective are likewise not entitled to the privilege under the Regulation. However, they may apply the voluntary payments made against any deficiency tax liability for the taxable year 2018, in case of a tax audit. 

Effectivity and Period of Availment

The VAPP Regulation takes effect on 21 September 2020. Qualified taxpayers may avail of the VAPP until 31 December 2020, unless extended by the Secretary of Finance.