Settling taxes through BIR program

Published in Daily Tribune on September, 2020
by: Glorydee Comparativo

The Bureau of Internal Revenue (BIR) is pulling all the stops to increase its tax collections this year amid the disruption caused by the COVID-19 pandemic. To ramp up tax collections, while complying with the health protocols on social distancing as well, BIR issued Revenue Regulations (RR) 21-2020 also known as Voluntary Assessment and Payment Program (VAPP). It is a one-time opportunity to settle ALL deficiency internal revenue taxes with or without assessments for taxable year ending 31 December 2018, and fiscal year 2018 ending on the last day of the months of July 2018 to June 2019. Taxpayers who have undergone a tax audit know that a deficiency tax assessment may balloon to millions or billions of pesos if left unchecked. With the VAPP, one can wipe the slate clean by settling these deficiencies at a significantly reduced rate.

VAPP covers all deficiency internal revenue taxes, relieving taxpayers from being audited for 2018 upon issuance of the Certificate of Availment (CoA). An applicant with a duly issued CoA shall not be audited for 2018 for all tax types covered by the availment. For those with ongoing BIR audits on their 2018 Tax Returns, the audit is suspended and if the availment is deemed valid, the issued Letter of Authority and Assessment Notices shall be withdrawn and canceled.

However, excluded from availing the VAPP are taxpayers who have been issued a Final Assessment Notice that have become final and executory prior to effectivity of RR 21-2020, persons under investigation pursuant to Section 282 of Tax Code, those with tax fraud cases filed before the Department of Justice or courts, and those with pending tax evasion and other criminal offenses. Qualified persons have until 31 December 2020 to avail themselves of the VAPP.

VAPP applicants need to accomplish BIR Forms 2119 and 0622, submit 2017 and 2018 Audited Financial Statements and Tax Returns with proofs of payment and pay the corresponding taxes under VAPP. For Income Tax, VAT, Percentage Tax, Excise Tax and DST, these taxes shall be contingent on the higher of a specified percentage of gross sales or of net taxable income set by BIR (based on the percentage of increase or decrease in total taxes paid from 2017 to 2018), subject to a minimum amount ranging from P100,000 to P1,000,000 for corporations based on its subscribed capital. For individuals, estates and trusts, and other juridical entities, the minimum amount is P75,000. For withholding taxes and those with unpaid taxes related to one-time transactions (ONETT), the tax is five percent of the total basic withholding tax remittances, and basic tax due on the unfiled tax returns/unpaid taxes plus five percent, respectively. Submitted requirements will be evaluated and, if acceptable, approved within 30 days from receipt of the application. The CoA should be issued within three working days after approval. Denied applications will not be entitled to the foregoing privileges. Any payment made may, however, still be applied against any deficiency tax liabilities for taxable year 2018, in case of BIR audit/investigation. Any payment made under RR 21-2020 is construed as a waiver of right to claim cash refund or credit.

Despite issuance of the CoA, applicants may still be audited/assessed for 2018, and the availment rendered invalid, when there is strong evidence of under-declaration of sales/income or overstatement of deductions by more than 30 percent and when there is verifiable information that the applicant failed to remit withholding taxes. It appears, however, that the burden of proving the invalidity of the CoA is on the BIR, unlike in ordinary tax audits where all presumptions are in BIR’s favor.

In availing of the VAPP, taxpayers must ensure the sufficiency of their documents. Otherwise, it may end up costing the taxpayer more. It never hurts to consult tax experts who can review the documents and advise on the VAPP application, especially when the BIR reserves the right to still assess businesses as mentioned above.

The VAPP is a rare opportunity and taxpayers must seriously consider it as it will surely benefit businesses and the government in these trying times.