The Bureau of Internal Revenue recently released its latest Revenue Regulation-21-2020, which promotes the promulgation of the VAPP (Voluntary Assessment and Payment Program) for the taxable year of 2018. According to this circular, taxpayers may settle their unpaid tax deficiencies for 2018 without being subject to any investigation or meticulous audit of their personal and business finances regardless of the types of tax they avail.
Noteworthy, this excludes those who have received final assessment before the launch of the program, those already under investigation as a result of a verified information filed by a tax informer, and those who are probed for tax evasion, tax fraud, and other criminal behavior. This VAPP entails every type of internal revenue taxes due for the particular taxable year, ending on December 31, 2018. It likewise covers the fiscal year of 2018, ending on July 31, 2018 to June 30, 2019. The signatories of the program said that this move should be able to amplify the government’s collection. To date, the program is set to take effect 15 days after it was announced last September 5, and it will be until December 31, 2020.
Usually, additional tax revenues are created through an audit. However, to limit contact and mitigate the spread of the coronavirus, the VAPP was put in place. Less audits also equate to minimize administrative costs, which in a way shall defray the expenses of the government due to this pandemic. The program also includes ONETT or one-time transactions such as donor’s taxes, capital gains taxes, and estate taxes. It also includes expanded withholding taxes, creditable withholding taxes that are ONETT-related, as well as documentary stamp taxes.
Taxpayers who desire to take advantage of VAPP will generally pay a percentage of their 2018 taxable net income or gross sales. The amount will be whatever is higher, depending on the rate increase or decrease in overall taxes from the years 2017 to 2018. The rate is further subject to a minimum figure based on the subscribed capital. Payment should be in the form of cash.
For taxes considered ONETT, the payable will be based on the unpaid basic tax due on the unfiled tax return or unpaid tax due to plus 5 percent. For none-ONETT withholding taxes, the taxpayers shall pay 5 percent of the sum of total withholding tax remittance for 2018. Thus, to ascertain that you’re paying the correct amount, the formula of the aforementioned tax types are specified with examples on the RR21-2020 circular.
In the meantime, for those who have already paid any non-ONETT tax deficiencies of 2018, the tax deficiency payment will already be accepted as payment for 2018 when the final computation of the voluntary payment amount under the VAPP. Through this scheme, the needed VAPP payments will be significantly reduced for those who have already settled their previous tax investigations or audits. This will help unburden the wallets of taxpayers who are currently battling economic recession due to the worldwide coronavirus pandemic.
The Department of Finance (DOF) hopes to increase its tax collection through this scheme as it will provide taxpayers a very easy, cost-efficient, and effective means of settling their unpaid tax deficiencies. Right now, the DOF is anticipating a reduced revenue collection for this year due to the health crisis that resulted in enhanced community quarantine and strict social distancing measures to prevent the spread of COVID-19. As such, economic activities have been adversely impacted. Right now, the first seven months of 2020 showed an alarming decline of almost 11 percent, and it is anticipated to decline even more as businesses close.