Bureau of Internal Revenue
Republic of the Philippines

Voluntary Assessment and Abatement Program (VAAP)

To set in place an integrated approach in the handling of under-declarations generated by the RELIEF system, the BIR issued Revenue Regulations (RR) No. 12-2002 on September 12, 2002.
Under the RR, Income, VAT and Excise taxpayers with under-declared sales/receipts/income for the Calendar and Fiscal Years 2000 and 2001, and the first and second quarters of 2002 are entitled to avail of the Bureau's Voluntary Assessment and Abatement Program (VAAP) until November 15, 2002 (or before the deadline specified in the Letter Notice that will be sent by the BIR).

Under-declarations in the third quarter 2002 returns and succeeding quarters will no longer be entitled to the VAAP, but will be subjected to the full force of the law.

In case a concerned taxpayer fails or refuses to avail of the VAAP for any of the taxable periods covered by the RR, the BIR shall institute such criminal or administrative actions as may be authorized under the Tax Code, specifically closure, criminal actions or audit and investigation, depending on the extent of under-declaration.

Expansion of VAAP Coverage

With the issuance of RR No. 17-2002 on October 16, 2002, taxpayers subject to Percentage Tax, Documentary Stamp Tax, Improperly Accumulated Earnings Tax, Withholding Tax and taxes involving one-time transactions (i.e. Estate Tax, Donor's Tax, etc.) can also avail of the VAAP.

Even the taxable periods covered by VAAP was expanded to include calendar/fiscal year and taxable period ending June 30, 2002 and all prior taxable periods (in the case of Income, VAT, Excise and Percentage Tax).

To make it easier for taxpayers to pay their deficiency taxes under the VAAP, payment of the minimum amounts per Letter Notices (amounting to P 500,000 and above) is also allowed in two to three equal installments within 2002, depending on the minimum amounts payable.

For voluntarily disclosed amounts (P 500,000 and above), installment payment will be in three (3) equal parts, the first payment being made before the filing of the VAAP Application Form with the concerned Revenue District Office.

The deadline for submission of Application Forms for VAAP availment and payment of corresponding deficiency Income Tax, VAT and Excise Tax is on November 15, 2002. Applications and payment for the other type of taxes covered must be received by the BIR not later than November 29, 2002.

Extension of Installment Payment

The BIR issued RR No. 18-2002, which made it possible for taxpayers to request for extension of installment payment of their deficiency taxes under VAAP on the ground of financial incapacity.
For their request to be approved, taxpayers must submit a list of banks to which they maintain bank deposits/accounts as well as execute a waiver of bank secrecy of deposits, among others.

Taxpayers have until December 16, 2002 to avail of the VAAP pursuant to RR No. 23-2002.

Further Extension of VAAP

With the issuance of Revenue Regulations No. 28-2002, the period for availment of the VAAP was further extended, subject to additional incremental surcharge (progressively increasing from January to October 2003) of 5% to 50% for those with Letter Notices (LNs), and 2.5% to 25% for those without LN.

To effectively monitor the status of VAAP availments as well as the compliance of taxpayers who have been sent LN by the Bureau, a VAAP Tracking and Monitoring System (TMS) was rolled out in all Revenue District Offices on December 11, 2002.

Through the VAAP TMS, taxpayers who (after availing the VAAP) still have under-declared sales/receipts/income for taxable years 2000, 2001 and the first and second quarters of 2002 will be discovered.

VAAP Frequently Asked Questions

Q: Can we still pay despite the lapse of the VAAP?
A: Within 10 days from receipt of demand letter otherwise NO.

Q: Can we pay on installment basis?
A: RR 28 - 2002 ; subject to approval of DCIR Evangelista

Q: What is the effect if we don't comply with the demand letter?
A: Criminal Prosecution / Closure of business

Q: Can we reduce the rate of penalty?
A: NO

Q: Will the BIR issue us a certification that we have settled out tax liabilities?
A: VAAP application and proof of compliance will suffice.

Priorities

-Promised to come back
a. With payments / PDC's
b. Submit requirements

-Those who did not respond
a. Did they receive the LN
b. Did they receive the demand letter
- Failure to comply will cause the filing of criminal case / closure of business

- Returned to sender (demand letter) - call then verify address
a. Closed
b. Transferred
c. Single proprietor to corporation

- Responded to demand letter but:
a. Only thru letter
b. Only thru phone calls

- Those who went to the BIR but did not make any commitment

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Modified Tax Compliance Verification Drive

Commissioner Guillermo L. Parayno, Jr. signed a Memorandum of Understanding (MOU) with the Fellowship of Christians in Government, Inc. (FOCIG) last October 22 for a more effective implementation of the Bureau's Tax Compliance Verification Drive (TCVD).

Under the MOU, FOCIG, as represented by its Chairman, Niels Patrick Riconalla, volunteered to be the Bureau's partner in the dissemination of tax information prior to the conduct of the TCVD.

With the issuance of Revenue Memorandum Order No. 31-2003 last October 7, a Modified TCVD is being implemented wherein standardized reminder letters will be distributed to business establishments during the Tax Information and Compliance Phase (Phase I).

The conduct of Phase I in the MTCVD aims to give business establishments the opportunity to comply with the tax requirements listed in the reminder letter before they are visited by authorized Revenue Officers.

Phase I of the MTCVD will be undertaken by FOCIG and other interested civic and cause-oriented groups that are willing to assist the BIR in its tax information drive.

To ensure its legitimacy, FOCIG will provide its volunteers with identification cards to be countersigned by the concerned Revenue District Officer (RDO), together with a letter of authorization that will be used during the information campaign.

In addition to organizing/conducting briefings and door-to-door campaigns, FOCIG will also submit to concerned RDOs reports of their monthly accomplishments, contributions and policy recommendations on the conduct of the MTCVD.

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Letter Notice Monitoring Project

Under the LN Monitoring Project, the generation and monitoring of Letter Notices (LNs) to be sent to taxpayers will be automated.

Last October 14, 2003, the BIR LN Monitoring Project kicked off through a meeting attended by top BIR officials, led by Commissioner Guillermo L. Parayno, Jr., and officials of SAS.

Through the Project, a system will be developed by SAS, which will have the capability to automatically produce LNs and its details, and deliver them to the Revenue District Offices via the BIR website. The initial coverage of the project, however, will be limited to the Reconciliation of Listings for Enforcement (RELIEF) outputs.

The system will also have the capability to monitor and generate management reports on the status of LNs, including the progress of collection.

Automating the LN processes will strengthen the capability of the BIR to better manage the growing number of LNs sent to identified taxpayers with deficiency taxes/tax fraud cases, which were uncovered through the discrepancy reports generated under the RELIEF program and other Third Party information systems of the Bureau.

The LN Monitoring System is targeted to be completed by December 2003 and rolled out by early 2004.

No-Contact-Audit Approach

The Bureau of Internal Revenue (BIR) has adopted a "no-contact-audit" approach in examining and assessing taxpayers' compliance with their tax obligations.

Pursuant to Revenue Memorandum Order No. 42-2003, the approach includes the computerized matching of sales and purchases data contained in the Schedule of Sales and Domestic Purchases, and Schedule of Importation submitted by VAT taxpayers under the Reconciliation of Listings for Enforcement (RELIEF) System.

The approach likewise includes the matching of data from other information or returns filed by taxpayers with the BIR such as Alphalist of Payees Subject to Final or Creditable Withholding Taxes.

Even without conducting a detailed examination of the taxpayer's books and records, which is normally done under the traditional audit approach, discrepancies in the taxpayers' declarations will be uncovered through the computerized/manual matching of sales and purchases/expenses under the "no-contact-audit" approach.

Taxpayers will be notified of the said discrepancies through computer-generated Letter Notices that will be served to them by the concerned Revenue District Offices.

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Imposition of Advance Tax on Privilege Stores

Sometime in January this year, the problem of collecting taxes from "tiangges" (or "privilege stores" as coined by the BIR) was brought to the attention of the Bureau by the officers of the Philippine Retailers Association (PRA), led by Mr. Bienvenido Tantoco III and Mr. Manuel Siggaoat. After several meetings with the PRA officers, BIR came out with a Revenue Regulations (RR No. 16-2003) last April 29 to impose the advance payment of business tax and income tax on operators of "privilege stores" or "tiangges", as well to prescribe the tax obligations of organizers or exhibitiors of space for the operation of "tiangges".

Under the said Regulations, a fixed amount of Value-Added Tax or Percentage Tax, as the case may be, of P 150 per day (or P 4,500 per month) and Income Tax of P 50 per day (or P 1,500 per month) are be imposed and collected in advance on a monthly basis from "tiangge" operators for the entire duration of their business operation. The advance payments are credited against the actual business tax and income tax due from such persons for the taxable period for which such payments were remitted to the BIR.

In response to the various comments received by the BIR after the issuance of RR No. 16-2003, a revised revenue issuance (Revenue Regulations No. 24-2003) was issued on August 29, 2003.

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