(NAR) VOL. 10 NO. 2 / APRIL - JUNE 1999
Q-1: | Can taxpayers beginning operations in taxable year 1998 and having filed the requisite return for the first time qualify for immunity from audit as contemplated under the ERAP Program? | ||
A-1: | The policy is now to extend the ERAP Program to new taxpayers, provisions of RMC No. 18-99 to the contrary notwithstanding. But since these taxpayers beginning business operations in taxable year 1998 would not have any basis for the comparison of their taxes paid, therefore, these taxpayers, if individuals, shall have paid or must pay at least one-half of one percent (1/2 of 1%) of his 1998 Gross sales/receipts, while if corporations, at least two percent (2%) of its 1998 Gross sales/receipts on or before July 15, 1999. | ||
Q-2: | How is the ERAP requirement computed if the individual taxpayer, who wishes to avail, earned only compensation income in 1997? | ||
A-2: | The basis of the ERAP requirement is the total tax paid (tax due per return) in 1997. Thus, assuming a taxpayer, married, had the following data: | ||
1997 Taxable Compensation Income | P100,000 | ||
1997 Creditable Withholding Tax | 10,255 | ||
1998 Tax Due per return filed | 9,000 | ||
In order to qualify for ERAP, he shall make an additional payment of P3,306.00 computed as follows: | |||
1997: Taxable Compensation | P100,000 | ||
Less Personal Exemption | 18,000 | ||
Amount Subject To Tax | P 82,000 | ||
Tax Due Thereon | P10,255 | ||
Less Creditable W/h Tax | 10,255 | ||
Tax Still Due | P 0 | ||
1998: ERAP Requirement (P10,255 x 120%) | P12,306 | ||
Less 1998 Tax Paid | 9,000 | ||
Additional Payment | P 3,306 | ||
======== | |||
Q-3: | How is the ERAP requirement computed if the individual taxpayer, who wishes to avail, earned only business income in 1997? | ||
A-3: | The basis of the ERAP requirement is the total tax paid (tax due per return) in 1997. To illustrate, assuming a taxpayer, married, had the following data: | ||
1997 Net Taxable Business Income P170,000 | |||
1997 Creditable Withholding Tax 14,000 | |||
1998 Tax Due per return filed 12,100 | |||
In order to qualify for ERAP, he shall make an additional payment of P14,300.00 computed as follows: | |||
1997: Net Taxable Business Income | P170,000 | ||
Less Personal Exemption | 18,000 | ||
Amount Subject To Tax | P152,000 | ||
Tax Due Thereon | P22,000 | ||
Less Creditable W/h Tax | 14,000 | ||
Tax Still Due and Paid | P 8,000 | ||
vvvvvvvvvv | |||
1998: ERAP Requirement (P22,000 x 120%) | P26,400 | ||
Less 1998 Tax Paid | 12,100 | ||
Additional Payment | P14,300 | ||
vvvvvvvvv | |||
Q-4: | How is the ERAP requirement computed if the individual taxpayer, who wishes to avail, earned both compensation and business income in 1997? | ||
A-4: | The basis of the ERAP requirement is the total tax paid (tax due per return) in 1997. Thus, assuming a taxpayer, married, had the following data: | ||
Compensation | Business | ||
1997 Taxable Income | P100,000 | P170,000 | |
1997 Creditable Withholding tax | 10,255 | 14,000 | |
1998 Tax Due per return filed | P11,300 | ||
In order to qualify for ERAP, he shall make an additional payment of P31,726.00 computed as follows: | |||
1997: Compensation | |||
Taxable Compensation | P100,000 | ||
Less Personal Exemption | 18,000 | ||
Amount Subject To Tax | P 82,000 | ||
Tax Due Thereon | P10,255 | ||
Less Creditable W/h Tax | P10,255 | ||
Tax Still Due | P 0 | ||
Business | |||
Net Taxable Business Income | P170,000 | ||
Less Personal Exemption | 0 | ||
Amount Subject To Tax | P170,000 | ||
Tax Due Thereon | P25,600 | ||
Less Creditable W/h Tax | 14,000 | ||
Tax Still Due/Collectible | P11,600 | ||
Total Tax Due and Paid | P11,600 | ||
vvvvvvvv | |||
1998: ERAP Requirement | (P35,855 x 120%) | ||
P43,026 | |||
Less 1998 Tax Paid | 11,300 | ||
Additional Payment | P31,726 | ||
vvvvvvvvv | |||
The basis for computing the ERAP requirement shall be the total income taxes paid for 1997 equivalent to the combined income tax due on the compensation income and business income. | |||
Q-5: | How can a VAT-registered person qualify for immunity from audit for VAT purposes under the ERAP Program? | ||
A-5: | In general, a VAT-registered person may qualify for immunity from audit for his 1998 VAT returns if he has paid an output tax in 1998 of at least 20% more than his output taxes paid in 1997, provided, that this minimum increase in output taxes must have been actually paid in the quarterly returns, otherwise an amount is to be paid by the taxpayer to the extent that the receipted payments per return does not cover the required amount of minimum increase in output taxes. In fine, the minimum increase in output taxes required for availment can not be paid using input taxes. To illustrate: |
| Case A |
|
|
| 1997 | 1998 | ERAP |
Output Taxes | P1,000,000 | P1,200,000 | P200,000 |
Input Taxes | 900,000 | 800,000 |
|
VAT Paid per Quarterly Returns | P 100,000 | P 400,000 | -400,000 |
Additional Payment Required |
|
| P 0 |
| Case B |
|
|
| 1997 | 1998 | ERAP |
Output Taxes | P1,000,000 | P1,200,000 | P200,000 |
Input Taxes | 1,000,000 | 1,200,000 |
|
VAT Paid per Quarterly Returns | P 0 | P 0 | 0 |
Additional Payment Required |
|
| P200,000 |
| Case C |
|
|
| 1997 | 1998 | ERAP |
Output Taxes | P1,000,000 | P700,000 | P500,000 |
Input Taxes | 650,000 | 400,000 |
|
VAT Paid per Quarterly Returns | P 350,000 | P300,000 | -300,000 |
Additional Payment Required |
|
| P200,000 |
|
|
| vvvvvvvvvv |
| Case D |
|
|
| 1997 | 1998 | ERAP |
Output Taxes | P1,000,000 | P500,000 | P700,000 |
Input Taxes | 950,000 | 500,000 |
|
VAT Paid per Quarterly Returns | P 50,000 | P 0 | - 0 |
Additional Payment Required |
|
| P700,000 |
|
|
| vvvvvvvvvvv |
| Case E |
|
|
| 1997 | 1998 | ERAP |
Output Taxes | P1,000,000 | P1,500,000 | P200,000 |
Input Taxes | 950,000 | 1,300,000 |
|
VAT Paid per Quarterly Returns | P 50,000 | P 200,000 | -200,000 |
Additional Payment Required |
|
| P 0 |
|
|
| vvvvvvvvvv |
| 1997 | 1998 | ERAP |
|
|
|
|
Gross Sales/Receipts | P6,500,000 | P10,000,000 |
|
Percentage Tax (1st - 2nd Qtr) | P 15,000 |
|
|
|
|
|
|
Output Tax (3rd - 4th Qtr) | P 600,000 |
|
|
Output Tax (whole year) |
| P1,000,000 | P200,000 |
Input Taxes | 400,000 | 900,000 |
|
VAT Paid per Quarterly Returns | P 200,000 | P 100,000 | - 100,000 |
Additional Payment |
|
| P100,000 |
|
|
| vvvvvvvvvvv |
Q-6: | Will the imposition of civil penalties be waived for late filers who wanted to file returns now and avail of the ERAP program? |
A-6: | No. The imposition of civil penalties (surcharge and interest) is mandatory in case of late filing of normal tax returns. However, the civil penalties will not apply to the additional tax required to be paid under the program in order to qualify. This means that the civil penalties will only apply to the tax due per return which should be actually paid even without the ERAP Program |
Q-7: | If a return qualifies for the immunity from audit or investigation by complying with the minimum payment requirements and an application for immunity has already been filed by the taxpayer, can the BIR refuse to issue or delay the issuance of the Certificate of Immunity From Audit? |
A-7: | No. The issuance of the Certificate of Immunity From Audit within 30 days from filing of the application with the required attachments is mandatory. If the BIR fails to issue the Certificate within this period, the same shall be deemed to have been issued, provided, that the taxpayer is qualified for immunity and has filed the application with the necessary information and supporting documents. |