Taxpayers beginning business operations in 1998 would not have any basis for comparison since they have not filed any tax return in 1997. Therefore, these taxpayers can not qualify for immunity from audit under the ERAP Program.

Corporations with fiscal year ending November 30, 1998 shall be allowed to pay the 20% or more additional tax on or before April 15, 1999 to afford them the opportunity to avail of immunity under the ERAP Program.

No. The taxpayer is still required to file an application for immunity from Audit using the BIR Form 2103. Upon approval of BIR Form 2103, a Certificate of Immunity from Audit (CIA) shall be issued to him. The duty of the Revenue District Officer/Large Taxpayer's Division to pre-audit the return is limited to the verification of the information on the face of the returns that the minimum tax requirement is duly complied with in accordance with the Regulations.

Large taxpayers shall pay for the 20% or more additional tax with the Authorized Agent Banks (AABs) located at the Large Taxpayers Division in conformity with the policy laid down in RR1-98. They shall file for their application for immunity at the Large Taxpayers Division. The Large Taxpayers Division shall process the applications and prepare the corresponding CIAs under the procedures prescribed by Sections 6.1 and 6.2 of RMO 10-99 and forward the same to the Office of the Commissioner for approval.

If a taxpayer has not yet filed his income tax return for 1998, he can incorporate the 20% or more additional income tax as a separate item in his 1998 income tax return or opt to pay the additional tax using his 1998 ITR for his regular operations and the Payment Form (BIR Form 0605) for the additional tax.

He can make the additional payment using the Payment Form (BIR Form 0605).

The excess MCIT shall be paid on top of the minimum payment required under RR 2-99 to qualify for immunity. If after increasing the 1997 normal tax by 20%, the resultant amount effectively exceeds the MCIT, then there will be no more excess MCIT to be carried forward to the next three succeeding years. For instance, Corporations A and B have the following schedule of tax liabilities:

In Corporation A, the ERAP requirement of 120% of the 1997 tax payment already exceeded the MCIT, thus, leaving no excess MCIT to be carried over to the next three succeeding taxable years. However, in Corporation B, the ERAP requirement as computed is lower by P10,000 as compared to the MCIT, in which case the ERAP requirement shall be paid on top of the excess MCIT in order to qualify for immunity.

The voluntary payment of the 20% or more additional tax requirement under RR 2-99 to qualify for the immunity from audit (20% or more of 1997 tax payment) shall be used as the basis for computing the excess MCIT credits which may be carried over to the next three (3) succeeding taxable years. Thus, in the example given, Corporation B shall carry forward P10,000 as excess MCIT credit, which is the difference of the MCIT of P130,000 over the adjusted normal tax of P120,000.

Retained Earnings

xxx

Cash

xxx

Retained Earnings

xxx

Cash

xxx

Taxes & Licenses (Percentage Tax)

xxx

Cash

xxx

In order to avail of immunity under the ERAP Program, the comparison of tax payments shall be on a per tax-type basis for the entire taxable year. In this example, there is no basis for comparison of taxes paid for the entire taxable year in 1997 with the entire taxable year in 1998. Accordingly, the individual taxpayer shall have to pay at least of 1% of his 1998 gross sales/receipts to qualify for immunity under the ERAP Program.

In order to avail of the immunity from audit and investigation for 1998 VAT quarterly returns, the taxpayer shall pay or shall have paid TWENTY PERCENT or more than the tax paid in 1997 (Sec. 2.1 of RR2-99). For purposes of the ERAP Program, the term 'Value Added Tax paid' shall mean the total output tax or the value added tax before input tax for the entire calendar year.

To qualify for immunity, the taxpayer shall have to pay an amount equivalent to one hundred twenty percent (120%) of the output taxes for all the taxable VAT quarters of 1997, computed as follows:

Yes, the taxpayer can qualify for immunity for the entire year of 1998 if he shall pay at least 120% or more of the total tax paid for the whole year of 1997 in 1998. For ERAP Program purposes, total tax paid for VAT immunity refers to total output tax for the entire calendar year. In fine, the availment of immunity from audit shall be on an annual basis, and not on a quarterly basis.

Yes. If the all of the 1997 VAT quarterly returns reflect output tax due, the taxpayer may qualify for immunity by paying 20% or more of the 1997 output taxes of the four taxable quarters. However, if there are no output taxes, as in the case of zero-rated VAT exporters, the 1997 VAT quarterly returns are considered as no-payment returns. In which case, the taxpayer shall pay 1/2 of 1% (for individuals) or 2% (for corporations) of their 1998 gross sales or receipts to qualify for immunity from VAT investigation under the ERAP Program. This is apart from their availment of the program for income tax purposes.

The coverage of the immunity from audit under the ERAP Program for 1998 VAT quarterly returns of corporations whether on a fiscal or calendar year shall be the period covering January 01, 1998 to December 31, 1998. In fine, the program covers only VAT returns and Percentage Tax Returns for the Calendar Year 1998.

Since no VAT quarterly returns were filed in 1997, the taxpayer does not have a basis for comparison upon which to compute for the 20% or more additional tax in 1998 over the 1997 VAT. As such, his 1997 returns shall be considered as no payment returns. He shall have to pay at least one-half of one percent (1/2 of 1%) of his 1998 Gross sales/receipts on or before June 30, 1998 using BIR Form 0605.

Since availment of immunity under the ERAP Program is on per-tax-type basis, there is no basis of comparison on an annual basis for the percentage taxes paid in 1997 with the percentage and VAT taxes paid in 1998. In this case, the returns filed for 1997 shall have to be considered as no payment returns and the taxpayer shall have to pay at least of 1% (individuals) or 2% (corporations) of gross sales/receipts as the case may be to avail of immunity under the ERAP Program. This rule applies irrespective of the dominant tax paid in 1997 and 1998.

For income tax purposes, the total taxes paid by the parties in 1997 prior to the merger or consolidation is considered as the tax paid by the new entity for taxable year 1997.

For VAT purposes, the combined output taxes of the parties concerned for all taxable quarters in 1997 prior to the merger or consolidation is considered as the tax paid by the new entity for taxable year 1997.

For percentage tax purposes, the total percentage taxes paid by the parties for all taxable quarters in 1997 prior to the business combination is considered as the tax paid by the new entity for taxable year 1997.

No, the input taxes which were already utilized against output taxes for the 1998 quarterly VAT returns are no longer available for credit for the taxable quarters in 1999. For example if the following figures are available in the 1998 VAT quarterly returns, viz:

In this example, only P200,000.00 shall be carried over to the 1st Quarter of 1999 as excess creditable input tax. This means that deductions of input taxes against output tax on returns already filed will not be disturbed by the availment of VAT immunity under the ERAP Program. The 20% or more additional payment based on the comparison of output taxes for the entire calendar year of 1997 and 1998 required to qualify for VAT immunity under the ERAP Program is separate and distinct from the regular VAT payments made per quarterly VAT returns filed in 1997 and 1998.

Since we cannot compare output taxes for only one quarter vis-a-vis output taxes for four quarters, the taxpayer in this case shall be considered to have filed a no-payment return for 1997 and accordingly, shall have to pay at least of 1% (individuals) or 2% (corporations) of 1998 gross sales/receipts, to qualify for the immunity under the ERAP Program.

Since the comparison of tax payments is on a per tax-type basis, we cannot compare VAT with Percentage Taxes. Accordingly, the taxpayer shall be considered to have filed no-payment returns in 1997 and shall have to pay at least of 1% (individuals) or 2% (corporations) of 1998 gross sales/receipts, to qualify for the immunity under the ERAP Program. For ERAP Program purposes, total VAT paid is total output tax for the entire calendar year.

Same answer as in Q#22 above.

This Circular supplements RMO No. 10-99 and RMC No. 17-99. Any provision thereof, if inconsistent herewith, is hereby considered amended, modified, or revoked accordingly.