Are you looking for VDA meaning? The Voluntary Disclosure Agreement, often called the VDA, is the agreement that business owners can submit to the local tax authorities regarding the potential tax liabilities of their businesses, even before they operate in the state jurisdictions. It is the proactive approach from business owners to disclose or be transparent with the local governments regarding the business they are doing in the state jurisdictions and the potential taxes they will need to pay in the future. This is in contrast to the regular taxing process for businesses that the local authorities need to check after the business is operating for some time in the state’s jurisdiction areas.
The VDA itself is a program from the government to make it easier for businesses to disclose their taxes to the local tax authorities and to become more proactive in doing that. In return, businesses will receive certain benefits from the government, which they can enjoy for the years ahead. It will also help them run their business with little to no interruptions from the local tax authorities once they’ve submitted the Voluntary Disclosure Agreement to the government.
Here are various important things you need to know about Voluntary Disclosure Agreement:
- It’s a win-win solution for the business and the state. For the business, they can disclose their potential tax liabilities to the local authorities, so that they won’t be the subject of audits and assessments later. For the state, they know what to expect from the businesses beforehand.
- Elimination of penalty. Tax penalties can happen for businesses if the state considers the business to be non-compliance to the current taxation laws. However, with the VDA submission, businesses can eliminate their tax penalties after disclosing their tax liabilities with the local authorities.
- Certain tax-related benefits. For some states, there are taxes businesses need to pay based on their business type, earnings, and how they operate in the state. However, by submitting the voluntary disclosure agreement, the state can decide to remit certain taxes for businesses upon inspecting the VDA submitted by them.
- Elimination of past liabilities. There are some cases when the state might forgive the business for their past tax liabilities in return for the future compliance of the business. With VDA, it is possible for the state to eliminate the past tax liabilities of the business in return for the full compliance of the business to follow the local tax laws in the future.
- The look-back period. The state can also limit the look-back period for the businesses that have submitted the voluntary disclosure agreement to 3-4 years. This can benefit the business because they don’t need to deal with a longer look-back period, in which they will need to pay more taxes to the government.
Save time from any sudden tax examination. For businesses operating in the United States, they might undergo certain tax examinations from time to time if the state considers the business to be not complying with the current tax laws in the state jurisdictions. With the VDA, this won’t need to happen, as businesses have disclosed the various potential tax liabilities with the government. So, it will also eliminate the potential for sudden tax examination by the government, which can often take a lot of time for businesses to resolve.