1 REVENUE REGULATIONS NO. 18-2006 issued on November 14, 2006 prescribes the policies, procedures and guidelines in the implementation of the Improved Voluntary Assessment Program (IVAP) for Taxable Year 2005 and prior years. The Program grants taxpayers (including those enjoying preferential tax treatment) the opportunity to avail of the privilege of last priority in audit and investigation, which shall apply to all internal revenue taxes covering taxable years ending December 31, 2005 and fiscal year ending on any day not later than June 30, 2006 and all prior years, including onetime transactions (such as Estate Tax, Donor’s Tax, Capital Gains Tax, Final Withholding Tax, Expanded Withholding Tax and Documentary Stamp Tax on the transfer, sale, exchange or disposition of assets). The IVAP may be availed of by qualified taxpayers on a per taxable year/period and on a per tax-type basis. Any person, natural or juridical, including estates and trusts, liable to pay any of the said internal revenue taxes for the specified period/s who, due to inadvertence or otherwise, erroneously paid his/its internal revenue tax liabilities or failed to file tax returns/pay taxes, may avail of the IVAP, except those falling under any of the following instances: a. Those taxpayers who have already been issued a Preliminary Assessment Notice (PAN) and/or Final Assessment Notice (FAN) on or before the effectivity of these Regulations with respect to the internal revenue taxes applicable to the taxable period(s) covered by the PAN or FAN; b. Persons under investigation as a result of verified information filed by a Tax Informer, duly processed and recorded in the Bureau of Internal Revenue (BIR) Official Registry Book on or before the effectivity of these Regulations; c. Tax fraud cases filed and pending in the Department of Justice or in the courts for adjudication; d. Those with unpaid tax liability as admitted and reflected in the books of accounts/records, or financial statements and tax returns of the covered period, with respect to the tax type covered by the said admitted tax liability, unless they first pay the same (i.e., Documentary Stamp Tax payable, Withholding Tax payable, and unpaid individuals’ second installment of Income Tax, etc.); e. Cases handled by the BIR under the Run After Tax Evader (RATE) Program; and f. Cases in which Letter Notices were issued, where the discrepancy in sales exceeds 30% of sales of base year or the discrepancy in purchases exceeds 30% of the purchases of the base year. A taxpayer who has availed of the IVAP shall not be audited, except upon prior authorization and approval of the Commissioner of Internal Revenue (CIR) when there is strong evidence or finding of understatement in the payment of a taxpayer’s correct tax liability by more than 30%, as supported by a written report of the appropriate office stating in detail the facts and the law on which such finding is based: Provided, however, that any IVAP payment should be allowed as tax credit against the deficiency tax due, if any, in case the concerned taxpayer has been subjected to tax audit. Audit of taxpayers shall automatically be suspended upon filing of application and payment of the IVAP amount. However, if the audit case is prescribing within 6 months from date of application and payment of the IVAP, the investigating office should evaluate the availment within 5 days from receipt of the payment to determine its qualification to the Program. If after evaluation, the taxpayer has been disqualified under these Regulations, the audit shall be revived and should proceed accordingly. Letters of Authority (LAs)/Audit Notices (ANs), Letter Notices (LNs), Taxpayer Verification Notices (TVNs) and Mission Orders (MOs) shall be cancelled and withdrawn for IVAP availments with issued Certificate of Qualification. The suspension of audit/investigation and the cancellation of the authority to audit/investigate, shall be on a per taxable year/period and on a per tax type basis or only on the kind of tax covered by the IVAP availment. 2 Before any LA/AN, TVN or MO is issued against a taxpayer for the taxable year/s covered by IVAP, it is incumbent upon the investigating office to ensure that the taxpayer has not validly availed of the IVAP. The IVAP applicant-taxpayer shall signify his intention to avail of last priority in the audit and investigation by filing his application and paying the required amount to comply with the IVAP formula with the appropriate BIR collection agent and filing his application form, proof of payment and other necessary attachments to the Revenue District Office (RDO) having jurisdiction over the taxpayer’s registered address using BIR Forms to be prescribed by the CIR, subject to the following conditions: a. Computation of IVAP amount payable — Compliance with IVAP requirement shall be the total payment for the covered year of the amount in Condition No. (1) (prescribed percentage in the applicable or covered taxable year) but with a minimum payment of the absolute amount in Condition No. (2) in the year of availment (both conditions are specified in Section 4 of the Regulations). Payment of the minimum absolute amount in Condition No. 2 is required for all IVAP applications, where the required percentage increase has already been met in the tax due for the covered year. The base year mentioned shall be the immediately preceding year. Any deficiency tax paid for the base year shall form part of the tax due or net ValueAdded Tax (VAT) due of the base year. b. Mode and treatment of IVAP payment — IVAP payments shall not include any tax debit memo, Creditable Withholding Tax (CWT), Minimum Corporate Income Tax (MCIT) carry-over and Income Tax carry-over from prior period. The IVAP payment cannot be used as tax credit in the year of payment as well as in the returns for subsequent year/s nor as a deduction for internal revenue tax purposes. Nonetheless, if despite IVAP availment, tax audit is conducted on the covered year under the circumstances allowed by these Regulations or prescribed by the law (e.g. Refund Case), the IVAP payment shall be credited against the deficiency tax after audit. It is to be noted, however, that IVAP availment is not an admission on the part of the taxpayer of erroneous payment of the tax as well as of failure to file returns and pay the required tax. c. Issuance of the Certificate Authorizing Registration (CAR) or the Tax Clearance Certificate (TCC) for taxes on one-time transactions — The TCC or the CAR shall be issued in accordance with the procedures prescribed by the BIR after the verification of the taxpayer’s compliance of the asset and liability valuation rules as well as evaluation of the documents submitted to substantiate the assets reported and the deductions claimed. The clearance to be issued shall cover only the assets declared by the taxpayer in the tax return/declaration and verified by the BIR to be properly valued and completely tax-paid. Taxpayers who have applied for No Audit Program (NAP) or Expanded Voluntary Assessment Program (EVAP) but whose availments are found to be invalid may avail of the privilege under the IVAP. Payment under NAP or EVAP may be credited against the IVAP on a per tax type basis. Taxpayers who have applied for IVAP but whose availments are found to be invalid may apply said payments against the deficiency taxes for the same taxable year on a per tax type basis. Invalid availments include, among others, those cases enumerated as exceptions under Section 1 of the Regulations. When the IVAP amount is in excess of P 5,000,000.00, the taxpayer may elect to pay the tax in 3 equal installments provided that all installment payments shall be made on or before November 29, 2006 unless extended by the CIR. If any installment is not paid on or before the date fixed for its payment, the whole amount of tax unpaid becomes due and payable or else, the IVAP application shall be denied and payment invalidated as IVAP payment. Notwithstanding these terms for installment payment, taxpayers may request in writing an extension for installment payment of IVAP on the ground of financial incapacity. 3 The request shall be approved by the concerned Regional Director/ Officer-in-Charge, Large Taxpayers Service (LTS) upon compliance with the following conditions: a. Taxpayer must submit a list of banks in which he/it maintains bank deposits/accounts; b. Taxpayer must execute a waiver of secrecy of bank deposits thereby authorizing the BIR to inquire into the bank accounts of the taxpayer in order to verify his claim of financial incapacity; c. Taxpayer must submit a written undertaking to pay the IVAP installments within a period not exceeding 6 months from date of filing his/its IVAP application; and d. Taxpayer must put up a bond corresponding to the installment payments to be made if the tax case is prescribing within 6 months from the date of filing the IVAP application. Said requirements must be filed with the RDO having jurisdiction over the taxpayer, or with the LTS, in the case of large taxpayers, at the time of the submission of IVAP Application Form. All IVAP Application Forms (AF) and validated IVAP Payment Form (PF), and such other documents as may be required and duly received by the RDO or LTS, shall serve as proof of the taxpayer’s availment of IVAP. All IVAP availments made shall be subject to the review and evaluation of the concerned Regional Office/LTS. Upon verification of the correctness of the taxpayer’s application for IVAP availment, the Regional Director/Officerin-Charge, LTS shall issue a Certificate of Qualification for the privileges granted under the Program. Nonetheless, if the review reveals deficiencies or defects in the IVAP availment, the reviewing BIR office shall inform the originating BIR office to require the taxpayer to comply, correct or rectify the deficiencies or defects. Upon completion of all the requirements and satisfaction of all the conditions, the Certificate of Qualification shall be issued. The IVAP availment shall be reviewed within 30 days from date of application and payment and the resulting Certificate of Qualification or Notice of Disqualification, whichever is applicable, shall accordingly be issued. A taxpayer who has received a Notice of Disqualification may appeal the same to the Assessment Service, through the Assessment Programs Division, whose recommendation shall be subject to approval by the CIR after review by the Deputy Commissioner, Operations Group. Selected IVAP availments may be subjected to post audit by the Assessment Service to check the competence and efficiency of the processing BIR personnel. The Program is valid until November 29, 2006, subject to extension by the CIR on meritorious grounds.