REVENUE REGULATIONS NO. 6-2005 issued on March 7, 2005 provides the implementing rules for EO No. 399 directing the Bureau of Internal Revenue (BIR) to establish the “No Audit Program” (NAP) to enhance tax compliance and increase tax collections. Any taxpayer registered with the BIR and who has actually filed and paid income and business taxes for taxable year 2003 may participate in the NAP. If a taxpayer fails to participate and qualify for the NAP for taxable year 2004, he shall no longer be allowed to participate in the said program for any year thereafter. If a taxpayer participates in the NAP for a taxable year but fails to qualify for the NAP for any subsequent taxable year, he shall be disqualified from further participating in the said program. A taxpayer who commences business operations and registers with the BIR at anytime after the effectivity of the Regulations may apply for qualification under NAP on the subsequent taxable year from the taxable year when he commenced business operations and registration with the BIR; Provided, however, that if he fails to participate and qualify on the taxable year subsequent to the taxable year he commenced business operations, he shall be disqualified from further participating in the program. For a taxpayer to qualify for the NAP, he must satisfy all of the following conditions: a. Income tax payment for the current taxable year must exceed income tax payment for the base year by at least 20%; b. Income tax payment for the last quarter of the current taxable year must exceed the income tax payment for the last quarter of the base year by at least 25%; c. Income tax payment for the first quarter of the taxable year immediately following the current taxable year must exceed the income tax payment for the first quarter of the current taxable year by at least 25%; d. Ratio of income tax payment to gross sales/receipts for the current taxable year must be at least equal to that of the base year; e. Ratio of income tax payment to gross/receipts for the first quarter of the taxable year immediately following the current taxable year must be at least equal to that of the first quarter of the current taxable year; f. Ratio of net value added tax or business tax actually paid to gross sales/receipts for the current taxable year must be at least equal to that of the base year, provided, however, that in no case shall it be less than 3%, or the industry benchmark as may be determined from time to time by the Commissioner of Internal Revenue (CIR). Taxpayers who qualify under the terms and conditions prescribed in the Regulations shall be exempted from audit and/or investigation of his tax, except Overseas Communication Tax and all forms of withholding taxes, for that particular taxable year for which he qualifies. The following taxpayers may not participate in the Program: a. Those who are reporting net loss or have a net operating loss carryover; b. Those who are paying Minimum Corporate Income Taxes; and c. Those whose gross income, whether in whole or partially, are not subject to the regular individual/corporate income taxes. The CIR shall have the right to audit a taxpayer who falls in any of the following circumstances: a. Those to whom Letter Notices have been issued, which were not disputed and which remain outstanding on the date the taxpayer filed the application required under the Regulations; b. Those to whom Letter Notices may be issued by the CIR himself in the future as a result of information obtained from third party information or from information filed by the taxpayer himself that there appears to be discrepancy in his tax payment; and c. Those who shall fail to file all the required tax and information returns or do not provide all the information/data required in the tax and information returns filed A taxpayer must file an application form, duly accomplished, together with all its attachment, not later than 30 days from the statutory deadline for the filing of first quarterly return for the succeeding year or 30 days from the effectivity of the Regulations, whichever comes later. All returns and payments made by taxpayer who applied to participate in the NAP are deemed to be final and conclusive, and by applying to participate in the NAP, the taxpayer shall be deemed to have waived all his right to claim any refund pertaining thereto.