REVENUE REGULATIONS NO. 9-2006 issued on July 11, 2006 further amends certain
provisions of Revenue Regulations (RR) No. 6-2005, as amended, implementing the provisions
of Executive Order (EO) No. 399, as amended by EO No. 422, otherwise known as the “No
Audit Program (NAP)”.
To qualify for the NAP, the following criteria must be satisfied by the taxpayer:
a. Income tax payment for the Current Taxable Year must exceed the Income Tax
payment for the Base Year by at least 20%;
b. 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.
For taxpayers earning mixed income (business income and employment
income), the computation of the 20% increase in the Income Tax payment and the
ratio of Income Tax payment to gross sales must be based on the total tax paid and
total income by the taxpayer from his business and employment. Provided, however,
that increase/decrease in the compensation and its corresponding effect on the tax due
for the Current Taxable Year shall be excluded for purposes of computing the
compliance with the required increase in Income Tax payment and the ratio of tax
payment to gross sales/receipts.
Taxpayers who paid or are paying the Minimum Corporate Income Tax
(MCIT) can still avail of the NAP provided that the required increase in the Income
Tax payment and the ratio of tax payment to gross sales/receipts shall be based on the
MCIT payment in the Base Year and the MCIT due in the Current Year. Further,
excess MCIT shall not be credited from the succeeding year’s tax due, even if the
normal Income Tax becomes higher than the MCIT. Deferred Charges-MCIT for the
Current Year must be closed to retained earnings account.
Taxpayers enjoying the benefit of the preferential tax rates (not subject to the
normal Income Tax rate) can still avail of the program. Provided, that the required
increase in the Income Tax payment and the ratio of Income Tax payment to gross
sales/receipts as stated in the Regulations are complied with and shall be based on the
tax due computed applying the preferential tax rate for the Base Year and the Current
Year. The same rule applies, even if the taxpayer’s Current Year is no longer entitled
to the application of the preferential tax rate.
c. The ratio of net Value-Added Tax (VAT) 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% for those subject to
Percentage Tax, or 30% of the VAT rate provided by law for any given period for
those subject to VAT, or the industry benchmark as may be determined from time to
time by the Commissioner of Internal Revenue.
VAT zero-rated transactions and VAT exempt transactions, not subject to
Percentage Tax, shall not be considered for purposes of determining compliance with
the required VAT or Percentage Tax ratio. Provided, however, that the gross
sales/receipts from the aforesaid transactions are included for purposes of qualifying
with the requirements prescribed in the Regulations.
Taxpayers having purely VAT zero-rated transactions or VAT exempt
transactions, not subject to Percentage Tax, shall not be required to comply with this
criteria and shall be deemed qualified for said exemption provided, that the previous
requirements of this section are complied with. Provided, further, that photocopies of
the required documents included in the NAP Participation Form (April 2006 Version)
shall be presented for validation of their business tax type/s.
In determining the tax payments for the Current Taxable Year, only taxes
actually paid in cash as shown in the Annual Income Tax Return (ITR), Quarterly
ITR, Quarterly VAT Return, Monthly VAT Declaration and Quarterly/ Monthly
Percentage Tax Return shall be considered. For this purpose, Creditable Withholding
Taxes (CWT) for the Tax Year concerned, which are properly supported by a
Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)/Certificate of
Compensation Payment/Tax Withheld (BIR Form No. 2316), shall be considered as
cash payment. On the other hand, Tax Credit Certificates (TCCs)/Tax Debit Memos
(TDMs), and tax credit carried over from prior years are considered non-cash items
and shall be excluded from determining the tax payments for the Current Taxable
Year.
The growth rate and ratio provided in the Regulations shall be adjusted to
reflect the effect of the increase/decrease of the tax rate resulting from legislative
measures. These growth rate and ratio shall be determined by the Commissioner for
every NAP participation year which shall be released through a Revenue
Memorandum Circular (RMC) to be issued before the deadline for filing of NAP
Participation Form on a yearly basis.
Taxpayers who are reporting net loss or have a Net Operating Loss Carry-over without
MCIT due shall be disqualified from participating in the NAP. This includes taxpayers having
net income but having no tax payable due to their deduction of personal and additional
exemptions.
A taxpayer must file a duly accomplished NAP Participation Form, together with the
required attachments, not later than 30 days from the statutory deadline for the filing of Annual
ITR for the year subject of the Participation, or in the case of taxpayers whose statutory deadline
for the filing of Annual ITR occurred earlier than the date of the effectivity of these Regulations,
their application must be filed within 30 days from the effectivity thereof.
However, for taxpayers whose Taxable Year ends December 31, 2005 and Fiscal Year
ending on January, February or March, 2006, the NAP Participation Form must be filed together
with the required attachments, on or before July 31, 2006.
Taxpayers who failed to avail and qualify for 2004 NAP availment can still avail of the
Program by complying with the prescribed requirements provided in the Regulations: Provided,
however, that no Final Assessment Notice (FAN) pursuant to a Letter of Authority, Tax
Verification Notice or Letter Notice has yet been issued for the Taxable Year 2004. Additional
payments, if any, must be made using BIR Form 06015-101 and NAP Participation Form must
be filed not later than July 31, 2006.
The NAP Review Committee, who will review the NAP application and its required
attachments, are composed of the following:
a. Regional Level:
Head : Assistant Regional Director
Members:
1. Revenue District Officer (RDO) where taxpayer is registered
2. Chief, Assessment Division
3. Chief, Legal Division
b. Large Taxpayers:
Head : HREA (Regular/Excise)
Members:
1. Chief, Large Taxpayers Audit and Investigation Division (LTAID)
I/LTAID II/, Large Taxpayers District Office where taxpayer is
registered
2. Chief, Large Taxpayers Collection and Enforcement Division
(LTCED)
3. Head, Review Team
The said Committee shall recommend the issuance of a Certificate of Exemption from
Audit/Investigation or Notice of Disqualification which shall be signed by the Regional Director,
for regional office cases, or the Assistant Commissioner, Large Taxpayers Service, for large
taxpayers’ cases.
Any unpaid amount found after the Committee’s review shall be paid within 30 days
from receipt by the taxpayer of the written notification from the RDO or Chief of concerned
Large Taxpayers Office; otherwise, the taxpayer’s availment will be invalid.
Taxpayers who received a Notice of Disqualification may file an appeal to the NAP
Committee-National Office Level within 30 days from its receipt thereof. The composition,
functions, duties and responsibilities of NAP Committee-National Office Level will be provided
through a Revenue Special Order (RSO) to be issued by the Commissioner for that purpose.