RR No. 10-2005: Amends certain provisions of Revenue Regulations No. 6-2005 (No Audit Program) resulting from the amendment of EO No. 399

Summary

RR No. 10-2005 amends certain provisions of RR No. 6-2005 (No Audit Program) as a result of the amendment of Section 2 of EO No. 399.

Key points

1. Amended qualifying criteria. Income Tax payment for the Current Taxable Year must exceed the Base Year by at least 20%. The income tax to gross sales/receipts ratio must at least equal the Base Year’s. The net VAT or business tax ratio must also at least equal the Base Year’s, but never less than 3% for those subject to Percentage Tax, 30% of the VAT rate for those subject to VAT, or the industry benchmark set by the CIR.
2. What counts as tax payment. For the Current Taxable Year, only taxes actually paid in cash as shown in the return count. Creditable withholding taxes supported by BIR Form 2307 count as cash, while TCCs, Tax Debit Memos and tax credits carried over from prior years are excluded. For the Base Year, the total tax due is included regardless of mode of payment.
3. Partial-year Base Year. If the taxpayer did not operate for the whole Base Year, the Base Year tax payments are annualized and used for computing the required growth and ratio.
4. Application period. The application form with attachments is filed not later than thirty (30) days from the statutory deadline for the annual Income Tax return for the year concerned. If that deadline fell before the effectivity of these Regulations, the application is filed within thirty (30) days from effectivity.
5. Eligibility and voluntary payment. Only taxpayers whose annual income tax returns were not amended may apply. A taxpayer short of qualifying may make a voluntary payment of not less than the deficiency, which is non-refundable and not deductible against income, and which becomes part of that tax year’s base for qualifying in the subsequent tax year.

Who is affected

• Taxpayers applying to the No Audit Program
• Taxpayers subject to Percentage Tax or VAT

Deadlines and effectivity

• Application: within thirty (30) days from the statutory deadline for the annual Income Tax return
• Where that deadline came before effectivity: within thirty (30) days from effectivity

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.