RR No. 14-2006: Provides the revised implementing rules for EO No. 399, as amended by EO No. 422, directing the BIR to establish the “No Audit Program” for the purpose of enhancing tax compliance and increasing tax collections with extensions of the deadline for availment thereof

Summary

RR No. 14-2006 gives the revised implementing rules for the No Audit Program (NAP) under EO No. 399, as amended by EO No. 422, with extended deadlines for availment.

Key points

1. Coverage and effect. Taxpayers who qualify are exempt from audit and investigation for the taxable year they qualify, except for Overseas Communication Tax and all forms of withholding taxes. The NAP runs for taxable years 2004, 2005, 2006, 2007 and 2008.
2. Who may join. A BIR-registered taxpayer who filed and paid income and business taxes for Taxable Year 2003 may join. A taxpayer who fails to participate and qualify for Taxable Year 2004, or fails to qualify in a later year, cannot join afterward, unless the business was established after 2004. New businesses may apply for the taxable year after the one in which they began operations and registered.
3. Qualifying tests. Current-year income tax payment must exceed the Base Year payment by at least 30%, and the ratio of income tax to gross sales or receipts must be at least equal to the Base Year ratio. The net VAT or business tax to gross sales ratio must also be at least the Base Year ratio, but not below 5% for financial institutions, 4% for other percentage taxpayers, or 30% for sellers of goods and 50% for sellers of services of the VAT rate, or the CIR industry benchmark.
4. What counts as payment. Only taxes actually paid in cash count for the current year, and creditable withholding taxes supported by BIR Form 2307 count as cash. TCCs, TDMs and tax credits carried over are excluded. Special rules cover mixed-income earners, MCIT payers and preferential-rate taxpayers.
5. Disqualification and CIR audit rights. Taxpayers reporting a net loss, or with a Net Operating Loss Carry-over without MCIT due, are disqualified. The CIR may still audit those with undisputed outstanding Letter Notices, future Letter Notices, cases under a Letter of Authority from confidential information, and those who fail to file required information returns.
6. Filing and review. The NAP Participation Form (BIR Form No. 2114, April 2006 Version) is filed with attachments, and an NAP Review Committee reviews it. Unpaid amounts found on review must be paid within 30 days from notice, and a Notice of Disqualification may be appealed within 30 days from receipt.

Who is affected

• Taxpayers registered with the BIR who filed and paid income and business taxes for Taxable Year 2003
• New businesses applying for the subsequent taxable year

Deadlines and effectivity

• NAP in force for taxable years 2004 to 2008
• Participation Form due not later than 30 days from the statutory Annual ITR deadline
• For taxable years ending December 31, 2005 and fiscal years ending January to April 2006: on or before October 1, 2006, subject to CIR extension
• Increased growth rate and ratio apply to applications filed after July 31, 2006

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