RR No. 6-2005: Provides the implementing rules for EO No. 399 directing the BIR to establish the “No Audit Program” (NAP) to enhance tax compliance and increase tax collections

Summary

RR No. 6-2005 provides the implementing rules for EO No. 399, which directs the BIR to set up the No Audit Program (NAP) to enhance tax compliance and increase tax collections.

Key points

1. Who may participate. Any BIR-registered taxpayer who actually 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 who joins but later fails to qualify, can no longer take part in later years.
2. New businesses. A taxpayer who starts business and registers after the Regulations take effect may apply for qualification in the taxable year after the year of starting. Failing to participate and qualify in that year disqualifies the taxpayer from the program.
3. Qualifying conditions. All conditions must be met, including: current year income tax payment above the base year by at least 20%, and last quarter payment above the base year’s last quarter by at least 25%. First quarter payment of the next year must exceed the current year’s first quarter by at least 25%, and the income tax to gross sales/receipts ratios, as well as the net VAT or business tax ratio (never less than 3%, or the industry benchmark set by the CIR), must at least equal the base year’s.
4. Effect and exclusions. A qualified taxpayer is exempt from audit and investigation of his tax for that taxable year, except Overseas Communication Tax and all withholding taxes. Taxpayers with a net loss or net operating loss carryover, those paying Minimum Corporate Income Tax, and those whose gross income is not subject to regular income taxes, even partly, may not participate.
5. CIR right to audit. The CIR may still audit taxpayers with undisputed outstanding Letter Notices at the time of application, those who may later receive Letter Notices over discrepancies, and those who fail to file all required returns or give all required information.
6. Application and finality. The application form with attachments is due not later than 30 days from the statutory deadline for the first quarterly return of the succeeding year, or 30 days from effectivity of the Regulations, whichever is later. Returns and payments of applicants are deemed final and conclusive, and applicants waive all right to claim a refund of them.

Who is affected

• BIR-registered taxpayers who filed and paid income and business taxes for taxable year 2003
• Taxpayers who start business after the Regulations take effect

Deadlines and effectivity

• Application: not later than 30 days from the statutory deadline for the first quarterly return of the succeeding year, or 30 days from effectivity of the Regulations, whichever is later

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