RR No. 9-2006: Further amends certain provisions of RR No. 6-2005, as amended, implementing the “No Audit Program (NAP)”

Summary

RR No. 9-2006 further amends certain provisions of RR No. 6-2005, as amended, which implements the No Audit Program (NAP) under EO No. 399, as amended by EO No. 422.

Key points

1. Income tax criteria. Income Tax payment for the Current Taxable Year must exceed that of the Base Year by at least 20%. The ratio of Income Tax payment to gross sales or receipts must be at least equal to that of the Base Year.
2. Special cases. For mixed income earners, changes in compensation and their tax effect are excluded from the computation. MCIT payers and taxpayers on preferential tax rates may join, using the MCIT or the preferentially computed tax of the Base Year and Current Year.
3. VAT or Percentage Tax ratio. The ratio of net VAT or business tax paid to gross sales or receipts must be at least equal to the Base Year, and not less than 3% for Percentage Tax payers or 30% of the VAT rate for VAT payers, or the industry benchmark set by the Commissioner. Taxpayers with purely VAT zero-rated or VAT exempt transactions are not required to meet this criterion.
4. What counts as tax paid. Only taxes actually paid in cash count, including creditable withholding taxes supported by BIR Form No. 2307 or 2316. Tax Credit Certificates, Tax Debit Memos and tax credits carried over from prior years are excluded.
5. Disqualification. Taxpayers reporting a net loss, or a Net Operating Loss Carry-over without MCIT due, are disqualified. So are those with net income but no tax payable because of personal and additional exemptions.
6. Filing, review and appeal. The NAP Participation Form is filed within 30 days from the statutory annual ITR deadline, or within 30 days from effectivity if that deadline already passed. A regional or large taxpayer Review Committee recommends a Certificate of Exemption or Notice of Disqualification, unpaid amounts are paid within 30 days from notice, and a disqualified taxpayer may appeal to the NAP Committee-National Office Level within 30 days.

Who is affected

• Taxpayers applying to the No Audit Program, including mixed income earners, MCIT payers and preferential rate taxpayers

Deadlines and effectivity

• NAP form: within 30 days from the statutory annual ITR deadline
• Taxable year ended December 31, 2005 and fiscal years ending January, February or March 2006: on or before July 31, 2006
• 2004 availment, if no FAN is yet issued for 2004: file not later than July 31, 2006
• Unpaid amounts: within 30 days from notice

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