Key Definitions
- Base Year: The taxable year immediately prior to the Current Taxable Year (e.g., 2003 for 2004 qualification)
- Current Taxable Year: The taxable year applying for NAP qualification
- Taxable Year: Any 12-month period starting between July 1 of previous year and June 30 of the indicated year (fiscal year considered)
- Taxpayer: Any individual or corporation earning purely business income
Coverage and Eligibility
- Open to registered taxpayers who have filed and paid income and business taxes for taxable year 2003
- Non-participation or disqualification in one year bars further participation in succeeding years
- New taxpayers may apply for qualification starting the taxable year following their business commencement
Benefits for Qualifying Taxpayers
- Exemption from audit and investigation for the qualified taxable year
- Exception: Does not apply to Overseas Communication Tax and withholding taxes
Qualification Criteria
- Income tax paid in Current Taxable Year exceeds Base Year by at least 20%
- Income tax paid in last quarter of Current Year exceeds last quarter of Base Year by at least 25%
- Income tax paid in first quarter following Current Year exceeds first quarter of Current Year by at least 25%
- Income tax to gross sales/receipts ratio in Current Year at least equal to Base Year
- Same ratio for first quarter following Current Year at least equal to first quarter of Current Year
- Net VAT or business tax paid to gross sales ratio at least equal to Base Year and not less than 3% or industry benchmark
- Only taxes paid in cash or supported by valid withholding certificates count; tax credit carry overs and certificates of tax credits are excluded
- Annualization allowed for taxpayers not in operation for entire Base Year
- Adjustments allowed for legislative changes and final tax assessments
Disqualifications
- Taxpayers reporting net loss or carrying Net Operating Loss Carryover
- Those paying Minimum Corporate Income Taxes
- Taxpayers whose gross income is wholly or partially exempt from regular income taxes
Reservation of Audit Rights
- BIR Commissioner may audit taxpayers with outstanding undisputed letters of notice
- Audits possible if discrepancies arise from third-party or filed information
- Failure to file required returns or provide complete data may trigger audit
Procedures for Availment
- The Commissioner of Internal Revenue to issue necessary guidelines and memoranda for the program's implementation
Application Deadlines and Conditions
- Application must be filed within 30 days after statutory deadline for first quarterly return of succeeding year or 30 days from effectivity of regulations, whichever later
- Returns and payments are considered final and conclusive upon application
- Waiver of refund claims related to said returns by taxpayers applying for NAP
Issuance of Certificate of Exemption
- Applications reviewed by a National Committee on NAP established by the Commissioner
- Committee recommends issuance of Certificate signed by Commissioner or authorized officer
Effectivity
- Regulations effective 15 days after publication in a newspaper of general circulation
Authority Signatories
- Signed by Cesar V. Purisima, Secretary of Finance
- Recommended by Guillermo L. Parayno, Jr., Commissioner of Internal Revenue