Professional Documents
Culture Documents
Professionals
The Philippine Bureau of Internal Revenue (BIR) released last May 2018
a new Revenue Memorandum Order (RMO) covering the availment of
the 8% income tax rate option for professionals and self-employed
individuals.
The BIR memo (RMO 23-2018) provides clear guidelines and
instructions on how to avail the 8% income tax rate, under the approved
TRAIN tax law of the Philippines.
a. If the gross sales/receipts and other non-operating income do not exceed the
VAT threshold, the individual has the option to be taxed at:
i. Graduated income tax rates as provided under Section 24 (A)(2)(a) of the
NIRC, as amended; or
ii. Eight percent (8%) income tax rate based on gross sales/receipts and other
non-operating income in lieu of the graduated income tax rates and
percentage tax under Section 116 of the NIRC, as amended.
b. If the gross sales/receipts and other non-operating income exceeds the VAT
threshold, the individual shall be subject to the graduated income tax rates
prescribed under Section 24 (A)(2)(a) of the NIRC, as amended.
4. The following criteria should all be satisfied to be able to qualify and
avail of the 8% income tax rate option:
The BMBE cannot avail both BMBE status (exempted from income tax,
but liable to other internal revenue tax) and the 8% income tax rate
option (in lieu of the graduated income tax rates and percentage tax) at
the same time, since taxpayers are not allowed to avail of double or
multiple tax exemption under different laws, unless specifically provided
by law.
Sample: Mr. A elected the 8% income tax rate option on February 14, 2019 by
filing BIR Form 1905. Later, before the due date on filing of the 1st Quarterly
Percentage Tax Return or 1st Quarterly Income Tax Return, Mr. A had a
change of heart to be taxed at the graduated rates. Can Mr. A signify the option
to be taxed at the graduated rates in filing his 1st Quarterly Percentage Tax
Return or 1st Quarterly Income Tax Return or re-filing the BIR Form 1905
before filing his 1st Quarterly Percentage Tax Return?
The answer is no. The election made on February 14, 2019 is irrevocable and
no amendment of option shall be made for the said taxable year. Beginning
2020, Mr. A is automatically subjected to the graduated income tax rates,
unless opted to elect the 8% income tax rate by signifying his intention.
9. Self-employed individual who is qualified and availed of the 8% income tax
rate option is:
a. Required to file the Quarterly Income Tax Return, unless exempted by any
revenue issuances;
b. Required to file the Annual Income Tax Return [Financial Statement (FS) is
not required to be attached];
c. Not required to file the Quarterly Percentage Tax Return;
d. Required to signify the intention to avail the 8% income tax rate every
taxable year.
e. Required to maintain books of accounts and issue receipts/invoices;
A taxpayer shall automatically be subjected to graduated income tax rates, liable
to VAT prospectively and attached an audited FS in filing of the annual income
tax return, if the gross annual sales and/or receipts exceed the amount of Three
Million Pesos (P 3,000,000.00) anytime during the current taxable year when
the option was made. S/he shall immediately update his/her registration within
the month following the month s/he exceeded the VAT threshold to reflect the
change in tax profile from non-VAT to a VAT taxpayer. Percentage tax shall be
imposed from the beginning of the year until taxpayer is liable to VAT.
a. The net taxable income, if taxpayer opted to be taxed at graduated rates or has
failed to signify the 8% income tax rate option;
12. For Mixed Income Earner, the excess of the P250,000.00 over the actual
taxable compensation income is not deductible against the taxable income from
business/practice of profession under the 8% income tax rate option.
The total tax due shall be the sum of the tax due from compensation computed
using the graduated income tax rates and the tax due from self-
employment/practice of profession resulting from the multiplication of the 8%
income tax rate with the total of the gross sales/receipts and other non-operating
income.”
What taxes are included in the new Philippine tax reform program, also
known as TRAIN?
We summarize below a list of revised and brand-new taxes that are part
of the approved Tax Reform for Acceleration and Inclusion or TRAIN law
initiated by the Department of Finance (DOF) and ratified by Congress.
Implementation of the new taxation under TRAIN begun on January 1,
2018 after being signed into law by Pres. Rodrigo Duterte in December
2017.
Let’s take an in-depth look at what’s included in this tax reform program.
Full details of the New Personal Income Tax Rates and Income Tax
Tables can be found here.
2. Lower Tax Rates for Professionals
With the revised personal income tax table, salaried employees will
surely benefit from the lower tax rate. Self-employed professionals,
meanwhile, can expect to pay lower taxes as well with the reduced tax
rates for professionals, as follows:
ANNUAL SALES OR GROSS RECEIPTS TAX RATE
Below P3 million May choose either 8% flat tax on gross receipts or follow personal income ta
ANNUAL SALES OR GROSS RECEIPTS TAX RATE
Professionals will no longer have to file and pay the percentage tax;
instead they will be charged a withholding tax of 8% flat rate on gross
sales or receipts.
Self-employed professionals earning annual income of P3 million and
below may choose to pay the 8% flat tax or follow the personal income
tax table.
The new excise taxes for cars will follow a four-tier scheme:
Excise Tax on Cars and Automobiles
NET MANUFACTURER'S PRICE TAX RATE ON HYBRID CARS TAX RATE ON NON-HYBRID CARS
8. Tax on Coal
The approved excise tax on coal is as follows (currently P10.00 tax per
metric ton):
P50.00 tax per metric ton in 2018
P100.00 tax per metric ton in 2019
P150.00 tax per metric ton in 2020
9. Tax on Tobacco Products
Excise taxes on tobacco products will be increased to P32.50 initially
during the first six months of 2018, then will rise to P35.00 from the rest
of 2018 until 2019.
From 2020 to 2021, the tobacco tax will rise to P37.50, followed by a
fixed tax of P40.00 to be imposed from 2022 to 2023. From 2023
onwards, tobacco taxes will rise 4% annually.
10. Donor’s Tax
Donations or gifts with at least P250,000 worth will be charged a donor’s
tax of 6% flat rate. This will be charged regardless of the relationship
between the donor and the donee.
11. Estate Tax
The estate tax, or tax levied on the properties or estate of lawful heirs and
beneficiaries inherited from a deceased person, will now be subject to a
flat rate of 6% on the amount in excess of P5 million.
Estates with a net value of P5 million and below will be exempted from
paying the estate tax. Family homes that are valued at P10 million or
less will also be exempted from estate tax. Under existing tax laws, only
family homes worth P1 million are exempted.
The stock transaction tax — a tax charged on stock sellers when a buy or
sell transaction is made — will be increased to 0.6% of the gross trade
amount from the current 0.5% rate.
Stock-related transactions of companies not listed in the Philippine Stock
Exchange (PSE) will be slapped with a higher stock transaction tax of
15%, an increase from the current 5% or 10%.
1. Veto on the 15% special tax rate for employees of Regional Headquarters
(RHQ), Regional Operating Headquarters (ROHQ), Offshore Banking
Units, and Petroleum Service Contractors and Subcontractors. Thes
employees will be taxed using the regular income tax table as shown in Item
No. 1 above.
2. Veto on the exemption of self-employed professionals, with gross sales or
receipts not exceeding P500,000, from the payment of the 3% percentage tax.
3. Veto on the excise tax exemption of petroleum products used as input,
feedstock, or as raw material in the manufacturing of petrochemical products, or
in the refining of petroleum products, or as replacement fuel for natural gas fired
combined cycle power plants (see Item No. 6 above).
4. Veto on the zero rating of sales of goods and services to separate customs
territory and tourism enterprise zones, specifically, the areas under the Tourism
Infrastructure Enterprise Zone Authority (Tieza).
5. Veto on the earmarking of incremental tobacco taxes