Taxpayers Who Are Not Qualified Of The 8% Income Tax Rate

Do you consider to avail of the 8% Income Tax rate? If not, taxpayers may consider of the following individuals who are not qualified to avail of the 8% Income Tax Rate as follows:

1. Purely compensation income earners;

2. VAT-registered taxpayers, regardless of the amount of gross sales/receipts and other non-operating income;

3. Non-VAT taxpayers whose gross sales/receipts and other non-operating income exceeded the P3,000,000.00 VAT threshold;

4. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except those under Section 116 of the same title;

5. Partners of  a General Professional Partnership (GPP) since their distributive share from the GPP is already net of costs and expenses; and

6. Individuals enjoying income tax exemption such as those registered under the Barangay Micro Business Enterprises (BMBEs), etc., since taxpayers are not allowed to avail of double or multiple tax exemptions under different laws, unless specifically provided by law.

The above mentioned is stated in Revenue Memorandum Circular (RMC) No. 50-2018 that clarifies certain provisions of Revenue Regulations (RR) Nos. 8-2018 and 11-2018 Implementing the Income Tax Provisions of Republic Act (R. A.) No. 10963, Otherwise Known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" Act. 

Benefits Classified/Considered As "De Minimis" Not Subject To Income Tax As Well As Withholding Tax

Revenue Memorandum Circular (RMC) No. 50-2018 is a circular that clarifies certain provisions of Revenue Regulations (RR) No. 8-2018 and 11-2018 as amended by RR Nos. 15-2018 and 14-2018, respectively.  The stated RRs were issued to implement the TRAIN law's income tax provisions including its consequent withholding tax. 

As of January 1, 2018, the following are the "de minimis" benefits:

a. Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year; 

b. Monetized value of vacation and sick leave credits paid to government officials and employees; 

c. Medical cash allowance to dependents of employees not exceeding P 1,500.00 per employee per semester or P250.00 per month; 

d. Rice subsidy of P2.000.00 or one (1) sack of 50 kg. rice per month amounting to not more than P2,000.00; 

e. Uniform and clothing allowance not exceeding P6,000.00 per annum; 

f. Actual medical assistance, e.g., medical allowance to cover medical and healthcare needs. annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10.000.00 per annum;

g. Laundry allowance not exceeding P300.00 per rnonth; 

h. Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other tl-ran cash or gift certificate, with an annual monetary value not exceeding P10,000.00 received by the employee under an established written plan which does not discriminate in favor of highly paid employees; 

i. Gifts given during Christmas and major anniversary celebrations not exceeding P5.000.00 per employee per annum

j. Daily, meal allowance for overtime work and night/grave yard shift not exceeding twenty-five percent (25%) of the basic minimum wage on a per a region basis; and 

k. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos (P10,000) per employee per taxable year. 

All other benefits given by employers which are not included in the above enumeration shall not be considered as "de minimis'' benefits and hence, shall be subject to income tax as well as withholding tax.

The benefits given in excess of the maximum amount allowed as "de minimis" benefits shall be included as part of "other benefits" which is subject to the P90.000.00 ceiling. Any amount in excess of the P90,000 shall be subject to income tax and consequently, to the withholding tax on compensation. 

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/RMC%20No%2050-2018.pdf of RMC No. 50-2018.

Gross Annual Sales, Earnings, Receipts Or Output Required For Taxpayer's Books Of Accounts Audited & Examined Yearly By Independent CPAs

Republic Act (RA) No. 10963 shall be known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" with effectivity date of January 01, 2018.

Sec. 71 of RA No. 10963 further amends Section 232 of the NIRC as follows:

"SEC. 232. Keeping of Books of Accounts. - 

"(A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts. - All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep and use relevant and appropriate set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year: Provided, That Corporations, companies, partnerships or persons whose gross annual sales, earnings, receipts or output exceed Three million pesos (P3,000,000), shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form (AIF) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/TRAIN%20matters/RA-10963-RRD.pdf of the full text of RA No. 10963.

New Rule: Lease of Residential Units Exempt From VAT & Exempt From The 3% Percentage Tax

Revenue Regulations (RR) No. 13-2018 are Regulations Implementing the Value-Added  Tax Provisions under the Republic Act (RA) No. 10963, or the “Tax Reform for Acceleration and Inclusion (TRAIN),” Further Amending Revenue Regulations (RR) No. 16-2005 (Consolidated Value-Added Tax Regulations of 2005), as Amended.

Taxpayers and other concerns need to know the updates with regards to tax rule in Lease of Residential Units. In these regulations, Lease of Residential Units is considered as VAT Exempt Transactions stated in Sec. 4. 109-1, B (q) as follows:

(q) Lease of residential units with a monthly rental per unit not exceeding Fifteen Thousand Pesos (P15,000.00). 

The foregoing notwithstanding, lease of residential units where the monthly rental per unit exceeds Fifteen Thousand Pesos (P15,000.00), but the aggregate of such rentals of the lessor during the year do not exceed Three Million Pesos (P3,000,000.00) shall likewise be exempt from VAT; however, the same shall be subject to three percent (3%) percentage tax under Section 116 of the Tax Code. 

In cases where a lessor has several residential units for lease, some are leased out for a monthly rental per unit of not exceeding P15,000.00 while others are leased out for more than P15,000.00 per unit, his tax liability will be as follows:

1. The gross receipts from rentals not exceeding P15,000.00 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts. It is also exempt from the 3% percentage tax. 

2. The gross receipts from rentals exceeding P15,000.00 per month per unit shall be subject to VAT if the aggregate annual gross receipts from said units only exceeds P3,000,000.00. Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code.

In case of mixed transactions, the above-mentioned rule should be observed. 

The term ‘residential units’ shall refer to apartments and houses & lots used for residential purposes, and buildings or parts or units thereof used solely as dwelling places (e.g., dormitories, rooms and bed spaces) except motels, motel rooms, hotels and hotel rooms, lodging houses, inns and pension houses. 

The term ‘unit’ shall mean an apartment unit in the case of apartments, house in the case of residential houses; per person in the case of dormitories, boarding houses and bed spaces; and per room in case of rooms for rent.

Please refer https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2013-2018%20Corrected%20Copy.pdf of the full text of RR No. 13-2018 and illustrations.

Revised Creditable Income Tax Rates on Professional Fees, Talent Fees, Etc. For Services Rendered

Revenue Regulations (RR) No. 14-2018 are regulations to amend certain provisions of RR No. 11-2018 particularly Section 2 & 14.

SECTION 2. AMENDATORY PROVISIONS - The provisions of Sections 2 and,14 of RR 11- 2018, are hereby amended as follows: 

"SECTION 2. Certatn items of Section 2.57.2 of RR No. 2-98 is hereby renumbered and further amended to read as follows: 

SECTION 2.57.2, Income Payments Subject to Creditable Withholding Tax and Rates Prescribed Thereon. - Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: 

(A) Professional fees, talent fees, etc. for services rendered - on the gross professional, promotional, and talent fees or any other form of remuneration for the services rendered by the following: 

Individual payee: 

If gross income for the current )rear did not exceed P3M - Five percent (5%) 

If gross income is more than P3M or VAT Registered regardless of amount - Ten percent (10%)

Non-individual payee: 

Ten percenl (10%) s income for the current year did not exceed P720.000-Ten percent (10%); If gross income exceeds P720.000  - Fifteen percent (15%) 

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2014-2018.pdf of the full text of RR No. 20-2018.