Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 16-2003)
The Regulations govern the advance payment of value-added tax or percentage tax and income tax by persons who sell goods/services through "privilege-stores," pursuant to Sections 244, 245, and 6 in relation to other specific sections of the National Internal Revenue Code of 1997.
A "Privilege-Store" refers to a stall or outlet which is not permanently fixed to the ground, typically set up temporarily in places like shopping malls, hospitals, office buildings, parks, streets, and other public places, where goods/services are sold for brief durations.
The Exhibitor or Organizer is the primary lessee of the entire space where privilege-stores operate, holding a lease contract with the owner and sub-leasing to the privilege-store operators. If the property owner directly leases to the operator, the owner is regarded as the Exhibitor or Organizer.
Key obligations include posting the Certificate of Registration publicly, withholding and remitting expanded withholding tax on lease payments to the lessor, informing the Revenue District Office about the operators, ensuring operators are registered and have paid taxes, and reporting non-compliance to the Bureau of Internal Revenue.
Operators must withhold and remit expanded withholding tax on sub-lease rentals to the organizer; pay advance income tax and advance value-added or percentage tax monthly before the operations, and register with the BIR at their principal place of business.
Business tax is set at P150 per day or P4,500 per month; income tax is P50 per day or P1,500 per month, payable in advance for the duration the privilege-store is allowed to operate.
Advance payments of business and income taxes are credited against actual taxes due for the taxable period. Advance business tax credits are applied against output tax (if VAT taxpayer) or percentage tax (if non-VAT taxpayer). Advance income tax is credited against the income tax due upon filing quarterly and annual returns.
Operators must present validated BIR Form No. 0605 and Official Receipts or Deposit Slips issued by authorized banks or Revenue Collection Officers as proof of advance tax payment, which must accompany the applicable tax returns to claim the credit.
Violations are subject to penalties under Sections 254, 275, and other related provisions of the National Internal Revenue Code of 1997, which include fines, surcharges, and other sanctions.
RDOs monitor compliance by organizers and operators, validate submitted lists, deploy Revenue Collection Officers to perform physical checks, ensure registrations, monitor advance and withholding tax payments, and prepare reports on compliance.