QuestionsQuestions (BOC CUSTOMS MEMORANDUM ORDER NO. 04-2014)
Individuals earning purely from self-employment/business and/or practice of profession, including single proprietors, professionals, and mixed income earners—provided all the qualification criteria in the Order are satisfied.
P3,000,000.00 gross sales/receipts and other non-operating income during the taxable year.
They may choose either (a) the graduated income tax rates under Section 24(A)(2)(a) of the NIRC, as amended, or (b) the 8% income tax on gross sales/receipts and other non-operating income in excess of P250,000.00 in lieu of graduated rates and percentage tax under Section 116.
No. Purely compensation income earners are expressly excluded and remain subject to the graduated income tax rates.
No. VAT-registered taxpayers are excluded regardless of the amount of gross sales/receipts and other non-operating income.
Taxpayers subject to other percentage taxes under Title V are excluded from the 8% option, except those subject under Section 116 (the percentage tax relevant to the Order’s framework).
Compensation income remains subject to graduated income tax rates. Business/profession income may be subject to the 8% income tax based on gross sales/receipts and other non-operating income if the VAT-threshold condition is met; however, if the VAT threshold is exceeded, the business/profession income must be taxed using the graduated rates.
There is a P250,000.00 reduction. The 8% tax applies to gross sales/receipts and other non-operating income in excess of P250,000.00.
No. The P250,000 reduction is available only to self-employed individuals earning income purely from self-employment and/or practice of profession; it is not applicable to mixed income earners.
They must (1) be individuals earning from self-employment/practice of profession, (2) be taxpayers registered and subject only to percentage tax under Section 116 or exempt from VAT or other percentage taxes, and (3) must signify their intention to elect the 8% rate through the enumerated election methods in the Order.
By registering using BIR Form No. 1901 and/or 1701Q; or by selecting the option in the initial quarterly return (BIR Form No. 2551Q and/or 1701Q) for the taxable year after the commencement of business/practice of profession.
By filing BIR Form 1905 at the beginning of the taxable year to end-date the quarterly percentage tax form type, and selecting the 8% option in the initial quarterly income tax return for income tax purposes; or by using the first quarterly percentage tax return and/or first quarterly income tax return with the proper election.
No. The election is irrevocable for the taxable year it is made, and no amendment of option is allowed for that taxable year.
They cannot change the election within the same taxable year; the option remains effective and is irrevocable. They are automatically subject to graduated rates only in succeeding years unless they elect 8% again.
They become liable to income tax under graduated income tax rates with a tax credit for previous 8% payments; they must update registration immediately within the month following the excess; they become VAT-liable prospectively starting the first day of the month after the threshold is breached; and percentage tax is imposed from the beginning of the year until VAT liability begins.
No. Qualified taxpayers are not required to file quarterly percentage tax returns.
They must file Quarterly Income Tax Returns (unless exempted by other revenue issuances), file an Annual Income Tax Return (with no requirement to attach the Financial Statement), must signify the intention to avail of the 8% option every taxable year, and must maintain books of accounts and issue receipts/invoices.
No. The Order states that FS is not required to be attached when filing the annual income tax return.