QuestionsQuestions (BUREAU OF INTERNAL REVENUE)
It supplements RMC No. 30-2016 by clarifying the registration and tax compliance requirements of individuals under job order or service contract agreements with government departments and agencies, instrumentalities, LGUs, state colleges and universities, GOCCs, and GFIs.
A Licensed Professional is engaged in the practice of professions or callings rendering services for a fee and enumerated under Section 2.57.2(A)(1) of RR No. 2-98, as amended. A Non-Licensed Professional is not identified under that provision and not registered/regulated by bodies such as the PRC, Supreme Court, or IBP, but renders services/labor-only for a fee under a contract of service.
When the individual’s gross receipts are P100,000 and below in any 12-month period (or an amount equivalent to the statutory minimum wage rates fixed by DOLE-RTWPB/NWPC) from a lone payor and with no other source of income.
Registration is done using BIR Form 1901 for TIN issuance. The registration officer adds the words “- Job Order” in the business name field (e.g., “Juan Dela Cruz - Job Order”).
They are exempt from the Annual Registration Fee (ARF), not required to have a Certificate of Registration (COR) issuance, and their tax type is Income Tax.
They file the Annual Income Tax Return using BIR Form 1701 (and pay if applicable). They are exempt from filing the Quarterly Income Tax Return using BIR Form 1701Q.
They are “not subject to creditable withholding tax rates” and are exempt from payment of business taxes such as VAT or any Percentage Tax.
They register using BIR Form 1901 for issuance of TIN with taxpayer type of “Professional” or “Professional - In General,” with documentary requirements including (1) service contract showing income payment and (2) an authorized government identification showing name, address, and birthdate; they pay the Annual Registration Fee; tax types include RF, Income Tax (1701), and VAT/Percentage Tax (as applicable).
COR issuance is exempted. For invoicing/receipts, they are generally exempt from issuance of registered principal receipts/invoices only if qualified under substituted receipt rules; otherwise, they require approval of Authority to Print (ATP) and may need to register and maintain books (except if qualified under substituted receipts).
They are subject to creditable withholding tax rates: 10% or 15% for licensed professionals (whichever is applicable), and 2% expanded withholding tax for non-licensed professionals under RR No. 2-98, as amended.
The payor must withhold 3% percentage tax under Section 5.116(A)(1) of RR No. 2-98 (as amended) or 5% final VAT withholding under Section 4.114-2 of RR No. 16-2005 (as amended), or 12% VAT under Section 9.245(A) of RR No. 2-98 (as amended) if the payee will avail substituted VAT filing under RR No. 14-2003.
Professionals (licensed/non-licensed) hired under contract of service or job order receiving income above statutory minimum wage rates, with only one payor for the calendar year, may opt for substituted filing of percentage/VAT instead of monthly and quarterly returns.
For VAT taxpayer only: Waiver of the Privilege to Claim Input Tax Credits (Annex C); Notice of Availment on the Option to Pay the Tax through the Withholding Process (Annex E); and Notice of Availment on the Substituted Filing (Annex A/B). If properly subjected to withholding by the lone payor, the payee is no longer required to file the monthly/quarterly percentage tax or VAT returns.
BIR Form 1600 filed by the payor serves as the substituted percentage tax/VAT return of the payee, provided BIR Form 2306 (Certificate of Final Tax Withheld at Source) is attached and properly signed by both payer and payee.
They must immediately file a Notice of Cancellation on the Availment of the Substituted filing of Returns (Annex D).
Yes. They are exempt from issuing duly registered principal receipts for payments of services rendered. Instead, BIR Form 2306 is constituted and treated as the substituted official receipt.
Category C requires registration with issuance of TIN and COR, payment of ARF, tax types include RF, Income Tax (1701/1701Q), VAT or Percentage Tax, and the professional must register/maintain books and issue registered principal receipts, then file quarterly and annual income tax returns and monthly/quarterly VAT or percentage tax returns (with quarterly summary lists for VAT).