Question & AnswerQ&A (Republic Act No. 7496)
The main policy is to have a uniform and equitable tax system where all tax groups pay their fair share, with higher income groups bearing a higher tax burden than lower income groups.
A 'self-employed' person is someone engaged in business who derives personal income from such business, including single proprietorships like manufacturers, traders, market vendors, owners of eateries, farmers, and service shops.
Professionals are persons who derive income from practicing their profession, including those registered with the Professional Regulation Commission such as lawyers, doctors, dentists, certified public accountants, as well as artists and athletes who pursue an art and make a living therefrom.
The tax rates are as follows: Not over P10,000 - 3%; Over P10,000 but not over P30,000 - P300 + 9% of excess over P10,000; Over P30,000 but not over P120,000 - P2,100 + 15% of excess over P30,000; Over P120,000 but not over P350,000 - P15,600 + 20% of excess over P120,000; Over P350,000 - P61,600 + 30% of excess over P350,000.
Only the following direct costs are allowed: raw materials, supplies and direct labor; salaries of employees directly engaged; telecommunications, electricity, fuel, light and water; business rental; depreciation; contributions to government and accredited relief organizations; and interest on loans from accredited financial institutions related to the business or profession. For those with difficult to determine costs, a maximum of 40% of gross receipts may be allowed as deductions.
Yes. The tax applies to every individual, whether a citizen of the Philippines or an alien residing in the Philippines, who is self-employed or practices a profession therein.
Section 3 further amended the tax schedule for taxable compensation income to a progressive income tax schedule with specific rates and brackets, from 0% up to 35% for income over P500,000.
The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate and publish necessary rules and regulations for its effective implementation as stated in Section 6.
According to Section 7, if any provision is declared unconstitutional or invalid for any reason, the remaining provisions and their application to other persons or circumstances remain unaffected.
After three (3) years from the effectivity of the Act, the Commissioner may implement a withholding tax scheme, subject to rules and regulations issued by the Secretary of Finance based on the Commissioner's recommendation.