Key Definitions
- Professional: either Licensed or Non-Licensed.
- Licensed Professional: individuals engaged in fee-based professions regulated by law (e.g., those under RR No. 2-98).
- Non-Licensed Professional (Non-Professional): individuals not registered or regulated by professional regulatory bodies who render services or labor for a fee.
Registration and Compliance for Marginal Income Earners (Gross receipts up to P100,000 or statutory minimum wage)
- Registration using BIR Form No. 1901 classified as Professional.
- Documentary requirements include service contract and government-issued ID.
- Business name to include "Job Order".
- Exempt from payment of Annual Registration Fee and issuance of Certificate of Registration.
- Exempt from maintenance of books of accounts, issuance of registered receipts/invoices, business taxes like VAT or percentage tax.
- Required to file Annual Income Tax Return only; quarterly returns and withholding taxes do not apply.
Registration and Compliance for Professionals with Gross Receipts Above P100,000
- Mandatory registration with BIR Form No. 1901; payment of ARF required.
- Taxpayer must comply with income tax, VAT or percentage tax.
- Books of accounts must be maintained; approval for Authority to Print receipts/invoices required.
- Required to file Annual Income Tax Return; Quarterly Income Tax Returns are exempted.
- Financial Statements or Account Information Form attachments to tax returns are not required.
- Subject to creditable withholding tax rates: 10%-15% for licensed, 2% for non-licensed professionals.
- Government payors must withhold appropriate percentage tax or VAT in compliance with relevant RR provisions.
- Monthly and quarterly VAT or percentage tax returns must be filed and paid.
Substituted Filing Options for Professionals with Single Payor
- Professionals earning above statutory minimum wage from one payor may opt for substituting monthly/quarterly VAT and percentage tax filings with withholding by the payor.
- Requires filing notices and waivers indicating this option.
- Lone payor withholds and remits required tax (3% percentage tax or VAT rate).
- Taxpayer exempt from filing monthly percentage tax or VAT returns; Form 1600 filed by payor serves as substituted return.
- BIR Form 2306 issued to the payee acts as a substituted official receipt, exempting from issuing registered receipts.
- Notification of change in payor triggers cancellation of substituted filing option.
Procedures Upon Termination or Layoff
- Taxpayer must notify the home Revenue District Office using BIR Form No. 1905.
- Must file Notice of Cancellation of substituted filing within ten days from separation.
- Closure procedures must be followed if no longer engaged in profession or business.
Registration and Compliance for Professionals with Multiple Payors or Other Income Sources
- Registration required with payment of ARF and issuance of COR.
- Bookkeeping and issuance of registered receipts required.
- Filing of quarterly and annual income tax returns mandatory.
- Subject to applicable withholding taxes.
- Government payors required to withhold and remit applicable percentage tax or VAT.
- Monthly and quarterly VAT or percentage tax returns must be filed.
- Quarterly submission of Summary List of Sales and Domestic Purchases for VAT taxpayers.
Administrative Directives
- All prior inconsistent issuances are repealed or modified accordingly.
- Internal Revenue officers directed to widely publicize these provisions.
Penalties and Compliance Enforcement
- While specific penalties are not detailed, non-compliance can result in denial of tax exemptions, penalties, or interest under general tax laws.
- Government agencies are mandated to withhold and remit taxes properly based on this circular's guidelines.
This comprehensive delineation ensures clarity in registration, filing, and tax compliance among individual professionals engaged by government under Job Order or Service Contracts.