RMC No. 67-2021 — Clarifies the issues relative to the temporary reduction of Percentage Tax rate imposed under Section 116 of the NIRC of 1997, as amended by Section 13 of RA No. 11534 (CREATE Act) Digest | Full Text

REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL RE\'ENUE 30 April 2021 RE'ENUE MEM.RANDUM .IRCULAR No. lgl __ 2021 SUBJECT : Clarifies Issues Relative to the Temporary Reduction of Percentage Tax Rate Imposed Under Section 116 of the National Internal Revenue Code of 1997, as Amended (Tax Code) by Sec. 13 of R.A. hlo. 11534, Otherwise Known as the "Corporate Recovery and Tax Incentives for Enterprises Act" (CREATE) : All Internal Revenue Officers and Others Concerned This Circular is issued to answer frequently asked questions andicfariff issues relative to the amendments made to Percentage Tax pursuant to 13 of R.A. No. 1 1F34, otherwise known as the CREATE, as implemented by Revenue Regulations (RR) No. 4-2021. QL: ir The smendments to the Tax Code under the CREAT\ ,)was intended for corporations. Was the decrease of Percentage Tax rate from thiee percent (3%) to one percent (1%) effective July 1, 2020 until lune 30, 2023 pqr{uant to Section 13 of R.A, No. 11534 intendedfor corporate tascpayers only? A1: i : No. Sec. 116 of the Tax Code, applies to both corporate taxpayers and self-employed individuals and professionals whose gross sales or gross receipts are not exceeding the three million pesos (P3,000,000.00) threshold, except for cboperatives and self- employed individuals and professionals availing the 8Yo incom{ t$x rate. Q2: Does the 1% percentage tax rate refer to those covered W Secl tUg(l)(CC) only or A2: as a whole, meaning, those under Sec, 116 of the Tax Code? : : Yes. The coverage is as a whole under Section 116 of the Tax Code, which provides that any person whose sales or receipts are exempt under Section 109(1)(CC) of the Tax Code from the payment of VAT and who is not a VAT-regiitered person shall be subject to percent age tax,provided, that the taxpayer did not opt [o] be VAT-registered even if the P3,000,000.00 threshold was not breached. i llI The reduced rate of loh forpercentage tax prescribed under Seg. 116 is imposed on transactions or activities which are neither specifically exempt under Sec. 109 of the Tax Code nor are subject to VAT, because they have not reached the three million pesos VAT threshold as provided for under Sec. 109(1XCC) of the same Code. lN IERrvnL Rrveruur 2;t ..\ l I

Q3: Are non-VAT-Registered taxpayers required to amend their Percentage Tax returns (BIR Form l{o. 2551Q) for the third 6'd) andfourth (4'o) quarters of 2020 up to the effectivity of RR l,{o. 4-2021 by using the I% rate? A3: Yes. Taxpayers who filed their 3'd and 4th quarter Percentage Tax returns for 2020 and those who may have filed their 1't quarter percent age tax returns for 2021 using the 3oh rate are required to amend their duly filed Percentage Tax returns using the lYo rate to reflect the overpaid taxes. Q4: If the taxpayer will carry over the overpaid percentage taxes for the succeeding ?: period/s, will amending the return be subjected to penalty for every amended return? A4z No. Amendment of the Percentage Tax returns is not subject to penalty for affected taxpayers which/who will carry over the overpaid percentage taxes. Q5: Pursuant to the "Transitory Provisions" of RR No. 4-2027, excess Percentage Tax poyments as a result of the decrease of tax ratefrom 3% to 1% starting July 1,2020 until the effictivity of the said Regulations may be carriedforward to the succeeding taxable quarter/s by reJlecting the excess percentage tax payment under Line 17 of the Quarterly Percentage Tax Return (BIR Form No. 2551Q), does this mean that the taxpayer is already precludedfrom claiming tax refundfor the overpayment? A5: Yes. The carry-over is intended for Percentage Taxpayers who are iegularly filing the returns and are expected to have overpaid taxes as a result of the retroactive application of CREATE starting July 1,2A20. The transitory provisions in RR No. 4- 2,021 allows flexibility to affected taxpayers by allowing them to carry over the overpaid taxes in order for taxpayers to utilize the overpaid amount against future percentage tax liabilities. Q6: (Jnder what instances are percentage taxpayers allowed for refund? ' 4.6: percentage taxpayers who have overpaid taxes as a result of the decrease of tax rate from 3o/oto lo/o starting July l,2O2O until the effectivity of RRNo. 4-2021 are allowed for a tax refund in the event that: ,'a. The taxp ayer shifted from non-VAT to VAT-registered status; or ,b. The taxpayer has opted to avail the eight percent (S%) income tax rate at the beginning of TY 2021 Q7: For lack of option to carry over the overpaid amount in BIR Form No. 25 51Q what should the percentage taxpayer do to indicate the said option? A7: Please note that in the current Percentage Tax Return (BIR Form No. 2551Q), the only option reflected in the said form is for refund or issuance of tax credit certificate (TCC). The percentage taxpayer who shall caffy-over the overpaid amount should observe the following guidelines:

a. For taxpayers filing BIR Form No. 2551Q manually, neither of the options "To be Refunded" or "To be Issued a Tax Credit Certificate" shall be marked in the said tax return but rather write the phrase "To be Carried Over" on the return; or b. For eFPS and eBIRForms filers, the option "To be Issued Tax Credit Certificate" shall be marked as a workaround procedure to proceed with the electronic filing. For purposes of the transitory provisions in Section 3 of RR No. 4-2021, it is presumed that the taxpayer will carry over the overpaid tax to the succeeding taxable quarter once the said option was chosen. However, if the taxpayer is intent in having the overpaid tax. to be refunded or issued with TCC for any ofthe reason stated in Q&A No. 6, the BIR shall be informed thru BIR Form No. I9l4 or the "Application for Tax Credits/Refunds" by indicating therein that it shall be in the form of refund or TCC. The same procedure shall be undertaken, whether the return was filed manually or electronically, by the percentage taxpayer until the overpaid amount has been fully utilized. Q8: In case the taxpoyer has marked or has inadvertently marked either of the options for tax refund or TCC but opts to carry over the overpayment instead, will this be nllowed? A8: Yes. If the percentage taxpayer will carry over the overpayment but has inadvertently marked either tax refund or issuance of TCC on the ,"ir*, the Bureau will f,r.ru.rr. that the overpaid amount will be carried over. Once the overpayment has been carried forward, the option initially chosen shall automatically be superseded. Q9: In case a percentage taxpayer caruied oyer the alleged overpayment without amending the affected Percentage Tax returns to any quarter/s staging 2021, will the carried over percentage tax be disallowed? ,{9: "Yes. The amended Percentage Tax returns showing the overpayment shall be the basis for the aarry over. Q10: How will the overpayment of percentage taxes be recovered by individuals under a iob order or service contract agreement with the departments and agencies of the government, its instrumentalities, local government units (LGUs), state universities and colleges (SUCs), including government-owned and/or -controlled corporntions (GOCCs) and government Jinancial institutions GfIg ? A10: The withholding agent/government agency shall be responsible in refunding the overpaid taxes of Individuals under Job Order or Service Contract Agreement, who rj availed of sqbstituted filing on Percentage Tax pursuant to RMC No. 51-2018. rr Individual contractors claiming for the refund shall issue an authorizationand shall I.lt surrender the certificates of withholding of percentage taxes (BIR 2306) with the withholding agent/government agency. The withholding agent/government agency shall caffy over the over-remitted taxes to the next succeeding quarter/s in I accordance'with Section 3 of RR No. 4-2021, attaching thereto the authorrzation and the certificate (BIR 2306) from the payee. as Cz

l. For Percentage taxpayers who are not substituted filers, the overpayment shall be carried forward to the succeeding quarter/s pursuant to the transitory provisions in Section 3 of RRNo. 4-2021, assuming that the percentage taxpayer has not shifted from non-VAT to VAT registration status or did not avail of the 8% income tax rate pursuant to RMC No. 51-2018. Q11: Are the government, its instrumentalities, LG(Is, S(ICs, including GOCCs and GFIs also required to amend the tax returns filed including the Alphalists tf they will refund the overPaid taxes? Al l: yes. The government, its instrumentalities, LGUs, SUCs, including GOCCs and GFIs shall u-.nd previously filed returns including the respective Alphalists, if any, but the reductionor resulting overpayment shall only be to the extent of the amount to be refunded. Qt2: Are the existing revenue issuances pertaining to percentage taxes prior to CREATE auto matic ally repealed? Al2: Yes. Under the CREATE,, only the rate was reduced for percentage tax imposed in Sec. 116 of the Tax Code from 3Yoto loh effective July 1,2020 until June 30,2023. Consistent with the repealing clause of Section 4 of RR No. 4-2021, previous issuances where the 3o/o percentage tax was mentioned were deemed modified and reduced to Loh. el3: For government money payments, please clarify the taxes that need to be withheld on purchases of goods or services from suppliers. Al3: It is to be emphasized that there are two (2) types of withholding taxes involving govemment money payments pursuant to the provisions of RR No. 2-98, as amended, summarized as follows: a. Income Tax - in the form of creditable withholding taxes with the rates depending on the nature of the transaction as required under existing issuances; and b. Sales Tax - in the form of 5% creditable withholding VAT if the supplier is VAT-registered or lo/o percentage tax if the supplier is subject to percentage tax under Section 116 of the Tax Code, or any other applicable rate depending on the transaction as prescribed under existing issuances. Q14: Witl the overpaid percentage tax be allowed as carry over or may be applied for refund/TCC if the percentage taxpayer has already claimed the same as a deduction part of the taxes and licenses in the Annual Income Tax Return for taxable year 2020? t Al4: No. If the whole amount of 3o/opercentage tax has been claimed as deductible expense for purposes of computing the income tax due, the taxpayer can no longer be allowed as caffy over or apply for tax refund/TCC the alleged overpaid percentage tax. F INTERNAL ll]) ka\4 ;;;i 1\ N k-cr) D$ MG T. D IVIS IO

Ql5: In order to quolify for the cury-over or refund of the overpaid percentage taxes, will the Annual Income Tax Return (ITR) for TY 2020 for taxpayers under the calendar year period or quarterly ITR for Jiscal year, together with the Audited Financial Staternents (AFS), tf any, also be amended if a return hss been Jiled reflecting the 3% percentage taxes paid? A15: Only the ITR/s filed are needed to be amended without necessarily amending the corresponding AFS. However, if the AFS will not be amended, the overpaid percentage tax shall be reflected as a reconciling item in the amended ITR/s. All BIR Rulings or issuances inconsistent herewith are hereby considered amended, modified or revoked accordingly. All revenue officials concerned are requested to give this Circular as wide publicity as possible. This Circular takes effect immediatelv. /tr& CAESAR R. DULAY Commissioner of Internal Revenue 043 227 BUREAU OF INTERNAL REVENUE ID .:2q4fP2/hiltr ii r-. c(l < ng turi;l'. 0tvt s toN