BIR Ruling No. 493-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

RepublicAct No. 10963. otherwise known as "Tax Reform for Acceleration and Inclusion (TRAIN) Act: RR No. 2-98; RMO No.23-2018; & RMC No. 50-2018

CT-0493-2020

Date: SEP 0 8 2020

GP TAN ACCOUNTING OFFICE

03-0254 Banikag Avenue, Barangay 3 San Francisco, Agusan del Sur 8501

Attention: GIL P. TAN, CPA

Sir:

This refers to your email dated August 14, 2019 seeking clarification and

interpretation of existing BIR issuances regarding the individual income tax and withholding

government payees.

You represented that you are an individual earning from self-employment (Sole

Proprietorship Business) and practice of profession with your gross sales/receipts and other

non-operating income not exceeding P 3,000,000.00 VAT threshold during the taxable year.

Moreover, you have already availed of the 8% Income Tax Rate in accordance with

the provisions of Revenue Memorandum Order (RMO) No. 23-2018, which will exempt you

from paying 3% percentage tax imposed under Revenue Regulations (RR) No. 2-98.

However, the local branch of Landbank of the Philippines (LBP) is renting a space in

your building for the current year 2019 and it has been withholding from its payment 3% for

the Final Withholding Percentage tax and 5% Creditable Withholding Tax.

You now seek clarification if you will still be subjected to the payment of the 3%

percentage tax pursuant to RR No. 2-98 or be exempt from payment of percentage tax

considering that you have already availed the 8% income tax rate option for individuals

pursuant to RMO No. 23-2018.

In reply, please be informed that Section 3 (C) of RR No. 8-2018 provides, to wit

"A taxpayer who signifies the intention to avail of the 8% income tax

rate option, and is conclusively qualified for said option at the end of the

taxable year [annual gross sales/receipts and other non-operating income did

GIL P. TAN - GP Tan Accounting Office Page 2 of 3 -0493-2029 SEP 0 8 2020

not exceed the VAT threshold(P3,000,000.00], shall compute the final

annual income tax due based on the actual annual gross sales/receipts and

other non-operating income. The said income tax due shall be in lieu of the

graduated rates of income tax and the percentage tax under Sec. 116 of the Tax Code, as amended. "

income payments if the payee is qualified and opted for the 8% income tax rate are provided In relation thereto, the guidelines for withholding agents/payors on the treatment of

under Revenue Memorandum Circular (RMC) No. 50-2018 which states, among others, viz:

their earned income from business and/or practice of profession, and for "Q42: Can you provide a guide for individual taxpayers on the taxability of

under the graduated IT rates; if payee is qualified and opted for the 8% IT withholding agents/payors on the treatment of income payments if the payee is

rate; if subject or not to withholding taxes (WT)?

treatment of individual income earnings/payments: and/or practice of profession as well as for withholding agents/payors on the A42: This will serve as a guide for individual taxpayers engaged in business

P250,000 bo GrOSS AML Salex Receipts T Tax Taxabia as Taxa bilin If Graduated IT rates Mo swpias A ps Nmi inom bh coio prsion,bad n othe aon-opeating mre som binss ticeof ioj o bsinew rd ar oss saleractipis& TomE m(with inome om muiomiciv Taxabilin If S9o IT rate Nof porely poassion iom buian ndo Yimix WT

PT Sublext ZOVOTA Sbyet, is Not acbjer Not subjet

Do Pay's Swom Dertion COR Pay's Svom Dacrtion nd COR

P3.000,000 Above P250.000 to T 2ppiicab!e gAO Taxable at Tates On et ixom tplicable Subject as O Sa on gross sales.receipts and ocher ror-operaing income, itledto tion P250.00 howver. pure business practice Sub)e to soplicsblee

PT Ssbjet pxyc Subjecs, i FOVAYAYMN Not subjet No subjet

D Pry' Swom Dition 1C COR Pay's Swom Decartion COR

Above P3,000,000 T Subject to spplicabl* Subjxt to WT Not antitla to avail

IT-IxotxWT BT -Witholding xPT-Pcntage taxBT-Businss tx N 3bject to VAT payo Suojkt (0 WTOVAT W govenTaR

XXX XXX IXX "

GIL P.TAN-GP Tan Accounting Office Page 3 of 3 OT-0493-2020 SEP 0 8 2020

longer required to file and pay the 3% percentage tax since the 8% income tax rate is in lieu Based on the foregoing, if you qualified and availed of the 8% income tax, you are no

of the graduated income tax rates and percentage tax under Section 116 of the Tax Code, as amended. It follows, therefore, that your income payments from LBP is not subject to the

withholding of 3% percentage tax as clarified by RMO No. 23-2018 and RMC No. 50-2018.

Finally, please take note that the option to avail of the 8% income tax rate must be signified annually, on or before May 15 of each year.

However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours,

CAESAR R.DULAY

Commissioner of Internal Revenue

036581

O

CC: Presidential Complaint Center, Malacanang, Manila

PCC Code No. TE-JYC-09-18-2019-124 Attention: Jaime Llaguno Mabilin, Director IV

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