1. PRACTICING
PROFESSIONALS: RMC 64-2012 – issued on October 31, 2012 clarifies the
imposition of business taxes on services performed by persons engaged in the
practice of profession or calling. Apart from applicable income taxes and
withholding taxes, a professional is liable to VAT at the rate of 12% if his
gross receipts/professional fees for the past 12 months is more than
P1,919,500. A professional is likewise liable to register as a VAT-taxpayer
if there are reasonable grounds to believe that his gross receipts/professional
fees for the next 12 months will exceed P1,919,500. If he fails to register, he
shall be liable to pay the 12% output tax under Section 108 of the 1997 Tax
Code, as amended, as if he were a VAT-registered person, but without the
benefit of input tax credits for the period in which he was not properly
registered.
A professional is liable to
Percentage Tax at the rate of 3% if his gross receipts/professional fees for
the past 12 months is equal to or is below P1,919,500 and he is not a
VAT-registered person. If the professional registers as a VAT-person, he
shall be liable to VAT upon registration as a VAT taxpayer and not to
Percentage tax, irrespective of the amount of his gross receipts/professional
fees. A professional who is not required to register for VAT may elect to
be VAT-registered but he shall not be allowed to cancel such registration for
the next 3 years counted form the quarter when the election was made.
Bethuel V.
Tanupan
CPA-Lawyer, CMA, MM, DipIFRS
Partner
CPA-Lawyer, CMA, MM, DipIFRS
Partner
Diaz Murillo Dalupan and Company is a member of HLB
International.
Which is better, VAT or Non-VAT registered? VAT registered pays 12% while Non-VAT registered pays 3% percentage tax and 10% withholding tax in some cases, like real estate brokers, for a total of 13%.
TumugonBurahinDepending on your business, if you are in retail business with VAT products it is more advantageous to be VAT registered. But if you are a Real Estate Broker, it is best that you remain under Percentage Tax of 3% with gross receipt below 1.9M because of lack of Input VAT to be deducted from your Output VAT to determine your VAT due.
TumugonBurahinDo not look at 10% withholding tax negatively because you can claim it at your tax credit because it is essentially an advance payment of your income tax.