RMC No. 77-2008: Clarifies the taxability of director’s fees received by directors who are not employees of the corporation for VAT or Percentage Tax purposes

Key points

1. Not in the course of trade or business. Fees, per diems, honoraria and allowances paid to a director as such are remunerations for exercising an owner’s right in managing the corporation. They are not from an activity pursued in the course of trade or business under Section 105 of the Tax Code.
2. No 12% VAT or 3% Percentage Tax. These payments are exempt from the 12% VAT and the 3% Percentage Tax, even though they are not among the items listed in Section 109 of the Code.
3. Repeal. The penultimate paragraph of RMC No. 34-2008, which treated such directors as sellers of services liable to the 12% VAT under Section 108 or the 3% Percentage Tax under Section 116, is repealed.

Who is affected

• Directors who are not employees of the corporation