RMC No. 51-2002: Clarifies the imposition of the Gross Receipts Tax on items of gross income subject to final withholding tax as well as the tax base thereof.

Key points

1. Final withholding tax does not bar percentage tax. RR No. 2-98 clarifies that final withholding tax on an income does not relieve the recipient from the Percentage Tax.
2. Limit of finality. The finality of withholding tax covers only the payee’s income tax liability on that income. It does not cover other tax liability on the same income, such as Percentage Tax.
3. Tax base includes the amount withheld. The income received, including the withholding tax withheld by the payor, is still subject to Percentage Tax if applicable.
4. Gross Receipts Tax base. The tax is based on income actually or constructively received in a taxable period, which equals the economic benefit derived. It is therefore inclusive of the Final Withholding Tax under the doctrine of constructive receipt of income.

Who is affected

• Recipients of income subject to final withholding tax and Percentage Tax