RMC No. 64-2012: Clarifies the imposition of business taxes on professionals

Summary

RMC No. 64-2012 clarifies the business taxes on services of persons engaged in the practice of profession or calling, covering when VAT or Percentage Tax applies.

Key points

1. VAT at 12%. Besides income and withholding taxes, a professional is liable to VAT at 12% if gross receipts or professional fees for the past 12 months exceed P1,919,500.00. Registration as a VAT taxpayer is also required if there are reasonable grounds to believe the next 12 months will exceed that amount.
2. Failure to register. A professional who fails to register is liable for the 12% output tax under Section 108 of the 1997 Tax Code, as amended. This applies as if VAT-registered, but without input tax credits for the period of improper registration.
3. Percentage Tax at 3%. A professional who is not VAT-registered and has gross receipts or fees for the past 12 months equal to or below P1,919,500.00 is liable to Percentage Tax at 3%.
4. Voluntary VAT registration. A VAT-registered professional pays VAT, not Percentage Tax, regardless of amount. One not required to register may elect VAT registration but cannot cancel it for the next 3 years counted from the quarter of the election.

Who is affected

• Persons engaged in the practice of profession or calling

Deadlines and effectivity

• Threshold test: gross receipts for the past 12 months
• Election to be VAT-registered cannot be cancelled for 3 years from the quarter of election

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.