RMC No. 67-2021: Clarifies the issues relative to the temporary reduction of Percentage Tax rate imposed under Section 116 of the NIRC of 1997, as amended by Section 13 of RA No. 11534 (CREATE Act)

Summary

RMC No. 67-2021 clarifies issues on the temporary reduction of the Percentage Tax rate under Section 116 of the NIRC, as amended by Section 13 of RA No. 11534 (CREATE Act), including amended returns, carry-over and refund.

Key points

1. Reduced rate and coverage. The rate falls from 3% to 1% from July 1, 2020 until June 30, 2023 for corporate taxpayers and for self-employed individuals and professionals whose gross sales or receipts do not exceed ₱ 3,000,000.00. Cooperatives and those availing the 8% Income Tax rate are excepted.
2. Amending returns. Taxpayers who filed BIR Form No. 2551Q for the 3rd and 4th quarters of 2020, or the 1st quarter of 2021, at 3% must amend using 1%. The amendment carries no penalty for those who carry over the overpayment, and a carry-over without an amended return is disallowed.
3. Carry-over or refund. Overpayments are carried over to later periods under Section 3 of RR No. 4-2021. A refund is allowed if the taxpayer shifted from non-VAT to VAT status or opted for the 8% Income Tax rate at the start of TY 2021, and the BIR is informed through BIR Form No. 1914.
4. How to mark the return. Manual filers neither mark refund nor Tax Credit Certificate and write ‘To be Carried Over’. eFPS and eBIRForms filers mark ‘To be Issued Tax Credit Certificate’ as a workaround, and an inadvertent refund or TCC mark is still presumed to be a carry-over.
5. Job order and government payees. For individuals under Job Order or Service Contract Agreement who used substituted filing under RMC No. 51-2018, the withholding agent or government agency refunds the overpaid tax. The contractor issues an authorization and surrenders the Certificates of Withholding of Percentage Taxes (BIR 2306), and the agency carries over the over-remitted taxes.
6. Other rules. Earlier issuances that mention the 3% Percentage Tax are deemed modified to 1%. If the whole 3% was claimed as a deductible expense, no carry-over, refund or TCC is allowed, and only the TY 2020 ITRs or fiscal-year quarterly ITRs reflecting 3% need amending, without necessarily amending the Audited Financial Statements.

Who is affected

• Corporate taxpayers
• Self-employed individuals and professionals with gross sales or receipts not exceeding ₱ 3,000,000.00
• Withholding agents and government agencies

Deadlines and effectivity

• Reduced 1% rate: July 1, 2020 until June 30, 2023

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