RMC No. 69-2017: Clarifies the registration and compliance requirements of individuals under a Job Order or Service Contract Agreement with the Departments and Agencies of the Government, Instrumentalities, Local Government Units, State Colleges and Universities, including the Government-Owned and/or -Controlled Corporations and Government Financial Institutions

Summary

RMC No. 69-2017, issued on August 17, 2017, clarifies the registration and compliance requirements of individuals working under a Job Order or Service Contract Agreement with government offices, LGUs, state colleges and universities, GOCCs and GFIs.

Key points

1. Option for substituted filing. Professionals (licensed or non-licensed) with income above the SMW rates and only one payor in the calendar year may opt for substituted filing of the Percentage/VAT return and substituted issuance of official receipts. This replaces monthly and quarterly returns.
2. How the option is availed. The payee files a Waiver of the Privilege to Claim Input Tax Credits (VAT taxpayers only), a Notice of Availment on the Option to Pay the Tax through the Withholding Process, and a Notice of Availment on the Substituted Filing of Percentage Tax/VAT Return. These are copied to the payor and the RDOs of both. The lone payor must then withhold the 3% Percentage Tax or applicable VAT rate and remit it.
3. Returns no longer required. A payee already subjected to withholding of 3% Percentage Tax or 12% VAT need not file BIR Form No. 2551M, 2550M or 2550Q. BIR Form No. 1600 filed by the payor serves as the substituted return, provided BIR Form No. 2306 signed by both payor and payee is attached.
4. Substituted receipt. A seller of service whose gross receipts were subjected to the withholding is exempt from issuing a registered principal receipt. The BIR Form No. 2306 for the payee with one payor serves as the substituted official receipt.
5. Additional client or layoff. If an additional client comes in during the taxable year, the payee must immediately file the Notice of Cancellation on the Availment of the Substituted Filing of Returns. On layoff, the professional updates registration with BIR Form No. 1905 and files that notice within ten (10) calendar days from the effectivity of separation.
6. Requirements by taxpayer type. A table lists registration, filing and payment requirements per type. Professionals with gross receipts of P100,000 and below in any 12-month period and/or SMW rates from a lone payor are in one group. Non-licensed and licensed professionals above P100,000 with a lone payor may avail of the substituted filing, with 2% and 10% (15% above P720,000 gross income) withholding rates shown. Professionals with multiple payors or other income are a separate group.

Who is affected

• Professionals (licensed or non-licensed) under Contract for Services or Job Order
• Individuals with only one payor in the calendar year
• Withholding agent-payors in government

Deadlines and effectivity

• Notice of Cancellation on layoff: within ten (10) calendar days from effectivity of separation
• Notice of Cancellation upon an additional client: immediately

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