THE Bureau of Internal Revenue (BIR) issued Revenue Regulation (RR) 11-2018, amending certain provisions of RR 2-98, as amended, to implement further amendments introduced by Republic Act 10963, known as the "Tax Reform for Acceleration and Inclusion Law," relative to withholding of income tax.
One of the noticeable amendments made in the above regulation prescribed for the withholding taxes on professional fees, talent fees, etc., for services rendered. This article outlines a comprehensive guide on withholding taxes for professionals in the Philippines.
Professionals subject to expanded withholding tax
• Licensed individuals engaged in the practice of profession or calling; lawyers; certified public accountants; doctors of medicine; architects; civil, electrical, all other profession requiring government licensure examination regulated by the Professional Regulations Commission, Supreme Court, etc.;
• Professional entertainers, such as but not limited to, actors and actresses, singers, lyricists, composers and emcees;
• Professional athletes;
• All directors and producers involved in movies, stage, radio, television and musical productions;
• Insurance agents and insurance adjusters;
• Management and technical consultants;
• Bookkeeping agents and agencies;
• Other recipients of talent fees;
• Fees of directors who are not employees of the company;
• Brokers and agents;
• Commissions of independent and/or exclusive sales representatives and marketing agents of companies
The amounts subject to withholding tax shall include not only fees but also per diem fees, allowances, and other forms of income payments not subject to withholding tax on compensation.
In the case of professional entertainers, professional athletes, directors involved in movies, stage, radio, television and musical productions, and other recipients of talent fees, the amounts subject to withholding tax shall include amounts paid to them in consideration for the use of their names or pictures in print, broadcast, or other media or public appearances, for purposes of advertisements or sales proportion.
Withholding tax rates for professionals
There shall be withheld a creditable income tax at the rates on the gross professional, promotional and talent fees or any other form of remuneration for the services rendered by the following:
Individual payee: If gross income for the current year did not exceed P3 million, 5 percent; and if gross income is more than P3 million, 10 percent.
Non-individual payee: If gross income for the current year did not exceed P720,000, 10 percent; and if gross income exceeds P720,000, 15 percent.
The higher rate of 10 percent for individual and 15 percent for non-individual shall apply if: The payee failed to provide the income payor/withholding agent such sworn declaration; individual payee's gross income exceeds P3 million during the taxable year; non-individual payee's gross income exceeds P720,000 during the taxable year.
Obligations of the withholding agent of professional fees
The withholding agents/payors shall execute a sworn declaration stating the number of payees with the accompanying copies of their certificate or registration, which shall be submitted to the concerned BIR office or before January 31 of each year or 15 days following the month when a new income recipient has submitted the payee's sworn declaration.
1. File and remit the monthly withholding taxes on professional fees applicable within 10 days (within 15 days for electronic filing and payment system filers) from the end of the applicable month using BIR Form 0619E.
2. File and remit them quarterly withholding taxes on professional fees applicable not later than the last day of the month following the end of the applicable quarter using BIR Form 1601EQ accompanied by Quarterly Alphalist of Payees.
3. Issue income payees a Certificate of Creditable Withholding Tax Withheld at Source (BIR Form 2307) within 20 days from the end of quarter or every after payment with withholding upon the request of the income payee.
4. File with BIR Annual Information Return of Creditable Withholding Taxes Withheld (BIR Form 1604E) including the corresponding Annual Alphalist of Payees on or before March 1 of the following year in which payments were made.
Professionals in medical field
For professional fees paid to medical practitioners by hospitals, clinics, health maintenance organizations (HMOs) and similar establishments:
1. It shall be the duty and responsibility of the hospitals, clinics and HMOs to withhold and remit taxes due to the professional fees of their medical practitioners, paid by patients who were admitted and confined to such hospitals and clinics. The hospitals and clinics shall not allow their medical practitioners to receive payment of professional fees directly from patients. They must include the professional fees in the total medical bill of the patient which shall be payable directly to the hospital or clinic.
2. The withholding tax shall not apply whenever there is proof that no professional fee has been charged by the medical practitioner and paid by his patient. A sworn declaration must be jointly executed by the medical practitioner and the patient or his duly authorized representative. This sworn declaration shall form part of the hospital or clinic records and shall be made readily available to any duly authorized revenue officer for tax audit purposes. In case of failure or refusal of any medical practitioner to execute the sworn declaration, the administrator of the hospital or clinic shall inform the concerned large taxpayer services/revenue region/regional district office within 10 days from the occurrence of such events.
3. Every 15th day after the end of each calendar quarter, the hospitals, clinics, HMOs shall submit the list containing the names and address of medical practitioners, to the concerned revenue region for non-large taxpayers and national office or large taxpayer district office for large taxpayers, where such hospital or clinic is registered in the prescribed format.