Philippine Judicial Academy

September 14, 2009 BIR RULING [DA-(OSL-032) 538-09] RA 9257; [DA-(OSL-001) 039-08]; 058-97; DA-249-02 Philippine Judicial Academy Supreme Court, 3rd Floor, Centennial building Supreme Court of the Philippines Padre Faura, Manila Attention: DCA Bernardo T. Ponferrada PHILJA Chief of Office for PMC Gentlemen : This refers to your letter dated March 9, 2009 requesting for opinion on whether or not the mediators accredited by the Supreme Court are entitled to the privileges provided to senior citizens under Republic Act No. 7432, as amended. CaDEAT It is represented that the mediators are the major players in the Court-Annexed Mediation (CAM) Program of the Supreme Court; that they were recruited and trained by Philippine Judicial Academy (PHILJA) Philippine Medication Center Office (PMCO) and accredited by the Court En Banc upon recommendation of the PCMO Executive Committee; that once accredited, the Mediators can now mediate cases referred by the courts either from the First and Second Level Courts or from the Appellate Court; that the Mediators are entitled to the Mediator's fee upon termination of each case, the rates of which are as follows: OLD RATES NEW RATES (Prior to March 2, 2009) (A.M. No. 04-8-12-SC) Effective March 2, 2009 First and Appellate First and Appellate Second Level Court Second Level Court Result of Courts (MTC, (Court of Courts (MTC, (Court of Mediation MeTC, MTCC, Appeals) MeTC, MTCC, Appeals) (Per Case) MCTC and RTC MCTC and RTC Successful P700.00 P1,400.00 P1,000.00 P2,000.00 Unsuccessful P350.00 P700.00 P350.00 P700.00 that at present, the PHILJA Finance is withholding 10% of the professional fees (Mediators' Fees) of the mediators for remittance to the BIR; and that PHILJA is in quandary, because of the requests of the senior citizen-mediators for exemption from paying the said 10% withholding tax and for the refund of whatever may have been deducted/withheld from them since their accreditation. In reply, please be informed that Section 4 of Republic Act (R.A.) No. 9257, otherwise known as "An Act Granting Additional Benefits and Privileges to Senior Citizens" amending R.A. No. 7432, as implemented by Section 3 (a) of Revenue Regulations (RR) No. 4-2006 provides that senior citizens are entitled to exemption from the payment of individual income tax and consequently, from the withholding tax provided that their annual taxable income does not exceed the poverty level as determined by the National Economic and Development Authority (NEDA) for that year. The poverty thresholds as provided by the National Statistical Coordination Board are as follows: 2007 Annual Per Capita Poverty Thresholds (in PhP) NCR 2/ 19,345 1st District 2/ 19,907 2nd District 2/ 19,319 3rd District 2/ 18,838 4th District 2/ 19,807 Pursuant to Section 4 of RR No. 4-2006, the senior citizen's exemption shall be determined by the Revenue District Officer (RDO) having jurisdiction over the place where the senior citizen resides by submitting a certified true copy of his Senior Citizen Identification Card (OSCA ID) issued by the Office for Senior Citizens Affairs (OSCA) of the city or municipality where he resides. He must file an Annual Information Return (in lieu of the Income Tax Return) indicating that his annual taxable income does not exceed the poverty level as determined by the NEDA thru the National Statistical Coordinating Board (NSCB) through a formal written document sent to the Commissioner of Internal Revenue for this year and every year thereafter. If qualified, his name shall be recorded by the RDO in his Master List of Tax Exempt Senior Citizens for that particular year, which the RDO is mandatorily required to keep. caCEDA Accordingly, if the Mediator is covered by R.A. No. 9257 amending R.A. No. 7432 and his annual taxable income does not exceed the poverty level for the entire year, his remunerations are exempt from income tax and consequently, from withholding tax and PHILJA shall be exempt from the duty to withhold the corresponding tax on his remunerations. Conversely, if the Mediator's annual taxable income exceeds the poverty level, his remunerations are subject to income tax and consequently, to withholding tax and PHILJA is required by law to withhold the corresponding tax on his remunerations. (BIR RULING [DA-(OSL-001) 039-08] dated July 15, 2008). Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service