Propriety of Payment of Percentage Tax on 1-unit PUJ Subsistence or Livelihood Endeavor that Nets Less than P36,000 a Year after Deducting Expenses

October 25, 1995 BIR RULING NO. 173-95 21(f) 000-00 173-95 115 Mr. Eduardo C. Torralba Rivera Village Sajada, Davao City S i r : This refers to your letter dated June 20, 1995 requesting for our opinion on the following: 1. Whether or not you are obligated to pay percentage tax on your 1-unit PUJ subsistence or livelihood endeavor that nets you less than P36,000 a year after deducting your expenses. 2. Whether or not you are required to file your quarterly and annual income tax return? llcd 3. Whether you are going to apply again for tax exemption certificate and submit your birth certificate, business permit, latest income tax return (ITR), letter of application and your OSCA Identification Card to be qualified as a tax exempt senior citizen. It is represented that you are 71 years of age who owns one (1) unit Cimarron PUJ which you lease to a driver who hires it for an average of 20 days per month at P150/day; that the said driver takes care of purchasing the gasoline he needs to make his trips and the vulcanizing or patching shop charges in case of flat tires; that, on your part, you take care of all the other costs and expenses such as the licensing, taxes, insurance, purchase of parts and tires, etc.; that you have been paying the 3% percentage tax on common carriers despite your belief that you are exempt from the payment of the said tax because of the relevant provisions in RR Nos. 10-94 and 14-94 exempting from the payment of VAT or from the applicable percentage tax imposed under the NIRC any business where the gross sales or receipts do not exceed P100,000 during any 12-month period; that recently, you were being required by the BIR-Davao Office to file your quarterly income tax return and likewise to apply for tax exemption as a senior citizen but that you have to produce the following birth certificate, business permit, latest ITR, can present all the aforesaid requirements but that you cannot find a copy of the tax exemption certificate which you believe you could have submitted to OSCA when you got your OSCA ID card. In reply, please be informed as follows: 1. Section 6(b) of Revenue Regulations No. 2-94 implementing RA No. 7432, otherwise knows as the "Senior Citizens Act," provides as follows" "Sec. 6. Taxability of Senior Citizens to Other Internal Revenue Taxes . "(a) . . . "(b) Regardless of the amount of taxable income, a senior citizen who derives income from self-employment, business and practice of profession shall be subject to other internal revenue taxes which include but are not limited to the value-added tax, . . . and other percentage taxes. He shall, therefore, file the corresponding business tax returns in accordance with existing laws, rules and regulations." Therefore, as a transportation contractor, YOU ARE OBLIGATED TO PAY THE PERCENTAGE TAX on the business income you derive from your 1-unit Cimarron passenger jeep imposed under Section 115 of the Tax Code, as amended, even though your net income therein does not exceed P36,000 per annum. 2. Section 3(a) of the aforesaid Revenue Regulations exempts you only from the payment of individual income tax BUT DOES NOT EXEMPT YOU FROM FILING YOUR INDIVIDUAL INCOME TAX RETURN. Therefore, as a self-employed individual, you have to file your quarterly and your final income tax returns on the income you derive therein, which income shall be subject to the tax rates imposed under Section 21(f) of the Tax Code, as amended. 3. Finally, Section 5 of the aforesaid Revenue Regulations provides a self-explanatory procedure on how a senior citizen like you can avail of the income tax exemption granted to senior citizen under RA No. 7432, viz: "A senior citizen who shall avail of the EXEMPTION FROM INCOME TAX is REQUIRED to SUBMIT THE FOLLOWING DOCUMENTS TO THE REVENUE DISTRICT OFFICER (RDO) of the place where he is a permanent resident, who shall make the necessary verification and report for purposes of the income tax exemption to be issued by the Commissioner of Internal Revenue or his duly authorized representative. aisadc "(a) Certified true copy of his Birth Certificate of Baptismal Certificate or in the absence thereof, a certification from the National Statistics and Census Bureau or an affidavit by two (2) disinterested credible persons who know personally the senior citizen. "(b) If he has a benefactor as defined in Section 2(f) of RR No. 2-94, certification as to the name, address, occupation, office or business address and TIN of his benefactor; "(c) . . . "(d) If self-employed (i.e., practice of profession, or engaged in business as single proprietorship), a copy of his ITR for the preceding taxable year together with the annual license or permit issued by the City or Municipality where he has his principal place of business, supported by a copy of his declaration of sales or income. xxx xxx xxx "The RDO concerned shall transmit his verification report/recommendation to the said Regional Director, as duly authorized representative of the Commissioner, for issuance of the certificate of income tax exemption to the senior citizen. "For purposes of applying for the OSCA ID Card, the duly stamped income tax return and or the BIR Certification shall be honored." Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue