BIR Ruling No. 432-12

June 25, 2012 BIR RULING NO. 432-12 R.A. 9994; RR 07-10; 000-00 Sayrabe D. Rasay Kingking, Pantukan Compostela Valley Province Madam : This refers to your letter dated October 18, 2011 requesting clarification on privileges extended to senior citizens regarding the payment of income tax. It is represented that you are a retired DepEd professional teacher; that you are accommodated as a college instructor in the local college with an honorarium of one hundred pesos (P100.00) per hour; and that the Municipal accountant deducts 10% from your honorarium as withholding tax, for reason that you are exercising profession as instructor. In reply, please be informed that Section 3 of Revenue Regulations No. 007-2010 implementing R.A. No. 9994, otherwise known as "Expanded Senior Citizens Act of 2010," provides as follow: SEC. 3. Income Tax of Senior Citizens . Generally, qualified Senior Citizens deriving returnable income during the taxable year, whether from compensation or otherwise, are required to file their income tax returns and pay the tax as they file the return. However, if the returnable income of a Senior Citizen is in the nature of compensation income but he qualifies as a minimum wage earner under RA No. 9504, he shall be exempt from income tax on the said compensation income subject to the rules provided under Revenue Regulations No. 10-2008 applicable to minimum wage earners. cAHIaE Likewise, if the aggregate amount of gross income earned by the Senior Citizen during the taxable year does not exceed the amount of his personal exemptions (basic and additional),he shall be exempt from income tax and shall not be required to file an income wage tax return. xxx xxx xxx In relation to this, Sec. 8 of the same Regulations provides as follows: SEC. 8. Availment of Income Tax Exemption of Senior Citizens . A Senior Citizen who is a minimum wage earner, or whose taxable income during the year does not exceed his personal exemptions, will be exempt from income tax upon compliance with the following requirements: 1. A Senior Citizen must first be qualified as such by the Commissioner of Internal Revenue or his duly authorized representative ( i.e. ,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 OSCA of the city or municipality where he resides; 2. He must file a Sworn Statement on or before January 31 of every year that his annual taxable income for the previous year does not exceed the poverty level as determined by the NEDA thru the NSCB; and 3. If qualified, his name shall be recorded by the RDO in the Master List of Tax-Exempt Senior Citizens for that particular year, which the RDO is mandatorily required to keep. However, a Senior Citizen who is a compensation income earner deriving from only one employer an annual taxable income exceeding the poverty level or the amount determined by the NEDA thru the NSCB on a particular year, but whose income had been subjected to the withholding tax on compensation, shall, although not exempt from income tax, be entitled to the substituted filing of income tax return under Revenue Regulations No. 2-98, as amended. DEHaAS Accordingly, if the returnable income of a Senior Citizen is in the nature of compensation income but he qualifies as a minimum wage earner under RA No. 9504, he shall be exempt from income tax on the said compensation income subject to the rules provided under Revenue Regulations No. 10-2008 applicable to minimum wage earners. Likewise, if the aggregate amount of gross income earned by the Senior Citizen during the taxable year does not exceed the amount of his personal exemptions (basic and additional), he shall be exempt from income tax and shall not be required to file an income tax return. The Senior citizen must first be qualified as such by the Commissioner of Internal Revenue or the Revenue District Officer having jurisdiction over the place where he is a resident in accordance with the aforequoted provisions of Sec. 8 of Revenue Regulations No. 007-2010. However, a Senior Citizen who is a compensation income earner deriving from only one employer an annual taxable income exceeding the poverty level or the amount determined by the NEDA thru the NSCB on a particular year, but whose income had been subjected to the withholding tax on compensation, shall, although not exempt from income tax, be entitled to the substituted filing of income tax return under Revenue Regulations No. 2-98, as amended. Conversely, a senior citizen who does not qualify as a minimum wage earner under RA No. 9504 shall not be exempt from the payment of individual income tax and consequently shall be subject to the withholding tax. Lastly, Section 2.57.2 (A) (1) of Revenue Regulations No. 2-98, as amended, provides as follows: "SEC. 2.57.2. Income Payment Subject to Creditable Withholding Tax and Rates Prescribed Thereon. Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: (A) Professional fees, talent fees, etc.,for services rendered by individuals On the gross professional, promotional and talent fees or any other form of remuneration for the services of the following individuals Fifteen percent (15%),if the gross income for the current year exceeds P720,000; and Ten percent (10%),if otherwise: IaSCTE (1) Those individually engaged in the practice of professions or callings: lawyers; certified public accountants; doctors of medicine; architects; civil, electrical, chemical, mechanical, structural, industrial, mining, sanitary, metallurgical and geodetic engineers; marine surveyors; doctors of veterinary science; dentist; professional appraisers; connoisseurs of tobacco; actuaries; and interior decorators designers and all other profession requiring government licensure examinations and/or regulated by the Professional Regulations Commission, Supreme Court, etc.; xxx xxx xxx Accordingly, income payments to individuals engaged in the practice of professions, other than those earning compensation income, are subject to the withholding tax at the rate of ten percent (10%) or fifteen percent (15%) based on the gross professional fees received. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue