#AskTheTaxWhiz: Will I qualify for the 8% flat tax rate on gross sales?
I am an individual taxpayer who is earning an estimated annual gross sales of P2 million from my business. Will I qualify for the 8% flat tax rate?
Section 24 of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law added a provision which grants the 8% flat tax rate option to self-employed individuals and/or professionals. However, the following criteria should be met:
Individual who earns purely business-related income or mixed-income (both compensation and business-related income). The optional 8% flat tax rate shall apply to business income only.
A non-VAT registered individual taxpayer, except for partners of a general professional partnership (GPP) and those businesses whose nature may fall under percentage tax based on Section 117 to Section 127 of the National Internal Revenue Code, such as:
- Domestic carriers and keepers of garages
- International air/shipping carriers doing business in the Philippines
- Gas and water utilities
- Radio and television broadcasting companies whose annual gross receipts of the preceding year do not exceed P10 million and did not opt to register as a VAT taxpayer
- Overseas dispatch, message or conversation originating from the Philippines
- Banks and non-bank financing intermediaries performing quasi-banking functions
- Life insurance companies (except purely cooperative companies or associations)
- Insurance agents authorized under the Insurance Code to procure policies of insurance for companies not authorized to transact business in the Philippines
- Cabarets, night or day clubs, videoke bars, karaoke bars, karaoke televisions, karaoke boxes and music lounges
- Boxing exhibitions
- Professional basketball games
- Jai-alai and race track (operators shall withhold tax on winnings)
- Winnings on horse races
- Sale, barter, exchange or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer of securities [Section 127 (A)]
- Sale, barter, exchange or other disposition through initial public offering (IPO) of shares of stock in closely-held corporations [Section 127 (B)]
- Gross receipts and/or sales do not exceed the new VAT threshold of gross sales/receipts of P3 million.
- You signify your intent by filing the 8% flat tax rate for your first quarterly income tax.
In addition, the Bureau of Internal Revenue (BIR) released a tax advisory regarding the change of status from VAT to non-VAT as shown below:
Is it true that the deadline of filing of the expanded and final withholding tax has been moved to a later date?
Yes. Under Section 18 of TRAIN, the deadline has been moved to the "last day of the month following the close of the taxable quarter." However, the BIR recently released a tax advisory as shown below:
I've read the BIR issuances since the passage of TRAIN but I still cannot grasp the changes and how these will affect me. Are there any other ways by which non-accountants like me can easily understand these changes?
Yes, various seminars are being conducted now that TRAIN has taken effect. In this regard, we invite you to catch the TRAIN with Philippine Tax Whiz Mon Abrea, together with tax experts and advocates of the Tax Whiz Academy:
- WHAT: Catching the TRAIN Seminar
- WHEN: February 21, 2018 at 6 pm
- WHERE: Clock In, Makati Stock Exchange Building, Ayala Avenue, Makati City
- RSVP: https://tinyurl.com/TRAINSeminar (limited slots only)
Registrants will receive an email with the complete details and inclusion of the seminar fee.
Register now and grab a copy of Got A Question about Taxes? #AskTheTaxWhiz Train Edition featuring 100 questions about the TRAIN law. For bulk orders, email us at firstname.lastname@example.org or call (02) 372-5727.
In this digital era where almost all information is at everyone's fingertips, there's no more reason to be left behind by the TRAIN. Sign up on the Tax Whiz App for free and enjoy the ease of complying with the new tax law. Register here.
Mon Abrea, popularly known as the Philippine Tax Whiz, is one of the 2016 Outstanding Persons of the World, a Move Awards 2016 Digital Mover, one of the 2015 The Outstanding Young Men of the Philippines (TOYM), an Asia CEO Young Leader of the Year, and founder of the Abrea Consulting Group and Center for Strategic Reforms of the Philippines (CSR Philippines). He currently serves as Adviser to the Commissioner of Internal Revenue of the Philippine government on tax administration reform in promoting inclusive growth. Follow Mon on Twitter (@askthetaxwhiz) or visit his Facebook page. You may also email him at email@example.com.