BIR says JOs not gov’t employees to justify 3% tax on services rendered
Beginning March 2017, employees on job order status in the Local Government Unit of Flora, Apayao started paying taxes for the salaries they get out of services they have rendered. Latest count shows there are a total of 78 JOs in LGU-Flora scattered in the various departments or programs. Accordingly (in theory) they are not considered employees of the government (but in practice) they are actually performing tasks no lesser than that of regular government employees. This is because they are primarily hired with this arrangement.
On April 18, Local BIR Officer Myra Bautista met with the JOs to clarify issues and hear their queries. The meeting was coordinated by Acting HRM Officer Frederick Peneyra.
Revenue Memorandum Circular (RMC No. 130-2016) issued by Commissioner Caesar R. Dulay of the Bureau of Internal Revenue on Dec. 8, 2016, is to clarify the withholding taxes imposed on income payments departments and agencies of the government financial institutions, including government-owned and/or –controlled corporations and government financial institutions (GFIs) to individuals whose services are engaged under a contract of service or job order arrangement. This RMC explains that JOs are under contract subject to Value Added Tax (VAT) rate of three percent. They are also be required to pay a Registration Fee of P500 whether the employee has already a Tax Identification Number (TIN) or a new payee.
BIR said that under existing policies and guidelines of the Civil Service Commission (CSC), defining the terms “Individual Contract of Services/Job Order” and clarifying the terms “Contract of Service” and “Job Order”, there is no employer-employee relationship created under either a job order or contract for service, and that services rendered pursuant thereto shall not be considered as government
Accordingly the JO personnel would still be required to pay a percentage tax of 3% to be withheld at source even if he does not meet the VAT threshold of P1,919,500. Thus JOs are required the withholding of percentage tax to any money payment made by the government or any of its bureaus, offices and instrumentalities. Persons exempt from VAT shall be required to pay a 3-percent withholding tax on gross money payments made by the government to them. A higher tax rate is imposed on JO personnel who are professionals such as lawyers and accountants.
“In general, individuals who follow an independent trade, business or profession, in which they offer their services to the public, are not employees. For professionals who are paid for the services they render, they are subject to a withholding tax rate of 10 percent or 15 percent, whichever is applicable, on their gross professional fee.
This is a big burden for the JOs but “a law is a law no matter how harsh it is,” which means there’s nothing they can do about it but take the bitter pill (meaning they need to work to make both ends meet). Besides the government needs to collect taxes to pay the salaries of its employees, fund for the construction and maintenance of roads, bridges, buildings and other infrastructures for the benefit of the public even if JOs and other individual tax payers with measly income suffer the consequences. The only sensitive solution, according to BIR’s Bautista herself, so that this will not be hard for the JOs is for them to ask for an increase of their salaries. A Resolution setting the minimum wage for JOs based on provincial rate was approved recently by the Sangguniang Bayan but according to Presiding Officer and Vice Mayor Jessica de San Jose the same resolution was vetoed by Mayor Rodolfo Juan due to insufficient funds. With that we can’t do anything about it because it is a prerogative of the Local Chief Executive. But the Resolution has been re-tabled at SB and is now under review.
Let’s just hope that the ambitious plan to shift to a federalist form of governance (if it pushes through) can pave the way for ending the sensitive issue of ‘contractualization’ that has already marginalized the labor sector as well as many professionals under the JO system. Whewww!!!