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(a) "Self-employed" means persons engaged in business and who derive their personal income from such business. This includes single proprietorships, i.e., manufacturers, traders, market vendors, owners of eateries, farmers and service shops; and chanrobles virtuallaw libraryred(b) "Professionals" means persons who derive their income from the practice of their profession. This includes lawyers and other persons who are registered with the Professional Regulation Commission such as doctors, dentists, certified public accountants and others similarly situated. The term "professional" also refers to one who pursues an art and makes his living therefrom such as artists, athletes and others similarly situated.chanrobles virtual law library 

"(a) Taxable compensation income. — A tax is hereby imposed upon the taxable compensation income as defined in Section 27, other than the incomes subject to tax under paragraphs (b), (c),(d),(e) and (f) of this section, received during each taxable year from all sources determined in accordance with the following schedule: 

Not over P2,500 0%chanrobles virtuallaw libraryred"Over P2,500 but not over P5,000 1%

"Over P5,000 but not over P10,000 P25 + 3% of excess over P5,000

"Over P10,000 but not over P20,000 P175 + 7% of excess over P10,000

"Over P20,000 but not over P40,000 P875 +11% of excess over P20,000chanrobles virtuallaw libraryred

"Over P40,000 but not over P60,000 P3,075+15% of excess over P40,000

"Over P60,000 but not over P100,000 P6,075+19% of excess over P60,000

"Over P100,000 but not over P250,000 P13,675+24% of excess over P100,000

"Over P250,000 but not over P500,000 P46,675+29% of excess over P250,000

"Over P500,000 P122,175+35% of excess over P500,000

"(f) Simplified Net Income Tax for the Self-employed and for Professionals Engaged in the Practice of Profession. — A tax is hereby imposed upon the taxable net income as determined in Section 27 received during each taxable year from all sources, other than income covered by paragraphs (b),(c),(d) and (e) of this section by every individual whether a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his profession therein, determined in accordance with the following schedule: 

"Not over P10,000 3%chanrobles virtuallaw libraryred"Over P10,000 but not over P30,000 P300 + 9% of excess over P10,000

"Over P30,000 but not over P120,000 P2,100 + 15% of excess over P30,000

"Over P120,000 but not over P350,000 P15,600 + 20% of excess over P120,000

"Over P350,000 P61,600 + 30% of excess over P350,000chanrobles virtuallaw libraryred

"In computing taxable income subject to tax under Sections 21(a); 24(a), (b), and (c); and 25(a) (1), there shall be allowed as deductions the items specified in paragraphs (a) to (i) of this section: Provided, however, That, in computing taxable income subject to tax under Section 21 (f) in the case of individuals engaged in business or practice of profession, only the following direct costs shall be allowed as deductions: 

"(a) Raw materials, supplies and direct labor; chanrobles virtuallaw libraryred"(b) Salaries of employees directly engaged in activities in the course of or pursuant to the business or practice of their profession; 

"(c) Telecommunications, electricity, fuel, light and water; 

"(d) Business rental; chanrobles virtuallaw libraryred

"(e) Depreciation;

"(f) Contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President; and

"(g) Interest paid or accrued within a taxable year on loans contracted from accredited financial institutions which must be proven to have been incurred in connection with the conduct of a taxpayer's profession, trade or business.

"For individuals whose cost of goods sold and direct costs are difficult to determine, including professionals as herein defined, a maximum of forty percent (40%) of their gross receipts shall be allowed as deductions to answer for business or professional expenses as the case may be."

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Sec. 8. The provision of Section 21 and 29 of the National Internal Revenue Code, as amended, and all other laws, decrees, orders, rules and regulations, or parts thereof, inconsistent with this Act are hereby repealed or amended accordingly.chanrobles virtuallaw libraryred

Sec. 9. After three (3) years from the effectivity of this Act, the Commissioner of Internal Revenue may implement a withholding tax scheme to further enhance the taxation of the self-employed and professionals as defined under this Act.cralaw:red 

In furtherance of this section, the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, shall issue and publish the implementing rules and regulations to implement this mandate.chanrobles virtuallaw libraryred

Sec. 10. This Act shall take effect upon its approval. 
 
 

Approved: May 15, 1992