The Relevance of Professional Tax Receipt (PTR)

According to BIR, a licensed professional can only become LEGALLY PRACTICING the profession if he/she has a Professional Tax Receipt (PTR). The PTR is the proof that a professional broker or appraiser is PRACTICING the profession for the specific year. PTR is the ultimate basis to prove number of years in practice in relation to a person's applications to qualify for license exam for Broker, Appraiser, or Consultant.

PTR is required not only for PRC-licensed professionals, but also to those service providers who are not required to get PRC registration/license, including Salespersons, Property Presenters, Flier Girls, Documenters, etc.

Brokers MUST have PTR individually. One Person, One PTR, good for One year.

If you would understand the spirit behind VAT and percentage tax, plus you would understand the characteristic of a broker's commission, you will be able to tell, in the same manner as I can, that broker's commission MUST be exempt from VAT and Percentage Tax.

The comparative analogy is very simple.

A regular employee who works 8AM-5PM everyday in a company who earns P2,000,000 Gross Income a year will be taxed with INCOME TAX ONLY at around 35% Effective Rate, and no VAT at all.

On the other hand, a broker who works independently everyday who earns P2,000,000 Gross Commission a year will be taxed with INCOME TAX at around 35% Effective Rate, PLUS 12% VAT.

Now you see the comparison.

VAT is a tax that can be passed on to the buyer of the goods and services. If the BIR will insist on applying VAT on commission, we CAN add up 12% VAT over and above the 5% commission that we charge to the client. So we charge the client 5% Commission PLUS 12% VAT.

As brokers, we pass the VAT burden to the Seller who pays the commission. In turn the Seller will pass it to the buyer of the property, hence creating an inflationary impact on real estate prices.

Example:

OLD SCHOOL / NON-PAYER OF TAX
Total Contract Price of Property = P10,000,000
Collectible Broker's Commission = 5% = P500,000

NEW SCHOOL / PAYER OF TAX
Total Contract Price of Property = P10,000,000
Collectible Broker's Commission = 5% + (VAT12% of 5%) = 5.6% = P560,000

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TWO TYPES OF RESPs

There are two types of RESPs after licensing. One is a PRACTICING and the other is NON-PRACTICING. The determinant is the Professional Tax Receipt (PTR). The non-practicing are dormants, they maintain license for "whatever" other purpose other than making a living out of it.

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