Retainers, Directorships, and Other Doctor Income

The one question that decides the tax: employee or not?

Almost every "other income" question for a doctor comes down to whether the engagement creates an employer-employee relationship. If it does, the pay is compensation, taxed on the salary withholding table and reported on a Form 2316, and it's outside VAT and percentage tax. If it doesn't, the pay is a professional or business fee, subject to 5% or 10% creditable withholding with a Form 2307, and it counts toward your ₱3,000,000 VAT threshold. The test is about control: an employer controls not just the result but the how, the hours, and the means. A doctor who merely renders scheduled services while keeping an independent practice is usually earning professional fees.

How each kind of side income is treated

The 5% / 10% split is the standard professional-fee rate: 5% if your gross income for the year is ₱3,000,000 or less and you're non-VAT, 10% above.

Retainers, in practice

A company that keeps you on retainer as its physician is the classic gray case. If you set your own schedule, use your own methods, and keep your own practice, the retainer is almost always a professional fee: the company withholds 5% or 10% and gives you a 2307, and you report it as business income. If instead the company controls your hours and integrates you like staff, the arrangement can be employment, and the pay becomes compensation. Because the label the contract uses isn't decisive, this is worth confirming rather than assuming.

Director's fees

Sitting on a hospital or company board is increasingly common for senior doctors. If you're not an employee of that company, your director's fees are professional or business income, subject to the same 5% or 10% creditable withholding and counted toward your VAT threshold. One caution worth flagging: some sources still quote older director's-fee withholding rates of 10% or 15%, which were superseded, so the current figures are 5% and 10%. If you're also a salaried employee of the same company, the director's fees are treated as part of your compensation instead.

Honoraria, talks, and medico-legal work

A speaking fee at a convention, an honorarium for a lecture, an expert-witness or medico-legal report, these one-off earnings feel different from clinic income, but the BIR treats them as professional income all the same. They're declarable, they're usually subject to the 5% or 10% withholding when a private or government payer issues them, and if they recur they count toward your VAT threshold. The one-off nature doesn't make them tax-free; it just makes them easy to forget.

Why the classification is worth getting right

The employee-or-not question isn't academic, because the two treatments diverge in real money and real filings. Professional income is subject to the 5% or 10% creditable withholding, counts toward your ₱3,000,000 VAT threshold, and lands on your own return with your 2307 credits. Compensation is withheld on the salary table, sits outside VAT and percentage tax, and is reported by the payer on a 2316. Misclassify a stream and you can end up filing the wrong returns, mis-measuring your VAT threshold, or missing credits you were owed. When a new engagement doesn't obviously fit one box, that's the moment to confirm it rather than guess, because the classification quietly sets everything downstream.

A worked example: a doctor with a retainer and a board seat

A note on government honoraria

Doctors are often tapped by government bodies, to sit on a panel, lecture at a state training, or serve on a review board, and the honoraria that follow have their own wrinkle. When a government office pays an outside professional an honorarium, it generally withholds on the payment as an income payment and the amount remains declarable professional income to you. It doesn't become tax-free simply because the payer is government or because it's occasional. Keep whatever certificate the agency issues, since it's your credit, and report the income like any other professional fee. The recurring theme across all of these side engagements is the same: unusual-feeling income is still income, and the safe default is to declare it and let the classification, not the novelty, decide the treatment.

Frequently asked questions