Professional Documents
Culture Documents
WITHHOLDING TAXES
Atty. Vic C. Mamalateo
May 14, 2015
ACPACI, Hotel Intercon,
Makati City
SCOPE OF PRESENTATION
INCOME TAX (Title II, NIRC)
Class of taxpayer receiving income
Ordinary income tax on individuals, estates and trusts
Corporate income tax on corporations and partnerships
Nature of income
Compensation income and fringe benefits
Business or professional income and other income
Capital gain or passive investment income
SCOPE OF PRESENTATION
VALUE ADDED TAX (Title IV, NIRC)
Sale of taxable goods, property or
services to government
Payment to non-resident persons
OBLIGATIONS OF WITH
AGENT
1. To deduct and withhold the income tax at the
proper time
Large Taxpayer or Top 20,000 Corporation
Top 5,000 Individual
To consider sworn statement from professionals to
determine applicable EWT rate
OBLIGATIONS OF WITH
AGENT
4. To attach SAWT/MAP to withholding tax
returns filed
5. To submit Alpha Lists of Employees and
BIR Forms 2316 to appropriate BIR
office
6. To submit semestral list of regular
suppliers
7. To comply with the disclosure
requirements in AFS under RR 15-2010
and posting requirements
INCOME TAX
INCOME TAX
Tax on all yearly profits arising from property, professions,
trades or offices, or as a tax on a persons income,
emoluments, profits and the like (Fisher v. Trinidad).
Income tax is a direct tax on taxable actual or presumed
income (gross or net) of a taxpayer received, accrued or
realized during the taxable year.
WITHHOLDING TAX
PERSONS AUTHORIZED TO
COLLECT INTERNAL REVENUE
TAXES
PRIMARY DUTY
BIR
(Sec. 2, NIRC)
DELEGATED POWER
BOC VAT and excise tax on imported goods
Banks duly accredited by CIR (Sec. 12, 269-270,
NIRC)
Withholding agents
GENERAL PRINCIPLES ON
WT
Creditable withholding tax (CWT) is not an internal revenue tax.
Sec. 22, NIRC enumerates the different internal revenue taxes.
Creditable withholding tax is only a method of collecting income tax
in advance from the recipient of income thru the payor thereof,
which is constituted by law as a withholding agent of government.
Subject to the rules and regulations, income tax on specified items
of income shall be withheld by the payor and paid in the same
manner and subject to the same conditions as provided in Sec. 58,
NIRC.
Withholding tax applies only when the income, gain or profit is subject to
income tax. NO INCOME TAX, NO WITHHOLDING TAX!
Not all income, gain or profit subject to income tax are also subject to
withholding tax. The duty to withhold and remit income taxes arises only on
instances required by law or regulation.
The EWT, which shall be not less than 1% but not more than 32% of
income, is creditable against income tax for the year.
GENERAL PRINCIPLES ON
WT
WT return shall be filed and tax, paid in WAs legal
residence or principal place of business, or where the
WA is a corporation, where the principal office is
located, except on sales of real property subject to
income tax where the EWT shall be paid in the RDO
where the property is located.
Taxes deducted and withheld by WA shall be held as a
special fund in trust for government until paid to
collecting officers. They should not be commingled with
other funds of the WA (Sec. 58(D), NIRC).
FWT shall be filed and tax paid within 25 days from
close of each calendar quarter. CWT, not later than the
last day of the month following the close of the quarter
GENERAL PRINCIPLES OF
WITH TAX
during which withholding was made, provided
that CIR, with approval of Sec. of Finance, may
require WAs to pay or deposit taxes withheld at
more frequent intervals, when necessary to
protect the interest of government (Sec. 58(A), NIRC).
The act of the withholding agent is the act of
the principal (BIR). Thus, non-remittance of the
amount of tax withheld by the withholding
agent from the income of the recipient does not
prejudice the latter.
GENERAL PRINCIPLES
Withholding agent is agent of both the
government and the taxpayer
Obligation to withhold tax is mandatory on the
part of the withholding agent. The agent is not
liable for the tax as no wealth flowed into him or
no income was earned by him. He becomes
liable to tax for the breach of his legal duty to
withhold. Liability of withholding agent is direct
and different from the duty to pay income tax of
the taxpayer.
Withholding agent becomes personally liable to
pay the withholding tax. The law sets no
condition for the personal liability of WA to attach.
Filing of tax return by local agent did not relieve it
from its duty to withhold tax on premium paid to
NRFC
GENERAL PRINCIPLES
Deduction from gross income will be allowed (up to Dec
31, 2012), even if no WT was made, where:
Payee reported the income and pays the tax due thereon and
WA pays the tax, incl. interest, and surcharge, if applicable, at
time of audit or reinvestigation or reconsideration;
Payee failed to report the income on due date, but WA pays the
tax, incl. interest, and surcharge, if applicable, at time of audit
or reinvestigation or reconsideration;
WA erroneously under-withheld the tax but pays the difference,
incl. interest, and surcharge, if applicable, at time of audit or
reinvestigation or reconsideration (RR 14-2002, Sept 9, 2002).
PURPOSES
To improve tax administration; existence of audit trail thru the
withholding of advance income tax, although generally small in
amount, makes non- or under-reporting of income by recipient of
income difficult or capable of being discovered by BIR;
To improve liquidity of government;
It is easier to collect from thousands of big, registered WAs than from
millions of small, sometimes unregistered, recipients of income.
To ensure collection of income from non-resident taxpayers thru the
withholding tax system
TYPES OF WITHHOLDING
TAXES
Final Withholding Tax (FWT)
Recipient is a resident person
Recipient is a non-resident person
Dividends
Royalties
Capital gains
Sale of real property located in the Philippines
Sale of shares of stocks of a domestic corporation
Other income
Prizes and winnings
Rental
Vessel
Aircraft, machinery and equipment
Dividends
Royalties
TAX DISTORTIONS
RA 9504, approved June 17, 2008
Statutory Minimum Wage (SMW) rate fixed by the
Regional Tripartite Wage and Productivity Board, as defined
by BLES of DOLE (Sec. 22(GG), NIRC)
Minimum Wage Earner (MWE) worker in the private
sector paid the statutory minimum wage, or to an
employee in the government sector with compensation
income of not more than the statutory minimum wage in
the non-agricultural sector where he/she is assigned (Sec.
22 (HH), NIRC)
TAX DISTORTIONS
RA 9504 (2008)
The following individuals shall not be required
to file an income tax return:
d. A MWE as defined in Sec 22(HH) of this Code
(Sec.
51, NIRC)
TAX DISTORTIONS
RR 10-2008, July 8, 2008
An employee who receives/earns additional compensation such as
commissions, honoraria, fringe benefits, benefits in excess of the
allowable statutory amount of P30,000, taxable allowances and other
taxable income other than the SMW, holiday pay, overtime pay, hazard
pay and night shift differential pay, shall not enjoy the privilege of being
a MWE and, therefore, his/her entire earnings are not exempt from
income tax and, consequently, from withholding tax.
MWEs receiving other income, such as income from the conduct of trade,
business or practice of profession, except income subject to final tax, in
addition to compensation income, are not exempted from income tax on
their entire income earned during the year.
This rule notwithstanding, the SMW, holiday pay, overtime pay, night
shift differential pay, and hazard pay shall still be exempt from
withholding tax.
TAX DISTORTIONS
RR 10-2008, July 8, 2008
TAX DISTORTIONS
RMC 91-2010, Dec 2, 2010
If in Dec 2010, the MWE was promoted, her
salary for the month of December will be
subject to income tax if it exceeds her
personal and additional exemptions (Q10).
If an MWE with a salary of P382/day assigned
in NCR was re-assigned in Laguna with the
same salary in May 2010, his salary in Laguna
will be subject to withholding tax because his
daily wage is above the prevailing minimum
wage in Laguna region (Q14-15).
DE MINIMIS BENEFITS
RR 10-2008, July 8, 2008
Facilities and privileges of relatively small value.
Ordinarily, facilities and privileges (such as
entertainment, medical services, or so-called
courtesy discounts on purchases), otherwise known
as de minimis benefits, furnished or offered by an
employer to his employees, are not considered as
compensation subject to income tax and
consequently, to withholding tax, if such facilities or
privileges are of relatively small value and are offered
or furnished by the employer merely as means of
promoting the health, goodwill, contentment, or
efficiency of his employees.
DE MINIMIS BENEFITS
RR 5-2011, Mar 16, 2011
Monetized unused vacation leave credits of private
employees not exceeding 10 days
Monetized value of vacation and sick leave credits
paid to government employees
Medical cash allowance to dependents of employees,
not exceeding P750 per employee per semester or
P125 per month
Rice subsidy of P1,500 or one sack of 50 kg rice per
month amounting to not more than P1,500
Uniform and clothing allowance not exceeding P4,000
per annum
DE MINIMIS BENEFITS
Actual medicine assistance (e.g., medical allowance to cover medical and
healthcare needs, annual medical/executive check-up, maternity
assistance, and routine consultations, not exceeding P10,000 per annum
Laundry allowance not exceeding P300 per month
Employees achievement awards (e.g., for length of service or safety
achievement, which must be in the form of tangible personal property
other than cash or gift certificate, with an annual monetary value not
exceeding P10,000 received by employee under an established written
plan which does not discriminate in favor of highly paid employees
Gifts given during Xmas and major anniversary celebrations not
exceeding P5,000 per employee per annum
Daily meal allowance for overtime work and night/graveyard shift not
exceeding 25% of basic minimum wage on a per region basis
All other benefits not included above shall not be considered as de
minimis benefits; hence, subject to income tax and withholding tax.
EXCLUSIONS
Sec. 32(B), NIRC
Amounts received thru accident or health insurance or under
workmens compensation acts, as compensation for personal injuries or
sickness, plus the amounts of any damages received, whether by suit
or agreement, on account of such injuries or sickness, is excluded from
gross income (Sec. 32(B)(4), NIRC).
Any amount received by an official or employee or by his heirs from the
employer as a consequence of separation of such official or employee
from the service of his employer because of death, sickness or other
physical disability or for any cause beyond the control of said official or
employee, shall be excluded from gross income [Sec. 32(B)(6)(b),
NIRC].
REQUISITES OF EWT
Requisites must concur:
1. Expense, which is paid or payable by the
payor-withholding agent, is income to
recipient subject to income tax;
2. Income payment is listed in the
regulations subject to CWT, except when
taxpayer is designated by BIR as a Top
20,000 Corporation or a Top 5,000 Individual;
3. Income recipient and payor of income are
both residents of the Philippines.
PERSONS REQUIRED TO
WITHHOLD
WITHHOLDING AGENT (WA)
WA is a person who has control, receipt, custody, disposal, or payment of
income to person entitled to it, that is designated by law or regulation to act
as agent of government in the collection of tax, and who, at the same time,
TIME TO WITHHOLD
Sec. 2.57.4, RR 2-98: WT shall be withheld,
whichever comes first:
When income payment is paid; or
When income payment is payable; or
Payable refers to the date the obligation becomes due,
demandable or legally enforceable
TOP 20,000
CORPORATION
Corporation that has been determined and notified by
BIR as having satisfied any of the following criteria:
Large Taxpayer or Top 10,000 Corporation, unless
previously de-classified;
VAT payment or payable, whichever is higher, of at least
P100,000 for the preceding year;
Annual income tax due of at least P200,000 for the
preceding year;
Total percentage tax paid of at least P100,000 for the
preceding year;
Gross sales of P10 million or above;
Gross purchases of P5 million or above;
Total excise tax payment of at least P100,000 or above
INCOME TAX ON
INDIVIDUAL
COMPENSATION INCOME
Gross compensation income
Less: Personal (P50T) and
additional exemptions
(P25T)
Tax base
Multiplied by graduated rates
of income tax (5%-32%)
Ordinary income tax
Less: Creditable
withholding tax (CWT)
Balance due upon filing of
return
PROFESSIONAL INCOME
Gross professional fees
Less: Cost of service
Gross income
Less: Deductions
Personal and addl
exemptions
Net income
Multiplied by grad tax rates
Income tax
Less: CWT
Balance due
PARTNERSHIPS
EXEMPT
General professional partnership (GPP) is exempt from
income tax
Partners are subject to income tax on their share of GPP
profit, whether distributed or not during the year income
is earned
EWT must be withheld and remitted by GPP to BIR
TAXABLE
Partnerships, no matter how created or organized, other than GPP
If taxable, partnership is taxed like a corporation.
If taxable partnership derives net income during the year, the entire net
income is deemed received by the partners in the year it was earned by
the partnership.
If GPP adopts itemized deductions during the year, partners must use
itemized deductions during the same year.
TAX IMPLICATIONS OF RR
14-2013
PATIENT
VAT-registered person (e.g., practicing lawyer or employee of VAT-reg personemployer)
Non-VAT-registered person (e.g., employee or student/elderly)
MEDICAL PRACTITIONER
VAT-registered person or gross receipts exceed P1,919,500
Non-VAT-registered person
HOSPITAL/CLINIC
VAT-registered person
Non-VAT-registered person
TAX ISSUES:
Who is the withholding agent for government?
Who shall issue BIR Form 2307 (Certificate of Tax Withheld)?
What kind of official receipts (VAT/NV) shall be issued to payor and doctor?
RR 10-2013, June 6,
2013
INCOME PAYMENTS SUBJECT TO EWT (RR 2-98, as
amended by RR 14-2002 and RR 30-2003):
Professionals, including real estate service practitioners (RE
consultants, RE appraisers, and RE brokers) under RA 9646 (RESA
Law) 10% up to P720,000 gross commission; 15%, over P720,000
RE brokers who failed or did not take up the licensure examination
given by RE Service under PRC 10% of gross commission.
- 15%
- 10%
- 15%
- 10%
3. Rental income
Real properties
- 5%
Personal properties of P10,000 per payment; P10,000
shall not apply when accumulated rental to same
lessor exceeds or is reasonably expected to exceed
P10,000 within a year
- 5%
Poles, satellites and transmission facilities
Billboards
- 5%
- 5%
4. Gross payments to resident individuals and corporate cinematographic film owners, lessors, or distributors
5. Gross payments to contractors
- 2%
6. Income distribution to beneficiaries
- 15%
7. Income payments to certain brokers and agents
8. Income payments to partners of general professional
partnerships:
If gross income for current year exceedsP720,000
If otherwise
- 10%
9. Professional fees paid to medical practitioners
If gross income for current year exceedsP720,000
If otherwise
- 10%
10. Gross additional payments to government personnel from
importers, shipping and airline companies, or their
agents
- 15%
11. One-half of gross amounts paid by any credit card
company in the Philippines
- 1%
5%
10%
15%
15%
- 1%
- 1%
- 5%
eFPS Payment
On or before 15th day of month following withholding was made, except for December,
on or before Jan 20 of following year
In case of NGAs, all returns must be electronically filed and payment shall be made in
same day.
FINAL WITHHOLDING
TAXES
BIR Form 1601-F (Monthly
remittance return of final income
taxes withheld)
BIR Form 1602 (Monthly remittance
return of final income taxes withheld
on interest paid and yield on deposit
substitutes/trusts)
BIR Form 1600-WP (Remittance
return of percentage tax on winnings
and prizes withheld by race track
WT RETURNS
1601C - Monthly remittance return of
income taxes withheld on compensation
income
1601E - Monthly remittance return of
creditable income taxes withheld
(expanded)
1601F - Monthly remittance return of final
income taxes withheld
1603 - Monthly remittance return of final
income taxes withheld on fringe benefits
paid to employees other than rank and file
WT RETURNS
1604CF - Annual information return of income
taxes withheld on compensation and FWT
1604E - Annual information return of creditable
income taxes withheld (expanded)/income
payments exempt from withholding tax
1606 - Withholding tax return for onerous
transfer of real property other than capital asset
(including taxable and exempt)
2306 Certificate of FINAL Withholding Tax
2307 Certificate of CREDITABLE Withholding Tax
ATTACHMENTS
PERSONS REQUIRED TO SUBMIT SAWT
SAWT is alpha list of WAs from whom income was earned
or received and subjected to WT to be submitted by the
payee-recipient of income.
SAWT contains total amounts of income/gross sales or
receipts and claimed tax credits taken from all Certs of
Creditable WT (BIR Form 2307) issued by payors of
income payments.
All persons claiming refund or applying for creditable tax
withheld against the tax due with not more than 10 WApayors of income payment per return period are strictly
required to submit SAWT in hard copy. If the person has
more than 10 payors of income, SAWT shall be
submitted in electronic form (3.5 inch floppy diskette).
ATTACHMENTS
PERSONS REQUIRED TO SUBMIT MAP
MAP is a consolidated alpha list of income earners from
whom taxes have been withheld by the payor of income
for a given period and in whose behalf, taxes were
remitted.
MAP contains a summary of information on taxes
withheld and remitted thru the monthly remittance
returns (BIR Form Nos. 1601-E, 1601-F, or 1600),
showing total amounts of income, gross sales or receipts
and taxes withheld and remitted.
All WAs under Secs. 2.57, 4.11, 5.11 of RR 2-98, as
amended, who are required to withhold and remit taxes
and have not more than 10 income payees-recipient of
income per return period shall submit MAP in hard copy.
If he has more than 10 payees, submit MAP in 3.5 inch
floppy diskette (RR 2-2006, Dec 1, 2005).
PENALTIES
1. SURCHARGE
25%: No WT return was filed or there was late filing of return
50%: Willful failure to file return or fraudulent return was filed
2. DEFICIENCY INTEREST
20% per annum from date tax is due to date of payment, without
maximum amount
3. COMPROMISE PENALTY
Criminal liability from certain violation is extinguished by
payment of compromise penalty
ANNUAL INFORMATION
RETURNS
BIR Form 1604-E (Annual information
return of creditable income taxes
withheld/income payments exempt
from withholding tax)
BIR Form 1604-CF (Annual
information return of income taxes
withheld on compensation and final
withholding taxes)
DEADLINE
10th day of following month, whether eFPS or manual filing
and payment
RELEVANT REV
REGULATIONS
2015
RR
2014
RR 1-14, 2-14
2013
RR 1-13, 5-13, 10-13, 11-13, 13-13
2012
RR 3-12, 6-12, 8-12, 14-12, 16-12; RMC 41-12, 42-12, 81-12, 8512
2011
RR 5-11, 7-11, 13-11; RMC 20-11, 23-11, 38-11, 49-11
2010
RR 11-10; RMC 21-10
RELEVANT REV
REGULATIONS
2009
RR 1-09, 2-09, 3-09, 5-09, 6-09, 8-09, 10-09; RMC 409, 10-09,
2008
RR 4-08, 5-08, 6-08, 7-08, 14-08, 10-08
2007
RR 4-07; RMC 23-07 (Govt money payments)
2006
RR 1-06, 2-06, 4-06
RELEVANT REV
REGULATIONS
2004
RR 1-04, 3-04, 5-04
2003
RR 14-03, 16-03, 17-03, 30-03
2002
RR 3-02, 4-02, 14-02, 19-02, 26-02
2001
RR 6-01, 9-01, 12-01
2000
RR 8-2000, 10-2000
1999
RR 3-99
END OF PRESENTATION
Atty. Vic C. Mamalateo
Mobile: 0939-9209175; 09175280445
Email: vicmamalateo@yahoo.com
vic.mamalateo@vcmlaw.com.ph