UPDATES ON

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

Residence of taxpayer receiving income

Resident taxpayer
Non-resident taxpayer

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

OTHER PERCENTAGE TAXES (Title

V, NIRC)
Money payments by government

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

2. To file withholding tax return and pay the tax

within the date prescribed by law or regulation,
including annual information returns
Centralized or decentralized filing of return

3. To issue appropriate BIR certificates (BIR Form

2307) within the dates prescribed by the regulation

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.

WHEN IS INCOME TAXABLE?

There is income, gain or profit;
Received, accrued or realized during the taxable year; and
Not exempt from income tax under the Constitution, tax
treaty, Tax Code or special law

Withholding (income) tax applies only when the

income is subject to income tax.

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

(Sec. 57-59, NIRC).

INCOME TAX SYSTEMS

GLOBAL TAX SYSTEM (Subject to or exempt from

CWT)

SCHEDULAR TAX SYSTEM (Subject to FWT)

Compensation income not subject to FWT

Business and/or professional income
Capital gains not subject to FWT
Passive investment income not subject to FWT
Other income not subject to FWT
Compensation income subject to FWT
Capital gains subject to FWT
Passive investment income subject to FWT
Other income subject to FWT

The Philippines adopted the semi-global or semi-schedular

tax system. Either the global or schedular system, or both
systems, may apply on income of a taxpayer, depending on
the nature of income.
You apply the schedular tax system only when the income,
gain or profit is subject to FWT.

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).

Beginning Jan 1, 2013, no deduction from gross income

shall be allowed if there was no withholding tax and
even if the deficiency withholding tax is paid at time of
audit.
Withholding taxes are funds in trust held by the WA for
the government.

NATURE AND PURPOSES OF

WITH TAX
NATURE
WT is not an internal revenue tax. It is a method of collecting
income tax in advance from the recipient of income thru the
withholding agent/payor of the income.

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

Creditable Withholding Tax

(CWT)
Compensation income
Expanded Withholding Tax
Money payments by government

FINAL WITHHOLDING TAX

Income payment is listed in Sec 57(A), NIRC, as subject to

FWT.
FWT withheld by the payor of income (e.g., 20% FWT on
interest income on bank deposits) represents FULL payment
of income tax due on such income of the recipient.
Income payee (or recipient of income) does not report
income subjected to FWT in his income tax return (BIR
Forms 1701 and 1702), although income is reflected in his
audited financial statements for the year. However, he is
not allowed to claim any tax credit on income subjected to
FWT. New BIR income tax returns require presentation of
income subjected to FWT.
Withholding agent (payor of income) files the withholding
tax return, which includes the FWT deducted from the
income of payee, and pays the tax to the BIR. There is no
Certificate of Tax Withheld issued to income payee.
No Certificate of Tax Withheld (BIR Form 2307) is attached
to the income tax return of recipient of income because he
does not claim any tax credit in his tax return.

FWT: SEC 57(A), NIRC

Income tax is imposed or prescribed by:
Sec. 24(B)(1) Interests, royalties, prizes & other winnings
Sec. 24(B)(2) Cash and/or property dividends
Sec. 24(C) CGs from sale of shares not traded in PSE
Sec. 24(D)(1) CGs from sale of real property
Sec. 25(A)(2) Cash and/or property dividends from DC;
interests, royalties, prizes and other winnings
Sec. 25(A)(3) CGs from sale of shares not traded in PSE and real
property
Sec. 25(B) NRA not engaged in trade or business in the Phil
Sec. 25(C) Alien employed by RHQ and ROHQ
Sec. 25(D) Alien employed by OBU
Sec. 25(E) Alien employed by petroleum service contractor and
sub-contractor

INCOME PAYMENTS SUBJECT

TO FWT
Payments to resident persons:
Compensation income
Alien employed by RHQ, ROHQ, OBU and petroleum contractor

Passive investment income

Interests
Peso deposit (long-term or not; individual or corporation)
Foreign currency deposit (FCDU or OBU)

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

INCOME PAYMENTS SUBJECT

TO FWT
Payments to non-resident persons:
Business profits
Services rendered in the Philippines

Rental
Vessel
Aircraft, machinery and equipment

Passive investment income

Interests
Foreign currency loan

Dividends
Royalties

 COMPENSATION INCOME AND

FRINGE BENEFITS
BIR Form 1601-C (Monthly remittance
return of income taxes withhheld on
compensation)
BIR Form 1603 (Quarterly remittance
return of final income taxes withheld on
fringe benefits paid to employees other
than rank and file)

WHO ARE REQUIRED TO FILE

BIR Form 1601-C?
Every registered withholding agent on compensation,
including:
Individuals engaged in business or practice of profession
with employees subject to income tax;
All juridical persons, whether or not engaged in business;
Government agencies and instrumentalities, including local
government units

Deadline for filing and payment

Payment via eFPS: On or before the 15th day of following
month withholding was made, except for taxes withheld for
December, on or before Jan 20 of succeeding year
Manual filing and payment: 10th day of following month,
except for December, not later than Jan 15 of following year

RR 10-2008, July 8, 2008

Steps in determining amount of withholding tax:
1. Determine the total monetary and non-monetary compensation paid
to an employee for the payroll period, segregating gross benefits which
include 13th month pay, productivity incentives, Christmas bonus, other
benefits, and employees contributions to SSS, GSIS, HDMF, PHIC, and union
dues.
2. Segregate the taxable from the non-taxable income for the payroll
period.
3. Segregate the taxable compensation income into regular and
supplementary income. RATA is exempt from income tax and WT.
4. Use appropriate tables (depending on qualified dependents) for the
payroll period monthly, semi-monthly, weekly or daily.
5. Fix the compensation level.
6. Compute the WT due by adding the tax predetermined in the compensation
level to the tax on the excess of total regular and supplementary
compensation over the compensation level, which is computing by multiplying
the excess by the rate indicated at the top of the same column/compensation
level.

RR 10-2008, July 8, 2008

Use of exceptional computations
A. Cumulative average method
B. Annualized withholding tax method
When the employer-employee relationship is terminated before the end of the year; and
When computing for the year-end adjustment.

1. Determine taxable regular and supplementary compensation paid for the

entire year
2. If employee has previous employment within the year, add the amount of
taxable regular and supplementary compensation paid by present employer to
the taxable compensation received from previous employer during the year
3. Deduct from the aggregate amount the total personal and additional
exemptions of the employee
4. Deduct amount of premium payments on health and/or hospitalization
insurance
5. Compute the tax on the difference in Step 4.
6. Determine the deficiency or excess, if any, of the tax computed in Step 5
over the cumulative tax already deducted and withheld since the beginning of
the year.

RR 10-2008, July 8, 2008

Updating Status of Taxpayer
Application for registration for individuals earning
compensation income (BIR Form 1902)
Certificate of Update of Exemption and of
Employers and Employees Information (BIR
Form 2305)
Certificate of Compensation Payment/Tax
Withheld (BIR Form 2316) for compensation
payment with or without withholding tax
Sworn declaration and waiver of right to claim
exemptions of dependent children by the husband

RR 10-2008, July 8, 2008

BIR Form 1604 CF (Annual Info Return of IT
Withheld on Compensation Income and FWT)
Every employer is required to file with LTAD/LTDO/RDO where it
is registered on or before Jan 31 of the following year,
together with the alpha list of employees, showing WAs name,
address, and TIN.

Alpha List of Employees

Name and TIN of employees; Gross compensation paid by
present and previous employers for the year; Taxable amount
for rank-and-file and for managerial employees; Non-taxable
13th month and other benefits (present employer); Non-taxable
SMW; Non-taxable holiday pay, overtime pay, night shift diff pay
and hazard pay; amount of exemptions; premium payments
on health and hospitalization insurance not exceeding P2,400;
tax withheld; adjustments, if any.

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)

Minimum wage earners shall be exempt from the payment

of income tax on their taxable income: Provided, further,
That the holiday pay, overtime pay, night shift differential
pay and hazard pay received by such MWE shall likewise
be exempt from income tax (Sec. 24(A)(2), 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)

Except in the case of a MWE, every employer

making payment of wages shall deduct and
withhold upon such wages a tax determined
in accordance with the rules and regulations
to be prescribed by the Secretary of Finance,
upon recommendation of the CIR (Sec. 79(A), 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

Any reduction or diminution of wages for

purposes of exemption from income tax
shall constitute misrepresentation and
therefore, shall result to the automatic
disallowance of expense; i.e.,
compensation and benefits account, on
the part of the employer.
The offenders may be criminally
prosecuted under existing laws.

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).

TAXES ON LABOR DISPUTE

AWARDS
RMC 39-2012, Aug 3, 2012
Backwages, allowances and benefits awarded in a labor
dispute constitute remuneration for services that would
have been performed by the employee in the year when
actually received, or during the period of his dismissal from
the service which was subsequently ruled to be illegal.
The employee should report as income and pay the
corresponding income taxes by allocating or spreading his
backwages, allowances and benefits thru the years from
his separation up to the final decision of the court awarding
the backwages.
The backwages, allowances and benefits are subject to
withholding tax on wages.

TAXES ON LABOR DISPUTE

AWARDS
However, when the judgment awarded in a labor dispute is
enforced thru garnishment of debts or having in possession
or control of such credits (e.g., banks or other financial
institutions) would normally release and pay the entire
garnished amount to the employee. As a result, employers
who are mandated to withhold taxes on wages cannot
withhold the appropriate tax due thereon.
In order to ensure the collection of the appropriate
withholding tax on wages, garnishees of a judgment award
in a labor dispute are constituted as withholding agents with
the duty to withhold tax on wages equivalent to five percent
(5%) of the portion of the judgment award, representing the
taxable backwages, allowances and benefits.

WHO ARE REQUIRED TO FILE

BIR Form 1603 (FBT)
Every withholding agent/payor who is either an
individual or non-individual required to deduct
and withhold taxes on fringe benefits furnished to
employees other than rank and file employees
subject to final withholding tax.
Deadline
eFPS: On or before 15th day of the month following
the end of calendar quarter in which FB were granted
to recipient. In the case of NGAs, on or before 10 th day
of the month following the quarter.
Manual: On or before 10th day of the month following
end of calendar quarter

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].

Compensation for damages to personal or family rights,

damages for slander and libel, award for loss of life, damages
for injuries to the goodwill of a taxpayers business, unless they
exceeded its cost, are not taxable (Prentice-Hall Federal Tax Handbook, 1983).

 EXPANDED WITHHOLDING TAX

ON CERTAIN INCOME PAYMENTS
BIR Form 1601-E (Monthly remittance
return of income taxes withheld, except
for transactions involving onerous
transfer of real property classified as
ordinary asset)
BIR Form 1606 (EWT on onerous transfer
of real property classified as ordinary
asset)

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,

claims the expenses

(RR 30-2003, as implemented by RMC 9-2006, Jan 25, 2006).

Persons constituted as withholding agents:

Any juridical person, including non-stock, non-profit associations, whether
engaged in trade or business;
An individual, with respect to payments made in connection with his trade or
business, and on taxable sale of real property by the seller;
All government offices, including GOCCs, and LGUs.
All persons, with respect to their income payments made as campaign
expenditures and/or purchase of goods and services intended as campaign
contributions.
Agents or any person purchasing goods or services, or paying for and in
behalf of the WA shall withhold in behalf of said WA.

PERSONS EXEMPT FROM

WT
1. National government and its instrumentalities, including
LGUs and barangays, except GOCCs that are not exempt
from income tax;
2. Persons enjoying exemption from income tax, such as:
Sales of real property classified as socialized housing (PD 957);
Entities registered with the BOI, PEZA, and SBMA and other freeport
zones (EO 226, RA 7916, RA 7227);
General professional partnerships (Sec. 26, NIRC);
JVs undertaking construction projects or engaged in energy-related
projects pursuant to an operating or consortium agreement with the
government [Sec. 20(B), NIRC];
Revenue derived from carriage of persons, cargo or mail originating
from the Philippines up to final destination, paid to international
shipping line or thru its shipping agent, subject to GPB tax (BIR
Ruling No. DA-204-2006 & 321-2008).

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

When income payment is accrued or recorded as an

expense or asset, whichever is applicable, in the
payors books, whichever comes first. In such a
case, the obligation to withhold shall arise in the last
month of the return period in which the same is
claimed as an expense or amortized for tax purposes.
ING v. CIR, CTA EB No. 52, April 5, 2005 (WT on bonus)

TIME TO CLAIM TAX

CREDIT
Taxpayer shall report gross income and
claim costs and deductions in the proper
year (Sec. 44-45, NIRC).
The taxpayer cannot advance or delay the
reporting of income, costs and expenses.
Sales or revenues as well as withholding taxes
on costs and deductions subject to tax shall
be reported in the same taxable year.
The withholding tax of the principal cannot be
claimed as a tax credit by the agent thereof.

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

TOP 5,000 INDIVIDUAL

Individual engaged in trade or business or
exercise of profession, notified by BIR has
having satisfied any of the following criteria:
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;
Percentage tax paid of at least P100,000;
Gross sales of P10 million or above;
Gross purchases of P5 million or above;
Excise tax paid of at least P100,000.

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.

RR 14-2013, Sept 20,

2013
(I) Prof fees paid to medical practitioners Any
amount collected for and paid to medical practitioners by
hospitals and clinics or paid directly to the medical
practitioners by HMO and/or similar establishments 15%,
if income exceeds P720,000; and 10%, if otherwise.
A. It shall be the duty of hospitals, clinics, HMOs and similar
establishments to withhold and remit taxes due on the prof fees
of their accredited medical practitioners, paid by patients who
were admitted and confined to them. For this purpose, hospitals
and clinics shall not allow their medical practitioners to receive
payment of prof fees directly from their patients who were
admitted and confined and, instead, must include the fees in the
total medical bill of the patient which shall be payable directly
to the hospital or clinic.

RR 14-2013, Sept 20,

2013
B. Exception. The WT shall not apply whenever
there is proof that no professional fee has been
charged by the medical practitioner and paid by
his patient, provided this fact is shown in a sworn
declaration jointly executed by the medical
practitioner and the patient or his auth
representative, if minor or otherwise incapacitated.
Provided, further, the administrator of the hospital
or clinic shall inform the RDO having jurisdiction
about any medical practitioner who fails or refuses
to execute the sworn statement, within 10 days
from the occurrence of such event.

RR 14-2013, Sept 20,

2013
C. Hospitals and clinics shall submit the names and addresses of
medical practitioners in the following classifications, every 15 th day
after the end of every quarter, to Coll Div or LTDP&QAD or LTDO.
D. Medical practitioners shall include medical technologists, allied
health workers (e.g., occupational therapists, physical therapists,
speech therapists, nurses, etc) and other med practitioners who are
not under an employer-employee relationship with the hospital,
clinic, HMO or similar establishments.
Hospitals and clinics and HMOs shall be responsible for the accurate
computation and timely remittance of the withholding tax (10% or
15% EWT, whichever is applicable).
The hospital, clinic or HMO shall issue a Certificate of CTW (BIR
Form 2307) to medical practitioners who are subjected to WT every
20th day following the close of the taxable quarter or upon request of
the payee.
This regulation shall take effect on Oct 1, 2013.

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.

If a professional (e.g., doctor of medicine) wants that EWT

rate for payments in the second semester be still at 10%
because his total gross professional fees for the first
semester does not exceed P720,000, he must file with the
BIR a Sworn Declaration for this purpose and give copy
thereof to the payor of professional fee.

RMC 38-2011, Sept 1,

2011
PAYMENTS BY PHILHEALTH TO:
Doctor who provided medical services
10%/15% EWT
Hospital for the use of its medical facilities
2% EWT
Philhealth is constituted as withholding
agent for the government because it has the
receipt, control and custody of the funds
Doctor and hospital shall issue their
respective official receipts to Philhealth

RR 12-2013, July 12,

2013
Sec. 2.58.5, RR 2-98, as amended by RR 122013:
Any income payment which is otherwise deductible
under the Tax Code shall be allowed as a deduction
from the payors gross income only if it is shown that
the income tax required to be withheld has been
paid to the Bureau in acc with Secs. 57 and 58 of the
Code.
No deduction will also be allowed notwithstanding
payments of withholding tax at the time of the audit
investigation or reinvestigation/reconsideration in
cases where no withholding of tax was made in acc
with Secs 57 and 58 of the Code.

RMC 63-2013, Sept 26,

2013
RR 12-2013 (No WT, no deduction
from gross income) shall apply to
audit investigation for the taxable
year 2013.

INCOME PAYMENTS SUBJECT

TO EWT

1. Professional fees for services rendered by individuals; and

professional entertainers and athletes, and directors:

- 15%
- 10%

If gross income for current year exceeds P720,000

If gross income for current year does not P720,000

- 15%
- 10%

2. If recipient of professional fees, talent fees, etc. is

a juridical person:

If gross income for current year exceeds P720,000

If gross income for current year does not P720,000

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%

INCOME PAYMENTS SUBJECT

TO EWT

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%

INCOME PAYMENTS SUBJECT

TO EWT

12. Income payments made by any Top 20,000 Corp

Supplier of goods
- 1%
Supplier of services
- 2%
13. Income payments made by government to its local/resident
supplier of goods and services other than those covered
by other rates of withholding taxes
Supplier of goods
- 1%
Supplier of services
- 2%
14. Commissions of independent and exclusive distributors,
and marketing agents of companies
- 10%
15. Tolling fees paid to refineries
- 5%
16. Payments made by pre-need companies to funeral parlor
17. Payments made to embalmers
- 1%
18. Income payments made to suppliers of agricultural products
19. Income payments on purchases of minerals, mineral products and quarry resources (RR 6-12 amended RR 17-03)
20. MERALCO refund to customers
With active contracts
- 25%
With terminated contracts
- 32%

- 1%
- 1%
- 5%

WT BASES AND RATES

COMPUTATION OF EWT
Payment to non-VAT seller of service
P100,000 x 2% = P2,000 EWT

Payment to VAT-registered seller of

service
P100,000 x 2% = P2,000 EWT
P100,000 + P12,000 VAT = P112,000 (Total
invoice amount) P2,000 = P110,000 (check
payment)
If total invoice amount does not separately
indicate the VAT component, remove first
the VAT portion.

WT BASES AND RATES

Payments to Meralco and
telecommunication companies are
considered as payment for services
subject to 2% EWT.

Tax base shall be amount due as shown in

Meralco billing
Payment for installation and removal cost of
service application for temporary service is
subject to 2% EWT. All amounts reimbursed by
payor to Meralco for relocation of poles and
other electrical facilities are not subject to EWT.
Tax base paid to telecom companies shall
exclude 10% overseas communication tax.

WT BASES AND RATES

Top 20,000 Corp shall withhold the 2% EWT,
whether or not the electric meter is in its name,
provided that valid proof that payment of
particular expense is shouldered by the payor
claiming the expense. Lessee shall present
contract of lease, together with photocopy of the
notice from the BIR, designating the corp as one
of Top 20,000 Corp, to Meralco, PLDT and other
utility companies, thru the lessor and shall issue
the corresponding BIR Form 2307 in the name of
the utility companies.
EWT shall be in the current month and may only
be deducted in the billings for the current month.

WT BASES AND RATES

Payments of life and non-life insurance
premiums are considered as payments for
sales of services. Tax base is the amount
of premiums paid, exclusive of VAT and
other taxes (DST and local taxes).
Payment thru broker or agent authorized
to receive premium payment on behalf of
the insurance company shall be subject to
2% EWT to be withheld by the WA.
However, WA shall issue BIR Form 2307 in
the name of the insurance company, not in
the name of the broker or agent.

WT BASES AND RATES

Payments of interest on loans, service fees
and other charges by TTC to banks are
subject to 2% EWT, excluding payment of
principal.
When credit card is used, TTC shall
withhold the 2% EWT on interest and/or
service fee and other charges imposed by
the credit card company. The credit card
company shall withhold % of 1% of the
gross amount paid to any business entity.

WT BASES AND RATES

Payments by TTC to a customs broker for arrastre, customs duties,

wharfage, documentation, handling fee, and to forwarders are
subject to 2% EWT. However, advance payment by the customs
brokers for expenses such as arrastre, wharfage, documentation,
etc. should not form part of gross receipts, if invoiced directly in
the name of the brokers client and if reimbursement to the broker
is not invoiced with the brokers VAT invoice/ official receipt.
Although the broker has control over the fund, the customer has
primary responsibility to remit the WT to BIR. Broker shall
compute and deduct the EWT due on the income payment and at
the same time, issue BIR Form 2307 to and in the name of the
third-party provider of services, as agent of the customer, net of
the VAT.
The provider of services shall then issue OR in the name of the
customer of the broker.
In the subsequent claim for reimbursement of said payment,
broker shall demand from customer only the amount actually paid
to service provider (which is net of EWT), with instructions to the
customer to remit to BIR the amount of EWT on said payment (RMC
9-2006, Jan 25, 2006).

WT BASES AND RATES

Income tax treatment of payments made to
security agency
Security Agency (SA) must record as part of its
gross income the agency fee, net of VAT
thereon.
Since security guard salaries are tacked in as
part of service fees, SA must always recognize
that portion of the fees as a liability. For this
purpose, the contract must provide for a
breakdown of the amount of security services
into two components: (a) agency fee; and (b)
security guard salaries. If contract does not
provide for the breakdown, the whole amount
will be taxed as income of the SA.
Client of SA engaged in business can claim as
deduction from gross income the total amount
paid to SA, net of VAT on the agency fee.

RMC 18-2011, April 12,

2011
Exempt from long-term deposit or investment
Depositor or investor is an individual citizen (resident or
non-resident) or alien (RA or NRAE);
LT deposit or investment certificate is in the name of the
individual and not under the name of a corporation or
the bank or trust department/unit of the bank;
LT deposit or investment must be in the form of savings,
common or individual trust funds, depsub, IMA and other
investments evidenced by certificates in such forms
prescribed by BSP;
LT deposit or investment is issued by banks only and not
by other financial institutions;

RMC 18-2011, April 12,

2011
LT deposit or investment must have a maturity period
of not less than five (5) years;
LT deposit or investment is in denomination of P10,000
or other denominations as prescribed by BSP;
Only interest income from LT deposit or investment is
covered by income tax exemption;
Income tax exemption does not cover any other
income, such as gain from trading, foreign exchange
gain;
LT deposit or investment should not be terminated by
the investor before the 5th year; otherwise, it shall be
subjected to the graduated rates of 5%, 12%, or 20%
on interest income earnings.

TIME TO FILE RETURN AND

PAY TAX
eFPS Filing (for taxpayers using eFPS based on industry classification
groupings per RR 26-2002):
Group A 15 days following end of month
Group B 14 days
Group C 13 days
Group D 12 days
Group E 11 days
Staggered filing of returns shall not apply in case of NGAs per RR 1-2013.

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.

Manual Filing and Payment

10th day of the following month, except for December, on or before Jan 15 of following
year

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

4. DISALLOWANCE OF DEDUCTION FROM GROSS

INCOME
Payment of WT not paid should result in the allowance of
deduction, provided it is paid during the conduct of the request
for reinvestigation.

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)

VALUE ADDED TAX AND OTHER

PERCENTAGE TAX
Sale to government
Payment to non-resident person

SEC. 114(C) WITHHOLDING

OF VAT
The government or any of its political subdivisions,
instrumentalities or agencies, including GOCCs, shall, before
making payment on account of each purchase of goods and
services which are subject to VAT imposed in Secs. 106 and
108 of this Code, deduct and withhold the VAT due at the
rate of 5% of gross payment thereof: Provided, That the
payment for lease or use of properties or property rights to
nonresident owners shall be subject to 12% VAT at the time
of payment. For purposes of this Section, the payor or
person in control of the payment shall be considered as the
withholding agent.
The VAT withheld under this Section shall be remitted within
10 days following the end of the month the withholding was
made.

WHO ARE REQUIRED TO FILE

BIR Form 1600?
All government offices on money payments made to private persons as
required under RA Nos. 1051, 7649, 8241, 8424 and 9337.
Payors of income subject to VAT to non-residents.
Payors of income to persons who opted to remits its/its VAT or OPT thru
the withholding and remittance of same by the WA.
Returns previously filed and proof of tax payments, if amended return
Certificate of tax treaty relief, if applicable
eTRA (previously TRA) for NGAs
BIR Form 0605, for advance payment

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

2005 (RA 9337)

RR 8-05

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

1998 (RA 8424)

RR 2-98, 3-98, 8-98, 10-98, 12-98

 END OF PRESENTATION
Atty. Vic C. Mamalateo
Mobile: 0939-9209175; 09175280445
Email: vicmamalateo@yahoo.com

vic.mamalateo@vcmlaw.com.ph