1 WITHHOLDING TAX AT SOURCE Revenue Regulations No

1 WITHHOLDING TAX AT SOURCE (Revenue Regulations No. 2 -98, as amended) Presented by: SHARA MAE C. PONTERO, CPA Revenue Officer Revenue Region No. 19 -Davao City

Duties & Obligations of a Withholding Agent 2 ü To register ü To deduct and withhold ü To remit the tax withheld ü To file withholding tax returns ü To issue withholding tax certificate

INCOME PAYMENTS SUBJECT TO EWT A. Professional fees, talent fees, etc. , for services rendered by individuals DESCRIPTION 15% if gross income exceeds P 720 T 10% if otherwise On the gross professional, promotional and talent fees or any other form of remuneration for the services rendered. 1)Those engaged in the practice of profession – all profession requiring government licensure examination and/or regulated by PRC, Supreme Court, etc. 2)Professional entertainers 3)Professional athletes 3

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION 4) Directors and producers of movies, stage, etc. 5) Insurance agents and adjusters 6) Management and technical consultants 7) Bookkeeping agents and agencies 8) Other recipients of talent fees 9) Fees of directors who are not employees of the company including per diems, allowances and any other form of income payments not subject to w/holding tax on compensation. 4

DISCLOSURE REQUIREMENT Every individual shall periodically disclose his gross income for the current year to the BIR by submitting a Notarized Sworn Declaration to the Collection Division of the Regional Office having jurisdiction of the income earner in (3) copies. Can also be filed by the income payor on behalf of the professionals/talents/directors whose services were being rendered exclusively to the aforesaid payor; Should be filed on June 30 of each year or w/in 15 days after the end of the month the professional/talent/directors income reaches P 720 T, w/c ever comes first. 5

INCOME PAYMENTS SUBJECT TO EWT B. Professional fees, talent fees, etc. , for services of taxable juridical persons DESCRIPTION 15% if gross income exceeds P 720 T 10% if otherwise On the gross professional, promotional and talent fees or any other form of remuneration for the services rendered. 6

INCOME PAYMENTS SUBJECT TO EWT C. Rentals DESCRIPTION 1. ) On real properties – 5% 2. ) On personal properties - on gross rental or lease in excess of P 10, 000 annually (The P 10, 000 threshold shall not apply when the accumulated gross rental or lease exceeds or reasonably expected to exceed P 10, 000 within the year. ) “Reasonably expects” - is determined when it clearly shows in the documents like lease contracts/agreement the amount to be received within a given period. 3. ) Poles, satellites and transmission facilities – 5% 4. ) Billboards – 5% 7

INCOME PAYMENTS SUBJECT TO EWT D. Cinematographic film rental and …other payments DESCRIPTION 5% on gross payment E. Income Payments to certain contractors 2% on gross payments of the ff: 1. General engineering contractors 2. General building contractors 3. Specialty contractors 4. Other contractors a. Filling, demolition, salvage work contractors and operators of mine drilling apparatus; b. Operators of dockyards; 8

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION Other Contractors (con’t. ) c) Persons engaged in the installation of water system, and gas or electric light, heat or power; d) Operators of stevedoring, forwarding establishments; warehousing or e) Transportation contractors, where the gross payments to the same payee amounts to at least P 2, 000/mo. regardless of the number of shipments during the month f) Printers, bookbinders, lithographers and publishers (with certain exceptions) 9

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION Other Contractors (con’t. ) g) Messengerial, janitorial, private detective and/or collection agencies and other business agencies h)Advertising agencies, exclusive of gross payments to media; i)Independent producers of TV, radio and stage performances or shows; j)Independent producers of “jingles”; k)Labor recruiting agencies and/or “labor-only” contractors 10

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION Other Contractors (con’t. ) l ) Persons engaged in the installation of elevators, central air-conditioning units, computer machines and other equipment and machineries and the maintenance services thereon; m) Persons engaged in the sale of computer services, computer programmers, software/program developer/designer, internet service providers, web page designing, computer data processing, conversion or base services and other computer related services; 11

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION Other Contractors (con’t. ) n) Persons engaged in landscaping services; o) Persons engaged in collection and disposal of garbage; p) TV and radio station operators on sale of TV and radio airtime; and q) TV and radio block timers on sale of TV and radio commercial spots. 12

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION F. Income 15% on the income distributed to the distribution to the beneficiaries of estates and trusts beneficiaries G. Gross payments to certain brokers 10% on gross commissions or service fees and agents H. Income payments to partners of general On income payments made to partners such as professional drawings, advances, sharing, allowances and partnerships stipends 15% if gross income exceeds P 720 T 10% if otherwise 13

INCOME PAYMENTS SUBJECT TO EWT I. Professional fees paid to medical practitioners DESCRIPTION 15% if gross income exceeds P 720 T 10% if otherwise 1. On PF paid by hospitals or clinics, or paid directly to the medical practitioners by patients who were admitted and confined 2. PF paid by HMOs to medical practitioners 14

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION q. It shall be the duty of the hospital/clinic/HMO to remit taxes withheld from professional fees q. The W/tax shall not apply if there is proof that no PF has in fact been charged in a form of sworn declaration q. The hospital shall inform the BIR about any medical practitioner who fails or refuses to execute the sworn declaration within ten days from occurrence 15

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION q. Hospitals and clinics shall submit the names and address of medical practitioners every 15 th day after end of each quarter q. The hospitals and clinics shall be responsible for the accurate computation, timely remittance and issuance of withholding tax certificates every 20 th day following close of the taxable quarter or upon request of the payee 16

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION J. Gross selling price or total amount of consideration or its equivalent paid to seller/owner for the sale, exchange, or transfer of real property classified ad ordinary asset Seller/transferor is exempt from Creditable Withholding Tax (CWT) in accordance with Sec. 2. 57. 5 of the regulation Seller/transferor is habitually engaged in the real estate business: Selling price is P 500 k of less SP <P 500 K but => P 2 M SP <P 2 M Seller/transferor is not habitually engaged in the real estate business 17 - 1. 5% - 3. 0% - 5. 0% - 6. 0%

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION K. Additional income On gross additional payments to gov’t. personnel for overtime services as authorized by personnel from law - 15% importers, shipping and airline companies L. Certain income payments made by credit card companies 1% on ½ of the gross amounts paid 18

INCOME PAYMENTS SUBJECT TO EWT M. Income payments made by the top 20 K private corp. to their local/ resident supplier of goods/services other than those covered by other w/tax rates DESCRIPTION Supplier of goods – 1% Supplier of services – 2% Withholding tax on Agricultural Purchases in their original state shall apply on excess of the cumulative amount of P 300, 000 within the same taxable year. 19

INCOME PAYMENTS SUBJEC TO EWT N. Income payments made by the government to its local/resident supplier of goods/services other than those covered by other w/tax rates DESCRIPTION Supplier of goods – 1% Supplier of services – 2% Income payments, except any single purchase which is P 10, 000 and below, which are made by a government office on their purchase of goods/services from local resident supplier. GOCCs shall withhold taxes as GOCC rather than as corporation. 20

INCOME PAYMENTS SUBJEC TO EWT DESCRIPTION O. Commissions of independent and/or exclusive sales representatives, and marketing agents and companies 10% on gross commissions, rebates, discounts, and other similar considerations P. Tolling fees paid to refineries 5% on gross processing/tolling fees 21

INCOME PAYMENTS SUBJEC TO EWT DESCRIPTION Q. Payments made by pre-need companies to funeral parlor 1% on gross payments R. Payments to embalmers 1% on gross payment S. Income payments to suppliers of agricultural products 1% (suspended by RR 3 -2004) 22

INCOME PAYMENTS SUBJEC TO EWT DESCRIPTION T. Income payments on purchases to minerals, mineral products and quarry resources as defined and discussed in Sec. 151 of the Tax Code 10% on income payments U. MERALCO payments 10% / 20% V. Interest income on the 10% / 20% refund paid either through direct payment or application against customers’ billing by other electric distribution utilities. 23

INCOME PAYMENTS SUBJECT TO EWT DESCRIPTION W. Income payments made by the top 5 K individual taxpayers to their local/resident supplier of goods/services other than those covered by other w/tax rates Individuals engaged in trade or business including non resident aliens engaged in trade or business in the Philippines. Withholding tax on Agricultural Purchases in their original state shall apply on excess of the cumulative amount of P 300, 000 within the same taxable year. Supplier of goods – 1% Supplier of services – 2% 24

Persons Required to Deduct & Withhold 25 Agents, employees or any person purchasing goods or services/paying for and in behalf of the aforesaid withholding agents v shall likewise withhold in their behalf v the official receipts/invoices must be issued in the name of the person whom the former represents v the withholding tax certificate must be issued immediately

Persons Required to Deduct & withhold RR 30 -2003 26 All income payments which are required to be subjected to WT shall be subject to the corresponding rate to be withheld by the person having control over the payment and who claims the expenses. v Utilities even if the meter or billing statement is in the name of the payor v With valid proof, like contract between reg. user and payor

Time of Withholding (RR 12 -2001) The obligation to deduct and withhold arises at the time an income payment is • paid or payable or • an income payment in accrued or recorded as an expense or asset in the payor’s book, whichever comes first. The term payable refers to the date the obligation becomes due, demandable or legally enforceable. 27

Time of Withholding (RR 12 -2001) Provided however, that were income is not yet paid or payable but the same has been recorded as an expense or asset, 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. 28

Exemption from Withholding on Income Tax Shall not apply to income payments made to the ff: A. National government and its instrumentalities, including provincial, city or municipal governments and barangays except GOCCs (RR 14 -2002) B. Persons enjoying exemption from payment of Income Tax 1. HLURB/HDUCC registered 2. BOI/PEPZ/SBMA/Omnibus Investment Code 29

Exemption from Withholding on Income Tax C. Corporation which are exempt from Income Tax • GSIS • SSS • PHIC • Local Water District (RMC 28 -2010) • PCSO D. Gen. Professional Partnerships E. Joint ventures or consortium (RR 14 -2002) 30

FINAL WITHHOLDING TAX 31

Income Payments Subject to Final Withholding Tax ØInterest from any peso bank deposit, and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements – 20% ØRoyalties (except on books as well as other literary works and musical compositions – 20% ØPrizes (except prizes amounting to P 10, 000. 00 or less )– 20% ØWinnings (except Philippines Charity Sweepstakes Winnings and lotto winnings ) - 20% 32

Income Payments Subject to Final Withholding Tax: ØRoyalties on books, as well as other literary works and musical compositions – 10% ØInterest income received by a resident individual taxpayer from a depository bank under the Foreign Currency Deposit System – 7. 5% 33

Income Payments Subject to Final Withholding Tax: ØCash and/or property dividends (received by individuals) - 10% ØNet capital gains from sale, barter, exchange of shares of stocks in a domestic (except through stock exchange ): Not over P 100, 000. 00 - 5% On any amount in excess of P 100, 000. 00 – 10% 34

Income Payments Subject to Final Withholding Tax: ØInterest income from long-term deposit or investment : Four years to less than five years – 5% Three years to less than four years – 12% Less than three years – 20% ØOn capital gains from sale, exchange, or other disposition of real property classified as capital assets - 6% 35

WITHHOLDING TAX ON VALUE ADDED TAX AND PERCENTAGE TAX 36

Withholding Tax of VAT General Rule: VAT due on sales of goods and services are not subject to withholding since the tax is not determinable at the time of sale. Except: 1. Gross payments to non-residents by both gov’t. and private entities for services rendered in the Philippines a. For lease or use of property or property rights to nonresident owners(final) - 10% b. Services rendered to local insurance companies with respect to reinsurance premiums payable to non-resident insurance or reinsurance companies (final) - 10% c. Other services rendered in the Philippines by non-residents (final) - 10% 2. Sale of goods and services to government 37

Final Withholding VAT on Government Purchases OLD NIRC Contractors by the 3% government or any of its on gross payment for political subdivisions, the purchase of goods instrumentalities or 6% agencies, including on gross receipts for government-owned and services by contractors controlled corporations 8. 5% (GOCCs) on government public works contractors 38 RA 9337 5% Final VAT

Withholding on Percentage Tax 1. Persons exempt from VAT - 3% 2. Domestic carriers and keepers of garages • Cars for rent or hire • Transportation contractors • Domestic carriers by land, air or water - 3% 1. International carriers doing business in the Phils. - 3% 2. Franchises – radio and TV - electric, gas, and water utilities 5. Banks and non-bank financial intermediaries - 3% 2% 0%, 1%, 3%, 5% 6. Finance Companies - 0%, 1%, 3%, 5% 7. Life insurance premiums (w/ certain exclusions) 5% 39

Withholding on Percentage Tax 8. Agents of foreign insurance companies - 10%, 5% 9. Amusements - 18%, 10%, 15%, 30% 10. Sale, barter or exchange of shares or stocks listed or traded through local stock exchange - ½ of 1% 11. Shares of stock sold or exchanges through initial public offering - 1%, 2%, 4% 12. On gross payments to stock, real estate, commercial, customs, insurance and immigration brokers based on gross receipts 40 - 7%

Illustration 41 The Office of the Provincial Capitol of Davao del Sur purchased the following goods and services for the month of Feb. 2012. Invoice Price q Rice P 50, 000. 00 q Construction Materials 44, 800. 00 q Repair of Aircon Units 22, 400. 00 q Rental of equipments 33, 600. 00 Compute for the withholding tax on government money payments assuming the seller is: a) Non-VAT registered b) VAT taxpayer

Answer – Non VAT Supplier 42 Invoice Price Tax Base Tax Rate EWT Rice 50, 000. 00 EWT 1% 500. 00 Const. Materials 44, 800. 00 EWT – 1% GMP – 3% 448. 00 Repair of Aircon Untis 22, 400. 00 EWT – 2% GMP – 3% 448. 00 Rental of Equipments 33, 600. 00 EWT – 5% GMP – 3% 1, 680. 00 GMP % Tax None 1, 344. 00 672. 00 1, 008. 00

Answer – VAT Supplier 43 Invoice Price Rice 50, 000. 00 Tax Base Tax Rate EWT 50, 000. 00 EWT 1% 500. 00 EWT – 1% GMP – 5% 400. 00 Const. Materials 44, 800. 00 40, 000. 00 Repair of Aircon Untis 22, 400. 00 20, 000. 00 EWT – 2% GMP – 5% 400. 00 Rental of Equipments 33, 600. 00 30, 000. 00 EWT – 5% GMP – 5% 1, 500. 00 GMP VAT None 2, 000. 00 1, 500. 00

ON MANDATORY ATTACHMENTS RR No. 2 -2006 44

REVENUE REGULATIONS NO. 2 -2006 45 Mandatory Attachment : v

Monthly Alpha list of Payees(MAP) 46 Ø is a consolidated alpha list of income earners from whom taxes have been withheld by the payor of income for a given return period and in whose behalf, the taxes were remitted. Ø It contains a summary of information on taxes withheld and remitted through the monthly remittance returns (BIR Form Nos. 1601 -E, 1601 -F, 1600) showing , among others; Ø total amounts of income/gross sales/gross receipts and Ø taxes withheld and remitted.

Annex “B” BIR REGISTERED NAME TRADE NAME ADDRESS TIN MONTHLY ALPHALIST OF PAYEES (MAP) RETURN PERIOD (mm/yy) TIN Seq no. 1 Including branch code Registered Name (Alphalist) 3 Return period mm/yy 4 ATC 5 Nature of income payment 6 AMOUNT Tax base 7 Tax rate 8 Tax Withheld 9 2 1 2 3 4 5 TOTAL AMOUNT P I declare under the penalties of perjury, that this has been made in good faith, verified by me, and to the best of my knowledge and belief, is true and correct pursuant to the provisions of the NIRC, and the regulations issued under the authority thereof; that the information contained herein completely reflects all income payments with the corresponding taxes withheld from payees are duly remitted to the BIR and proper Certificates of Creditable Withholding Tax at Source (BIR Form Nos. 2304/2307/2306/2316) have been issued to payees; that, the information appearing herein shall be consistent with the total amount remitted and that, inconsistent information shall result to denial of the claims for expenses. _____________ Signature over printed name Taxpayer/Authorized representative Attachments to BIR Form Nos. 1601 -E, 1601 -F, 1600 47

Monthly Alpha List of Payees 48 q Below 10 payees - hard copy q 10 or more payees - compact disc recordable (CDR) q EFPS regardless of the - e-attach number of income payees/ income recipient

1601 -E WITHHOLDING AGENTS (PAYORS) MAP 1601 -F MAP BIR 1600 MAP 49

Statements and Returns 50 Ø Requirement for List of Payees a. Less than ten (10) payees - Manually prepared alpha list b. With ten(10) or more payees - Manually prepared alpha list + softcopy (In cd or email: esubmission@bir. gov. ph)

I. WITHHOLD TAXES TIME TAX BASE COMPENSATION WHEN PAID / CONTRUCTIVELY PAID TAXABLE COMPENSATION INCOME EXPANDED GMP WHEN PAID / PAYABLE GROSS PAYMENT (NET OF VAT) GMP WHEN PAID / PAYABLE FINAL OTHER FINAL WHEN PAID / PAYABLE (VAT PAYEE) (NON VAT PAYEE) FRINGE BENEFITS WHEN PAID 51 GROSS PAYMENT GROSS –UP MONETARY VALUE

II. WITHHOLING TAX REMITTANCE TYPES COMPENSATION FORM 1601 -C EXPANDED 1601 -E BANKS 1602 Real Property (Ordinary Asset) 1606 MANUAL FILING/ PAYMENT EFPS FILING 10 th day of the ff month except for the month of December which is due on the Jan. 15 Staggered Filing (RR 26 -2002) 10 th day of the ff month Not applicable 52 EFPS PAYMENT 15 th day of the ff month except for the month of December which is due on the Jan. 20 Not applicable

II. TYPES WITHHOLING TAX REMITTANCE FORM EFPS PAYMENT MANUAL FILING/ PAYMENT EFPS FILING 10 th day of the ff month Staggered Filing (RR 26 -2002) 15 th day of the ff month FINAL OTHER FINAL 1601 -F W/TAX ON VAT & PERCENTAGE 1600 10 th day of the ff month (ALPHAL IST) 10 th day of the ff month FRINGE BENEFITS 1603 15 th day of the month ff the end of the quarter 10 th day of the month following the end of the qtr. 53

III. WITHHOLDING TAX CERTIFICATES TYPES FORM COMPENSATION 2316 EXPANDED 2304 (Exempt) 2307 (Taxable) TIME Jan 31 of the ff year For terminated employees - last payment of salary 20 days ff. close of the quarter or upon demand GOV’T. MONEY PAYMENTS 2307 For Non-VAT : 10 th day of the ff month 2306 For VAT FINAL TAX 2306 Jan. 31 of the following year FRINGE BENEFITS 2306 Jan. 31 of the following year 54 : 10 th day on the month ff month

IV. ANNUAL RETURNS TYPE COMPENSATION FORM 1604 CF DESCRIPTION Alphalist of employees Less than 10 employees - manual filing 10 employees or more - softcopy e. FPS Filer - e-attach EXPANDED 1604 E Alphalist of payees Less than 10 payees or more e. FPS Filer 55 - manual filing - softcopy - e-attach TIME Jan. 31 of the ff year March 1 of the ff year

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