WITHHOLDING TAX AT SOURCE (Revenue Regulations No. 2-98, as amended) Presented by: SUSAN D. TUSOY, CPA, MPS Asst. Chief, Assessment Division Revenue Region No. 19-Davao City
I. REGISTER 1901SELF-EMPLOYED/PROFESSIONALS/TRUST 1903 CORPORATIONS / GOCC /PARTNERSHIP 1903GOVERNMENT AGENCIES / LGUs WHEN:ON OR BEFORE COMMENCEMENT OF BUSINESS/ BEFORE PAYMENT OF ANY TAX DUE/ UPON FILING A RETURN 10 DAYS AFTER BECOMING AN EMPLOYER ( SEC 2.83.6 Rev. Regulations No. 2-98) WHERE: RDO
Duties & Obligations of a Withholding Agent • To register • To deduct and withhold • To remit the tax withheld • To file withholding tax returns • To issue withholding tax certificate
Designation of Government Officials as Withholding Agents • All Heads of Offices (officials holding the highest position) • Provincial Governors and Treasurers • City Mayors and Treasurers • Municipal Mayors & Treasurers • Brgy. Captains and Treasurers Note: including their respective accountants
Liability of Designated Officers • Additions to the tax • The designated treasurers, chief accountants, and other persons holding similar positions who have the duty to withhold and remit shall be personally liable for the additions to the tax • Upon conviction for each act or omission, be fined of not less than P5,000 but not more than P50,000 or imprisonment, or both
DIFFERENCE: FINAL AND CREDITABLE WITHHOLDING TAX
On Agricultural Products • For purchases involving agricultural products in their original state, the tax required to be withheld shall only apply to purchases in excess of the cumulative amount of P300,000.00 within the same taxable year.
On Agricultural Products • Agricultural Products in their original state shall only include: • corn • rice • coffee • coconut • cassava • fruits • copra • sugar cane • marine food products • vegetables • palay • poultry and livestocks
Amount of EWT: • In 2009 - not subject • In 2010 - P20,000 x 1% = P200.00 • In 2011 - P100,000 x 2% = P1,000 • In 2012 - not subject
Persons Required to Deduct & withhold • Juridical persons, whether or not engaged in trade or business; • Individuals in connection with his trade or business, however, individual buyers of real properties are also constituted as withholding agents; • All government offices.
Persons Required to Deduct & withhold Agents, employees or any person purchasing goods or services/paying for and in behalf of the aforesaid withholding agents • shall likewise withhold in their behalf • the official receipts/invoices must be issued in the name of the person whom the former represents • The withholding tax certificate must be issued immediately
Persons Required to Deduct & withholdRR 30-2003 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. • Utilities even if the meter or billing statement is not in the name of the payor • With valid proof like contract between registered 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.
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.
Exemption from Withholding on Income Tax • Shall not apply to income payments made to the ff: • National gov’t. and its instrumentalities, including provincial, city or municipal governments and barangays except GOCCs (RR 14-2002) • Persons enjoying exemption from payment of Income Tax • 1. HLURB/HDUCC registered • BOI/PEPZ/SBMA/Omnibus Investment Code
Exemption from Withholding from Income Tax • 3. Corporation which are exempt from Income Tax • * GSIS • * SSS • * PHIC • * Local Water District (RMC 28-2010) • * PCSO • 4. Gen. Professional Partnerships • 5. Joint ventures or consortium (RR 14-2002)
Income Payments Subject to Final Withholding Tax: Interest from any peso bank deposit, and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements – 20% Royalties (except on books as well as other literary works and musical compositions – 20% Prizes (except prizes amounting to P10,000.00 or less )– 20% Winnings (except Philippines Charity Sweepstakes Winnings and lotto winnings ) - 20%
Income Payments Subject to Final Withholding Tax: Royalties on books, as well as other literary works and musical compositions – 10% Interest income received by a resident individual taxpayer from a depository bank under the Foreign Currency Deposit System – 7.5%
Income Payments Subject to Final Withholding Tax: Cash and/or property dividends (received by individuals) - 10% Net capital gains from sale, barter, exchange of shares of stocks in a domestic (except through stock exchange ): Not over P100,000.00 - 5% On any amount in excess of P100,000.00 – 10%
Income Payments Subject to Final Withholding Tax: Interest 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% On capital gains from sale, exchange, or other disposition of real property classified as capital assets - 6%
WITHHOLDING TAX ON VALUE ADDED TAX AND PERCENTAGE TAX
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: • Gross payments to non-residents by both gov’t. and private entities for services rendered in the Phils. • For lease or use of property or property rights to • non-resident owners(final) - 10% • Services rendered to local insurance companies • with respect to reinsurance premiums payable • to non-resident insurance or reinsurance • companies (final) - 10% • Other services rendered in the Phils. • by non-residents (final) - 10% • 2. Sale of goods and services to government
Final Withholding VAT on Government Purchases OLD NIRC RA 9337 Contractors by the government or any of its political subdivisions, instrumentalities or agencies, including government-owned and controlled corporations (GOCCs) 3% on gross payment for the purchase of goods 6% on gross receipts for services by contractors 8.5% on government public works contractors } 5% Final VAT
Withholding on Percentage Tax • Persons exempt from VAT - 3% • Domestic carriers and keepers of garages - 3% • Cars for rent or hire • Transportation contractors • Domestic carriers by land, air or water • International carriers doing business in the Phils. - 3% • Franchises - 3% • Banks and non-bank financial intermediaries - 0%, 1%, 3%, 5% • Finance Companies - 0%, 1%, 3%, 5% • Life insurance premiums (w/ certain exclusions) - 5%
Withholding on Percentage Tax • 8 . Agents of foreign insurance companies - 10% /5% • Amusements - 18%,10%, 15%, 30% • Sale, barter or exchange of shares or stocks listed • or traded through local stock exchange - ½ of 1% • 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 - 7%