1. UPDATES ON WITHHOLDING TAXES
Atty. Vic C. Mamalateo
May 14, 2015
ACPACI, Hotel Intercon, Makati City

2. 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

3. 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

4. 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

5. OBLIGATIONS OF WITH AGENT
4. To attach SAWT/MAP to withholding tax returns filed
5. To submit Alpha Lists of Employees and BIR Forms to appropriate BIR office
6. To submit semestral list of regular suppliers
7. To comply with the disclosure requirements in AFS under RR and posting requirements

6. INCOME TAX INCOME TAX WHEN IS INCOME TAXABLE?
Tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person’s 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.

7. 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, , NIRC)
Withholding agents (Sec , NIRC).

8. INCOME TAX SYSTEMS GLOBAL TAX SYSTEM (Subject to or exempt from CWT)
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
SCHEDULAR TAX SYSTEM (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.

9. 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.

10. GENERAL PRINCIPLES ON WT
WT return shall be filed and tax, paid in WA’s 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

11. 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.

12. 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

13. 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 , 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.

14. NATURE AND PURPOSES OF WITH TAX
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

15. 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

16. 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.

17. 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

18. 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

19. 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

20. 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)

21. 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

22. RR , 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.

23. 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.

24. 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 Employer’s and Employee’s 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

25. RR , 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 WA’s 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.

26. 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)

27. 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).

28. 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.

29. TAX DISTORTIONS
RR , 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.

30. 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).

31. TAXES ON LABOR DISPUTE AWARDS
RMC , 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.

32. 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.

33. 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 10th day of the month following the quarter.
Manual: On or before 10th day of the month following end of calendar quarter

34. 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.

35. 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

36. 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.

37. EXCLUSIONS Sec. 32(B), NIRC
Amounts received thru accident or health insurance or under workmen’s 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 taxpayer’s business, unless they exceeded its cost, are not taxable (Prentice-Hall Federal Tax Handbook, 1983).

38. 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)

39. 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.

40. 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 , as implemented by RMC , 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.

41. 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 & ).

42. TIME TO WITHHOLD
Sec , 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 payor’s 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, (WT on bonus)

43. TIME TO CLAIM TAX CREDIT
Taxpayer shall report gross income and claim costs and deductions in the proper year (Sec , 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.

44. 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

45. 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.

46. 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

47. 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.

48. RR , 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.

49. RR , 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.

50. RR , Sept 20, 2013
C. Hospitals and clinics shall submit the names and addresses of medical practitioners in the following classifications, every 15th 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.

51. TAX IMPLICATIONS OF RR 14-2013
PATIENT
VAT-registered person (e.g., practicing lawyer or employee of VAT-reg person-employer)
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
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?

52. RR , June 6, 2013
INCOME PAYMENTS SUBJECT TO EWT (RR 2-98, as amended by RR and RR ):
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.

53. 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

54. RR , July 12, 2013
Sec , RR 2-98, as amended by RR :
Any income payment which is otherwise deductible under the Tax Code shall be allowed as a deduction from the payor’s 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.

55. RMC , Sept 26, 2013
RR (No WT, no deduction from gross income) shall apply to audit investigation for the taxable year 2013.

56. INCOME PAYMENTS SUBJECT TO EWT
1. Professional fees for services rendered by individuals; and
professional entertainers and athletes, and directors:
If gross income for current year exceeds P720, %
If gross income for current year does not P720, %
2. If recipient of professional fees, talent fees, etc. is
a juridical person:
3. Rental income
Real properties %
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 %
Poles, satellites and transmission facilities %
Billboards %

57. INCOME PAYMENTS SUBJECT TO EWT
4. Gross payments to resident individuals and corporate cine-
matographic film owners, lessors, or distributors %
5. Gross payments to contractors %
6. Income distribution to beneficiaries %
7. Income payments to certain brokers and agents %
8. Income payments to partners of general professional
partnerships:
If gross income for current year exceedsP720, %
If otherwise %
9. Professional fees paid to medical practitioners
If otherwise %
10. Gross additional payments to government personnel from
importers, shipping and airline companies, or their
agents %
11. One-half of gross amounts paid by any credit card
company in the Philippines %

58. INCOME PAYMENTS SUBJECT TO EWT
12. Income payments made by any Top 20,000 Corp
Supplier of goods %
Supplier of services %
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
14. Commissions of independent and exclusive distributors,
and marketing agents of companies %
15. Tolling fees paid to refineries %
16. Payments made by pre-need companies to funeral parlor %
17. Payments made to embalmers %
18. Income payments made to suppliers of agricultural products %
19. Income payments on purchases of minerals, mineral pro-
ducts and quarry resources (RR 6-12 amended RR 17-03) %
20. MERALCO refund to customers
With active contracts %
With terminated contracts %

59. 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 + 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.

60. 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.

61. 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.

62. 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.

63. 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 ½% of 1% of the gross amount paid to any business entity.

64. 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 broker’s client and if reimbursement to the broker is not invoiced with the broker’s 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 , Jan 25, 2006).

65. 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.

66. RMC , 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;

67. RMC , 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.

68. TIME TO FILE RETURN AND PAY TAX
eFPS Filing (for taxpayers using eFPS based on industry classification groupings per RR ):
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
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

69. 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 operators)

70. 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
Monthly remittance return of final income taxes withheld on fringe benefits paid to employees other than rank and file

71. 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
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

72. 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 WA-payors 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).

73. 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 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 , Dec 1, 2005).

74. PENALTIES 1. SURCHARGE 2. DEFICIENCY INTEREST 3. COMPROMISE PENALTY
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.

75. 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)

76. VALUE ADDED TAX AND OTHER PERCENTAGE TAX
Sale to government
Payment to non-resident person

77. 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.

78. 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

79. 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, 85-12
2011
RR 5-11, 7-11, 13-11; RMC 20-11, 23-11, 38-11, 49-11
2010
RR 11-10; RMC 21-10

80. RELEVANT REV REGULATIONS
2009
RR 1-09, 2-09, 3-09, 5-09, 6-09, 8-09, 10-09; RMC 4-09, 10-09,
2008
RR 4-08, 5-08, 6-08, 7-08, 14-08, 10-08
2007
RR 4-07; RMC (Govt money payments)
2006
RR 1-06, 2-06, 4-06
2005 (RA 9337)
RR 8-05

81. 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 ,
1999
RR 3-99
1998 (RA 8424)
RR 2-98, 3-98, 8-98, 10-98, 12-98

82. END OF PRESENTATION
Atty. Vic C. Mamalateo
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