Revenue regulation increasing withholding tax rates drafted by BIR

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It has already became a part of our regular business process to withheld taxes on certain income payments to individuals and juridical persons as required by the Bureau of Internal Revenue (BIR). The laws and regulations covering withholding taxes has became too complex as it requires different rates on differing nature of goods and services and based on the tax status of the taxpayers. Furthermore, various amendments of the existing Revenue Regulations No. 2-98 has been issued making it difficult for the taxpayers to monitor which part of it are still applicable and which are modified or are already repealed.

Then here comes another amendment from the BIR which seemingly is intended to meet the BIR’s collection target. The BIR drafted a revenue regulation entitled “Amending Pertinent Provisions of Revenue Regulations No. 2-98, as Amended, Increasing the Withholding Tax Rates on Certain Income Payments and Amending the Manner of Submission of the Alphabetical List of Employees/Payees which are Required to be
Attached in the Annual Information Returns (BIR Form Nos. 1604-CF and 1604-E)”

Download Draft Revenue Regulations Increasing Withholding Tax on Certain Income Payments here.

Increase in Withholding Tax Rates for Certain Income Payments

The highlights of this draft revenue regulations are increasing the following income payments:

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  1. Income payments to certain contractors from 2% to 4%
  2. Income payments to certain brokers and agents from 10% to 15% if the gross income exceeds P720,000 and 10% if otherwise
  3. Certain income payments made by credit card companies from 1% to 2%
  4. Income payments made by the top twenty thousand (20,000) private corporations to their local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax:
    • Supplier of goods – from 1% to 2%
    • Supplier of services – from 2% to 4%
    • Purchases involving agricultural products in their original state – 2% in excess of P300,000 within same year
  5. Income payments made by the government to its local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax, except casual or single purchase of P1o,000 and below:
    • Supplier of goods – from 1% to 2%
    • Supplier of services – from 2% to 4%
    • Purchases involving agricultural products in their original state – 2% in excess of P300,000 within same year
  6. Commission of independent and/or exclusive sales representatives, and marketing agents of companies from 10% to 15% if the gross income exceeds P720,000 and 10% if otherwise
  7. Payments made by pre-need companies to funeral parlors from 1% to 4%
  8. Payments made to embalmers from 1% to 4%
  9. Income payments made by the top five thousand (5,000) Individual Taxpayers to their local/resident suppliers of goods and local/resident supplier of services other than those covered by other rates of withholding tax
    • Supplier of goods – from 1% to 2%
    • Supplier of services – from 2% to 4%
    • Purchases involving agricultural products in their original state – 2% in excess of P300,000 within same year

Changes in the Manner of Submission of Alphalists

The same draft regulation also prescribe the following:

  1. Requirement to file an Annual Information Return of Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax (BIR Form 1604-E) with List of Payees from whom creditable (expanded) withholding tax was withheld on or before March 1 of the following year.
    • Thru Electronic Filing and Payment System (eFPS) 
    • Thru the e-Submission facility of the Bureau, using Comma Separated Value (CSV) data file format
    • Thru Compact Disc-Recordable (CD-R)
  2. Requirement to file an Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes (BIR Form No. 1604-CF) and the alphabetical list of employees/payees in excel format or using taxpayer’s own extract program/data entry module developed by the Bureau, to be submitted on or before January 31 following the close of the calendar year.
    • Thru Electronic Filing and Payment System (eFPS) 
    • Thru the e-Submission facility of the Bureau, using Comma Separated Value (CSV) data file format
    • Thru Compact Disc-Recordable (CD-R)
  3. Enumerated the information that must be provided in the Annual Information Return of Income Tax Withheld on Compensation and in the Alphabetical List of Employees and Payees Subjected to Final Withholding Tax

The withholding agent shall be responsible to all the information reflected in the alphalist of employees/payees submitted. Every erroneous information reflected in the submitted alphabetical list of employees/payees shall be a ground for the imposition of penalty pursuant to Section 255 of the Tax Code.

Public Comments

While there are various undocumented public comments regarding this draft regulation, we noted that there some of them which actually are valid and significant which BIR should consider.

Some requested a consolidated withholding tax regulation to summarize all previously issued regulations concerning withholding taxes and integrating the various amendments and ruling issued by the BIR so that taxpayers would just look into one reference in dealing with withholding taxes.

Some are particularly concern on the accumulation of their excess credits year-on-year as these were not utilized and may not be able to utilize if their business conditions will not changed. Specifically citing certain business models that comes with minimal margin or little to no income, taxpayers are particularly concern on how can they recover these excess credits and further accumulating credits, considering that refunds from the BIR takes a millennium.

Some individuals and group in the social media are appealing for them to be heard by the BIR as they are thinking that this regulation is drafted for the sole interest of government officials with collection targets.

Comments are being welcomed and interested parties can send their comments to rosana.sanvicente@bir.gov.ph and/or jerry.benaning@bir.gov.ph.

How about you? What do you think about this draft regulation?  Let us know! 🙂


Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact support@philcpa.org for more information and if you want to avail professional services. Find us on Facebook!



Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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