How to compute expanded withholding tax in the Philippines? How to file BIR Form 1601-E or the Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) return? This is the follow up post on our previous published article titled “Expanded Withholding Tax in the Philippines”, where we’ve discussed its definition, nature and the individuals or entities who are required to file the expanded withholding tax returns.
As we tackled in our previous article, Expanded Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the payee for the taxable quarter or year in which the particular income was earned. If you are engaged in business, you need an office or commercial space, but you don’t own a land or building, you definitely resort into renting. Thus, you become a lessee and pay rental expense to your lessor. In this case, you become a withholding agent who shall withhold tax on the rental payment you pay to the lessor.
Companies and businesses also often need to outsource services from professionals, such as Certified Public Accountants, lawyers, engineers, architects and software programmers. When this happens, they also need to withhold expanded withholding tax on the income payments they pay to those professionals through monthly filing of BIR Form 1601E and annual submission of BIR Form 1604E (Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Taxes). In return, the professionals and the lessor above can claim the taxes withheld as creditable taxes which they can deduct against their income taxes due for the corresponding taxable quarter or year. They can do that by asking for BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) from the withholding agent and attaching it to their income tax returns.
How to Compute Expanded Withholding Tax
The calculation of expanded withholding tax is simpler than the computation of withholding tax on compensation. Expanded withholding tax is computed using the fixed rates imposed on different natures of income payments as shown below:
Expanded Withholding Tax Rates as shown on the back of BIR Form 1601E
Sample Computation of Expanded Withholding Tax
Let’s assume Company A is paying a gross monthly rental of P20,000 to Mr. B for the office space rented by Company A. What is the monthly tax that should be withheld and remitted to the BIR by Company A?
The nature of income payments paid by Company A belongs to rentals, which include real/personal properties, poles, satellites & transmission, facilities and billboards (please refer to the tax rate schedule above). This type of income payment has a tax rate of 5%. Hence, the computation of tax to be withheld is as follows:
EWT= Income payments x tax rate
EWT= P20,000 x 5%
Computation of expanded withholding tax is easy as you only refer to the tax rates table above. Now let’s try for our own actual computation.
How to file BIR Form 1601-E
Below, are the requirements and procedures of filing the Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded).
1.Return previously filed and proof of remittance, if amended return
2. Monthly Alphalist of Payees (MAP)
3. For advance payment, BIR Form No. 0605
4. Tax Remittance Advice (for NGAs)
1. Read instructions indicated in the tax return.
2. Accomplish BIR Form No. 1601-E in triplicate copies.
3. If there is tax required to be remitted:
a) Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1601- E, together with the required attachments and your payment.
b) In places where there are no AAB’s, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form 1601 E, together with the required attachments and your payment
c) Receive your copy of the duly stamped and validated form from the teller of the AAB’s/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.
4. If there is no tax required to be remitted:
a) Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form 1601 E, together with the required attachments.
b) Receive your copy of the duly stamped and validated form from the RDO representative.
Filing Via EFPS
Group A – Fifteen (15) days following end of the month
Group B – Fourteen (14) days following end of the month
Group C – Thirteen (13) days following end of the month
Group D – Twelve (12) days following end of the month
Group E – Eleven (11) days following end of the month
Note: The staggered manner of filing is only allowed to taxpayers using the Eletronic Filing and Payment System (EFPS). Please refer to RR No. 26-2002 for the groupings of taxpayers based on the industry classification.
Payment Via EFPS
On or before the fifteenth (15th) day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be paid on or before January 20th of the succeeding year
Manual Filing and Payment
On or before the tenth (10th) day of the month following the month the withholding was made, except for taxes withheld for the month of December which shall be filed and paid on or before January 15 of the succeeding year
New and subsequent BIR rulings, issuances, memorandums and or laws may render the whole or part of the article obsolete or inaccurate. Furthermore, there may also be other relevant information that have been missed to include in this article. For more information, please visit the Bureau of Internal Revenue (BIR) website.