Expanded withholding tax on certain income payments and withholding tax on compensation are two of the common withholding taxes you should withheld and remit to the government, when applicable. In turn, the payees of these income payments can claim those taxes withheld as creditable against their income tax due for the corresponding quarters or year by attaching the applicable certificate of creditable tax withheld (BIR Form 2316 for taxes withheld on compensation and BIR Form 2307 for taxes withheld at source). In the following discussions, we shall tackle and aim to learn more about the expanded withholding tax in the Philippines.
What is expanded withholding tax?
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/year in which the particular income was earned.
What income payments are subject to Expanded Withholding Tax?
The following income payments are subject to Expanded Withholding Tax:
1. Professional fees / talent fees for services rendered by the following:
a) Those individually engaged in the practice of profession or callings such as lawyers,certified public accountants, doctors of medicine, architecs, engineers and all other professionals who have undergone licensure examinations regulated by the Professional Regulations Commission, Supreme Court, etc.
b) Professional entertainers such as but not limited to actors and actresses, singers, lyricist, composers and emcees
c) Professional athletes including basketball players, pelotaris and jockeys
d) Directors and producers involved in movies, stage, radio, television and musical productions
e) Insurance agents and insurance adjusters
f) Management and technical consultants
g) Bookkeeping agents and agencies
h) Other recipient of talent fees
i) Fees of directors who are not employees of the company paying such fees whose duties are confined to attendance at and participation in the meetings of the Board of Directors
2. Professional fees, talent fees, etc for services of taxable juridical persons
3. Rentals:
a) -Rental of real property used in business
b) -Rental of personal properties in excess of P 10,000 annually
c) -Rental of poles, satellites and transmission facilities
d) -Rental of billboards
4. Cinematographic film rentals and other payments
5. Income payments to certain contractors
a) General engineering contractors
b) General building contractors
c) Specialty contractors
d) Other contractors such as transportation contractors, janitorial, security, messengerial, advertising, labor recruiting agencies, computer programmers, etc.
6. Income distribution to the beneficiaries of estates and trusts
7. Gross commission or service fees of customs, insurance, stock, real estate, immigration and commercial brokers and fees of agents of professional entertainers
8. Income payments to partners of general professional partnerships
9. Payments made to medical practitioners
10. Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property classified as ordinary asset
11. J. Additional income payments to government personnel from importers, shipping and airline companies or their agents
12. Certain income payments made by credit card companies
13) Income payments made by the top 20,000 private corporations to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding
14. Income payments by government offices on their purchase of goods and services, from local/resident suppliers other than those covered by other rates of withholding
15. Commission, rebates, discounts and other similar considerations paid/granted to independent and exclusive distributors, medical/technical and sales representatives and marketing agents and sub-agents of multi level marketing companies.
16. Tolling fees paid to refineries
17. Payments made by pre-need companies to funeral parlors
18. Payments made to embalmers by funeral parlors
19. Income payments made to suppliers of agricultural products (suspension not yet lifted)
20. Income payments on purchases of mineral, mineral products and quarry resources
21. On gross amount of refund given by MERALCO to customers with active contracts as classified by MERALCO;
22. Interest income on the refund paid through direct payment or application against customers’ billing by other eletrict Distribution Utilities in accordance with the rules embodied in ERC Resolution No. 8 series of 2008 dated June 4, 2008 governing the refund of meter deposits which was approved and adopted by ERC in compliance with the mandate of Article 8 of the Magna Carta for Residential Electricity Consumers and Article 3.4.2 of DSOAR exempting all electricity consumers, whether residential or non-residential from the payment of meter deposit.
23 Income payments made by the top 5,000 individual taxpayers to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding
24. Income payments made by political parties and candidates of local and national elections of all their campaign expenditures, and income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates
Who are required to file the expanded withholding tax returns?
The following individuals and entities are required to file the BIR Form No. 1601-E – Monthly Remittance Return of Income Taxes Withheld (Expanded) and BIR Form No. 1604-E -Annual Information Return of Creditable Income Taxes Withheld (Expanded):
Every registered withholding agent on Expanded Withholding Tax, which may include, but not limited to the following:
1) Individual engaged in business or practice of profession
2) Non-individual (corporation, association, partnership) whether engaged in business or not.
3) Government agencies and instrumentalities (e.g., National Government Agencies, Government-Owned or Controlled Corporations, Local Government Units, etc.)
What are the procedures of filing the expanded withholding tax returns?
For the steps and procedures in computing and filing the expanded withholding tax payable and returns, please read our article titled “How to Compute Expanded Withholding Tax in the Philippines.”
Disclaimer:
New and subsequent BIR rulings, issuances 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.
Source:
BIR Income Tax information on withholding tax
Victorino Q. Abrugar is a marketing strategist and business consultant from Tacloban City, Philippines. Vic has been in the online marketing industry for more than 7 years, practicing problogging, web development, content marketing, SEO, social media marketing, and consulting.
Hi, I hope this inquiry will be read and answered. Are single proprietors, not included in the Top 5,000 Individual Taxpayers, also required to withhold tax and issue BIR form2307 to service providers such as logistics if they will or if they issued an official receipt?
Hi Gen,
The Top 5,000 individuals are just one of the taxpayers listed in the BIR list that require to file expanded withholding tax. There are other instances that you can be required to withheld, though you are not in the top 5,000 individuals (e.g., when you pay for the professional services of CPAs, Doctors, contractors, subcontractors, etc.,) The article listed the income tax payments that are subject to expanded withholding tax. For the full list, you can check the source link from the BIR at the bottom of the article. If the income payee is not listed there, then you might not be required to withhold tax from the income payee. For more information, please contact the BIR office within your jurisdiction. Thanks for your question.
Hi Vic,
For fixed periods of service rendered like two years of project management, would it be more appropriate to be subject to EVAT rather than Tax withheld on compensation? This is for the service of a freelance CPA. Thanks.
Regards,
Kaye
Hi Kaye,
Do you mean EWT rather than EVAT? If you are paid for professional fee rather than compensation/salaries, I believe that EWT is more appropriate than tax withheld on compensation. The principle of withholding on compensation is the fact that there is an employee-employer relationship that exists. Outsourced services that are not considered as employment, such as security services, accounting services, legal, bookkeeping, etc., are subject to EWT, and they are usually under a fixed period of service with contracts.
Pursuant to RR 2-98, GPP is exempt from withholding tax but taxable on their distributive share of income.
Hi Sir Vic,
If we are not required to file EWT but still withheld such, are we liable for a certain penalty?
Hello. If you have withheld EWT (example, office rent, professional fees, etc.) you are required to remit it to the BIR thru 1601E since you are also required to issue certificate of withholding EWT. If your BIR registration doesn’t include EWT, you have to update your registration with the BIR. For more confirmation, please visit BIR in your RDO to ask advice.
Hi sir!
For example, we entered into a contract with a sevice provider and the stated price for the year was P5,500.00 plus VAT,to be paid every quarter. Can we withhold a tax?
Thank you in advance sir.
Hi Gen. Yes, individuals engaged in trade or business or practice of profession are required to withhold 2% of its gross payments to logistics because they fall under certain contractors.
Hi Vic,
Are the training cost charged by a foreign company located outside the Phil are required to be withheld by 10 to 15% WHT?
Thanks,
Glen
Hi, the following income derived from all Sources Within the Philippines by a Non-Resident Foreign Corporation is subject to Final Withholding Tax (not expanded withholding tax) according to BIR website tax info http://www.bir.gov.ph/taxinfo/tax_withld.htm
“Gross income from all sources within the Philippines such as interest, dividends, rents, royalties, salaries, premiums (except re-insurance premiums), annuities, emoluments or other fixed determinable annual, periodic or casual gains, profits and income or capital gains”
For more details, please contact the RDO in your jusrisdiction. Thank you.
Hi Glen! Just checking if this is still open. If the training cost in your case above refers to services of foreign corporation rendered outside of the Phils., then, there is no withholding tax because it is not covered by our income tax law. Services are taxable in the place of rendition so that services rendered outside of the Philippines of a non-resident is not taxable in the Philippines. However, in practice BIR always asks for BIR ruling to that effect so I would suggest securing a tax treaty relief or ITAD ruling.
what about buying a POS (point-of-sale) software/program. should we withhold 2%? let’s say the cost is P100,000.00 (inclusive of VAT). should we withhold and pay only to the company P98,214.29 (net of withholding tax of P1,785.71).
if the supplier asks, do they fall under CERTAIN CONTRACTORS (2%)?
Hi John! POS is classifiable as a sale of good and not a service the way certain contractors should be classified. As such, as a rule the same is not subject to withholding tax, except under the following:
a. Your company is a top-twenty thousand corporation or you are a member of top-5000 individual duly notified by the BIR as such – 1% of P100k; or
b. The seller is a non-resident foreign corporation – 30% of P100k.
To know more on withholding taxes, we do have a seminar this coming August 10 that might interest you. Please click on my name for the details.
salamat GHAR! so my guiding principle when it comes to expanded withholding tax is: if it’s a SERVICE rendered, the latter transaction would typically be subject to withholding tax. if it’s a purchase of GOODS, the latter transaction is typically NOT subject to withholding tax.
Not necessarily John, though most subject are services. Some goods (e.g. real properties & top twenty thousand corporation purchases of goods) or services are subject, while others are not depending on the nature. Just refer to the enumeration of Vic above.
Hi,
Thanks for posting this article.
My family has a business and it has been in operation for almost a year.
We have never paid this tax since then until yesterday when we purchased more sales invoice,we were asked to submit and pay the “Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) 1601-E”. They said that the tax was for printing of records/purchasing sales invoice and they deducted 2%.
I was wondering if you could help me point out which category does this fall into. Since our purchase was one time, do we need to pay this tax monthly?
Appreciate your help.
Hi,
-Who asked you to submit and pay the “Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) 1601-E?
-Who deducted the 2%?
—- possibilities are that your company belongs to the top 10,000 private corporations, whose income payments made to their local /resident of supplier of “SERVICES” should withhold 2% of it.
–You may check your company’s certificate of registration COR (BIR form 2303) if 1601-E is within your taxability. If it’s there, you should file 1601-E monthly ( a.file and pay if there is payable or b. file only if there is no payable). If it’s not in your taxability, then maybe you can just file and pay if there are transactions and taxes to be remitted. You can inquire this to BIR in your jurisdiction for more clarification.
— you can also check out the computation, rates, and other important information about expanded withholding tax in our article: http://businesstips.ph/how-to-compute-expanded-withholding-tax-in-the-philippines/
Thanks
Thanks for your response. Appreciate it much!
The printing company asked as to pay this, we were asked to fill in the 1601-E form and pay the 2% tax in the bank. They said the tax is for purchasing the sales invoice. Is this appropriate?
Hi Gladys! For better understanding of withholding taxes, I suggest you attend our one-day seminar on withholding taxes.
Tax education is really a big thing and simple lapses means a lot. This is where we get our concept of advocating to educate small & medium entrepreneurs by providing tutorials, seminars and workshops at reasonable costs.
Hi. I am a professional consultant (non employee) and have a contract with a company for 25k every month. This is my only source of income. They withold 10 percent from this every month. Is this the right amount? The problems is that I computed my quarterly and yearly income tax and it is much less than what is withheld. Does this mean I am eligible for a tax refund? How long does that normally take? Shouldn’t the company I work with withhold less?
Hi Migg, I have good news and bad news for you. Good new is you can refund because you have excess withholding tax credits and you can file it within the 2-year period. Bad news is, you will have to be examined before BIR will grant the refund and the process may take quite a time, say months or years depending on the status of your books of accounts and tax compliance and how you deal with them.
Alternatively, you can forget the refund because you can use them forever under the carry-over, and instead, concentrate on having more taxable income from other clients or sources so you can consume the tax credits. If you can bargain for an employment set-up, that is even better because refund is at the level of employer upon annualization.
Tax education is really a big thing and simple lapses means a lot. This is where we get our concept of advocating to educate small & medium entrepreneurs by providing tutorials, seminars and workshops at reasonable costs.
My firm is a specialty contractor business partnership . The BIR has ruled on a specialty contractor corporation doing the same business as ours that its expanded creditable witholding tax is 2%. Notwithstanding this ruling presented to my client, he claims that the ruling applies only to corporations and not to my firm and still deducts 15% on my billings. In case my client erred, are there any other official documents that I can present to him? In case my client is wrong, what recourse can I take to compel it to rectify its error?
Is a business partnership taxed differently from corporations doing the same business?
What is the expanded creditable witholding tax on a business partnership specialty contractor?
Is there a difference between business partnerships and corporations who are both specialty contractors on the application of the expanded creditable witholding tax?
Our firm is a specialty contractor business partnership . The BIR has ruled on a specialty contractor corporation doing the same business as ours that its expanded creditable witholding tax is 2%. Is this ruling also applies to our firm which is a business partnership (it is different from a professional partnership wherein the partners are required to be duly registered and licensed professionals?
Hi Mario. I share my view on your two posts above. Specialty contractor under Revenue Regulations 2-98, as amended, is subject to creditable withholding tax of 2%. This applies whether a partnership or a corporation in the same line of business. Besides, a partnership is taxed in the same manner as a corporation under the Tax Code, as amended, so I do not see any good at your client’s claim. Maybe a good explaining with your clients will do.
Frankly speaking, if your effective tax rate is more than 15% of gross income then, it would not matter if they use 2% or 15% because that is a creditable withholding tax that your partnership can use as against income tax liability. It would only be a cash flow advantage. A general professional partnership is exempt from tax.
Hi ! I am a computer programmer engaged in “Other computer related activities” .. its my first time getting a Business Permit and a Business name. i have the Receipts too. i usually sell my software at about 30-60 thousand. i have one customer who requires an O.R. and wanted me to add 1 computer set packaged with my software.
how much tax am i going to pay ? i called BIR one time and they said it should be 3% of my income. can you please tell me what are the taxes or vat that i should consider before i give a cost for the software and the hardware. i dont exceed 1 million in annual income.
I understand you already have a BIR official receipt so I take this to mean that you are already issued a BIR Certificate of Registration (C.O.R) Try to look at the COR whether you registered for 3% percentage tax (OPT) or 12% value added tax (VAT), and such registration will answer your question. Assuming you are not yet registered, I suggest that before you register, you try to consider the benefits of OPT over VAT or vice versa. If you do not have much input tax, then, you are better off at OPT.
We conduct tutorials on BIR compliance and one discussions in the benefits of VAT and OPT, proper preparations of tax returns, and maintaining books of accounts. You may click on my name to view our website for the programs, in case it interests you. You may have to spend some amount for the seminar but it may be less costly than to suffer penalties for misapplications. Thanks
Hi! Just want to ask if purchase of gift checks is subject to EWT? Thank you.
Hi! Just want to clarify on the following computation for company loan:
Bank interest on loan – P10,000
EWT 10,000 x 2% 500
How much will be paid to the bank, is it 9,500 after deducting 500 or still 10,000 and add 500 to 10,000 as the total interest expense?
Hi Sir,
Our company deals with other computer related activities we have 2 programmer consultants were paying 75k &; 45k a month and w/hold only 2%. Is it correct? We classify it as a individual contractor.
Thanks in advance.
Hi! How would i know if our company belongs to top 10,000 corporation?
The BIR will send you a letter stating that you now belong to the top 10,000 corporation.
Hi! Another question again.
I was engaged in a contract obliging me to pay 50% for down payment and another 50% for final billing for advertising purposes. am i required to withhold 10% ewt (income payment made to other recipients of talent fees)?
If EWT was not withheld for the first payment can I withhold the entire EWt amount upon payment of final billing?
Hi,
We are on the final payment to a company which we hired to manage our office fit-out. we have a project management agreement/contract.
the question is what tax rate whould we withheld? the 15% for management consultants? or the 2% for the primecontractor/subcontractor?
thanks
can we still refund withholding tax on rent paid in 2009? the landlord was billing us rent for 2009. we prepared the check (rent payment) and remitted the corresponding 5% EWT to BIR. but because business was “slow” for that year, the landlord decided not to charge us rent for that year. can we still get back the 5% ewt we paid to bir since the rent transaction never pushed thru.
Who are not subject to expanded withholding tax? Do you have the lists? Because some of our vendor’s said they are not. Do we need a bir rulings attesting that they are not subject to withholding tax so that we will not deduct and remit the said taxes.
Thanks a lot!
Hi, the list of those who are subject to expanded withholding tax are stated above. Hence, those who are not in the list are not subject to such tax. You may state the specific nature of the transaction so that we can determine if the transaction or payment is subject to expanded withholding tax.
Hello again!thank you for your reply. The nature is rent payment to some Government Agencies and selected Universites. Others, are utilities paid to selected Malls. What are the documents/requirements that we need from them to ensure that we were not subject to BIR assesment in case we will not deduct and remit the withholding tax.
Thanks.
As stated, rental used in business is subject to expanded withholding tax. Are you the lessor (the one receives the rental income)? Your tenants should withhold income payments to you. You then ask for certificate of creditable withholding taxes from them so you can claim those withheld taxes against your income taxes or business taxes.
Sir, we are the lessee, our tenants is a government agencies and school, with regards to school they are claiming that they are non profit org. that is why they are exempted. About utilities payment to selected Malls, they claimed that they only billed us reimbursement kaya dapat daw ay walang deductions sa tax. We need now is a proof that they are really not subject or exempted from expanded withholding tax.
Thanks.
sorry po..kami nga po pala ang tenants
we are the tenants, since the landlord (owns a building) stipulates in the contract to increase our rent 10% yearly , but it is not stated there that we will bear the remittance of withholding tax (5%). So, in total we were being charged 15%. Is this right?
We are a local company who are purchasing goods and services to a non-resident foreign corporation, those goods and services are being sold latter to local buyers.
Is the our payments made for the purchase of goods and services to a non resident corporation subject to Final Withholding Tax. If Yes, what is the rate and what is the bir regulation that would support on this issue.
Thanks
we overpaid EWT on rent in 2009. can we still file an amended return (1601E) to claim a refund or a tax credit? actually, we prefer a carryover to the next period but this option is not available in the 1601E form.
No more refund/tax credit if you already made use of the over remittance as it will be a double benefit prejudicial to the government.
what are the instances when you use the over remittance of expanded withholding tax? we wanted to use the over remittance to apply to future payments. however, if you take a look at the 1601E form, carryover is not an option. you only have two options: refund or TCC. with only these two options, there cannot be any possibility of using the over remittance…in our case, what happened was, there was a rent transaction in 2009 that was still being negotiated (whether to pay or not). we still prepared the check (but the check was never released) and paid the 5% EWT in 2009 just in case the decision was to pay. it was only in 2011 that we were allowed not to pay the rent for year 2009. so what do we do now with the 5% EWT that we paid for year 2009? based on the 1601E form, we seem to only have two options: refund or TCC.
Hi,
Can we exempt reimbursements in 2% expanded ewt? Our contractors, purchase fire extinguisher from another supplier and reimburse the same from us. But they claim it as only reimbursement not subject to vat and ewt. What are the requirements/documents that we can ask from them to consider the billing merely reimbusement not subjet to tax.
thank you in advance for immediate reply
hi sir! just like to ask, do i need to apply EWT(10%) to my income at clinic( i’m a doctor po) every month? income refers to the consultations/professional fees directl paid nat my clinic, i issue them an Official receipt every time. just wondering if i should withhold it an expanded tax? many thanks po! God bless
Your clients will actually withhold it (the payor) and not you (the payee/receiver of income). If you have corporate clients, they might withhold EWT to the professional income they are paying to you. Your ordinary clients might not withhold your income since it will require them to prepare certificate of creditable withholding taxes.
Dear All,
Good day. I would like to seek advice about the 13th month pay I have received last year. The situation goes like this: I was “hired” by a company January last year for a consultant position within their organization. However, the position that I was supposed to fill-in was not included on their headcount deliberation for it was an “emergency” post. As per the company’s policy, every new position / headcount for an incoming year should be raised for deliberation on or before a certain cutoff period. Needless to say, my post hasn’t made it to the scheduled cutoff date. Now, in order to facilitate my employment, I was temporarily handed over to a third party contractor – with the sum of my salary and benefits fully paid for by the company to the contractor in advance. My tenure with that contractor was scheduled to last until December, after which I will formally join the company who actually “hired” me. Under the contractor, I was being deducted 2% withholding tax as a “contractor/sub-contractor” class employee. Come December, I received a 13th month pay which was also subjected to 2% withholding tax (my monthly salary is 30 thousand pesos). I was wondering if it is correct that such deduction was taken from my 13 month bonus, whereas as far as I know, 13 month pay of 30,000 and below are exempted from taxes. I asked the officer in charge from the contractor company and the response was – the 13th month pay of an employee with a “contractor” status will be subjected to 2% tax. Of course, the amount in question is just small, however, I’m really curious about what is happening and am interested to know more. COuld you please enlighten me with this? Thanks.
Regards,
Eraqus
The 13th month pay given to you by your real employer (in which you have employer-employee relationship status) should only be taxed in excess of 30T. Your situation is a little bit confusing… that is why it would be nice if you can confirm this to the BIR. As for your withholding tax… you can claim them against your income tax payable. And if it will exceed, it will become an over-payment, in which you can claim a refund or you can carryover the overpayment to credit against your future income taxes. Thus, you don’t need to worry much.
Good Day!.. i’m quiet confused as to how much will be remitted to the lessor when the contract says P15,750 is the monthly rental exclusive of all taxes. IS THE sample computation below correct?
gross rental 15750
add: VAT 12% 1890
tOTAL 17640
LESS: W/HOLDNG TAX 5% 787.50
PAYABLE TO LESSOR 16852.5o
ur response will be much valued…thanks
your computation is correct.
Sorry do not have calculator now. VAT could be on top, while withholding tax is excludes VAT.
Hi! We are required to pay EWT since we are leasing the place of business. however, for the year 2011, we were not able to pay EWT. We are planning to pay but how do we do that? The monthly rental is 5,000. Can you give me a rough estimate as to how much would be the total payment including the fines and everything. Thank you! Your help would be very much appreciated.
Hi Grace, its 5% of 5,000 plus 25% surcharge, 20% interest, and compromise penalties.
hi miss belle! is that on a monthly basis? can you give me the computation for the whole year 2011. thank you!
hi grace!
the surcharge is 25% of (5% of 5,0000/month) and the interest starts from the first day after due date of 1601-E monthly and the compromise for basic tax of 250 is P200. so interest lang mababago monthly..sana makatulong
hi sonny! interest po is 20% per annum? meaning ipprorate pa po, tama po ba? kasi last time, when i had this late filing sa vat, naka fix 20% na agad nung amount. e parang 1 day pa lang nman po ung naglapse..
Hi Grace, you may need someone to handle it for you if you are busy with your business operations and developments. Its a waste to pay penalties if you would treasure the value of hard earned business profit. I can help you find one in case.
Hi Sir,
My grand mother is a senior citizen and currently she is a writer, when the publisher wer her books are being released, she is given/entitled for ROYALTY, since she is a senior now, we know that she is exempted on EXPANDED WITHHOLDING TAX for professional fee for royalty. but a 10%EWT is still deducted to her royalty by the publisher.
HOW could we exempt her from these?
thank you.
joana marie galvez
First, there is no exemption for income tax for being a senior citizen if its income exceeds the personal exemptions. Second, 10% final withholding tax constitutes final income tax payments so no more additinal income tax shall be imposed.
hi sir/ma’am,
in our certificate of registration, one of our registered activities is withholding tax-expanded/oth. We are leasing the place of business, so we are really required to EWT on that. My question is, are we also automatically required to withhold 1% on the purchases of goods? we are a corporation. Is that automatic or the BIR has to expressly appoint us that we are withholding agent on the 1% EWT on purchase of goods? thank you!
Hi icy! 1% for top twenty thousand corporations (TTC) is not automatic and will require BIR notification as TTC first. Without such notification letter, you are not mandated to withhold 1% (goods) and 2% (services) from regular suppliers.
Hi belle,
We have the same case to ICV,we are not in TTC but we are withheld to our suppliers and our client also withheld a 2% EWT to our sales.
What would be the effect to our business? What are the actions needed to correct the transactions we did?
Thanks.
hello sir!
We failed to file the form 1604cf for the preceding year (2011). what are the consequences of such, and if we are going to file, what would be our penalties? Thanks in advance!
Its only a compromise penalty of say P1,000 for late filing. You may file anytime and pay the penalty.
hi sir/ma’am,
we are a corporation, and listed in our registered activities is withholding tax-expanded/oth. We are leasing the place of business so automatically, we are required to withhold taxes on that. however, are we also automatically required to withhold the 1% on purchases? we are not sure if we are included in the top 10000 or 20000 corporations appointed by BIR as withholding agents. They didnt give us any formal letter informing us that we are TTC. is the 1% withholding on purchases automatic or we still have to be expressly appointed first by BIR. Thanks in advance!
Please see answer above with the same import.
hi sir,
i’m a doctor and my question is this, if the payment that i receive from the clinic is already subjected to 10%EWT (monthly) do i have to pay the monthly percentage (3%) for this payment or should i reflect this only in my quarterly tax payment ?
thanks
jun
Hi Doc Jun. This is a common confusion. The 10% withheld is an advance income tax collected upon payment to you. This will be deducted from your quarterly or annual income tax due using BIR Form No. 2307 issued by the payor to you.
3% Percentage tax or 12% VAT is another tax type separate from VAT and as such, a separate payment is required. Let me take this opportunity to invite you to our programs advocating on tax and accounting education. Please click on my name to reach our website for more details.
I have a pharmacy in the Philippines that caters to US beneficiaries living in the Philippines. I collect from the US govt through an outsourced biller company based in Hong Kong which I pay 30 percent of gross collection. The 30 percent is my pharmacy expense for an outsourced billing services outside the Philippines. Am I required to pay any withholding tax for this service? This service is processed in Hong Kong and the biller company is in Hong Kong.
Thanks
Hi Al! we have a tax rule saying that a service is taxable in the place where rendered, and that non-residents are taxable only on income from within the Philippines. Applying the said rules, a view that HK Company is not taxable on income from services rendered abroad. Considering the material amount of transactions you have, I suggest you secure a BIR Ruling of this import as a preventive measure. Please contact us should you need our further assistance.
Hi,
May I ask if rental payment to a Non-profit corporation (lessor) is subject to the 5% EWT? They claim that they were exempt from income tax hence no need to pay any EWT. Is there any BIR ruling stating that any income derived by a Non-profit corparation from their real property?
Thanks.
Hi Mikee! The exemption of non-stock, non-profit companies from withholding tax is because of their income tax exemption under Section 30 of the Tax Code. Such income tax exemption is based on the use of their income for the registered operations with the SEC. It is not automatic and requires a BIR ruling for said exemption so I suggest you secure from them proof of their exemption aside from the SEC and BIR registrations. If they could not provide, I suggest you withhold lease payments to them.
Thanks,
They have a BIR ruling exempting them from income taxation. But also written in the ruling is “However, they are subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997 on their income derived from any of their properties, real or personal, or any activity conducted for profit regardless of the disposition thereof (i.e. rental payment from their building/premises), which income should be returned for taxation.”.
The above paragraph was also the last paragraph of Sec. 30 of the tax code. Will the ruling given is enough for non-withholding of EWT?
Thanks again.
In such case, I believe you should withhold on your rental payments as the wordings of the ruling seems clear.
Also,
Can i ask if payment to a Counselling firm base outside abroad subject to EWT? But the service is done here in the country.
Am I right that if the firm is a non-resident corporation. Payment to them is not subject to EWT as their income within the Philippines is subject to Final tax.
Thanks,
You may have a point on that. Yes, they maybe considered non-resident corporation taxable on income from within the Philippines and such payments are subject to withholding tax for their corresponding income tax liability in the Philippines.
In your case, services are rendered in the Philippines. As such, they are taxable in the Philippines – 30% income tax based on gross payments, and 12% final VAT that your company is supposed to remit using BIR Form No. 1600. VAT paid is at the same time, your company’s input VAT for the month or quarter of payment.
Thanks a lot! =)
Hi! I would like to inquire regarding Withholding taxes and VAT as well. We will be having a foreign contractor based in Singapore but they have a marketing office registered and created here in the Philippines which is just used to look for prospective clients here.
When they bill us in foreign currency, is it right for their company to also include 12% VAT and on our part, to withhold tax from their billing? Their contractor services will be done here in the Philippines.
What about if they bill us in PhP? Are there any changes?
Thank you for your prompt reply..
Hello! We need advice…. My mom is leasing her 2 condo units to a company here in the Philippines. From the total rent for example
Monthly Rental P15,000
Less 5% w/tax. P750
Total: P14,250
Plus 12% VAT P1,710
Total amount: P15,960
This is how the company calculate the rent each month. They don’t ask for an official receipt either, what documents they need to provide us for the evat? Should they provide anything ? Some friends say they should only withold 5% and the 7% will be paid by the lessor as long as they can provide a credible witholding tax at the end of lease contract. Pls advice us thanks so much
Hi!
Again, I have to ask the same issue which nobody had answered since i submitted by query in Oct. 2011. I am bothered by the computation of our company regarding the 2% EWT so i just want to be clarified. The bank billed P60,000 as interest for a loan with P3,000 gross receipts tax (GRT). Instead of deducting from the total interest of P60,000 our company added P1,200 as 2% EWT, which it withheld together with the GRT. Hence the total payment to the bank still amounted to P60,000, in effect our company was the one who paid for the EWT. Please enlighten me if this is really correct. Thank you for your attention.
Hi Glo. EWT is an advance income tax payment of the recipient so it shall be for the account of the bank and not an add on.
Hi Glo, the practice of your company is erroneous. The 2% EWT should be deducted from the P60,000 income payment. Hence, the total cash outlay of your company relative to the interest payment should be net of 1,200.
hi. may I ask what withholding tax rate shld i use for purchase of goods with services included. we purchased a software and we are also billed for the services on implementation. shld this be 1% and 2% separately? also, there are instances where supplier of goods would charge us for delivery charge. shld i use 1% ewt. thanks very much
If service is separable and material, apply the 2%, otherwise, lumped with the 1%.
Goody day!
Clarify ko lang po. Kakaregistered ko lang po as new business last june 21, 2012 sa bir. Ayon sa aking cor i have to file 1601e – expanded tax. Nag re-rent po ako 5,500, Para sa business place. Kaso ung lessor ko just provided me a contarct without stipulations anything about taxes…. At mukhang hindi po sya tatangap ng certificate of withholding tax para sa renta kc bahay lng po iyon na pinaparentahan nya……mkelangan ko po bang magbayad sa bir ne expanded tax or file lang ako ng return na “no withholding tax” . Thank you.
Yes, you need to withhold and pay. It is a mandatory requirements for business establishment you really really need to. Penalty applies if you will fail to do so.
Sirs, are asset purchases subject to EWT? If it is, does it belong to the 1% rate on purchases of goods?
Btw, the asset is a vehicle.
Thanks.
Gene, if your company is a top 20,000 copr, then, it is subject to 1% EWT as purchase of good. If not top 20,000, no EWT.
Hi, I have a question regarding withholding tax on leasing of games software. What is the correct withholding tax if our Philippines company pay a leasing fee for games software to a Philippines company? If the lessor is foreign company, what is the correct withholding tax? Thanks
If it represents lease of a property, 5% applies to payments to a domestic company. If it falls on royalty, then, 20%. 30% is the normal rate for foreign company except under tax Treaty but you need a Tax Treaty Relief Appplication with BIR-ITAD.
Hi! when is your next seminar for these topics? I would like to attend.
May I know what Revenue Regulation stating that the witholding of tax is upon invoice not upon payment?
Reveneu Regulations 2-98 is the withholding tax regulations that underwent a number of amendments already. You maycheck it out for references.